Sep 142018
 
 September 14, 2018  Posted by at 8:28 am Finance Tagged with: , , , , , , , ,  


Claude Monet The sheltered path 1888

 

The Bailouts for the Rich Are Why America Is So Screwed Right Now (Stoller)
Ten Years After the Crash, We’ve Learned Nothing (Taibbi)
Millions Of Americans Trapped In Underwater Homes 10 Years After Crisis (R.)
No-Deal Brexit Could Lead To Financial Crisis As Bad As 2008 – Carney (Ind.)
Europe’s Top Rights Court Rules Against Britain Over Mass Surveillance (AFP)
S&P Sees Major Opportunity In China’s $11 Trillion Bond Market (CNBC)
China Says World Trade System Not Perfect, Needs Reform (R.)
‘Little Mussolinis’: EU Chief Angers Italy With Comment On Far Right (R.)
Third Of Earth’s Surface Must Be Protected To Prevent Mass Extinction (Ind.)
Hurricane Florence Deluges Carolinas Ahead Of Landfall (R.)

 

 

And there are different ways…

The Bailouts for the Rich Are Why America Is So Screwed Right Now (Stoller)

In 1933, when FDR took power, global banking was essentially non-functional. Bankers had committed widespread fraud on top of a rickety and poorly structured financial system. Herbert Hoover, who organized an initial bailout by establishing what was known as the Reconstruction Finance Corporation, was widely mocked for secretly sending money to Republican bankers rather than ordinary people. The new administration realized that trust in the system was essential. One of the first things Roosevelt did, even before he took office, was to embarrass powerful financiers. He did this by encouraging the Senate Banking Committee to continue its probe, under investigator Ferdinand Pecora, of the most powerful institutions on Wall Street, which were National City (now Citibank) and JP Morgan.

Pecora exposed these institutions as nests of corruption. The Senate Banking Committee made public Morgan’s “preferred list,” which was the group of powerful and famous people who essentially got bribes from Morgan. It included the most important men in the country, like former Republican President Calvin Coolidge, a Supreme Court Justice, important CEOs and military leaders, and important Democrats, too. Roosevelt also ordered his attorney general “vigorously to prosecute any violations of the law” that emerged from the investigations. New Dealers felt that “if the people become convinced that the big violators are to be punished it will be helpful in restoring confidence.” The DOJ indicted National City’s Charles Mitchell for tax evasion.

This was part of a series of aggressive attacks on the old order of corrupt political and economic elites. The administration pursued these cases, often losing the criminal complaints but continuing with civil charges. This bought the Democrats the trust of the public. When Roosevelt engaged in his own broad series of bank bailouts, the people rewarded his party with overwhelming gains in the midterm elections of 1934 and a resounding re-election in 1936. Along with an assertive populist Congress, the new administration used the bailout money in the RFC to implement mass foreclosure-mitigation programs, create deposit insurance, and put millions of people to work. He sought to save not the bankers but the savings of the people themselves.

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Neil Barofsky on Twitter: “No need to write a retrospective on the bailouts, @mtaibbi has got it all covered here.”

Taibbi’s reply: “Wow. Can I unpublish so you will write one? (Neil wrote the definitive book on the subject)”.

(Barofsky was the SIGTARP, the Special United States Treasury Department Inspector General overseeing the Troubled Assets Relief Program from late 2008 till early 2011)

Ten Years After the Crash, We’ve Learned Nothing (Taibbi)

Too Big To Fail shows Fuld on a rant: “People act like we’re crack dealers,” Fuld (James Woods) gripes. “Nobody put a gun to anybody’s head and said, ‘Hey, nimrod, buy a house you can’t afford. And you know what? While you’re at it, put a line of credit on that baby and buy yourself a boat.” This argument is the Wall Street equivalent of Reagan’s famous Cadillac-driving “welfare queen” spiel, which today is universally recognized as asinine race rhetoric. Were there masses of people pre-2008 buying houses they couldn’t afford? Hell yes. Were some of them speculators or “flippers” who were trying to game the bubble for profit? Sure. Most weren’t like that – most were ordinary working people, or, worse, elderly folks encouraged to refinance and use their houses as ATMs – but there were some flippers in there, sure.

People pointing the finger at homeowners are asking the wrong questions. The right question is, why didn’t the Fulds of the world care if those “nimrods” couldn’t afford their loans? The answer is, the game had nothing to do with whether or not the homeowner could pay. The homeowner was not the real mark. The real suckers were institutional customers like pensions, hedge funds and insurance companies, who invested in these mortgages. If you had a retirement fund and woke up one day in 2009 to see you’d lost 30 percent of your life savings, you were the mark. Ordinary Americans had their remaining cash in houses and retirement plans, and the subprime scheme was designed to suck the value out of both places, into the coffers of a few giant banks.

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“As of June 30, nearly one in 10 American homes with mortgages were “seriously” underwater..”

Millions Of Americans Trapped In Underwater Homes 10 Years After Crisis (R.)

School bus driver Michael Payne was renting an apartment on the 30th floor of a New York City high-rise, where the landlord’s idea of fixing broken windows was to cover them with boards. So when Payne and his wife Gail saw ads in the tabloids for brand-new houses in the Pennsylvania mountains for under $200,000, they saw an escape. The middle-aged couple took out a mortgage on a $168,000, four-bedroom home in a gated community with swimming pools, tennis courts and a clubhouse. “It was going for the American Dream,” Payne, now 61, said recently as he sat in his living room. “We felt rich.” Today the powder-blue split-level is worth less than half of what they paid for it 12 years ago at the peak of the nation’s housing bubble.

Located about 80 miles northwest of New York City in Monroe County, Pennsylvania, their home resides in one of the sickest real estate markets in the United States, according to a Reuters analysis of data provided by a leading realty tracking firm. More than one-quarter of homeowners in Monroe County are deeply “underwater,” meaning they still owe more to their lenders than their houses are worth. The world has moved on from the global financial crisis. Hard-hit areas such as Las Vegas and the Rust Belt cities of Pittsburgh and Cleveland have seen their fortunes improve. But the Paynes and about 5.1 million other U.S. homeowners are still living with the fallout from the real estate bust that triggered the epic downturn.

As of June 30, nearly one in 10 American homes with mortgages were “seriously” underwater, according to Irvine, California-based ATTOM Data Solutions, meaning that their market values were at least 25 percent lower than the balance remaining on their mortgages.

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And he just signed up to oversee it till 2020.

No-Deal Brexit Could Lead To Financial Crisis As Bad As 2008 – Carney (Ind.)

A no-deal Brexit could lead to a financial crisis as bad as the crash in 2008, the governor of the Bank of England has warned. Mark Carney told Theresa May and senior ministers that not getting a deal with the European Union would lead to a number of negative economic consequences. It is also understood that Mr Carney warned house prices could fall by up to 35 per cent over three years in a worst case scenario, an event that could cause the value of sterling to plummet and force the bank to push up interest rates. His bleak prognosis came as France said it could halt flights and Eurostar trains from the UK if there was no agreement when Britain leaves the EU in March 2019.

The Bank of England declined to comment on Mr Carney’s briefing to ministers. Following the three-and-a-half hour meeting of the cabinet, a Downing Street spokesman said ministers remained confident of securing a Brexit agreement, but had agreed to “ramp up” their no-deal planning.

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So what changes now?

Europe’s Top Rights Court Rules Against Britain Over Mass Surveillance (AFP)

Europe’s top rights court ruled Thursday that Britain’s programme of mass surveillance, revealed by whistleblower Edward Snowden as part of his sensational leaks on US spying, violated people’s right to privacy. Ruling in the case of Big Brother Watch and Others versus the United Kingdom, the European Court of Human Rights in Strasbourg, France, said the interception of journalistic material also violated the right to freedom of information. The case was brought by a group of journalists and rights activists who believe that their data may have been targeted. The court ruled that the existence of the surveillance programme “did not in and of itself violate the convention” but noted “that such a regime had to respect criteria set down in its case-law”.

They concluded that the mass trawling for information by Britain’s GCHQ spy agency violated Article 8 of the European Convention on Human Rights regarding the right to privacy because there was “insufficient oversight” of the programme. The court found the oversight to be doubly deficient, in the way in which the GCHQ selected internet providers for intercepting data and then filtered the messages, and the way in which intelligence agents selected which data to examine. It determined that the regime covering how the spy agency obtained data from internet and phone companies was “not in accordance with the law”.

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China needs money, badly. Or it wouldn’t open up like this.

S&P Sees Major Opportunity In China’s $11 Trillion Bond Market (CNBC)

Financial services and ratings giant S&P Global is honing in on China’s $11 trillion bond market, a move that may spell good news for international investors in search of more reliable ratings for bonds. Speaking to CNBC on Friday, S&P Global Chief Financial Officer Ewout Steenbergen explained that it’s a good time to enter China as Asia’s largest economy has lifted foreign ownership restrictions for credit ratings agencies. Elaborating on the company’s plan to offer ratings services for the bond market there, Steenbergen said that S&P Global intends to start a new entity for its mainland business.

“We are expanding our market intelligence business in China, very specific local content, for example for Chinese private company data … But the most attractive opportunity we have is in the ratings business,” he said on CNBC’s “Squawk Box.” “It is the third-largest domestic bond market in the world, we think it will overtake Japan soon to become the second-largest domestic bond market,” added Steenbergen, who is also an executive vice president at S&P Global. [..] Steenbergen said he hopes that S&P Global’s move to enter that market can create more confidence. “Today, Chinese domestic bonds, 2 percent are bought by international investors, 98 percent only by Chinese investors. And I think (how) we can help with the market is to create more maturity, more confidence.

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Another way to protest tariffs.

China Says World Trade System Not Perfect, Needs Reform (R.)

The current world trade system is not perfect and China supports reforms to it, including to the World Trade Organization, to make it fairer and more effective, Beijing’s top diplomat said. China is locked in a bitter trade war with the United States and has vowed repeatedly to uphold the multilateral trading system and free trade, with the WTO at its center. But speaking late on Thursday to reporters after meeting French Foreign Minister Jean-Yves Le Drian, Chinese State Councillor Wang Yi said some reforms could be good. While certain doubts have been raised about the current international trading system, China has always supported the protection of free trade and believes that multilateralism with the WTO at its core should be strengthened, Wang added.

[..] China will not buckle to U.S. demands in any trade negotiations, the major state-run China Daily newspaper said in an editorial on Friday, after Chinese officials welcomed an invitation from Washington for a new round of talks. The official China Daily said that while China was “serious” about resolving the stand-off through talks, it would not be rolled over, despite concerns over a slowing economy and a falling stock market at home. “The Trump administration should not be mistaken that China will surrender to the U.S. demands. It has enough fuel to drive its economy even if a trade war is prolonged,” the newspaper said in an editorial.

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Brussels still feels superior.

‘Little Mussolinis’: EU Chief Angers Italy With Comment On Far Right (R.)

The EU’s top economic official has voiced fears that “little Mussolinis” might be emerging in Europe, drawing a furious response from Italy’s far-right interior minister who accused him of insulting his country and Italians. Pierre Moscovici, a Frenchman who is the European Union’s economics affairs commissioner, said the current political situation, with populist, far-right forces on the rise in many nations, resembled the 1930s when Germany’s Adolf Hitler and Italian fascist chief Benito Mussolini were in power. “Fortunately there is no sound of jackboots, there is no Hitler, (but maybe there are) small Mussolinis. That remains to be seen,” he told reporters in Paris, speaking in a jocular fashion.

Moscovici, a former French finance minister, mentioned no names, but Matteo Salvini, who is a deputy prime minister and heads Italy’s anti-immigrant League, took it personally. “He should wash his mouth out before insulting Italy, the Italians and their legitimate government,” Salvini said in a statement released by his office in Rome. Salvini took advantage of the spat to set out once again his grievances with France, which he accuses of not doing enough to help deal with migrants from Africa and of having plunged Libya into chaos by helping to oust former strongman Muammar Gaddafi. “EU commissioner Moscovici, instead of censuring his France that rejects immigrants … has bombed Libya and has broken European (budget) parameters, attacks Italy and talks about ‘many little Mussolini’ around Europe,” Salvini said.

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Yeah. Not going to happen.

Third Of Earth’s Surface Must Be Protected To Prevent Mass Extinction (Ind.)

Two leading scientists have issued a call for massive swathes of the planet’s land and sea to be protected from human interference in order to avert mass extinction. Current levels of protection “do not even come close to required levels”, they said, urging world leaders to come to a new arrangement by which at least 30 per cent of the planet’s surface is formally protected by 2030. Chief scientist of the National Geographic Society Jonathan Baillie and Chinese Academy of Sciences biologist Ya-Ping Zhang made their views clear in an editorial published in the journal Science.

They said the new target was the absolute minimum that ought to be conserved, and ideally this figure should rise to 50 per cent by the middle of the century. “This will be extremely challenging, but it is possible,” they said. “Anything less will likely result in a major extinction crisis and jeopardise the health and wellbeing of future generations.” Most current scientific estimates have the amount of space needed to safeguard the world’s animals and plants at between 25 and 75 per cent of land and oceans.

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Nervous weekend ahead. In the Philippines too.

Hurricane Florence Deluges Carolinas Ahead Of Landfall (R.)

Heavy rain, wind gusts and rising floodwaters from Hurricane Florence swamped the Carolinas early on Friday as the massive storm crawled toward the coast, threatening millions of people in its path with record rainfall and punishing surf. Florence was downgraded to a Category 1 storm on the five-step Saffir-Simpson scale on Thursday evening and was moving west at only 6 mph (9 km/h). The hurricane’s sheer size means it could batter the U.S. East Coast with hurricane-force winds for nearly a full day, according to weather forecasters. Despite its unpredictable path, it was forecast to make landfall near Cape Fear, North Carolina, at midday on Friday.

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Aug 262018
 
 August 26, 2018  Posted by at 9:09 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh Starry night over the Rhône 1888

 

The Real John McCain (Kerwick)
Steele or Assange: Who Really Deserves 1st Amendment Protection? (Machon)
Trump: 5-Year Prison Sentence for Whistleblower Reality Winner ‘Unfair’ (TIME)
Cohen’s Plea Deal Is Prosecutor’s Attempt To Set Up Trump (Hill)
Europe Must Save The British From Themselves On Brexit (IT)
Ending The Fiscal-Monetary Tug-o-War (NEF)
Greece’s “Bailout” Was a Disaster for Greece (Klein)
Greece Remains A Debtor’s Prison, The EU Won’t Let Go Of The Keys (Varoufakis)
US Study Shows How Austerity Devastated Greece’s Health (UoW)
Italy Disembarks Stranded Migrants, Salvini Under Investigation (R.)
Time Is Running Out For The Pope To Pacify The Faithful’s Anger (O.)

 

 

I was going to leave McCain in peace. I strongly believe in not kicking a man when he’s down, and besides there’s already so much anger out there. I’ve always thought that perhaps as a POW he suffered some kind of brain damage. But I still can’t get the image out of my head of him singing “Bomb, bomb, bomb, bomb, bomb Iran” And then seeing people refer to him as an “unparalleled example of human decency”. It’s too much.

The Real John McCain (Kerwick)

McCain is not alone in having their blood on his hands. Yet in a Regime, a Government-Media-Complex, comprised of warmongers, McCain enjoys the dubious distinction of being the warmonger par excellence. On the false pretense that Saddam Hussein posed an imminent threat against the United States via the “weapons of mass destruction” (WMDs) that he never possessed, McCain urged as loudly and tirelessly as anyone for war. Those libertarians and old right conservative sorts who exposed holes in the WMD narrative and forecasted the disaster to which such a war would lead were dismissed, ignored, or mocked. Estimates of casualties vary, but today, some 14 years after McCain got his way, anywhere between 195,000 and possibly one million Iraqis are dead.

The Iraq Body Count project found that during the decade following the invasion, 174,000 Iraqis were killed. Of this number, 112,000-123,000 were civilian noncombatants. At present, the number is closer to 200,000 civilian noncombatant deaths. Between 2003 and 2014, nearly 5,000 American service members lost their lives in this war that McCain and his ilk cooked on the basis of a lie. Yet contractors, aid relief workers, and journalists are also among those who lost their lives. While we can tabulate numbers, the pain, suffering, and trauma endured by the loved ones of those killed is incalculable. In addition to the hundreds of thousands of Iraqi and American corpses that McCain and his comrades left in the wake of their rush to war, there are that many more who have lived but who suffer daily.

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Annie Machon is a former MI5 agent. She makes some very good points. One of them: Assange doesn’t get 1st amendment protection because he’s not American. Steele does get it even though he’s British.

Steele or Assange: Who Really Deserves 1st Amendment Protection? (Machon)

Steele has won a legal case in the USA, where he had been sued by three Russian oligarchs who claimed that the ‘Dirty Dossier’ traduced their reputations. And he won on the basis that his report was protected by First Amendment rights under the constitution of the USA, which guarantees US citizens the right to freedom of expression. Despite the fact that Steele is British. “But Judge Anthony Epstein disagreed, writing in his judgment that “advocacy on issues of public interest has the capacity to inform public debate, and thereby furthers the purposes of the First Amendment, regardless of the citizenship or residency of the speakers.”

This is the nub of the issue: Steele, a former official UK intelligence officer and current mercenary spy-for-hire, is granted legal protection by the American courts for digging up and subsequently leaking what appears to be controversial and defamatory information about the current US president as well as various Russians, all paid for by Trump’s political opponents. And Steele is given the full protection of the US legal system. On the other hand, we have an award-winning journalist and publisher, Assange, whose organization WikiLeaks has never been found to report anything factually incorrect in more than 10 years, being told that if he were to be extradited from his current political asylum in the Ecuadorian embassy in London to face the full wrath of a vengeful American establishment, he is not entitled to claim the protection of the First Amendment because he is an Australian citizen, not an American.

[..] On a slightly tangential note, there has been some speculation, suppressed in the UK at least via the D Notice censorship system, that MI6 informant and Russian traitor Sergei Skripal, the victim of the alleged Novichok poisoning in the UK earlier this year, remained in contact with his alleged handler Pablo Miller, who also is reported to work for Orbis Business Intelligence. If this were indeed the case, then it would be a logical assumption that Orbis, via Miller, might well have used Skripal as one of its “reliable sources” for the Dossier.

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Winner is definitely not a fan of Trump.

Trump: 5-Year Prison Sentence for Whistleblower Reality Winner ‘Unfair’ (TIME)

President Donald Trump said NSA whistleblower Reality Winner‘s five-year prison sentence for leaking a classified document to the media was “unfair” – and he used the assertion to again attack Attorney General Jeff Sessions. In a Friday morning tweet, Trump called Winner’s leaks “‘small potatoes’ compared to what Hillary Clinton did,” referring to his repeated accusations that his rival in the 2016 election had broken the law in her use of a private email server while Secretary of State. The tweet also marks the second time in two days that Trump has lashed out at Sessions, following remarks he made Wednesday saying his Attorney General “never took control of the Justice Department.”

“So unfair Jeff, Double Standard,” Trump wrote Friday. The attacks on Sessions come directly after Trump’s lawyer Michael Cohen pleaded guilty and implicated the President in campaign financing crimes.Winner, an ex-NSA contractor, leaked classified government information to a news organization in 2017. That news organization was never officially identified in court proceedings, however on the same day Winner was arrested the investigative site The Intercept released a report detailing a Russian attempt to influence voting in the 2016 election. Trump’s apparent support for Winner is contrary to his insistence that Edward Snowden, another former NSA employee who leaked secret information to the media, is a “traitor.”

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No agreement on whether Cohen violated anything other then laws linked to his own business. Payments to mistresses may be perfectly legal.

Cohen’s Plea Deal Is Prosecutor’s Attempt To Set Up Trump (Hill)

Why was Michael Cohen investigated? Because the “Steele dossier” had him making secret trips to meet with Russians that never happened, so his business dealings got a thorough scrubbing and, in the process, he fell into the Paul Manafort bin reserved by the special counsel for squeezing until the juice comes out. We are back to 1998 all over again, with presidents and candidates covering up their alleged marital misdeeds and prosecutors trying to turn legal acts into illegal ones by inventing new crimes.

The plot to get President Trump out of office thickens, as Cohen obviously was his own mini crime syndicate and decided that his betrayals meant he would be better served turning on his old boss to cut the best deal with prosecutors he could rather than holding out and getting the full Manafort treatment. That was clear the minute he hired attorney Lanny Davis, who does not try cases and did past work for Hillary Clinton. Cohen had recorded his client, trying to entrap him, sold information about Trump to corporations for millions of dollars while acting as his lawyer, and did not pay taxes on millions.

The sweetener for the prosecutors, of course, was getting Cohen to plead guilty to campaign violations that were not campaign violations. Money paid to people who come out of the woodwork and shake down people under threat of revealing bad sexual stories are not legitimate campaign expenditures. They are personal expenditures. That is true for both candidates we like and candidates we do not. Just imagine if candidates used campaign funds instead of their own money to pay folks like Stormy Daniels to keep quiet about affairs. They would get indicted for misuse of campaign funds for personal purposes and for tax evasion.

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Germny, Greece, UK.

Europe Must Save The British From Themselves On Brexit (IT)

[Keynes in 1919 on the Treaty of Versailles] : “The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable – abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilized life of Europe.”

[..] Just as British civil servants, especially in the treasury and foreign office, never thought for a second that Germany would meet the demands of Versailles, I can’t believe anybody at the ECB or IMF thinks there is a chance that they will get back what Greece apparently owes them. According to some experts, Germany ended up paying back less then one-sixth of what was demanded in 1919. The withdrawal agreement that the United Kingdom may or may not negotiate over the next few weeks will not bear such close resemblance to those postwar reparations. At least Germany – and, more recently, Greece – tried to limit the damage being inflicted by the other side of the table.

Today the UK negotiators turn up for talks goaded by the Brexiteers to do as bad a deal as possible, to inflict as much damage as they can on themselves. If Keynes were alive today he would write another scathing polemic. The EU has a big call to make. Having crushed the Greeks, does it now do the same to the British? Does it accede to their weird demands for a dreadful deal? How much should it punish the Brexiteers for their idiocy?

Brussels is looking at opponents squabbling over whether to shoot themselves in the foot or the head. Are EU leaders, unlike their 1919 counterparts, able to see that the time for (limited) generosity has arrived? They have the opportunity to save the British from themselves. Why would they do this? The Versailles negotiators couldn’t see that it was in their own interests not to overly punish the Germans. Europe today runs too many risks from an enfeebled and resentful UK. Europe needs to remind itself of the civilising zeal of the EU’s founders and the values of the Enlightenment. Or, at the very least, the value of enlightened self-interest.

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The Bank of England and the Treasury move in opposite directions.

Ending The Fiscal-Monetary Tug-o-War (NEF)

For some time now our two most influential economic institutions -the Bank of England and the Treasury – have been pulling in opposite directions. The Bank has tried to do its job of boosting aggregate demand (spending), but the Treasury has been running fiscal austerity, which has the opposite effect. The great irony is that through its monetary policy stimulus the Bank of England has opened up significant ‘fiscal space’. ‘Fiscal space’is a term used by the IMF to describe the extent to which national governments can take on more public borrowing without harming their economy. This begs the question whether the Treasury has acted irresponsibly by not taking full advantage of the fiscal potential the Bank affords it?

Without fiscal cooperation, the Bank is left trying to stimulate the economy on its own by indirectly influencing the borrowing and spending behaviour of the private sector. To this end, the Bank has lowered interest rates to historic lows, and has injected £445 billion and £125 billion of new money through so called Quantitative Easing (QE) and the Term Funding Scheme (TFS), respectively. In doing so, the Bank has helped keep the economy afloat – but at what cost? Standalone monetary policy has reduced the number of safe assets in the market, supported more risk taking, encouraged households to take on more debt (to record levels), fuelled asset price bubbles, and promoted inequality. To boot, very little of the new money created by the Bank has trickled down into productive investments and household incomes.

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We are finally waking up. But it’s way too late.

Greece’s “Bailout” Was a Disaster for Greece (Klein)

Had Greece been a country with its own currency, such as the Czech Republic or New Zealand, the central bank could have plugged the funding gap and prevented an abrupt collapse in spending. Membership in the euro area removed that option. The government and the banks owed debt in a currency the Bank of Greece could not print, and the ECB was not keen on helping. The textbook response would have been for the government to default on its debt and get a loan from the International Monetary Fund to help smooth out the adjustment. The amount of money required to buy time after a restructuring would not have been large compared with the nearly €300 billion that ended up being lent.

That option was blocked, however, by a coalition of Greece’s “European partners” and the U.S. They were still traumatized by the bankruptcy of Lehman Brothers and had come to believe that its default had made the financial crisis far worse than it otherwise would have been. The result was a firm commitment to avoid any reduction in what the Greek government owed. Their concern was not about what a default would do to Greece, but about what it would do to them. In addition to the €230 billion in potential losses on government debt, which by itself might have been enough to wipe out the capital of many large European banks, foreigners had another €120 billion in exposure to Greek banks. Greek banks did not have much exposure to Greek government debt—only about 8% of total assets in 2009—but it was still more than their total capital and loan-loss reserves.

Restructuring the government’s debt would therefore have required either the partial liquidation of the Greek banking system or an explicit bailout of Greece’s banks paid by someone else. Again, this should have been doable, but U.S. Treasury Secretary Timothy Geithner and ECB President Jean-Claude Trichet were terrified about how it might affect the still-fragile Euro-American financial system. [..] There was no political will in 2010 to spend hundreds of billions of euros to bail out Dutch, French, and German banks. To Greece’s eternal misfortune, however, there was enough “solidarity” to launder that Northern European bank bailout through the Greek government.

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“..it was decided that the Greek government could not be allowed to tell the truth..”

Greece Remains A Debtor’s Prison, The EU Won’t Let Go Of The Keys (Varoufakis)

On the European continent, a far worse drama was unfolding due to the EU’s odd decision, back in 1998, to create monetary union featuring a European Central Bank without a state to support it politically and 19 governments responsible for salvaging their banks in times of financial tumult, but without a central bank to aid them. Why this anomalous arrangement? Because the German condition for swapping the deutschmark for the euro was a total ban on any central bank financing of banks or governments – Italian or Greek, say. So, when in 2009 the French and German banks proved even more insolvent than those of Wall Street or the City, there was no central bank with the legal authority, or backed by the political will, to save them.

Thus, in 2009, even Germany’s Chancellor Merkel panicked when told that her government had to inject, overnight, €406bn of taxpayers’ money into the German banks. Alas, it was not enough. A few months later, Mrs Merkel’s aides informed her that, just like the German banks, the over-indebted Greek state was finding it impossible to roll over its debt. Had it declared its bankruptcy, Italy, Ireland, Spain and Portugal would follow suit, with the result that Berlin and Paris would have faced a fresh bailout of their banks greater than €1tn. At that point, it was decided that the Greek government could not be allowed to tell the truth, that is, confess to its bankruptcy.

To maintain the lie, insolvent Athens was given, under the smokescreen of “solidarity with the Greeks”, the largest loan in human history, to be passed on immediately to the German and French banks. To pacify angry German parliamentarians, that gargantuan loan was given on condition of brutal austerity for the Greek people, placing them in a permanent great depression. To get a feel for the devastation that ensued, imagine what would have happened in the UK if RBS, Lloyds and the other City banks had been rescued without the help of the Bank of England and solely via foreign loans to the exchequer. All granted on the condition that UK wages would be reduced by 40%, pensions by 45%, the minimum wage by 30%, NHS spending by 32%. The UK would now be the wasteland of Europe, just as Greece is today.

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How to devastate an entire population.

US Study Shows How Austerity Devastated Greece’s Health (UoW)

A new study by a School of Dentistry faculty member and dozens of other researchers from the University of Washington and around the world has found that Greece’s population health declined markedly and death rates rose sharply after harsh austerity measures were imposed on Greece by the European Union and the International Money Fund in 2010. “This study is important because it provides a framework for health surveillance on a national level following major socioeconomic changes,” said Dr. Georgios Kotsakis of the School of Dentistry’s Department of Periodontics, one of the study’s authors. The study, which was published this week in the British journal The Lancet Public Health, reported that government health spending fell sharply and that the causes of death that increased the most were largely those that could have been addressed by health care.

The researchers noted that Greece’s reduced health spending, required as part of the austerity measures, had been criticized for omitting measures to protect the country’s National Health System. They said that health policymakers should place a special focus on ensuring that Greece’s health-care system is equipped to meet the needs of the country’s citizens. The researchers identified an increase in the pace at which Greece’s population was aging as another important concern and wrote: “The increase in total deaths in children younger than 5 years and older adults with increase in causes sensitive to resource availability (e.g., access to screening and urgent care) suggest that the health system requires substantial restructuring to cope with the effects that the financial crisis has had on resource availability, resource allocation, and population structure.”

They reported that while the country’s overall death rate rose by about 5.6 percent from 2000 to 2010, it jumped by about 17.7 percent in the six years that followed, after austerity measures were imposed. The rate rose three times faster than the rate in Western Europe overall, and came at a time when mortality rates were actually declining worldwide. The largest increase came among people 70 and older, while the very young also saw a disproportionate increase.

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Yeah, but it’s only until the next ship tries to dock.

Italy Disembarks Stranded Migrants, Salvini Under Investigation (R.)

Italy on Sunday disembarked all 150 migrants from a rescue ship that had been docked for five days in a Sicilian port, ending the migrants’ ordeal and a bitter stand-off between Rome’s anti-establishment government and its European Union partners. The migrants, mainly from Eritrea, had been stranded in the port of Catania since Monday because the government refused to let them off the boat until other EU states agreed to take some of them in. Interior Minister Matteo Salvini said Albania had offered to accept 20 of the migrants and Ireland 20-25, while the rest would be housed by Italy’s Catholic Church “at zero cost” to the Italian taxpayer.

“The church has opened its heart and opened its wallet,” Salvini, from the right-wing League party, told supporters at a rally in Pinzolo in northern Italy on Saturday evening. Salvini, who has led a popular crackdown against immigration since the government took office in June, also announced that he had been placed under investigation by a Sicilian prosecutor for abuse of office, kidnapping and illegal arrest. “Being investigated for defending the rights of Italians is a disgrace,” he said. On Saturday, the United Nations called for reason from all sides after a meeting of envoys from 10 EU states in Brussels a day earlier failed to break the deadlock. “Frightened people who may be in need of international protection should not be caught in the maelstrom of politics,” the U.N. refugee agency UNHCR said in a statement.

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The Vatican is a huge business empire disguised as a religion. That why there will never be a thorough investigation.

Time Is Running Out For The Pope To Pacify The Faithful’s Anger (O.)

Wave after wave of scandal concerning decades of abuse by priests and cover-up by bishops has crashed at the doors of the Vatican this year. The issue threatens to derail Francis’s papacy unless he can belatedly show that he does not just understand the scale and systemic nature of the problem but is willing to take concrete action to deal with it. The past few weeks alone have seen the publication of a shocking grand jury report into clerical abuse and its concealment in Pennsylvania, the resignation as a cardinal of a former archbishop of Washington over alleged sexual assaults, a police raid on the Catholic church’s HQ in Chile, the sentencing of an Australian archbishop convicted of covering up child abuse, and a growing clamour from Irish survivors for the pope to take responsibility for these failings.

More scandals and revelations may be looming. Cardinal George Pell, the third-ranking official in the Vatican and an ally of Pope Francis, is facing legal proceedings in Australia relating to allegations of historic sexual offences. Early next year, the trial will begin in France of two cardinals on charges of concealing sexual abuse. “This is a potential tipping point, not just for Francis’s papacy, but in the Catholic church writ large,” said John Allen, editor of the Catholic magazine Crux and a Vatican expert. “Ordinary Mass-going Catholics are saying that when this first blew up, and for a long time afterwards, they stuck with the church, because people in power were saying, ‘we understand how awful this is, it has to be fixed and we’re going to fix it’. What is punching Catholics in the gut right now is the thought that what they were told about the determination to get this sorted simply wasn’t real.”

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Aug 232018
 
 August 23, 2018  Posted by at 9:28 am Finance Tagged with: , , , , , , , , , ,  


Pablo Picasso Seated woman 1903

 

 

 

The Weaponization of the Dollar (Lebowitz)
Turkey’s Lira Crisis Was Written In Istanbul’s Skyline (G.)
U.S.-China Trade War Escalates As New Tariffs Kick In (R.)
Shooting War With China More Likely Than You Think (Rickards)
Wall Street Marks Longest-Ever ‘Bull Market’ (AFP)
Saudi Energy Minister Denies Aramco IPO Will Be Called Off (R.)
Australia In Crisis As Prime Minister Faces Down Political Coup Attempt (G.)
Trump Says He’s Considering Pardon For Manafort (R.)
Making Plans For A New World Order (Heiko Maas)
Italian Prosecutors Investigate Salvini’s Bar On Ship Arrivals (G.)

 

 

“..the true all-in cost of borrowing was not 5% but 54%.”

The Weaponization of the Dollar (Lebowitz)

China, Turkey, and Iran are all classified as emerging markets. While the classification is broad and includes a diverse group of countries, these countries have many things in common. One is that their currencies, for the most part, are not liquid or highly valued. Thus, they heavily rely on the world’s reserve currency, the U.S. dollar, to conduct international trade. As an example, when Pakistan buys oil from Qatar, they transact in U.S. dollars, not rupees or riyals. To facilitate trade efficiently, these countries must hold excess dollars in reserve. In almost all cases, emerging market nations rely on U.S. dollar-denominated debt for their transactional needs.

Dollar-denominated debt is currently the cause of much economic pain for Turkey. To understand why, we present a simplified example. Suppose on January 1, 2018, a Turkish corporation borrowed $100 million U.S. dollars with an agreement to pay it back with interest of 5% on August 15th, 2018. The company, as is typical, converts the loaned dollars to Turkish Lira. On August 15, 2018, the company will convert the Lira back to dollars in order to pay the principal and interest due on the loan. The following graph charts the Turkish Lira versus the Dollar over the life of the loan.

On January 1, 2018, one U.S. Dollar was worth 3.79 Lira. Over the next eight months, the U.S dollar appreciated significantly versus the Lira such that one U.S. dollar was worth approximately 5.81 Lira. As such, the company will now need 5.81 Lira to purchase each dollar it needs to repay the loan. Due to the strengthening of the U.S. dollar versus the Lira over the time period of the outstanding loan, the company would need 584,282,000 Lira to pay back what was originally a 378,750,000 Lira loan. In other words, the true all-in cost of borrowing was not 5% but 54%.

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“90% of the credit in Turkish real estate companies came from loans in foreign currencies.”

Turkey’s Lira Crisis Was Written In Istanbul’s Skyline (G.)

From a distance, Esenyurt, a newly built up neighbourhood on the edges of Istanbul, looks a bit like Hong Kong or Dubai, with a bustling downtown of shiny skyscrapers. Upon closer examination, however, you notice that tower after tower stands incomplete, lacking windows or furnishings; others are only half-occupied, their windows dark after nightfall. “In the residential areas, 100% of the construction has stopped,” says Mohamed Karman, a local estate agent, from his small office in the central square of Esenyurt. “Do you know why? The materials. Everything is in dollars, you pay in dollars.” The crash of the Turkish lira last week after two years of steady decline spooked global markets – but anyone looking at Istanbul’s skyline would have been far from surprised.

Everywhere you look in the city, evidence of a debt-fuelled construction boom abounds: new skyscrapers frame the horizon, huge shopping malls dot the streets and among several megaprojects is a new airport, set to be the world’s largest. Funding for this construction frenzy has been at the heart of Turkey’s economy, accounting for up to 20% of the country’s GDP growth in recent years, and employing around two million people. In a parallel to the 2008 financial crash, the boom was funded by low-interest loans and ballooning debt. Property developers funded their buildings with cheap loans in foreign currencies – and will be struck particularly hard by the lira’s collapse, as those loans grow harder to repay every day. According to government statistics, at the end of 2016 nearly 90% of the credit in Turkish real estate companies came from loans in foreign currencies.

[..] The Istanbul Sapphire – one of the tallest buildings in Europe when completed in 2011 – was financed through loans worth 164m lira in 2013, 154m of which was in US dollars. That loan would now cost around 539m lira.

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Is this the best they can do?

U.S.-China Trade War Escalates As New Tariffs Kick In (R.)

The United States and China escalated their acrimonious trade war on Thursday, implementing punitive 25 percent tariffs on $16 billion worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington. The world’s two largest economies have now slapped tit-for-tat tariffs on a combined $100 billion of products since early July, with more in the pipeline, adding to risks to global economic growth. China’s Commerce Ministry said Washington was “remaining obstinate” by implementing the latest tariffs, which kicked-in on both sides as scheduled at 12:01 p.m. in Beijing (0401 GMT). “China resolutely opposes this, and will continue to take necessary countermeasures,” it said in a brief statement.

“At the same time, to safeguard free trade and multilateral systems, and defend its own lawful interests, China will file suit regarding these tariff measures under the WTO dispute resolution mechanism,” it said. President Donald Trump has threatened to put duties on almost all of the more than $500 billion of Chinese goods exported to the United States annually unless Beijing agrees to sweeping changes to its intellectual property practices, industrial subsidy programs and tariff structures, and buys more U.S. goods. That figure would be far more than China imports from the United States, raising concerns that Beijing could consider other forms of retaliation, such as making life more difficult for American firms in China or allowing its yuan currency to weaken further to support its exporters.

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“The U.S. will win this trade war because Xi does not want to lose his throne.”

Shooting War With China More Likely Than You Think (Rickards)

The mainstream media narrative about the U.S.-China trade war implies that Trump is on a highly damaging ego trip and China holds all the cards. The exact opposite is true. Trump has ample financial warfare weapons including tariffs, penalties, bans on direct investment, improved cybersecurity, forced divestiture and freezing of assets. Meanwhile, China has almost run out of room to impose tariffs. Further, they will invite retribution if they try to devalue their currency further. China’s vulnerabilities run deeper than that. The U.S.-China trade war comes in the aftermath of a Chinese Communist Party conference that made Xi Jinping dictator for life and enshrined his doctrines on the same level as Mao Zedong.

Once Xi got these powers, he proceeded on a disastrous policy course that has resulted in a slowdown of the Chinese economy, higher debt defaults, lost investment opportunities in the U.S. and declining hard currency reserves. The knives are now out in Beijing. Reports are circulating that Xi’s opponents are questioning his judgment and the wisdom of expanding his powers at such a critical time. Many are starting to blame Xi for the trade war almost as much as they blame Trump. Xi still has torture, firing squads and concentration camps at his disposal, but the notion of a unified, coherent leadership structure in Beijing is now seen to be a myth. Trump will keep up the pressure; he never backs off and always doubles down.

It will be up to Xi to blink and acquiesce in many U.S. demands. The U.S. will win this trade war because Xi does not want to lose his throne. Yet there will still be material damage to the global economy and lasting animosity between Xi and Trump.

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Party.

Wall Street Marks Longest-Ever ‘Bull Market’ (AFP)

Wall Street graduated to the longest-ever “bull market” Wednesday, a run that began amid extraordinary crisis-era monetary policy and which experts think could persist at least a while longer. US President Donald Trump cheered the news after the S&P 500 closed for the 3,453rd straight time without a drop of 20 percent over the more than nine-year stretch. “Longest bull run in the history of the stock market. congratulations America!” Trump said on Twitter shortly after the closing bell. The marathon run comes amid signs the US economy has accelerated this year after a long period of slow but steady growth. Experts say trade wars and higher interest rates are among potential threats to the persistence of the bull run.

Market watchers liken the landmark to other stock market records, such as when the Dow hit 25,000 points for the first time. Investing in stocks remains concentrated among the wealthiest, with many Americans still hesitant to buy stocks following the 2008 financial crisis. While financial experts are well aware of the durability of the current stock market cycle, the record is “news more to Main Street than to Wall Street,” according to Art Hogan, chief market strategist at B. Riley FBR. The S&P 500 finished the day down less than 0.1 percent at 2,861.82. When stocks fall at least 20 percent below their previous record, they enter a “bear market.”

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But several people insist it is. it’s just that it can’t be announced right now.

Saudi Energy Minister Denies Aramco IPO Will Be Called Off (R.)

Saudi Arabia’s energy minister denied a Reuters report that state oil giant Aramco’s initial public offering will be called off, in a statement issued early on Thursday. “The government remains committed to the initial public offering of Saudi Aramco, in accordance with the appropriate circumstances and appropriate time chosen by the Government,” Energy Minister Khalid al-Falih said in a statement released on Saudi Press Agency. Reuters reported on Wednesday that four senior industry sources said Saudi Arabia has called off both the domestic and international stock listing of Aramco.

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Oz politics is so bad it’s not even funny.

Australia In Crisis As Prime Minister Faces Down Political Coup Attempt (G.)

Australia is on the brink of having its sixth prime minister in a decade after a chaotic, internecine coup attempted, but failed, to topple the incumbent Malcolm Turnbull on Thursday. In a media conference during which he refused to resign, Turnbull called on his challengers to prove he had lost the confidence of his own party, and made a thinly veiled swipe at influences “outside the parliament”. The reference was widely interpreted as an attack on the power of Rupert Murdoch’s News Corporation newspapers and TV channels, which have consistently campaigned against him. “The reality is that a minority in the party room supported by others outside the parliament have sought to bully, intimidate others into making this change of leadership that they’re seeking,” Turnbull said.

The leadership brawl stalled political business on Thursday morning when the government voted to shut down the House of Representatives until 10 September, unsure it would be able to command a majority on the floor of the House, and unwilling to face questions from the opposition after at least 13 ministers tendered their resignations. Since 2007, no Australian prime minister has served a full term in office, with four cut down by their own parties while in office, earning Canberra the title of “coup capital of the Pacific”. Turnbull survived Thursday, but appears almost certain to lose the prime ministership to a party room vote, likely as soon as Friday.

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But not today, for sure.

Trump Says He’s Considering Pardon For Manafort (R.)

U.S. President Donald Trump said he would consider pardoning his former campaign chairman Paul Manafort, who was convicted on Tuesday of bank and tax fraud, according to a Fox News reporter who interviewed Trump. Fox News reporter Ainsley Earhardt said Trump told her in an interview on Wednesday that “he would consider” pardoning Manafort.“I think he feels bad for Manafort. They were friends,” Earhardt said in an appearance on Fox News’ “Hannity” program on Wednesday night.

Fox News has been airing excerpts of the interview with Trump, which is scheduled to be shown in its entirety on Thursday morning. The excerpts have not included a clip of Trump saying he would consider pardoning Manafort. Manafort was convicted on Tuesday of two counts of bank fraud, five counts of tax fraud and one charge of failing to disclose foreign bank accounts. In a tweet on Wednesday about the verdict, Trump called Manafort a “brave man” and said, “I feel very badly for Paul Manafort and his wonderful family.”

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Maas is the new German foreign minister. His proposal for an alternative SWIFT system launched a debate. But really, “new world order”?

Making Plans For A New World Order (Heiko Maas)

It starts with us exposing fake news. Like this: If the current account balance of Europe and the US includes more than just trade in goods, then it is not the US that has a deficit, it’s Europe. One reason is the billions in profits that European subsidiaries of Internet giants such as Apple, Facebook and Google transfer to the US every year. So when we talk about fair rules, we must also talk about the fair taxation of profits like that. It is also important to correct fake news because it can quickly result in the wrong policies. As Europeans, we have made it clear to the Americans that we consider the withdrawal from the nuclear agreement with Iran to be a mistake. Meanwhile, the first US sanctions have come back into force.

In this situation, it is of strategic importance that we make it clear to Washington that we want to work together. But also: That we will not allow you to go over our heads, and at our expense. That is why it was right to protect European companies legally from sanctions. It is therefore essential that we strengthen European autonomy by establishing payment channels independent of the US, a European monetary fund and an independent SWIFT [payments] system. The devil is in thousands of details. But every day that the Iran agreement lasts, is better than the potentially explosive crisis that threatens the Middle East otherwise.

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Let the courts decide.

Italian Prosecutors Investigate Salvini’s Bar On Ship Arrivals (G.)

Italian prosecutors have opened an investigation into the illegal detention of 177 migrants onboard a coastguard vessel that the minister of the interior, Matteo Salvini, refuses to allow to land. The Ubaldo Diciotti has been docked for 48 hours at the port of Catania, Sicily, but the migrants have not been allowed to disembark without having certainties from Brussels on their distribution to other countries. The investigation, conducted by the prosecutor of the city of Agrigento, was launched against “unknowns” but it is clear that if the magistrates were to go ahead with a judicial proceeding, Salvini would end up under investigation, being the only one responsible for the landing ban.

“I heard that the prosecutor’s office in Agrigento has opened an investigation,” said Salvini in a recent video on Facebook Live. “I also heard that the suspects are ‘unknown’ at the moment. But I’m not unknown. My name is Matteo Salvini, I’m the minister of the interior. Come on, try me too, I’m here.” The Ubaldo Diciotti docked on Monday night in the port of Catania but the migrants, including 29 unaccompanied minors, were refused authorisation to disembark. The ship picked up 190 people on 15 August from an overcrowded boat about 17 nautical miles from the Italian island of Lampedusa. Thirteen of them were evacuated for emergency medical treatment.

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Aug 212018
 
 August 21, 2018  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , , , ,  


Henri Matisse The painter and his model 1916-17

 

China’s Biggest Risk May Be Its Property Market – Not The Trade War (CNBC)
Why Do American CEOs Get Paid So Much? (Galbraith)
Trump Says It Is ‘Dangerous’ For Twitter, Facebook To Ban Accounts (R.)
Trump Worries That Mueller Interview Could Be A ‘Perjury Trap’ (R.)
Trump Demands Fed Help On Economy, Complains About Interest Rate Rises (R.)
UK’s Hunt To Call On Trump To Impose Fresh Sanctions On Russia (G.)
‘Secret Directive’ Bans UN Agencies From Helping Rebuild Syria – Lavrov (RT)
UK Household Debt Balloons To £19bn As Bailiff Problems Multiply (Ind.)
NHS Leak Warns Of Brexit Drug Shortages And Disease Risk (G.)
Jacinda Ardern Freezes New Zealand MPs’ Pay To Tackle Rich-Poor Divide (G.)
Salvini Refuses To Let In Refugees After Coastguard Ship Docks (G.)
What Being Back in the Markets Actually Means for Greece (TPP)
The Winners Will Lose and the Losers Will Win (Kunstler)
The Inescapable Weight Of My $100,000 Student Debt (G.)

 

 

“Real estate investment accounts for about two-thirds of Chinese household assets..”

China’s Biggest Risk May Be Its Property Market – Not The Trade War (CNBC)

China’s hot real estate market remains a challenge for authorities trying to maintain stable economic growth in the face of trade tensions with the U.S. In fact, property is the country’s biggest risk in the next 12 months, much greater than the trade war, according to Larry Hu, head of greater China economics at Macquarie. He said he is especially watching whether the real estate market in lower-tier, or smaller, cities will see a downturn in prices or housing starts after recent sharp increases. Real estate investment accounts for about two-thirds of Chinese household assets, according to wealth manager Noah Holdings. The property market also plays a significant role in local government revenues, bank loans and corporate investment.

As a result, a sharp slowdown in the real estate market’s growth and drop in prices would have a negative affect on overall economic growth. So far, the market has been hot: The average selling price for newly built non-governmental housing in 60 tier-three and tier-four cities tracked by Tospur Real Estate Consulting rose 28.1 percent from January 2016 to May 2018. [..] Last week, Nanjing, a tier-two city, announced a ban on corporate purchases of residential properties, following similar moves to limit speculation by Shanghai and some other cities. That’s a good move for controlling risk, according to Joe Zhou, real estate and investment management firm JLL’s regional director for China capital markets. He said the government is not likely to loosen its policy soon and that prices could decline on average.

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“The reliance of tech firms on venture capital and bubble psychology, rather than cash flow..”

Why Do American CEOs Get Paid So Much? (Galbraith)

A new report from the Economic Policy Institute calls attention to the hardy perennial of how much America’s corporate titans make: bosses of the top 350 firms made an average of $18.9m in 2017. That’s a ratio of 312-1 over the median worker in their industries. Big bucks to be sure. And a big change since 1965, when the ratio was just 20-1. But what does it mean? And if there’s a problem, what is it, exactly? What it means, as the EPI economists carefully document, is that the top US corporate chiefs are paid overwhelmingly with stock options, and their income fluctuates with the market. About 80% of the pay packet is in stocks, and the rise of 17% in 2017 after two flat years surely suggests that the top CEOs (not unreasonably) sensed the market peaked last year.

So they cashed in. On the other 20% of the pay packets, no gains occurred. The US numbers have shock value. But bear in mind that they reflect not only the way companies are run, but also changes over decades in the structure of the US economy and tax law, specifically the rise of market valuations in technology and finance at the expense of the major industrial corporations, and a corresponding decline in unions, which held down the ratios in the sectors the industrial firms dominated a half century back. Plus, there is the radical decline in top marginal tax rates on income and capital gains, beginning in 1978, which gave executives strong reasons to restructure their pay away from inside-the-corporation perks (the penthouses and country clubs of yore) and toward cash and capital assets.

The reliance of tech firms on venture capital and bubble psychology, rather than cash flow, deepened this trend. Note also that there is something a bit artificial about the resulting “wealth.” Jeff Bezos may have a net worth of over $150bn, mostly in Amazon stock, but he couldn’t convert it into cash if he wanted to, neither by selling nor by borrowing. Any effort to sell would demolish Amazon’s valuation and hence his own fortune. The rich aren’t like us – they have more money, true, but some of it isn’t really money and it can disappear, by the billions, pretty fast.

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As I wrote yesterday, this will have to change.

Trump Says It Is ‘Dangerous’ For Twitter, Facebook To Ban Accounts (R.)

U.S. President Donald Trump said on Monday that it is “very dangerous” for social media companies like Twitter and Facebook to silence voices on their services. Trump’s comments in an interview with Reuters come as the social media industry faces mounting scrutiny from Congress to police foreign propaganda. Trump has made his Twitter account – with more than 53 million followers – an integral and controversial part of his presidency, using it to promote his agenda, announce policy and attack critics. Trump previously criticized the social media industry on Aug. 18, claiming without evidence in a series of tweets that unnamed companies were “totally discriminating against Republican/Conservative voices.”

In the same post, Trump said “too many voices are being destroyed, some good & some bad.” Those tweets followed actions taken by Apple, Alphabet, YouTube and Facebook to remove some content posted by Infowars, a website run by conspiracy theorist Alex Jones. Jones’ own Twitter account was temporarily suspended on Aug. 15. “I won’t mention names but when they take certain people off of Twitter or Facebook and they’re making that decision, that is really a dangerous thing because that could be you tomorrow,” said Trump.

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Also mentioned yesterday. Chances of a sitdown in the next 10 days don’t look good.

Trump Worries That Mueller Interview Could Be A ‘Perjury Trap’ (R.)

U.S. President Donald Trump said on Monday he was worried that any statements under oath he provides to Special Counsel Robert Mueller could be used to bring perjury charges against him as part of the probe into Russia’s electoral interference. In an interview with Reuters, Trump echoed the concerns of his top lawyer in the probe, Rudy Giuliani, who has warned that any sit-down with Mueller could be a “perjury trap.” The president expressed fears that investigators could compare his statements with that of others who have testified in the probe, such as former FBI Director James Comey, and that any discrepancies could be used against him.

“So if I say something and he (Comey) says something, and it’s my word against his, and he’s best friends with Mueller, so Mueller might say: ‘Well, I believe Comey,’ and even if I’m telling the truth, that makes me a liar. That’s no good.” Despite his concerns, Trump did not comment on whether he would ultimately agree to an interview with Mueller, who is, among other things, investigating whether Trump’s campaign team colluded with Russians during the 2016 election and whether Trump has obstructed justice in the probe. Trump also declined to say whether he might strip Mueller of his security clearance, as he did last week to former CIA Director John Brennan, who had repeatedly criticized Trump’s handling of foreign policy and national security issues.

“I haven’t given it a lot of thought,” he said. [..] Trump asserted that he retained the power to intervene in the probe, but that he had chosen not to do so for the moment. His administration, Trump said, was “a smooth-running machine, except in that world. And I’ve decided to stay out. Now I don’t have to stay out. “I can go in, and I could do whatever — I could run it if I want. But I decided to stay out,” he said. “I’m totally allowed to be involved if I wanted to be. So far, I haven’t chosen to be involved. I’ll stay out.”

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Whatever the predictable comments on this, what he really does is confirm the Fed’s independence.

Trump Demands Fed Help On Economy, Complains About Interest Rate Rises (R.)

U.S. President Donald Trump said on Monday he was “not thrilled” with the Federal Reserve under his own appointee, Chairman Jerome Powell, for raising interest rates and said the U.S. central bank should do more to help him to boost the economy. In the middle of international trade disputes, Trump in an interview with Reuters also accused China and Europe of manipulating their respective currencies. American presidents have rarely criticized the Fed in recent decades because its independence has been seen as important for economic stability.

Trump has departed from this past practice and said he would not shy from future criticism should the Fed keep lifting rates. The president spooked investors in July when he criticized the U.S. central bank’s over tightening monetary policy. On Monday he said the Fed should be more accommodating on interest rates. “I’m not thrilled with his raising of interest rates, no. I’m not thrilled,” Trump said, referring to Powell.

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Nobody Hunt goes to Washington with veiled criticism of Trump. Good luck with that.

UK’s Hunt To Call On Trump To Impose Fresh Sanctions On Russia (G.)

The British foreign secretary, Jeremy Hunt, is to urge Donald Trump to face down Moscow’s threat to western values by imposing wider economic sanctions against Russia and agreeing new rules to protect the legitimacy of democratic elections. In a speech in Washington on Tuesday during his first visit since taking over from Boris Johnson as the UK’s most senior diplomat, Hunt will specifically call for tighter regulation of online political advertising and new measures to prevent cyber attacks on electoral machinery. Hunt will also throw out a challenge to Trump’s protectionist policies by warning a weakening of free trade will only damage western economies, and ultimately western political power.

He will say the emergence of an international order based on the application of law rather than might had led to an exponential growth in trade, leading to extraordinary advances in economic and social prosperity across the globe. He will also call for Nato to set clearer red lines about Russia’s use of chemical weapons and incursions into foreign territory such as the annexation of Crimea in 2014. Without directly challenging the legitimacy of Trump’s election as president in 2016, he will point to the drawbacks in many recent democratic outcomes, saying: “The heart of any democracy is freedom of expression, which allows citizens to access independent information to help decide who to vote for. But the ubiquity of fake news, social media targeting and foreign attempts to manipulate elections have undermined confidence that this can actually happen.”

Any tarnishing of Trump’s electoral mandate is highly perilous territory for a foreign politician, and Hunt will temper his criticism by saying western leaders should not deceive themselves that populism is merely a byproduct of social media spreading fake news.

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Rebuilding Syria can solve a large part of Europe’s refugee problem, and US and UN are holding it back?

‘Secret Directive’ Bans UN Agencies From Helping Rebuild Syria – Lavrov (RT)

Washington’s “absolutely deconstructive” stance is hampering the rebuilding of Syria and constricts the UN in aiding the country until a so called ‘political transition’ takes place, Sergey Lavrov, Russia’s Foreign Minister, said.
“We addressed UNESCO on how they plan to implement the longtime talks, the longtime understanding on attracting the potential of this organization to rebuilding Palmyra,” an ancient city, regarded by the agency as a World Heritage Site, Lavrov said. “From the explanations of why UNESCO has still been unable to get involved in this process actively, we took that there was some kind of a directive from the United Nations headquarters in New York.”

He said that the UN Secretariat, which is the organizations’ executive arms, has “actually issued and distributed a secret directive throughout the UN system in October last year that prohibited the agencies included in this system from participating in any kind of projects aimed at restoring the Syrian economy.” Only humanitarian aid and nothing more” was allowed, the minister told the journalists after talks with Lebanese counterpart, Gebran Bassil, in Moscow. “A term was put forward that restoration of Syria would only be on the agenda after a certain progress is made in the so-called political transition” in the country, he added. The Russian Foreign Ministry also said that due to the “absolutely deconstructive” stance of the US one also shouldn’t expect any positive decisions on rebuilding Syria and return of refugees to the country from the UN Security Council.

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“People can face having their essential services cut off, be kicked out of their home due to rent arrears or even face prison if they get behind on their council tax..”

A country moving backwards.

UK Household Debt Balloons To £19bn As Bailiff Problems Multiply (Ind.)

UK households have fallen behind on essential bills such as council tax and electricity by as much as £18.9bn, according to Citizens Advice, which says it helps someone with bailiff-related problems every three minutes. The total outstanding debt includes almost £7.5bn in tax credit overpayments, £2.84bn owed in council tax and £2.2bn owed to water companies. Household debt has now overtaken consumer credit as the main money problem people contact Citizens Advice about, and the charity said that falling behind on household bills “has more severe consequences than missing consumer credit repayments”, such as overdrafts and personal loans.

“People can face having their essential services cut off, be kicked out of their home due to rent arrears or even face prison if they get behind on their council tax,” Citizens Advice warned. The charity said it had seen a 24 per cent increase in bailiff problems since the government introduced reforms in 2014 that were meant to protect people from unfair bailiff practices. Under the reforms, bailiffs are no longer allowed to make late-night visits to collect debts, and are prevented from using force against people who owe money, amongst other rules.

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Since there is no progress on many essential Brexit elements, this is not some doom fantasy.

NHS Leak Warns Of Brexit Drug Shortages And Disease Risk (G.)

Hospitals face running out of drugs in a chaotic no-deal Brexit, the group that represents NHS hospital and ambulance service has privately warned. Poor co-ordination by ministers and health service bosses means there has been a failure to prepare for the UK to be left without a Brexit deal, a leaked letter from NHS Providers said. “Public health and disease control co-ordination could suffer,” said NHS Providers chief executive Chris Hopson, setting out how a hard Brexit or no deal could negatively effect “the entire supply chain of pharmaceuticals” and “jeopardise” the EU citizens making up the “workforce on which the NHS relies”. Hopson’s letter, sent to NHS England chief executive Simon Stevens and NHS Improvement chief Ian Dalton on Friday, was leaked to the Times.

Hopson said the possibility of a no-deal or hard Brexit “with minimal regulatory alignment appears to be growing … For as long as that risk remains it is important that detailed operation planning is undertaken across the NHS. “Yet trusts tell us that their work in this area is being hampered by the lack of visible and appropriate communication. “Our members have begun planning … but they have hit a problem, in that some activities are clearly best done at a national level and, in the view of trusts, are best co-ordinated by NHS England and NHS Improvement. “However there has been no formal communication to trusts from either of your organisations on this issue.”

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Always risky to cut your immediate colleagues, but makes a ton of sense.

Jacinda Ardern Freezes New Zealand MPs’ Pay To Tackle Rich-Poor Divide (G.)

Jacinda Ardern has frozen the salaries of New Zealand’s MPs, saying the pay rises were out of step with the wider workforce and were adding to the rich-poor divide. The radical move has cross-party support from Ardern’s coalition partners, as well as the opposition National party. MPs’ salaries and allowances would be frozen till July 2019, Ardern said, while “a fairer formula for future pay increases” is developed for those in politics, who earn between NZ$163,000 ($108,000) to more than NZ$450,000 ($300,000). Ardern said the freeze was “the right thing to do” and was not about cost-cutting, but making New Zealand a more equitable nation.

The PM was prompted to take action after the Remuneration Authority recommended MPs receive a 3% pay rise, in a year that is seeing widespread strike action by teachers, nurses and other workers across New Zealand. Ardern earns more than NZ$450,000 a year, making her the fifth-highest paid leader in the OECD, and better paid than Canada’s Justin Trudeau and the UK’s Theresa May. According to a survey by Stuff, 62% of New Zealanders think the country’s prime ministers are paid too much. Australian prime minister Malcolm Turnbull earns the largest salary of any leader in the OECD. “It’s about whether or not it’s right that we receive a 3% pay increase that continues to extend that gap between those on the highest incomes and those on lower and more modest incomes,” Ardern told Radio NZ today.

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The EU MUST come up with a plan.

Salvini Refuses To Let In Refugees After Coastguard Ship Docks (G.)

An Italian coastguard ship with 177 people on board has docked in the Sicilian seaport of Catania, but Italy’s far-right interior minister Matteo Salvini has not given authorisation for the refugees and migrants to disembark. The passengers, who have been stuck on the coastguard boat Ubaldo Diciotti for five days will not be allowed on land until “Europe steps in to help’’, Salvini said. The Diciotti picked up 190 refugees and migrants last Wednesday from an overcrowded boat about 17 sea miles from the island of Lampedusa. Thirteen of them were evacuated for emergency medical treatment. Since then, Rome has insisted that Malta should take the group because their boat first passed through its search-and-rescue area.

But Malta has refused, claiming that the migrants wanted to reach Italy. Questioned by the Italian authorities, the 13 evacuated migrants claimed that the Maltese had escorted them outside its search-and-rescue zone. On Monday afternoon, after three days of negotiations, Italy’s transport minister Danilo Toninelli announced finally on Twitter that “The Diciotti ship will dock in Catania.” But shortly afterwards, sources close to Salvini said he had not given the authorisation to disembark, suggesting the boat was granted permission to dock but the migrants will have to remain on board. Salvini said on Italian TV: “The ship may land in Italy, as long as the 177 migrants are distributed, in a spirit of solidarity by the EU.”

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What does it mean? More debt.

What Being Back in the Markets Actually Means for Greece (TPP)

The devil, as they say in English, lies in the details. Being ‘back in the markets’, ‘turning a page,’ even declaring ‘the end of the Greek Crisis’ have all become commonplace expressions over the past few weeks. But what does this substantively mean? It means that an economy that has shrunk by around 25% saw, due to that shrinkage, its debts go up by about the same amount, despite near 100 billion Euro in debt being wiped off in 2012. Current outstanding Greek debt stands at 343 billion Euro. It now needs to pay a large chunk of that back to get back to where it was in 2008, with 109% debt to GDP.

The years of the Greek crisis (2010-2018) were the years that former finance minister Yanis Varoufakis famously described as the years of ‘extend and pretend.’ The EU would extend more credit (debt) to Greece that Greece would pretend to pay back. While most of the bailout cash prior to 2013 went through Greece back to Northern Banks, after 2013 most of the Debt was held by an opaqueprivate financial institution housed in Luxemburg called the European Stability Mechanism (ESM). It’s the debts held by the ESM, and the loans disbursed by the ESM, that have been the focus of the new game of extend and pretend that is called variously ‘debt-relief’ and Greece ‘being back in the markets.’

Consider the following. The ESM lent 86 Billion Euro to Greece between August 2015 and July 2018. The final tranche of these loans will not be paid back until 2060, with payments beginning in 2034. This ten year deferral of payments along with an interest rate reduction to an average of 1.62% across issues is the much heralded debt relief agreement of June 21st 2018. All things considered, and given real ‘go to the market’ alternatives if you have Greece’s bond rating, this is not a bad deal – on paper. These measures, plus the final bailout cash being added to cash reserves, means that Greece will actually not have to return to the markets for funding for almost two years. Given this, the ‘return to the markets’ comes with some pretty large airbags, all of which makes buying Greek debt more attractive, hence recent bond rating upgrades. So, we are extending, but what are we still pretending?

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“..Pabst Blue Ribbon by the case!”

The Winners Will Lose and the Losers Will Win (Kunstler)

What a revoltin’ development, as Chester A. Riley used to say on “The Life of Riley” TV show back in 1955, when America was great (at least that’s the theory). Riley was an original deplorable before the concept even emerged from the murk of early pop culture. He worked in an aircraft factory somewhere in southern California, which only a few decades prior was the mecca of an earlier generations of losers: the Oakies and other Dust Bowl refugees who went west to pick fruit or get into the movies. Chester A. Riley supported a family on that job as a wing-riveter. All the male characters in the series had been through the Second World War, but were so far removed from the horror that the audience never heard about it.

That was the point: to forget all that gore and get down with the new crazes for backyard barbeque, seeing the USA in your Chevrolet, enjoying that healthful pack of Lucky Strikes in the valley of the Jolly Green Giant… double your pleasure, double your fun… and away go troubles down the drain…. As Tom Wolfe pointed out eons ago, the most overlooked feature of post-war American life was the way that the old US peasantry found themselves living higher on the hog than Louis the XVI and his court at Versailles. Hot and cold running water, all the deliciously engineered Betty Crocker cake you could eat, painless dentistry, and Yankees away games on Channel 11, with Pabst Blue Ribbon by the case! By 1960 or so, along came color TV and air-conditioning, and in places like Atlanta, St. Louis, and Little Rock, you barely had to go outside anymore, thank God! No more heat stroke, hookworm, or chiggers.

It was a helluva lot better than earlier peasant classes had it, for sure, but let’s face it: it was kind of a low-grade nirvana. And a couple of generations beyond “The Life of Riley” the whole thing has fallen apart. There are few hands-on jobs that allow a man to support a family. And what would we even mean by that? Stick the women back in kitchen and the laundry room? What a waste of human capital (even for socialists who oppose capital). The odd thing is that there is increasingly little for this class of people to do besides stand near the door of the WalMart, and if the vaunted tech entrepreneurs of this land have their way with robotics, you can be sure there would be less than nothing for them to do… except crawl off and die quietly, without leaving an odoriferous mess.

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Long read. Steve Keen comments: This will doom the USA to stagnation: a generation with too much debt and no prospect of using credit like the previous generation.

The Inescapable Weight Of My $100,000 Student Debt (G.)

On Halloween in 2008, about six weeks after Lehman Brothers collapsed, my mother called me from Michigan to tell me that my father had lost his job in the sales department of Visteon, an auto parts supplier for Ford. Two months later, my mother lost her job working for the city of Troy, a suburb about half an hour from Detroit. From there our lives seemed to accelerate, the terrible events compounding fast enough to elude immediate understanding. By June, my parents, unable to find any work in the state where they spent their entire lives, moved to New York, where my sister and I were both in school. A month later, the mortgage on my childhood home went into default.

After several months of unemployment, my mother got a job in New York City, fundraising for a children’s choir. In the summer of 2010, I completed my studies at New York University, where I received a BA and an MA in English literature, with more than $100,000 of debt, for which my father was a guarantor. My father was still unemployed and my mother had been diagnosed with an aggressive form of breast cancer. She continued working, though her employer was clearly perturbed that she would have to take off every Friday for chemotherapy. To compensate for the lost time, on Mondays she rode early buses into the city from the Bronx, where, after months of harrowing uncertainty, my parents had settled. She wanted to be in the office first thing.

In January 2011, Chase Bank took full possession of the house in Michigan. Our last ties were severed by an email my father received from the realtor, who had tried and failed to sell the property, telling him he could now cancel the utilities. In May, I got a freelance contract with a newspaper that within a year would hire me full-time – paying me, after taxes, roughly $900 every two weeks. In September 2011, my parents were approved for bankruptcy, and in October, due to a paperwork error, their car was repossessed in the middle of the night by creditors. Meanwhile, the payments for my debt – which had been borrowed from a variety of federal and private lenders, most prominently Citibank – totalled about $1,100 a month.

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Jun 262018
 
 June 26, 2018  Posted by at 8:01 pm Finance Tagged with: , , , , , , , , , ,  


Juan de la Corte (1597–1660) Lot And His Daughters Escaping From The Destruction Of Sodom And Gomorrah

 

There is no migration crisis, said an article in Toronto’s Globe and Mail a few days ago. French President Emmanuel Macron followed up over the weekend with “there is no migrant crisis”. Really? If this is not a crisis, what is? Yes, numbers of refugees landing in Europe are down from 2015. But it’s not a numbers game. It’s about people.

If Angela Merkel’s political career is forced to a close next week because the EU cannot agree on a unified refugee policy, will they call it a crisis then? Oh wait, both Macron and the G&M agree that there is a crisis, just not a migration one. No, “the crisis is political opportunism”.

But can the crisis be placed squarely on Trump and Italy’s Salvini, or is perhaps what led to their popularity partly to blame for that popularity? Salvini didn’t bomb Syria, Iraq, Afghanistan and Libya, nor did Trump cause the mayhem in Honduras, Guatemala and El Salvador, which is where most migrants come from. That was Bush, Obama, Billary, Blair, Cameron and their ilk. And before them Kissinger etc.

So who are the political opportunists exactly? “We” have exploited all of Africa, the Middle East and South and Central America for so long and so disgustingly thoroughly that it’s today the zenith of misleading arrogance to blame the consequences on Salvini, Trump and other right wingers.

You could see them coming from miles away. You created them. You literally built the space they occupy. What is happening is that the chaos we created in all these places is now boomeranging right back at us, on our own borders. And we’re not getting out of that chaos until we stop creating it in places where we don’t live. Until we allow people a future where they are born.

No, you’re right, Trump is not going to do that. His role is to disrupt the existing system that has relied on creating chaos for decades (or even longer, if you will). Salvini will play that part in Europe, by blowing up the EU. And after they’ve gone, we must find better people than them, but also better than all the rest that today fill our political classes, if we’re to turn chaos into order.

We have gathered our wealth through theft and murder. Untold millions have died and suffered for our riches. It’s time we acknowledge that. Just like it’s time that we acknowledge just how we choose our political “leaders”. Who all come from a tested model that relies on chaos and obfuscation. Because if we don’t, the chaos will continue and intensify.

Angela Merkel has created a problem for which she now has no possible solution anymore. She’s even allegedly trying to reach quid pro quo deals with Albania, Serbia and Skopje: take 100,000 or so refugees and you can become an EU member. The last gasps of Mutti. Merkel will leave behind a union about to implode. From a refugee crisis as well as a financial crisis. Thanks, Angela.

She should never have left Greece in its own double financial and refugee crisis; she should have helped to make it strong. That’s the de facto task of Europe’s leadership, even as it’s crazy that one country gets to call all the important shots for 27 others.

Too late now. Italy is very aware of how Greece has been treated, and very aware it could be next. What does Rome have to lose? They can afford to be fearless. Why not confront Brussels and Berlin? The union’s in tatters anyway.

As for Trump, he doesn’t have anyone to fear either. The Democrats, just like virtually all left wing parties in Europe, have lost their identity and therefore their voters because of Tony Blair, the Clintons stage act and Obama. The US media have become a lousy tired comedy routine, unable to see that a constant barrage of empty attacks on Trump could only ever make them irrelevant.

The New York Times, WaPo, CNN have created the space that Trump operates in. They might as well be working for him. And meanwhile the folks who actually constructed the multiple crises remain out of sight. And have their minions declare that there is no crisis. Or that it’s just a political one, brought on by opportunists.

Salvini and Trump are not the greatest specimens of the human race, but they are not to blame for what’s going on. Salvini will force Europe to either redo its Dublin accord or redo the EU altogether. Trump will water down his border policies. But the driving force behind all of it, hiding in the shadows, still remains.

And that force controls, as it has for many many years, your parliaments and governments. Want to be angry, want to be outraged? Yeah, right there. It’s not about how Trump treats the children, it’s about why they are there in the first place.

And yes, ICE and Homeland Security should be eliminated, they’re insults to America and to the Founding Fathers. But they’re not Trump’s creations. They were there for him to use. And so he did and does. But c’mon guys, take the blinders off. You can’t see a thing with them on. There is a bigger picture.

 

 

May 282018
 


Brassaï La Bande du Grand Albert 1931-32

 

President Mattarella Of Italy: From Moral Drift To Tactical Blunder (Varoufakis)
Italy President Vetoes Savona As Economy Minister, May Mean New Election (R.)
Italy’s President Calls In Former IMF Official Amid Political Turmoil (R.)
First Greece, Now Italy, Portugal Next? (ZH)
Corporate Debt Soars While Credit Ratings Fall (Harry Dent)
Fed Relies On Biased Data That Makes ‘B- Economy’ Look Like ‘A+’ – Bianco (CNBC)
Blowing Up the Iran Deal Brings Eurasia Closer to Integration (Pieraccini)
Sudden Chaos In Spanish Politics (Spain Report)
Spain Struggling To Deal With Escalating Migration Crisis (G.)
Google, Facebook Hit With $8.8 Billion In Lawsuits on New EU Privacy Rules (ZH)
US Congressman: F-35s Could Be ‘Used Against Greece’ If Sold To Turkey (K.)
Huge Rise In Food Redistribution To People In Need Across UK (G.)
In Britain, Austerity Is Changing Everything (NYT)
‘We’re Gonna Keep Riding Till We Get Everybody Back Home, From All Wars’ (AFP)

 

 

“The formation of another ‘technical’ government, under a former IMF apparatchik, is a fantastic gift to Mr Salvini.”

President Mattarella Of Italy: From Moral Drift To Tactical Blunder (Varoufakis)

I concede that there are issues over which I would welcome the Italian President’s use of constitutional powers that (in my humble opinion) he should not have. One such issue is the outrageous policy of the Lega and the promise of its leader, Mr Salvini, to expel five hundred thousand migrants from Italy. Had President Mattarella refused Mr Salvini the post of Interior Minister, on the basis that he rejects such a monstrous project, I would be compelled to support him. But, no, Mr Mattarella had no such qualms. Not even for a moment did he consider vetoing the formation of a 5S-Lega government on the basis that there is no place in a European country for scenes involving security forces rounding up hundreds of thousands of people, caging them, and forcing them into trains, buses and ferries before expelling them goodness knows where.

No, Mr Mattarella vetoed the formation of a government backed by an absolute majority of lawmakers for another reason: His disapproval of the Finance Minister designate. And what was this disapproval based on? The fact that the said gentleman, while fully qualified for the job, and despite his declaration that he would abide by the EU’s eurozone rules, has in the past expressed doubts about the eurozone’s architecture and has favoured a plan of euro exit just in case it is needed. It was as if President Mattarella were to declare that reasonableness in a prospective Finance Minister constitutes grounds for his or her exclusion from the post!

Let’s face it: There is no thinking economist anywhere in the world who does not share a concern about the eurozone’s faulty architecture. And there is no prudent finance minister who does not have a plan for euro exit; indeed, I have itr on good authority that the German finance ministry, the ECB, every major bank and corporation have plans in place for the possible exit from the eurozone of Italy, even of Germany. Is Mr Mattarella telling us that only the Italian Finance Minister is not allowed to imagine having such a plan? Beyond his moral drift (as he condones Mr Salvini’s industrial-scale misanthropy while vetoing a legitimate concern about the eurozone’s capacity to let Italy breathe in its midst), President Mattarella has made a major tactical blunder.

In short, he fell right into Mr Salvini’s trap. The formation of another ‘technical’ government, under a former IMF apparatchik, is a fantastic gift to Mr Salvini. Mr Salvini is secretly salivating at the thought of another election – one that he will fight not as the misanthropic, divisive populist that he is but as the defender of democracy against the Deep Establishment. Already last night hescaled the high moral with the stirring words: “Italy is not a colony, we are not slaves of the Germans, the French, the spread or finance.”

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More than half of Italy feel utterly betrayed by their own president.

Italy President Vetoes Savona As Economy Minister, May Mean New Election (R.)

Italy’s president rejected Prime Minister-designate Giuseppe Conte’s pick for the economy ministry, a political source said on Sunday, a veto that may lead to another election this year.Conte, a little-known law professor with no political experience, took his list of ministers to President Sergio Mattarella, but the president rejected Conte’s candidate to the Economy Ministry, the 81-year-old eurosceptic economist Paolo Savona. Before Conte or Mattarella had finished their meeting, far-right League leader Matteo Salvini said that the only option now was to hold another election, probably later this year, without directly confirming the president’s veto.

“In a democracy, if we are still in democracy, there’s only one thing to do, let the Italians have their say,” Salvini said in a fiery speech to supporters in central Italy. Salvini and 5-Star leader Luigi Di Maio had met Mattarella informally on Sunday to try to find a solution. “The problem is Savona,” the coalition source said, explaining that the economist had not sufficiently softened some of his more eurosceptic positions. On Sunday, Savona tried to allay concerns about his views in his first public statement on the matter. Savona has been a vocal critic of the euro and the EU, but he has distinguished credentials, including as industry minister in the early 1990s. “I want a different Europe, stronger, but more equal,” Savona said in a statement.

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Another technocrat. That won’t go well this time around.

Italy’s President Calls In Former IMF Official Amid Political Turmoil (R.)

Italy’s president is expected to ask a former IMF official on Monday to head a stopgap government amidst political and constitutional turmoil, with early elections looking inevitable. President Sergio Mattarella has called in Carlo Cottarelli after two anti-establishment parties angrily abandoned their plans to form a coalition in the face of a veto from the head of state over their choice of economy minister. In a televised address, Mattarella said he had rejected the candidate, 81-year-old eurosceptic economist Paolo Savona, because he had threatened to pull Italy from the single currency. “The uncertainty over our position has alarmed investors and savers both in Italy and abroad,” he said, adding: “Membership of the euro is a fundamental choice. If we want to discuss it, then we should do so in a serious fashion.”

Financial markets tumbled last week on fears the coalition being discussed would unleash a spending splurge and dangerously ramp up Italy’s already huge debt, which is equivalent to more than 1.3 times the nation’s domestic output. After Mattarella’s move, the euro gained ground, adding 0.6% against the Japanese yen and ticking up against other major trading partners as well. The far-right League and anti-establishment 5-Star Movement, which had spent days drawing up a coalition pact aimed at ending a stalemate following an inconclusive March vote, responded with fury to Mattarella, accusing him of abusing his office.

5-Star leader Luigi Di Maio called on parliament to impeach the mild-mannered Mattarella, while League chief Matteo Salvini threatened mass protests unless snap elections were called. “If there’s not the OK of Berlin, Paris or Brussels, a government cannot be formed in Italy. It’s madness, and I ask the Italian people to stay close to us because I want to bring democracy back to this country,” Salvini told reporters. [..] Cottarelli would be a calming choice for the financial markets, but any technocratic administration would likely only be a short-term solution because the majority of parliamentarians have said they would not support such a government.

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Portugal is supposed to be the Prince of the PIIGS.

First Greece, Now Italy, Portugal Next? (ZH)

While most investors are focused on Italian politics – the parallel currency ‘mini-BoT’ fears and potential for a constitutional crisis – Spain is now facing its own political crisis amid calls for a no-confidence vote against Rajoy. However, ‘Spaxit’ remains a distant concern for investors as another member of the PIIGS peripheral problems is starting to signal concerns about ‘Portugone’?

And the fundamental data confirms Portugal is next in line for a debt crisis… As Statista’s Brigitte van de Pas notes, on average, European Union countries had a gross government debt of roughly 81% of GDP in 2018. This average disguises real differences between EU countries. Whereas Greece had a government debt of 177.8% in 2018, Estonia had a debt of only 8.8% – the lowest in the entire EU zone.

While, the high Greek debt is well-known, a number of other countries however also have a debt that is higher than their own GDP. The Italian debt, for example, is lower than the Greek but still significant, at over 130% of GDP. Portugal, in third place, had a debt of 122.5%. One small positive note though: all three countries had even higher debts in 2017, and the European Commission forecasted a slow, but further decrease of their government debt in 2019. Whether this holds true for Italy, with their newly-elected government of Movimento 5 Stelle and Lega remains to be seen.

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“U.S. corporate debt has risen from $40 trillion to $70 trillion since the top of the last bubble in 2007. That’s 63% in 10 years. It’s risen 135% since 2000! [..] China is the worst by far, going from $6 to $36 trillion or a 500% increase!”

Corporate Debt Soars While Credit Ratings Fall (Harry Dent)

[First], Congress’s approving a bill to roll back the Dodd-Frank Act. If this passes, smaller financial institutions will find relief from the strict rules that have applied to Wall Street banks since after the 2008 crisis. This is sheer idiocy! It will not end well. The second is the U.S. corporate debt is suffering one of its worst sell-offs since 2000. This is another disaster in the making. U.S. corporate debt has risen from $40 trillion to $70 trillion since the top of the last bubble in 2007. That’s 63% in 10 years. It’s risen 135% since 2000! Only government debt has risen faster, from $35 to $64 trillion, or 83%. China is the worst by far, going from $6 to $36 trillion or a 500% increase! Of course, many of these bonds are simply financial engineering to buy back stock to increase earnings per share.

Uber-low long-term interest rates thanks to QE have allowed companies to do this cheaply. The problem is these long-term rates have been rising since just July 2016. They’ve gone from 1.38% to 3.10%. That’s an increase of 172 basis points in the risk-free 10-year Treasury bond. That naturally reverberates up through the risk spectrum from investment grade corporate bonds to junk bonds. You see, here’s the thing…Governments have artificially pushed down bond yields for so long that companies have embraced speculation rather than productive investment (i.e. they’re not spending money on productive assets that will serve them and the economy well in the long-term). This mentality only creates financial asset bubbles that burst.

When companies buy back their own shares at historically high valuations, they’re speculating, just like an investor or hedge fund. When stocks crash ahead, shareholders will demand to know why these corporations used the money they will need to survive the crisis to speculate in their own stock… at the highest prices in history! Well, as the numbers are now showing, this corporate bond bubble is starting to burst, and of course that will ultimately hit junk bonds the worst… then stocks and real estate. But the real story here is that we’ve been in this bond bubble since 1981. And the quality of this corporate debt has been falling for nearly 40 years now. QE has only accelerated the decline. We’re now at the point where the median corporate bond rating is borderline junk…

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You don’t say…

Fed Relies On Biased Data That Makes ‘B- Economy’ Look Like ‘A+’ – Bianco (CNBC)

A veteran market researcher is out with a warning — saying the Federal Reserve is relying too heavily on economic surveys skewed by social media to mold their policies. According to Bianco Research President James Bianco, most economists mistakenly believe that leading indicators are signaling an “A+” economy that can withstand rising interest rates. “It’s more like a B- economy,” he told CNBC’s “Trading Nation” on Friday. “It’s not this screaming home run that everybody thinks it is based on the survey data.” Bianco said social media is creating the bandwagon effect among survey respondents, a psychological phenomenon characterized by people following the herd.

“The advent of social media is allowing us basically to be inundated with financial news or economic news,” he said, adding the bulk of the news about the world’s largest economy has been largely favorable. “When somebody is asked ‘what do you think about the economy,” they are not answering ‘what do you think about the economy,’ Bianco said. “They are answering ‘What have you read about the economy?'” Bianco fears the Fed will make a policy error based on respondents’ answers. “Economists like at the Fed say ‘Wow, look at that data. It’s even better than we thought. We have to raise rates even faster,'” he said, adding that the tightening could derail the bull market. “The 10-Year [yield] could very well be at 3% by the end of next year with a 3% funds rate,” Bianco said. “[That’s when] you get an inverted yield curve.”

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Nobo’s popular at home anymore. Except for Putin.

Blowing Up the Iran Deal Brings Eurasia Closer to Integration (Pieraccini)

Washington finds itself increasingly isolated in its economic and military policies. Merkel’s visit to Russia reaffirms the desire to create an alternative axis to the one between Brussels and Washington. The victory in Italy of two parties strongly opposed to new wars and the annulment of the JCPOA, and especially the sanctions against Russia, serves to form a new alliance, accentuating internal divisions within Europe. Macron, Merkel and May are all grappling with a strong crisis of popularity at home, which does not aid them in their decision-making. Exactly the same problems affect MbS, Trump, and Netanyahu in their respective countries. These leaders find themselves adopting aggressive policies in order to alleviate internal problems.

They also struggle to find a common strategy, often displaying schizophrenic behavior that belies the fact that they are meant to be on the same side of the barricades in terms of the desired world order. In direct contrast, China, Russia, Iran, and now India, are trying to respond to Western madness in a rational, moderate, and mutually beneficial way. And as a result, Europeans may perhaps begin to understand that the future lies not in piggybacking on Israel, Saudi Arabia and the United States. Trump seems to have offered the perfect occasion for European leaders to assert their sovereignty and start to move away from their traditional servility shown towards Washington.

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“This, as the saying goes, could be it.”

Sudden Chaos In Spanish Politics (Spain Report)

PSOE leader Pedro Sánchez really wants to be Prime Minister. The Socialist Party has been mostly flat in the polls for months, slowly trending down from 23% at the beginning of the year to 19% in the Metroscopia poll in El País on May 13. Articles had recently appeared wondering if Mr. Sánchez had anything relevant to say at all. His only notable intervention of late had been a meeting with Mariano Rajoy at Moncloa, the Prime Minister’s office, to agree on a joint response to the challenge posed by Quim Torra, the new separatist First Minister of Catalonia, whom Mr. Sánchez then decided to frame as “Spain’s Le Pen”, “a racist and a supremacist”.

With the publication of the Gürtel fraud case judgement on Thursday, the Socialist Party, which holds 84 out of 350 seats in Congress, has seized on an opportunity to move back into the political spotlight and oust the Popular Party from power with a motion of no confidence. Mariano Rajoy, famously unresponsive as political scandals erupt and opponents die off, wants to stay on as Prime Minister, of course, but this is a serious crisis: El País has characterised it as a “national emergency”. It is such a big mess that the PM felt he had to cancel his trip to Kiev to watch Real Madrid in the Champions League final.

He gave an unscheduled press conference on Friday afternoon, accompanied by his ministers, and accused Mr. Sánchez of wanting to destabilise Spain and wreck the country’s economic recovery. Moncloa sent out an unsigned, unofficial, unstamped “economic report” on Saturday, warning that the socialist motion of no confidence would cost €5 billion and 6,500 jobs. PP spokesman Fernando Martínez Maíllo said Mr. Sánchez would become the “Judas of Spanish politics” if he did a deal with Catalan separatists to take power. The Popular Party and Mr. Rajoy himself—also sliding inexorably downwards in the polls—sense real danger in the PSOE’s move. This, as the saying goes, could be it.

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“By early May this year, 4,409 people had reached Spain and 217 people had died in the attempt.”

Spain Struggling To Deal With Escalating Migration Crisis (G.)

Spain’s maritime rescue service has rescued hundreds of people trying to cross the Mediterranean into Europe this weekend amid growing concerns that the country is struggling to cope with the migration crisis. The service said its crews had rescued 293 people from nine boats on Saturday. On Sunday, a further 250 migrants were rescued from eight boats, three of which were in poor condition and later sank, they added. The migrants were from various countries in North and sub-Saharan Africa. On a single day in August last year, Spanish rescuers saved 593 people from 15 small paddle boats – including 35 children and a baby – after they attempted to cross the seven-mile Strait of Gibraltar.

According to statistics from the International Organisation for Migration (IOM) 21,468 migrants and refugees arrived in Spain by sea in 2017, with 224 people dying on the journey. The arrival figures showed a threefold increase on 2016, when 6,046 people reached Spain and 128 people died en route. By early May this year, 4,409 people had reached Spain and 217 people had died in the attempt. The UN refugee agency, UNHCR, has already warned that Spain is facing “another very challenging year” when it comes to helping and protecting those arriving on its shores.

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His case looks solid. But we’re talking the heart of these companies’ business models.

Google, Facebook Hit With $8.8 Billion In Lawsuits on New EU Privacy Rules (ZH)

Accusing Facebook, Google, WhatsApp, and Instagram of “intentionally” violating Europe’s strict new privacy rules that officially went into effect on Friday, Austrian lawyer and privacy activist Max Schrems filed four lawsuits against the tech companies arguing they are still “coercing users into sharing personal data” despite rolling out new policies ostensibly aimed at complying with the new regulations.

Titled the General Data Protection Regulation (GDPR), the new rules require companies to explicitly and clearly request consent from users before mining their data, and Schrems argues in his complaints – which seek fines totaling $8.8 billion – that Google, Facebook, and the Facebook-owned Instagram and WhatsApp are still utilizing “forced consent” strategies to extract users’ data when “the law requires that users be given a free choice unless a consent is strictly necessary for provision of the service,” TechCrunch explains. “It’s simple: Anything strictly necessary for a service does not need consent boxes anymore. For everything else users must have a real choice to say ‘yes’ or ‘no,'” Schrems wrote in a statement.

“Facebook has even blocked accounts of users who have not given consent. In the end users only had the choice to delete the account or hit the ‘agree’-button—that’s not a free choice.” While Facebook—which is currently embroiled in international controversy following the Cambridge Analytica scandal—insists that its new policies are in compliance with Europe’s new regulatory framework, Schrems argues that Facebook and Google aren’t even attempting to follow the new law. “They totally know that it’s going to be a violation, they don’t even try to hide it,” Schrems told the Financial Times. Schrems believes that courts can curtail companies’ ability to poke around in our private lives and wean them off their idea that, “ ‘We’re Silicon Valley, we know what’s right for everybody else.’ ”

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Strong lobby for this in Washington.

US Congressman: F-35s Could Be ‘Used Against Greece’ If Sold To Turkey (K.)

The United States should freeze the sale of the Lockheed Martin F-35 fighter jets to Turkey because they are more likely to used against Greece than against terrorists, Democratic US Congressman Brad Sherman told US Secretary of State Mike Pompeo, during a Foreign Affairs Hearing on May 23. “I hope that the administration will oppose and prevent the sale of F-35s [to Turkey]. They are not a weapon to be used against terrorists. They are a weapon to be used against Greece,” he said.

A US Senate committee passed earlier this week a defense policy bill that includes a measure to prevent Turkey from purchasing the F-35s, citing the country’s detention of US citizen Andrew Brunson and its agreement with Russia to buy its weapons systems in December. Sherman also called on the State Department not to block a House resolution on genocidal campaigns committed by the Ottoman Empire. “I hope the State Department will at least be neutral should Congress consider, as we are considering, the remembrance of the millions of Armenian, Greek, Assyrian, Chaldean and Syriac victims of the Ottoman Empire at the beginning of the last century,” he added.

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Fastest growing industry.

Huge Rise In Food Redistribution To People In Need Across UK (G.)

The UK’s largest food redistribution charity is helping to feed a record 772,000 people a week – 60% more than the previous year – with food that would otherwise be , new figures reveal. One in eight people in the UK go hungry every day – with the most needy increasingly dependent on – yet perfectly good food is wasted every day through the food production supply chain. FareShare said it was now redistributing food that otherwise would have been wasted with an annual value of £28.7m, up from £22.4m last year. “Three years ago we were helping to feed 211,000 people a week – today it’s three-quarters of a million,” said FareShare’s chief executive, Lindsay Boswell. “We reported in 2015 that we provided food across 320 towns and cities – now it’s 15,000. It’s not rocket science to see there has been a massive hike in demand for food from frontline charities.”

FareShare currently redistributes about 13,500 tonnes of surplus food every year donated by supermarkets, wholesalers and suppliers to 9,653 charities including hospices, homeless shelters, care homes and women’s refuges, but its annual target is 100,000 tonnes. Demand for surplus food has soared against a background of growing dependence on food banks and rising in the UK. FareShare says it has the capacity – and a waiting list of charities wanting help – but needs access to more food. Its solution is a government fund that would cover the costs of storage and transport. Available to any charity or producer that incurs the costs of redistributing food, it would also save charities and other beneficiaries £150m by making free food available to them. A public petition supporting this move attracted more than 16,000 signatures, which guarantees a government response.

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People will start leaving in droves sson.

In Britain, Austerity Is Changing Everything (NYT)

For a nation with a storied history of public largess, the protracted campaign of budget cutting, started in 2010 by a government led by the Conservative Party, has delivered a monumental shift in British life. A wave of austerity has yielded a country that has grown accustomed to living with less, even as many measures of social well-being — crime rates, opioid addiction, infant mortality, childhood poverty and homelessness — point to a deteriorating quality of life. When Ms. Lewis and her husband bought their home a quarter-century ago, Prescot had a comforting village feel. Now, core government relief programs are being cut and public facilities eliminated, adding pressure to public services like police and fire departments, just as they, too, grapple with diminished funding.

By 2020, reductions already set in motion will produce cuts to British social welfare programs exceeding $36 billion a year compared with a decade earlier, or more than $900 annually for every working-age person in the country, according to a report from the Center for Regional Economic and Social Research at Sheffield Hallam University. In Liverpool, the losses will reach $1,200 a year per working-age person, the study says. “The government has created destitution,” says Barry Kushner, a Labour Party councilman in Liverpool and the cabinet member for children’s services. “Austerity has had nothing to do with economics. It was about getting out from under welfare. It’s about politics abandoning vulnerable people.”

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They should do that for all Americans stationed abroad today. Bring the living ones home while they’re still alive.

‘We’re Gonna Keep Riding Till We Get Everybody Back Home, From All Wars’ (AFP)

Wearing bandanas, cowboy hats or gleaming helmets, tens of thousands of bikers descended on Washington Sunday to parade in honor of US soldiers missing in action in foreign wars, a now 30-year-old tradition known as “Rolling Thunder.” “We’re gonna keep riding until we get everybody back home, from all wars,” said Jack Richardson, who at 73 crossed the country from California for the 13th time to participate in the annual Memorial Day weekend spectacular. Dressed in a leather jacket emblazoned with patches, this Vietnam War veteran had assembled with thousands of other bikers in a parking lot near the Pentagon, awaiting the start of the parade.

The route will take them into the center of official Washington, past the monuments on the National Mall and the austere black marble memorial engraved with the names of the nearly 60,000 US soldiers killed during the Vietnam War. “Still there are families waiting back home here in the United States that have not found out where their dads, their fathers, their brothers – they don’t know where they are,” said Richardson, a retired Los Angeles police officer who served two tours in Vietnam in the 1960s. “They don’t know if they’re still in Vietnam, they don’t know if they’re still alive, they don’t know if they’re dead, they don’t know if they’re captured,” he said.

According to organizers, more than 85,000 US soldiers remain unaccounted for in conflicts as far back as World War I. Most are from World War II, but 1,598 of the missing are from the war in Vietnam, a conflict still fresh in the memories of older veterans. The parade was begun in 1988 with some 2,500 motorcycles under the motto “We will never forget” to press for an accounting of the Vietnam missing. It has grown every year since into a rumbling, roaring extravaganza that organizers say attracts over a million people, including spectators. Besides the missing, the bikers also come to remember their fallen comrades.

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