Oct 062017
 
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Jean Renoir Les Grands Boulevards 1875

 

China’s Economic Boom Is About To Be Cut Short By Peak Oil (Ahmed)
A Volatility Trap Is Inflating Market Bubbles (BBG)
China Is In ‘Lock-down’ Ahead Of Its Most Important Meeting In Years (CNBC)
Bitcoin’s Rise Happened in Shadows of Finance. Now Banks Want In (BBG)
HSBC Traders Used Code Words to Trigger Front-Running (BBG)
US Rounds On Britain Over Food Quotas As Post-Brexit Trade Woes Deepen (Pol.)
Few Tears Are Being Shed In Quebec Over The Energy East Pipeline’s Demise (BBG)
Onshore Fracking To Begin In UK ‘Within Weeks’ (Ind.)
Catalan Separatists Squeezed Further as Spain Tightens Its Grip (BBG)
Apple Gave Uber ‘Unprecedented’ Access To Secret iPhone Backdoor (BI)
Tropical Storm Nate Kills 22 In Central America, Heads For US (R.)
Pesticides That Pose Threat To Humans And Bees Found In Honey (Ind.)
Tiny Pacific Island Nation Of Niue Creates Huge Marine Sanctuary (AFP)

 

 

From China’s government.

China’s Economic Boom Is About To Be Cut Short By Peak Oil (Ahmed)

A new scientific study led by the China University of Petroleum in Beijing, funded by the Chinese government, concludes that China is about to experience a peak in its total oil production as early as next year. Without finding an alternative source of ‘new abundant energy resources’ , the study warns, the 2018 peak in China’s combined conventional and unconventional oil will undermine continuing economic growth and ‘challenge the sustainable development of Chinese society’. This also has major implications for the prospect of a 2018 oil squeeze – as China scales its domestic oil peak, rising demand will impact world oil markets in a way most forecasters aren’t anticipating, contributing to a potential supply squeeze. That could happen in 2018 proper, or in the early years that follow.

There are various scenarios that follow from here – China could: shift to reducing its massive demand for energy, a tall order in itself given population growth projections and rising consumption; accelerate a renewable energy transition; or militarise the South China Sea for more deepwater oil and gas. Right now, China appears to be incoherently pursuing all three strategies, with varying rates of success. But one thing is clear – China’s decisions on how it addresses its coming post-peak future will impact regional and global political and energy security for the foreseeable future. The study was published on 19 September by Springer’s peer-reviewed Petroleum Science journal, which is supported by China’s three major oil corporations, the China National Petroleum Corporation (CNPC), China Petroleum Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC).

Since 1978, China has experienced an average annual economic growth rate of 9.8%, and is now the world’s second largest economy after the United States. The new study points out, however, that this economic growth has been enabled by “high energy consumption.” In the same period of meteoric economic growth, China’s total energy consumption has grown on average by 5.8% annually, mostly from fossil fuels. In 2014, oil, gas and coal accounted for fully 90% of China’s total energy consumption, with the remainder supplied from renewable energy sources. After 2018, however, China’s oil production is predicted to begin declining, and the widening supply-demand gap could endanger both China’s energy security and continued economic growth.

Read more …

“Zombie companies that would otherwise fail continue to be in business, refinancing at near-zero interest rates in bond markets.”

A Volatility Trap Is Inflating Market Bubbles (BBG)

A number of markets show not only elevated valuations, but also irrational behavior on the part of investors, including a suspension of traditional valuation models, an increase in trading volumes or “flipping” in the hopes of quick gains, and financial engineering. Potential bubbles can be found in emerging-market debt, technology stocks, U.S. high yield bonds, some sovereign debt, cryptocurrencies, properties — even art and collectibles. It is becoming clearer to economists and central bankers that even though we may be experiencing a long phase of growth, stretching the cycle with monetary stimulus inspired by crisis-era toolkits may be bringing several collateral effects. These include not only asset bubbles, but also a worsening of wealth inequality and a misallocation of resources.

Persistent low interest rates in the past have helped to roll forward an increasing amount of private and public debt to future generations, but this is no longer working. Economic fundamentals are different from the post-war period. Technology is deflationary. Demographics are no longer a tailwind, as there are fewer young people able to carry a higher debt burden in the future. The generation of so-called millennials is the first that will likely be poorer than their parents in the post-war period. Productivity is low as the economy suffers from hysteresis: a financial boom-bust cycle that can leave large swathes of the workforce out of the job market. The longer the debt cycle, the longer companies and workers develop business and skills in leverage-heavy sectors (e.g. finance, real estate, energy), the deeper the scars when the bust comes.

Often the misallocation is so large that low rates are necessary to keep people in their jobs: Zombie companies that would otherwise fail continue to be in business, refinancing at near-zero interest rates in bond markets.

Read more …

Xi will need drastic measures to tackle the debt disaster. But it may well be too late already.

China Is In ‘Lock-down’ Ahead Of Its Most Important Meeting In Years (CNBC)

Although the Chinese will head back to work and school on Monday, their country is expected to remain in a holding pattern ahead of a pivotal Communist Party Congress set to start later this month. “Commentators and markets rightly assume that the authorities are consumed by this transition and that all other policy matters are on the back-burner or in lock-down until after the Congress,” Freya Beamish, Pantheon Macroeconomics’ chief Asia economist, wrote in a recent note. The once-in-five-years meeting will usher in leadership changes that are likely to see incumbent President Xi Jinping extend his term and consolidate power. The coming years of Xi rule will be critical for the world’s second-largest economy as it grapples with the fallout from three decades of unbridled growth.

As Xi — the most powerful Chinese leader in decades — embarks on a new era, the meeting will review “faulty” outcomes from the economic reforms and review if China needs a new direction, said independent economist, Andy Xie. China undertook a series of market reforms in the last three decades that propelled the Communist country to the spot of the world’s second largest economy. Market watchers, however, are concerned about the nation’s debt-fueled growth, industrial overcapacity and capital outflows that may potentially spur a global economic crisis. The Communist Party has been working to steer outbound merger and acquisition activities over the last year, but major initiatives have slowed ahead of the Congress. That push is likely to pick up again in the fourth quarter, said Chunshek Chan, Dealogic’s global M&A research head.

No matter the macroeconomic concerns, the only thing on Beijing’s mind at this time is consolidating power in the country, Xie said: “It’s much more important now to strengthen the control of the Communist Party than anything else.” “The key is to have the Communist Party as a coherent organization to control everything in the society — that seems to be the case. The people at the top worry about the stability. Stability is always number one in China,” added Xie.

Read more …

“What are they going to do if bitcoin drops for a given client and they’ve given that client a ton of leverage on margin, and that client only has assets in bitcoin?”

Bitcoin’s Rise Happened in Shadows of Finance. Now Banks Want In (BBG)

At first, bitcoin was a way to make payments without banks. Now, with more than $100 billion stashed in digital currencies, banks are debating whether and how to get in on the action. Goldman Sachs CEO Lloyd Blankfein tweeted Tuesday that his firm is examining the cryptocurrency. Other global investment banks are looking into facilitating trades of bitcoin and other cryptocurrencies, according to industry consultants. Bitcoin has surged more than 300 percent this year, drawing the attention of hedge funds and wealthy individuals. “They’re clearly receiving interest from their clients, both from retail investors and on the institutional side,” said Axel Pierron, managing director of bank consultant Opimas. “It’s highly volatile, it’s highly illiquid when you need to trade large volumes, so they see the opportunity for a new asset class which would require the capability of a broker-dealer.”

But bitcoin presents Wall Street with a conundrum: How do banks that are required by law to prevent money-laundering handle a currency that’s not issued by a government and that keeps its users anonymous? The debate has played out in the open recently, with JPMorgan CEO Jamie Dimon and BlackRock CEO Larry Fink saying that bitcoin was mostly used by criminals, while Morgan Stanley chief James Gorman took a more measured stance, saying it was “more than just a fad.” On Wednesday, UBS Chairman Axel Weber, a former president of Germany’s central bank, said he was skeptical about bitcoin’s future because “it’s not secured by underlying assets.” There’s even tension within some banks. On the same day Dimon trashed bitcoin, calling it a “fraud,” his firm’s private bank hosted a panel stocked with cryptocurrency investors.

Handling bitcoin would invite scrutiny from every major U.S. regulator, according to Joshua Satten, director of emerging technologies at Sapient Consulting. “From the perspective of the U.S. Treasury, do you classify it as an asset class or a currency?” Satten said. “If banks are starting to manage and hold bitcoin for their clients, you would have the OCC and the FDIC looking at how they classify the assets on their balance sheet and how they state the assets for the portfolio of a client.” And banks need to avoid antagonizing governments that are increasingly concerned about this area. For instance, China is cracking down by shutting cryptocurrency exchanges. Then there’s the risk that stems from its high volatility and lack of correlation to other major assets. “What are they going to do if bitcoin drops for a given client and they’ve given that client a ton of leverage on margin, and that client only has assets in bitcoin?” Satten said.

Read more …

Greed.

HSBC Traders Used Code Words to Trigger Front-Running (BBG)

A group of HSBC currency traders in London and New York feverishly jumped ahead of a $3.5 billion client order after they were tipped off using the code words “my watch is off,” a U.S. prosecutor told a federal judge. The buying frenzy was launched after Mark Johnson, HSBC’s former global head of foreign exchange who the bank chose to lead the transaction, alerted the traders via phone call that was recorded, the prosecutor said Thursday in Brooklyn, New York. Johnson is on trial for fraud. After the trial recessed for the day, prosecutor Carol Sipperly told U.S. District Judge Nicholas Garaufis that the government wants the jury to hear the recordings on Friday, in which Johnson can be heard tipping off a trader in Hong Kong, a signal that she said eventually reached others on both sides of the Atlantic.

Prosecutors say Johnson and Stuart Scott, the bank’s former head of currency trading in Europe, along with these other traders, bought pounds before the transaction, collectively making the bank $8 million in illicit profit. Sipperly said the call involved Johnson, who was in New York that day, speaking to Scott who was in London, just before the Dec. 7, 2011, transaction for its client, Cairn Energy. “We actually have Mark Johnson telling Stuart Scott ‘Tell Ed my watch will be off,’” she said. “We have communications where the word ‘watch’ is used, and then within seconds, 20 seconds of ‘my watch is off,’ we have all that trading that’s been described. The word is instrumental in getting the information to the traders when it comes to their early front-running trades.”

Read more …

Things are getting messy.

US Rounds On Britain Over Food Quotas As Post-Brexit Trade Woes Deepen (Pol.)

The U.S. and other international trade heavyweights have dashed Prime Minister Theresa May’s hopes of a smooth Brexit by rejecting one of her core plans for reintegrating into global trade networks. Washington’s slap-down of Britain is the second big trade reality check for May in less than a fortnight. Only last week, the U.K.’s increasingly fragile position in trade disputes was exposed by the country’s inability to prevent new, ultra-high tariffs from the U.S. that could hit thousands of jobs in a plane factory in Northern Ireland. In a fast-developing second trade spat, Washington has teamed up with Brazil, Argentina, Canada, New Zealand, Uruguay and Thailand to reject Britain’s proposed import arrangements for crucial agricultural goods such as meat, sugar and grains after Brexit.

The fact that the U.K.’s opponents include the U.S., Canada and New Zealand is a significant setback because Britain is trying to style its former colonies as natural strategic and commercial allies after it has quit the EU. Since August, Britain and the EU have repeatedly insisted that they had reached an agreement on the terms under which Britain would buy in food from around the world after Brexit. Brussels currently negotiates all these quotas and tariffs on behalf of Britain and the 27 other EU countries jointly, but London will need to take independent control of these policies from March 2019. That creates a dilemma over how to divide up the EU’s current quota arrangements with other countries — agreed at the World Trade Organization — between the U.K. and the remaining 27. These tariff-rate quotas allow countries outside the EU to export certain goods into the bloc with reduced duties, but only up to a maximum limit.

The argument from Britain and the EU is that the rest of the world will be “no worse off” after Brexit — a key legal defense in trade disputes — if the EU’s quotas are simply reduced, and Britain takes a share of them. British Trade Minister Liam Fox told POLITICO in an interview that Britain had agreed to take a portion of the EU’s quotas based on the U.K.’s average consumption over the last three years. America and the six other big food exporters, however, wrote an unusually sharply worded letter of complaint dated September 26 to the U.K. and EU representatives at the World Trade Organization over the terms of such an arrangement. “We cannot accept such an agreement,” reads the letter, seen by POLITICO. The seven countries dispute the legal defense that the proposed post-Brexit arrangement would leave them “no worse off.”

Read more …

Transporting oil across thousands of miles just so you can sell it to Europe. Insane.

Few Tears Are Being Shed In Quebec Over The Energy East Pipeline’s Demise (BBG)

TransCanada had applied to build Energy East three years ago, seeking to open access for Western Canadian oil producers to the Atlantic Ocean for exports to Europe. It faced intense opposition in Quebec, where Premier Philippe Couillard said the C$15.7 billion ($12.5 billion) line posed a significant risk to its freshwater resources. Quebec has long required that TransCanada meet seven conditions before allowing construction of the pipeline. Among other demands, Quebec insisted that the project be subject to an environmental assessment and that TransCanada must guarantee an emergency plan in case of a spill, consult with communities including aboriginal groups along the route and ensure the project doesn’t reduce the province’s gas supply. Last month, TransCanada asked Canadian regulators for a 30-day suspension on its applications for the Energy East and Eastern Mainline projects, adding to doubt about the future of two major pipelines that the nation’s energy producers had hoped for.

The latest delay meant the writing was on the wall, Quebec Energy and Natural Resources Minister Pierre Arcand said Thursday. “We’re not the promoters of the project. The promoter made a commercial decision,” Arcand told reporters at the provincial legislature. “When they decided to suspend the project about one month ago, I thought we were inevitably going to go toward this decision.” Energy East “was supposed to cross more than 700 bodies of water,” Quebec Environment Minister David Heurtel said separately in Quebec City. “This is a project that raised a lot of questions. We were still in the process of getting answers to our questions” from the company, he said. TransCanada’s decision “is great news,” Jean-Francois Lisée, head of the separatist Parti Quebecois, the official opposition in the provincial legislature, said in Quebec City. “Quebec’s territorial integrity is no longer threatened.”

Read more …

Feels like the Middle Ages.

Onshore Fracking To Begin In UK ‘Within Weeks’ (Ind.)

Fracking for shale gas will begin in the UK within weeks, the company undertaking it for the first time has announced. Third Energy said it plans to complete five fracks in North Yorkshire before the end of 2017. The controversial technique involves injecting liquid into underground rock at high pressures in order to create cracks that release trapped gas. This is then collected and used to generate electricity. Fracking has been vocally opposed by environmental campaigners but permits to use the technique have been approved by government ministers. Alan Linn, Third Energy’s technical director, said the final sign-off needed for fracking to begin was ‘imminent’.

Read more …

Vote count to be published today?!

Catalan Separatists Squeezed Further as Spain Tightens Its Grip (BBG)

Spanish Prime Minister Mariano Rajoy convenes his cabinet on Friday as the financial and political squeeze on the separatist government in Catalonia tightens. After a week of political drama that rocked financial markets, Rajoy will meet with his ministers in Madrid as events 600 kilometers (370 miles) to the northeast in the Catalan capital Barcelona threaten to spiral still further out of control. The region’s president, Carles Puigdemont, risks economic damage and European isolation if he pushes ahead with plans to declare Catalan independence based on a referendum that breached Spain’s constitution. CaixaBank, the symbol of the region’s financial strength, may follow Banc Sabadell in abandoning Catalonia when its board meets Friday.

For his part, Rajoy and his minority government will be loathe to risk a repeat of Sunday’s scenes of police beating peaceful voters that drew international condemnation and inflamed the separatist cause. With options to quell an increasingly bitter constitutional dispute fast running out, events may come to a head on Monday. That’s when Puigdemont had sought to evaluate the result of the independence vote at a session of the regional parliament – until it was suspended by the Spanish Constitutional Court. That means Rajoy may again have to send in the police to enforce a court ruling, and Puigdemont must decide if he’s ready to again defy the law. “There will be some formula for the Catalan Parliament to convene and hold its meeting as planned,” Jordi Sanchez, who heads the most powerful group among the separatists, known as the Catalan National Assembly, said in an interview in Barcelona. “There will be a plenary session.”

As anti-independence organizers plan rallies for this weekend in Madrid and in Barcelona, Catalan separatist are seeking to avoid an immediate declaration of independence. There’s a divide in the movement’s leadership, with most leaders keen to delay that leap into the unknown to create more time for a negotiated settlement, according to two people familiar with their plans. Puigdemont’s mainstream separatist group is concerned that a move toward independence would send the economy into a tailspin, the people said. But following Sunday’s illegal referendum on secession – which the regional government said won the support of 90%t of 2.3 million voters – hardliners from the anarchist party CUP are demanding a quick break with Spain.

Read more …

What a surprise. Apple is an Uber investor.

Apple Gave Uber ‘Unprecedented’ Access To Secret iPhone Backdoor (BI)

Uber’s iPhone app has a secret backdoor to powerful Apple features, allowing the ride-hailing service to potentially record a user’s screen and access other personal information without their knowledge. The existence of Uber’s access to special iPhone functions is not disclosed in any consumer-facing information included with Uber’s app, despite giving the company direct access to features so powerful that Apple almost always keeps them off limits to outside companies. Although there is no evidence that Uber used this access to take advantage of the iPhone features, the revelation of the app’s access to privileged Apple code raises important questions for a company already under investigation for a variety of controversial business practices.

Uber told Business Insider the code was not currently being used and was essentially a vestige from an earlier version of its Apple Watch app, but it set off alarm bells among experts. “Granting such a sensitive entitlement to a third-party is unprecedented as far as I can tell, no other app developers have been able to convince Apple to grant them entitlements they’ve needed to let their apps utilize certain privileged system functionality,” Will Strafach, a security researcher who discovered the situation, told Business Insider. [..] Apple became an Uber investor through its investment in Chinese ride-hailing company Didi Chuxing. In 2016, Didi merged with Uber’s Chinese subsidiary.

Read more …

It ain’t over.

Tropical Storm Nate Kills 22 In Central America, Heads For US (R.)

Tropical Storm Nate has killed at least 22 people in Central America as it battered the region with heavy rain while heading toward Mexico’s Caribbean resorts and the US Gulf Coast where it could strike as a hurricane this weekend. Several offshore oil rigs in the Gulf of Mexico were evacuated and others had shut production ahead of the storm. In Nicaragua, at least 11 people died, seven others were reported missing and thousands had to evacuate homes because of flooding, according to the country’s vice president, Rosario Murillo. Emergency officials in Costa Rica reported that at least eight people were had been killed, including two children. Another 17 people were missing, while more than 7,000 had to take refuge from Nate in shelters.

Two youths also drowned in Honduras due to the sudden swell in a river, while a man was killed in a mud slide in El Salvador and another person was missing, emergency services said. “Sometimes we think we think we can cross a river and the hardest thing to understand is that we must wait,” Nicaragua’s Murillo told state radio, warning people to avoid dangerous waters. “It’s better to be late than not to get there at all.“ Costa Rica’s government declared a state of emergency, closing schools and all other non-essential services. Highways in the country were closed due to mud slides and power outages were also reported in parts of country, where more than 3,500 police were deployed. The National Hurricane Centre said Nate could produce as much as 51 cm (20 inches) in some areas of Nicaragua, where schools were also closed. Nate is predicted to strengthen into a Category 1 hurricane by the time it hits the US Gulf Coast on Sunday, NHC spokesman Dennis Feltgen said.

Read more …

Slow motion mass suicide.

Pesticides That Pose Threat To Humans And Bees Found In Honey (Ind.)

Three-quarters of the honey produced around the world contains nerve agent pesticides that can harm bees and pose a potential health hazard to humans, a study has shown. Scientists who tested 198 honey samples from every continent except Antarctica discovered that 75% were laced with at least one of the neonicotinoid chemicals. More than two-fifths contained two or more varieties of the pesticides and 10% held residues from four or five. Environmental campaigners responded by demanding a “complete and permanent” ban preventing any further use of neonicotinoids on farm crops in Europe. Experts called the findings “alarming”, “sobering” and a “serious environmental concern” while stressing that the pesticide residue levels found in honey generally fell well below the safe limits for human consumption.

However, one leading British scientist warned that it was impossible to predict what the long term effects of consuming honey containing tiny amounts of the chemicals might be. Dave Goulson, Professor of Biology at the University of Sussex, said: “Beyond doubt … anyone regularly eating honey is likely to be getting a small dose of mixed neurotoxins. “In terms of acute toxicity, this certainly won’t kill them and is unlikely to do measurable harm. What we don’t know is whether there are long-term, chronic effects from life-time exposure to a cocktail of these and other pesticides in our honey and most other foods.”

[..] The new research published in the journal Science could not have come at a more sensitive time in Europe. EC policymakers are right now discussing whether to make the ban permanent and more wide ranging. A total ban would have a huge impact on cereal growers in the UK. For the study, an international team of European researchers tested almost 200 honey samples from around the world for residues left by five different neonicotinoids. [..] While in most cases the levels were well below the EU safety limits for human consumption, there were exceptions. Honey from both Germany and Poland exceeded maximum residue levels (MRLs) for combined neonicotinoids while samples from Japan reached 45% of the limits.

Read more …

“This commitment is not a sacrifice, it is an investment in the certainty and stability of our children’s future..”

“..the palm-dotted island’s name in the local language means “Behold, the Coconut”..

Tiny Pacific Island Nation Of Niue Creates Huge Marine Sanctuary (AFP)

The tiny Pacific island nation of Niue on Friday announced the creation of a huge marine sanctuary, saying it wanted to stop overfishing and preserve the environment for future generations. While Niue’s landmass is only 260 square kilometres (100 square miles), its remote location about 2,400 kilometres northeast of New Zealand means it lays claim to vast tracts of ocean. The government said that 40% of its exclusive economic zone, about 127,000 square kilometres representing an area roughly the size of Greece, would be set aside for the marine sanctuary. Premier Toke Talagi said his government wanted to stop the depletion of fish stocks and give the ocean space to heal to protect the environment for the next generation.

“This commitment is not a sacrifice, it is an investment in the certainty and stability of our children’s future,” he said. “We simply cannot be the generation of leaders who have taken more than they have given to this planet and left behind a debt that our children cannot pay.” Known locally as “The Rock”, Niue was settled by Polynesian seafarers more than 1,000 years ago and the palm-dotted island’s name in the local language means “behold, the coconut”. The British explorer captain James Cook tried to land there three times in 1774 but was deterred by fearsome warriors, eventually giving up to set sail for more welcoming shores and naming Niue “Savage Island”.

Read more …

Jan 262017
 
 January 26, 2017  Posted by at 10:32 am Finance Tagged with: , , , , , , , , , ,  14 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Arthur Siegel Zoot suit, business district, Detroit, Michigan 1942

Trump Loves Debt, But It Won’t Love Him Back (BBG)
US Tax Reforms Could ‘Transform’ Global Oil Market (R.)
Trump Prepares Orders Aiming at Global Funding and Treaties, UN (NYT)
Trump Starts A ‘Sanctuary City’ War With Liberal America (BBC)
Kyle Bass Calls Trump ‘Gasoline’ on Smoldering Fire in China (BBG)
China Keeps 3% Budget Deficit Goal For 2017 As Debt Risks Grow (R.)
China Is Becoming ‘Increasingly Risky’ Because Of Its Economy (CNBC)
Dutch Respond To Trump’s ‘Gag Rule’ With International Safe Abortion Fund (G.)
Why the Corrupt, Worker-Hating New Democrats Must Be Purged (Bill Black)
Pippa Malmgren: The Social Contract In The West Is Broken (SLD)
Seymour Hersh Blasts Media For Promoting Russian Hacking Story (IC)
Austerity Economics Has Just Been Smashed. By The IMF. (GDB)
The Super Rich Are Preparing For The End Of The World (CNBC)
Rome Mayor Raggi Says She Received Summons From Prosecutors (BBG)
Deal On Greek Bailout’s Second Review Possible At February Eurogroup (R.)
“INAUGURATION DAY” (Bad Lip Reading)

 

 

Catch 20-something.

Trump Loves Debt, But It Won’t Love Him Back (BBG)

President Donald Trump, the self-proclaimed king of debt, may end up with a revolt on his hands.He wants to spend billions of dollars to rebuild American highways and bridges to double economic growth to about 4% a year. He wants to preserve medical benefits for the poor and elderly. And he’s selected someone to oversee the national budget who’s fundamentally opposed to huge piles of debt and pledges to reduce the nation’s deficit.This recipe doesn’t add up, either in theory or practice. Even if Trump finances his promised infrastructure plans entirely by cutting other government services, the nation’s debt load is forecast to surge by trillions of dollars over the next decade.

Trump faces two big problems when grappling with the U.S. debt load: an aging population that’s becoming sicker and inauspicious bond math. If Trump succeeds in fostering substantially higher growth rates, as he’s promised, then interest rates will most likely rise much more than forecast. That’ll make it materially more expensive for the nation to service its debt.Even without much more growth, the U.S. deficit will likely increase as interest rates rise. That’s according to the Congressional Budget Office, a nonpartisan group that analyzes the U.S. economy, which just released its forecast for the nation’s deficit and debt load over the next decade.

Its baseline scenario calls for gradually rising benchmark borrowing costs, with 10-year Treasury yields leveling out at about 3.6% by 2022 from about 2.5% today. Even with that relatively modest projection, CBO analysts wrote that “the government’s interest payments on that debt rise sharply over the next 10 years — nearly tripling in nominal terms and almost doubling relative to GDP.”Interest expense will rise to $768 billion in 2027 from $270 billion in 2017 under the CBO’s base-case scenario.But let’s say Trump succeeds in his attempt to foster more economic growth. That’ll mean that inflation will rise, prompting investors to demand higher U.S. Treasury yields to offset steadily rising consumer prices. Jeffrey Gundlach, the bond guru who runs DoubleLine Capital, said after the election that U.S. 10-year government bond yields could reach 6% in five years. In that case, the interest expense would balloon much more than expected, substantially eating into the nation’s budget.

Read more …

“We expect WTI could move to a $10 per barrel premium to Brent from a $3 discount – a $13 (+25%) relative move immediately.”

US Tax Reforms Could ‘Transform’ Global Oil Market (R.)

The push by Republicans in the U.S. House of Representatives for a shift to border-adjusted corporate tax (BTA) could push U.S. crude prices higher than the global benchmark Brent, triggering large-scale domestic production, according to analysts at Goldman Sachs on Tuesday. The measure, known as border adjustment, intends to boost U.S. manufacturing by taxing imports while exempting U.S. business export revenues from corporate taxation. Goldman said it anticipates a 25% jump in the prices of U.S. crude futures, also known as West Texas Intermediate (WTI), and refined products in comparison to the global prices if the switch is implemented.

The investment bank, however, said that uncertainty on whether such a policy will go ahead is high due to concerns about WTO-non compliance and transition issues and oil futures currently only imply a 9% probability for such a shift. “If implemented, the impacts on the oil market would be significant,” Goldman said. “We expect WTI could move to a $10 per barrel premium to Brent from a $3 discount – a $13 (+25%) relative move immediately.” Brent crude futures were trading on Tuesday at a $2.40 per barrel premium to WTI. The appreciation in prices could be an incentive for producers to sharply increase activity, the bank said warning, that the ramp up in U.S. production in a market only starting to rebalance would create a renewed large oil surplus in 2018, which could lead to an immediate sharp decline in global oil prices.

Read more …

The UN is dysfunctional, but this risks cutting the few parts that do actually work.

Trump Prepares Orders Aiming at Global Funding and Treaties, UN (NYT)

The Trump administration is preparing executive orders that would clear the way to drastically reduce the United States’ role in the United Nations and other international organizations, as well as begin a process to review and potentially abrogate certain forms of multilateral treaties. The first of the two draft orders, titled “Auditing and Reducing U.S. Funding of International Organizations” and obtained by The New York Times, calls for terminating funding for any United Nations agency or other international body that meets any one of several criteria. Those criteria include organizations that give full membership to the Palestinian Authority or Palestine Liberation Organization, or support programs that fund abortion or any activity that circumvents sanctions against Iran or North Korea.

The draft order also calls for terminating funding for any organization that “is controlled or substantially influenced by any state that sponsors terrorism” or is blamed for the persecution of marginalized groups or any other systematic violation of human rights. The order calls for then enacting “at least a 40% overall decrease” in remaining United States funding toward international organizations. The order establishes a committee to recommend where those funding cuts should be made. It asks the committee to look specifically at United States funding for peacekeeping operations; the International Criminal Court; development aid to countries that “oppose important United States policies”; and the United Nations Population Fund, which oversees maternal and reproductive health programs.

Read more …

Interesting power fight. But there are laws.

Trump Starts A ‘Sanctuary City’ War With Liberal America (BBC)

Mr Trump’s border wall announcement will make most of the headlines today, given that it was a central focus of his presidential campaign and has increased diplomatic tension with the Mexican government. His plan to target US “sanctuary cities”, however, likely sets the stage for a much tougher, uglier domestic political fight. More than 400 jurisdictions across the country, including New York, Los Angeles, Boston and Seattle – major cities in left-leaning states that did not vote for Mr Trump – have enacted policies protecting undocumented immigrants within their boundaries. Officials in these designated areas, including local law enforcement, are not allowed to enquire as to an individual’s immigration status in the course of their duties.

Candidate Trump pledged to end this practice, and on Wednesday he put some teeth into his promise – authorising the federal government to withhold funds from cities that do not co-operate with immigration officials or comply with federal law. His executive order frames the issue as one of national security. “Sanctuary jurisdictions across the United States wilfully violate Federal law in an attempt to shield aliens from removal from the United States,” it reads. “These jurisdictions have caused immeasurable harm to the American people and to the very fabric of our republic.”

Read more …

Speeding up decline. Or exposing it, rather.

Kyle Bass Calls Trump ‘Gasoline’ on Smoldering Fire in China (BBG)

Hedge fund manager Kyle Bass likened President Donald Trump’s trade and tax policies to gasoline — hastening an economic restructuring in China while stimulating capital investment and growth in the U.S. China has “recklessly built a system that’s going to need to restructure and that just so happens to be metastasizing right when Trump becomes elected,” Bass told Bloomberg TV. “This is a fire that’s been smoldering and it’s now starting to burn, and Trump is just more gasoline.” Imposing tariffs on Chinese imports could have “profound consequences” for the nation’s economy, where credit over the last 18 months has grown by $6.5 trillion while deposits expanded just $3 trillion, said Bass, founder of Hayman Capital Management.

Early last year, Bass called for a 30% devaluation in the yuan against the dollar, and he’s since opened two Asia-focused funds to wager on the imbalances in the region, which he said could extend to Hong Kong and Taiwan. “The idea that China is now the driving economic power in the world, I think, is illusory or somewhat of a fallacy,” he said. “It’s safe to say that the Asian theater is where we’ve been focused.” In the U.S., Bass said, border tax adjustments will help finance a lower corporate tax rate that Trump has proposed, which in combination with the repatriation of capital offshore will be “extremely stimulative.” He said Trump’s accelerated policies would lead to real capital investment, competitiveness and an improvement in productivity.

The impact will be “positive for the United States and slightly negative for the rest of the world,” he said. “But it’s not the globalist nightmare, in my opinion.” Inflation, set to increase in the U.S., will also spike in Germany, which will prompt a tapering of the ECB’s bond-buying program and possibly an increase in interest rates, he said. The move to do so will be sped up by Trump, he said.

Read more …

“Total fixed-asset investment rose 8.1% in 2016, the slowest pace since 1999, despite an 18.7% increase in investment by state entities..”

China Keeps 3% Budget Deficit Goal For 2017 As Debt Risks Grow (R.)

China’s policymakers plan to keep their budget deficit target for 2017 at the same level as last year to underscore a focus on debt reduction and reform, though they have wiggle room to increase fiscal stimulus if the economy needs support again. A budget deficit target of 3% of GDP, unchanged from 2016, was endorsed by top leaders at the Central Economic Work Conference in December, according to sources with knowledge of the meeting’s outcome. After government investment propped up activity for much of 2016, policymakers are looking for a recovery in private investment through public-private partnership (PPP) infrastructure projects to drive growth this year. “Fiscal policy is clear. It’s necessary to maintain last year’s 3% deficit ratio, although there is room to increase it slightly,” said one of the sources, a policy adviser.

Preliminary finance ministry data this week implied an actual deficit of 3.8% of GDP in 2016. However, China’s budget accounting allows it to use unspent money from previous years and funds from a Central Budget Stabilization Fund so it can report a final deficit in line with the target. The world’s second-largest economy grew 6.7% last year, supported by higher government spending and record bank lending, though it was still the slowest growth in 26 years. Reuters reported last week that sources said the 2017 economic growth target would be around 6.5%, down from last year’s 6.5-7%. “If this year’s growth goal is not that high, there will be less pressure on the strength of policy support,” said a second policy source. [..] Total fixed-asset investment rose 8.1% in 2016, the slowest pace since 1999, despite an 18.7% increase in investment by state entities, as private investment grew just 3.2%, the weakest on record.

Read more …

A risk to the west, that is.

China Is Becoming ‘Increasingly Risky’ Because Of Its Economy (CNBC)

A major risk to U.S. markets is looming, and it’s bigger than headlines and President Donald Trump’s tweets, Goldman Sachs’ Sharmin Mossavar-Rahmani told CNBC on Wednesday. The threat is the Chinese economy, the Goldman Sachs Private Wealth Management chief investment officer told “Squawk on the Street.” “We use the term that China could ‘submerge’ under the burden of its own debt,” Mossavar-Rahmani said. “If you look at any of the debt measures in China, they’re tremendously high.” Mossavar-Rahmani focused on the credit-to-GDP number from the BIS as a key measure of China’s accumulating debt. As of the second quarter of 2016, China’s ratio was 28.8%.

“China is about 30, the U.S. was at 12.4% just before the crisis. And if the U.S. didn’t avoid a financial crisis with all its strength, how can we assume that China will?” the wealth manager asked. China is still awaiting its 19th gathering of the National Congress of the Communist Party in the fall, which Mossavar-Rahmani said would weigh on the country’s economic position in 2018. The meeting will determine 370 of China’s Central Committee members for the next five years. “Then we have to see, in 2018, will they put structural reforms on the front burner or does it stay on the back burner?” Mossavar-Rahmani asked.

Read more …

The US has a large block of religious zealots. The rest of the west, not so much.

Dutch Respond To Trump’s ‘Gag Rule’ With International Safe Abortion Fund (G.)

Up to 20 countries have indicated support for the Netherlands’ plan to set up an international safe abortion fund to plug a $600m funding gap caused by Donald Trump’s reinstatement of the “global gag rule”, the Dutch international development minister, Lilianne Ploumen, said on Wednesday. Ploumen took soundings from a number of her colleagues around the world on Tuesday evening after the Netherlands said it would act to mitigate the impact on hundreds of charities around the world. The “global gag rule”, also known as the Mexico City policy, was reimposed by Trump on Monday, and bans US federal funding for NGOs in foreign countries that provide abortion services or abortion advocacy. ‘We’re in talks with 15 to 20 countries and we’ve also spoken to foundations,” Ploumen told the Guardian.

“As well as contacting a number of European countries that we work with on these issues, we’re also in touch with countries in South America and Africa, as well as the foundations. It’s important to have the broadest possible support for the fund.” Ploumen did not identify which countries had been approached or how much money the Dutch government might commit to the scheme. She said the aim would be to continue support for existing programmes being run by organisations such as the United Nations Population Fund (UNPFA), the International Planned Parenting Federation and Marie Stopes International. “These are successful and effective programmes: direct support, distributing condoms, making sure women are accompanied at the birth, and making sure abortion is safe if they have no other choice,” she said.

Read more …

Damning. DO read.

Why the Corrupt, Worker-Hating New Democrats Must Be Purged (Bill Black)

This article explains three critical reasons why the Democratic Party’s leaders are far more insane than all but a few Democrats understand. It focuses on the leaders of the Democratic National Committee (DNC) and the New Democrats. The DNC leadership is composed of New Democrats. Debbie Wasserman Schultz had to resign in disgrace when the leaks proved that she was putting the DNC’s thumbs on the scale to favor Hillary Clinton (a New Democrat) in the presidential nomination contest against Bernie Sanders. Wasserman Schultz also took large contributions from big finance and, until she faced the prospect of a serious primary challenger, she supported efforts by predatory lenders to use Congress to bar the regulators from stopping their abuses.

Donna Brazile, a New Democrat, now runs the DNC. In this article, I show that Brazile denounced Democrats who refused to cheer President Bush’s invasion of Iraq (and his “Mission Accomplished” declaration) as so disloyal that when their country needed them they went “AWOL.” Not satisfied with that libel, she added the homophobic smear that voters would view Democrats who failed to cheer Bush’s lies and invasion as “effete.” Best of all, she said that Democrats should take as their role models Paul Wolfowitz, Richard Perle, and Frank Gaffney – Bush’s “chicken hawks” that devised the campaign of lies that led to the disastrous invasion of Iraq. Gaffney is now spreading hate of Muslims – and advising President Trump.

The DNC is also in the news because it has just accepted a $20 million “donation” funded by Third Way, a Wall Street front group, to study why the white working class “abandoned” Hillary Clinton. Clinton is a leader of the New Democrats. Wall Street has long been the largest single funder of the New Democrats various institutions. The New Democrats, at the behest of Wall Street, have waged the “long war” against the working class since their formation in 1984. The New Democrats did not simply abandon the working class – they targeted it for scorn and assaulted it with policies that harmed many Americans, but caused the greatest harm to the working class.

Particularly in light of the Trump’s election, the logical reaction of the DNC would have been to refuse to take the Wall Street buyout and announce that the New Democrats would never again do Wall Street’s bidding. They would return to the Democratic Party’s historic role as the party that championed the rights of workers. Brazile, of course, ensured that the DNC eagerly took the $20 million Wall Street buyout. The New Democrats not only continue to be for sale (or rent) by Wall Street – they continue to show that they continue to for sale for chump change. The DNC does not need $20 million to figure out why the white working class “abandoned” the New Democrats. They can check out from their local library Tom Frank’s books warning that this would happen and explaining in detail why the New Democrats’ long war against the working class was making it happen.

Read more …

When growth could not be delivered. “There is always a deal between citizens and their governments. But now governments are defaulting on their citizens because of the debt problem. They can’t deliver retirement at 65.”

Pippa Malmgren: The Social Contract In The West Is Broken (SLD)

Question: The inability of continental Europe to grow has been a clear part of the concern in Britain about Europe. What role has this played?

Malmgren: The British received more Foreign Direct Investment than any other locartion in the EU before Brexit. It was assumed this flow would fall after Brexit. But, I hear from my clients that they are even more interested in the UK now. That’s because money is like water. It flows to wherever it faces the least resistance – the lowest tax rates and least regulatory burden. I would challenge the British to end up with more regulation and higher taxes that the EU after Brexit. Frankly, that would take a huge effort! But the problems on the Continent are deeper than this; The real issue is that the social contract between citizens and governments in the West are being broken. There is always a deal between citizens and their governments. But now governments are defaulting on their citizens because of the debt problem. They can’t deliver retirement at 65. Now everybody has to work longer.

They can’t deliver the healthcare that had been expected. Frankly they can’t deliver police, fire departments or roads without potholes. The social contract in the EU is under even greater stress because growth has been so very poor. The night of the victory of Brexit, the markets attacked Italian banks, not British banks. What did the state in Italy do? They said they’d find 5b Euros to bail out the oldest bank which had lost 98% of its shareholder value. Meanwhile, they can’t find 5 cents for the young who are experiencing over 30% unemployment rates. This breaks the social contract and helps explain the new anti-EU sentiment. The Europeans are also increasingly uneasy about immigration issues. It was not part of the original deal in the European contract to have completely open borders. In my view, the British are not xenophobic, but want more process around immigration. They want a more secure movement of people within Europe.

The media talks all the time about the proposed Wall by Trump in the US with Mexico, but the reality is there a wall-building spree going on in Europe. Look at the new walls being constructed between Hungry and Serbia, between Germany and the Czech Republic, as well as new walls in Estonia, Poland and Lithuania are constructing one around Kaliningrad with watchtowers, etc. Frankly new walls will increasingly be digital. Processing of people will begin well before you get anywhere near what you think the border is. We will pass through borders without realizing we’ve already been assessed. We are in a period of history where the Europeans are fundamentally rethinking what they want Europe to stand for, the European Union to do, and how to generate economic growth again. As everywhere else, the public are questioning the establishment because they have failed to deliver on their promises.

Read more …

“I don’t think the notion of democracy is ever going to be as tested as it’s going to be now.”

The ‘media’ have lost so much credibility, and permamently. That is dangerous.

Seymour Hersh Blasts Media For Promoting Russian Hacking Story (IC)

Pulitzer prize-winning journalist Seymour Hersh said in an interview that he does not believe the U.S. intelligence community proved its case that President Vladimir Putin directed a hacking campaign aimed at securing the election of Donald Trump. He blasted news organizations for lazily broadcasting the assertions of U.S. intelligence officials as established facts. Hersh denounced news organizations as “crazy town” for their uncritical promotion of the pronouncements of the director of national intelligence and the CIA, given their track records of lying and misleading the public. “The way they behaved on the Russia stuff was outrageous,” Hersh said when I sat down with him at his home in Washington, D.C., two days after Trump was inaugurated.

“They were just so willing to believe stuff. And when the heads of intelligence give them that summary of the allegations, instead of attacking the CIA for doing that, which is what I would have done,” they reported it as fact. Hersh said most news organizations missed an important component of the story: “the extent to which the White House was going and permitting the agency to go public with the assessment.” Hersh said many media outlets failed to provide context when reporting on the intelligence assessment made public in the waning days of the Obama administration that was purported to put to rest any doubt that Russian President Vladimir Putin ordered the hacking of the DNC and Clinton campaign manager John Podesta’s emails.

The declassified version of the report, which was released January 7 and dominated the news for days, charged that Putin “ordered an influence campaign in 2016 aimed at the U.S. presidential election” and “aspired to help President-elect Trump’s election chances when possible by discrediting Secretary Clinton and publicly contrasting her unfavorably to him.” According to the report, the NSA was said to have had a lower confidence level than James Clapper and the CIA about the conclusion that Russia intended to influence the election. Hersh characterized the report as full of assertions and thin on evidence.

“It’s high camp stuff,” Hersh told The Intercept. “What does an assessment mean? It’s not a national intelligence estimate. If you had a real estimate, you would have five or six dissents. One time they said 17 agencies all agreed. Oh really? The Coast Guard and the Air Force — they all agreed on it? And it was outrageous and nobody did that story. An assessment is simply an opinion. If they had a fact, they’d give it to you. An assessment is just that. It’s a belief. And they’ve done it many times.”

[..] While expressing fears about Trump’s agenda, Hersh also called Trump a potential “circuit breaker” of the two-party political system in the U.S. “The idea of somebody breaking things away, and raising grave doubts about the viability of the party system, particularly the Democratic Party, is not a bad idea,” Hersh said. “That’s something we could build on in the future. But we have to figure out what to do in the next few years.” He added: “I don’t think the notion of democracy is ever going to be as tested as it’s going to be now.”

Read more …

But it will just continue. Wanna bet?

Austerity Economics Has Just Been Smashed. By The IMF. (GDB)

A powerful new report finally kills off any remaining intellectual veil for a broken economics that is breaking society. Sometimes an ideology is so brilliantly propagated that observers might not even notice it’s an ideology. In the corridors of power and in mainstream discussion, it ceases to be questioned. Then it goes catastrophically wrong. And it begins to seen again for the ideology it is. It becomes questioned again. And, if they are smart, leaders hear this and start to self-correct. This is where we’ve got to with neoliberalism, austerity, and rising inequality. Except for the self-correct part. Right now, instead of self-correction, we’re seeing many mainstream politicians unable to shift away from dead economics, and what seems in too many countries like the start of social breakdown.

Change is well overdue. Who can prompt leaders to drop the old economic nostrums are causing so much harm? Enter the IMF with a sledgehammer. Progressives duck in case in the sledgehammer is meant for them. But then the IMF demolishes the case for neoliberalism and austerity. It sounds extraordinary, and it is. Today the IMF will launch a new report, “Macro-Structural Policies and Income Inequality in Low-Income Developing Countries”, the latest in series that mark the intellectual journey the IMF research department has been travelling in recent years. Packed with detailed quantitative analysis it demonstrates that much of what elites have been advancing as unquestioned economics is demonstrably harmful both to economic growth and to public wellbeing.

Of course what makes this surprising, and what may make some progressives unenthusiastic about welcoming this, is also what makes it so powerful: an institution that has been, for far too long, a defender of the free market story and the Washington Consensus – the idea that liberalizing trade, privatizing everything possible and cutting down public spending was a one-size-fits-all solution to any government in trouble – has now refuted it. This paper is not the first by the IMF to take a stand on inequality, but it is notable because it claims in no uncertain terms that public spending – i.e. the opposite of the budget cuts that it once advocated for – decreases income inequality. They even have a formula – a 1% increase in public spending, they report, leads to a 2.3% decrease in inequality after 5 years. The paper also takes a strong stand against prioritizing indirect taxes, such as VAT, showing that they increase inequality.

Read more …

Bit sensationalist, perhaps?

The Super Rich Are Preparing For The End Of The World (CNBC)

The Dow has hit 20,000 for the first time ever, but rather than celebrating, some of the richest of the rich are building bunkers to prepare for a potential apocalypse. These “preppers” are making other investments too. They’re buying houses in New Zealand, which has become a popular spot in case of calamity. Billionaire Peter Thiel just secured property and citizenship there. And they’re getting elective surgery. Steve Huffman, the 33-year-old co-founder and CEO of the online community Reddit, got Lasik so that he’d be able to be more independent in case of emergency. “If the world ends — and not even if the world ends, but if we have trouble — getting contacts or glasses is going to be a huge pain in the ass,” the San Francisco resident tells Evan Osnos as part of The New Yorker’s chronicle of the elite’s end-of-the-world preparations. “Without them, I’m f—ed.”

In addition to the eye surgery, Huffman has accumulated guns, ammunition and motorcycles so that he won’t get caught in traffic jams during an evacuation. The notion of “doomsday prepping” was popularized in the mainstream by the National Geographic channel’s show by the same name. The show’s website offers a quiz titled “How prepped are you?” so you can test your own likelihood of surviving an apocalypse. Former Facebook product manager Antonio García Martínez bought wooded land in the Pacific Northwest that he has stocked with generators, solar panels and ammo, The New Yorker reports. “You just need so many things to actually ride out the apocalypse,” García Martínez says. “I think people who are particularly attuned to the levers by which society actually works understand that we are skating on really thin cultural ice right now.”

In particular, the political climate has made many coastal elites anxious about the future. “I think, to some degree, we all collectively take it on faith that our country works, that our currency is valuable, the peaceful transfer of power — that all of these things that we hold dear work because we believe they work,” says Huffman. “While I do believe they’re quite resilient, and we’ve been through a lot, certainly we’re going to go through a lot more.”

Read more …

The war on Grillo will intensify.

Rome Mayor Raggi Says She Received Summons From Prosecutors (BBG)

Rome Mayor Virginia Raggi, a member of the anti-establishment Five Star Movement, said she has received a summons from city prosecutors over a staff appointment. Raggi, a lawyer who was elected mayor last year, wrote in a post on Facebook that the summons concerns her nomination of Renato Marra as head of the tourism department, which she has revoked. She said she had informed Five Star co-founder Beppe Grillo and the city council of the summons. “I am very serene; I have full confidence in the judiciary, as ever,” Raggi wrote. “We are ready to give every clarification.” Raggi’s city hall administration has been plagued by resignations. Five Star, which wants a referendum on Italy’s membership in the euro area, has remained neck and neck with the Democratic Party of Prime Minister Paolo Gentiloni and his predecessor Matteo Renzi in national opinion polls.

Five Star has made denunciations of political corruption one of its main themes, often calling for elected officials to resign if they are placed under investigation, long before a case comes to court. But under new rules posted on Grillo’s blog earlier this month, Five Star officials do not have to resign automatically if they are investigated. Italian newswire Ansa said Raggi was under investigation for alleged abuse of office in the personnel matter. [..] Alessandro Di Battista, a senior Five Star lawmaker, told La 7 television that Raggi had a duty to explain why she had made the appointment. “This isn’t about public money, or decisions which affect a right of citizens,” Di Battista said. “This would involve mistaken signatures, a mistaken nomination which was immediately revoked.”

Read more …

If not in February, forget 2017.

Deal On Greek Bailout’s Second Review Possible At February Eurogroup (R.)

Euro zone creditors could approve the completion of the second set of Greek bailout reforms at the next meeting of finance ministers in February, an euro zone official said on Wednesday. The approval of the outstanding reforms, mainly concerning Greek fiscal targets, the labor market and liberalization of the energy sector, would pave the way for further euro zone loans to Athens, which faces large repayments in the third quarter. Finance ministers of the 19 countries of the euro zone will meet on Thursday in Brussels but there hasn’t been sufficient progress in Greek reforms yet for them to sign off on a deal now, the senior official said, confirming what the EU economics commissioner Pierre Moscovici said on Tuesday.

Still, the ministers are likely to produce an agreement to continue talks with a view to concluding them at the next Eurogroup meeting on Feb. 20, according to the official. “There is a good chance” that an agreement will be reached on Thursday to send euro zone negotiators back to Athens so that a deal can be reached in February, the official said. “February is the last month in which there is no politically significant election in relevant member states,” the official said, and this meant “February is not formally but realistically the time when we need to reach a political agreement”. The Netherlands go to the polls in March, and the French will vote in presidential elections in April and likely also in May. Germany, the biggest economy in the euro zone, will hold a general election in September. A comprehensive deal for Greece will also have to involve the IMF, the official said.

Read more …

Pretty brilliant.

“INAUGURATION DAY” (Bad Lip Reading)

Read more …

Sep 292015
 
 September 29, 2015  Posted by at 8:46 am Finance Tagged with: , , , , , , , , , , , ,  1 Response »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Gottscho-Schleisner L Motors at 175th Street and Broadway, NYC 1948

center>

Commodity Rout Beginning to Look Like a Full-Blown Crisis (Bloomberg)
Glencore Shares Obliterated After Analysts Warn They Could Be Worthless (Tel.)
Is Glencore Worth $26 Billion Or $98 Billion? Analysts Can’t Decide (Bloomberg)
Global Stocks Set to Fall As $800 Billion Wipeout Boosts Yen, Bonds (Bloomberg)
Three Major Trends that Shaped Global Economy for Decades Set to Change (BBG)
Big Oil Faces Shrinking Prospects (FT)
Why Shell Quit Drilling In Arctic After Spending $7 Billion On Single Well (BBG)
Saudi Arabia Withdraws Billions From Markets to Plug Budget Deficit (BBG)
The Collapse Of Saudi Arabia Is Inevitable (Nafeez Ahmed)
Deutsche Bank Predicted To Cut 10,000 Jobs (Telegraph)
UK Steel Industry Buckles Under The Weight Of Cheap Chinese Product (Guardian)
VW Stock to Be Removed From Dow Jones Sustainability Indexes (Bloomberg)
Tick Tick Tick (Jim Kunstler)
Putin: West’s Rampant ‘Egotism’ To Blame For Syria, Ukraine, Isis (Guardian)
Obama Deifies American Hegemony (Paul Craig Roberts)
Barclays, HSBC Named In Swiss Precious Metals Price Fixing Investigation (TiM)
It’s Time To Unpick Corporate Welfare (Kevin Farnsworth)
Jamaica Seeks Billions Of Pounds In British Reparations For Slavery (Guardian)
New Zealand’s New Ocean Sanctuary One Of World’s Largest Protected Areas (Gua.)
More Than 1,100 Migrants Rescued Off Libyan Coast On Monday (DW)

Not beginning, continuing.

Commodity Rout Beginning to Look Like a Full-Blown Crisis (Bloomberg)

The 15-month commodities free-fall is starting to resemble a full-blown crisis. Investors are reacting to diminished demand from China and an end to the cheap-money era provided by the Federal Reserve. A Bloomberg index of commodity futures has fallen 50% since a 2011 high, and eight of the 10 worst performers in the Standard & Poor’s 500 Index this year are commodities-related businesses. Now it all seems to be coming apart at once. Alcoa, the biggest U.S. aluminum producer, said it would break itself into two companies amid a glut stemming from booming production. Shell announced it would abandon its drilling campaign in U.S. Arctic waters after spending $7 billion.

And the carnage culminated Monday with Glencore, the commodities powerhouse that came to symbolize the era with its initial public offering in 2011 and bold acquisition of a rival in 2013, falling by as much as 31% in London trading. “With China slowing down and a lot of uncertainty, fears in the market have intensified, and the reduction in the pace of demand growth for all commodities has seemed to send everybody off the cliff,” said Ed Hirs, managing director of a small oil producer who teaches energy economics at the University of Houston. Peak prices in gold and silver are four years old, oil’s plummet since June 2014 has been pushed along by OPEC’s November decision to keep pumping despite excess supply and U.S. natural gas prices have fallen to less than a fourth of their 2008 value.

It’s about to get worse, according to analysts John LaForge and Warren Pies of Venice, Florida-based Ned Davis Research Group. Commodities may be in the fourth year of a 20-year “bear super-cycle,” according to an Aug. 14 research note. The analysts looked at commodity busts dating to the 18th century and found them driven by factors such as market momentum rather than fundamentals, LaForge said Monday in an interview.

Read more …

“More than 85% has been wiped off the stock so far this year..”

Glencore Shares Obliterated After Analysts Warn They Could Be Worthless (Tel.)

Glencore shares plunged 30pc in afternoon trading to a new record low after analysts warned the stock could be worthless if commodity prices remain at current levels. The shares went into freefall after analysts at Investec issued a note warning that heavily indebted companies such as the Swiss-based mining and trading giant could see almost all their equity value eliminated under current commodity prices, leaving nothing for shareholders. Almost £2bn was wiped off the value of Glencore as investors panicked and dumped the stock. It puts further pressure on Glencore, which has already been hit hard by the slump in commodity prices. Earlier this month the miner was forced to raise $2.5bn through a share placement, selling 1.3 billion new shares at 125p apiece.

It has also has announced plans in recent weeks to suspend its dividend and sell off assets as part of debt reduction measures to bolster its balance sheet. Hunter Hillcoat, an analyst at Investec, said: “Mining companies gorged themselves on cheap debt in a race to grow production following the Chinese stimulus that occurred in the wake of the great financial crisis. “The consequences are only now coming home to roost, as mines take a long time to build. We expect commodity markets to remain subdued for several years to come given that excess supply has coincided with a slowdown in demand.”

Even a move by chief executive Ivan Glasenberg to instil confidence in investors by buying 110 million shares has had little effect on sentiment. More than 85pc has been wiped off the stock so far this year and it is trading far below its listing price in May 2011 of 530p. The analysis from Investec looked at the entire debt pile of Glencore, while the company itself has always argued its stockpiles of metals can quickly be sold to rapidly reduce the debt levels. However, the broker warned that: “If major commodity prices remain at current levels, our analysis implies that, in the absence of substantial restructuring, nearly all the equity value of both Glencore and Anglo American could evaporate.”

Read more …

How about nothing?

Is Glencore Worth $26 Billion Or $98 Billion? Analysts Can’t Decide (Bloomberg)

Glencore, the commodity trader that lost about a third of its value Monday, is worth either $98 billion or $26 billion, depending on which analyst you ask. At Sanford C. Bernstein, price targets published by Paul Gait suggest the Baar, Switzerland-based resource company can rally sevenfold to 450 pence, the top end of predictions tracked by Bloomberg. At the bottom, Nomura Holdings’s 120-pence forecast implies a market value that is $72 billion lower. The dispersion shows the difficulty in valuing a company caught between China’s slowing economy and mounting concerns about its debt load.

In addition to diverging views on copper prices, questions about how to evaluate Glencore’s trading business, unique among big mining companies, are muddling the equation, according to Clarksons Platou Securities’ Jeremy Sussman. “Glencore does have a unique trading business that is different from their competitors, and it’s a much more difficult business to model than a straight ‘you mine it, you sell it, and take whatever margin’ one,” said Sussman, an analyst for Clarksons Platou in New York. He recommends holding the stock, which he estimates will rise to 190 pence. Analysts “with targets in the higher end are probably in the camp that think trading will return to levels where it had been in the past couple of years.”

Read more …

There goes your recovery. Not going to happen.

Global Stocks Set to Fall As $800 Billion Wipeout Boosts Yen, Bonds (Bloomberg)

Global equities looked set to extend Monday’s $800 billion rout as U.S. and European index futures followed Asian stocks south amid a selloff in commodity-trading firms that’s sent investors toward the safety of the yen and sovereign bonds, while sending the cost of insuring debt skyward. Glencore dropped by a record in Hong Kong, tracking losses in London and dragging shares of Noble Group, Mitsui and BHP Billiton lower. The MSCI Asia Pacific Index is heading for its biggest quarterly loss since the global financial crisis, with every major benchmark in the region retreating on Tuesday. The yen was stronger against all 16 major peers, while the cost of insuring Asian debt jumped to the highest since October 2013. Australian and German bonds tracked Treasury gains.

A 15-month rout in raw materials and energy prices is colliding with surging corporate borrowing costs to challenge the business models of previously high-flying commodity firms such as Glencore, whose London shares have dropped 73% since June. The yield on U.S. non-investment grade corporate notes has risen for 11 straight days amid slowing Chinese growth and doubts about whether the U.S. economy is strong enough to handle higher Federal Reserve interest rates. “Glencore’s problems have heightened already deep concerns about the financial health of commodity companies,” said Win Udomrachtavanich at One Asset Management. “The outlook of commodity prices will continue to be very weak because of the prolonged global economic slowdown. Investors just face an even tougher environment with this as sentiment was already weakened by the U.S. interest-rate outlook.”

Read more …

Demographics. Cute, but very one-sided.

Three Major Trends that Shaped Global Economy for Decades Set to Change (BBG)

Demographics can explain two-thirds of everything, University of Toronto professor David K. Foot famously quipped. And according to Charles Goodhart, professor at the London School of Economics and senior economic consultant to Morgan Stanley, demographics explain the vast majority of three major trends that have shaped the socioeconomic and political environments across advanced economies over the past few decades. Those three would be declining real interest rates, shrinking real wages, and increasing inequality. Goodhart & Co.’s contentions aren’t necessarily novel, with versions of these conclusions having been articulated by Toby Nangle, head of multi-asset management at Columbia Threadneedle Investments, and given a U.S. focus by Matt Busigin and Guillermo Roditi Dominguez, portfolio managers at New River Investments.

But Goodhart’s work is a particularly thorough and forceful manifesto. The conditions that fostered these three intertwined major developments are nearly obsolete, writes the former member of the Bank of England’s Monetary Policy Committee and other analysts from Morgan Stanley, and this has profound implications for the framework of the global economy in the decades to come. Goodhart argues that since roughly 1970, the world has been in a demographic sweet spot characterized by a falling dependency ratio, or in plainer terms, a high share of working age people relative to the total population. At the same time, globalization provided multinational companies the ability to tap into this new pool of labor. This positive supply shock was a negative for established workers, forcing down the price of labor as capital flowed to these areas.

Read more …

“More worrying, from Shell’s point of view, is the prospect of a declining reserves base. In common with several of the other oil majors, it is pumping oil faster than it can book new reserves of bankable assets.”

Big Oil Faces Shrinking Prospects (FT)

One hundred and fifty miles from the Alaskan coast lies what must be the most expensive oil well ever drilled. Shell’s decision to abandon the Burger J prospect, along with its entire Arctic exploration campaign, marks an outcome that many at the oil major must have dreaded since it bought the leases in 2008. That is not because of the cost — enormous though it is — of setting up remote platforms and drilling into rock that lies beneath 140ft of water. Shell is reckoned to have spent about $7bn on the exploration effort; some estimates put the figure even higher. But its balance sheet is strong enough to absorb the loss. Nor will the public ill-will generated by years of exploration in pristine Arctic waters last for ever.

Indeed, for some senior executives at Shell, the prospect of success in the Arctic was more worrying than the possibility of failure. Building the permanent facilities needed for actual production would have been far more contentious than the limited (if sometimes hapless) exploration work. Among the people on record as opposing Arctic drilling is Hillary Clinton, the frontrunner for the Democratic nomination for president. That is a battle that Shell will no longer have to fight. More worrying, from Shell’s point of view, is the prospect of a declining reserves base. In common with several of the other oil majors, it is pumping oil faster than it can book new reserves of bankable assets. This was the reason for pushing on in the Arctic against public criticism and deteriorating economic prospects for so long.

If, as some of the company’s executives believed, the Chukchi Sea blocks held about 35bn barrels of oil, Shell’s reserve base would have been secured and much effort would have been devoted to winning hearts and minds and pushing down costs. As it stands, the reserve base will continue to decline. Shell’s $70bn purchase of BG Group, if completed, will bring access to some identified resources — for instance off the coast of Brazil — but the cost of development is high and success is very uncertain. In the long run, this is little short of an existential challenge. Can the existing reserves base be replaced with resources that can be developed commercially? Or is a period of corporate decline inevitable? For the past three years Shell has failed to find sufficient resources to replace production despite heavy exploration expenditure. In 2014 it replaced only 26% of its oil and gas production. Over the past three years the figure is just 67%.

Read more …

How to spell desperation.

Why Shell Quit Drilling In Arctic After Spending $7 Billion On Single Well (BBG)

Royal Dutch Shell’s abrupt announcement today that it would cease all offshore drilling in the Arctic is surprising for several reasons. One is the unusual degree of confidence the company expressed as recently as mid-August that it had identified 15 billion barrels of oil beneath the well known as Burger J it’s now abandoning. What on earth happened? After spending $7 billion over several years to explore a single well this summer, Shell said in a statement that it “found indications of oil and gas … but these are not sufficient to warrant further exploration.” This contrasts sharply with Shell officials’ statements as recently as July and August that based on 3D and 4D seismic analysis of core samples, its petroleum geologists were “very confident” drillers would find plentiful oil.

The geologists’ expectations were the main reason Shell spent all that money on a project that entailed much-higher-than-average operational risks and international environmental condemnation. Giving up has got to hurt at a company that prides itself on scientific and technical prowess. Shell said it would take an unspecified financial charge related to the folding of its Arctic operation, which carries a value of $3 billion on the company’s balance sheet. In late July, when Ann Pickard, Shell’s top executive for the Arctic, explained the economics of drilling in the Chukchi Sea, she readily acknowledged that if oil prices remained below $50 a barrel, the off-shore adventure would be for naught. At $70, Chukchi oil would be “competitive,” she told Bloomberg Businessweek, and at $110—a reasonable projection, according to the company’s economists—it would be a huge winner.

She was talking about prospective prices 15 years from now. Well, in recent weeks, Shell appears to have lost some of its bravado about where prices will be in 2030—according to a person familiar with the company’s thinking. Otherwise, it wouldn’t have given up altogether on the Chukchi, where it continues to hold 275 Outer Continental lease blocks. Indeed, Marvin Odum, director of Shell Upstream Americas, said in the written statement that the company “continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.”

Read more …

Indeed: “None of this should come as much surprise..”

Saudi Arabia Withdraws Billions From Markets to Plug Budget Deficit (BBG)

Saudi Arabia has withdrawn as much as $70 billion from global asset managers as OPEC’s largest oil producer seeks to plug its budget deficit, according to financial services market intelligence company Insight Discovery. “Fund managers we’ve spoken to estimate SAMA has pulled out between $50 billion to $70 billion from global asset managers over the past six months,” Nigel Sillitoe, chief executive officer of the Dubai-based firm, said by telephone Monday. “Saudi Arabia is withdrawing funds because it’s trying to cut its widening deficit and it’s financing the war in Yemen,” he said, declining to name the fund managers. Saudi Arabia is seeking to halt the erosion of its finances after oil prices halved in the past year.

The Saudi Arabian Monetary Authority’s reserves held in foreign securities have fallen about 10% from a peak of $737 billion in August 2014, to $661 billion in July, according to central bank data. The government is accelerating bond sales to help sustain spending.
“Foreign-exchange reserve depletion, rather than accumulation, is the new reality for Saudi Arabia,” Jason Tuvey, Middle East economist at Capital Economics, said in an e-mailed note Monday. “None of this should come as much surprise,” given the current-account deficit and risk of capital flight, he said. Saudi Arabia’s attempts to bolster its fiscal position contrast with smaller and less-populated nations in the Arabian peninsular such as Qatar.

The world’s richest nation on a per capita basis plans to channel about $35 billion of investment into the U.S. over the next five years as it seeks to move away from European deals. That’s on top of plans to set up a $10 billion investment venture with China’s Citic Group. With income from oil accounting for about 80% of revenue, Saudi Arabia’s budget deficit may widen to 20% of gross domestic product this year, according to the IMF. SAMA plans to raise between 90 billion riyals ($24 billion) and 100 billion riyals in bonds before the end of the year as it seeks to diversify its $752 billion economy, people familiar with the matter said in August.

Read more …

Theer are rumblings inside the House of Saud as we speak.

The Collapse Of Saudi Arabia Is Inevitable (Nafeez Ahmed)

On Tuesday 22 September, Middle East Eye broke the story of a senior member of the Saudi royal family calling for a “change” in leadership to fend off the kingdom’s collapse. In a letter circulated among Saudi princes, its author, a grandson of the late King Abdulaziz Ibn Saud, blamed incumbent King Salman for creating unprecedented problems that endangered the monarchy’s continued survival. “We will not be able to stop the draining of money, the political adolescence, and the military risks unless we change the methods of decision making, even if that implied changing the king himself,” warned the letter. Whether or not an internal royal coup is round the corner – and informed observers think such a prospect “fanciful” – the letter’s analysis of Saudi Arabia’s dire predicament is startlingly accurate.

Like many countries in the region before it, Saudi Arabia is on the brink of a perfect storm of interconnected challenges that, if history is anything to judge by, will be the monarchy’s undoing well within the next decade. The biggest elephant in the room is oil. Saudi Arabia’s primary source of revenues, of course, is oil exports. For the last few years, the kingdom has pumped at record levels to sustain production, keeping oil prices low, undermining competing oil producers around the world who cannot afford to stay in business at such tiny profit margins, and paving the way for Saudi petro-dominance. But Saudi Arabia’s spare capacity to pump like crazy can only last so long. A new peer-reviewed study in the Journal of Petroleum Science and Engineering anticipates that Saudi Arabia will experience a peak in its oil production, followed by inexorable decline, in 2028 – that’s just 13 years away.

This could well underestimate the extent of the problem. According to the Export Land Model (ELM) created by Texas petroleum geologist Jeffrey J Brown and Dr Sam Foucher, the key issue is not oil production alone, but the capacity to translate production into exports against rising rates of domestic consumption. Brown and Foucher showed that the inflection point to watch out for is when an oil producer can no longer increase the quantity of oil sales abroad because of the need to meet rising domestic energy demand. In 2008, they found that Saudi net oil exports had already begun declining as of 2006. They forecast that this trend would continue. They were right. From 2005 to 2015, Saudi net exports have experienced an annual decline rate of 1.4%, within the range predicted by Brown and Foucher.

A report by Citigroup recently predicted that net exports would plummet to zero in the next 15 years. This means that Saudi state revenues, 80% of which come from oil sales, are heading downwards, terminally. Saudi Arabia is the region’s biggest energy consumer, domestic demand having increased by 7.5% over the last five years – driven largely by population growth. The total Saudi population is estimated to grow from 29 million people today to 37 million by 2030. As demographic expansion absorbs Saudi Arabia’s energy production, the next decade is therefore likely to see the country’s oil exporting capacity ever more constrained.

Read more …

Add Deutsche to Merkel’s bailout list. VW, refugees etc etc

Deutsche Bank Predicted To Cut 10,000 Jobs (Telegraph)

Deutsche Bank’s new chief executive has to focus on rapid cost cuts if he wants to turn the struggling German giant around and win over investors, according to a top banking analyst’s assessment of the lender. JP Morgan’s Kian Abouhossein expects Deutsche’s John Cryan to announce plans to cut expenses at the bank by at least €2.5bn (£1.8bn) by 2018, chop 10,000 staff and cut back on 10,000 of the external consultants paid for by the group. Mr Cryan was given the top job in June following the departure of former co-chief executives Anshu Jain and Jurgen Fitschen, who quit after a three-year reign at the bank that was marred by the biggest ever Libor fine and a failure to impress shareholders. The bank’s stock shot up 8pc on the day it was announced that the co-chiefs were leaving, although the shares have since slide to 23.7 cents, which is 14pc below the price when Mr Cryan took over.

Mr Abouhossein believes the new boss has a difficult task ahead to prove his worth to shareholders, as the investor base has been let down repeatedly in the past by executives who have failed to turn the bank around. “In our view, DB [Deutsche Bank] management should focus on creating shareholder value by growing retained earnings and the key is to cut costs – a task which DB has failed to achieve in the past, and hence, on which we believe has little ‘goodwill’ with investors,” said the analyst in a research note to investors. He argued that “Deutsche Bank’s cost management has been poor historically”, resulting in a workforce of 84,000 full time staff plus an army of 30,000 external consultants, after excluding the group’s retail arm, Postbank.

Read more …

Globalization frees up everyone!

UK Steel Industry Buckles Under The Weight Of Cheap Chinese Product (Guardian)

Britain’s steel industry has been in meltdown for years: slowing demand and a flood of cheap Chinese steel into the market has hammered high-cost western producers. About half of the 1.6bn tonnes of steel made globally each year now comes from China. But an already perilous situation for British steelmakers has exacerbated in the past year as the Chinese economy slowed sharply, forcing Beijing to aggressively chase foreign cash for its wares. Tom Blenkinsop, chairman of the all-party parliamentary group on steel and MP for Middlesbrough South and East Cleveland, summed up the dilemma: “China is pouring steel into the European and world market for any currency it can get.” Flooding the market with cheap Chinese product has forced the price of slab steel down by 45% in just 12 months, from $500 (£330) a tonne to about $280.

As a result, China’s steel exports have grown 53% in the last year. In Britain, imports of Chinese steel have ballooned from 2% of UK demand in 2011 to 8% this year. This influx of cheap steel is a threat to all but the fittest western players – bad news for SSI UK, which is one of the weakest. Britain’s second biggest steelmaker has confirmed plans to axe 1,700 jobs and mothball its Redcar plant. It threatens to bring the curtain down on 160 years of steelmaking in the Teesside region of north-east England. It is the latest grisly chapter for Britain’s once mighty steel industry. Steel produced on Teesside was used to build well-known UK structures including Birmingham’s Bullring and Canary Wharf in east London. However, the industry now employs about 20,000 workers, a 10th of the number employed in the sector during the 1970s.

Read more …

As if anyone cares apart from those who seek to turn green into green.

VW Stock to Be Removed From Dow Jones Sustainability Indexes (Bloomberg)

Volkswagen AG’s stock will be removed from the Dow Jones Sustainability indexes after the automaker cheated on emissions tests. The Sept. 18 admission by VW that it systematically manipulated U.S. emissions tests prompted a review of its status, S&P Dow Jones Indices LLC and RobecoSAM said in a statement Tuesday. The stock will be pulled after the close of trading Oct. 5 from the DJSI World, DJSI Europe and all other related indexes, according to the statement. S&P Dow Jones Indices and RobecoSAM manage the Dow Jones sustainability indexes, which track the performance of companies that rank the best in their industries in terms of economic, environmental and social criteria.

The Dow Jones Sustainability World Index, introduced in 1999, was the first global such benchmark, according to the companies. Volkswagen’s stock has plunged 39% since Sept. 18, cutting the company’s market value by €27 billion, and prosecutors in Germany said Monday that they’ve started a criminal probe of the company that includes an investigation of former Chief Executive Officer Martin Winterkorn.

Read more …

Jim’s dead on on Putin.

Tick Tick Tick (Jim Kunstler)

Did Charlie Rose look like a fucking idiot last night on 60-Minutes, or what, asking Vladimir Putin how he could know for sure that the US was behind the 2014 Ukraine coup against President Viktor Yanukovych? Maybe the idiots are the 60-Minutes producers and fluffers who are supposed to prep Charlie’s questions. Putin seemed startled and amused by this one on Ukraine: how could he know for sure? Well, gosh, because Ukraine was virtually a province of Russia in one form or another for hundreds of years, and Russia has a potent intelligence service (formerly called the KGB) that had assets and connections threaded through Ukrainian society like the rhizomorphs of the fungus Armillaria solidipes through a conifer forest. Gosh, Charlie, it’s like asking Obama whether the NSA might know what’s going on in Texas.

And so there is Vladimir Putin, a former KGB officer, having to spell it out for the American clodhopper super-journalist. “We have thousands of contacts with them. We know who and where, and when they met with someone, and who worked with those who ousted Yanukovych, how they were supported, how much they were paid, how they were trained, where, in which country, and who those instructors were. We know everything.” The only thing Vlad left out of course was the now-world-famous panicked yelp by Assistant Secretary of State Victoria Nuland crying, “Fuck the EU,” when events in Kiev started getting out of hand for US stage-managers. But he probably heard about that, too. Charlie then voice-overed the following statement: “For the record, the US has denied any involvement in the removal of the Ukrainian leader.”

Right. And your call is important to us. And your check is in the mail. And they hate us for our freedom. This bit on Ukraine was only a little more appalling than Charlie’s earlier segment on Syria. Was Putin trying to rescue the Assad government? Charlie asked, in the context of President Obama’s statement years ago that “Assad has to go.” Putin answered as if he were explaining something that should have been self-evident to a not-very-bright high school freshman: “To remove the legitimate government would create a situation which you can witness in other countries of the region, for instance Libya, where all the state institutions have disintegrated. We see a similar situation in Iraq. There’s no other solution to the Syrian crisis than strengthening the government structure.”

Read more …

And Putin’s dead on when it comes to distorted western power games.

Putin: West’s Rampant ‘Egotism’ To Blame For Syria, Ukraine, Isis (Guardian)

“Egotism” was a word Vladimir Putin used more than once as he gave a thinly veiled dressing down to the United States on Monday. His speech covered little new ground but sharpened his critique of the current world order and called on the world to come together to fight terrorism in the Middle East. Putin bemoaned “a world in which egotism reigns supreme” and railed against the arrogant hubris of the west. Putin has been giving much the same speech since he first laid out his grievances in February 2007: the “unipolar” world in which Washington dominates, he says, has led to a more dangerous world than that of the cold war, when an imperfect but useful balance stopped any one country from dominating.

This speech, his first to the United Nations general assembly since 2005, comes as Putin visits the US for the first time since the Ukraine crisis prompted acrimony, mistrust and sanctions. It was notable for its intonation. Putin adopted the tone of a wise elder, alternately angered by the bellicosity and saddened by the naivety of the west. “You want to ask the people who created this situation: ‘Do you at least understand what you’ve done?’ But I fear that the question would just hang in the air, because after all, they have not turned their back on policies based on self-certainty, a sense of superiority and impunity.” The chaos in the Middle East and the rise of the Islamic State? That was the fault of the west, who armed those it naively thought to be secular freedom fighters.

The military conflict in Ukraine (or, as Putin put it, the “armed coup organised from abroad followed by civil war”)? Also down to the meddling of the west. Washington, said Putin, was repeating the mistakes of the Soviet Union by trying to export its own model of development to other countries. It has forced post-Soviet countries to make a “false choice between east and west”, sowing chaos and prompting unrest, he said. It was a description of events that would not have gone down well with the Ukrainian delegation – though they were not there to hear it, having walked out before Putin took to the podium.

Read more …

Obama’s speech at the UN yesterday was an exercise in severe embarrassment to himself and the US.

Obama Deifies American Hegemony (Paul Craig Roberts)

On this 70th anniversary of the UN, I have spent much of the day listening to the various speeches. The most truthful ones were delivered by the presidents of Russia and Iran. The presidents of Russia and Iran refused to accept the Washington-serving reality or Matrix that Obama sought to impose on the world with his speech. Both presidents forcefully challenged the false reality that the propagandistic Western media and its government masters seek to create in order to continue to exercise their hegemony over everyone else. What about China? China’s president left the fireworks to Putin, but set the stage for Putin by rejecting US claims of hegemony: “The future of the world must be shaped by all countries.” China’s president spoke in veiled terms against Western neoliberal economics and declared that “China’s vote in the UN will always belong to the developing countries.”

In the masterly way of Chinese diplomacy, the President of China spoke in a non-threatening, non-provocative way. His criticisms of the West were indirect. He gave a short speech and was much applauded. Obama followed second to the President of Brazil, who used her opportunity for PR for Brazil, at least for the most part. Obama gave us the traditional Washington spiel: “The US has worked to prevent a third world war, to promote democracy by overthrowing governments with violence, to respect the dignity and equal worth of all peoples except for the Russians in Ukraine and Muslims in Somalia, Libya, Iraq, Afghanistan, Syria, Yemen, and Pakistan.” Obama declared Washington’s purpose to “prevent bigger countries from imposing their will on smaller ones.”

Imposing its will is what Washington has been doing throughout its history and especially under Obama’s regime. All those refugees overrunning Europe? Washington has nothing to do with it. The refugees are the fault of Assad who drops bombs on people. When Assad drops bombs it oppresses people, but when Washington drops bombs it liberates them. Obama justified Washington’s violence as liberation from “dictators,” such as Assad in Syria, who garnered 80% of the vote in the last election, a vote of confidence that Obama never received and never will. Obama said that it wasn’t Washington that violated Ukraine’s sovereignty with a coup that overthrew a democratically elected government. It was Russia, whose president invaded Ukraine and annexed Crimera and is trying to annex the other breakaway republics, Russian populations who object to the Russophobia of Washington’s puppet government in Ukraine.

[..] Did the UN General Assembly buy it? Probably the only one present sufficiently stupid to buy it was the UK’s Cameron. The rest of Washington’s vassals went through the motion of supporting Obama’s propaganda, but there was no conviction in their voices. Vladimir Putin would have none of it. He said that the UN works, if it works, by compromise and not by the imposition of one country’s will, but after the end of the Cold War “a single center of domination arose in the world”—the “exceptional” country. This country, Putin said, seeks its own course which is not one of compromise or attention to the interests of others. In response to Obama’s speech that Russia and its ally Syria wear the black hats, Putin said in reference to Obama’s speech that “one should not manipulate words.” Putin said that Washington repeats its mistakes by relying on violence which results in poverty and social destruction. He asked Obama: “Do you realize what you have done?”

Read more …

UBS to get lenient treatment, squeal on all others in a LIBOR repeat.

Barclays, HSBC Named In Swiss Precious Metals Price Fixing Investigation (TiM)

UK banks Barclays and HSBC are among seven financial institutions being investigated by Swiss officials amid allegations of price fixing in the precious metals market. According to the Bern-based Weko commission, the probe will look at possible collusion of bid/ask spreads in the metals market for gold, silver, platinum and palladium. Also under investigation are two Swiss banks, UBS and Julius Baer, as well as three foreign banks – Deutsche Bank, Morgan Stanley and Mitsui. Weko said in a statement: ‘We have indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned.’ Weko said it was looking at what effects any possible collusion would have had on the Swiss market.

Findings are expected to be published by 2017 and banks found to have flouted Switzerland’s competition laws could be fined as much as 10% of revenue. Weko’s inquiry follows similar investigations by the European Commission and the US Department of Justice and is the latest in a long line of probes into manipulation of the precious metals and foreign exchange markets. Last year, Switzerland’s financial regulator FINMA said it had found a ‘clear attempt’ to manipulate precious metals price benchmarks during a cross-market investigation into trading at UBS. HSBC said this year that the US Department of Justice requested documents from the bank in November in relation to a criminal antitrust investigation in to precious metals.

In January, the US Commodity Futures Trading Commission also issued a subpoena to the bank, seeking documents relating to its precious metals trading operations. And in April, the European Commission issued a request for information related to HSBC’s precious metals operations and the bank is currently co-operating with authorities. The UK’s FCA has already taken action and last year fined Barclays £26million after an options trader was found to have manipulated the London gold fix.

Read more …

“I write “debated”, but this is too generous to some of those who have passed judgment on the work.”

It’s Time To Unpick Corporate Welfare (Kevin Farnsworth)

I am the person behind the second most-debated figure of the Labour leadership race – the £93bn corporate welfare bill. I write “debated”, but this is too generous to some of those who have passed judgment on the work. Once Jeremy Corbyn had begun campaigning on the basis that some of the £93bn could be saved, proper analysis and discussion gave way to myth making and conjecture, and I didn’t recognise many of the arguments that were attributed to me. Despite being mentioned at some point by just about all of the media outlets, the only journalist who contacted me before writing about my research was Aditya Chakrabortty, who wrote the original front-page splash for the Guardian based on my report.

I’m hardly surprised then, if disappointed, that publications as venerable as the Economist have got basic things confused in their rush to write off Corbyn and my research. The report was published in July by the Sheffield Political Economy Research Institute and builds on years of researching and writing about public and social policies. Each category of corporate welfare I identify – made up of the various forms of state provision that service the needs of businesses – builds on the work of British and international academics, journalists, governmental organisations, politicians, policymakers and think tanks. Businesses could not do business without huge amounts of government support.

They require legal protections, a state-backed currency, the right frameworks to hire and fire and essential infrastructure. They depend on financial backing to exploit innovations and invest. And public policies operate to socialise various corporate risks. Employers need educated and healthy workers. Unemployment benefits and pensions increase labour market flexibility, making it easier to hire, fire and retire employees. The annual Global Competitiveness Report clearly illustrates the importance of comprehensive state provision to economic growth, productivity, profitability and national competitiveness. And it is published by the World Economic Forum – the organisation that runs the Davos gathering, so hardly a mouthpiece of the left.

The £93bn estimate, in fact, excludes most of the above. It is made up only of more direct benefits and services. It doesn’t include the indirect benefits that accrue to businesses from the social welfare system and the legacy costs linked to the bank bailouts. It doesn’t even include the cost of in-work tax credits, which have been labelled corporate welfare by others, including Conservative MPs. The more direct categories of corporate welfare identified in my report include official estimates of the cost of subsidies and grants to companies, worth about £15bn a year. Beyond this, the report identifies tax benefits as a major component of corporate welfare, at £44bn. Not surprisingly, this has proved to be the most controversial category of all.

Read more …

“You are a grandson of the Jamaican soil who has been privileged and enriched by your forebears’ sins of the enslavement of our ancestors … You are, Sir, a prized product of this land and the bonanza benefits reaped by your family and inherited by you continue to bind us together like birds of a feather..”

Jamaica Seeks Billions Of Pounds In British Reparations For Slavery (Guardian)

David Cameron is facing calls for Britain to pay billions of pounds in reparations for slavery ahead of his first official visit to Jamaica on Tuesday. Downing Street said the prime minister does not believe reparations or apologies for slavery are the right approach, but the issue is set to overshadow his trade trip to the island, where he will address the Jamaican parliament. Ahead of his trip, Sir Hilary Beckles, chair of the Caricom Reparations Commission, has led calls for Cameron to start talks on making amends for slavery and referenced the prime minister’s ancestral links to the trade in the 1700s through his cousin six times removed, General Sir James Duff.

In an open letter in the Jamaica Observer, the academic wrote: “You are a grandson of the Jamaican soil who has been privileged and enriched by your forebears’ sins of the enslavement of our ancestors … You are, Sir, a prized product of this land and the bonanza benefits reaped by your family and inherited by you continue to bind us together like birds of a feather. “We ask not for handouts or any such acts of indecent submission. We merely ask that you acknowledge responsibility for your share of this situation and move to contribute in a joint programme of rehabilitation and renewal. The continuing suffering of our people, Sir, is as much your nation’s duty to alleviate as it is ours to resolve in steadfast acts of self-responsibility.”

Professor Verene Shepherd, chair of the National Commission on Reparation, told the Jamaica Gleaner that nothing short of an unambiguous apology from Cameron would do, while a Jamaican MP, Mike Henry, called on fellow parliamentarians to turn their back on Cameron if reparations are not on the agenda, noting that the Jamaican parliament has approved a motion for the country to seek reparation from Britain. “If it is not on the agenda, I will not attend any functions involving the visiting prime minister, and I will cry shame on those who do, considering that there was not a dissenting voice in the debate in parliament,” he told the newspaper.

Read more …

Sweet.

New Zealand’s New Ocean Sanctuary One Of World’s Largest Protected Areas (Gua.)

New Zealand will create one of the largest marine protected areas in the world, spanning an area of 620,000 sq km. The Kermadec ocean sanctuary will be one of the world’s most significant fully protected ecosystems, the prime minister of New Zealand, John Key, told the UN general assembly in New York. The sanctuary is in the South Pacific Ocean, about 1000km north-east of New Zealand, and expands a marine reserve that surrounds a clutch of small islands. The area is considered crucial in terms of biodiversity, featuring nearly 35 species of whales and dolphins, 150 types of fish and three of the world’s seven sea turtle species. It is also geologically significant, encompassing the world’s longest chain of submerged volcanoes and the second deepest ocean trench, plunging to 10km underwater – deeper than Mount Everest is tall.

The scale of the sanctuary will dwarf any previous New Zealand protected area, spanning twice the size of the country’s landmass. It will cover 15% of New Zealand’s exclusive economic zone. Commercial and recreational fishing will be completely banned, as will oil, gas and mineral prospecting, exploration and mining. Key’s government aims to pass legislation establishing the sanctuary next year. “The Kermadecs is a world-class, unspoiled marine environment and New Zealand is proud to protect it for future generations,” Key said.

Read more …

Every single day our shame grows bigger.

More Than 1,100 Migrants Rescued Off Libyan Coast On Monday (DW)

The Italian coast guard coordinated the rescue of 1,151 migrants in nearly a dozen separate operations on Monday off the coast of Libya, it said. In one instance, a coast guard ship picked up more than 440 people from four inflatable boats. Separately, the charity Doctors Without Borders (MSF) said one of its boats had rescued 373 people, tweeting a picture of a distressed 6-year-old child. Libya is one of the major crossing points for African migrants trying to get to Europe. The European Union is trying to combat people smuggling and will go after suspected traffickers in the international waters of the Mediterranean Sea as of next week. Beginning October 7, the next phase of what’s known as Operation Sophia will allow naval forces belonging to EU member states to board, search and seize suspicious vessels. The operation has so far centered on saving those drifting on the high seas, but will now include directly targeting trafficking operations.

Read more …