Jan 172018
 


Eugene de Salignac Painters suspended on cables of the Brooklyn Bridge Oct 7 1914

 

If Bull Market For Stocks Ends In 2018, Blame The Credit Market Bubble (MW)
Dramatic Stock Market Reversal Signals More Volatility Ahead (CNBC)
Bitcoin, Ethereum Suffer Massive Drops, Many Crypto’s Fare Even Worse (CNBC)
South Koreans Sign Petition To Stop Crackdown On Bitcoin ‘Happy Dream’ (CNBC)
‘Black Swan’ Event Could Threaten China’s Financial Stability (R.)
US and China Brace For Trade War That Could Rattle Global Economy (ZH/WSJ)
The New Cold War In 2018 (Stephen Cohen)
The One Fact Which Disproves Russiagate (CJ)
Carillion’s Failure: The Many Questions That Need Answers (Coppola)
After Carillion How Many Firms Can UK Pensions Lifeboat Rescue? (G.)
No Way Around Sorry Shape Social Security Is In (Newsmax)
Britain Is Being Stalked By A Zombie Elite (G.)
Dutch Say Nations Hit By Brexit Shouldn’t Plug EU Budget Hole (BBG)
Nomi Prins’ New Book: Central Banks Have Become the Markets (Martens)
New Zealand Fisheries Want Images Of Dead Penguins Caught In Nets Censored (G.)

 

 

Blame the Everything Bubble.

If Bull Market For Stocks Ends In 2018, Blame The Credit Market Bubble (MW)

Will 2018 be the year the stock market rally screeches to a halt? It may be, if those analysts who are cautioning that a bubble is forming in credit markets are right and companies are overextending themselves to a degree that could spell trouble ahead. Most analysts agree that the credit market has been speeding ahead at a bubble-like pace. Companies have been piling on debt in recent years to take advantage of low interest rates, or more recently, to get ahead of a series of well-telegraphed interest-rate hikes. If their borrowing is simply to refinance existing debt at lower interest rates, it’s a positive for balance sheets. But many companies have borrowed to raise funds for shareholder rewards, and that may come back to bite them if rates were to spike.

For example, Apple debt may be highly rated, just two notches below triple-A at AA+ at S&P Global Ratings, but the technology giant continues to ride the borrowing bandwagon as it looks to fund its massive share buyback program. Apple issued $7 billion of debt in November, two months after selling $5 billion worth of corporate bonds and several months after adding more debt. The U.S. primary corporate bond market is currently at record levels. The investment-grade market saw $1.44 trillion of issuance in 2,127 deals through December 26, topping the record $1.34 trillion recorded in 2016, according to data analytics company Dealogic. The high-yield market has chalked up $266.3 billion of debt in 469 deals, making it the fourth-biggest year for issuance, according to Dealogic. The high-yield record goes to 2012 when issuers sold $321 billion of debt in 604 deals.

Combined investment-grade, high-yield and FIG issuance—FIG is financial institutions group—is a record $1.71 trillion, topping the previous record of $1.57 billion set in 2015. What’s starting to worry some analysts is that despite the fact that the Federal Reserve and other central banks are draining liquidity from the marketplace and the yield curve is flattening, near-record credit market valuations suggest investors haven’t prepared for any potential speed bumps. One sign of this complacency, is how narrow the spread is between yields on speculative grade, or “junk” bonds, and corresponding risk-free Treasury notes. S&P Global Ratings said Tuesday its speculative-grade composite spread tightened by three basis points (0.03 percentage points) to 399 basis points, well below the five-year moving average of a 528 basis-point spread.

Read more …

How much longer can volatility remain ultra low?

Dramatic Stock Market Reversal Signals More Volatility Ahead (CNBC)

After a mostly one-way trade higher for weeks, Tuesdays’ dramatic stock market reversal signals the potential for more choppy trading ahead. The Dow rocketed 283 points Tuesday, before erasing those gains and heading down 100 points. It later recovered and closed just 10 points lower at 25,792 after its most volatile day since Dec. 1 and on the first day it traded above 26,000. Traders blamed Washington for some of the selling as lawmakers appeared to be having difficulty agreeing to a spending resolution and on reports that former White House advisor Steve Bannon will testify in the Russia investigation. But while the focus was on Washington, traders also looked at the morning market surge Tuesday as another sign that the market was getting too frothy and overbought.

“The healthiest thing would be some downward action for the next two or three sessions. Today you did have a somewhat bearish, outside reversal,” said Scott Redler, partner with T3Live.com, who follows the market’s short-term technicals. A reversal is when the market opens above a prior high and then closes below a prior low. “That happened in some sectors like small-caps. … You can’t get too bearish if you’re still above the 8- and 21-day moving average,” Redler said. Strategist Laszlo Birinyi on Tuesday said he expects a possible six weeks of consolidation and sideways trade, but he is not bearish on stocks. “Right now, the market is at the upper end of the trading range. It’s 5% over its 50-day moving average, and those are areas where the market tends to digest, consolidate, take a breather but not go down,” he said, as the market gyrated Tuesday.

Steve Massocca, managing director at Wedbush Securities, said the market has clearly become fatigued after its sharp move higher. The S&P 500 is up 4% since the beginning of the year and crossed above 2,800 for the first time Tuesday before closing down 9 at 2,776. “We’ve had a pretty significant move. It’s quite natural that this would be exhausted at some point. … A potential government shutdown is a handy excuse,” he said. But a government shutdown Friday is not likely, said Dan Clifton, head of policy research for Strategas. “My overall view on this is they’re preparing a temporary stop-gap measure. I just don’t think we’re going to shut down, but we’re trying to buy time until there could be a larger spending package. It was very much companies that were influenced by government spending that were selling off. The market is saying there is some risk of a government shutdown,” Clifton said.

Read more …

Closing in on $10,000 as we speak. Is that a psychological barrier?

Bitcoin, Ethereum Suffer Massive Drops, Many Crypto’s Fare Even Worse (CNBC)

Most major digital currencies sold off sharply on Tuesday, but the declines in bitcoin, ethereum and litecoin prices weren’t as bad as much of the rest of the market. All of the top 20 digital currencies — by market value — suffered double digit losses over the last 24 hours, according to data from industry website CoinMarketCap. For example, ripple was down 26%, bitcoin cash was down 24%, iota was down 27% and monero was down 22% as of 8:51 a.m. HK/SIN. In fact, at their low point on the day, many cryptocurrencies with large market caps saw their prices essentially halved. On the other hand, bitcoin was down 17% at that time, ethereum was down 19% and litecoin was down 19%, according to the same site.

The declines followed speculation in the market about what regulators in Asia may be planning for digital tokens. On Monday, a report from Bloomberg, citing unnamed sources, said Beijing plans to block domestic access to Chinese and offshore cryptocurrency platforms that allow centralized trading. Last week, South Korean Justice Minister Park Sang-ki said his ministry was preparing a bill that, if passed, could ban trading via cryptocurrency exchanges. His comments roiled the market and subsequently the justice ministry and other sections of South Korea’s government have softened their stance.

Read more …

Just perfect.

South Koreans Sign Petition To Stop Crackdown On Bitcoin ‘Happy Dream’ (CNBC)

A petition in South Korea against cryptocurrency regulation has reached the number of signatures that would induce a government response. As of Tuesday morning, ET, more than 212,700 had signed a petition launched Dec. 28 on the website of the South Korean presidential office. A Google translation of the website states that if more than 200,000 people support a petition within 30 days, officials will respond. “Our people have been able to make a happy dream that they have never had in Korea because of virtual money,” the anonymous author of the petition wrote, according to a Google translation. “People are not stupid. … virtual money is invested because it is judged to be the fourth revolution.” The petition did support South Korea’s recent actions on cryptocurrencies, such as banning anonymous trading accounts.

“However, I wish that the economy will not decline due to unjustifiable regulations in the present situation,” the Google translation of the petition said. Unemployment among South Korean youth, or those ages 15 to 29, is around 9%, nearly three times the national average, according to Statistics Korea. Young people are generally more interested in buying and selling digital currencies than their elders. In the last several months, South Korea has accounted for a significant portion of the trading volume in digital currencies such as bitcoin, ethereum and ripple. Earlier this month, ripple prices appeared to plunge in U.S. dollar terms after CoinMarketCap said it was excluding price information from some Korean exchanges due to “extreme divergences in price from the rest of the world.”

Read more …

No kidding.

‘Black Swan’ Event Could Threaten China’s Financial Stability (R.)

China’s banking regulator chief warned that a “black swan,” or an unforeseen event could threaten the country’s financial stability, official People’s Daily reported on Wednesday. In an interview with the paper, Guo Shuqing said that while risks in the financial system are manageable, they are still “complex and serious.” Since his appointment as the head of the China Banking Regulatory Commission early last year, Guo has introduced a flurry of new rules to reign in lender risks including from curbs on shadow banking activities to the crackdown on loan fraud. Guo said the dangers stem from the pressure of rising bad debt, imperfect internal risk systems at financial institutions, the relatively high levels of shadow banking activities and rule violations.

All of these risks could upend financial stability through a “black swan” event, Guo told the People’s Daily, referring to major, unexpected occurrences. “We need to focus on reducing the debt ratio of companies, restrict household leverage, strictly control cross-financial sector products, continue to dismantle shadow banking,” said Guo. China will step up oversight of the banking sector this year to reduce financial risks, the CBRC said on Monday, stressing that long-term efforts would be needed to control banking sector chaos.

Read more …

A trade war wouldn’t qualify as a black swan.

US and China Brace For Trade War That Could Rattle Global Economy (ZH/WSJ)

Once under way, the repercussions of a trade war would be felt well beyond the combatants themselves. US friends and allies along Asian supply chains would be early collateral damage. China is still to a large extent the final assembly point for imported high-tech components from Japan, South Korea and Taiwan. Navigating increasingly complex global supply chains in a constant state of disruption would be hugely problematic for businesses across industries. Furthermore, if it escalated far enough, a trade war could take down the entire global trading architecture. That could be Trump’s goal. Many in his administration, including trade representative Robert Lightizer, believe the biggest mistake the US ever made was to usher China into the World Trade Organization in 2001. Aides say Trump regularly threatens to pull out of the rules-setting body.

Trump has in the past suggested that Chinese help on North Korea could head off US trade action. In a phone call with the US president on Tuesday, Xi suggested that trade issues should be resolved by “making the cake of cooperation bigger.” Meanwhile, Trump expressed disappointment that the US trade deficit with China has continued to grow” and made clear that “the situation is not sustainable.” In private, however, senior Chinese officials believe Beijing has many tactical advantages: Some are cultural – the Chinese people, one says, are more prepared to endure economic hardship. [..] Many US trade experts don’t mince words: They believe China would prevail in a trade war with the US, and that the US economy would suffer lasting damage.

Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, thinks China would win. Among his reasons: China’s ability to concentrate pain, and the outcry from affected businesses in America’s more open political system. He argues that “the political costs to the Trump administration of maintaining new protectionist measures will be much higher than the costs of retaliation to the Xi regime.” Derek Scissors, a trade expert at the American Enterprise Institute argues that the major US advantage is that China is far more dependent on trade for its financial health. “A shorter, smaller-scale trade conflict favors China due to its comparative agility,” he says. “The more serious it gets, the worse China would fare because it’s badly outmatched monetarily.”

Read more …

Part of a podcast with America’s no.1 Russia scholar Stephen Cohen at TFMetalsReport.com.

The New Cold War In 2018 (Stephen Cohen)

I’m not a Trump supporter and I didn’t vote for him. However, we can actually support Donald Trump’s campaign promise which I think he’s tried to act on since he’s been president that it’s necessary to cooperate with Russia. This is what was called detente in the 20th century. I don’t know why Trump doesn’t make this point. I don’t think he has very good advisors in regard to Russia either in terms of what’s going on in Russia or in terms of his own policy making but Trump might say in his own defense because they’re indicting him for simply saying I want to cooperate with Russia and with Putin in particular. He could say look, every Republican president of consequence in the 20th century pursued detente with Russia.

First Eisenhower, the first detente the spirit of Camp David with Khrushchev, then the Nixon Kissinger attempt at a grand detente with Brezhnev and finally above all Ronald Reagan a detente with Gorbachev the last Soviet leader Soviet Russian leader so great that Reagan and Gorbachev ended the cold war. Trump could put himself in that tradition and say “I’m the traditional Republican. This is what Eisenhower, Nixon and Reagan did. They did it wisely. They avoided nuclear war with Russia. We’re in a new Cold War. The dangers are grave. It’s not only my duty as the American president to pursue cooperation to ward off a catastrophe but I commend the honorable tradition of the Republican Party”. He doesn’t say that. I don’t know why as I say it because he doesn’t know what or because he wants to be the one and only I have no idea what he needs to say.

And if he said it it would compel a conversation in Washington that we’re not having. What’s happened to detente and what’s happened is we have if we ignore his own idiom and put it in again I speak as a story in the historical language of 20th century diplomacy. We have a pro-detente President who for the first time in history is not permitted to at least try because every time he has a sensible conversation with Putin, no matter whether it’s face to face or on the telephone, he’s accused not only by the traditionally crazies in American politics but by the New York Times of treason. So what we could do and it will be hard for a lot of people because of the loathing for Trump. Is so pervasive just and I didn’t vote for Trump is the fifth amendment I didn’t vote for Trump and I didn’t support President Trump. But about this he is not only right. He’s our only hope at the moment.

Read more …

Caitlin Johnstone is a delight to read. Summary here: Putin is supposed to have paid out many billions when no-one believed Trump was a viable candidate. Was he psychic?

The One Fact Which Disproves Russiagate (CJ)

Just a few days ago Russiagaters were having yet another “BOOM! We got him!” social media parade about an article from the Clinton-directed Daily Beast, claiming that a senior national security aide within the Trump administration had suggested scaling down the US troop presence along Russia’s border, a dangerous escalation which all peace advocates support eliminating. In the first sentence of the article’s second paragraph, the author Spencer Ackerman acknowledges that “the proposal was ultimately not adopted.” Huh? So President Trump, alleged to have been groomed early and at great expense by the Kremlin in anticipation of a presidential victory nobody else imagined possible at that time, was pitched a recommendation to scale down new cold war escalations with Russia… and he refused? That’s how you’re starting your article about the “return on Russia’s election-time investment in President Trump”?

Russiagate is so weird. You need to plug yourself into Louise Mensch and Rachel Maddow ramblings so extensively that you can contort your sense of reason to the point where it looks perfectly rational to believe that Putin was omniscient enough to know that Trump could defeat all primary opponents and take the fight to the heir apparent Hillary Clinton back when virtually no one else imagined such a thing was possible, recruited his team reportedly at the cost of billions of dollars, poured all kinds of intel and resources into ensuring Trump’s election using hackers and bots to influence American opinion, only to get a US president who is, when it comes to facts in evidence, already just a year into his administration demonstrably more hawkish towards Russia than his predecessor was. Again: huh?

Nobody wants to think about this because it doesn’t fit in with America’s stale partisan models; Democrats would have to admit that their best shot at getting a rival president impeached is pure gibberish, and Trump supporters would have to acknowledge that their swamp-draining populist hero is actually just one more corrupt globalist neocon like his predecessors.

Read more …

The next Carillion is already in sight: Interserve. The British privatization model is failing spectacularly. That will cost a lot of jobs.

Carillion’s Failure: The Many Questions That Need Answers (Coppola)

Britain is reeling from the shock collapse of one of its largest corporations, the giant construction and services company Carillion Group plc. In talks over the weekend, Carillion’s management was unable to persuade its lenders to provide any more funds, and the U.K. government refused to help. Carillion was left with no options. On Monday morning, Carillion filed for compulsory liquidation. This was a completely unexpected move. Discussions about Carillion’s fate over the previous week had centered around restructuring, bail-in of creditors and perhaps placing the company into administration, the U.K.’s equivalent of Chapter 11 bankruptcy protection. No one expected the company to be wound up. But that is what will now happen to it.

As Carillion has extensive U.K. Government construction and services contracts, the U.K.’s High Court appointed the Government’s Official Receiver to manage the liquidation. Among other things, the Official Receiver will be responsible for ensuring that public sector services currently provided by Carillion continue to run, and the staff providing them continue to be paid. Without this assurance, meals to hospital patients and schoolchildren might not be delivered, and prisons might not be staffed. But the future of Carillion’s 19,000 employees in the U.K. (43,000 worldwide) is still highly uncertain. Staff working on U.K. public sector service contracts are protected for the moment, but those working on other projects could lose their jobs within days.

The Official Receiver will be supported by six insolvency specialists from the accountancy firm PWC, who will act as “special managers”. PWC’s message to Carillion’s shareholders was blunt and immediate: Unfortunately, as a result of the liquidation appointments, there is no prospect of any return to shareholders. At least shareholders know where they stand. They have been wiped. Trading in Carillion’s shares has been suspended, of course.

Read more …

I see trouble in your future.

After Carillion How Many Firms Can UK Pensions Lifeboat Rescue? (G.)

The pensions lifeboat that comes to the rescue when firms go bust is about to get a lot more crowded following the collapse of Carillion. The sprawling construction and outsourcing firm had a pension deficit of £580m but is now likely to rise to at least £800m because it no longer has a solvent business standing alongside it. The company’s crash into liquidation has thrown the spotlight on other firms with huge pension scheme deficits such as IAG, BT and BAE. It has also raised questions about how many more big company failures the Pension Protection Fund (PPF) can absorb, and why companies with big deficits are allowed to pump out bumper dividend payouts to shareholders.

It is almost certain that the fund will now have to step in and bail out workers at Carillion, which has more than 28,000 defined-benefit – in this case, final salary – pension scheme members. Those already taking pensions will be protected, but those members below retirement age will face cuts of 10-20% because there is a cap on payouts to higher earners. It’s been a busy time for the PPF: in the spring, roughly 20,000 members of the British Steel pension scheme will start moving into the fund. They will eventually be joined by about 2,000 former BHS workers (the vast majority of the retailer’s staff chose to move their retirement funds into a new pension scheme).

Carillion’s liquidation has fuelled concern about the financial stability of other big companies. Last year a report by JLT Employee Benefits put the total deficit in FTSE 100 pension schemes at the end of 2016 at £87bn – £17bn worse than a year earlier, even though firms paid in around £11bn. 66 companies had deficits – ie their liabilities to pension scheme members were greater than their assets. Booming stock markets in 2017 helped narrow the gap. Mercer, the leading pensions consultancy, said deficits at the biggest 350 firms fell to £76bn from £84bn the year before. But even with the FTSE at a new peak, the deficits remain alarmingly high.

Read more …

Pensions, Social Security, it’s all stupidly overpromised. And that will remain so until it’s too late.

No Way Around Sorry Shape Social Security Is In (Newsmax)

If you want to know what makes people worry, here are four facts to make you lose your sleep whatever your age:

1. The Social Security Shortfall Is Growing Three Times Faster Than the US Economy. The imbalance of Social Security is measured by its shortfall, or the amount of money, that with interest earned, would enable the program to pay benefits over the next 75 years. That hole in the program’s finances is growing at three times the rate of our ability to fill it. Here are the numbers. Over the past 15 years, the system’s liabilities have grown at 9.6% compounded annually, while the trustees expect that even in a robust year real economic growth will not break 3%. Moreover, the trustees believe that the long-term growth rate of the economy is 2.1%. At the end of 2001, the Social Security shortfall was $3.157 trillion. At the end of 2016, it was $12.5 trillion. With the passage of yet another year of inaction on the program’s finances, the figure is more than $13 trillion.

2. People Turning 70 Today expect to Be Alive When Benefits are Reduced. If you think the problems of Social Security are limited to people under the age of 40 —think again. That assessment has not been a realistic concern in nearly two decades. The Social Security Administration believes that more than half of the people turning 70 today will be alive and well when the trust fund is exhausted. The exhaustion of the trust fund means that benefits will be reduced to the level of revenue collected. At this point, the trustees of the Social Security Trust Funds believe that benefits will fall by 23% in 2034, with cuts rising over time. The CBO believes that the reductions will rise to 30% over time.

3. In 2016, the Program Lost More Money than It Collected. Over the course of 2016, the program’s unfunded liabilities rose by nearly $1.2 trillion. That is a breathtaking jump considering that the program only collected about $950 billion in revenue. Mechanically, Social Security takes in money in exchange for the promise of future benefits. In the case of 2016, for every $1 that the program took in, the system generated more than $1.20 of promises that no one expects it to keep. In English, we could have reduced benefits to zero for the entire year of 2016, and the program would have finished the year in worse shape than it started.

4. Dependency on Social Security Rises with Age. Typically, worriers about Social Security say that Social Security accounts for 90% of the income of more than one-third of seniors. Politifact has largely confirmed this statistic.

Read more …

It’s a zombie nation.

Britain Is Being Stalked By A Zombie Elite (G.)

Britain in 2018 is stalked by zombie ideas, zombie politicians, zombie institutions – stripped of credibility and authority, yet somehow still presiding over our lives. Nowhere is this more true than in the way we run our economy. This September marks the 10th anniversary of the death of Lehman Brothers. In autumn 2008, the banks broke, the governments stepped in – and the cast-iron premises that underpin our economic system were exposed as fiction for all to see on the Ten O’Clock News. Yet a decade later, those dead ideas still walk among us. They form what John Quiggin at the University of Queensland terms zombie economics – dogmas now cracked beyond repair, but which continue to shape British society.

Austerity – the policy that more than any other will define this decade – was lifted by George Osborne straight out of Margaret Thatcher’s handbag. He justified it with zombie rhetoric about how business was being “crowded out” by childcare centres and the rest of the public sector, and how 21st-century sovereign countries could be run just like household budgets. Tax cuts for “wealth creators” and privatisations of the few remaining national assets: all utter zombie-ism. And this was no one-party game. Labour frontbenchers from Andy Burnham to Chuka Umunna spent the first half of this decade pleading guilty to the trumped-up charge of creating a debt crisis.

Labour councils are among those pursuing outrageous privatisations. And over the past four decades both sides have adopted as an article of faith the idea that politics is about What Works – and that What Works is a mix of Potemkin markets and crude managerialism. From Tony Blair to David Cameron and Nick Clegg, politics was no longer about left battling right – but technocrats and open-necked Oxford philosophy, politics and economics graduate special advisers who “got it” versus the dinosaurs and well-meaning naifs. In this way, a broken economy has been force-fed more of the same ideas that helped to break it. The outcome has been almost predictably dire.

Read more …

Yeah, let’s get Greece to pay up for that. Show us some solidarity!

Dutch Say Nations Hit By Brexit Shouldn’t Plug EU Budget Hole (BBG)

Dutch Finance Minister Wopke Hoekstra said European Union countries that are set to suffer the most from Brexit shouldn’t also have to help plug the hole it will tear in the bloc’s budget. “A small group of countries on the west coast of Europe is hit very hard in the economy by Brexit, which applies primarily to Ireland, but also to the Netherlands, Denmark, Spain and a number of other countries,” Hoekstra said in interview with Dutch TV station RTL Z. “It cannot be the intention that those who already experience the damage of Brexit will also pay the bill.” While the remaining 27 EU countries are maintaining a united front in Brexit talks, national interests diverge when it comes to the future trading relationship and splits are starting to emerge.

The Netherlands is one of the EU countries keenest on securing a trade deal with the U.K. that doesn’t harm crucial commercial trade ties between the two countries, whose ports face each other across the North Sea. Hoekstra met his Spanish counterpart Luis de Guindos last week and the pair agreed they both wanted a Brexit deal that keeps the U.K. as close to the EU as possible, according to a person familiar with the situation. A Spanish economy ministry official said last week the two finance chiefs had underlined the importance of U.K. ties for both countries, and agreed to keep track of their common interests. The U.K. will continue to pay into the current budget until the end of 2020; after that a new seven-year budget cycle comes into effect. The U.K. is a net contributor to the current budget, which redistributes funds across the bloc.

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The real collusion.

Nomi Prins’ New Book: Central Banks Have Become the Markets (Martens)

Nomi Prins’ latest book, Collusion: How Central Bankers Rigged the World, ensures her place as one of this century’s most informed Wall Street historians. It’s the perfect segue from Prins’ earlier “It Takes a Pillage,” and her 2014 book All the Presidents’ Bankers. If you are serious about understanding the corrupting influences that have left the U.S. vulnerable to another epic financial crash, buy all three books and read them as one. Prins is a veteran of Wall Street who has now written six books and dozens of articles to help Americans navigate the snake pit that has replaced the financial system of the United States. It all started with her first book in 2004, Other People’s Money: The Corporate Mugging of America, where she explained her motivation as follows:

“When I left Wall Street, at the height of a wave of scandals uncovering scores of massively destructive deceptions, my choice was based on a very personal sense of right and wrong…So, when people who didn’t know me very well asked me why I left the banking industry after a fifteen-year climb up the corporate ladder, I answered, ‘Goldman Sachs.’ “For it was not until I reached the inner sanctum of this autocratic and hypocritical organization – one too conceited to have its name or logo visible from the sidewalk of its 85 Broad Street headquarters [now relocated to 200 West Street] that I realized I had to get out…The fact that my decision coincided with corporate malfeasance of epic proportions made me realize that it was far more important to use my knowledge to be part of the solution than to continue being part of the problem.”

In Collusion, Prins walks us through the critically-important events occurring during the 2007-2009 financial crash, many of which would have been relegated to the dust bin of history if not for this book. Prins makes the case that the U.S. is headed toward another epic financial crash as a result of the unchecked powers of the U.S. central bank (the Federal Reserve) and its global counterparts who are creating dangerous new asset bubbles in an effort to paper over the last ones. Prins convincingly shows that colluding central bankers have effectively become the markets through a never-ending flow of cheap money to the mega banks which have deployed that cheap money to buy back and inflate their own stock – with a green light from their own regulator and money pimp (our term, not hers) – the U.S. Federal Reserve.

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The new PM should jump on this. She cannot afford to let this stand.

New Zealand Fisheries Want Images Of Dead Penguins Caught In Nets Censored (G.)

The seafood industry in New Zealand has asked the government to withhold graphic video of dead sea life caught in trawler nets as they are potentially damaging to fisheries and to brand New Zealand. A letter from five seafood industry leaders to the Ministry of Primary Industries highlights the fisheries’ growing unease with the government’s proposal to install video cameras on all commercial fishing vessels to monitor bycatch of other species and illegal fish dumping. The letter requests an amendment to the Fisheries Act, so video captured onboard cannot be released to the general public through a freedom of information request, frequently used by the media, campaign groups and opposition parties.

“They [the proposed videos] also raise significant risks for MPI and for ‘New Zealand Inc'”, the letter reads, also citing concerns about invading the privacy of employees onboard, and protecting commercial and trade secrets. There are no reliable figures on the numbers of penguins, sea lions, dolphins and seals that die in fishing nets or longlines in New Zealand, but according to some researchers and environmental groups the commercial fishing industry is the main culprit for declining populations of endangered sea lions and yellow-eyed penguins. Only 25% of deepwater trawlers in New Zealand have government observers onboard to record bycatch and discards, according to the National Institute of Water and Atmospheric Research [Niwa], which relies on statistical modelling techniques to generate bycatch estimates for the 75% of boats that work unobserved.

Niwa estimates for every kilogram of reported target catch (what the fishing boat aims to catch ) there is 0.2 kg of bycatch. “These are the images the fishing industry doesn’t want you to see”, said Forest & Bird’s chief executive Kevin Hague. “What they [the seafood industry] are saying is catching endangered penguins, dumping entire hauls of fish overboard and killing Hector s dolphins looks really bad on TV. Well, the solution is to stop doing it, not to hide the evidence. It’s hard to think of a more credibility damaging activity than trying to change the law so the rest of us can’t see what’s really happening out there.” Deepwater fishing vessels account for 80% of New Zealand’s annual catch and earn NZ$650m per annum in export dollars.

Read more …

Dec 292017
 
 December 29, 2017  Posted by at 10:16 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh Snowy landscape with Arles in the background 1888

 

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Natural Time Cycles: A Dow Forecast For 2018-2020 (Freeze)
Trump Says Russia Inquiry Makes US ‘Look Very Bad’ (NYT)
Russiagate Is Devolving Into an Effort to Stigmatize Dissent (Carden)
US Fiscal Path Will Rattle the Rafters of the Casino – Stockman (SG)
China May Be A Bigger Worry For 2018 (CNBC)
China’s Leaders Fret Over Debts Lurking In Shadow Banking System (R.)
China Temporarily Waives Taxes To Get Foreign Firms To Stay (AFP)
How Far the Scams & Stupidities around “Blockchain Stocks” are Going (WS)
IRS Guidance on Property Taxes Has the US Confused (BBG)
Turns out, Uber Shareholders Are Eager to Sell at 30% Discount (WS)
UK Holds Back Historic Files on EU as It Prepares for Brexit (BBG)
Greek Migration Ministry Responds To Criticism Over Island Camps (K.)

 

 

Gann is all the vogue these days. Why has it taken so long? Lots of graphs here.

Natural Time Cycles: A Dow Forecast For 2018-2020 (Freeze)

The analysis and forecasts presented in this article are based on the analytical framework of W.D. Gann. Gann is an investing legend, labeled as genius by many financial historians. He reportedly accumulated $50 million in profits during his trading career. His superior track record and those of others using his methods argues that, regardless of our opinion of his methodology, we should heed the advice of his work. A more detailed explanation of his analytical framework is included in the last section of this article.

Forecast: 2018-2020

The Dow Jones Industrial Average forecast, in the graph above, is based upon the natural 20-year cycle that Gann identified. The lines in the graph show the projected monthly cumulative percentage returns from the peak level. The yellow line is the average scenario and the aqua line is the pessimistic scenario. The graph provides monthly estimates for 2018. The last data point represents June 2020, which covers the entire 30-month period from December 2017. My average scenario forecasts a -15.29% price return for 2018. The cumulative price return is forecast to bottom in June 2020 at -20.39%, at which time an extended rally should ensue. My pessimistic scenario forecasts a -32.90% price return for 2018. The cumulative price return is forecast to be little-changed in June 2020 at -31.23%, at which time an extended rally in should ensue.

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The New York Times feels obliged to cede the stage to the one person they’ve sought to discredit for the past 2 years. Must be humiliating.

Trump Says Russia Inquiry Makes US ‘Look Very Bad’ (NYT)

President Trump said Thursday that he believes Robert S. Mueller III, the special counsel in the Russia investigation, will treat him fairly, contradicting some members of his party who have waged a weekslong campaign to try to discredit Mr. Mueller and the continuing inquiry. During an impromptu 30-minute interview with The New York Times at his golf club in West Palm Beach, the president did not demand an end to the Russia investigations swirling around his administration, but insisted 16 times that there has been “no collusion” discovered by the inquiry. “It makes the country look very bad, and it puts the country in a very bad position,” Mr. Trump said of the investigation. “So the sooner it’s worked out, the better it is for the country.”

Asked whether he would order the Justice Department to reopen the investigation into Hillary Clinton’s emails, Mr. Trump appeared to remain focused on the Russia investigation. “I have absolute right to do what I want to do with the Justice Department,” he said, echoing claims by his supporters that as president he has the power to open or end an investigation. “But for purposes of hopefully thinking I’m going to be treated fairly, I’ve stayed uninvolved with this particular matter.” Hours after he accused the Chinese of secretly shipping oil to North Korea, Mr. Trump explicitly said for the first time that he has “been soft” on China on trade in the hopes that its leaders will pressure North Korea to abandon its nuclear weapons program. He hinted that his patience may soon end, however, signaling his frustration with the reported oil shipments.

[..] Mr. Mueller’s investigation appears to be moving ahead despite predictions by Mr. Trump’s lawyers this year that it would be over by Thanksgiving. Mr. Trump said that he was not bothered by the fact that he does not know when it will be completed because he has nothing to hide. Mr. Trump repeated his assertion that Democrats invented the Russia allegations “as a hoax, as a ruse, as an excuse for losing an election.” He said that “everybody knows” his associates did not collude with the Russians, even as he insisted that the “real stories” are about Democrats who worked with Russians during the 2016 campaign. “There’s been no collusion. But I think he’s going to be fair,” Mr. Trump said of Mr. Mueller.

[..] Mr. Trump said he believes members of the news media will eventually cover him more favorably because they are profiting from the interest in his presidency and thus will want him re-elected. “Another reason that I’m going to win another four years is because newspapers, television, all forms of media will tank if I’m not there because without me, their ratings are going down the tubes,” Mr. Trump said, then invoked one of his preferred insults. “Without me, The New York Times will indeed be not the failing New York Times, but the failed New York Times.” He added: “So they basically have to let me win. And eventually, probably six months before the election, they’ll be loving me because they’re saying, ‘Please, please, don’t lose Donald Trump.’ O.K.”

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Russiagate has turned into a huge embarrassment.

Russiagate Is Devolving Into an Effort to Stigmatize Dissent (Carden)

Of all the various twists and turns of the year-and-a-half-long national drama known as #Russiagate, the effort to marginalize and stigmatize dissent from the consensus Russia-Trump narrative, particularly by former intelligence and national-security officials and operatives, is among the more alarming. An invasion-of-privacy lawsuit, filed in July 2017 by a former DNC official and two Democratic donors, alleges that they suffered “significant distress and anxiety and will require lifelong vigilance and expense” because their personal information was exposed as a result of the e-mail hack of the DNC, which, the suit claims, was part of a conspiracy between Roger Stone and the Trump campaign.

According to a report in The New York Times published at the time of the suit’s filing, “Mr. Trump and his political advisers, including Mr. Stone, have repeatedly denied colluding with Russia, and the 44-page complaint, filed on Wednesday in the Federal District Court for the District of Columbia, does not contain any hard evidence that his campaign did.” (Emphasis added.) In a new development, in early December, 14 former high-ranking US intelligence and national-security officials, including former deputy secretary of state William Burns; former CIA director John Brennan; former director of national intelligence James Clapper; and former ambassador to Russia Michael McFaul (a longtime proponent of democracy promotion, which presumably includes free speech), filed an amicus brief as part of the lawsuit.

The amicus brief purports to explain to the court how Russia deploys “active measures” that seek “to undermine confidence in democratic leaders and institutions; sow discord between the United States and its allies; discredit candidates for office perceived as hostile to the Kremlin; influence public opinion against U.S. military, economic and political programs; and create distrust or confusion over sources of information.” The former officials portray the amicus brief as an offering of neutral (“Amici submit this brief on behalf of neither party”) expertise (“to offer the Court their broad perspective, informed by careers spent working inside the U.S. government”).

The brief claims that Putin’s Russia has not only “actively spread disinformation online in order to exploit racial, cultural and political divisions across the country” but also “conducted cyber espionage operations…to undermine faith in the U.S. democratic process and, in the general election, influence the results against Secretary Hillary Clinton.”

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“The Fed will sell more bonds in the next 3-4 years than had been accumulated by all of the central banks of the world in all of recorded history as of 1995!”

US Fiscal Path Will Rattle the Rafters of the Casino – Stockman (SG)

[..] the US government is spending money like a drunken sailor. But nobody really seems to care. Since Nov. 8, the US national debt has risen $1 trillion. Meanwhile, the Russell 2000 (a small-cap stock market index) has risen by 30%. Former Reagan budget director David Stockman said this makes no sense in a rational world, and he thinks the FY 2019 is going to sink the casino. In a rational world operating with honest financial markets those two results would not be found in even remotely the same zip code; and especially not in month #102 of a tired economic expansion and at the inception of an epochal pivot by the Fed to QT (quantitative tightening) on a scale never before imagined.” Stockman is referring to economic tightening recently launched by the Federal Reserve. It’s not only the increasing interest rates.

By next April the Fed will be shrinking its balance sheet at an annual rate of $360 billion and by $600 billion per year as of next October. By the end of 2020, the Fed will have dumped $2 trillion of bonds from its books. Stockman puts this into perspective. So the net of it is this: The Fed will sell more bonds in the next 3-4 years than had been accumulated by all of the central banks of the world in all of recorded history as of 1995!” Now pause for just a moment and think about this. The GOP just passed a tax plan that will add another $1.5 trillion to the deficit. And word is Trump’s next big push will be to pass an infrastructure bill – even more spending and debt. Meanwhile, during a time of rising debt, the Fed will be flooding the market with bonds. And what do governments have to do to finance debt? That’s right. They sell bonds.

There is literally a fiscal red ink eruption heading straight at the Fed’s balance sheet shrinkage campaign that will rattle the rafters in the casino … Uncle Sam’s borrowing requirements are likely to hit $1.25 trillion or more than 6% of GDP in FY 2019 owing to the fact that the tax bill is so heavily front-loaded and the GOP’s wild spending spree for defense, disasters and much else.”

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It’s starting to feel like Xi is seriously stuck. Let zombies default, and accept the lost jobs and mom and pop investments, or keep propping them up.

China May Be A Bigger Worry For 2018 (CNBC)

For a market dependent on synchronized global growth, investors may be betting too much that China will not rock the boat next year. Part of the S&P 500’s rally to record highs this year comes on the back of better economic growth around the world. A major contributor to that growth was stability in China as leaders prepared for a key 19th Communist Party Congress this fall. Now that the congress is over and Beijing looks set to take action on its growing debt problems, worries about a sharper-than-expected slowdown in the world’s second-largest economy could hurt U.S. stocks. “With the 19th Party Congress now behind us, the risk is that the peak growth in China is also behind us,” David Woo, head of global rates, FX and EM FI strategy & econ research at Bank of America, said in an outlook report.

“Curiously, the market has been ignoring the string of negative Chinese data surprises in recent weeks. It is possible that the market views them as temporary.” “We are concerned that China could be vulnerable to US tax reform getting done,” Woo said, noting that a resulting increase in U.S. rates and the U.S. dollar would likely cause capital flight from China to accelerate and weaken the Chinese yuan. If that happens, China’s central bank would be likely “to tighten liquidity, which in turn would raise further concerns about the growth outlook,” he said. Fears of negative spillover from a rapid slowdown in China’s economy hit global markets in August 2015 after a surprise yuan devaluation. Further weakness in the currency in the first few weeks of 2016 contributed to the worst start to a year on record for both the Dow and S&P 500.

Since then, Chinese authorities have proven they are still able to control their economy. But stability has come at the cost of ever-increasing debt levels. The IMF warned in October that China’s banking sector assets have risen steadily to 310% of GDP from 240% of GDP at the end of 2012. S&P Global Ratings downgraded China’s long-term sovereign credit rating in September, following a similar downgrade by Moody’s in May. “If clusters of credit defaults start to form, concerns about contagion into the wider economy could take hold if fears of default in wealth management products arise,” UBS Wealth Management’s chief investment office said in its 2018 outlook. “Should this happen, the Chinese government, in our view, would likely have sufficient resources to prevent widespread contagion.”

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Xi made the conscious choice to rise on the shadow’s coat tails. Now he has to keep riding or else.

China’s Leaders Fret Over Debts Lurking In Shadow Banking System (R.)

Before the 2008 financial crisis, there was very little shadow banking in China. In the aftermath of that shock, Chinese authorities launched a massive effort to stimulate the economy, mostly through a huge increase in lending. This led to a boom in property and infrastructure spending that continues today. Demand for credit increased sharply, especially from local and municipal government-owned companies. To meet this demand, banks began selling wealth management products offering higher interest rates than normal deposits. Many investors believed these products were implicitly guaranteed by the issuer, even if it was not expressly stated in the contract. Banks also borrowed cash from other banks and companies. For banks, these funds can then be lent to borrowers prepared to pay higher rates.

But the banks want to sidestep rules designed to restrict lending to overheated sectors including property, mining and other resources. So, people in the shadow banking industry say, these loans are often disguised by directing them through a complex chain of intermediaries, including trusts, securities companies, other banks and asset managers. To earn interest on these loans, a bank will buy a financial product from one of the intermediaries, which directs earnings back to the bank. That allows the bank to describe what is really a loan as an investment on its books. This type of lending can be more profitable because banks can set aside much less capital than they are required to hold for regular loans as a safeguard against defaults. By the end of 2015, shadow lending was growing faster than traditional bank lending, and was equivalent to 57% of total bank loans, according to a 2016 report from investment bank CLSA.

This dramatically accelerated the speed at which overall debt expanded in China’s financial system. Moody’s said in a November report that China’s shadow banking assets grew more than 20% in 2016 to 64 trillion yuan ($9.8 trillion), equivalent to 86.5% of GDP. [..] At the center of shadow banking are the 12 nationally licensed joint stock banks and many of the more than 100 city commercial lenders which hold about a third of China’s commercial banking assets. From 2010, these mid-tier banks and regional lenders set about competing with the country’s so-called Big Five lenders, the state-controlled behemoths that dominate the economy. The key to the upstarts’ growth is selling wealth management products and borrowing from other banks, allowing them to create loans wrapped in financial instruments to give the appearance of investments.

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Translation: foreign reserves are fleeing. Blame the Trump tax plan.

China Temporarily Waives Taxes To Get Foreign Firms To Stay (AFP)

China will temporarily waive income taxes for foreign companies on profits they reinvest in the country as Beijing battles to retain foreign firms and investment. The finance ministry announced Thursday the new tax policy, which will apply retroactively from January so businesses will be able to take advantage of the exemption for this year’s taxes. The new incentives for foreign business to keep their earnings in China follow the passing last week of a corporate tax overhaul in the United States. The US reform will lower the tax rate for most corporations to 21%. Businesses in China pay 25%. The temporary exemption “will create a better investment environment for foreign investors and encourage foreign investors to sustain their investments in China,” a spokesman for the ministry of commerce said.

The policy announcement also comes as China has struggled with capital flight and tightened capital controls this year to stem the outflow of money. But foreign companies have long complained of the onerous bureaucracy they must navigate, barriers to market access, and policies that favour local firms. The new tax incentives aim to make China more attractive but come with a slew of restrictions. To be eligible, the profits must be invested in industries and activities where the Chinese government encourages foreign investment: manufacturing, services, research and development. Locations in the west of the country are also prioritised for development. Companies have three years to apply for the exemptions after paying tax.

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“This can happen only during the very late stage of a bubble.”

How Far the Scams & Stupidities around “Blockchain Stocks” are Going (WS)

It just doesn’t let up. UBI Blockchain Internet, a Hong Kong outfit whose shares trade in the US [UBIA], filed with the SEC to sell an additional 72.3 million shares owned by its executives. In other words, it isn’t selling the shares to raise money for corporate purposes, but to allow its executives, including CEO Tony Liu, to bail out. This is happening after the company – which sports zero revenues and a disconnected phone number in its SEC filings – managed to get its shares to spike briefly by over 1,100%, pushing its market capitalization to $8 billion. UBI Blockchain didn’t do an IPO. Instead, in October 2016, it acquired a publicly traded shell company registered in Las Vegas, called “JA Energy.” It then changed the name and ticker symbol to what they’re now.

Over the six trading days starting on December 11, 2017, its shares soared over 1,100%, from $7.20 to $87 on December 18, as the word “blockchain” in its name and sufficient hype and speculator-idiocy took hold. By December 21, shares had plunged 67% to $29. They closed on Wednesday at $38.50. At this price, it still has a ludicrous market cap of $3.64 billion. In its prospectus for the share sale, filed with the SEC on December 26, UBI explains the overcooked spaghetti of its dreamed-up activities: UBI Blockchain Internet Ltd. business encompasses the research and application of blockchain technology with a focus on the Internet of things covering areas of food, drugs and healthcare. Management plans to focus its business in the integrated wellness industry, by providing procedures for safety and effectiveness in food and drugs, but also preventing counterfeit or fake food and drugs.

With the advancement of the blockchain technology, the Company plans to trace a food or drug product from its original source within the context of the Internet of Things to the final consumer. It explains that “management is uncertain that the Company can generate sufficient revenues in the next 12-months to sustain our operations. We shall need to seek additional funding to continue our operations and implement our plan of operations.” It added that “due to the uncertainty of our ability to meet our financial obligations and to pay our liabilities as they become due,” the auditors in the financial statement for the year ended August 31, 2017, questioned “our ability to continue as a going concern.” For the year, UBI had an operating loss of $1.83 million on zero revenues. It had $15,406 in cash, and: “In order to keep the company operational and fully reporting, management anticipates a burn rate of approximately $220,000 per month, pre and post-offering.”

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Overtime for accountants.

IRS Guidance on Property Taxes Has the US Confused (BBG)

New guidance from the Internal Revenue Service that limits taxpayers’ ability to deduct prepaid property levies on their 2017 tax returns is causing confusion nationwide as people rush to pay in advance without knowing whether they’re wasting their time and money. The IRS said Wednesday that taxpayers can deduct prepaid state and local property taxes for 2018 on 2017 returns only if the taxes were assessed before 2018. The brief guidance – which doesn’t define the term “assessed” – had local tax officials scratching their heads. Some see the issue as an early signal of far wider confusion that’s coming soon – the predictable result of passing a bill that rewrites the tax code just two weeks before many of the changes take hold.

“This is the tip of the iceberg as state and local governments try to figure this out – and by the way, they’re trying to figure it out with one week before the changes take effect,” said Richard Auxier, a researcher with the Urban-Brookings Tax Policy Center, a Washington public policy group. “And that week happens to be the week between Christmas and New Year’s.” The IRS guidance comes after many state and local officials – including New York Governor Andrew Cuomo and New Jersey Governor Chris Christie – have taken pains to clear the way for their residents to accelerate property-tax payments. The nationwide flurry came ahead of the new tax law that will cap property tax deductions – along with those for state and local income taxes or sales taxes – at an overall total of $10,000.

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Uber just lost a third of its valuation.

Turns out, Uber Shareholders Are Eager to Sell at 30% Discount (WS)

Softbank, an acquisitive junk-rated Japanese holding company that also owns about 80% of Sprint, has been preparing for months to buy a large stake in Uber. At the end of November, it launched a tender offer to buy enough shares from investors and employees to give it a 14% stake. It dangled out a price of $33 a share, which valued Uber at $48 billion – a 30% discount from Uber’s “valuation” of $69 billion, which had been established behind closed doors during the last fund-raising round. The offer at a $48-billion valuation is even lower than Uber’s valuation back in June 2015 of $51 billion. When the tender offer was started, there was uncertainty if enough sellers would be willing to dump their shares at this discount. The other option for them would be to hold out until the IPO, in the hopes for a better deal. The tender offer expired today at noon Pacific Time.

Turns out, there are plenty of eager sellers – despite any dreams of a blistering IPO: The tendered shares amount to about 20% of the company’s equity, “people familiar with the matter” told the Wall Street Journal. But SoftBank will likely acquire only a 15% stake, “the people said.” Other members of the consortium SoftBank is leading – including Dragoneer Investment Group and Tencent Holdings – are likely to buy some but not all of the remaining tendered shares. This deal will not raise money for Uber itself but will allow employees and early investors to cash out some of their holdings – at a steep discount. But to maintain the illusion of the previous “valuation” of $69 billion – which is critical for a properly hyped future IPO – SoftBank will also make a $1-billion direct investment into Uber at the $69-billion “valuation,” as part of the deal.

Since startup “valuations” are based on the price paid during fund-raising, this $1-billion deal forms Uber’s new “valuation,” the same as the prior one. So the “valuation” illusion remains intact. [..] SoftBank already owns major stakes in other rideshare startups, including Didi Chuxing, the largest rideshare company in China; Grab, a major rideshare company in Southeast Asia; Ola, the largest rideshare company in India, slightly ahead of Uber; and 99, the largest rideshare company in Brazil. So SoftBank is serious about getting into this business on a global scale. But all rideshare companies are competing with each other, with taxis, rental cars, mass transit, and other modes of transportation on service and low fares, and they’re competing with each other to rope in drivers by offering them incentives.

The plan is to dominate the markets. And all of them are losing money hand over fist. The chart below shows what quarterly “adjusted” losses look like for Uber. Actual losses under GAAP would be much larger since the costs of employee stock compensation, interest, taxes, depreciation, and amortization have been stripped out of the figures that Uber shows the media:

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It’s hard to keep track of all the Monty Python moves at Downing Street 10.

UK Holds Back Historic Files on EU as It Prepares for Brexit (BBG)

As Prime Minister Theresa May prepares for the next round of Brexit negotiations, her government has held back publication of secret files relating to the creation of the European Union. The documents from 1992 were due to be released Friday at the National Archives under British rules that allow government papers to enter the public domain. Out of 495 files from the prime minister’s office that year, a total of 114 were held back. Of those, 12 related to European policy. The main opposition party was quick to pounce. Jon Trickett, a high-ranking Labour politician described it as “profoundly shocking, particularly given the current state of the national debate.”

May’s government has had a series of problems with information around Brexit. Last week, after months of ministers trying to keep them secret, the government published an assessments of how different segments of the economy will cope with leaving the EU. Lawmakers commented that the documents contained little that couldn’t be found on Wikipedia. The Cabinet Office, which supports May in running the government, said in an email that “there is no question that any files are deliberately ‘withheld’ from the media.” A further 26 files covering the EU were sent to the archives too late for journalists to read them before publication.

It explained that “we have to ensure all files are properly reviewed and prepared before they are transferred, so that they do not harm national security or our relations with other countries or disclose the sensitive personal data of living individuals.” The files that were released reveal the extent to which Britain’s 1992 expulsion from the Exchange Rate Mechanism turned Conservatives against Europe. That year, Sept. 16 was christened “Black Wednesday” after the government’s failed attempt to keep the pound within the system by pushing interest rates up to 15%.

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Everybody accuses everybody else, because assigning the blame is more important than helping the refugees.

Greek Migration Ministry Responds To Criticism Over Island Camps (K.)

The Migration Ministry has blamed local authorities for the grim conditions inside island migrant camps in the wake of criticism from a senior European Union official. In an interview with news website New Europe on Sunday, the EU’s special envoy on migration, Maarten Verwey, said the European Commission had made funding available to ensure appropriate accommodation for all. “However, the Commission cannot order the creation or expansion of reception capacity against the opposition of the competent authorities,” he added. Speaking to Kathimerini on Thursday, sources inside the ministry did not deny the existence of EU funds, adding however that Verwey had omitted any mention of the difficulties “although he has personal experience.”

Authorities on Lesvos and Chios have opposed government plans to expand screening centers for refugees. Meanwhile, only a small amount of the available funds have been absorbed. Of the 540 million euros earmarked until 2020, Greece has received just 97 million euros, according to the Economy Ministry. The same sources referred to recent remarks by Migration Minister Yiannis Mouzalas, who accused EU governments of “hypocrisy” for failing to shoulder their fair share of the refugee burden.

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Dec 272017
 
 December 27, 2017  Posted by at 10:18 am Finance Tagged with: , , , , , , , , , ,  


Vincent van Gogh Landscape with snow 1888

 

World’s Wealthiest Became $1 Trillion Richer in 2017 (BBG)
The Rich Are Getting So Much Richer So Fast Their Spending Can’t Keep Up (CNN)
Germany – A Most Dangerous And Ridiculous Nation (Bilbo)
Britons Borrow An Average £452 Each On Credit Cards At Christmas (G.)
Bitcoin’s Rally Has Taken A Pause (BBG)
Case-Shiller 20-Home Price Index Just Shy Of 2006 Bubble Peak (Mish)
China Bets on More State Control for 2018 (Balding)
Eight Lawsuits Over Apple Defrauding iPhone Users By Slowing Devices (R.)
From Snowden To Russia-gate – The CIA And The Media (Moon of A.)
Italy Rescues More Than 250 Migrants In Mediterranean (R.)

 

 

They won’t be able to keep doing this without facing pitchforks.

World’s Wealthiest Became $1 Trillion Richer in 2017 (BBG)

The richest people on earth became $1 trillion richer in 2017, more than four times last year’s gain, as stock markets shrugged off economic, social and political divisions to reach record highs. The 23% increase on the Bloomberg Billionaires Index, a daily ranking of the world’s 500 richest people, compares with an almost 20% increase for both the MSCI World Index and Standard & Poor’s 500 Index. Amazon.com founder Jeff Bezos added the most in 2017, a $34,2 billion gain that knocked Microsoft co-founder Bill Gates out of his spot as the world’s richest person in October. Gates, 62, had held the spot since May 2013, and has been donating much of his fortune to charity, including a $4.6 billion pledge he made to the Bill & Melinda Gates Foundation in August.

Bezos, whose net worth topped $100 billion at the end of November, currently has a net worth of $99.6 billion compared with $91.3 billion for Gates. George Soros also gave away a substantial part of his fortune, revealing in October that his family office had given $18 billion to his Open Society Foundations over the past several years, dropping the billionaire investor to No. 195 on the Bloomberg ranking, with a net worth of $8 billion. By the end of trading Tuesday, Dec. 26, the 500 billionaires controlled $5.3 trillion, up from $4.4 trillion on Dec. 27, 2016. “It’s part of the second-most robust and second-longest bull market in history,” said Mike Ryan, chief investment officer for the Americas at UBS Wealth Management, on Dec. 18. “Of all the guidance we gave people over the course of this year, the most important advice was staying invested.”

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It’s curious to see that so many people are so blind to the notion of economies and societies needing a minimum level of balance. When that balance is destroyed, a reaction must automatically and inevitably follow. The rich could have gone on enjoying their privileges for a long time, but greed got in the way.

The Rich Are Getting So Much Richer So Fast Their Spending Can’t Keep Up (CNN)

It’s never a bad year to be rich, exactly. But 2017 turned out to be a particularly good one. Rich people are doing so well these days that their spending on luxury goods isn’t even keeping up. Luxury spending rose 5% globally in 2017, the management consulting firm Bain & Company found. But that is a fraction of the 40% rise in net worth that people in America’s top-tenth of income earners saw between 2013 and 2016, according to the Federal Reserve. “We used to see that the growth of luxury was closely correlated with the stock market,” said Milton Pedraza, chief executive officer of the Luxury Institute, a consulting firm for high-end brands. “The stock market and real estate have gone up so much that nobody wants to spend all that money. It’s impossible.”

The big increase in wealth has exacerbated a long-evolving financial split between those at the very top and those at the bottom, even as the robust economy has lifted many working people with jobs and higher wages. Here are some examples. The S&P 500 Index has risen 20% since the beginning of the year and the Dow Jones Industrial Average is up 25%, fattening portfolios and boosting dividends. To a certain extent, the benefits are shared through ownership of 401(k) accounts. But only about half of Americans participate in an employer-sponsored retirement fund, according to the Pew Research Center, and a much smaller 18.7% of Americans own stock directly. In both cases, market participation is skewed toward those with higher incomes, which means that the wealthy disproportionately benefit from Wall Street’s boom.

Home prices reached all-time highs, according to the Case-Shiller home price index. That’s especially the case in hot markets like Seattle and San Francisco, where many working people are already unable to afford ownership. Although homeownership is a source of middle class wealth, homeowners generally tend to be higher-income. According to the Census Bureau, 78.4% of families making more than the median income own homes, compared to 49.5% of those making less.

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Just another chapter in the ‘Rich Getting Richer’ files. This too will evoke a response.

Germany – A Most Dangerous And Ridiculous Nation (Bilbo)

Germany’s domination of the EMU is clear both in political and economic terms. The current political impasse within Germany will not change that. Once resolved the on-going government will continue in the same vein – running excessive fiscal surpluses and huge external surpluses. It can sustain those positions because it dominates European policy and can force the adjustment to these overall ‘unsustainable’ positions onto both its own citizens (lowering their material living standards), and, more obviously, onto citizens of other EMU nations, most noticeably Spain and Greece. If it couldn’t bully nations like Greece, Italy, Spain and even France, Germany’s dangerous domestic strategy would be less effective. If all EMU nations followed Germany’s lead – then there would be mass Depression throughout Europe. This dangerous and ridiculous nation is a blight.

Only by exiting the Eurozone and floating their currencies against the currency that Germany uses can these beleaguered EMU nations gain some respite. When the Europhile Left come to terms with that obvious conclusion things might change within Europe. The following graph (using IMF WEO data) shows the sectoral balances for Germany from 1991 to 2017 (the last year is estimated). It is an extraordinary graph really in the context of Germany’s integral role in the Economic and Monetary Union (EMU). Germany is part of a currency union and its outcomes are much more closely tied to the fortunes of its EMU partners than say a nation, such as Australia, which has its own currency and floats it on international markets. What you see are two distinct EMU periods, when Germany was in gross violation in one way or another of the Treaty rules (laws).

It is not overstating the case to say that the increased poverty and hardship for citizens within Europe is directly related to the German government’s obsession with fiscal and external surpluses and its intransigence when confronted about this. Germany has become a dangerous yet ridiculous nation. While the Financial Times article (Dec 22, 2017) – The fiscal surplus that Germany should spend – referred to “Germany’s fiscal surplus” as an: ..a chronic embarrassment of riches.. I would prefer to refer to it as an embarrassing example of policy vandalism and an illegal assault on the rules that Germany has signed up to follow. Why illegal? Because it is directly related to Germany’s violation of the Macroeconomic Imbalance Procedure, which specifies under its so-called Scoreboard Indicators that the “major source of macroeconomic imblances” includes a: “3-year backward moving average of the current account balance as% of GDP, with thresholds of +6% and -4%”.. So the upper warning threshold (for an external surplus) is 6% of GDP.

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Nicely put: “January should be a time for looking ahead but up and down the country millions of Brits will be looking over their shoulder at the cost of their festive spending..”

Britons Borrow An Average £452 Each On Credit Cards At Christmas (G.)

The Christmas spending hangover means that Britons who splurged on plastic will start 2018 owing an average of more than £450 on their credit cards – with many fearful the debt will still be haunting them by next Christmas. Nearly £8.5bn has been loaded on to cards to cover the cost of gifts and entertaining, according to research by the price comparison service uSwitch, which found nearly a fifth of consumers had exceeded their Christmas budget as they grappled with rising living costs. “January should be a time for looking ahead but up and down the country millions of Brits will be looking over their shoulder at the cost of their festive spending,” said Tashema Jackson, money expert at uSwitch.com which polled 4,000 consumers.

The survey found Britons had borrowed an average of £452 to cover the cost of the festivities. One annual survey found that the UK’s cheapest supermarket Christmas dinner cost 18% more than last year, as the impact of inflation and Brexit-related commodity costs made its way to the festive family table. Half of the respondents told uSwitch they were worried they would still be trying to clear the debt in December 2018. Nearly one in 10 were still paying off debts dating back to last Christmas.

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If you bought at $19,000 and used leverage, does this still feel like a pause?

Bitcoin’s Rally Has Taken A Pause (BBG)

Bitcoin’s rally took a pause Wednesday, suggesting it isn’t about to make another run at its record reached last week. The fervor that propelled the digital currency past $19,000, prompted in part by regulated U.S. derivatives exchanges starting to trade contracts based on the unit this month, has yet to return. Bitcoin traded around $15,947 as of 10:31 a.m. Tokyo time Wednesday, according to composite prices on Bloomberg, up 0.1% from late Tuesday though below that day’s high. “Nobody knows the ultimate value of this underlying asset,” Edward Stringham, president of the American Institute for Economic Research, said on Bloomberg Television. “We cannot predict whether it’s going to be zero or one million dollars or anything in between.”

For skeptics doubting whether individuals and businesses will truly start using bitcoin as a medium of exchange – as opposed to some officially backed digital currency – the short-lived rebound from the past week’s selloff portends further declines. “It’s much more likely once you’ve made a big downward movement like the one we made last week that you have a bigger and more complex correction,” Ric Spooner, a Sydney-based analyst at CMC Markets, told Bloomberg Television. “Once a market like this one locks into those patterns it becomes pretty good” to follow via chart-based analysis, he said. Spooner said it’s possible bitcoin could drop to $5,700 or $8,700 in coming months.

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“Congratulations. The Fed re-blew the housing bubble. In the misguided way in which the Fed calculates inflation, none of this is considered inflationary. Few new buyers can afford to buy.”

Case-Shiller 20-Home Price Index Just Shy Of 2006 Bubble Peak (Mish)

The Case-Shiller national home price index surged past the pre-recession high last year. The city composites lag. Steady gains continue in the Case-Shiller Home Price Indexes.

Case-Shiller Year-Over-Year Summary
• The National Home Price NSA Index reported a 6.2% annual gain in October, up from 6.1% in the previous month.
• The 10-City Composite annual increase came in at 6.0%, up from 5.7% the previous month.
• The 20-City Composite posted a 6.4% year-over-year gain, up from 6.2% the previous month.
• Seattle, Las Vegas, and San Diego reported the highest year-over-year gains among the 20 cities. In October, Seattle led the way with a 12.7% year-over-year price increase, followed by Las Vegas with a 10.2% increase, and San Diego with an 8.1% increase.

Nine cities reported greater price increases in the year ending October 2017 versus the year ending September 2017.

Case-Shiller Month-Over-Month Summary
• Before seasonal adjustment, the National Index, 10-City and 20-City Composites all posted a month-over-month gain of 0.2% in October.
• After seasonal adjustment, the National Index, 10-City and 20-City Composites all recorded a 0.7% month-over-month increase in October.
• Eleven of 20 cities reported increases in October before seasonal adjustment, while all 20 cities reported increases after seasonal adjustment.

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Xi cannot afford to even allow teh suggestion that he loses control; at the same time he needs to generate growth. He may well find the two contradict each other.

China Bets on More State Control for 2018 (Balding)

First, watch the data, not the New Year’s resolutions. While China touts deleveraging efforts, the data is mixed. The debt-to-GDP ratio in China is only up slightly from 2016 to 260%, though it is expected to top out at 327% in 2022. The moderation was due not to slowing debt growth, but a jump in commodity prices that pushed up nominal GDP. Watch debt growth in 2018: Prices are expected to fall again, raising debt-to-GDP. China still has not given up its debt habit. Second, the Federal Reserve rate hikes last year were likely to play a big role in Chinese policy. In retrospect, they did and did not. Interest rates in China are up sharply, with even interbank rates over one month up 1.5% since January 2017. Money market rates are up to 6.39% for 14-day repurchases.

Rate increases are putting pressure on Chinese corporate bonds given the overwhelmingly short-term nature of borrowing, which constantly resets rates. Oddly, even as U.S. interest rates increased, the dollar fell, with indexes down 9%. Though it is unclear why the dollar fell, if the Fed hikes four times as predicted by Goldman Sachs, this could cause the currency to reverse course. A strong dollar and rising U.S. rates will pressure China. Third, heading into the National Congress, I said watch out for Chinese politics. Though Premier Li Keqiang remains in office, Beijing clearly swept away any vestiges of market adherence. The installation of Party committees over the board of directors in foreign firms and major state-owned enterprises laid bare Beijing’s ambition. Communist Party strength would take priority over everything.

As we look into 2018, some of these themes carry forward, but with a twist. Beijing is solidifying its control over all aspects of the economy. The Party released new rules on overseas investments by firms and has enforced rules mandating that banks balance their foreign exchange transactions. After the Fed recently raised rates by 0.25%, the People’s Bank of China followed with a hike of only 0.05%, confident it can tame any potential outflows. If the Fed hikes another three times and the dollar does not drop another 10%, this would push interest rates in China for debt over six months close to an intolerable 8% and reduce foreign exchange reserves beneath the $3 trillion level.

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What a curious mistake.

Eight Lawsuits Over Apple Defrauding iPhone Users By Slowing Devices (R.)

Apple defrauded iPhone users by slowing devices without warning to compensate for poor battery performance, according to eight lawsuits filed in various federal courts in the week since the company opened up about the year-old software change. The tweak may have led iPhone owners to misguided attempts to resolve issues over the last year, the lawsuits contend. All the lawsuits – filed in U.S. District Courts in California, New York and Illinois – seek class-action to represent potentially millions of iPhone owners nationwide. A similar case was lodged in an Israeli court on Monday, the newspaper Haaretz reported. The company acknowledged last week for the first time in detail that operating system updates released since “last year” for the iPhone 6, iPhone 6s, iPhone SE and iPhone 7 included a feature “to smooth out” power supply from batteries that are cold, old or low on charge.

Phones without the adjustment would shut down abruptly because of a precaution designed to prevent components from getting fried, Apple said. The disclosure followed a Dec. 18 analysis by Primate Labs, which develops an iPhone performance measuring app, that identified blips in processing speed and concluded that a software change had to be behind them. One of the lawsuits, filed Thursday in San Francisco, said that “the batteries’ inability to handle the demand created by processor speeds” without the software patch was a defect. “Rather than curing the battery defect by providing a free battery replacement for all affected iPhones, Apple sought to mask the battery defect,” according to the complaint.

[..] The problem now seen is that users over the last year could have blamed an aging computer processor for app crashes and sluggish performance – and chose to buy a new phone – when the true cause may have been a weak battery that could have been replaced for a fraction of the cost, some of the lawsuits state.

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“Bezos and Omidyar obviously helped the NSA to keep more than 95% of the Snowden archive away from the public…”

From Snowden To Russia-gate – The CIA And The Media (Moon of A.)

The promotion of the alleged Russian election hacking in certain media may have grown from the successful attempts of U.S. intelligence services to limit the publication of the NSA files obtained by Edward Snowden. In May 2013 Edward Snowden fled to Hongkong and handed internal documents from the National Security Agency (NSA) to four journalists, Glenn Greenwald, Laura Poitras, and Ewen MacAskill of the Guardian and separately to Barton Gellman who worked for the Washington Post. Some of those documents were published by Glenn Greenwald in the Guardian, others by Barton Gellman in the Washington Post. Several other international news site published additional material though the mass of NSA papers that Snowden allegedly acquired never saw public daylight.

In July 2013 the Guardian was forced by the British government to destroy its copy of the Snowden archive. In August 2013 Jeff Bezos bought the Washington Post for some $250 million. In 2012 Bezos, the founder, largest share holder and CEO of Amazon, had already a cooperation with the CIA. Together they invested in a Canadian quantum computing company. In March 2013 Amazon signed a $600 million deal to provide computing services for the CIA. In October 2013 Pierre Omidyar, the owner of Ebay, founded First Look Media and hired Glenn Greenwald and Laura Poitras. The total planned investment was said to be $250 million. It took up to February 2014 until the new organization launched its first site, the Intercept. Only a few NSA stories appeared on it. The Intercept is a rather mediocre site.

Its management is said to be chaotic. It publishes few stories of interests and one might ask if it ever was meant to be a serious outlet. Omidyar has worked, together with the U.S. government, to force regime change onto Ukraine. He had strong ties with the Obama administration. Snowden had copies of some 20,000 to 58,000 NSA files. Only 1,182 have been published. Bezos and Omidyar obviously helped the NSA to keep more than 95% of the Snowden archive away from the public. The Snowden papers were practically privatized into trusted hands of Silicon Valley billionaires with ties to the various secret services and the Obama administration.

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The EU is actively assisting Libya’s slave trade. That is quite something to close off the year with.

Italy Rescues More Than 250 Migrants In Mediterranean (R.)

More than 250 migrants were rescued in the central Mediterranean during the night between Monday and Tuesday, Italy’s Coast Guard said. A statement said the migrants, in one large rubber dinghy and two small boats, were rescued in three missions by two ships, one from a non-governmental organization. Migrant arrivals to Italy have fallen by two-thirds year on year since July after officials working for the U.N.-backed government in Tripoli put pressure on people smugglers in the Libyan city of Sabratha to stop boats leaving. Italy is also bolstering the Libyan coast guard’s ability to turn back boats. Last week, the United Nations began bringing African refugees to Italy from Libya, evacuating them from detention centers whose conditions have been condemned by rights groups as inhumane.

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Dec 192017
 
 December 19, 2017  Posted by at 9:40 am Finance Tagged with: , , , , , , , , , ,  


Edwin Rosskam Store in alley-dwelling section of Washington, DC 1941

 

China’s Growth Story… Don’t Look For A Happy Ending! (Hamilton)
One Of The Co-Founders Of Bitcoin.com Has Sold All Of His Bitcoin (BI)
Germany Backs French-Led Push for Global Bitcoin Regulation (BBG)
The EU’s Top Court Will Decide Whether Or Not Uber Is A Taxi Company (BBG)
UK Cannot Have A Special Brexit Deal For The City – EU (G.)
Bad Moon: (Trouble) Rising (Crooke)
The RussiaGate Witch-Hunt -The Deep State’s “Insurance Policy” (Stockman)
The Darkest Hours (Jim Kunstler)
As Catalan Vote Looms, Jailed Leader Offers Olive Branch To Spain (R.)
Germany’s Entire Submarine Fleet Is Paralyzed (ZH)
We’re Buying More Stuff We Don’t Need (BBG)
ECB Sued Over Decision To Freeze Help To Greek Banks (R.)
Let It Go: The Arctic Will Never Be Frozen Again (Grist)

 

 

No domestic consumers, no foreign clients. But a truckload of debt going forward.

China’s Growth Story… Don’t Look For A Happy Ending! (Hamilton)

Many economists suggest China is on the cusp of significant growth in domestic consumer demand. That this rising domestic demand coupled with continued growth as the global exporter will push the global economy further. However, I’ll briefly show why neither of these outcomes is remotely likely.

Problem #1- China as Consumer: According to the UN data, China’s 15-40yr/old childbearing population peaked in 2005 and has been rapidly shrinking since. Since ’05, China’s population capable of producing more Chinese has fallen by 83 million persons or a 14.3% decline. By 2030, China’s childbearing population will have declined by 157 million or a 27% reduction of those capable of childbirth (no estimate here…this is simply moving the existing population forward in adulthood). Couple a massive decline in the childbearing population and the ongoing negative birthrate and serious depopulation (particularly among the rural regions) is not only possible but growing more likely. Minor increases in wages will be no match for the massive declines in the consumer base. The chart below shows China’s total 15 to 40 year old population (in blue) and the annual change (in red).

Problem #2- China as Exporter:
Who will China continue to export to? The primary importers of China’s goods are N. America (US/Canada), Europe (including Russia and Eastern Europe), Australia/New Zealand. These nations represent roughly one seventh of the world’s population but consume over half of all the worlds oil production. But here again I have the same problem; combined childbearing population peaked in 1988 and has been declining since. The population capable of childbirth has fallen over 40 million or nearly 10% since the ’88 peak. By 2030, despite many of these nations allowing, promoting, and/or enduring large immigrations of precisely this age of migrants, the population is anticipated to be 60 million fewer than during the peak, or a 15% fall from peak. The basis of present and future demand growth simply is non-existent.

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Illiquidity.

One Of The Co-Founders Of Bitcoin.com Has Sold All Of His Bitcoin (BI)

Bitcoin.com is one of the world’s largest bitcoin sites, having grown its profile thanks to the insane price surge of the cryptocurrency this year. But its co-founder and CTO, Emil Oldenburg, a Swedish native, is extremely skeptical of bitcoin’s future. “I would say an investment in bitcoin is right now the riskiest investment you can make. There’s an extremely high risk,” he says in an interview with Swedish tech site Breakit. “I have in fact sold all my bitcoins recently and switched to bitcoin cash,” says Oldenburg, referring to the problems with bitcoin’s high transaction costs and lead times. Indeed, by some counts, bitcoin transaction fees are doubling every three months, and it now takes on average 4.5 hours to confirm a bitcoin transaction. Ars Technica reported that fees reached $US26 ($34) per trade recently. Bitcoin.com operates in everything that has to do with bitcoins.

Today, the site – based out of Tokyo but registered on St Kitts – has tens of millions of unique monthly visitors, according to Similarweb, a web analytics site. The company’s biggest single revenue stream is its so called bitcoin “mining pool”, where it forges new units of the cryptocurrency that are released on the market. Oldenburg doesn’t want to disclose any revenue numbers, more than revealing “it’s an awfully lot of money”, he says to Breakit. Even on a personal level. “All my salary in the past three years has come in bitcoin,” just as those of his 60 colleagues in Tokyo, Oldenburg says. But according to the Swedish bitcoin expert, it’s time to change to bitcoin cash. There’s a big reason for that switch, and it’s all about the market liquidity — or lack thereof — of bitcoin.

The reason why people haven’t understood the risks inherent in owning bitcoins, according to Oldenburg, is simply because most have so far only bought the cryptocurrency — but never sold or traded with them. “As soon as people realise that this is how it works, they will start to sell,” he tells Breakit. “The old bitcoin network is as good as unusable.” While buying, selling or trading in bitcoins is not an issue today, according to Oldenburg, the problems surface when bitcoin transactions are recorded on the blockchain, the digital ledger that records each transaction. The problem centres on the limited amount of transactions per second you can make in the bitcoin network, which in turn depends on the formation of the memory “block size” that store the transactions. This, according to Oldenburg, makes for a very illiquid and unusable cryptocurrency.

[..] In what may be considered somewhat ironic, Oldenburg says bitcoin.com is distancing itself from bitcoin and has even stopped developing services for it — to mostly focus on bitcoin cash, the currency that split from bitcoin back in August, and recently overtook Ethereum as the world’s second-largest cryptocurrency. “It only costs $0.012 (10 Swedish “öre”, the centesimal subdivision of krona) to send a [Bitcoin Cash transaction] and there are no lead times. The only drawback is that you need larger hard drives, but that’s not a problem for most people,” Oldenburg says to Breakit.

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One tiny problem: how can you regulate something you don’t understand: “I don’t like it,” Le Maire said of bitcoin. [..] we need to look at it, study it,” he said.

Germany Backs French-Led Push for Global Bitcoin Regulation (BBG)

Germany joined European governments pushing for global bitcoin regulation amid mounting alarm that the world’s most popular digital currency is being used by money-launderers, drug traffickers and terrorists. Germany’s Finance Ministry said it welcomed a proposal by French Finance Minister Bruno Le Maire to ask his counterparts in the Group of 20 to consider joint regulation of bitcoin. The concerns are shared by the Italian government, which is also open to discussing regulation, while the European Union is bringing in rules backed by the U.K. that would apply to bitcoin. “It makes sense to discuss the speculative risks of virtual currencies and their impact on the financial system at international level,” the Finance Ministry in Berlin said in an email. The next meeting of G-20 finance ministers and central bank governors would be “a good opportunity to do so.”

Signs of growing European concern came as bitcoin took another step toward acceptability with the launch of futures trading Sunday night at CME’s venue. That’s a week after Chicago rival Cboe Global Markets introduced similar derivatives on the volatile cryptocurrency that was created in the wake of the 2008 financial crisis as an alternative to banks and government-issued currencies. Bitcoin was closing in on a fresh record of $20,000 on Monday. The Finance Ministry in Germany, Europe’s biggest economy, “monitors developments in the financial market very closely,” it said. “This also applies to the current development of bitcoin.” While Europe’s concerns have been voiced before in select forums about a currency which is stepping further into the mainstream financial world, Le Maire made those worries public in a weekend interview. “I don’t like it,” Le Maire said of bitcoin. “It can hide activities such as drug trafficking and terrorism,” and he has concerns for savers. “There is an obvious speculative risk, we need to look at it, study it,” he said.

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You can’t forever hide behind the word ‘tech’. Or every company can do it.

The EU’s Top Court Will Decide Whether Or Not Uber Is A Taxi Company (BBG)

Uber Technologies is set to reach the end of the road in a legal battle over a question that’s reached the European Union’s top court – is the world’s most valuable startup a taxi company or not? Uber has argued that it’s a technology platform connecting passengers with independent drivers, not a transportation company subject to the same rules as taxi services. The decision is being closely watched by the technology industry because it could set a precedent for how other companies in the burgeoning gig economy are regulated across the 28-nation bloc. “The judgment will either promote the digital single market or lead to more market fragmentation for online innovators,” said Jakob Kucharczyk, of the Computer & Communications Industry Association, which speaks for companies like Uber, Amazon.com, Google and Facebook. “The court should make a clear distinction between the online intermediation and the underlying service it facilitates.”

The case centers around UberPop, an inexpensive ride-hailing service Uber launched in several European cities that allowed drivers without a taxi license to use their own cars to pick up passengers. Legal challenges have forced Uber to shutter its UberPop services in most major European companies in favor of UberX, which requires drivers to get a license. A loss for Uber would mean countries in the EU will have to classify Uber as a transportation service. While Uber adheres to many taxi laws in countries where it operates, the case could lead to new regulations and fees. “Any ruling will not change things in most EU countries where we already operate under transportation law,” Uber said in a statement. “However, millions of Europeans are still prevented from using apps like ours. As our new CEO has said, it is appropriate to regulate services such as Uber. We want to partner with cities to ensure everyone can get a reliable ride at the tap of a button.”

The question of whether Uber is a transport service has long vexed regulators and lawmakers across Europe. Uber has faced roadblocks, real and regulatory, across Europe, amid complaints brought by taxi drivers who say the company tries to unfairly avoid regulations that bind established competitors. Without the pressure from regulators, companies in the gig economy will force other businesses to employ similarly aggressive business practices, said Andrew Taylor, who earlier this year was commissioned by U.K. Prime Minister Theresa May to come up with recommendations to regulate the gig economy. “There’s a danger of a race to the bottom,” said Taylor. “Major American companies are treating national norms, culture, regulators and tax systems in a cavalier way.”

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What’s going to be left of Britain without the City?

UK Cannot Have A Special Brexit Deal For The City – EU (G.)

Britain cannot have a special deal for the City of London, the European Union’s chief Brexit negotiator has told the Guardian, dealing a blow to Theresa May’s hopes of securing a bespoke trade agreement with the bloc. Michel Barnier said it was unavoidable that British banks and financial firms would lose the passports that allow them to trade freely in the EU, as a result of any decision to quit the single market. “There is no place [for financial services]. There is not a single trade agreement that is open to financial services. It doesn’t exist.” He said the outcome was a consequence of “the red lines that the British have chosen themselves. In leaving the single market, they lose the financial services passport.”

The stark declaration quashes the hopes of the Brexit secretary, David Davis, for a unique trade deal that would include financial services. The Brexit secretary has called for a “Canada plus plus plus” deal with the EU, a reference to the free trade agreement struck between Ottawa and Brussels in 2016, but with the crucial addition of financial services. In an exclusive interview with European newspapers, including the Guardian, Barnier gave examples of his own three pluses – judicial cooperation, defence and security and aviation.

The negotiator also said: • A trade deal could be agreed within a two-year transition period, but would have to be ratified by more than 35 national and regional parliaments. • The UK could not stop Brexit unilaterally, arguing that overturning the decision to leave would require the consent of 27 EU member states – a view at odds with one of the authors of article 50, Lord Kerr. • The UK must follow all rules and regulations of the EU during the transition period, including new laws passed after the UK has left. • The UK could negotiate trade agreements with the rest of the world during the transition, but they could not come into force. • He would not confirm British estimates that the final Brexit bill – the UK’s outstanding obligations to the EU – would be no more than €45bn (£39bn).

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Boy, what a failure Russiagate has been. How do you recover from that?

Bad Moon: (Trouble) Rising (Crooke)

President Obama lay very much in the globalist ‘struggle for a democratic-liberal world’ mould, (though he did try to make the ‘ruling interests’ understand that there were limits: that there had to be boundaries to US commitments). In other words, Obama accepted the globalist premise, though he tried to mitigate some of its military impulses. Notably however, he acquiesced to re-heating the Russia ‘threat’ (after Medvedev gave place to Mr Putin (thus ending Obama’s hope to seduce Russia into the embrace of the global economic order). But then Donald Trump, elected President by his deplorables’ base, made clear that he wished for détente with Russia, and even disdained the claims made on ordinary Americans by the maintenance of America’s unipolar global ‘order’.

For this heresy, he has been punished by the manufactured ‘Russiagate’ non-scandal. “Can a president, concerned that he might be removed from office by a special prosecutor or possibly assassinated, resist the march toward war?” – asks Paul Craig Roberts, who asserts that the President has been effectively caged, by a trifecta of Establishment generals, on the one hand; and by a Goldman Sachs posse, on the other. That the ‘ruling interests’ have managed substantially to contain President Trump is undeniable, but what is new, and perhaps – or perhaps, not – alters the calculus, is that these ‘ruling interests’ have had to come out from the shadows into the open.

The former Acting Director of the CIA, Mike Morrell, an early voice peddling the Russian collusion meme now publicly admits in a surprisingly frank interview with Politico, his leading role in the intelligence community waging political war against President Trump, describing his actions as something he didn’t “fully think through”, adding that maybe it wasn’t such a great idea to leak against, and bash a new president: “There was a significant downside”, Morrell acknowledges. Just to recall: Not only had Morell in an early NY Times op-ed piece asserted that he was committed to doing “everything I can to ensure that she [Hillary Clinton] is elected as our 45th president”, but he went so far as to call then candidate Trump “a threat to our national security”, while making the extraordinary claim that “in the intelligence business, we would say that Mr. Putin had recruited Mr. Trump as an unwitting agent of the Russian Federation.”

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A list of people who never worked an honest job.

The RussiaGate Witch-Hunt -The Deep State’s “Insurance Policy” (Stockman)

There was a sinister plot to meddle in the 2016 election, after all. But it was not orchestrated from the Kremlin; it was an entirely homegrown affair conducted from the inner sanctums – the White House, DOJ, the Hoover Building and Langley – of the Imperial City. Likewise, the perpetrators didn’t speak Russian or write in the Cyrillic script. In fact, they were lifetime beltway insiders occupying the highest positions of power in the US government. Here are the names and rank of the principal conspirators: John Brennan, CIA director; Susan Rice, National Security Advisor; Samantha Power, UN Ambassador; James Clapper, Director of National Intelligence; James Comey, FBI director; Andrew McCabe, Deputy FBI director; Sally Yates, deputy Attorney General, Bruce Ohr, associate deputy AG; Peter Strzok, deputy assistant director of FBI counterintelligence; Lisa Page, FBI lawyer; and countless other lessor and greater poobahs of Washington power, including President Obama himself.

To a person, the participants in this illicit cabal shared the core trait that made Obama such a blight on the nation’s well-being. To wit, he never held an honest job outside the halls of government in his entire adult life; and as a careerist agent of the state and practitioner of its purported goods works, he exuded a sanctimonious disdain for everyday citizens who make their living along the capitalist highways and by-ways of America. The above cast of election-meddlers, of course, comes from the same mold. If Wikipedia is roughly correct, just these 10 named perpetrators have punched in about 300 years of post-graduate employment – and 260 of those years (87%) were on government payrolls or government contractor jobs.

As to whether they shared Obama’s political class arrogance, Peter Strzok left nothing to the imagination in his now celebrated texts to his gal-pal, Lisa Page: “Just went to a southern Virginia Walmart. I could SMELL the Trump support……I LOATHE congress….And F Trump.” You really didn’t need the ALL CAPS to get the gist. In a word, the anti-Trump cabal is comprised of creatures of the state.

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“..even hogs busy fattening up don’t have a clue about their imminent slaughter.”

The Darkest Hours (Jim Kunstler)

The Tax “Reform” bill working its way painfully out the digestive system of congress like a sigmoid fistula, ought be re-named the US Asset-stripping Assistance Act of 2017, because that’s what is about to splatter the faces of the waiting public, most of whom won’t have a personal lobbyist / tax lawyer by their sides holding a protective tarpulin during the climactic colonic burst of legislation. Sssshhhh…. The media has not groked this, but the economy is actually collapsing, and the nova-like expansion of the stock markets is exactly the sort of action you might expect in a system getting ready to blow. Meanwhile, the more visible rise of the laughable scam known as crypto-currency, is like the plume of smoke coming out of Vesuvius around 79 AD — an amusing curiosity to the citizens of Pompeii below, going about their normal activities, eating pizza, buying slaves, making love — before hellfire rained down on them.

Whatever the corporate tax rate might be, it won’t be enough to rescue the Ponzi scheme that governing has become, with its implacable costs of empire. So the real aim here is to keep up appearances at all costs just a little while longer while the table scraps of a four-hundred-year-long New World banquet get tossed to the hogs of Wall Street and their accomplices. The catch is that even hogs busy fattening up don’t have a clue about their imminent slaughter. The centerpiece of the swindle, as usual, is control fraud on the grand scale. Control fraud is the mis-use of authority in applying Three-Card-Monte principles to financial accounting practice, so that a credulous, trustful public will be too bamboozled to see the money drain from their bank accounts and the ground shift under their feet until the moment of freefall.

Control fraud is at work in the corporate C-suites, of course, because that is its natural habitat — remember that silver-haired CEO swine from Wells Fargo who got off scot-free with a life-time supply of acorns after scamming his account-holders — but their errand boys and girls in congress have been superbly groomed, pampered, fed, and trained to break trail and cover for them. The country has gotten used to thinking that the game of pretend is exactly the same as what is actually going on in the world. The now-seminal phrase coined by Karl Rove, “we make our own reality,” is as comforting these days to Republicans from Idaho as it is to hairy, “intersectional” professors of post-structural gender studies in the bluest ivory towers of the Ivy League. Nobody in this Republic really wants to get his-hers-zhe’s-they’s reality on.

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How can you have a fair election with so many people either in jail or in exile?

As Catalan Vote Looms, Jailed Leader Offers Olive Branch To Spain (R.)

The jailed leader of Catalonia’s main pro-independence party has backed away from demands for unilateral secession from Spain, days before a regional election that polls suggest will produce a hung parliament. The independence drive has tipped Spain into its worst political crisis since the return of democracy in the 1970s, dividing opinion in the region, denting an economic rebound and prompting a business exodus to other parts of the country. In reply to written questions from Reuters passed to him in prison where he is being held on allegations of rebellion and sedition, Oriol Junqueras struck a conciliatory tone. He wrote that he would continue to pursue independence if he became Catalonia’s next president, but also “build bridges and shake hands” with representatives of the Spanish state.

“I can assure you that we are democrats before we are separatists and that the aim (of gaining independence) does not always justify the means,” he said in comments that appeared to drop his party’s earlier demand for unilateral secession. Junqueras’ Esquerra Republicana (Republican Left) party is tipped to become the largest separatist force in parliament in Thursday’s ballot, but surveys suggest neither the pro-independence nor the pro-unity camp will win a majority. He was deputy leader of the Catalan government that was sacked in October after the regional assembly unilaterally declared independence following a referendum that central authorities had deemed illegal. Madrid also dissolved the assembly and called fresh elections.

The Spanish justice system’s actions against the region’s leaders has since then hamstrung the pro-independence camp and further muddied the electoral waters before Thursday’s vote. Catalonia’s ex-president Carles Puigdemont is campaigning from self-imposed exile in Brussels and Junqueras doing so from jail along with several other politicians. It is unclear if many of those likely to be elected will be able to attend parliament.

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The Russians did it.

Germany’s Entire Submarine Fleet Is Paralyzed (ZH)

Throughout 2017, America’s control of NATO policymaking has become more evident than ever, with the sole objective of war-making against Russia. NATO and Russia continue to build up arms, equipment, and troops along the eastern region of Europe, but there is a new development that has NATO worried. Germany’s operational readiness of its entire submarine fleet is dead in the water. Yes, you heard that correctly, Germany’s prized submarines are currently on maintenance calls or in desperate need of repairs. On October 15, Germany lost the last of its submarines when the Type 212a vessel was performing a diving maneuver off the Norweigan coast when it suffered a catastrophic blow to one of its four fins after the submarine struck a boulder. The submarine was quickly rendered not operational and had to be towed back to the German port of Kiel for maintenance work.

In the latest operational summary provided by RT, there are six submarines in the German fleet and all are out of service. Two Type 212a vessels are undergoing scheduled maintenance, and will be redeployed in the second half of 2018, while another two are in a critical state for repairs, with no estimated time of completion. The fifth submarine, as we mentioned above, crashed in October. The sixth submarine was commissioned in October and is currently undergoing rigorous sea trials before it will become operational in May 2018. Germany’s submarine fleet will be paralyzed for the next 4-5 months, which presents an enormous national security risk for the country. The submarines’ most fundamental feature is stealth, coupled with defense capabilities and surveillance, but as mentioned above, there is currently a major gap in Germany’s military defense at the moment, which we hope is not exploited by an adversary.

The German parliament’s Defense Commissioner Hans-Peter Bartels told ARD, “this a real disaster for the navy and it’s the first time in history that none [of the U-boats] would be operational for months.” Bartels blamed the lack of spare parts for the broken submarines with the lack of government funding. Ever since the Cold War, German authorities have decided against stockpiling spare parts due to its high costs.

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Without waste our economies collapse.

We’re Buying More Stuff We Don’t Need (BBG)

Here’s a Grinchian question for the holidays: How much do Americans spend on stuff they don’t really need? A very rough analysis suggests they’re blowing more money on nonessential items than they have in more than 17 years. Back in the 1950s, the economist John Kenneth Galbraith made a bleak argument about modern capitalism: Advertising can create artificial wants – say, for the latest gadget or skin cream – that spur ever-greater consumption without actually making people better off. As a result, economies can grow without improving the lot of humanity. Whether or not he’s right – it remains a matter of debate – the idea raises an interesting empirical question: How much of what we consume is related to wants rather than needs?

This isn’t easy to answer using even the most detailed data on consumer spending, because many categories could go either way. A car, for example, could be pure transportation or a Ferrari. That said, a number of categories – such as gambling, hairdressers and recreational vehicles – are pretty clearly nonessential. Following them consistently over time can give at least a sense of trend. So how are we doing? In the third quarter of this year, nonessential items (of my own subjective selection 1) accounted for almost 18.5 percent of total U.S. consumer spending. That’s the highest share since June 2000. Here’s a chart:

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This is about liquidity, not about the refusal to include in the ECB bond purchases. But it’s equally unjustifiable politically as well as economically. The ECB should not be able to do these things under cover of darkness.

ECB Sued Over Decision To Freeze Help To Greek Banks (R.)

Former Greek finance minister Yanis Varoufakis and a German parliamentarian are suing the ECB to gain access to a document underpinning the ECB’s decision to freeze vital funding to Greek banks in 2015. That move left Alexis Tsipras’ government with little choice but to shut down banks and impose capital controls, weakening his negotiating position with the country’s international lenders during bailout negotiations. Eventually, hard-liner Varoufakis resigned and Tsipras made a deal that gave Greece cash in return for austerity measures and reforms. Varoufakis and a German leftist parliamentarian, Fabio De Masi, are asking the EU’s top court to force the ECB to disclose a legal opinion that informed that decision, which they say might be unlawful.

“By restricting liquidity to the Greek banking sector to force cuts in pensions, tax increases and fire-sale privatizations, the ECB overstepped its mandate,” De Masi said. After their request was rejected by the ECB, Varoufakis and De Masi are turning to the General Court of the European Union to obtain the document. An ECB spokesman said the legal opinion preceded the decision to withhold funding by at least two months. The ECB decided not to disclose it to protect its legal advisers and its internal deliberations, he said. The ECB’s Agreement on Emergency Liquidity Assistance (ELA), published earlier this year, prohibits national central banks from providing ELA if it “interferes with the objectives and tasks” of the Eurosystem, such as maintaining price stability and safeguarding payments.

“There is an overriding public interest in knowing how far the ECB … weighed different goals against each other and how they themselves and their legal experts have interpreted the legal framework in this respect,” the complainants’ lawyer, Andreas Fischer-Lescano, said in the appeal.

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No more Santa. Or reindeer, polar bears.

Let It Go: The Arctic Will Never Be Frozen Again (Grist)

Last week, at a New Orleans conference center that once doubled as a storm shelter for thousands during Hurricane Katrina, a group of polar scientists made a startling declaration: The Arctic as we once knew it is no more. The region is now definitively trending toward an ice-free state, the scientists said, with wide-ranging ramifications for ecosystems, national security, and the stability of the global climate system. It was a fitting venue for an eye-opening reminder that, on its current path, civilization is engaged in an existential gamble with the planet’s life-support system. In an accompanying annual report on the Arctic’s health — titled “Arctic shows no sign of returning to reliably frozen region of recent past decades” — the National Oceanic and Atmospheric Administration, which oversees all official U.S. research in the region, coined a term: “New Arctic.”

Until roughly a decade or so ago, the region was holding up relatively well, despite warming at roughly twice the rate of the planet as a whole. But in recent years, it’s undergone an abrupt change, which now defines it. The Arctic is our glimpse of an Earth in flux, transforming into something that’s radically different from today. At a press conference announcing the new assessment, acting NOAA Administrator Timothy Gallaudet emphasizes the “huge impact” these changes were having on everything from tourism to fisheries to worldwide weather patterns. “What happens in the Arctic doesn’t stay in the Arctic — it affects the rest of the planet,” Gallaudet said.

[..] Take, for instance, the hypothesis of University of Alaska-Fairbanks permafrost scientist Vladimir Romanovsky: So far, 2017 has seen the highest permafrost temperatures in Alaska on record. If that warming continues at the current rate, widespread thawing could begin in as few as 10 years. The impact of such defrosting “will be very very severe,” Romanovsky says, and could include destruction of local infrastructure — like roads and buildings — throughout the Northern Hemisphere and the release of additional greenhouse gases that have been locked for generations in the ice.

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Dec 162017
 
 December 16, 2017  Posted by at 10:32 am Finance Tagged with: , , , , , , , , , , ,  


Ann Rosener Salvage. Chicago automobile graveyard. 1942

 

A Journey Through A Land Of Extreme Poverty: Welcome To America (G.)
The Chart That Jeffrey Gundlach Calls “Must Watch” For 2018 (ZH)
Ignorance Is No Excuse (Roberts)
Uber Stole Trade Secrets, Bribed Foreign Officials And Spied On Rivals (G._
While Truth Puts On Its Shoes (W.Standard)
Taking Liberty (Jim Kunstler)
France, Germany To Unveil Eurozone Reforms In March (AFP)
EU To Force Firms To Reveal True Owners In Wake Of Panama Papers (G.)
EU Gives Itself June Deadline On Refugees (K.)
First Vulnerable Child Refugee Arrives In UK From Greece (G.)
Ovid’s Exile To The Remotest Margins Of The Roman Empire Revoked (G.)

 

 

“That way lies 50 blocks of concentrated human humiliation.”

A Journey Through A Land Of Extreme Poverty: Welcome To America (G.)

Los Angeles, California, 5 December “You got a choice to make, man. You could go straight on to heaven. Or you could turn right, into that.” We are in Los Angeles, in the heart of one of America’s wealthiest cities, and General Dogon, dressed in black, is our tour guide. Alongside him strolls another tall man, grey-haired and sprucely decked out in jeans and suit jacket. Professor Philip Alston is an Australian academic with a formal title: UN special rapporteur on extreme poverty and human rights. General Dogon, himself a veteran of these Skid Row streets, strides along, stepping over a dead rat without comment and skirting round a body wrapped in a worn orange blanket lying on the sidewalk. The two men carry on for block after block after block of tatty tents and improvised tarpaulin shelters. Men and women are gathered outside the structures, squatting or sleeping, some in groups, most alone like extras in a low-budget dystopian movie.

We come to an intersection, which is when General Dogon stops and presents his guest with the choice. He points straight ahead to the end of the street, where the glistening skyscrapers of downtown LA rise up in a promise of divine riches. Heaven. Then he turns to the right, revealing the “black power” tattoo on his neck, and leads our gaze back into Skid Row bang in the center of LA’s downtown. That way lies 50 blocks of concentrated human humiliation. A nightmare in plain view, in the city of dreams. Alston turns right. So begins a two-week journey into the dark side of the American Dream. The spotlight of the UN monitor, an independent arbiter of human rights standards across the globe, has fallen on this occasion on the US, culminating on Friday with the release of his initial report in Washington. His fact-finding mission into the richest nation the world has ever known has led him to investigate the tragedy at its core: the 41 million people who officially live in poverty. Of those, nine million have zero cash income – they do not receive a cent in sustenance.

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History is a poet.

The Chart That Jeffrey Gundlach Calls “Must Watch” For 2018 (ZH)

Having shown us his favorite trade of the year for 2018, DoubleLine CEO Jeffrey Gundlach tweeted last night his “must watch” chart for 2018. “Since Jan SPX up big & way above MA’s all year…” “…yet JNK unchanged and below 50, 100 & 200 MA’s with a death cross even… As Gundlach concludes: This is “unusual… Must Watch”

So, what happens next?

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“80% of Americans continue to live paycheck-to-paycheck” That’s an economy that doesn’t have much of a foundation left. It’s wobbly at best, prone to collapse.

Ignorance Is No Excuse (Roberts)

On Thursday, the retail sales report for November clicked up 0.8%. Good news, right? Not so fast. First, sales of gasoline, which directly impacts consumers ability to spend money on other stuff, rose sharply due to higher oil prices and comprised 1/3rd of the increase. Secondly, building products also rose sharply from the ongoing impact of rebuilding from recent hurricanes and fires. Again, this isn’t healthy longer-term either as replacing lost possessions drags forward future consumptive capacity. But what the headlines miss is the growth in the population. The chart below shows retails sales divided by those actually counted as part of the labor force. (You’ve got to have a job to buy stuff, right?)

As you can see, retail sales per labor force participant was on a 5% annualized growth trend beginning in 1992. However, after the financial crisis, the gap below that long-term trend has yet to be filled as there is a 22.7% deficit from the long-term trend. (If we included the entirety of the population, given the number of people outside of the labor force that are still consuming, the trajectory would be worse.) But wait, retail sales were really strong in November? Again, not so fast. The chart below shows the annual % change of retail sales per labor force participant. The trend has been weakening since the beginning of 2017 and shows little sign of increasing currently.

While tax cuts may provide a temporary boost to after-tax incomes, that income will simply be absorbed by higher energy, gasoline, health care and borrowing costs. This is why, 80% of Americans continue to live paycheck-to-paycheck and have little saved in the bank. It is also why, as wages have continued to stagnate, that the cost of living now exceeds what incomes and debt increases can sustain. Yes, corporations will do well under the “tax reform” plan, and while the average American may well see an increase in take-home pay, it will unlikely change their financial situation much. As a result, economic growth will likely remain weak as the deficit expands to $1 Trillion over the next couple of years and Federal debt marches toward $32 trillion.

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Anyone surprised?

Uber Stole Trade Secrets, Bribed Foreign Officials And Spied On Rivals (G._

Uber allegedly engaged in a range of “unethical and unlawful intelligence collections”, including the theft of competitive trade secrets, bribery of foreign officials and spying on competitors and politicians, according to an explosive legal document published on Friday. It’s the latest chapter in the discovery process for the company’s messy legal squabble with Waymo, Google’s driverless car spin-off, which has accused Uber of stealing trade secrets. The details were outlined in a 37-page demand letter filed by the ex-Uber security manager Richard Jacobs, who left the company earlier this year. The document paints a picture of a team of employees dedicated to spying on rivals and “impeding” legal investigations into the company.

Jacobs alleges that when he raised concerns over the techniques being used, he was given a poor performance review and demoted as “pure retaliation” for refusing to buy into the culture of “achieving business goals through illegal conduct even though equally aggressive legal means were available”. He had sent the letter to Uber’s in-house counsel with his allegations about possible criminal activity carried out by the special group in May this year, threatening to sue the company. Uber did not provide the letter to Waymo as part of legal discovery before the trial started. An Uber spokeswoman said in a statement: “While we haven’t substantiated all the claims in this letter – and, importantly, any related to Waymo – our new leadership has made clear that going forward we will compete honestly and fairly, on the strength of our ideas and technology.”

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MSM destroying its credibility more every day.

While Truth Puts On Its Shoes (W.Standard)

Covering the Trump presidency has not always been the media’s finest hour, but even grading on that curve, the month of December has brought astonishing screwups. Professor and venerable political observer Walter Russell Mead tweeted on December 8, “I remember Watergate pretty well, and I don’t remember anything like this level of journalistic carelessness back then. The constant stream of ‘bombshells’ that turn into duds is doing much more to damage the media than anything Trump could manage.” [..] Since October of last year, when Franklin Foer at Slate filed an erroneous report on a computer server in Trump Tower communicating with a Russian bank, there have been an unprecedented number of media faceplants, most of them directly related to the Russia-collusion theory. The errors always run in the same direction—they report or imply that the Trump campaign was in league with Moscow.

For a politicized and overwhelmingly liberal press corps, the wish that this story be true is obviously the father to the errors. Just as obviously, there are precedents for such high-profile embarrassments in the past. Editors at top news organizations once treated anonymous sourcing as a necessary evil, a tool to be used sparingly. Now anonymous sources dominate Trump coverage. It’s not just a problem for readers, who should rightly be skeptical of information someone isn’t willing to vouch for by name. It’s a problem for reporters, too, because anonymous sources are less likely to be cautious and diligent in providing information. According to CNN, the sources behind the busted report on Trump Jr.’s contact with WikiLeaks didn’t intend to deceive and had been reliable in the past. Maybe so, but given the network’s repeated errors it’s difficult to just take CNN’s word for it.

But it’s one thing to use anonymous sources; it’s quite another to be entirely trusting of them. CNN decided to report the contents of an email to Donald Trump Jr. based only on the say-so of two anonymous sources and without seeing the emails. [..] For their part, the media don’t seem to be coming to grips with the damage they’re doing to their own credibility. CNN, which calls itself “the most trusted name in news,” didn’t retract their WikiLeaks report but rewrote it in such a way as to render the story meaningless. They also came to the defense of Raju and Herb, saying the reporters acted in accordance with the network’s editorial policies. And of course they didn’t out their sources—the ultimate punishment news organizations can mete out to anonymous tipsters who steer them wrong.

It understandably infuriates the media that President Trump remains unwilling to own up to his own glaring errors and untruths, while news organizations run correction after correction. And it also understandably upsets the media to watch the president actively attack and seek to undermine their work, which remains vital to ensuring accountability in American governance. What they haven’t grasped is how perversely helpful to him they are being: On a very basic level, President Trump’s repeated salvos against “fake news” have resonance because, well, there does indeed appear to be a lot of fake news.

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“The desperation to get rid of Trump by the Democratic Party and its handmaidens in the media has an odor of reckless dishonesty..”

Taking Liberty (Jim Kunstler)

I’m not a Trump admirer, didn’t vote for the guy (nor Hillary, either), am not invested emotionally in his political survival, but I do have a pretty firm idea of what he represents: primitive maleness in all its lumbering vulgarity. I can see why he has a certain symbolic appeal in a society that increasingly shouts “men need not apply here.” He also represents the widespread disappointment with the poor job that the remaining men in charge of things have done in recent decades caretaking this polity. They’ve managed to dodge the repair of every broken institution and duck engagement with any of the really scary problems facing citizens of this republic, from the gross disparities of wealth, to pervasive racketeering in health care and education, to our rotting infrastructure, to the quandaries of race, immigration, climate change — you name it and they have done squat.

Men mostly in charge of the FBI are currently busy demonstrating that they can completely botch the wished-for Trump-ending investigation of Russian “meddling and collusion” — whatever that is as a legal matter — under special prosecutor Robert Mueller. The agency begins to look like the brotherhood depicted on The Sopranos TV show some years back. The congressional committees (mostly men) with oversight on the FBI (and its umbrella agency, the Department of Justice) can’t even get a few deputy Attorneys General to answer a subpoena. If ever there was a display of feckless impotence, this is it. The desperation to get rid of Trump by the Democratic Party and its handmaidens in the media has an odor of reckless dishonesty from a faction that succumbs more and more each day to the dangerous idea that the ends justify the means.

Despite the momentary jubilation over the defeat of Roy Moore in the Alabama special election for senator, the party is close to committing suicide via the collective fantasy that all romantic gambits by men are always and everywhere a prelude to rape. But then, the Republican Party ought to be on suicide watch, too, as it debates a stupendously mendacious tax reform bill that will only shove the country closer to financial meltdown.

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2018 is set to become a very divisive year for the EU.

France, Germany To Unveil Eurozone Reforms In March (AFP)

Germany and France will offer their joint vision for reforming the eurozone by March, German Chancellor Angela Merkel said on Friday, in an effort to bridge divisions over the future of the single currency. Meeting without departure-bound Britain, the bloc’s 27 leaders were tasked by EU President Donald Tusk to speak freely about their often clashing visions for the single currency’s future at a summit widely expected to be dominated by Brexit. Overhauling the eurozone and making it more resilient to economic shocks has been a top priority of French President Emmanuel Macron, as well as for European Commission head Jean-Claude Juncker.

But these ambitions have been stymied by political uncertainty in Germany, where Macron ally Merkel is still trying to form a government after the pro-business FDP party abandoned talks amid doubts about eurozone reform. “We will find a common position because it is necessary for Europe,” Merkel said at a news briefing, speaking alongside Macron after a summit focused mostly on Brexit. Merkel’s overture to France will rankle her conservative CDU party which toes an austerity-minded line on economic matters, but appeals to Social Democrats, with whom she must now build a coalition. Reform of the eurozone is often blocked by political divisions, with rich countries – such as Germany and the Netherlands – reticent to adopt policies that share risks with their heavily-indebted eurozone partners, such as France, Spain, Italy or Greece.

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EU needs to open up about Luxembourg, Netherlands et al as tax havens.

EU To Force Firms To Reveal True Owners In Wake Of Panama Papers (G.)

Companies across the EU will be forced to disclose their true owners under new legislation prompted by the release of the Panama Papers. Anti-corruption campaigners applauded the agreement as a major step in the fight against tax evasion and money laundering, but expressed disappointment that trusts will mostly escape scrutiny. The revised terms of the EU’s fourth anti-money laundering directive include: • A requirement for companies to disclose their beneficial, or true, owners in a publicly available register. • Data on the beneficial owners of trusts to be available to tax and law enforcement authorities, as well as sectors with an obligation to follow anti-money laundering rules, such as lawyers. • A requirement for member states to verify beneficial ownership information submitted to their registers. • Extending anti-money laundering and counter-terrorism regulations to apply to virtual currencies, provision of tax services and those dealing in works of art.

EU member states will have 18 months to transpose the new directive into domestic legislation. As a current member of the EU, the UK will implement the legislation. “This is a big breakthrough and confirms that full transparency of corporate ownership is now the global standard against which other countries will be judged,” said Laure Brillaud, the anti-money laundering policy officer at Transparency International EU. “The EU deserves credit for taking this bold leap to end the secrecy that facilitates corruption, tax evasion and other crimes.” Global Witness applauded the move “in the face of opposition from countries like the UK, Luxembourg, Ireland, Malta and Cyprus,” but criticised the failure to introduce the same requirements for trusts.

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All the time in the world. Who cares about the misery?

EU Gives Itself June Deadline On Refugees (K.)

EU leaders appealed for unity in a last-ditch effort to break their deadlock on sharing out refugees by June, telling reluctant eastern states they could otherwise be outvoted on a dispute that has shaken the bloc’s foundations. Coming out from a fraught discussion among 28 EU leaders that went into the small hours on Friday morning in Brussels, rivals in the two-year-old dispute all stuck to their guns, hemmed in by expectations they have raised with their own voters. The Mediterranean frontline states Italy and Greece, and the rich destination countries including Germany, Sweden, Belgium, France, Luxembourg and the Netherlands are demanding that all countries host some refugees as a way to demonstrate solidarity.

Their four ex-communist peers Poland, Slovakia, Hungary and the Czech Republic refuse to accept people from the mostly-Muslim Middle East and North Africa, saying that would threaten their security after a raft of Islamic attacks in Europe. “There are areas where there is no solidarity and this is something I find unacceptable,” German Chancellor Angela Merkel told reporters. At one point during the two days of talks in Brussels, cameras caught Merkel, the bloc’s paramount national leader, as she appeared to become agitated when talking with the leaders’ chairman, Donald Tusk, making her displeasure with him clear. That came after Tusk, a former prime minister of Poland, came out strongly against “ineffective” and “highly divisive” obligatory refugee quotas, ruffling the feathers of those states that back them as well as the executive European Commission.

“The manner in which the principle of solidarity was being questioned does not only undermine the discussion on the refugee issue, but the future of Europe,” Greek Prime Minister Alexis Tsipras told reporters after what he called “intense” talks. Tusk said the ineffectiveness of relocation schemes was demonstrated by the fact that only 35,000 asylum seekers had been transferred from Greece and Italy under a 2015 plan meant to move 160,000 people. “Mandatory quotas remain a contentious issue,” Tusk told a joint news conference with the Commission’s head Jean-Claude Juncker, the disagreement between the two playing out visibly despite their usually friendly rapport. “Relocation is not a solution to the issue of illegal migration.”

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Oh well, that only took a year and a half. Were they hoping his suicide attempts would be successful?

First Vulnerable Child Refugee Arrives In UK From Greece (G.)

The first vulnerable child refugee stranded in Greece who qualifies for sanctuary under the Dubs amendment has arrived in the UK, more than a year after the government pledged to bring over hundreds of children. The Home Office had accepted that the boy was vulnerable and eligible for transfer 16 months ago. The Dubs amendment, part of the 2016 Immigration Act, was passed after a campaign to transfer 3,000 unaccompanied child refugees stuck in camps to Britain. There are more than 3,300 unaccompanied children in Greece, 11,186 in France and 13,867 in Italy. The Home Office agreed to resettle 480 under the Dubs scheme. Conditions for lone children in Greece have been condemned by Human Rights Watch, which found filthy cells infested with bugs and vermin, sometimes without mattresses or access to showers.

Hammersmith and Fulham council in west London has stepped in to offer the boy a home and one of its social workers travelled to Greece to assess the child, who has lost contact with his family in Syria. The boy, who is said to be deeply traumatised, was detained until last month in a police cell with no access to medical professionals, and forced to sleep on an inch-thick mattress on the ground. Police said the boy had repeatedly self-harmed, tried to kill himself and was at “imminent risk” of doing this. According to Antonia Moustaka, a lawyer for the humanitarian agency Praksis, he spent more than 380 days in psychiatric clinics, 124 days in shelters for unaccompanied minors and six weeks in police detention.

[..] George Gabriel, the project lead at the charity Safe Passage, said: “There are more than 3,300 unaccompanied children in Greece and only 1,130 spaces in shelters. The winter is bitterly cold and conditions are getting worse. “Over a year and a half ago, the Dubs amendment brought hope that hundreds of these kids would be brought to safety. It has been appalling to watch these minors wait, month after month, on bureaucratic delays.”

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Only took 2,000 years. What were all other mayors of Rome during that time thinking?

Ovid’s Exile To The Remotest Margins Of The Roman Empire Revoked (G.)

More than 2,000 years after Augustus banished him to deepest Romania, the poet Ovid has been rehabilitated. Rome city council on Thursday unanimously approved a motion tabled by the populist M5S party to “repair the serious wrong” suffered by Ovid, thought of as one of the three canonical poets of Latin literature along with Virgil and Horace. Best known for his 15-book epic narrative poem Metamorphoses and the elegy Ars Amatoria, or the Art of Love, Publius Ovidius Naso was exiled in 8 AD to Tomis, the ancient but remote Black Sea settlement now known as the Romanian port city of Constanta. He remained there until his death a decade later. Although ordered directly by the emperor, scholars have long speculated over the motive for Ovid’s exile; the poet himself attributed it to “carmen et error”, a poem and a mistake.

Experts believe the cause was probably a combination of three factors: that Ovid’s erotic poetry was considered offensive, his attitude to Augustus was too disrespectful, and that he may have been involved in an unspecified plot or scandal. La Republicca reported that M5S, which holds a majority of the seats on the council, demanded that “necessary measures” be adopted to revoke the order in what the capital’s deputy mayor, Luca Bergamo, described as an important symbol. “It is about the fundamental right of artists to express themselves freely in societies in which, around the world, the freedom of artistic expression is increasingly constrained,” Bergamo told councillors.

Ovid was indisputably “one of the greatest poets in the history of humanity,” the deputy mayor said, and moreover the real reasons for his mysterious banishment by the emperor “were never placed on the historical record”. Sulmona, the Abruzzo town where the poet was born (then Sulmo), formally acquitted him of any wrongdoing. Dante, the great Renaissance poet, was similarly pardoned in 2008 by Florence – from where he was exiled on pain of death in 1302.

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Oct 072017
 
 October 7, 2017  Posted by at 8:39 am Finance Tagged with: , , , , , , , ,  


Vincent van Gogh Landscape at twilight 1890

 

BLS Caught Fabricating Wage Data (ZH)
Tropical Storm Nate Heads Into The Heart Of US Offshore Oil Industry (CNBC)
It’s ‘Crunch Time’ For Australian Households (BI)
JPMorgan Paid Fine for 2008 Mortgage Crisis With .. Phony Mortgages (N.)
EU Official Warns War a Possibility in Catalonia (VoA)
Spain Apologizes, Tone Softens In Catalonia Independence Crisis (R.)
OECD New Approaches to Economic Challenges (Steve Keen)
Mainstream Economists Live In A Parallel Universe (Ren.)
Light It Up (Jim Kunstler)
Russiagate Is More Fiction Than Fact (Nation)
Your Local Bank Could Be the Central Bank (BBG)
US Escalates Trade Dispute With UK And Canada Over Bombardier (G.)
Canada Will Pay Compensation To Thousands Of Indigenous ‘Stolen Children’ (R.)
FDP Chief Says Schaeuble ‘Not Tough Enough’ On Greece (K.)
Greece’s Ruling Syriza Party Falls Apart (K.)
Overcrowded Greek Refugee Camps Ill-Prepared For Winter: UNHCR (R.)

 

 

And loses 33,000 jobs while unemployment falls?! And 935,000 full time jobs are added. Time to stop paying any attention to the B(L)S. You can’t trust it.

BLS Caught Fabricating Wage Data (ZH)

[..] the BLS reported that the annual increase in Average Weekly Earnings was a whopping 2.9%, above the 2.5% expected, and above the 2.5% reported last month. On the surface this was a great number, as the 2.9% annual increase – whether distorted by hurricanes or not – was the highest since the financial crisis. However, a problem emerges when one looks just one month prior, at the revised August data. What one sees here, as Andrew Zatlin of South Bay Research first noted, is that while the Total Private Average Weekly Earnings line posted another solid increase of 0.2% month over month, an upward revision from the previous month’s 0.1%, when one looks at the components, it become clear that the BLS fabricated the numbers, and may simply hard-coded its spreadsheet with the intention of goalseeking a specific number.

Presenting Exhibit 1: Table B-3 in today’s jobs report. What it shows is that whereas there was a sequential decline in the Average Weekly Earnings for Goods Producing and Private Service-producing industries which are the only two sub-components of the Total Private Line (and are circled in red on the table below) of -0.8% and -0.1% respectively, the BLS also reported that somehow, the total of these two declines was a 0.2% increase! Another way of showing the July to August data: • Goods-Producing Weekly Earnings declined -0.8% from $1,118.68 to $1,109.92 • Private Service-Providing Weekly Earnings declined -0.1% from $868.80 to $868.18 • And yet, Total Private Hourly Earnings rose 0.2% from $907.82 to $909.19. What the above shows is, in a word, impossible: one can not have the two subcomponents of a sum-total decline, while the total increases. The math does not work.

This, as Zatlin notes, undermines not only the labor inflation narrative, but it puts into question the rest of the overall labor data, and whether there are other politically-motivated, goalseeked “spreadsheet” errors. We have sent an email to the BLS seeking an explanation for the above data fabrication, meanwhile here is what likely happened: a big, juicy fat-finger error, whether on purpose or otherwise because if one looks at the finalized July weekly earnings of $907.82, it’s precisely the same as what the August preliminary wage number was as released last month, also $907.82. For the excel fans out there, it means that the August totals were simply hard coded when the BLS shifted cells in the spreadsheet, becoming July.

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Will probably be a Cat 2-3 hurricane by then.

Tropical Storm Nate Heads Into The Heart Of US Offshore Oil Industry (CNBC)

As Tropical Storm Nate continued on its course toward the Gulf of Mexico on Friday, energy companies shut down offshore oil and gas platforms, while Louisiana braced for a potential hurricane. Nate is forecast to strengthen as it enters the Gulf and develop into a hurricane by the time it reaches the northern Gulf Coast on Saturday evening, the National Hurricane Center said Friday. Hurricane and storm surge watches are in effect for southeastern Louisiana, including New Orleans, through the Mississippi-Alabama border. The Gulf is home to nearly one-fifth of all U.S. oil output. Drillers who pump crude from offshore platforms have lately produced at record levels above 1.7 million barrels a day. The region already had to contend with Hurricane Harvey in August.

“The major difference between Harvey and Nate is that the trajectory of Nate brings it right through the heart of the U.S. Gulf of Mexico oil and gas producing region,” said Andy Lipow, president of Lipow Oil Associates. BP and Chevron are ceasing production on all platforms in the Gulf of Mexico, Reuters reported. Royal Dutch Shell and Anadarko Petroleum dialed back activity, while Exxon Mobil, Statoil and others are withdrawing workers. If Nate develops into a Category 2 or 3 hurricane, it could impact up to 80% of the Gulf’s output, Lipow forecast. The storm also has the potential to affect about 15% of U.S. refining capacity in the New Orleans area, Mississippi and Alabama. The region’s biggest refineries include Exxon Mobil’s Baton Rouge facility and Marathon Petroleum’s Garyville, Louisiana, plant, both capable of turning out more than 500,000 barrels a day.

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A whole nation full of debt slaves in denial. And not the only nation either.

It’s ‘Crunch Time’ For Australian Households (BI)

Australian households are in a vulnerable financial position, especially those who have taken out a mortgage. And in an era of weak incomes growth, soaring energy prices and high levels of indebtedness, with the prospect of higher interest rates on the way, many intend to cut discretionary spending in anticipation of even tighter household budgets. That’s the finding of the latest AlphaWise survey conducted by Morgan Stanley, which paints an unsettling picture on the outlook for not only Australia’s retail sector, but also the broader economy. Yes, the weakness in retail sales over the past two months may soon become entrenched. The “crunch time” for Australian households, as Morgan Stanley puts it, has begun. “In early June, we expressed the view that the Australian consumer faces a domestic cash flow and credit crunch,” the bank wrote in a note released this week.

“Income growth has not recovered, ‘cost of living’ inflation is re-accelerating and ‘macro-prudential’-related tightening of credit conditions is extending from housing into consumer finance.” In order to test how households may respond to higher interest rates, whether as a result of macroprudential measures to slow investor and interest-only housing credit growth or official moves from the Reserve Bank of Australia (RBA), Morgan Stanley conducted a national survey of 1,836 mortgagors to identify household conditions during late July and early August. Australia’s 2016 census found that 34.5% of households were currently paying off a mortgage. Morgan Stanley says the survey was designed to provide insight into the health of the household balance sheet, including their spending intentions as a result of higher mortgage rates. The news was not good.

“Findings from the AlphaWise survey confirm the stresses in the consumer sector we have been highlighting for some time now,” it says. “Most households have minimal buffers against a shock to their income, and expect to respond to higher debt servicing costs by drawing down on savings and cutting back on expenditure. “Other sectors of the economy may be able to offset some of the headline weakness, but the concentrated exposure of the household sector and economy to an extended housing market is posing an increasingly important structural and cyclical risk to consumer spending.” Of those households surveyed, 54% said they intended to cut back on expenditure in response to higher interest rates, with a further 25% planning to draw down on their savings to cope with higher servicing costs, a pattern that has been seen in Australia’s savings ratio which fell to a post-GFC low in the June quarter.

Somewhat alarmingly, 40% of those surveyed indicated that they did not save at all over the past year, particularly among low-income households. [..] “Only around 13% of respondents expect to be able to save more in the next 12 months..”

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Read the whole thing. It’s completely insane.

JPMorgan Paid Fine for 2008 Mortgage Crisis With .. Phony Mortgages (N.)

You know the old joke: How do you make a killing on Wall Street and never risk a loss? Easy—use other people’s money. Jamie Dimon and his underlings at JPMorgan Chase have perfected this dark art at America’s largest bank, which boasts a balance sheet one-eighth the size of the entire US economy. After JPMorgan’s deceitful activities in the housing market helped trigger the 2008 financial crash that cost millions of Americans their jobs, homes, and life savings, punishment was in order. Among a vast array of misconduct, JPMorgan engaged in the routine use of “robo-signing,” which allowed bank employees to automatically sign hundreds, even thousands, of foreclosure documents per day without verifying their contents.

But in the United States, white-collar criminals rarely go to prison; instead, they negotiate settlements. Thus, on February 9, 2012, US Attorney General Eric Holder announced the National Mortgage Settlement, which fined JPMorgan Chase and four other mega-banks a total of $25 billion. JPMorgan’s share of the settlement was $5.3 billion, but only $1.1 billion had to be paid in cash; the other $4.2 billion was to come in the form of financial relief for homeowners in danger of losing their homes to foreclosure. The settlement called for JPMorgan to reduce the amounts owed, modify the loan terms, and take other steps to help distressed Americans keep their homes. A separate 2013 settlement against the bank for deceiving mortgage investors included another $4 billion in consumer relief.

A Nation investigation can now reveal how JPMorgan met part of its $8.2 billion settlement burden: by using other people’s money. Here’s how the alleged scam worked. JPMorgan moved to forgive the mortgages of tens of thousands of homeowners; the feds, in turn, credited these canceled loans against the penalties due under the 2012 and 2013 settlements. But here’s the rub: In many instances, JPMorgan was forgiving loans on properties it no longer owned. The alleged fraud is described in internal JPMorgan documents, public records, testimony from homeowners and investors burned in the scam, and other evidence presented in a blockbuster lawsuit against JPMorgan, now being heard in US District Court in New York City.

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Big demos today against Catalans.

EU Official Warns War a Possibility in Catalonia (VoA)

The team captain of Spain’s storied football club Barcelona, which has become a focal point of secessionist Catalan sentiment, is urging politicians in Madrid and the Catalan capital to start negotiating about the future of Spain’s restive northeast province. “Before we do ourselves more damage, those in charge must open dialogue with each other. Do it for all of us. We deserve to live in peace,” Andrés Iniesta wrote on his Facebook page, apologizing at the same time for weighing in on “situations that are complex.” His appeal came as a top EU official Thursday warned that the separatist dispute, exacerbated by Catalan secessionists holding an illegal independence referendum Sunday, risks escalating into armed conflict.

“The position is very, very alarming. Civil war is conceivable there, in the middle of Europe,” Gunther Oettinger, the Germany EU commissioner said at an event in Munich. Oettinger and the EU Commission, the European bloc’s governing body, which fears Catalan independence might stir up separatism elsewhere in Europe, have also urged the authorities in Madrid and Barcelona to start negotiations and to avoid further provocations. But there are little signs of that happening. Both sides appear to be standing firm in Spain’s worst constitutional crisis since an attempted coup in 1981. [..] Nationalist sentiment is deepening fast: in Madrid observers have noted more buildings are sporting the Spanish national flag. Spaniards have long harbored an historical fear of dismemberment – Catalan nationalist sentiment was a key factor behind the Spanish civil war of the 1930s.

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Wonder how long that holds.

Spain Apologizes, Tone Softens In Catalonia Independence Crisis (R.)

Spain apologized on Friday for a violent police crackdown on Catalonia’s independence referendum, in a conciliatory gesture as both sides looked for a way out of the nation’s worst political crisis since it became a democracy four decades ago. Spain’s representative in northeast Catalonia, which accounts for a fifth of the national economy, made the apology just as Catalonia’s secessionist leader appeared to inch away from a plan to declare independence as early as Monday. “When I see these images, and more so when I know people have been hit, pushed and even one person who was hospitalized, I can’t help but regret it and apologize on behalf of the officers that intervened,” Enric Millo said in a television interview.

[..] Moments earlier, a Catalan parliament spokeswoman said the regional government’s leader, Carles Puigdemont, had asked to address lawmakers on Tuesday, in timing that appeared at odds with earlier plans to move an independence motion on Monday. Puigdemont wanted to speak on the “political situation”. The softer tone contrasted with remarks earlier on Friday from Catalonia’s head of foreign affairs who told BBC radio it would go ahead with an independence debate in the regional parliament. Spanish Prime Minister Mariano Rajoy has offered all-party political talks to find a solution, opening the door to a deal giving Catalonia more autonomy. But he has ruled out independence and rejected a Catalan proposal for international mediation.

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Steve in the lion’s den. “The OECD was one of the formal economic policy groups that wildly misinterpreted the economic data of 2007..”

OECD New Approaches to Economic Challenges (Steve Keen)

This is one of the highlights so far of my life as a rebel economist: giving an invited talk at the OECD. The OECD was one of the formal economic policy groups that wildly misinterpreted the economic data of 2007, believing that it heralded “sustained growth in OECD economies … underpinned by strong job creation and falling unemployment.” Five years later, they established the New Approaches to Economic Challenges (NAEC) initiative, and they’re trying to expand the horizons of economics beyond the narrow and fallacious confines of Neoclassical economics. Being invited to speak there, and getting such a positive reception from OECD Ambassadors, confirmed my belief that if change is to come in economics, it will come from formal economic bodies (the OECD, IMF, Central Banks and Treasuries) rather than university departments.

Formal bodies have to wear the consequences of being wrong about the economy, whereas Neoclassical-dominated university departments can retreat into isolation when the real world fails to conform to their fantasies about it. Nothing is certain however. The desire to fall back into ideologically comfortable but practically false ways of thinking about the economic system is strong. Groups like NAEC within the OECD need support, and they themselves need to support the young students in Rethinking Economics, who are far more amenable to a new paradigm than their hidebound academic instructors in the major Universities.

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“Neoclassical economists are not experts on money but experts in finding reasons to believe you can model capitalism as though money banks and debt don’t exist. “And then you give them the right to control the banking system.”

Mainstream Economists Live In A Parallel Universe (Ren.)

Neoclassical economic theory claims that the human being is a rational self-serving profit maximising unit. It claims to prove the market can handle anything. Classical economists model the economy based on the concept of rational consumers maximising utility and firms maximising profits. Their vision of the world claims that equilibrium is reached and the world functions best if there is no government, no trade unions and no monopolies. Professor Keen says mainstream economist change reality to fit their model. University campuses used to be about education, challenging people exposing them to ideas they didn’t necessarily have in the first instance. But Professor Keen says economics actually leads away from this possibility. “Economics starts by inculcating a view of how you should think about the economy that rules out a whole range of alternatives,” he said.

“It rules out thinking about the sort of work that I do, working from the top down, looking at the overall economy and modelling that way. They say ‘no, you’ve got to start from the isolated individual and you have to talk about individuals for maximising utility’. We’re talking about them as consumers or firms who are maximising profits. “In their mind that is the definition of a perfectly functioning system, but it is not the definition of the world in which we live. “Once you’ve got the mathematical structure of trying to do that, you have a very hard time treating anything else as a sensible analysis of capitalism. They rule out a whole lot of other ways of thinking.”

[..] “Imagine capitalism with no banks, no debt, and no money,” says Professor Keen. “You’re getting pretty close to being a neoclassical economist.” “Neoclassical economists are not experts on money but experts in finding reasons to believe you can model capitalism as though money banks and debt don’t exist. “And then you give them the right to control the banking system.”

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“..with half of the flyover population in an opiate daze, and chain-stores shuttering to the tune of 10,000 this year, and car leases expiring into a car market dependent on liar loans bundled into janky securities, and the debt problem festering away like a something dead under the floor boards.”

Light It Up (Jim Kunstler)

Grinning like Wonderland’s Cheshire Cat, the Golden Golem of Greatness pronounced this interval of fine fall weather “the calm before the storm.” Hmmmm. Talk about cryptic. This was less than a week after he verbally smacked down Secretary of State Rex Tillerson for “wasting his time” trying to diplomatically reach “Little Rocket Man… “ whereby Rex riposted, calling the President a “moron.” Ordinarily — say, during the past 220-odd years of this nation’s existence — talk like that would prompt a resignation (though, there are no other instances of talk like that). illerson must think that for the good of the country he can’t resign, and God knows what kind of desperate notes are being swapped around between the State Department and the Pentagon.

[..] We are entering a slot of time where an awful lot of things might go wrong. What gets me is seeing the stock markets make new record highs every other day, whether Puerto Rico is destroyed overnight or hundreds of people are shot in a Las Vegas parking lot — and notwithstanding the overall phony-baloney condition of the American economy, with half of the flyover population in an opiate daze, and chain-stores shuttering to the tune of 10,000 this year, and car leases expiring into a car market dependent on liar loans bundled into janky securities, and the debt problem festering away like a something dead under the floor boards. Some kind of financial accident with a this-sucker-is-going-down flavor feels like it’s waiting to happen.

I don’t think Trump was referring to that either, but what if it came down around the same moment that we decided to light up North Korea? Or, alternately, if Rex Tillerson, Mike Pence, and a score of other senior politicos decide that its time for Trump to go? The president is looking mighty friendless these days, and more than a little reckless. I mean, for the good of the country, ladies and gentlemen, what are they waiting for? Will his generals defend him? Nah. Fuggedabowdit. I wonder what the code-name for their action will be. Operation Moron Overboard? The whole spectacle is starting to look like a Coen Brothers movie. When the time comes, I hope they will make the documentary about these strange days of October, 2017.

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But it will just keep going.

Russiagate Is More Fiction Than Fact (Nation)

In the electrified aftermath of the election, aides to Hillary Clinton and Obama pored over polling numbers and turnout data, looking for clues to explain what they saw as an unnatural turn of events. One of the theories to emerge from their post-mortem was that Russian operatives who were directed by the Kremlin to support Trump may have taken advantage of Facebook and other social media platforms to direct their messages to American voters in key demographic areas in order to increase enthusiasm for Trump and suppress support for Clinton. These former advisers didn’t have hard evidence that Russian trolls were using Facebook to micro-target voters in swing districts—at least not yet—but they shared their theories with the House and Senate intelligence committees, which launched parallel investigations into Russia’s role in the presidential campaign in January.

The theories paid off. A personal visit in May by Democratic Senator Mark Warner, vice-chair of the Senate Intelligence Committee, “spurred the company to make some changes in how it conducted its internal investigation.” Facebook’s announcement in August of finding 3,000 “likely” Russian ads is now an ongoing “scandal” that has dragged the company before Congressional committees. Other election threats loom. A recent front-page New York Times article linking Russian cyber operations to voting irregularities across the United States is headlined, “Russian Election Hacking Efforts, Wider Than Previously Known, Draw Little Scrutiny.” But read on and you’ll discover that there is no evidence of “Russian election hacking,” only evidence-free accusations of it.

Voting problems in Durham, North Carolina, “felt like tampering, or some kind of cyberattack,” election monitor Susan Greenhalgh says, and “months later…questions still linger about what happened that day in Durham as well as other counties in North Carolina, Virginia, Georgia and Arizona.” There is one caveat: “There are plenty of other reasons for such breakdowns—local officials blamed human error and software malfunctions—and no clear-cut evidence of digital sabotage has emerged, much less a Russian role in it.” The evidence-free concern over Russian hacking expanded in late September when the Department of Homeland Security informed 21 states that they had been targeted by Russian cyber-operations during the 2016 election. But three states have already dismissed the DHS claims, including California, which announced that after seeking “further information, it became clear that DHS’s conclusions were wrong.” Recent elections in France and Germany saw similar fears of Russian hacking and disinformation—and similar results.

In France, a hack targeting the campaign of election winner Emmanuel Macron ended up having “no trace,” of Russian involvement, and “was so generic and simple that it could have been practically anyone,” the head of French cyber-security quietly explained after the vote. Germany faced an even more puzzling outcome: Nothing happened. “The apparent absence of a robust Russian campaign to sabotage the German vote has become a mystery among officials and experts who had warned of a likely onslaught,” the Post reported in an article headlined “As Germans prepare to vote, a mystery grows: Where are the Russians?” The mystery was so profound that The New York Times also explored it days later: “German Election Mystery: Why No Russian Meddling?”

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RIpping apart the blockchain.

Your Local Bank Could Be the Central Bank (BBG)

In practice it is difficult to envisage a sustainable digital currency that would not be accessible to all; cryptocurrencies are increasingly attractive to the general public. As for privacy, a decentralized ledger, on top of the security advantage it brings, makes the anonymity attached to cash transactions technically possible, and is thus nothing new. The BIS acknowledges as much: While it may look odd for a central bank to issue a cryptocurrency that provides anonymity, this is precisely what it does with physical currency, i.e. cash. Perhaps a key difference is that, with a retail CBCC, the provision of anonymity becomes a conscious decision.

Some might argue that an anonymous payment network would run against the current trend in anti-money-laundering regulation, where the origin of invested cash is carefully vetted to avoid criminal or tax evasion activities. Technically, there is nothing to prevent central bank digital currencies from being fully traceable. Even a decentralized ledger (where transactions are recorded digitally across many computers) only provides the potential for anonymity but does not guarantee it. But if there is no desire for anonymity, then there would be no need for the ledger to be decentralized. The logical outcome would be for central banks themselves to offer retail services, taking deposits from the general public. The BIS considers this possibility:

“We argue that the main benefit that a consumer-facing retail CBCC would offer, over the provision of public access to (centralized) central bank accounts, is that the former would have the potential to provide the anonymity of cash. In particular, peer-to-peer transfers allow anonymity vis-à-vis any third party. If third-party anonymity is not of sufficient importance to the public, then many of the alleged benefits of retail CBCCs can be achieved by giving broad access to accounts at the central bank.” A central bank e-minting monopoly would fundamentally change the structure of the banking system, leading to an increased monetary basis and seigniorage. Any temptation to abuse the enhanced minting monopolies would be reduced not by new technology but by the competitive alternatives offered by other countries’ digital currencies, or even, if necessary, old-fashioned valuable commodities.

The introduction of CBBCs that are traceable would also bring about a revolutionary transformation of the financial system architecture. This is, quite obviously, the opposite of the libertarian ideology underpinning the original cryptocurrencies. It would also accelerate the dismantling of the banking system as we know it. With central banks offering retail services, commercial banks would lose deposits, and with it their ability to lend. It would curtail or end the role of the money multiplier – whereby banks lend more than they receive in deposits, thus increasing the overall money supply – in the economy, and so necessitate massive monetary creation to maintain levels of liquidity in the market. Lending would increasingly be made by regulated specialized funds.

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Strange and ugly.

US Escalates Trade Dispute With UK And Canada Over Bombardier (G.)

The US has escalated its trade dispute with Britain and Canada by announcing plans to slap a further 80% duty on the export of planes built by Bombardier. The move follows complaints by Boeing that Canadian-owned Bombardier, which employs more than 4,000 people in Belfast, had dumped its C Series jets at “absurdly low” prices. Bombardier is facing a planned 220% tariff as part of a separate investigation, the US Department of Commerce confirmed. A second levy of 80% is also being applied to Bombardier’s sales to the US after a preliminary finding that the jets were sold below cost price to Delta Air Lines in 2016. Boeing claimed that 75 aircraft were sold at nearly £10.6m below cost price. Bombardier dismissed the claim as “absurd”. The company is due to begin delivering a blockbuster order for up to 125 new jets to Atlanta-based Delta next year.

The US commerce secretary, Wilbur Ross, said: “The United States is committed to free, fair and reciprocal trade with Canada, but this is not our idea of a properly functioning trading relationship. We will continue to verify the accuracy of this decision, while doing everything in our power to stand up for American companies and their workers.” [..] The proposed duties would not take effect unless affirmed by the US International Trade Commission (ITC) early next year. To win its case before the ITC, Boeing must prove it was harmed by Bombardier’s sales, despite not using one of its own jets to compete for the Delta order. Bombardier said it was confident that the ITC would find Boeing had not been harmed, calling the Department of Commerce decision a case of “egregious overreach”. Delta said the decision was preliminary and it was confident the ITC “will conclude that no US manufacturer is at risk” from Bombardier’s plane.

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Australia next?! US?

Canada Will Pay Compensation To Thousands Of Indigenous ‘Stolen Children’ (R.)

Canada will pay up to C$750m in compensation to thousands of aboriginals who were forcibly removed as children from their families decades ago, promising to end “a terrible legacy”. The move is the latest attempt by the Liberal government of the prime minister, Justin Trudeau, to repair ties with Canada’s often-marginalised indigenous population, which says it has been the victim of systemic racism for centuries. In the so-called “Sixties Scoop”, welfare authorities took about 20,000 aboriginal children from their homes between the 1960s and 1980s and placed them in foster care or allowed them to be adopted by non-indigenous families. The compensation package is designed to settle many of the lawsuits launched by survivors, who say the forced removal deprived them of their heritage and led to mental disorders, substance abuse and suicide.

“Language and culture, apology, healing – these are essential elements to begin to right the wrong of this dark and painful chapter,” said Carolyn Bennett, the federal minister in charge of relations with the indigenous population. Canada’s 1.4 million aboriginals, who make up about 4% of the population, experience higher levels of poverty and incarceration and have a lower life expectancy than other Canadians. They are often victims of violent crime and addiction. Indigenous activists complain Trudeau has broken repeated promises to improve their lives since taking office in late 2015. He reshuffled his cabinet in August to put more emphasis on helping aboriginal people. Bennett, at times fighting back tears, told a news conference she had heard “truly heartbreaking stories” about loss of identity and alienation.

Marcia Brown Martel, an aboriginal chief who led the campaign for compensation, lamented the “stealing of children” and noted some of those involved lived as far away as New Zealand. “Think of it as a puzzle, a great big puzzle. Pieces, people are missing,” she told reporters. [..] Trudeau and other Canadian leaders have already apologized for the many abuses committed over a 150-year period when 150,000 aboriginal children were forcibly separated from their parents and sent to church-run residential schools. In 2015, an official report said the schools were an attempt to end the existence of aboriginals as distinct legal, social, cultural, religious and racial entities in Canada.

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A look at the future.

FDP Chief Says Schaeuble ‘Not Tough Enough’ On Greece (K.)

The leader of Germany’s Free Democrats (FDP), Christian Lindner, seen as a likely successor at the finance ministry if his pro-business party enters a coalition with Chancellor Angela Merkel’s Christian Democrats (CDU), has criticized outgoing Finance Minister Wolfgang Schaeuble for not being tough enough on Greece. “Mr Schaeuble did not manage to impose himself over the chancellor in many questions of European policy. Just remember the third aid package for Greece, which he originally did not want to do,” Lindner told German daily Handelsblatt in an interview Friday. The 38-year-old politician managed to lead the FDP back into parliament after a four-year absence on the back of a pledge to limit financial perils from the eurozone and an illiberal assault on Merkel’s open-doors refugee policy.

In the same interview, Lindner called for the creation of an insolvency law for eurozone states, while arguing that countries should be able to leave the common currency area while remaining in the European Union. In May, the FDP chief said that Greece should leave the euro temporarily until its economy was back on track. If the Greek debt is not sustainable as the IMF claims, Lindner said at the time, then it has to be restructured – and this cannot take place within the eurozone. Lindner avoided to say if his party would push to take over the Finance Ministry. “For us a change in fiscal policy is more important than a new minister,” said Lindner, who also expressed doubts about the prospects of a three-way alliance between CDU, FDP and the Greens, known as the “Jamaica coalition.”

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Due to lack of identity.

Greece’s Ruling Syriza Party Falls Apart (K.)

An overwhelming majority of SYRIZA’s “Socialist Trend” faction under MEP Costas Chrysogonos have voted to part ways with the ruling leftists over differences in policy. In a ballot held on Friday, the proposal was backed by 1,678, or 82.6%, of the faction’s 2,032 members. Only 31 wanted to stay with SYRIZA. Officials said the faction will take steps to transform into an independent political grouping. They added that more details will be announced next week. Representatives of the faction also accused SYRIZA of turning into “a true replica of the centralized mainstream parties.”

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“..four of the five island camps are hosting two or three times as many people as they were designed for..”

Overcrowded Greek Refugee Camps Ill-Prepared For Winter: UNHCR (R.)

Greece must speed up winter preparations at refugee camps on islands in the Aegean Sea where there has been a sharp rise in arrivals, the United Nations refugee agency said on Friday. Nearly 5,000 refugees, mostly Syrian or Iraqi families, crossed from Turkey in September – a quarter of all arrivals this year, UNHCR data shows. While that is a fraction of the nearly 1 million who arrived in 2015 – due to a European Union deal with Turkey to block that route – four of the five island camps are hosting two or three times as many people as they were designed for. “UNHCR urges action on the islands to ease overcrowding, improve shelter, and stock and distribute appropriate and sufficient aid items,” said Philippe Leclerc, UNHCR representative in Greece.

In the Moria camp on the island of Lesbos, one of the main entry points, more than 1,500 people are in makeshift shelters or tents without insulation, flooring or heating, UNHCR said. They include pregnant women, people with disabilities, and very young children. On nearby Samos, about 400 people are living in “very difficult” conditions and another 300, including families and lone children, are sleeping in tents in the woods due to a lack of space in the camp, UNHCR said. More than 3,000 people on Samos are crammed into facilities designed to hold 700. In January, refugees in Greece suffered sub-zero temperatures when an icy spell gripped parts of the country and scores of summer tents were weighed down by snow. More than 60,000 refugees and migrants have been trapped in Greece since Balkan countries along the northward overland route to western Europe sealed their borders in March 2016.

UNHCR has been gradually reducing its involvement on the islands since national institutions took over most services in August.

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Oct 052017
 
 October 5, 2017  Posted by at 8:41 am Finance Tagged with: , , , , , , , , ,  


Juan Gris Guitar on a chair 1913

 

S&P 500 Poised To Lose $10 Trillion In Value (Pal.)
The Sum of All Fears: China Shadow Banking Hits $40 Trillion (DT)
EU Parliament Defends ‘Proportionate Force’ in Catalonia (RT)
Catalonia Chaos Begins to Squeeze Spain’s Financial Markets (DQ)
ECB To Banks: Set Aside More Cash For Bad Debt Amid €1 Trillion Problem (G.)
Investors Are Too Inured to Markets’ Repeated Records (DDMB)
Puerto Rico’s Debt Is Quietly Sitting in Mom and Pop Mutual Funds (Martens)
The Cost Of Not Understanding Sovereign Currencies (Bill Black)
Whose Bright Idea Was RussiaGate? (PCR)
Who Really Holds Power at the Fed (BBG)
Court Orders Trump Administration Reinstate Obama Emissions Rule (AP)
US Honeybee Queen Life Expectancy Halves In 10 Years (NatGeo)
Ancient Bristlecone Pine Forests Overwhelmed By Climate Change (LAT)
60% Of Global Biodiversity Loss Is Down To Meat-Based Diets (G.)
Are Space, Time, And Gravity All Just Illusions? (F.)

 

 

Just so you know.

S&P 500 Poised To Lose $10 Trillion In Value (Pal.)

The last two recessions were devastating for the S&P 500. The dot-com bubble during March 2000 to October 2002 saw the Index drop -49%, while the Global Credit Crisis from October 2007 to March 2009 saw an even greater drop of -57%. Since then, the S&P 500 has been on fire, gaining 250% and breaking record highs almost daily. As the old adage goes, “the bigger they are, the harder they fall”. If the S&P loses 57% in the next market crash, that would represent $10 trillion in value lost, and would take the Index down to 1,077. As the more cyclical sectors begin to decline, portfolio managers will begin to reallocate capital to more attractive sectors. As we noted in our previous write-up, Gold Stocks To Explode When The S&P Implodes, in the current bull market, the S&P is up 247%, while gold stocks are down -30%.

If the pattern holds, the succeeding bear market in the S&P will trigger a major gold rally, which we predict will continue into the next S&P bull. Portfolio managers will look for undervalued stocks in sectors considered safe havens. Gold stocks check all the boxes and a surge of capital will soon find its way into them. Using the materials sector as proxy to gold stocks, we saw in each of the last two bears the weighting of the sector increase. The total value drop was also less in terms of percentage compared to the overall market. We calculate inflows of $206 billion in 2000-2002, and $270 billion in 2007-2009. If the coming drop follows that of the recent recession, we can expect an inflow of at least $440 billion into gold stocks. That is a lot of money on the sidelines. And when it begins to pour in, gold stocks will explode.

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I’ve warned a thousand times on China’s shadow system. This is excellent from ‘Deep Throat’. As I’ve suggested, the shadow system is now bigger than the official one.

The Sum of All Fears: China Shadow Banking Hits $40 Trillion (DT)

Unfortunately, per the People’s Bank of China (PBOC), Shadow Bank lending has reversed course abruptly and skyrocketed since the 2015 McKinsey report. Nobody really knows how big China’s Shadow Bank ecosystem is, but the PBOC recently offered a rather shocking guess in their 2017 Financial Stability Report (pg.48). China’s Off-Balance-Sheet, un-regulated, “Shadow” loans have grown to nearly US $37 Trillion (RMB 252.3 Trillion) and have surpassed China’s US$34 Trillion, “On-Balance Sheet” bank assets as of the close of 2016. They also restated the 2015 numbers, increasing the 2015 figures to US$ 28 Trillion (RMB 189 Trillion), roughly doubling the 2015 figure.

Keep in mind, the PBOC estimating Non-Bank Shadow loans is a bit like the local Sheriff estimating “unreported financial crime”. He doesn’t have authority over the mechanics of the activity, lacks enforcement resources and therefore can’t do much about preventing the crime(s). Even if he had authority and resource, he’d have a hard time zeroing in on the metric….criminals generally don’t respond to surveys or self-report their schemes. Moreover, the Sheriff would have an incentive to under-estimate the problem and hope everything works out, since, at some point, someone is going to be held accountable. As history shows, and Chinese Bankers are well aware of this, financial scoundrels are normally exiled to horrific disgrace on a private tropical island with access to boatloads of Cayman Islands money…..so it goes.

Again, based solely on the usual, limited transparency inherent in PBOC reporting (good things are trumpeted and bad things are swept under the rug), a disclosure like this would indicate that the problem is potentially much larger than they are letting on. In the 2017 Financial Stability Report (an oxymoron if I’ve ever heard one) the PBOC restates the Shadow Bank Assets for 2014 and 2015 (as shown by the dotted line in the chart below). To my knowledge, no other major economy has ever experienced an acceleration anywhere near these levels of Non-Bank, Shadow debt relative to GDP, much less restated it in a gigantic “ooppps….our bad” buried in a couple of paragraphs in the bowels of a report. In China….they do things big. The bigger the better. The two Charts below, prepared by Capital Economics illustrate that we’ve apparently entered uncharted waters.

Although the fiercely independent citizens, politicians and bankers of Hong Kong and Singapore might disagree, we can generalize that the leverage in those economies (tall bars on the left of the chart) is inextricably linked to the Chinese financial system. If there were ever a potential “ground-zero” for a default-induced financial contagion Shang-Hong-apore would be it. Moreover, when we examine the PBOC/CE Charts above, it wouldn’t be much of a reach to conclude that Shadow/Non-Bank Credit has become an absolutely essential tool for keeping all of the financial balls in the air. [..] Jahangir Aziz and Haibin Zhu from JP Morgan said the debts of the state-owned entities (SOEs) have alone reached 90pc of GDP or $13.3 trillion. Nearly 60pc of new credit this year is being used to repay old loans. It takes four times as much new credit to generate a given amount of extra of GDP as it did a decade ago.

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The EU leadership doesn’t give a shit what Europeans think of them (they’re not elected). Wave bye bye.

EU Parliament Defends ‘Proportionate Force’ in Catalonia (RT)

EU member states have the right to use “proportionate” force to defend the rule of law, Frans Timmermans, European Commission First Vice President, said three days after hundreds were injured by Spanish police trying to stop an independence vote in Catalonia. “It is a duty for any government to uphold the rule of law, and this sometimes requires the proportionate use of force,” Timmermans told the European Parliament in Strasbourg during a debate on Catalonia. “Respect for the rule of law is not optional – it’s fundamental,” he said. An independence referendum was held in the relatively prosperous Spanish region of Catalonia on Sunday, despite Madrid labeling it “unconstitutional.” A brutal mass police crackdown during the vote saw over 800 people, including women and the elderly, injured in Barcelona and elsewhere across the region.

“If the law does not give you what you want, you can oppose the law, you can work to change the law, but you cannot ignore the law,” Timmermans said. For the EU, “it is fundamental that the constitutions of every one of our member states are upheld and respected,” he added. According to Timmermans, the Catalan regional government “has chosen to ignore the law in organizing the referendum of last Sunday.” The leader of the largest European Parliament group, the European People’s Party, Manfred Weber, has also decried the Catalan referendum as invalid during the debate. “Who leaves Spain, leaves the European Union,” including the eurozone and the single market, Webber warned the Catalan authorities.

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“..the Rajoy administration dispatched two military convoys to Barcelona today to beef up its coercive capabilities in the city..”

Catalonia Chaos Begins to Squeeze Spain’s Financial Markets (DQ)

Spain’s biggest political crisis of a generation, which has led to the complete breakdown of communication and understanding between its government in Madrid and the separatist region of Catalonia, is finally beginning to take its toll on the country’s financial markets. Spain’s benchmark index, the Ibex 35, slumped nearly 3% following its worst day of trading since the Brexit vote last June. Spain’s 10-year risk premium — the differential between the yield on its 10-year bonds and the yield on Germany’s 10-year bonds — soared to 129 basis points. And that’s despite the fact that the ECB continues to buy Spanish debt hand over fist. But it is the banks that have borne the brunt of the pain this week. On Monday, the first trading day after the independence referendum, they lost €4.84 billion in market value.

Over the past five trading days, shares of the two biggest Catalan-based banks, Caixabank and Banco de Sabadell, have plunged respectively, 9% and 13%. So tense is the situation that the CEOs of each bank felt compelled to release a statement today reassuring customers that they have all the means and tools necessary to protect their interests. Their contingency plans include the option of abandoning their base of operations in Catalonia and moving elsewhere — to Madrid in the case of Sabadell and Mallorca in the case of Caixabank. But it wasn’t just Catalan banks that were caught up in today’s rout. Important Spanish banks with somewhat less exposure to Catalonia also saw their shares plunge.

Santander, Spain’s only global systemically important bank, was down 3.8% on the day’s trading; BBVA, Spain’s second bank which has important operations in Catalonia after acquiring the failed saving bank Catalunya Caixa in 2015, fell 3.6%; and Bankia was also down 3.6%. Standard & Poor’s today put Catalonia’s credit rating — at B+/B, it’s already deep into junk — on review for a downgrade of one notch or more, “if we believed that escalating political tensions between Catalonia’s government and Spain’s central government could put in question the full and timely refinancing of Catalonia’s short-term debt instruments or undermine the effectiveness of the central government’s financial support to Catalonia.” The threat of default moves a step closer.

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$1 trillion and now they start counting?!

ECB To Banks: Set Aside More Cash For Bad Debt Amid €1 Trillion Problem (G.)

The ECB is attempting to put a lid on the near €1tn of bad debts stored in eurozone banks by asking lenders to be more prudent about the way they handle new customers falling behind on repayments. The Frankfurt-based institution issued guidance on Wednesday intended to stop a new pile of problem debts being built up inside eurozone banks by setting out how much cash it wanted lenders to set aside for bad debts incurred from January 2018. The measures are not applicable to the existing €1tn of bad debts, which are largely a legacy of Europe’s financial problems in the aftermath of the 2008 crash and languishing on the balance sheets of banks in countries such as Greece, Cyprus and Italy. The ECB wants lenders to set aside 100% of the value of an unsecured loan within two years and gives lenders seven years to put aside the full amount of a secured loan, such as a mortgage.

The aim is to set a formal guideline for how to tackle problem loans – known as non-performing loans (NPLs) – in contrast to the current situation where there are a variety of approaches across eurozone countries. Policymakers are concerned that bad debts inside banks not only weaken lenders but also make it difficult for them to grant more loans, which in turn can impede economic growth. But they are sensitive to announcing new measures that would make banks more cautious about issuing new loans or push up the cost of borrowing. Sharon Donnery, deputy governor of the Central Bank of Ireland, who presented the latest plan by the ECB to tackle bad debts, said: “We want to prevent a build-up of insufficiently covered NPLs in the future.” The new measures are not applicable to the existing stock of bad debts for which lenders have set aside 45% of the value of their problem loans, so if the new rules had been applied it could have led to multibillion-euro provisions for lenders.

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Who did that headline?

Investors Are Too Inured to Markets’ Repeated Records (DDMB)

After several boom-and-bust cycles it’s clear many investors have exhausted the term “bubble.” Instead, they will recall this cycle with another word: “record.” The question is: Will the memories be tinged with regret? The answer is an unequivocal “yes.” The stock market closes at a fresh high with such frequency it no longer triggers news flashes. The mirror image of these daily records is found in volatility, which has cascaded to record lows. The bond market, though, is where the real action has been since 2011. If the current pace of sales persists through the final quarter of this year, 2017 will mark the seventh consecutive year of record U.S. corporate bond issuance. In exchange, investors are extending issuers record lax lending terms and receiving near-record low returns. It is no longer uncommon for bonds to price at yields that are beneath an issuer’s leverage as gauged by debt as a multiple of earnings.

Moreover, three-quarters of loans sold into the $1 trillion leveraged loan market are of the “covenant-lite” variety, meaning they do not give investors protection against issuers loading themselves up with debt. Buyers have responded by pushing leveraged loan volumes up by more than half this year compared with 2016; issuance is on pace to surpass 2007’s record $534 billion. And while it isn’t at record lows, the yield spread over comparable Treasury bonds that investors receive for investment grade-rated credits has only been lower 20% of the time since 2000. In the case of high-yield credit, the spread has only been lower 14% of the time in the past 17 years.

The differentiating factor in the years 2004 through 2007, when spreads were at their tightest on record, is the relative dearth of securitization, a process by which pools of loans were divvied up into tranches engineered to disperse risk. Investors learned the hard way as the credit crisis unfolded that these “collateralized” vehicles did not perform as well as the underwriters advertised. And yet, while there’s no question the collateralized mortgage obligation, or CMO, hasn’t even flirted with a comeback, the same cannot be said of its cousin, the collateralized loan obligation. In September, CLO issuance volumes surpassed $82 billion, well past the $75 billion high end of what analysts had been forecasting for the full year. Volumes are running at twice last year’s pace and could easily surpass 2007’s record $89 billion level.

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Tax-free is not risk-free.

Puerto Rico’s Debt Is Quietly Sitting in Mom and Pop Mutual Funds (Martens)

There was likely a collective gasp at OppenheimerFunds Inc. yesterday when President Donald Trump made another of those market-moving pronouncements, telling Fox News that Puerto Rico’s debt would have to be wiped out. The President’s remarks suggested he thought the losers would be Wall Street banks. The President stated: “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out. That’s gonna have to be — you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave good-bye to that.” The reality is that a large percentage of Puerto Rico’s debt is held in tax-free municipal bonds and municipal bond mutual funds, owned not by Wall Street banks or tycoons, but by mom and pop investors seeking tax-free income.

(As a result of Congressional legislation, the interest on municipal bonds issued by the Commonwealth of Puerto Rico, its political subdivisions and public corporations, is not subject to Federal, state or local taxes. This has made the individual bonds and mutual funds particularly attractive in places like New York City and to residents of New York counties with high local taxes.) According to a semi-annual report made last month at the Securities and Exchange Commission, Oppenheimer Rochester Fund Municipals, a popular tax-free fund held by many New York investors, was sitting on a boatload of Puerto Rico municipal bonds as of June 30, 2017. The SEC filing shows over 100 different Puerto Rico bonds, issued by the Commonwealth and numerous other Puerto Rico issuers like the Puerto Rico Electric Power Authority and the Puerto Rico Sales Tax Financing Corp. (The fund, of course, holds a widely diversified portfolio of other bonds as well.)

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MMT.

The Cost Of Not Understanding Sovereign Currencies (Bill Black)

Jared Bernstein, Senior Fellow at the Centre on Budget and Policy Priorities and former chief economist to former Vice President Joe Biden, recently published an op ed in the New York Times entitled ‘Do Republicans Really Care About the Deficit?’. Republican elites, of course, have not really cared about federal budget deficits for decades. That is a good thing that Democrats should embrace in a bipartisan spirit. Bernstein, of course, is correct that the Republicans are hypocrites about federal budget deficits, pretending to care about them when the Democrats hold power and displaying their lack of any real care when Republicans hold power and the context is tax cuts for the wealthy.

Democrats display a similar hypocrisy. Even Democrats like Bernstein who know that the Republicans proposed expansion of the federal budget deficit through tax cuts is not a real economic problem are primed to attack Republican hypocrisy by falsely asserting that the Republican deficits would harm the Nation. Democrats should embrace honesty as the best policy and stop embracing the politically attractive pose of claiming to be the Party that “really cares” about the federal budget deficit. That politically attractive pose is not simply dishonest and financially illiterate, it is also a trap. The Republican and New Democrat deficit strategy is to force Democrats to make an endless series of “Sophie’s choices.” Choose which excellent program to kill in order to save (temporarily) another from the chopping block because we supposedly cannot afford to provide both.

Then repeat the process. The Republicans and New Democrats constantly, and falsely, claim that the federal government cannot afford to provide medical care availability that is routinely provided in most of Europe and Canada. It is a pure myth that the United States cannot afford to provide the safety net of Social Security, Medicare, and Medicaid. We need to start with first principles. In a nation with a sovereign currency like the United States, federal tax revenues do not fund federal expenditures. If that sentence, which is indisputably correct, strikes you as bizarre then it is a measure of the force of the propaganda you have been fed throughout your life. Today would be an excellent day to free yourself from the hold of that destructive lie.

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“There is nothing more reckless and irresponsible than convincing a nuclear power that you are going to attack. ”

Whose Bright Idea Was RussiaGate? (PCR)

The answer to the question in the title of this article is that Russiagate was created by CIA director John Brennan.The CIA started what is called Russiagate in order to prevent Trump from being able to normalize relations with Russia. The CIA and the military/security complex need an enemy in order to justify their huge budgets and unaccountable power. Russia has been assigned that role. The Democrats joined in as a way of attacking Trump. They hoped to have him tarnished as cooperating with Russia to steal the presidential election from Hillary and to have him impeached. I don’t think the Democrats have considered the consequence of further worsening the relations between the US and Russia.

Public Russia bashing pre-dates Trump. It has been going on privately in neoconservative circles for years, but appeared publicly during the Obama regime when Russia blocked Washington’s plans to invade Syria and to bomb Iran. Russia bashing became more intense when Washington’s coup in Ukraine failed to deliver Crimea. Washington had intended for the new Ukrainian regime to evict the Russians from their naval base on the Black Sea. This goal was frustrated when Crimea voted to rejoin Russia. The neoconservative ideology of US world hegemony requires the principal goal of US foreign policy to be to prevent the rise of other countries that can serve as a restraint on US unilateralism. This is the main basis for the hostility of US foreign policy toward Russia, and of course there also is the material interests of the military/security complex.

Russia bashing is much larger than merely Russiagate. The danger lies in Washington convincing Russia that Washington is planning a surprise attack on Russia. With US and NATO bases on Russia’s borders, efforts to arm Ukraine and to include Ukraine and Georgia in NATO provide more evidence that Washington is surrounding Russia for attack. There is nothing more reckless and irresponsible than convincing a nuclear power that you are going to attack. Washington is fully aware that there was no Russian interference in the presidential election or in the state elections. The military/security complex, the neoconservatives, and the Democratic Party are merely using the accusations to serve their own agendas. These selfish agendas are a dire threat to life on earth.

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Lots of changes.

Who Really Holds Power at the Fed (BBG)

To the casual observer, the Federal Open Market Committee September meeting in Washington might have looked like any other. But when San Francisco’s John Williams, Minneapolis’s Neel Kashkari, and the other regional Fed presidents took their seats at the big oval table, an historical anomaly glared back from the other side. In a rare alignment of events, the five voting presidents outweighed Board of Governors voters, who include Federal Reserve Chair Janet Yellen. It’s a gap that opened up earlier this year and which looks poised to persist, at least for the near future. This matters. There are 12 Fed presidents, chosen for five-year terms by their regional boards. The seven governors are appointed by the U.S. president and confirmed by the Senate for staggered 14-year terms.

Because of the retirement of Daniel Tarullo, the governor informally tasked with heading financial regulation, the Fed board has been down to four voters since May, and with Vice Chairman Stanley Fischer leaving, it’s possible the number could be down to three by the next FOMC meeting. It looks likely that Randal Quarles, Trump’s first nominee, could be confirmed before that, holding the Governors steady at four. The regional contingent, meanwhile, remains near full force, with only the Richmond Fed currently looking for a new president. At a time when the current occupant of the Oval Office could choose at least four new governors, the power of the regional presidents amounts to a stabilizing backbone and bastion of independence in an era of transition at the Fed. Yellen, Lael Brainard, and Jerome Powell are the holdouts on the board in Washington, and President Trump isn’t expected to reappoint Yellen when her term ends in February.

Thus it could fall to the Fed’s arcane system, born of populist angst, to protect monetary policy from massive upheaval. The current state of affairs underscores how this uniquely American setup, erected in stages beginning in the years before World War I, remains relevant a century later, even though many of the functional duties of the world’s most powerful central bank have changed. “The regional banks are a bizarre set of entities,” says Aaron Klein, a Brookings Institution fellow who studies the central bank. “In some ways the mission of the regional system is to bring in diverse viewpoints that challenge the political board.”

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“Prior to the rule, an estimated $100m in taxpayer-owned natural gas was wasted each year from oil and gas wells operating on public lands in New Mexico..”

Court Orders Trump Administration Reinstate Obama Emissions Rule (AP)

Rebuffing the Trump administration, a federal judge on Wednesday ordered the Interior Department to reinstate an Obama-era regulation aimed at restricting harmful methane emissions from oil and gas production on federal lands. The order by a judge in San Francisco came as the Interior Department moved to delay the rule until 2019, saying it was too burdensome to industry. The action followed an earlier effort by the department to postpone part of the rule set to take effect next year. US Magistrate Judge Elizabeth Laporte of the northern district of California said the department had failed to give a “reasoned explanation” for the changes and had not offered details why an earlier analysis by the Obama administration was faulty. She ordered the entire rule reinstated immediately.

The rule, finalized last November, forces energy companies to capture methane that’s burnt off or “flared” at drilling sites on public lands during production because it pollutes the environment. An estimated $330m a year in methane is wasted through leaks or intentional releases on federal lands, enough to power about 5m homes a year. Methane, the primary component of natural gas, is a leading contributor to global warming. It is far more potent at trapping heat than carbon dioxide but does not stay in the air as long. [..] Democratic senator Tom Udall from New Mexico said the methane rule provides badly needed revenue to states such as New Mexico for public education and other services.

Prior to the rule, an estimated $100m in taxpayer-owned natural gas was wasted each year from oil and gas wells operating on public lands in New Mexico, Udall said, adding that the rule has helped to reduce dangerous air pollution across the west, including a methane cloud the size of Delaware that hangs over the Four Corners region of New Mexico, Utah, Arizona and Colorado.

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What Happens If the Honeybees Disappear?

US Honeybee Queen Life Expectancy Halves In 10 Years (NatGeo)

A honeybee queen, when all is right in her world, should live for two to three years. But in the United States, beekeepers have seen that life span drop by more than half over the past decade, and researchers are trying to determine why. It’s one of many questions surrounding the mystery of honeybee mortality, a disturbing phenomenon that’s linked to a mix of factors, including parasites, pesticides, and habitat loss. Aside from making a delicious natural sweetener, honeybees—which are not native to the U.S.—also provide a crucial service to agriculture: pollination. From apples to almonds, many crops would suffer without honeybees. And while about 90% of beekeepers in this country are hobbyists, the majority of hives belong to large-scale, commercial operations, says North Carolina State University entomologist David Tarpy.

Colony collapse in general could be devastating to food production. So scientists are looking for alternatives. Most honeybees in the U.S. today are of Italian heritage and vulnerable to a pest called the varroa mite. But Russian bees are more resistant to it, and backyard beekeepers have had success with them. The problem, says Tarpy, is that Russian honeybees don’t make as much honey as their Italian counterparts and “aren’t as amenable” to the migratory nature of pollinating large-scale farms. Another option, says wildlife biologist Sam Droege of the U.S. Geological Survey, is to embrace the thousands of North American wild bee species, which are excellent pollinators, rarely sting, and are typically the size of a grain of rice. The drawback for some people is that none of the wild bee species produce honey. But, says Droege, “we can always get honey from other countries.”

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I’ve always been in awe of 5000 year old trees. They ‘saw’ the pyramids being built.

Ancient Bristlecone Pine Forests Overwhelmed By Climate Change (LAT)

For thousands of years, wind-whipped, twisted bristlecone pines have been clinging to existence on the arid, stony crests of eastern California’s White Mountains, in conditions inhospitable to most other life. Their growth rings provide a year-by-year account of the struggle to survive: It’s a tortuous cycle of dying off almost entirely, leaving only a few strips of bark that then continue to grow diagonally skyward or sideways along the ground. But the world’s oldest trees may never have experienced temperature increases as rapid as those of recent decades. The climatic changes have triggered a struggle for dominance, in very slow motion, between the ancient bristlecones and the younger limber pines that have been able to charge up-slope as conditions become warmer and wetter.

Scientists know that bristlecone pines will remain standing for centuries to come. But how will they cope with the intrusion of limber pines competing for sunlight, moisture, nutrients and room to grow? Which plants and animals will be first to adapt to niches in the increasingly diverse forests at elevations above 11,000 feet? [..] average ambient temperatures have risen nearly 2 degrees Fahrenheit in the last century, altering the precarious balance of life in the region long dominated by ancient bristlecone pines — regarded as symbols of longevity, strength and perseverance. “Whenever conditions change, there are winners and losers. And in this case, we won’t know the ultimate outcome for several thousand years,” Smithers said. “But some bristlecone pine forests could face a reduction in range if they’re crowded out … by limber pines moving into their turf.”

Bristlecone pines — named for their bottlebrush-like branches with short needles — are found in other parts of the semiarid Great Basin, which extends from California’s Sierra Nevada east to the Rockies. But the ones found in the White Mountains are the oldest. The slow growers are only about 25 feet tall and expand about 1 inch in diameter every 100 years. One of the oldest of the bunch is Methuselah, at about 4,768 years old. Its precise location is carefully guarded to avert vandalism.

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Animal feed.

60% Of Global Biodiversity Loss Is Down To Meat-Based Diets (G.)

The ongoing global appetite for meat is having a devastating impact on the environment driven by the production of crop-based feed for animals, a new report has warned. The vast scale of growing crops such as soy to rear chickens, pigs and other animals puts an enormous strain on natural resources leading to the wide-scale loss of land and species, according to the study from the conservation charity WWF. Intensive and industrial animal farming also results in less nutritious food, it reveals, highlighting that six intensively reared chickens today have the same amount of omega-3 as found in just one chicken in the 1970s.

The study entitled Appetite for Destruction launches on Thursday at the 2017 Extinction and Livestock Conference in London, in conjunction with Compassion in World Farming (CIFW), and warns of the vast amount of land needed to grow the crops used for animal feed and cites some of the world’s most vulnerable areas such as the Amazon, Congo Basin and the Himalayas. The report and conference come against a backdrop of alarming revelations of industrial farming. Last week a Guardian/ITV investigation showed chicken factory staff in the UK changing crucial food safety information. Protein-rich soy is now produced in such huge quantities that the average European consumes approximately 61kg each year, largely indirectly by eating animal products such as chicken, pork, salmon, cheese, milk and eggs.

In 2010, the British livestock industry needed an area the size of Yorkshire to produce the soy used in feed. But if global demand for meat grows as expected, the report says, soy production would need to increase by nearly 80% by 2050. “The world is consuming more animal protein than it needs and this is having a devastating effect on wildlife,” said Duncan Williamson, WWF food policy manager. “A staggering 60% of global biodiversity loss is down to the food we eat. We know a lot of people are aware that a meat-based diet has an impact on water and land, as well as causing greenhouse gas emissions, but few know the biggest issue of all comes from the crop-based feed the animals eat.”

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Author Ethan Siegel ends up being disappointed.

Are Space, Time, And Gravity All Just Illusions? (F.)

The Universe, as we know it, has a fundamental flaw staring us right in our faces, letting us know that our knowledge is incomplete. The four fundamental forces are described by two different and mutually incompatible frameworks: General Relativity for gravitation, and Quantum Field Theory for the electromagnetic and nuclear forces. Einstein’s theory on its own is just fine, describing how matter-and-energy relate to the curvature of space-and-time. Quantum field theories on their own are fine as well, describing how particles interact and experience forces. But where gravitational fields are strongest, and on the smallest of scales, we have no way of describing nature. The physics of our greatest theories breaks down. Under conventional circumstances, quantum field theory calculations are done in flat space, where spacetime isn’t curved.

We can do them in the curved space described by Einstein’s theory of gravity as well, although the calculations are far more difficult. This semi-classical approach gets us far, but it doesn’t get us everywhere. In particular, there are a few strong-field situations where we simply cannot obtain sensible answers using our current theories: • What happens to the gravitational field of an electron when it passes through a double slit? • What happens to the information of the particles that form a black hole, if the black hole’s eventual state is thermal radiation? • And what is the behavior of a gravitational field/force at and around a singularity? These questions all go unanswered without a quantum theory of gravity. The assumption we normally make is that there is a quantum theory of gravity, and we just haven’t found it yet.

Perhaps it’s string theory; perhaps it’s an alternative approach like loop quantum gravity, causal dynamical triangulations, or asymptotic safety. But since 2009, a new, exciting, and assumption-challenging approach has taken the scene by storm: the idea that gravity itself isn’t a real, fundamental force, but an illusory, emergent one. Pioneered by Erik Verlinde, the idea is that gravity emerges from a more fundamental phenomenon in the Universe, and that phenomenon is entropy. Sound waves emerge from molecular interactions; atoms emerge from quarks, gluons and electrons and the strong and electromagnetic interactions; planetary systems emerge from gravitation in General Relativity. But in the idea of entropic gravity — as well as some other scenarios (like qbits) — gravitation or even space and time themselves might emerge from other entities in a similar fashion.

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Aug 102017
 
 August 10, 2017  Posted by at 9:18 am Finance Tagged with: , , , , , , , ,  


Dorothea Lange Rooms for Rent, Mission District. Slums of San Francisco, California 1936

 

An Indicator of Peril (Lebowitz)
Former CBO Director: Fall 2017 Will Be “Very Scary”, Expect A Market Crash (ZH)
US Still Stuck Firmly In The Great Recession (BI)
10 Years After Crisis, Another Crash Is ‘Almost Inevitable’ – Steve Keen (RT)
This $5 Trillion Time Bomb Will Devastate Americans (IM)
New Report Raises Big Questions About Last Year’s DNC Hack (N.)
Unverified ‘Russiagate’ Allegations a Grave Threat to America (Stephen Cohen)
European Commission Spending Thousands On ‘Air Taxis’ For Top Officials (G.)
Refugee Crisis Triggers Heightened Risk Of Slavery In EU Supply Chains (G.)

 

 

“The data point, Real Value Added, is currently in negative territory and may, therefore, be a harbinger of an economic downturn. If it is a false signal, it would be the first in a 70-year history of observations.”

An Indicator of Peril (Lebowitz)

Gross Value Added (GVA) and Real Value Added (RVA). GVA is a measure of economic activity, like GDP, but formulated from the production side of the economy. It measures the dollar value of all goods and services produced less all the costs required to produce those goods or services. For example, if 720Global buys $100 worth of wood, $20 worth of other materials and employs $30 worth of labor to build a chair, we have produced a good for $150. If that good is sold for $200, 720Global has created $50 of economic value. Gross Domestic Product (GDP), the more popular measure of economic activity, calculates the level of commerce based on the dollar value of the final goods and services produced. It may help to think of GDP as economic activity measured from the demand side and GVA as measured from the supply side.

Despite the differences, the levels of economic activity reported are remarkably consistent. Since 1948, nominal GDP has averaged annual growth of 6.55% while GVA has averaged 6.50%. It is important to note that, while they track each other very well over the longer term, they are less correlated quarter to quarter. Economists prefer to measure economic activity without the effect of inflation. If inflation were rampant when making the chair in the example above, some of the incremental value was due to the general trend of rising prices and not value added by 720Global. To strip out the effect of inflation and compute a pure measure of value added, it is commonplace to subtract inflation from GVA. The result is Real Value Added (RVA = GVA less CPI). The graph below plots RVA since 1948. Periods deemed recessionary by the National Bureau of Economic Research (NBER) are denoted in gray.

Currently, three of the last four quarters have produced negative RVA levels. Real GDP is not producing similar results, having averaged 2% growth over the same quarters. As mentioned earlier, RVA and Real GDP may not be well correlated over short time frames. RVA is just one source of data arguing that economic trouble lies ahead, therefore, we would be wise not to read too much into this one indicator. Of concern, however, is that negative RVA readings have an impeccable pattern of signaling recession as a coincident indicator.

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Debt ceiling solution far from done.

Former CBO Director: Fall 2017 Will Be “Very Scary”, Expect A Market Crash (ZH)

Rudy Penner, the former director of the Congressional Budget Office and the person described by MarketNews international as “one of Washington’s most respected fiscal policy experts”, told MNI Wednesday in an exclusive interview that he expects a “very scary” fall 2017 due to fiscal issues, with market-disrupting battles ahead on both the debt ceiling and fiscal year 2018 spending. Penner directed the CBO under president Reagan, worked at high level posts in the White House budget office, and the Council of Economic Advisers. He is currently a fellow at the Urban Institute and sits on the board of the Committee for a Responsible Federal Budget. “There are so many politically hard issues and so little consensus on budget and tax policy. I assume we’ll somehow get through this, but not without getting frightened on a regular basis,” Penner said.

“Probably the best we can hope for is muddling through the (FY 2018) budget and the debt limit and getting very limited health, tax, and infrastructure legislation. There is not going to be significant stimulus coming out of Washington in the foreseeable future,” he said, echoing what many other pundits have said before. Penner said a “bipartisan negotiation is badly needed” to forge even a limited FY 2018 spending agreement. But he’s not certain this will occur. “Even a very limited spending agreement might be an impossible dream. We may just stumble into a series of short-term CRs,” he said, referring to temporary spending bills to keep the government funded. While the “record polarization” rhetoric is familiar, the clock is starting to tick ever louder: the 2018 fiscal year begins on October 1, 2017 and extends until September 30, 2018. None of the 12 annual spending bills for FY 2018 have yet been approved by Congress.

On to the debt ceiling, the one item on the calendar which Morgan Stanley (and others) have said will be the biggest hurdle for the market in the next two months, Penner said he believes it will be “very challenging” for Congress to pass legislation this fall to increase the statutory debt ceiling. Treasury Secretary Steve Mnuchin has asked Congress to lift the debt ceiling by the end of September. Penner countered that a “plausible path” for dealing with the debt ceiling is to pass legislation in September to suspend the debt ceiling until after the November 2018 mid-term elections. However, such legislation, he said, may have to be negotiated by an unusual coalition assembled by House Speaker Paul Ryan, a Republican, and House Minority Leader Nancy Pelosi, a Democrat. Such an agreement, Penner said, “could put Speaker Ryan’s job in peril” by conservative Republicans who oppose it. He said he believes the debt ceiling is “an incredibly stupid law that makes no logical sense.”

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What happens when you save banks only.

US Still Stuck Firmly In The Great Recession (BI)

Expectations are everything, especially in economics. That’s why a distinct lack of progress in a few basic measures of economic progress, particularly relative to pre-crisis expectations, has left many Americans questioning how much they have personally benefitted from the economic recovery. A new report from the Roosevelt Institute, a liberal think tank in Washington, highlights a number of ways in which “the recovery since 2009 is, in a sense, a statistical illusion.” The study finds the nation’s total economic output, its gross domestic product, “remains about 15% below the pre-recession trend, a larger gap than at the bottom of the recession.” The first chart below shows that lag, while the second offers insights into just how badly the crisis dented expectations about the future.

Strong employment gains in recent months have brought the jobless rate down to a historically-low 4.3%. However, this decline has not been accompanied by rising incomes or consumer prices, generally associated with a sustainable economic boom. Some Federal Reserve policymakers have found this trend puzzling, while many labor economists point to underlying weaknesses in the job market, including high levels of underemployment and long-term joblessness, as drags on income. Stagnant wages amid rising profits have meant that the wage share in US national income has fallen from 63% to 57% in the last 15 years, according to the report. “It is impossible for the wage share to ever rise if the central bank will not allow a period of ‘excessive’ wage growth,” writes J.W. Mason, who authored the report. “A rise in the wage share necessarily requires a period in which wages rise faster than would be consistent with longterm macroeconomic stability.”

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Zombie-to-be economies.

10 Years After Crisis, Another Crash Is ‘Almost Inevitable’ – Steve Keen (RT)

Speaking to RT, Keen said another financial crisis could be just around the corner unless a fundamentally different approach to debt is adopted. He says we are too focused on government debt, when what actually caused the crisis was “run-away private debt.” “The economy in the UK is not stable. It’s in the aftermath of the biggest financial crisis since the great depression, and there’s still a lack of awareness in the political classes about what actually caused the crisis in the first place,” Keen said. “The Tories were incredibly successful in convincing the electorate that the crisis was caused by government spending, which is absurd. That is technically saying government spending in the UK caused the financial crisis in the United States. Which is just nonsense. “And that gave us austerity for the last 10 years. That austerity has actually further weakened the economy.”

Keen says the level of private debt in the UK peaked at about 195% of GDP post-crisis. While it is now down to about 170% of GDP, it is roughly three times the level of debt England carried before the Margaret Thatcher era, he says. “That’s the stuff that’s being ignored. Nothing is really being done about that. With the amount of debt just sitting there we are still likely to have another crisis – but more likely, we are going to have stagnation.” What is cause for concern, Keen says, is what he calls the “zombie-to-be” economies, such as Australia, Belgium, China, Canada, and South Korea, which avoided the 2008 crisis by borrowing their way through it. Now they have a bigger debt burden to deal with when the next crisis hits, which could be between 2017 and 2020, he says.

“[The ‘zombie-to-be’ economies] are roughly equivalent in size to the American economy. So when they fall, then there will be a crisis that affects the rest of the world, including the UK.” Keen sees China as a terminal case. It has expanded credit at an annualized rate of around 25% for years on end. With private sector debt exceeding 200% of GDP, China resembles the over-indebted economies of Ireland and Spain prior to 2008. He also has little hope for his native Australia, whose credit and housing bubbles failed to burst in 2008. Last year, Australian private sector credit nudged above 200% of GDP, up more than 20 percentage points since the global financial crisis. Australia shows “that you can avoid a debt crisis today only by putting it off until tomorrow,” Keen says.

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Pensions.

This $5 Trillion Time Bomb Will Devastate Americans (IM)

Over 3,000 millionaires have fled Chicago in recent months. This is the largest outflow of wealthy people from any US city right now. It’s also one of the largest outflows of wealthy people in the world. But it’s not just millionaires… Every five minutes someone leaves Illinois. In a recent poll, 47% of people in Illinois said they want to leave the state. Over the last decade, more than half a million people have done just that. This is the largest outflow of people from any state in the country. The people who leave are generally better educated, more skilled, and earn more money than those who stay. Entire towns of affluent Illinois refugees have sprouted up in Florida, Arizona, and other states. Illinois is bleeding productive people. This is a major warning sign. Wealthy people are often the first to leave a bad situation. They have the means to simply get up and go.

And when they do, they take their money and their businesses with them. This hurts the local property market and the rest of the local economy. Many of Illinois’ millionaires own businesses that employ large numbers of people. As they leave, there are fewer people and businesses left to shoulder the state’s enormous and growing financial burdens. Many of these people are leaving for one simple reason: rising taxes. Illinois’ leftist tax-and-spend politicians are continuing to increase all sorts of taxes, which were already high in the first place. The state just passed a 32% income tax hike. Rising taxes are pushing more and more productive people to make the chicken run… and at the worst possible moment for the state’s coffers. Illinois is the most financially distressed state in the US. Every month, it spends $600 million more than it takes in.

It’s now $15 billion behind on its bills and counting. Illinois is about to become America’s first failed state. Even its governor has described it as a “banana republic.” Today, Illinois can’t pay contractors to fix the roads. It doesn’t have enough cash to pay lottery winners. (What happened to the money it collected selling lottery tickets?) The state can’t even afford food for its prisoners. Here are the sad facts. Illinois has: Nearly $15 billion in overdue bills (including $800 million in interest). A $7 billion budget deficit. And an eye-watering $250 billion bottomless pit of unfunded pension obligations. This $250 billion tab is one of the worst public pension crises in the US.

[..] While Illinois has the worst pension situation, it’s not the only state or city in crisis. California’s public pension system is also broken beyond repair. It’s $750 billion underfunded. State pension plans in Connecticut, Pennsylvania, New Jersey, and many other states are taking on water, too. Unfunded public pension liabilities in the US have surpassed $5 trillion. And that’s during an epic stock and bond market bubble.

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A long overview of all the evidence.

New Report Raises Big Questions About Last Year’s DNC Hack (N.)

It is now a year since the Democratic National Committee’s mail system was compromised—a year since events in the spring and early summer of 2016 were identified as remote hacks and, in short order, attributed to Russians acting in behalf of Donald Trump. A great edifice has been erected during this time. President Trump, members of his family, and numerous people around him stand accused of various corruptions and extensive collusion with Russians. Half a dozen simultaneous investigations proceed into these matters. Last week news broke that Special Counsel Robert Mueller had convened a grand jury, which issued its first subpoenas on August 3. Allegations of treason are common; prominent political figures and many media cultivate a case for impeachment.

The president’s ability to conduct foreign policy, notably but not only with regard to Russia, is now crippled. Forced into a corner and having no choice, Trump just signed legislation imposing severe new sanctions on Russia and European companies working with it on pipeline projects vital to Russia’s energy sector. Striking this close to the core of another nation’s economy is customarily considered an act of war, we must not forget. In retaliation, Moscow has announced that the United States must cut its embassy staff by roughly two-thirds. All sides agree that relations between the United States and Russia are now as fragile as they were during some of the Cold War’s worst moments. To suggest that military conflict between two nuclear powers inches ever closer can no longer be dismissed as hyperbole.

All this was set in motion when the DNC’s mail server was first violated in the spring of 2016 and by subsequent assertions that Russians were behind that “hack” and another such operation, also described as a Russian hack, on July 5. These are the foundation stones of the edifice just outlined. The evolution of public discourse in the year since is worthy of scholarly study: Possibilities became allegations, and these became probabilities. Then the probabilities turned into certainties, and these evolved into what are now taken to be established truths. By my reckoning, it required a few days to a few weeks to advance from each of these stages to the next. This was accomplished via the indefensibly corrupt manipulations of language repeated incessantly in our leading media.

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America still ignores its no. 1 Russia expert.

Unverified ‘Russiagate’ Allegations a Grave Threat to America (Stephen Cohen)

Considering all these unprecedented factors, it needs to be emphasized again: President Trump is right about this “all-time low & very dangerous” moment in US-Russian relations. Having recently returned from Russia, Cohen reports that the political situation there is also worsening, primarily because of the Cold War fervor in Washington, including the politics of Russiagate and and new sanctions. Contrary to opinion in the American political-media establishment, Putin has long been a moderate, restraining factor in the new Cold War, but his political space for moderation is rapidly diminishing. His reaction to the congressional sanctions—reducing the number of personnel in US official outposts in Russia to the far lesser number of Russians in American ones—was the least he could have done.

Far harsher political and economic countermeasures are being widely discussed in Moscow, and urged on Putin. For now, he resists, explaining, “I do not want to make things worse,” but he too has a surrounding political elite and it is playing a growing role against any accommodation or restraint in regard to US policy. Meanwhile, the pro-American faction in Russian governmental circles is being decimated by Washington’s actions; and, as always happens in times of escalating Cold War, the space for Russian opposition and other dissident politics is rapidly shrinking.

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Well, if you build yourselves €1 billion offices, who cares?

European Commission Spending Thousands On ‘Air Taxis’ For Top Officials (G.)

Jean-Claude Juncker and his top officials are spending tens of thousands of euros on chartering private planes, according to documents detailing the European commission’s travel expenses. After three years of battling with transparency campaigners fighting for full disclosure, the EU’s executive has released two months of travel costs for 2016, revealing regular use of chartered planes to transport Brussels’ 28 commissioners. The most expensive mission for which details have been released was in the name of Federica Mogherini, the EU’s high representative for foreign affairs. It cost €77,118 for her and aides to travel by “air taxi” to summits in Azerbaijan and Armenia between 29 February and 2 March 2016.

A two-day visit by Juncker, the European commission president, with a delegation of eight people to see Italy’s political leaders in Rome in February 2016 cost €27,000, again due to the chartering of a private plane. Mina Andreeva, a commission spokeswoman, said the use of air taxis was only allowed where commercial flights were either not available or their flight plans did not fit in with a commissioner’s agenda. Security concerns would also allow the chartering of a private plane under commission rules. She said of Juncker’s trip that there had been “no available commercial plane to fit the president’s agenda” in Italy, where he met the Italian president and prime minister, among other dignitaries. The spokeswoman added that the EU’s total spending on such administrative costs was publicly available and that the organisation led the way in being transparent in their work.

The commission was not able to provide details of how many planes are chartered by Brussels every year, although she insisted the number was limited. The travel costs accumulated by the commissioners come out of the general budget, agreed by the member states. [..] According to documents relating to the two months in 2016, total travel and accommodation costs for visits by commissioners to European parliament sessions in Strasbourg, the World Economic Forum in Davos and official missions to countries came to €492.249, an average of €8,790 a month per commissioner.

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That’ll teach them to stay home.

Refugee Crisis Triggers Heightened Risk Of Slavery In EU Supply Chains (G.)

The migrant crisis has increased the risk of slavery and forced labour tainting supply chains in three-quarters of EU countries over the past year, researchers have found. Romania, Italy, Cyprus and Bulgaria – all key entry points into Europe for migrants vulnerable to exploitation – were identified by risk analysts as particularly vulnerable to slavery and forced labour. The annual modern slavery index, produced by Verisk Maplecroft, assessed the conditions that make labour exploitation more likely. Areas covered by the index include national legal frameworks and the severity, and frequency, of violations. Countries outside Europe, such as North Korea and South Sudan, were judged to be at the greatest risk of modern slavery, but the researchers said the EU showed the largest increase in risk of any region over the past year.

“In the past, the slavery story has been in supply chains in countries far away, like Thailand and Bangladesh,” said Dr Alexandra Channer, a human rights analyst at Verisk Maplecroft. “But it is now far closer to home and it something that consumers, governments and businesses in the EU have to look out for. With the arrival of migrants, who are often trapped in modern slavery before they enter the workplace, the vulnerable population is expanding.” The International Labour Organisation estimates that 21 million people worldwide are subject to some form of slavery. The biggest global increase in the risk of slavery was in Romania, which rose 56 places in the indexand is the only EU country classified as “high risk”. Turkey came a close second, moving up 52 places, from medium risk to high risk.

The influx of hundreds of thousands of Syrians fleeing war, combined with Turkey’s restrictive work permit system, has led to thousands of refugees becoming part of an informal workforce, said the study. The government, which is focused on political crackdown, does not prioritise labour violations, further adding to the risk. Over the past year, several large brands from Turkish textile factories have been associated with child labour and slavery. The picture in Romania is more complex, researchers said. The country’s high risk category reflects more severe and frequent instances of modern slavery, but also reflects a greater number of criminal investigations in Romania, usually in collaboration with EU enforcement authorities. Both Romania and Italy, which rose 17 places, have the worst reported violations in the EU, including severe forms of forced labour such as servitude and trafficking, the study said.

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Aug 032017
 
 August 3, 2017  Posted by at 8:58 am Finance Tagged with: , , , , , , , , ,  


Marion Post Wolcott Street scenes. Port Gibson, Mississippi 1940

 

Buybacks and Dividends Eat 100% of Bank Earnings (WS)
America’s Productivity Plunge Explained (ZH)
Amazon is the New Tech Crash (David Stockman)
Public Pensions Average 0.6% Return In 2016 Despite 7.6% Assumption (ZH)
Plan For The Worst (Roberts)
Who Needs $100 Oil? Majors Making More Cash at $50, Goldman Says (BBG)
China’s Fear of Japan-Style Economic Bust Drives Crackdown on Deals (BBG)
The US Just Declared Full-Scale Trade War On Russia (Medvedev)
Seymour Hersh: RussiaGate Is A CIA-Planted Lie, Revenge Against Trump (Zuesse)
The Witch Hunt for Donald Trump Surpasses the Salem Witch Trials (PCR)
Canada Opens Montreal’s Olympic Stadium To House Asylum Seekers (R.)
Number Of Child Refugees In Greek Detention Centres Rises ‘Alarmingly’ (PA)
We Got Too BIG For The World (Kingsnorth)

 

 

And then they go after the Volcker rule. Take away their political power or else.

Buybacks and Dividends Eat 100% of Bank Earnings (WS)

When tighter regulations were imposed on the banks after the Financial Crisis, the largest among them, the very ones that threatened to bring down the financial system, began squealing. Those voices are now being heard by Congress, which is considering deregulating the banks again. In particular, they claim that current capital requirements force banks to curtail their lending to businesses and consumers, and thus hurt the economy. Nonsense! That’s in essence what FDIC Vice Chairman Thomas Hoenig told Senate Banking Committee Chairman Mike Crapo and the committee’s senior Democrat, Sherrod Brown, in a letter dated Tuesday, according to Reuters. The senators are trying to find a compromise on bank deregulation. If banks wanted to increase lending, they could easily do so without lower capital requirements, Hoenig pointed out.

Rather than blowing their income on share-buybacks or paying it out in form of dividends, banks could retain more of their income, thus adding it to regulatory capital. Capital absorbs the losses from bad loans. Higher capital levels make a bank more resilient during the next crisis. If there isn’t enough capital, the bank collapses and gets bailed out. But banks that increase their capital levels through retained earnings are stronger and can lend more. Alas, in the first quarter, the 10 largest bank holding companies in the US plowed over 100% of their earnings into share buybacks and dividends, he wrote. If they had retained more of their income, they could have boosted lending by $1 trillion. The CEO of the top bank on this list has been very vocal about plowing more of the bank’s income into share buybacks and dividends, while pushing regulators to lower capital requirements.

In his “Dear Fellow Shareholders” letter in April, Jamie Dimon wrote under the heading “Regulatory Reform,” among many other things: “It is clear that the banks have too much capital.” “And we think it’s clear that banks can use more of their capital to finance the economy without sacrificing safety and soundness. Had they been less afraid of potential CCAR stress losses, banks probably would have been more aggressive in making some small business loans, lower rated middle market loans and near-prime mortgages. But the government was preventing them from doing it, he suggested.

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I think it started when manufacturing was exported to China et al. How are you supposed to be productive when you don’t make anything?

America’s Productivity Plunge Explained (ZH)

For the first time since the financial crisis, US multifactor productivity growth turned negative last year, mystifying economists who have struggled to find something to blame for the fact that worker productivity is declining despite a technology boom that should make them more efficient – at least in theory. To be sure, economists have struggled to find explanations for the exasperating trend, with some arguing that the US hasn’t figured out how to properly measure productivity growth correctly now that service-sector jobs proliferate while manufacturing shrinks. But what if there’s a more straightforward explanation? What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?

To wit, Facebook has just released user-engagement data for its popular Instagram photo-sharing app. Unsurprisingly, the data show that the average user below the age of 25 now spends more than 32 minutes a day on the app, while the average user aged 25 and older. The last time Facebook released this data, in October 2014, its users averaged 21 minutes a day on the app.

According to Bloomberg, “time spent is an important metric for advertisers, which like to hear that users are browsing an app beyond quick checks for updates, making them more likely to run into some marketing.” Maybe they should matter more to economists, too. Aside from short-lived booms in the 1990s and 2000s, US productivity growth has averaged just 1.2% from 1975 up to today after peaking above 3% in 1972. As we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago. As we reported last year, users spent 51% of their total internet time on mobile devices, for a total of 5.6 hours per day snapchatting, face-booking, insta-graming and taking selfies.

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The new wonders are the ones who don’t make dick all.

Amazon is the New Tech Crash (David Stockman)

It won’t be long now. During the last 31 months the stock market mania has rapidly narrowed to just a handful of shooting stars. At the forefront has been Amazon.com, Inc., which saw its stock price double from $285 per share in January 2015 to $575 by October of that year. It then doubled again to about $1,000 in the 21 months since. By contrast, much of the stock market has remained in flat-earth land. For instance, those sections of the stock market that are tethered to the floundering real world economy have posted flat-lining earnings, or even sharp declines, as in the case of oil and gas. Needless to say, the drastic market narrowing of the last 30 months has been accompanied by soaring price/earnings (PE) multiples among the handful of big winners.

In the case of the so-called FAANGs + M (Facebook, Apple, Amazon, Netflix, Google and Microsoft), the group’s weighted average PE multiple has increased by some 50%. The degree to which the casino’s speculative mania has been concentrated in the FAANGs + M can also be seen by contrasting them with the other 494 stocks in the S&P 500. The market cap of the index as a whole rose from $17.7 trillion in January 2015 to some $21.2 trillion at present, meaning that the FAANGs + M account for about 40% of the entire gain. Stated differently, the market cap of the other 494 stocks rose from $16.0 trillion to $18.1 trillion during that 30-month period. That is, 13% versus the 82% gain of the six super-momentum stocks.

Moreover, if this concentrated $1.4 trillion gain in a handful of stocks sounds familiar that’s because this rodeo has been held before. The Four Horseman of Tech (Microsoft, Dell, Cisco and Intel) at the turn of the century saw their market cap soar from $850 billion to $1.65 trillion or by 94% during the manic months before the dotcom peak. At the March 2000 peak, Microsoft’s PE multiple was 60X, Intel’s was 50X and Cisco’s hit 200X. Those nosebleed valuations were really not much different than Facebook today at 40X, Amazon at 190X and Netflix at 217X. The truth is, even great companies do not escape drastic over-valuation during the blow-off stage of bubble peaks. Accordingly, two years later the Four Horseman as a group had shed $1.25 trillion or 75% of their valuation.

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“The media don’t crow every time the price of milk goes up, so why should it cheer higher prices in a different market? It’s great only if you own the cow.”

Dow 22,000 Is Not Good News For Most Americans (MW)

The U.S. stock market hit another record Wednesday, with the Dow Jones Industrial Average surpassing 22,000 for the first time. The media acted like Dow 22,000 is a good thing. The cheerleaders in the anchor desks are wearing goofy hats and high-fiving each other like their team just won the Super Bowl. But record-high stock prices are not inherently a good thing. Whether it’s good for you individually depends on whether you own lots of shares or not. Most people do not own very many shares at all, so most of us aren’t benefiting much from high stock prices. The media don’t crow every time the price of milk goes up, so why should it cheer higher prices in a different market? It’s great only if you own the cow.

Who owns the stock market? About half of all equity is owned by the richest 1 million or so families, and another 41% is owned by the rest of the top 10%. The bottom 90% of families own about 9% of outstanding shares. [..] High stock prices might have a benefit if it meant that more capital would be invested in America’s corporations. That’s the myth of the stock market, anyway. In reality, the stock market doesn’t funnel any additional capital into corporations at all. Nonfinancial corporations have been net buyers — not sellers — of equities for the past 23 years in a row. The stock market is actually a process for extracting wealth from corporations and passing it along to the wealthy people who owns shares.

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The headline bumbers are all you need really. Ponzi as far as the eye can see.

Public Pensions Average 0.6% Return In 2016 Despite 7.6% Assumption (ZH)

We’ve frequently argued that public pension funds in the U.S. are nothing more than thinly-veiled ponzi schemes with their ridiculously high return assumptions specifically intended to artificially minimize the present value of future retiree payment obligations and thus also minimize required annual contributions from taxpayers…all while actual, if immediately intangible, underfunded liabilities continue to surge. As evidence of that assertion, we present to you the latest public pension analysis from the Center for Retirement Research at Boston College. As part of their study, Boston College reviewed 170 public pension plans in the U.S. and found that their average 2016 return was an abysmal 0.6% compared to an average assumed return of 7.6%. Meanwhile, per the chart below, the average return for the past 15 years has also been well below discount rate assumptions, at just 5.95%.

All of which, as we stated above, continues to result in surging liabilities and collapsing funding ratios.

But, perhaps the most telling sign of the massive ponzi scheme being perpetrated on American retirees is the following chart which shows that net cash flows have become increasingly negative, as a percentage of assets, as annual cash benefit payments continue to exceed cash contributions.

Conclusion, you can hide behind high discount rates and a “kick the can down the road” strategy in the short-term…but in the long run actual cash flows matter.

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Pensions, planning: good luck in the bubble.

Plan For The Worst (Roberts)

One of the biggest mistakes that people make is assuming markets will grow at a consistent rate over the given time frame to retirement. There is a massive difference between compounded returns and real returns as shown. The assumption is that an investment is made in 1965 at the age of 20. In 2000, the individual is now 55 and just 10 years from retirement. The S&P index is actual through 2016 and projected through age 100 using historical volatility and market cycles as a precedent for future returns. While the historical AVERAGE return is 7% for both series, the shortfall between “compounded” returns and “actual” returns is significant. That shortfall is compounded further when you begin to add in the impact of fees, taxes, and inflation over the given time frame.

The single biggest mistake made in financial planning is NOT to include variable rates of return in your planning process. Furthermore, choosing rates of return for planning purposes that are outside historical norms is a critical mistake. Stocks tend to grow roughly at the rate of GDP plus dividends. Into today’s world GDP is expected to grow at roughly 2% in the future with dividends around 2% currently. The difference between 8% returns and 4% is quite substantial. Also, to achieve 8% in a 4% return environment, you must increase your return over the market by 100%. The level of “risk” that must be taken on to outperform the markets by such a degree is enormous. While markets can have years of significant outperformance, it only takes one devastating year of losses to wipe out years of accumulation.

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A new business model? Does this apply only to oil, or should all businesses cut their sales prices in half to increase their profits? Alternatively, maybe shareholders should sue BP and Shell for all missed profits in the past?

Who Needs $100 Oil? Majors Making More Cash at $50, Goldman Says (BBG)

Oil majors are raking in more cash now than they did in the heyday of $100 oil, according to Goldman Sachs. Integrated giants like BP and Royal Dutch Shell have adapted to lower prices by cutting costs and improving operations, analysts at the bank including Michele Della Vigna said in a research note Wednesday. European majors made more cash during the first half of this year, when Brent averaged $52 a barrel, than they did in the first half of 2014 when prices were $109. Back then, high oil prices had caused executives to overreach on projects, leading to delays, cost overruns and inefficiency, Goldman said. Those projects are coming online now, producing more revenue, while companies have tightened their belts and divested some assets to reduce debt burdens.

“Simplification, standardization and deflation are repositioning the oil industry for better profitability and cash generation in the current environment than in 2013-14 when the oil price was above $100 a barrel,” the analysts said. In the second quarter, Europe’s big oil companies generated enough cash from operations to cover 91 percent of their capital expenses and dividends, showing that they’re close to being able to fund shareholder payments with business-generated revenue, according to Goldman. That will give companies the ability to stop paying dividends by issuing new stock, which has diluted major European energy shares by 3 to 13 percent since 2014.

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Too late.

China’s Fear of Japan-Style Economic Bust Drives Crackdown on Deals (BBG)

President Xi Jinping’s top economic adviser commissioned a study earlier this year to see how China could avoid the fate of Japan’s epic bust in the 1990s and decades of stagnation that followed. The report covered a wide range of topics, from the Plaza Accord on currency to a real-estate bubble to demographics that made Japan the oldest population in Asia, according to a person familiar with the matter who has seen the report. While details are scarce, the person revealed one key recommendation that policy makers have since implemented: The need to curtail a global buying spree by some of the nation’s biggest private companies. Communist Party leaders discussed Japan’s experience in a Politburo meeting on April 26, according to the person, who asked not to be identified as the discussions are private.

State media came alive afterward, with reports trumpeting Xi’s warning that financial stability is crucial in economic growth. Then in June came a bombshell: reports that the banking regulator had asked lenders to provide information on overseas loans made to Dalian Wanda Group Co., Anbang Insurance Group Co., HNA, Fosun International Ltd. and the owner of Italian soccer team AC Milan. While the timing of those requests is unclear, other watchdogs soon issued directives to curb excessive borrowing, speculation on equities and high yields in wealth-management products. Jim O’Neill, previously chief economist at Goldman Sachs and a former U.K. government minister, said Chinese policy makers are constantly looking to avoid the mistakes of other countries — and Japan in particular.

“You see it in repeated attempts to stop various potential property bubbles so China doesn’t end up with a Japan-style property collapse,” O’Neill said in an email. “There does appear to be some signs that some Chinese investors don’t invest in clear understandable ways, but they wouldn’t be the only ones where that is true!” [..] The moves reflect concerns that China’s top dealmakers have borrowed too much from state banks, threatening the financial system and ultimately the party’s legitimacy to rule — a key worry ahead of a once-in-five-year conclave later this year that will cement Xi’s power through 2022.

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Well argued by Russia’s PM, and it shows just how extensive the sanctions are. Does America need decades more of Cold War?: “The sanctions codified into law will now last for decades, unless some miracle occurs. [..] the future relationship between the Russian Federation and the United States will be extremely tense, regardless of the composition of the Congress or the personality of the president.”

The US Just Declared Full-Scale Trade War On Russia (Medvedev)

The signing of new sanctions against Russia into law by the US president leads to several consequences. First, any hope of improving our relations with the new US administration is over. Second, the US just declared a full-scale trade war on Russia. Third, the Trump administration demonstrated it is utterly powerless, and in the most humiliating manner transferred executive powers to Congress. This shifts the alignment of forces in US political circles.

What does this mean for the U.S.? The American establishment completely outplayed Trump. The president is not happy with the new sanctions, but he could not avoid signing the new law. The purpose of the new sanctions was to put Trump in his place. Their ultimate goal is to remove Trump from power. An incompetent player must be eliminated. At the same time, the interests of American businesses were almost ignored. Politics rose above the pragmatic approach. Anti-Russian hysteria has turned into a key part of not only foreign (as has been the case many times), but also domestic US policy (this is recent).

The sanctions codified into law will now last for decades, unless some miracle occurs. Moreover, it will be tougher than the Jackson-Vanik law, because it is comprehensive and can not be postponed by special orders of the president without the consent of the Congress. Therefore, the future relationship between the Russian Federation and the United States will be extremely tense, regardless of the composition of the Congress or the personality of the president. Relations between the two countries will now be clarified in international bodies and courts of justice leading to further intensification of international tensions, and a refusal to resolve major international problems.

What does this mean for Russia? We will continue to work on the development of the economy and social sphere, we will deal with import substitution, solve the most important state tasks, counting primarily on ourselves. We have learned to do this in recent years. Within almost closed financial markets, foreign creditors and investors will be afraid to invest in Russia due to worries of sanctions against third parties and countries. In some ways, it will benefit us, although sanctions – in general – are meaningless. We will manage.

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No, Hersh is not some kind of nut.

Seymour Hersh: RussiaGate Is A CIA-Planted Lie, Revenge Against Trump (Zuesse)

During the latter portion of a phone-call by investigative journalist, Seymour Hersh, Hersh has now presented “a narrative [from his investigation] of how that whole fucking thing began,” including who actually is behind the ‘RussiaGate’ lies, and why they are spreading these lies.

In a youtube video upload-dated August 1st, he reveals from his inside FBI and Washington DC Police Department sources — now, long before the Justice Department’s Special Counsel Robert Mueller will be presenting his official ‘findings’ to the nation — that the charges that Russia had anything to do with the leaks from the DNC and Hillary Clinton’s campaign to Wikileaks, that those charges spread by the press, were a CIA-planted lie, and that what Wikileaks had gotten was only leaks (including at least from the murdered DNC-staffer Seth Rich), and were not from any outsider (including ’the Russians’), but that Rich didn’t get killed for that, but was instead shot in the back during a brutal robbery, which occurred in the high-crime DC neighborhood where he lived. Here is the video…

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So maybe Paul Craig Roberts lays it on a bit thick sometimes. But what happens in America is dangerous, and Trump is not the principal danger.

The Witch Hunt for Donald Trump Surpasses the Salem Witch Trials (PCR)

In 1940 US attorney general Robert Jackson warned federal prosecutors against “picking the man and then putting investigators to work, to pin some offense on him. It is in this realm—in which the prosecutor picks some person whom he dislikes or desires to embarrass, or selects some group of unpopular persons and then looks for an offense—that the greatest danger of abuse of prosecuting power lies. It is here that law enforcement becomes personal, and the real crime becomes that of being unpopular with the predominant or governing group, being attached to the wrong political views or being personally obnoxious to, or in the way of, the prosecutor himself.” Robert Jackson has given a perfect description of what is happening to President Trump at the hands of special prosecutor Robert Mueller.

Trump is vastly unpopular with the ruling establishment, with the Democrats, with the military/security complex and their bought and paid for Senators, and with the media for proving wrong all the smart people’s prediction that Hillary would win the election in a landslide. From day one this cabal has been out to get Trump, and they have given the task of framing up Trump to Mueller. An honest man would not have accepted the job of chief witch-hunter, which is what Mueller’s job is. The breathless hype of a nonexistent “Russian collusion” has been the lead news story for months despite the fact that no one, not the CIA, not the NSA, not the FBI, not the Director of National Intelligence, can find a scrap of evidence.

In desperation, three of the seventeen US intelligence agencies picked a small handful of employees thought to lack integrity and produced an unverified report, absent of any evidence, that the hand-picked handful thought that there might have been a collusion. On the basis of what evidence they do not say. That nothing more substantial than this led to a special prosecutor shows how totally corrupt justice in America is. Furthermore the baseless charge itself is an absurdity. There is no law against an incoming administration conversing with other governments. Indeed, Trump, Flynn, and whomever should be given medals for quickly moving to smooth Russian feathers ruffled by the reckless Bush and Obama regimes. What good for anyone can come from ceaselessly provoking a nuclear Russian bear?

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Spent so much time in that stadium watching baseball etc. Good memories.

Canada Opens Montreal’s Olympic Stadium To House Asylum Seekers (R.)

Canadian health authorities and aid workers are using an Olympic stadium to shelter asylum seekers as a growing number of people walk into the country from the United States. The Quebec Red Cross and local health authorities opened Montreal’s Olympic Stadium on Wednesday to asylum seekers brought in by bus after having crossed the U.S. border, Red Cross spokeswoman Stephanie Picard said. The city is seeing a growing influx in refugee claimants coming from the United States and is scrambling to house them all. The Red Cross is assisting with beds and providing bedding and other personal-care items. Montreal’s health authority would not provide exact numbers on how many people are being housed in the stadium, built for the 1976 Olympics and which now serves as an event space.

More than 4,300 people have walked across the U.S. border into Canada this year seeking refugee status. The vast majority of them come to Quebec, according to figures from the federal government. Many asylum seekers who spoke to Reuters say they left the United States fearing President Donald Trump’s immigration crackdown. People who cross the border illegally to file refugee claims are apprehended and held for questioning by both police and border officials before being allowed to file claims and live in Canada while their application is processed. Montreal Mayor Denis Coderre welcomed the asylum seekers on Twitter Wednesday afternoon, saying 2,500 people had come in July alone. He said on Twitter that providing for the new arrivals is a “humanitarian gesture.”

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Look, there have to be limits, or we will not survive this, none of us. Locking up children just because they have fled bombs is beyond insane.

Number Of Child Refugees In Greek Detention Centres Rises ‘Alarmingly’ (PA)

The number of unaccompanied child migrants living in “dirty” Greek detention centres has increased “alarmingly”, a human rights organisation has warned. An estimated 117 children were in police cells or custody centres in Greece at the end of July, compared to just two in November 2016, according to figures released by the country’s government. Under Greek law, the authorities should separate minors into safe accommodation, where they are appointed guardians who represent them in legal proceedings. But when there is no space in safe shelters, the authorities detain them in police stations and immigration detention facilities, sometimes with unrelated adults. “Instead of being cared for, dozens of vulnerable children are locked in dirty, crowded police cells and other detention facilities across Greece, in some cases with unrelated adults,” said Eva Cossé, the country’s researcher at Human Rights Watch.

“The Greek government has a duty to end this abusive practice and make sure these vulnerable kids get the care and protection they need.” Human Rights Watch has written to Migration Policy Minister Yiannis Mouzalas to stop the automatic detention of unaccompanied children. It suggested the government should amend legislation and significantly shorten the amount of time a child can be detained in protective custody. While they wait for a space in a shelter, many children are not provided with information about their rights and are not told how to apply for asylum, the organisation said. Aid workers have previously reported that the uncertainty and distress caused by the asylum process, exacerbated an ongoing mental health crisis among migrants living on the islands. Children as young as nine have harmed themselves, while 12-year-olds have attempted to kill themselves, Save the Children said in March.

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Too big NOT to fail.

We Got Too BIG For The World (Kingsnorth)

Living through a collapse is a curious experience. Perhaps the most curious part is that nobody wants to admit it’s a collapse. The results of half a century of debt-fueled “growth” are becoming impossible to deny convincingly, but even as economies and certainties crumble, our appointed leaders bravely hold the line. No one wants to be the first to say the dam is cracked beyond repair. To listen to a political leader at this moment in history is like sitting through a sermon by a priest who has lost his faith but is desperately trying not to admit it, even to himself. Watch your chosen president or prime minister mouthing tough-guy platitudes to the party faithful. Listen to them insisting in studied prose that all will be well. Study the expressions on their faces as they talk about “growth” as if it were a heathen god to be appeased by tipping another cauldron’s worth of fictional money into the mouth of a volcano.

In times like these, people look elsewhere for answers. A time of crisis is also a time of opening up, when thinking that was consigned to the fringes moves to center stage. When things fall apart, the appetite for new ways of seeing is palpable, and there are always plenty of people willing to feed it by coming forward with their pet big ideas. But here’s a thought: what if big ideas are part of the problem? What if, in fact, the problem is bigness itself? The crisis currently playing out on the world stage is a crisis of growth. Not, as we are regularly told, a crisis caused by too little growth, but by too much of it. Banks grew so big that their collapse would have brought down the entire global economy. To prevent this, they were bailed out with huge tranches of public money, which in turn is precipitating social crises on the streets of Western nations. The European Union has grown so big, and so unaccountable, that it threatens to collapse in on itself.

Corporations have grown so big that they are overwhelming democracies and building a global plutocracy to serve their own interests. The human economy as a whole has grown so big that it has been able to change the atmospheric composition of the planet and precipitate a mass-extinction event. One man who would not have been surprised by this crisis of bigness, had he lived to see it, was Leopold Kohr. Kohr has a good claim to be the most interesting political thinker that you have never heard of. Unlike Karl Marx, he did not found a global movement or inspire revolutions. Unlike Friedrich Hayek, he did not rewrite the economic rules of the modern world. Kohr was a modest, self-deprecating man, but this was not the reason his ideas have been ignored by movers and shakers in the half-century since they were produced. They have been ignored because they do not flatter the egos of the power-hungry, be they revolutionaries or plutocrats. In fact, Kohr’s message is a direct challenge to them.

“Wherever something is wrong,” he insisted, “something is too big.”

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Jul 162017
 
 July 16, 2017  Posted by at 9:19 am Finance Tagged with: , , , , , , , , ,  


Piet Mondriaan The Grey Tree 1912

 

Global Stocks Soared $1.5 Trillion This Week – Now 102% Of World GDP (ZH)
Central Bankers Are Always Wrong…Especially Before A Bust – Ron Paul (ZH)
How Brexit Is Set To Hurt Europe’s Financial Systems (R.)
Britons Face Lifetime Of Debt: BOE Warns Over 35 Year Mortgages (Tel.)
Is Russiagate Really Hillarygate? (Forbes)
The Way Chicago “Works”: Graft, Corruption, Connections, Bribes (Mish)
France’s Macron Says Defense Chief Has No Choice But To Agree With Him (R.)
France Calls For Swift Lifting Of Sanctions On Qatari Nationals (R.)
Is California Bailing Out Tesla through the Backdoor? (WS)
Brazil To Open Up 860,000 Acres Of Protected Amazon Rainforest (Ind.)

 

 

No markets. No investors.

Global Stocks Soared $1.5 Trillion This Week – Now 102% Of World GDP (ZH)

Thanks, it seems, to a few short words from Janet Yellen, the world’s stock markets added over $1.5 trillion to wealthy people’s net worth this week, sending global market cap to record highs. The value of global equity markets reached a record high $76.28 trillion yesterday, up a shocking 18.6% since President Trump was elected. This is the same surge in global stocks that was seen as the market front-ran QE2 and QE3. This was the biggest spike in global equity markets since 2016.

For the first time since Dec 2007, the market value of global equity markets is greater than the world’s GDP…

Of course – the big question is – how long can ‘they’ keep this dream alive?

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“Actually, the longer it takes to hit, the better it is for us…”

Central Bankers Are Always Wrong…Especially Before A Bust – Ron Paul (ZH)

The global dollar-based monetary system is in serious jeopardy, according to former Texas Congressman Ron Paul. And contrary to Fed Chairwoman Janet Yellen’s assurances that there won’t be another major crisis in our lifetime, the next economy-cratering fiat-currency crash could happen as soon as next month, Paul said during an interview with Josh Sigurdson of World Alternative media. Paul and Sigurdson also discussed false flag attacks, the dawn of a cashless society and the dangers of monetizing national debt. Paul started by saying Yellen’s attitude scares him because “central bankers are always wrong – especially before a bust.”

“There is a subjective element to when people lose confidence, and when is the day going to come when people realize we’re dealing with money that has no intrinsic value to it, we’re dealing with too much debt, too much bad investment and it will come to an end. Something that’s too good to believe usually is and it usually ends. One thing’s for sure, we’re getting closer every day and the crash might come this year, but it might come in a year or two.” “The real test is can it sustain unbelievable deficit financing and the accumulation of debt and it can’t. You can’t run a world like this, if that were the case Americans could just sit back and say “hey, everybody wants our money and will take our money.” Paul advised that, for those who are already girding for the crash by buying gold and silver and stocking their basements with provisions like canned food and bottled water, the rewards for their foresight will only grow with the passage of time.

“Actually, the longer it takes to hit, the better it is for us. The more we can get prepared personally, as well as warn other people, about what’s coming.” “It’s a sign that the authoritarians are clinging to power so they can collect the revenues collect the taxes and make sure you’re not getting around the system. That’s what the cashless society is all about. But it won’t work in fact it might be the precipitating factor that people will eventually lose confidence when the crisis hits. They say the crisis hasn’t come – welI in 2008 and 2009 we had a pretty major crisis and what we learned there is that the middle class got wiped out and the poor people got poorer and now there’s a lot of wealth going on but it’s still accumulating to the wealthy individual.” “People say it might not come for another ten years – well we don’t know whether that’s necessary but one thing that’s for sure when a government embarks on deficit financing and then monetizing the debt the value of commodities like gold and silver generally goes up.

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Anyone think the concentration of finance in the City is maybe not such a great idea? As, you know, for the people?

How Brexit Is Set To Hurt Europe’s Financial Systems (R.)

Interviews with scores of senior executives from big British and international banks, lawyers, academics, rating agencies and lobbyists outline some of the dangers for companies and consumers from potentially losing access to London’s markets. The EU needs London’s money, says Mark Carney, governor of the Bank of England. He calls Britain “Europe’s investment banker” and says half of all the debt and equity issued by the EU involves financial institutions in Britain. Rewiring businesses will be expensive, though estimates vary widely. Investment banks that set up new European outposts to retain access to the EU’s single market may see their EU costs rise by between 8 and 22%, according to one study by Boston Consulting Group.

A separate study by JP Morgan estimates that eight big U.S. and European banks face a combined bill of $7.5 billion over the next five years if they have to move capital markets operations out of London as a result of Brexit. Such costs would equate to an average 2% of the banks’ global annual expenses, JP Morgan said. Banks say most of those extra costs will end up being paid by customers. “If the cost of production goes up, ultimately a lot of our costs will get passed on to the client base,” said Richard Gnodde, chief executive of the European arm of Goldman Sachs. “As soon as you start to fragment pools of liquidity or fragment capital bases, it becomes less efficient, the costs can go up.”

UK-based financial firms are trying to shift some of their operations to Europe to ensure they can still work for EU clients, but warn such a rearrangement of the region’s financial architecture could threaten economic stability not only in Britain but also in Europe because so much European money flows through London. European countries, particularly France and Germany, don’t share these concerns, viewing Brexit as an opportunity to steal large swathes of business away from Britain and build up their own financial centres. Britain alone accounts for 5.4% of global stock markets by value, according to Reuters data. Valdis Dombrovskis, the EU financial services chief, said the EU will still account for 15% of global stock markets by value without Britain, and that measures were being taken to strengthen its capital markets. But he added: “Fragmentation is preventing our financial services sector from realising its full potential.”

Industry figures have similar concerns. Jean-Louis Laurens, a former senior Rothschild banker and now ambassador for the French asset management lobby, told Reuters: “If London is broken into pieces then it is not going to be as efficient. Both Europe and Britain are going to lose from this.” London is currently home to the world’s largest number of banks and hosts the largest commercial insurance market. About six trillion euros ($6.8 trillion), or 37%, of Europe’s financial assets are managed in the UK capital, almost twice the amount of its nearest rival, Paris. And London dominates Europe’s 5.2 trillion euro investment banking industry.

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Familiar patteren: first blow a bubble, then warn about it.

Britons Face Lifetime Of Debt: BOE Warns Over 35 Year Mortgages (Tel.)

British families are signing up for a lifetime of debt with almost one in seven borrowers now taking out mortgages of 35 years or more, official figures show. Rapid house price growth has encouraged borrowers to sign longer mortgage deals as a way of reducing monthly payments and easing affordability pressures. Bank of England data shows 15.75pc of all new mortgages taken out in the first quarter of 2017 were for terms of 35 years or more. While this is slightly down from the record high of 16.36pc at the end of 2016, it has climbed from just 2.7pc when records began in 2005. The steady rise has triggered alarm bells at the Bank, prompting regulators to warn that the trend risks storing up problem[s] for the future if lenders ignore the growing share of households prepared to borrow into retirement. Several lenders including Halifax, the UK’s biggest mortgage provider, and Nationwide have raised their borrowing age limits to 80 and 85 over the past year.

Bank figures show one in five mortgages are taken out for terms of between 30 and 35 years, from below 8pc in 2005, as the traditional 25-year mortgage becomes less popular. David Hollingworth, a director at mortgage broker London & Country, said the trend showed that an increasing share of borrowers were struggling with affordability pressures, and deciding that lengthening the term will offer leeway as house price growth continues to outpace pay rises. However, he said most borrowers were unlikely to stick with the same deal, with most having a desire to review that later and potentially peg [the extra interest costs] back . Mr Hollingworth added that longer mortgage terms were also better than interest-only deals that were prevalent before the credit crunch. The Bank noted in its latest financial stability report that there was little evidence that borrowers were signing up for longer mortgage deals to circumvent tougher borrowing tests for homeowners introduced in 2014.

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Fusion GPS.

Is Russiagate Really Hillarygate? (Forbes)

The most under covered story of Russia Gate is the interconnection between the Clinton campaign, an unregistered foreign agent of Russia headquartered in DC (Fusion GPS), and the Christopher Steele Orbis dossier. This connection has raised the question of whether Kremlin prepared the dossier as part of a disinformation campaign to sow chaos in the US political system. If ordered and paid for by Hillary Clinton associates, Russia Gate is turned on its head as collusion between Clinton operatives (not Trump’s) and Russian intelligence. Russia Gate becomes Hillary Gate. Neither the New York Times, Washington Post, nor CNN has covered this explosive story. Two op-eds have appeared in the Wall Street Journal. The possible Russian-intelligence origins of the Steele dossier have been raised only in conservative publications, such as in The Federalist and National Review.

The Fusion story has been known since Senator Chuck Grassley (R-Iowa) sent a heavily-footnoted letter to the Justice Department on March 31, 2017 demanding for his Judiciary Committee all relevant documents on Fusion GPS, the company that managed the Steele dossier against then-candidate Donald Trump. Grassley writes to justify his demand for documents that: “The issue is of particular concern to the Committee given that when Fusion GPS reportedly was acting as an unregistered agent of Russian interests, it appears to have been simultaneously overseeing the creation of the unsubstantiated dossier of allegations of a conspiracy between the Trump campaign and the Russians.”

Former FBI director, James Comey, refused to answer questions about Fusion and the Steele dossier in his May 3 testimony before the Senate Intelligence Committee. Comey responded to Lindsey Graham’s questions about Fusion GPS’s involvement “in preparing a dossier against Donald Trump that would be interfering in our election by the Russians?” with “I don’t want to say.” Perhaps he will be called on to answer in a forum where he cannot refuse to answer.

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And don’t think it’s over. The pension chips are yet to fall.

The Way Chicago “Works”: Graft, Corruption, Connections, Bribes (Mish)

Those who wish to understand how things work in Chicago need read a single article that ties everything together:

“Teamsters Boss Indicted On Charges Of Extorting $100,000 From A Local Business. A politically connected Teamsters union boss was indicted Wednesday on federal charges alleging he extorted $100,000 in cash from a local business. John Coli Sr., considered one the union’s most powerful figures nationally, was charged with threatening work stoppages and other labor unrest unless he was given cash payoffs of $25,000 every three months by the undisclosed business. The alleged extortion occurred when Coli was president of Teamsters Joint Council 25, a labor organization that represents more than 100,000 workers in the Chicago area and northwest Indiana. Coli, 57, an early backer of Mayor Rahm Emanuel, was charged with one count of attempted extortion and five counts of demanding and accepting prohibited payment as a union official.”

[..] Former governor Rod Blagojevich is now in prison for a 14-year sentence. He was found guilty of 18 counts of corruption, including attempting to sell or trade an appointment to a vacant seat in the U.S. Senate. He faces another eight years in prison after an appeals court upheld the sentence in April of this year. No other state can match this claim: 4 OUT OF PREVIOUS 7 ILLINOIS GOVERNORS WENT TO PRISON The way Chicago “works” is the same way Illinois “works”. Corrupt politicians get in bed with corrupt union leaders and screw the taxpayers and businesses as much as they can. Sometimes they get caught. Teamster boss Coli just got caught after all these years of extortion. His deals with Mayor Emanuel screwed Chicago taxpayers. Emanuel promised reforms and transparency but reforms and transparency stop once campaign donations are sufficient enough.

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Macron plays Napoleon.

France’s Macron Says Defense Chief Has No Choice But To Agree With Him (R.)

French President Emmanuel Macron said his defense chief has no choice but to agree with what he says, a weekly newspaper reported on Sunday, after his top general criticized spending cuts to this year’s budget. “If something opposes the military chief of staff and the president, the military chief of staff goes,” Macron, who as president is also the commander-in-chief of the armed forces, told Le Journal du Dimanche (JDD). Macron said on Thursday that he would not tolerate public dissent from the military after General Pierre de Villiers reportedly told a parliament committee he would not let the government “fuck with” him on spending cuts.

De Villiers still has Macron’s “full trust,” the president told JDD, provided the top general “knows the chain of command and how it works.” “No one deserves to be blindly followed,” De Villiers wrote in a message posted on his Facebook page on Friday. De Villiers’ last Facebook post is an open letter addressed to new military recruits that makes no mention of Macron. But it was perceived by French media as targeting the president’s earlier comments.

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Macron wants to be a global force too. While he has nothing to say in Europe.

France Calls For Swift Lifting Of Sanctions On Qatari Nationals (R.)

France called on Saturday for a swift lifting of sanctions that target Qatari nationals in an effort to ease a month-long rift between the Gulf country and several of its neighbors. Saudi Arabia, the United Arab Emirates, Bahrain and Egypt imposed sanctions on Qatar on June 5, accusing it of financing extremist groups and allying with the Gulf Arab states’ arch-foe Iran. Doha denies the accusations. “France calls for the lifting, as soon as possible, of the measures that affect the populations in particular, bi-national families that have been separated or students,” French Foreign Minister Jean-Yves Le Drian told reporters in Doha, after he met his counterpart Sheikh Mohammed bin Abdulrahman al-Thani. Le Drian was speaking alongside Sheikh Mohammed, hours after his arrival in Doha. He is the latest Western official to visit the area since the crisis began.

Later in the day he flew to Jeddah, where he repeated his concerns about the effects of the standoff in a televised press appearance with Saudi Foreign Minister Adel al-Jubeir. Jubeir said any resolution of the worst Gulf crisis in years should come from within the six-nation Gulf Cooperation Council. “We hope to resolve this crisis within the Gulf house, and we hope that wisdom prevails for our brothers in Qatar in order to respond to the demands of the international community – not just of the four countries,” he said. [..] Le Drian, who will visit the UAE and Gulf mediator Kuwait on Sunday, follows in the steps of other world powers in the region, including the United States, whose Secretary of State Rex Tillerson sought to find a solution to the impasse this week.

Officials from Britain and Germany also visited the region with the aim of easing the conflict, for which Kuwait has acted as mediator between the fending Gulf countries. In a joint statement issued after Tillerson and Sheikh Mohammed signed an agreement on Tuesday aimed at combating the financing of terrorism, the four Arab states leading the boycott on Qatar said the sanctions would remain in place.

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The Tesla tulip.

Is California Bailing Out Tesla through the Backdoor? (WS)

The California state Assembly passed a $3-billion subsidy program for electric vehicles, dwarfing the existing program. The bill is now in the state Senate. If passed, it will head to Governor Jerry Brown, who has not yet indicated if he’d sign what is ostensibly an effort to put EV sales into high gear, but below the surface appears to be a Tesla bailout. Tesla will soon hit the limit of the federal tax rebates, which are good for the first 200,000 EVs sold in the US per manufacturer beginning in December 2009 (IRS explanation). In the second quarter after the manufacturer hits the limit, the subsidy gets cut in half, from $7,500 to $3,750; two quarters later, it gets cut to $1,875. Two quarters later, it goes to zero. Given Tesla’s ambitious US sales forecast for its Model 3, it will hit the 200,000 vehicle limit in 2018, after which the phase-out begins.

A year later, the subsidies are gone. Losing a $7,500 subsidy on a $35,000 car is a huge deal. No other EV manufacturer is anywhere near their 200,000 limit. Their customers are going to benefit from the subsidy; Tesla buyers won’t. This could crush Tesla sales. Many car buyers are sensitive to these subsidies. For example, after Hong Kong rescinded a tax break for EVs effective in April, Tesla sales in April dropped to zero. The good people of Hong Kong will likely start buying Teslas again, but it shows that subsidies have a devastating impact when they’re pulled. That’s what Tesla is facing next year in the US. In California, the largest EV market in the US, 2.7% of new vehicles sold in the first quarter were EVs, up from 0.4% in 2012, according to the California New Dealers Association. California is Tesla’s largest market.

Something big needs to be done to help the Bay Area company, which has lost money every single year of its ten years of existence. And taxpayers are going to be shanghaied into doing it. To make this more palatable, you have to dress this up as something where others benefit too, though the biggest beneficiary would be Tesla because these California subsidies would replace the federal subsidies when they’re phased out. It would be a rebate handled at the dealer, not a tax credit on the tax return. And it could reach “up to $30,000 to $40,000” per EV, state Senator Andy Vidak, a Republican from Hanford, explained in an emailed statement. This is how the taxpayer-funded rebates in the “California Electric Vehicle Initiative” (AB1184) would work, according to the Mercury News:

“The [California Air Resources Board] would determine the size of a rebate based on equalizing the cost of an EV and a comparable gas-powered car. For example, a new, $40,000 electric vehicle might have the same features as a $25,000 gas-powered car. The EV buyer would receive a $7,500 federal rebate, and the state would kick in an additional $7,500 to even out the bottom line.” And for instance, a $100,000 Tesla might be deemed to have the same features as a $65,000 gas-powered car. The rebate would cover the difference, minus the federal rebate (so $27,500). Because rebates for Teslas will soon be gone, the program would cover the entire difference – $35,000. This is where Senator Vidak got his “$30,000 to $40,000.”

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Money changes everything.

Brazil To Open Up 860,000 Acres Of Protected Amazon Rainforest (Ind.)

The Brazilian environment ministry is proposing the release of 860,000 acres in the National Forest of Jamanxim for agricultural use, mining and logging. The government’s order was a compromise measure after protests from local residents and ecologists who claim that the bill could lead to further deforestation in the Pará area. If approved, the legislation will create a new protection area (APA) close to Novo Progresso. Around 27% of the national forest would be converted into an APA, the ministry said. Carlos Xavier, president of a lobbying group in Pará to decrease the size of the Jamanxim forest, said the APA would bring economic progress to the region. According to the ministry, the bill includes stipulations to reduce conflicts over land, prevent deforestation and create jobs. The measures were criticised by environmental groups.

“The bill is seen as an amnesty for illegal occupation of the conservancy unit,” said Observatório do Clima on its website, claiming that the government “yielded to pressure” from the rural lobby. Carlos Xavier, president of a lobbying group in Para to decrease the size of the Jamanxim forest, said the APA would bring economic progress to the region. In 2016, deforestation of the Amazon rose by 29% over the previous year, according to the government’s satellite monitoring, the biggest jump since 2008. Mongabay, an environmental science and conservation website, reports that experts using satellite images have identified illegal logging activities to the east of the BR-163 highway, in Pará state. The BR-163 protests involved stopping trucks from unloading grains at the riverside location of Miritituba, where barges carrying crops are transported en route to the export markets. ATP, the Brazilian private ports association, calculated that the highway protests would result in losses of $47m.

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