Aug 312018
 
 August 31, 2018  Posted by at 7:29 am Finance Tagged with: , , , , , , , , , , , , ,  


Vincent van Gogh Starry night 1889

 

Argentine Peso And Turkish Lira Crash, Put Pressure On Emerging Markets (CNBC)
US, China To Regulate Big Tech Firms ‘Like National Security Companies’ (CNBC)
Trumps Legal Team Preparing Counter Report To Delegitimize Mueller (ZH)
‘Vital’ US Moles in the Kremlin Go Missing! (Stephen Cohen)
Trump Is Right About “Flipping” (FFF)
France Says EU Needs Strategic Relationship With Russia On Defense (R.)
EU Says It Is Willing To Scrap Car Tariffs In US Trade Deal (Pol.eu)
China-Africa Summit To Target Investment Despite Debt Worries (AFP)
As Tesla Shares Fall, Amazon Takes Over As Most Shorted US Stock (R.)
IMF Unwavering On Greek Pension Cuts (K.)
The Three Tribes of Austerity (Varoufakis)
Trade Of Coastal Sand Is Damaging Wildlife, Coastlines Of Poorer Nations (G.)
France’s Ban On Bee-Killing Pesticides Begins Saturday (AFP)
The Ocean Cleanup Is Starting, Aims To Cut Garbage Patch By 90% By 2040 (F.)

 

 

At some point, these things start feeding upon themselves.

Argentine Peso And Turkish Lira Crash, Put Pressure On Emerging Markets (CNBC)

Emerging markets were rattled again, with the Argentine peso, Turkish lira and Indonesian rupiah tumbling overnight. The negative sentiment is set to weigh on other Asian currencies, although they will remain fairly resilient to the impact, analysts say. The peso crashed nearly 12 percent, following a domestic crisis which saw its central bank hike rates to 60 percent in an attempt to shore up its currency. Extending its steep losses this year, the lira fell 2.94 percent to a fourth straight day of declines. In Asia, India’s rupee fell to a new record low against the dollar on Friday — a more than 11 percent fall since the start of the year, and the Indonesian rupiah hit a near three-year low.

“Emerging markets will remain pressured by the Argentine peso and Turkish lira crises,” DBS analysts said in a note Friday morning. The peso is down more than 45% against the greenback this year. “Argentina has hiked rates to a record 60% to address double-digit inflation, but this would exacerbate the recession, and coupled with budget/current account deficits of around 5% of GDP, have increased the risk of for the government to default on its debt,” they added.

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Likely to be pushed hard ahead of mid terms.

US, China To Regulate Big Tech Firms ‘Like National Security Companies’ (CNBC)

The U.S. and China may be at odds on trade, but both are lining up to crack down on big tech, according to an analyst. “I think this is actually wrapped up in the trade issue, which is around national security and tech companies,” Michael Hessel, political economy analyst at Absolute Strategy Research, told CNBC’s “Squawk Box Europe” on Thursday. “There’s a growing push both within China and the U.S. to regulate some of these companies increasingly like national security companies, which could have huge implications for their business model.” President Donald Trump on Tuesday made Google his latest target in a tirade against big tech, saying the firm’s search service is “rigged” against conservatives in favor of left-leaning media.

The president subsequently took another shot at the tech giant on Wednesday, claiming it snubbed twice his State of the Union speeches, while promoting Barack Obama’s during each year of the latter’s presidency. Google later responded to this claim, saying it did promote Trump’s State of the Union address this year, but not in 2017. [..] Absolute Strategy Research’s Hessel did not expand on how he expected either country to clamp down on their respective tech industries. He said that a lack of regulation in the U.S. on tech — while the media industry is more heavily regulated — meant it could be a long-term concern for lawmakers in Washington. “I think the regulation of the tech industry is going to be a huge issue on a three-to-five year view,” Hessel said.

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2nd Special Counsel preparations.

Trumps Legal Team Preparing Counter Report To Delegitimize Mueller (ZH)

President Trump’s lawyers are preparing a rebuttal to any negative report issued by special counsel Robert Mueller following the DOJ’s probe into Russian collusion with the Trump campaign, reports the Daily Beast following an interview with Trump attorney Rudy Giuliani. Part of the rebuttal, says Giuliani, would focus on whether the “initiation of the investigation was…legitimate or not.” “According to Giuliani, the bulk of the report will be divided into two sections. One section will seek to question the legitimacy of the Mueller probe generally by alleging “possible conflicts” of interest by federal law enforcement authorities. The other section will respond to more substantive allegations of Trump campaign collusion with Russian government agents to sway the 2016 election, and obstruction of justice allegations stemming from, among other things, the president’s firing of former FBI director James Comey.” -Daily Beast

The latter section of the rebuttal will focus on Deputy Director Rod Rosenstein’s mandate when he ordered the Mueller’s investigation – though Giuliani admits he has no idea what the final report will consist of. “Since we have to guess what it is, [our report so far] is quite voluminous,” Giuliani said, claiming that he would spend much of this weekend “paring it down” and that he was editing the document created by the “whole team.” “The first half of it is 58 pages, and second half isn’t done yet…It needs an executive summary if it goes over a hundred” -Daily Beast In other words, Mueller has fair warning that the Trump administration intends to fight this tooth and nail.

The Weekly Standard’s Eric Felton offered this last month: “Appellate and constitutional lawyers David B. Rivkin, Jr. and Elizabeth Price Foley recently made a compelling case that the political bias among the FBI agents working on “Crossfire Hurricane” renders illegitimate everything flowing from that investigation. If “Crossfire was politically motivated then its culmination, the appointment of a special counsel, inherited the taint,” Rivkin and Foley wrote in the Wall Street Journal. “All special-counsel activities—investigations, plea deals, subpoenas, reports, indictments and convictions—are fruit of a poisonous tree, byproducts of a violation of due process.” Rivkin and Foley add: “That Mr. Mueller and his staff had nothing to do with Crossfire’s origin offers no cure.” -Weekly Standard

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Another fully crazy story. And yes, if such moles existed, nobody would tell the media.

‘Vital’ US Moles in the Kremlin Go Missing! (Stephen Cohen)

on August 25, the ever-eager New York Times published yet another front-page Russiagate story—one that if true would be sensational, though hardly anyone seemed to notice. According to the Times’ regular Intel leakers, US intelligence agencies, presumably the CIA, has had multiple “informants close to…Putin and in the Kremlin who provided crucial details” about Russiagate for two years. Now, however, “the vital Kremlin informants have largely gone silent.” The Times laces the story with misdeeds questionably attributed to Putin and equally untrustworthy commentators, as well as a mistranslated Putin statement that incorrectly has him saying all “traitors” should be killed. Standard US media fare these days when fact-checkers seem not to be required for Russia coverage. But the sensation of the article is that the US had moles in Putin’s office.

The real novelty of Russiagate is the allegation that a Kremlin leader, Putin, personally gave orders to affect the outcome of an American presidential election. In this regard, Russiagaters have produced even less evidence, only suppositions without facts or much logic. With the Russiagate narrative being frayed by time and fruitless investigations, the “mole in the Kremlin” may have seemed a ploy needed to keep the conspiracy theory moving forward, presumably toward Trump’s removal from office by whatever means. And hence the temptation to play the mole card again, now, as yet more investigations generate smoke but no smoking gun.

The pretext of the Times story is that Putin is preparing an attack on the upcoming November elections, but the once-“vital,” now-silent moles are not providing the “crucial details.” Even if the story is entirely bogus, consider the damage it is doing. Russiagate allegations have already delegitimized a presidential election, and a presidency, in the minds of many Americans. The Times’ updated, expanded version may do the same to congressional elections and the next Congress. If so, there is an “attack on American democracy”—not by Putin or Trump but by whoever godfathered and repeatedly inflated Russiagate.

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Common practice, but in this case questionable.

Trump Is Right About “Flipping” (FFF)

Suppose a federal criminal defendant contacts a prospective witness in a case and offers him $50,000 in return for his “cooperation” in his upcoming trial. The money will be paid as soon as the trial is over. The defendant makes it clear that he wants the witness to “tell the truth” but that his “cooperation” when he testifies at trial would be greatly appreciated. What would happen if federal officials learned about that communication and offer? They would go ballistic. They would immediately secure an indictment for bribery and witness tampering. What if the defendant says, “Oh, no, I wasn’t tampering with the witness. I specifically told him that I wanted him to tell the truth when he took the witness stand. I was just seeking his friendly ‘cooperation’ with my $50,000 offer to him.”?

It wouldn’t make a difference. Federal prosecutors would go after him with a vengeance on bribery and witness-tampering charges. And it is a virtual certainty that they would get a conviction. There is good reason for that. The law recognizes that the money could serve as an inducement for the witness to lie. Even though the defendant tells him to “tell the truth,” the witness knows that the fifty grand is being paid to him to help the defendant get acquitted, especially since it is payable after the trial is over. The temptation to lie, in return for the money, becomes strong, which is why the law prohibits criminal defendants from engaging in this type of practice.

Suppose a federal prosecutor says to a witness, “You are facing life in prison on the charges we have brought against you. But if you ‘cooperate’ with us to get John Doe, we will adjust the charges so that the most the judge can do is send you to jail for only 5 years at most. If you are really ‘cooperative,’ we will recommend that the judge give you the lowest possible sentence, perhaps even probation. Oh, one more thing, we want to make it clear that we do want you to tell the truth.” Do you see the problem? The temptation to please the prosecutor with “cooperation” becomes tremendous. If the witness can help secure a conviction of Doe, he stands to get a much lighter sentence for his successful “cooperation.” The inducement to commit perjury oftentimes takes over, notwithstanding the prosecutor’s admonition to the witness to “tell the truth.”

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Are the UK going to use this to justify Brexit?

France Says EU Needs Strategic Relationship With Russia On Defense (R.)

The European Union needs a strategic relationship with Turkey, including in defense matters, and should modernize its post-Cold War relations with Russia, French President Emmanuel Macron said on Thursday. Macron is a strong advocate for a Europe that is able to defend its strategic interests and financial independence and respond to new global economic and defense situation brought on by Donald Trump’s presidency in the United States. He has sought to improve relations with Russia’s President Vladimir Putin, although his efforts have been complicated by allegations of Russian meddling in elections from the United States to France and a nerve agent attack in Britain.

“It is in our interest for the EU to have a strategic relationship with Turkey as well as with Russia that brings stability, that will in the long term and bring more strength and coherency,” Macron said in a news conference in Helsinki alongside Finnish President Sauli Niinisto. He said the EU’s relations with Russia needed to be “brought up to date”, using the Italian word “aggiornamento”. “I think that on matters like cybersecurity, defense, strategic relationships, we could envisage the outlines of a new relationship between Russia and the EU which is coherent with the direction Europe is headed in,” Macron said.

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Not enough, says Trump.

EU Says It Is Willing To Scrap Car Tariffs In US Trade Deal (Pol.eu)

Brussels is willing to scrap tariffs on all industrial products, including cars, in its trade talks with the United States, EU trade chief Cecilia Malmström said Thursday. “We said that we are ready from the EU side to go to zero tariffs on all industrial goods, of course if the U.S. does the same, so it would be on a reciprocal basis,” Malmström told the European Parliament’s trade committee. “We are willing to bring down even our car tariffs down to zero … if the U.S. does the same,” she said, adding that “it would be good for us economically, and for them.”

Malmström’s comment went beyond what was agreed in July in the joint statement between European Commission President Jean-Claude Juncker and U.S. President Donald Trump, which only mentioned eliminating tariffs, non-tariff barriers and subsidies for “non-auto industrial goods.” [..] The EU’s car tariff of 10 percent is higher than the general U.S. auto tariff of 2.5 percent, but America imposes a 25 percent duty on light trucks and pick-ups. Malmström insisted that the discussions were not about “restarting TTIP” but aiming for “a more limited trade agreement.” “Agriculture would not be in the agreement, nor public procurement as it looks to today,” she said.

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Same as Silk Road: loading countries up with debt. Then take their assets.

China-Africa Summit To Target Investment Despite Debt Worries (AFP)

African leaders will gather in Beijing Monday for a summit focused on economic ties, granting China a feel-good photo opportunity as it comes under increasing fire for its debt-laden approach to aid in the developing world. President Xi Jinping will host leaders from across the continent for the two-day Forum on China-Africa Cooperation, which will include talks on his cherished “Belt and Road” infrastructure programme. The massive scheme, aimed at improving Chinese access to foreign markets and resources, and boosting its influence abroad, has already seen Beijing loan billions of dollars to countries in Asia and Africa for roads, railways, ports and other major building projects.

“The initiative will probably be expanded to include the whole of Africa,” said Cobus van Staden, senior researcher on Africa-China relations at the South African Institute of International Affairs. While some critics have branded the strategy a debt-trap, African leaders have long embraced Chinese investment, helping make Beijing the continent’s largest trading partner for the past decade. At the last three-yearly gathering in Johannesburg in 2015, Xi announced $60 billion of assistance and loans for Africa. This year, China will want to add more African countries to “its ever-expanding list of ‘friendly’ nations”, especially from the north and francophone west, said Adebusuyi Isaac Adeniran, an expert on the relationship at Nigeria’s Obafemi Awolowo University.

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Starting to short all of Big Tech. Buffett calling iPhones underpriced may be seen in that light.

As Tesla Shares Fall, Amazon Takes Over As Most Shorted US Stock (R.)

With Tesla’s shares briefly dipping below the $300 level on Thursday, the electric carmaker ceded its seat as the most shorted U.S. stock to Amazon.com, according to data from financial technology and analytics firm S3 Partners. Tesla short interest in dollars, calculated using the number of shares sold short and the share price, stood at $9.93 billion, on Thursday, just shy of $9.95 billion for Amazon, S3 Partners data showed. Analysts said investors were still shorting Tesla shares, or taking positions that amounted to bets the stock would keep declining. Short-sellers aim to profit by selling borrowed shares, hoping to buy them back later at a lower price.

“While there was some short covering the week after the tweet, there has still not been any significant net Tesla short covering on the Street,” said Ihor Dusaniwsky, head of research at S3 in New York. “Any traders who have closed down their positions to realize some profits have been replaced by new ones looking for continued price weakness,” he said. Tesla shares whipsawed this month after Chief Executive Elon Musk on Aug. 7 tweeted he planned to take the company private, only to abandon the idea by Aug. 24.

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Sovereign nation.

IMF Unwavering On Greek Pension Cuts (K.)

The government’s aim to suspend pension cuts due to come into effect in January is likely to fuel friction in the coming weeks, Kathimerini understands, as the IMF is adamant that the reductions should be made even if they are not required for Greece to meet budget targets. The IMF’s stance is at odds with that of European officials who are more flexible on the issue, as European Economic and Monetary Affairs Commissioner Pierre Moscovici has suggested in a series of recent comments. Indeed, according to sources, the EC’s envoy to Greece, Declan Costello, is working on a compromise that would be acceptable to the government.

The IMF has not publicly declared its position on the Greek pensions issue yet but sources say the Fund has not shifted from its stance in favor of pension cuts despite the more favorable than expected fiscal forecasts, due to fears about the Greek pension system, which remains unsustainable partially due to the country’s aging population. The IMF’s unofficial position, it seems, is that fiscal savings worth 1 percent of GDP – the value of the planned pension cuts – are not required for Greece to achieve a primary surplus of 3.5 percent of GDP but it is preferable that they be carried out and offset by countermeasures than not carried out.

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US Republicans and German social democrats have the same agenda. But the latter have all but vanished.

The Three Tribes of Austerity (Varoufakis)

The first, and best known, “austerian” tribe is motivated by the tendency to view the state as no different from a business or a household that must tighten its belt during bad times. Overlooking the crucial interdependence between a government’s expenditure and (tax) income (from which businesses and households are blissfully free), they make the erroneous intellectual leap from private parsimony to public austerity. Of course, this is no arbitrary error; it is powerfully motivated by an ideological commitment to small government, which in turn veils a more sinister class interest in redistributing risks and losses to the poor.

A second, less recognized, austerian tribe can be found within European social democracy. To take one towering example, when the 2008 crisis erupted, Germany’s finance ministry was in the hands of Peer Steinbrück, a leading member of the Social Democratic Party. Almost immediately, Steinbrück prescribed a dose of austerity as Germany’s optimal response to the Great Recession. Moreover, Steinbrück championed a constitutional amendment that would ban all future German governments from deviating from austerity, no matter how deep the economic downturn. [..] Against a background of failing banks and a mighty recession, he opined that fiscal deficits deny elected politicians “room for maneuver” and rob the electorate of meaningful choices.

The third austerian tribe is American and perhaps the most fascinating of the three. Whereas British Thatcherites and German social democrats practiced austerity in an ill-conceived attempt to eliminate the government’s budget deficit, US Republicans neither genuinely care to limit the federal government’s budget deficit nor believe that they will succeed in doing so. After winning office on a platform proclaiming their loathing of large government and pledging to “cut it down to size,” they proceed to boost the federal budget deficit by enacting large tax cuts for their rich donors. Even though they seem entirely free of the other two tribes’ deficit phobia, their aim – to “starve the beast” (the US social welfare system) – is quintessentially austerian.

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Mindless and braindead.

Trade Of Coastal Sand Is Damaging Wildlife, Coastlines Of Poorer Nations (G.)

The secretive trade of coastal sand to wealthy countries such as China is seriously damaging the wildlife of poorer nations whose resources are being plundered, according to a new study. Sand and gravel are the most extracted groups of materials worldwide after water, with sand used in the concrete and asphalt of global cities. China consumed more sand between 2011 and 2013 than the US did during the entire 20th century. India has more than tripled its annual use of construction sand since 2000. But coastal sand is also being used to make wealthy countries larger via land reclamation projects, and the cost to poorer nations is revealed in a presentation to the Royal Geographical Society’s annual conference.

Research by Melissa Marschke and Laura Schoenberger of the University of Ottawa highlights that the dredging of coastal sand from Cambodia is causing the loss of mangrove swamps, coastal erosion, and damaging local fishing. They also allege that the sheer scale of the multimillion dollar trade of sand must be illegal, given that the volumes permitted for import are being exceeded. Singapore is built on sand: its land area has grown by more than a fifth since its independence in 1965 from 581 sq km to 719 sq km in 2015, according to the researchers. Between 2007 and 2017, Singapore imported more sand from Cambodia than any other country. Sand worth US$752m was imported by Singapore from Cambodia between 2007 and 2016, according to UN data.

Cambodia is not the only place experiencing vast sand extraction. A study recently estimated that 236m cubic metres of sand were extracted from Poyang Lake in China, causing its water levels to drop dramatically. Sand miners have destroyed at least two dozen islands in Indonesia since 2005. The UK obtains about one fifth of its sand from the seabed.

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But the minister who made it possible resigned last week. Watch out.

France’s Ban On Bee-Killing Pesticides Begins Saturday (AFP)

A ban on five neonicotinoid pesticides enters into force in France on Saturday, placing the country at the forefront of a campaign against chemicals blamed for decimating critical populations of crop-pollinating bees. The move has been hailed by beekeepers and environmental activists, but lamented by cereal and sugar beet farmers who claim there are no effective alternatives for protecting their valuable crops against insects. With its ban, France has gone further than the European Union, which voted to outlaw the use of three neonicotinoids — clothianidin, imidacloprid and thiamethoxam — in crop fields. Heavily agriculture-reliant France banned these three neonicotinoids plus thiacloprid and acetamiprid, not only outdoors but in greenhouses too.

These are the only five neonicotinoid pesticides hitherto authorised for use in Europe. Introduced in the mid-1990s, lab-synthesised neonicotinoids are based on the chemical structure of nicotine, and attack the central nervous system of insects. They were meant to be a less harmful substitute to older pesticides, and are now the most widely-used to treat flowering crops, including fruit trees, beets, wheat, canola, and vineyards. In recent years, bees started dying off from “colony collapse disorder,” a mysterious scourge blamed partly on pesticides along with mites, viruses, and fungi, or some combination of these. Scientific studies have since shown that neonicotinoids harm bee reproduction and foraging by diminishing sperm quality and scrambling the insects’ memory and navigation functions.

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Watching with great interest.

The Ocean Cleanup Is Starting, Aims To Cut Garbage Patch By 90% By 2040 (F.)

A massive cleanup of plastic in the seas will begin in the Pacific Ocean, by way of Alameda, California. The Ocean Cleanup, an effort that’s been five years in the making, plans to launch its beta cleanup system, a 600-meter (almost 2,000-foot) long floater that can collect about five tons of ocean plastic per month. It’s a start. The launch date is September 8, and the Great Pacific Garbage Patch being targeted is more than 1,000 nautical miles from the launch point and on the move. The Ocean Cleanup plans to monitor the performance of the beta, called System 001, and have an improved fleet of 60 more units skimming the ocean for plastics in about a year a half. The ultimate goal of the project, founded by Dutch inventor Boyan Slat when he was 18, is to clean up 50% of the patch in five years, with a 90% reduction by 2040.

The organization will take time to learn lessons from System 001, but “we are in a big hurry,” said Lonneke Holierhoek, chief operating officer at The Ocean Cleanup. “We really see the urgency in starting the cleanup because there’s so much harm that could happen with this plastic that’s floating out there.” The total cost of System 001 is about 21 million euros ($24.6 million U.S.), according to a rep for startup. That includes design, development, production, assembly and monitoring during the first year of operation. The company will welcome corporations and philanthropists to sponsor their own cleanup system in coming years, the rep says. These systems will sport a sponsor logo and related app that follows the unit’s course through the gyre and shows how much plastic has been collected.

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Oct 262017
 
 October 26, 2017  Posted by at 9:08 am Finance Tagged with: , , , , , , , ,  


Salvador Dalí Living still life 1956

 

The Current Bond Bull Market Is The Longest In More Than 500 Years (BI)
Get Ready For A ‘Substantial’ Slowdown In The US Economy – Natixis (CNBC)
America is in Worse Financial Shape than Russia or China – Kotlikoff (SMN)
Xi Has Built Chinese Economy On ‘Foundation Of Sand’ – Kyle Bass (BBG)
China US Buying Spree Prompts Move to Toughen Deal Reviews (BBG)
S&P: Britain’s £200 Billion Consumer Debt Boom Is ‘Unsustainable’ (BI)
Mario Draghi Is Preparing For His Final Act As ECB President (BBG)
Sydney Apartment Market Has Cracked (Aus.)
New Zealand To Ban Foreign Buyers Snapping Up Existing Homes (G.)
Almost 1,400 Companies Have Left Catalonia Since October 2 (ZH)
‘Schauble Has Reduced Europe To Rubble’ – German Foreign Minister (Tel)

 

 

Enough to make you nervous?!

The Current Bond Bull Market Is The Longest In More Than 500 Years (BI)

We’re currently living through the second longest bond bull market in recorded history, and the longest since the 16th century, according to a new research paper from the Bank of England. Written by Paul Schmelzing, a Harvard PhD candidate currently working with the bank, the paper, titled “Eight centuries of the risk-free rate: bond market reversals from the Venetians to the ‘VaR shock’” — explores hundreds of years of data around real rates and bonds. “This paper presents a new dataset for the annual risk-free rate in both nominal and real terms going back to the 13th century. On this basis, we establish for the first time a long-term comparative investigation of ‘bond bull markets’,” Schmelzing writes.

The paper — which started out as an entry on the Bank of England’s staff blog, Bank Underground — argues that the current bull market in bonds is only surpassed by one longer period of growth in recorded history. “The average length of bond bull markets stands at 25.8 years, and the range falls between 61 years (1451-1511) and 12 years (1718-1729). Our present real rate bond bull market, at 34 years, is already the second longest ever recorded,” Schmelzing writes. Here’s the chart (note that blue shaded areas represent periods of bull markets):

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“If US growth slows down markedly … equity valuation and share prices will start falling.”

Get Ready For A ‘Substantial’ Slowdown In The US Economy – Natixis (CNBC)

One investment bank is urging investors to prepare for the U.S. economy to roll over as early as 2018. “The US economy will in all likelihood slow down substantially: there is a limit to the rise in the participation rate and the employment rate; real wages are slowing down,” wrote Patrick Artus, chief economist at Natixis, on Tuesday. “Investors should therefore prepare for the consequences.” Consequences of this slowdown, notes Artus, include a brief rise in interest rates, a market sell-off and a depreciating dollar. Natixis is a French corporate and investment bank headquartered in Paris. Natixis Global Asset Management oversees roughly $950 billion, according to its website. The analyst also called the current level of corporate investment “abnormally high” and suggested a downward correction.

To be sure, the more mainstream investment banks on Wall Street are not nearly as pessimistic. Wall Street foresees a positive 2.5% change in GDP in the third quarter year over year, according to the consensus estimate collected by Thomson Reuters. The Bureau of Economic Analysis will release GDP number on Friday before the bell. And none of the major banks see a recession on the horizon. The American people are even more bullish. According to CNBC’s All-American Economic Survey, optimism about the economy hit an all-time high earlier this month. Forty-three% of the public believes the economy is in excellent or good condition while the four-quarter average for every major economic metric in the poll is at a record 10-year high.

Goldman Sachs is probably the most bearish on the U.S. economy among major firms, predicting 3.9% annual global growth through 2020, but that U.S. growth will decelerate to just 1.5% annually over that time. [..] Natixis has a warning for clients in the note, “If US growth slows down markedly … equity valuation and share prices will start falling.”

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Time to get things out into the open.

America is in Worse Financial Shape than Russia or China – Kotlikoff (SMN)

America’s 2017 fiscal gap will come in near $6 trillion, nine times higher than the $666 billion deficit announced by the US Department of the Treasury last week, says Laurence Kotlikoff, an economics professor at Boston University. “Our country is broke,” says Kotlikoff, who estimates total US government debts at more than $200 trillion, when unfunded liabilities are included. “We are in worse shape than Russia, China or any developed nation.” Worse, says Kotlikoff, who has testified before Congress, government officials are well-aware that many of America’s debts and accruing liabilities are being written off the books. However, for the most part, they are keeping their mouths shut.

The upshot is a de facto “two-tier” financial reporting system, in which politicians and insiders have access to key data buried in footnotes about unfunded liabilities, which indicate that there are huge problems in the economy. The public, on the other hand, in slews of Presidential and Congressional Speeches and publications, is led to believe that while things are tough, overall everything is OK. According to Kotlikoff, a long-time activist for fiscal rectitude, the problem stems in large part from the fact that the US government has been spending almost all of Americans’ approximately $795 billion in social security payroll taxes to pay current bills, rather than investing them to fund retirees’ benefits. The upshot is that on a net basis, the US government has no money to pay all the benefits that have been promised. Politicians know that defaults will occur, they just haven’t figured out how to finesse this.

Kotlikoff, unlike most, has a solution. He believes that the US government should adopt what he calls “fiscal gap accounting”, which involves putting all future receipts and expenditures on its books. The idea is that if Americans knew about all the money that their politicians were borrowing and spending, they would be able to make better decisions as to the usefulness of those policies. If the US government produced a financial statement that listed the $200 trillion in unfunded liabilities that Kotlikoff says it owes, workers might make different decisions about how much they will save for retirement. Sadly, current de facto US government practice – inspired by Keynesian thinkers such as Paul Krugman – is for governments to spend, tax, borrow and print as much money as possible, in an effort to keep the economy perpetually running at full steam. The idea is to leave future generations to deal with the problems.

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“Today Xi is celebrated in media reports, but when future historians look back, he will be blamed for recklessly building the Chinese economy on a foundation of sand..”

Xi Has Built Chinese Economy On ‘Foundation Of Sand’ – Kyle Bass (BBG)

Hedge fund manager Kyle Bass, who has been betting against the yuan and warning of a collapse in China’s banking system, said the nation will one day come to regret handing Xi Jinping more power than any leader in decades. “Today Xi is celebrated in media reports, but when future historians look back, he will be blamed for recklessly building the Chinese economy on a foundation of sand,” Bass, founder of Hayman Capital Management, said in an email Wednesday. “Xi desperately seeks credibility, but true developed economies do not impose severe capital controls or move short-term rates hundreds of basis points overnight in attempts to manipulate their own currency.”

At a twice-a-decade congress in Beijing, China’s ruling Communist Party enshrined President Xi’s policies alongside those of former leaders Mao Zedong and Deng Xiaoping. Xi, who has sought to turn China into a global economic power and was the architect of the Belt-and-Road infrastructure drive, had his theories on “socialism with Chinese characteristics for a new era” included in China’s guiding charter. Yet, some foreign investors have been less than impressed as China’s currency has remained sheltered behind exchange restrictions and curbs on foreign investment. They’ve also pointed to China’s ever-growing pile of debt, with borrowing swelling to 260% of GDP at the end of 2016, Bloomberg Intelligence data show. Moody’s and S&P both downgraded the nation this year on risks from soaring debt.

Bass, who has called for a 30% drop in the Chinese currency, said in an interview earlier this month that he expects the government to relax its grasp on the exchange rate after the National Party Congress. He said he believed once Xi consolidates power, he’ll allow natural economic forces to play out within the banking system. “China remains an emerging backwater when it comes to global currency settlements,” he said Wednesday.

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Tech.

China US Buying Spree Prompts Move to Toughen Deal Reviews (BBG)

Lawmakers in Washington, spurred by Chinese acquisitions of American firms, are moving to broaden the government’s authority to scrutinize overseas investment in the U.S. with bi-partisan legislation set to be proposed in the coming days, according to people familiar with the matter. The bill would expand the power of a national security panel to review investments by foreigners to include joint ventures and minority stakes in companies, according to documents detailing the legislation obtained by Bloomberg. Lawmakers say the current framework for reviews conducted by the Committee on Foreign Investment in the U.S., or CFIUS, misses deals that pose national security risks because the panel focuses primarily on full acquisitions of American companies even though foreigners conduct a range of deal types in the U.S.

“Many Chinese investments are coordinated state-driven efforts to target critical American infrastructure and disrupt our defense supply-chain requirements,” said Republican Congressman Robert Pittenger of North Carolina, one of the sponsors of the legislation. “Our bi-partisan bill strengthens and modernizes CFIUS to give the government the necessary tools to better track and evaluate Chinese investments.” The Defense Department has raised concerns about Chinese investors financing American start-ups that are developing leading-edge technology in sectors with military applications like artificial intelligence, augmented reality and robotics. Those types of investments generally avoid CFIUS scrutiny because they’re not full acquisitions.

The proposal follows a drumbeat of concerns from lawmakers about recent Chinese deals in U.S. technology, agriculture and financial services. Chinese acquisitions and minority investments in the U.S. peaked in 2016 at $45.9 billion, up from $17.7 billion in 2015, according to Bloomberg data. Chinese deals in 2017 so far are behind 2016’s pace at $23.6 billion. Several Chinese deals have fallen apart this year after encountering objections from CFIUS, an interagency panel that reviews foreign acquisitions of U.S. companies for national security risks. The panel is led by the Treasury Department and includes officials from the Defense, State and Justice departments among others. While CFIUS can impose changes to deals, only the president can block them.

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Wonder where Britain will be in 5 years, 10.

S&P: Britain’s £200 Billion Consumer Debt Boom Is ‘Unsustainable’ (BI)

Double-digit growth in UK consumer debt this year should alarm British lenders, according to credit rating agency Standard and Poor’s. S&P said in a report on Tuesday that consumer credit — which constitutes borrowing like car finance and credit cards — has climbed over £200 billion this year in a low-interest rate market, and warned that losses from lenders could lead to ratings agencies downgrading UK lenders. The agency added that while near-term credit risk remains low, “the recent double-digit annual growth rate in U.K. consumer credit would be unsustainable if it continued at the same pace.” The report also highlighted the Bank of England’s concern over consumer credit levels, which have grown by 10% this year while household income growth has grown by only 2%.

“The Bank of England’s recent assessment of stressed losses on consumer credit lending, brought forward as part of its annual stress test results, also indicates that the regulator is concerned that the resilience of these portfolios may be reducing,” it said. S&P Global Ratings credit analyst Joseph Godsmark said lenders had not been seriously tested on their ability to pull back lending since the 2008 financial crisis. “Although we consider that near-term credit risk remains low, past experience shows that lenders find it hard to avoid inherent cyclicality in consumer credit, and the impact can be severe,” he said.

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End of an era.

Mario Draghi Is Preparing For His Final Act As ECB President (BBG)

Mario Draghi is preparing for the final act in his dramatic tenure as ECB president. The ECB’s meeting on Thursday to discuss how and when it should bring large-scale bond purchases to an end is one of the most keenly anticipated by investors and economists since early 2015 when the program was unveiled. The decision will be announced at 1:45 p.m. in Frankfurt and Draghi will speak 45 minutes later. It’s something of a crossroads for the ECB chief, who faced down the sovereign-debt crisis and near-deflation in the euro area but may end his term in October 2019 without reaching the central bank’s inflation goal or raising interest rates. The Governing Council looks likely to cut monthly asset purchases from 60 billion euros ($71 billion) and stretch them out for as long as capacity allows while it waits for consumer-price growth to pick up.

The president won’t want to repeat the mistake of his predecessor Jean-Claude Trichet who raised interest rates twice in his final months in charge in 2011, only for Draghi to reverse the hikes shortly after taking office. Economists in a Bloomberg survey foresee a nine-month extension of quantitative easing at around 30 billion euros a month, starting in January. There are a range of potential outcomes though – with some officials pushing for QE to end sooner, Bloomberg economists expect a six-month extension at €40 billion. Most commentators expect the ECB to keep its pledge to extend the program further if needed. The central bank is also considering highlighting a related measure: the reinvestment of the proceeds of bond holdings as they mature. That additional spending, which will average about €15 billion a month in 2018 and could run for years, could work as a shock absorber amid any market concerns about the pullback in stimulus.

Economists don’t expect any change to the forward guidance that interest rates will remain unchanged until “well past” the end of net asset purchases. They foresee a rate hike, which would be the first under Draghi’s presidency, only in the first half of 2019 at the earliest. A critical factor for the ECB is the amount of debt still available under its own rules. Some officials see room for little more than €200 billion of purchases in 2018, which would bring total holdings to around €2.5 trillion.

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It’s happening. It’ll be painful.

Sydney Apartment Market Has Cracked (Aus.)

As readers know I have been warning the nation that our banking industry is undertaking a property credit squeeze on a scale not seen for decades. For the most part the regulators and the bankers are inexperienced and are operating in silos so have not understood the combined power of the weapons they are using. Many will be shocked at the results of their actions and by what is to come. In putting numbers to the extent of the fall readers need to understand that the cracking process has been sudden and parts of the Sydney apartment market and other Sydney residential property markets have yet to receive the impact. Many will not fall as much as the big Sydney apartment estate markets, which also led the rise. If you want a headline figure, apartments sold as used apartments in the big Sydney apartment estates have fallen by at least 20%.

The fall rate for individual sales can rise to 25%. These are huge declines by any measure although in Melbourne 18 months after the 1987 share crash falls of 50% were common. However the price fall in new apartments bought either off the plan or as the developer sells a completed apartment are down in the vicinity of 12%. As I will describe later there are good reasons for the difference. And so a hypothetical apartment bought by an investor or a residential buyer for, say, $1 million in the boom (most two bedroom apartments were selling for between $1.2 million and $1.4 million) is now selling for $800,000 — a 20% decline. If I want to buy that hypothetical $1 million apartment off the plan or as a completed unit it would cost about $880,000 — a 12% decline.

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She has to amend TPP to get it done.

New Zealand To Ban Foreign Buyers Snapping Up Existing Homes (G.)

New Zealand is planning to ban foreign buyers from purchasing existing homes in an attempt to tackle a housing crisis by halting a trend among the world’s wealthy to snap up property in the country. The restrictions announced by the prime minister-designate, Jacinda Ardern, are likely to be closely watched by other countries around the world also facing housing shortages and price rises driven by foreign investors. At 37, Ardern has become New Zealand’s youngest leader for 150 years. New Zealand has become a destination for Chinese, Australian and Asian buyers and has gained a reputation as a bolthole for the world’s wealthy – who view it as a safe haven from a potential nuclear conflict, the rise of terrorism and civil unrest, or simply as a place to get away from it all.

The country has become a hotspot for wealthy Americans seeking an escape from political upheaval elsewhere, who view it as a stable nation with robust laws and far from potential conflict zones. Peter Thiel, the co-founder of PayPal and a Facebook board member and donor to Donald Trump’s campaign, is among those to have purchased property in New Zealand. Global financiers have been increasingly snapping up properties in the country. Speaking at the annual gathering of the world’s elite in Davos, Robert Johnson, the president of the Institute for New Economic Thinking, said: “I know hedge-fund managers all over the world who are buying airstrips and farms in places like New Zealand because they think they need a getaway.”

Reports by Bloomberg and the New Yorker have suggested dozens of Silicon Valley futurists are secretly preparing for doomsday, acquiring boltholes in the country. Jack Ma, the man behind Alibaba, China’s answer to Amazon and its richest man, is also reported to have shown interest in buying a home there. Land sales to foreign buyers are booming in New Zealand, with 465,863 hectares (1.16m acres) bought in 2016, an almost sixfold increase on the year before. That is the equivalent to 3.2% of farmland in a country of 4.7 million people.

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The price of freedom. Pray for peace.

Almost 1,400 Companies Have Left Catalonia Since October 2 (ZH)

A total of 1,394 companies moved their headquarters from Catalonia to other regions of Spain between 2 and 23 October, according to data from the Association of Commercial Registrars of Spain. On Monday, a total of 92 companies emerged, after recording highs at the end of last week. As El Economista reports, the vast majority (1,255) of the companies that left Catalonia had their headquarters in the province of Barcelona, while 25 left Gerona, 57 moved from Lleida and 57 did so from Tarragona. In the period between 2 and 9 October, the number of companies leaving Catalonia was 219 entities, while this figure rose to 551 companies until day 11, to 700 companies until October 16, to 805 until day 17, 917 until Wednesday 18, 1,185 until Thursday 19 and 1,302 until Friday 20. With the departures of Monday 23, there are already 1,394 companies.

The days with the greatest number of transfers of headquarters of Catalonia were 19 of October, with 268; on October 9, with 212 outgoing entities, and on October 10, with 177 companies. After the rebound experienced from day 16 (68 transfers), when the trend was that each day increased the number of exits, to the maximum of 19 (268 transfers), on Friday decreased the number of companies that changed their registered office outside of the community (117), a decline that continued this week (92 on Monday). Without taking into account weekends or holidays, every 15 minutes and a half leaves a company from Catalonia. For its part, a total of 55 companies from outside Catalonia moved their headquarters to the region between 2 and 23 October, 48 of them to the province of Barcelona. We wonder how that ratio will change after today…

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They’ve been in the same government for years. Gabriel should have spoken out sooner.

‘Schaeuble Has Reduced Europe To Rubble’ – German Foreign Minister (Tel)

Germany’s foreign minister launched an extraordinary attack on the country’s outgoing finance minister on Tuesday, exposing deep divisions within Angela Merkel’s government of the last four years. On the day Wolfgang Schäuble was elected speaker of the German parliament, Sigmar Gabriel accused him of “reducing Europe to a pile of rubble which has to put back together by others”. In an interview with several German newspapers, Mr Gabriel said the former finance minister had “succeeded in turning almost all EU member states against Germany” with his hardline stance against Eurozone bailouts. What made the outburst more remarkable was that Mr Gabriel served alongside Mr Schäuble as economy minister and vice-chancellor for much of the period he was describing.

Mr Schäuble has long been a divisive figure in European politics. As Mrs Merkel’s long-serving finance minister, he is feted in Germany for presiding over a period of economic strength. But he is hated in countries like Greece for his deep-seated aversion to bailing out the poorer performing economies of southern Europe. The foreign minister’s outburst is the first sign that Mr Schäuble’s policies were disliked much closer to home — within Mrs Merkel’s government. Mr Gabriel led his Social Democrats (SPD) into coalition with Mrs Merkel’s Christian Democrats (CDU) in 2013 — only for his party to suffer its worst ever defeat in last month’s election. Although the SPD has announced it is going into opposition, Mr Gabriel and other ministers are staying on in a caretaker government while Mrs Merkel holds talks on putting together a new coalition with the pro-business Free Democrats (FDP) and the Greens.

The 75-year-old Mr Schäuble agreed to become speaker to free up the finance ministry, which the FDP is widely expected to demand as the price for its support. He was elected unopposed in Tuesday’s first sitting of the newly elected parliament. But in a sign that Mr Gabriel had spoken for many in his party, his nomination was not applauded from the SPD benches, against tradition.

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Jan 032015
 
 January 3, 2015  Posted by at 12:55 pm Finance Tagged with: , , , , , , , ,  


Jack Delano Joliet, Illinois. Leaving the Atchison, Topeka & Santa Fe railyard 1943

Europe’s Bond Yields Fall To Lowest Since The Black Death (AEP)
Dollar Index Soars To Nearly 9-Year High (MarketWatch)
Greek And European Prospects For 2015 (Varoufakis)
Lithuania Joins Eurozone Despite 40% Of Population Being Against (RT)
Obama Sanctions North Korea For Sony Hack It Didn’t Perpetrate (Zero Hedge)
Oliver Stone’s New Movie: “Ukraine: The CIA Coup” (Zero Hedge)
China Zombie Factories Kept Open To Give Illusion Of Prosperity (FT)
Why The Stock Market Casino Is Dangerous: Looney Tunes And Sand Dunes (Stockman)
As Oil Price Drops, Good Times Run Out for Sand Producers (WSJ)
The ‘Shock’ That Awaits Pensioners At Retirement (BBC)
Michael Hudson: The War on Pensions – The US Budget Anti-Pension Law (NC)
New Consumer Debt Reaches Seven-Year High In UK (Guardian)
Right Wing In Europe Could Bring ‘Turmoil’ (CNBC)
General Motors: A New Year, A New Series Of Recalls (Reuters) <
Failure To Stop Petrobras Scandal Could Haunt Brazil’s Rousseff (Reuters)
The Imperial Collapse Playbook (Dmitry Orlov)
South Australia ‘Incredibly Dangerous’ Wildfires Worst Since 1983 (Bloomberg)

“Nothing like this has been seen in European history since the 14th century, after the depletion of silver mines set off a slow monetary contraction, followed by Edward III’s default on debts to Italian banks and the Black Death soon after..”

Europe’s Bond Yields Fall To Lowest Since The Black Death (AEP)

Bond yields have plummeted to record lows across the eurozone as deflation becomes lodged in the system and markets bet on a blitz of asset purchases by the European Central Bank this month. German five-year yields dropped below zero for the first time ever, touching -0.007% on the first day of new year trading, implying that investors are willing to pay the German government to store their money for the rest of this decade. Italian, Spanish and Portuguese yields have seen spectacular drops over the past two trading days. The French state can borrow for five years at a rate of 0.13%, and Ireland can do so at 0.32%. Nothing like this has been seen in European history since the 14th century, after the depletion of silver mines set off a slow monetary contraction, followed by Edward III’s default on debts to Italian banks and the Black Death soon after, compounding a deflationary collapse.

“What we are seeing is the ‘Japanification’ trade,” said Andrew Roberts, credit chief at RBS. “The eurozone is sinking into corrosive deflation and it is too late to stop. We think the inflation rate in December may already have been negative. The ECB are in trouble, and they know it.” Mario Draghi, the ECB’s president, told Germany’s Handelsblatt that a slip into deflation “cannot be ruled out completely” and admitted that the bank is at mounting risk of breaching its price stability mandate. Mr Draghi said the ECB is “making technical preparations” to boost its balance sheet in early 2015, but offered no fresh clues on how much it will be or whether the measures will include full quantitative easing in the form of sovereign bond purchases.

Investors have taken his comments as a strong hint of QE as soon as this month, even though he repeated his usual caveat that new measures will be undertaken only “should it become necessary to further address risks of a too prolonged period of low inflation”. His interview may have been the trigger for the latest dash for EMU sovereign debt. There are not enough bonds to buy from certain countries if the ECB sweeps into the market on a grand scale. Bank of America said there would be an acute shortage of German debt since Berlin plans to run a budget surplus this year and will therefore be retiring bonds gradually instead of issuing them. The ECB would quickly run out of Latvian or Greek bonds trading on the open market. The US bank predicted bond purchases of between €180bn and €360bn a year, warning that the economic outlook will “deteriorate substantially” if the ECB is prevented from carrying out QE for political reasons.he said.

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On its way to parity.

Dollar Index Soars To Nearly 9-Year High (MarketWatch)

The U.S. dollar soared Friday, building on big gains scored in 2014, on expectations the Federal Reserve will raise interest rates while the ECB and Bank of Japan continue to loosen monetary policy in the year ahead. The ICE dollar index rose to 91.11, up from 90.27 in late North American trade on Wednesday and marking its highest level since March 2006, according to FactSet data. The index rose almost 13% in 2014, to mark its best yearly gain since 2005. “We have entered ‘15 with the same themes that we ended last year, namely positive U.S. sentiment fueling U.S. dollar gains,” wrote Jeremy Stretch, strategist at CIBC in London. Meanwhile, the euro “remains bedeviled by broad-based uncertainty as the Japanese yen remains on the defensive as the Bank of Japan maintains that they still have various tools to ease policy,” he said.

The euro kicked off 2015 on a downbeat note, falling to its lowest level versus the dollar since 2010, after European Central Bank President Mario Draghi hinted that the bank is moving closer to launching a full-scale quantitative easing program. The shared currency fell to $1.2001, down from $1.2099 on Wednesday, its lowest level since 2010. The euro’s weakness on Friday continued a trend seen in 2014, when it lost 12.2% against the dollar on expectations the ECB will act in early 2015 to implement full-blown quantitative easing, to help avert outright deflation in the eurozone. Renewed political turmoil in Greece, which faces a snap general election in January, is also weighing on the shared currency.

Draghi spoke about low inflation in an interview with German newspaper Handelsblatt, published on Friday, in which he said the eurozone remains in danger of falling into a downward spiral of declining consumer prices. “The risk that we do not fulfill our mandate of price stability is higher than six months ago,” he said in the interview. To fight off the risk of deflation, the central bank is therefore preparing to “adjust the scope, pace and composition of measures at the start of 2015, should this be necessary to respond to a too-long period of low inflation,” the ECB president said.

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“The threat to a SYRIZA government will not come from the markets. Remember: Greece is bankrupt and is not borrowing from private investors. [..] the threat to a SYRIZA government comes from the ECB, from the EU and from Berlin.”

Greek And European Prospects For 2015 (Varoufakis)

European media often speak of the “Greek recovery” and the growth of competitiveness of the country to try to persuade the public opinion about the effectiveness of austerity and structural reforms imposed by the Troika. Considering the macroeconomic data, however, we find a youth unemployment above 50%, a negative inflation rate and a debt-deflation spiral out of control. How is it possible to speak of “recovery” when three Greek citizen out of five have exceeded the poverty line? Over the past two years, no fact could get in the way of the EU propaganda machine which, approximately eighteen months ago, went into overdrive in an attempt to shore up the Samaras government, terrified at the prospect of a new government in Athens that insists of speaking truth to power. Have you noticed how the ‘Greek Success Story’ narrative disappeared once elections became inevitable? What kind or ‘recovery’ was it that went up in a puff of smoke the moment an election appeared over the horizon?

The answer is: a ‘recovery’ that existed only in the realm of propaganda. A ‘recovery’ that was engineered by means of two new bubbles, one in the bond market the other in the market for Greek banking shares – bubbles that burst the moment the Greek people seemed as if they were to have a chance to express what they felt about the said ‘recovery’ in the polling stations. A ‘recovery’ evidenced in one quarter’s positive GDP growth (equal to 0.7%), after seven years of continuous decline, which was due to the sad fact that nominal GDP fell – but for the first time it fell less than average prices did. So, let’s be frank: There was no recovery. What we did have was a monstrous denial that was functional to the story Mrs Merkel wanted to convey to European citizens: If austerity worked even in Greece, it must be the right cure for every European realm, and it must thus be accepted unthinkingly by every European – especially the… Italians.

In Greece there will be a general election next January 25, 2015. According to the latest polls, SYRIZA, the main opposition party critic of the austerity measures imposed by the Troika, could be the winner. But, victory at the polls could be precluded by the speculative attack of the markets on spread, aimed at creating a climate of terror among the public. What remains of democracy in this oligarchic regime of the European Union? And the same scenario could be repeated in other countries with those parties critical of the institutional architecture of the EU? The threat to a SYRIZA government will not come from the markets. Remember: Greece is bankrupt and is not borrowing from private investors.

When you do not borrow, you do not care about the interest rate! No, the threat to a SYRIZA government comes from the ECB, from the EU and from Berlin. Days after its election, there is a strong chance that our European partners’ officials, in violation of democracy’s – and logic’s – most basic principles, will threaten the new Athens government with a shutdown of Greece’s banking system until and unless it bows to their will. This is far, far worse, and morally more reprehensible, than being terrorised by the markets. Investors have every right to demand high interest rates in order to lend you money. Fellow democratic governments and unelected central bankers have no right to threaten a newly elected government with Armageddon if it dares ask for a renegotiation of an unsustainable loan agreement with the EU, the ECB and the IMF.

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HA HA! “EU economic affairs commissioner Pierre Moscovici said that in joining the euro, the Lithuanian people are “choosing to be part of an area of stability, security and prosperity.“

Lithuania Joins Eurozone Despite 40% Of Population Being Against (RT)

Lithuania has celebrated the New Year by joining the eurozone. The decision is country’s bid to boost stability despite inflation fears and euro zone debt troubles. However, according to a November poll about 40% of the population opposed the move. Lithuanian Prime Minister Algirdas Butkevicius withdrew his first 10 euro bill from a Vilnius cash machine right after midnight January 1. The exchange rate is now set at one euro for 3.45 litas, the country’s old currency. Both litas and euros will circulate in the country till June. “The euro will serve as a guarantee for our economic and political security,” Butkevicius said at a ceremony which was attended by officials of other Baltic states – Estonia and Latvia.

Latvia joined the eurozone on January 1, 2014 despite opinion polls showing that a majority of the country’s population opposed the move, with just 20% strongly in favor. Estonia joined the currency bloc in 2011. “Myself, and I think, many of you feel sad that the litas, which has served us well for more than two decades, becomes history, but we have to move forward,” said Lithuania’s Finance Minister Rimantas Sadzius at the ceremony. Earlier the country’s President Dalia Grybauskaite said that joining eurozone is symbol of “deeper economic and political integration with the West.” However, not everyone in Lithuania shared the optimism of Grybauskaite.

According to a November survey released by the central bank, only 53% of the population supported the move, while 39% were against. “Financial commitments are a huge burden and increase the country’s debt. I think we should have delayed entry,” financial analyst Valdemaras Katkus told AFP. In the meantime the European Commission has put a huge banner over its headquarters in Brussels, saying “Welcome to the euro area, Lithuania!” EU economic affairs commissioner Pierre Moscovici said that in joining the euro, the Lithuanian people are “choosing to be part of an area of stability, security and prosperity.” Lithuania has already donated millions of euros to the eurozone’s rescue fund for struggling EU members, such as Greece.

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“.. this action is so stupid no amount of commentary would possibly do it justice ..”

Obama Sanctions North Korea For Sony Hack It Didn’t Perpetrate (Zero Hedge)

US foreign policy just jumped the shark: a few days after both the FBI and the US State department were humiliated when it was revealed that it wasn’t North Korea but a disgruntled, laid off Sony employee that was responsible for the “hack”, and when the best possible course of action would have been to simply let this latest embarrassing incident fade from memory, moments ago Obama – currently not working out next to a rainbow or flashing his support of “Shaka” – just signed his first executive order of 2015, imposing even more sanctions against North Korea. From Bloomberg:

President Obama signs order imposing additional sanctions on North Korea in response to country’s “efforts to undermine U.S. cyber-security and intimidate U.S. businesses and artists exercising their right of freedom of speech,” according to Treasury Dept statement. [..] Sanctions target 3 entities, 10 individuals [..] Including North Korea’s intelligence agency, arms dealer, North Korea’s representatives in Namibia, Sudan, Iran, Syria, China “Even as the FBI continues its investigation into the cyber-attack against Sony Pictures Entertainment, these steps underscore that we will employ a broad set of tools to defend U.S. businesses and citizens, and to respond to attempts to undermine our values or threaten the national security of the United States,” Treasury Sec. Lew says in statement.

That this action is so stupid no amount of commentary would possibly do it justice is quite clear, which is why we patiently await North Korean TV to escalate its comedic feud with the “monkey in a tropical jungle.” Perhaps the only silver lining is that Obama did not launch a nuclear attack on Pyongyang outright, although there is still a 2 year period until January 2017. And anything goes, especially once the NSA fabricates another YouTube clip.

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“The truth is not being aired in the West. It’s a surreal perversion of history that’s going on once again, as in Bush pre-Iraq ‘WMD’ campaign.”

Oliver Stone’s New Movie: “Ukraine: The CIA Coup” (Zero Hedge)

From Oliver Stone’s Facebook page: Excuse my absence these past weeks. A combination of overwork, prepping the Snowden movie in Germany & England, a side trip to Moscow, and a devastating head cold have laid me low. Recovering over Christmas in California; winter sun helps. Interviewed Viktor Yanukovych 4 hours in Moscow for new English language documentary produced by Ukrainians. He was the legitimate President of Ukraine until he suddenly wasn’t on February 22 of this year. Details to follow in the documentary, but it seems clear that the so-called ‘shooters’ who killed 14 police men, wounded some 85, and killed 45 protesting civilians, were outside third party agitators.

Many witnesses, including Yanukovych and police officials, believe these foreign elements were introduced by pro-Western factions – with CIA fingerprints on it. Remember the Chavez ‘regime change’/coup of 2002 when he was temporarily ousted after pro and anti-Chavez demonstrators were fired upon by mysterious shooters in office buildings. Also resembles similar technique early this year in Venezuela when Maduro’s legally elected Government was almost toppled by violence aimed at anti-Maduro protestors. Create enough chaos, as the CIA did in Iran ‘53, Chile ‘73, and countless other coups, and the legitimate Government can be toppled. It’s America’s soft power technique called ‘Regime Change 101.’

In this case the “Maidan Massacre” was featured in Western media as the result of an unstable, brutal pro-Russian Yanukovych Government. You may recall Yanukovych went along with the February 21 deal with opposition parties and 3 EU foreign minsters to get rid of him by calling for early elections. The next day that deal was meaningless when well-armed, neo-Nazi radicals forced Yanukovych to flee the country with repeated assassination attempts. By the next day, a new pro-Western government was established and immediately recognized by the US (as in the Chavez 2002 coup). A dirty story through and through, but in the tragic aftermath of this coup, the West has maintained the dominant narrative of “Russia in Crimea” whereas the true narrative is “USA in Ukraine.”

The truth is not being aired in the West. It’s a surreal perversion of history that’s going on once again, as in Bush pre-Iraq ‘WMD’ campaign. But I believe the truth will finally come out in the West, I hope, in time to stop further insanity. For a broader understanding, see Pepe Escobar’s analysis “The new European ‘arc of instability,’” which indicates growing turbulence in 2015, as the US cannot tolerate the idea of any rival economic entity. You might also see “Untold History” Chapter 10 where we discuss the dangers of past Empires which did not allow for the emergence of competing economic countries.

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No surprise here.

China Zombie Factories Kept Open To Give Illusion Of Prosperity (FT)

In the shadow of a group of enormous smokestacks and abandoned foundries, a peeling sign welcomes visitors to the Wenxi Steel Industrial Park. But in the nearby village, the working-age men and many of the women have gone, leaving only the elderly and the very young. ‘If you cut down the big tree, all the small trees around it will die’, says 69-year-old Wang Peiqing, referring to the collapse of Highsee Iron and Steel Group, which operated the foundries before its recent closure devastated the economy of a once-prosperous corner of Shanxi province in central China. The entire region relied on the steel mill; now the young people have to go and look for work across China.

Highsee stopped paying its 10,000 employees six months ago. Local officials estimate the plant supported indirectly the livelihood of about a quarter of Wenxi county s population of 400,000. Highsee was the biggest privately owned steel mill in Shanxi, accounting for 60 per cent of Wenxi s tax revenues. For those reasons, the local government was reluctant to allow the company to go out of business, even though it had been in serious financial difficulties for several years. By 2011 Highsee was already like a dead centipede that hadn t yet frozen stiff with rigor mortis, says one official. More than half the plant shut down, but it was still producing steel even though its suppliers wouldn’t deliver anything without cash up front and it was drowning in debt.

Across the vast expanses of China, similar experiences are playing out, with thousands of companies in heavy industrial sectors plagued by chronic overcapacity that should be going bust instead being propped up by local governments. With enormous power over courts, state-owned banks and local administrative departments, Communist party officials across China are prepared to go to great lengths to support the biggest failing employers in their jurisdictions. It was only last month, four years after Highsee began to flounder, that the company was finally allowed by the government to initiate bankruptcy proceedings.

In the past month alone Chinese media have reported on at least nine large steel mills that appeared to be suspended in limbo after halting production but which are forbidden from going formally bankrupt. There are large numbers of companies across China that should go bankrupt but haven’t done so, says Han Chuanhua, a bankruptcy lawyer at Zhongzi Law Office, a Beijing legal practice. The government doesn’t want to see bankruptcy because as soon as companies go bust, unemployment spikes and tax revenues disappear. By stopping companies from going bankrupt, officials are able to maintain the illusion of local prosperity, economic growth and stable taxes.

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“.. the Fed is committed to sending its interest rate change messages by pony express to speculators who operate in the nano-second based cybersphere of modern trading technology. It’s not even a contest; its a bad joke which showers the 1% with stupendous windfalls.”

Why The Stock Market Casino Is Dangerous: Looney Tunes And Sand Dunes (Stockman)

On August 4th the Wall Street Journal carried a breathless tale of how a handful of obscure oilfield suppliers were striking immense riches in the sand dunes of Wisconsin. Owing to the “shale revolution”, the stock price of an outfit that had originated in the stagnating business of supplying sand traps to golf courses, and which had been at death’s door as recently as 2011, had gone parabolic. Emerge Energy Services (EMES) presently traded at $145 per share, reflecting a red hot gain of 8.5X over its $17 IPO price fifteen months earlier. In a literal sense, silicon valley had come to the silicon dunes of Lake Michigan, as reflected in EMES’ valuation at 43X its LTM earnings.

Given the fact that EMES’ share price had most recently risen by $100 or $2.5 billion of market just since January 2014, the “momo” story was self-evidently all about upside growth, not current profits or cash flow. In fact, during its 14 quarters as a public filer, EMES had generated negative $50 million of operating cash flow after CapEx. So at a total enterprise value of $3.7 billion, the punters chasing the stock straight up the parabolic curve would seemingly have anticipated some stupendous growth indeed. Except……except they had no idea about EMES’ sustainable growth potential and didn’t care because the buyers were robots, day traders and flavor-of-the-month hedge funds.

They were piling into the stock of a company selling a form (white sand) of the second most abundant low-value commodity on planet earth for no other reason than Emerge Energy Services was another momo play on steroids. The “price action” was the investment thesis. Yet this typical momo “rip” had occurred not out of the natural elements of human greed and capitalist enterprise, but because the stock market has been destroyed by the Fed. That is, the combination of ZIRP and wealth effects “puts” have eviscerated all of the checks and balances that contain and modulate speculation in honest free markets. On the one hand, Fed policy has massively subsidized momo speculators in two powerful ways.

First, most of them operate through the options markets or employ other forms of heavy, short-term position leverage. Accordingly, their “carry” cost is close to zero, and their position leverage can be continuously rolled-over without risk. That’s because the Fed’s foolish commitment to “transparency” in pegging its policy rate means that speculators are in the catbird seat. In effect, the Fed is committed to sending its interest rate change messages by pony express to speculators who operate in the nano-second based cybersphere of modern trading technology. It’s not even a contest; its a bad joke which showers the 1% with stupendous windfalls.

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Sand ‘producers’? Is that like water producers?

As Oil Price Drops, Good Times Run Out for Sand Producers (WSJ)

“This isn’t our first rodeo” has become a catchphrase among oil-industry executives who are laying off workers and dialing back spending in the wake of tumbling crude-oil prices. But for many sand producers, this is their first time on the bucking bronco that is the cyclical energy business—and not all of them are ready for the wild ride, industry analysts say. Sand is an important ingredient in hydraulic fracturing, or fracking, which has pushed American oil output above 9 million barrels a day, rivaling the production of Saudi Arabia or Russia. Sand companies’ biggest customers used to be golf courses and glass manufacturers, but the oil boom brought energy clients to their door and now roughly 60% of business is tied to fracking, according to PacWest Consulting Partners, which forecasts sand demand.

Now that oil prices have fallen, many fracking companies are retrenching—and that is bad news for sand producers. Earlier this fall PacWest projected sand use would grow by 20% each year in 2015 and 2016. But following the plunge in oil prices, PacWest now expects sand demand to stay flat. Meanwhile, new sand mines could add another 10% on top of the existing pile, creating a glut and pushing down prices, said Samir Nangia, a principal of PacWest. Global oil prices have plunged 50% since June, as the surging supply—thanks to fracking—collided with lackluster world-wide demand for fuel this fall.

With their revenue threatened, oil drillers and fracking companies are under tremendous pressure to dial down their spending and the companies they buy sand from will be easy targets, said Karen Nickerson, an energy analyst at Moody’s. “They’re going to push on who they can,” she said. U.S. Silica Holdings Inc., which operates sands mines in Wisconsin, Illinois and Oklahoma, says it is still expecting to grow in 2015, said chief executive Bryan Shinn. Even if oil companies drill fewer wells next year, they are increasing the amount of sand they use per well, he said. “This is providing us with a backstop,” said Mr. Shinn, adding that job cuts aren’t in the cards for his company. “We’re not even talking about that. If anything we might be looking to add jobs as opportunities arise.”

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Big collapse coming.

The ‘Shock’ That Awaits Pensioners At Retirement (BBC)

The next generation of Americans to hit retirement will be ‘shocked’ when they find out how little they have to live on. A former Assistant Secretary of the Treasury warns that the US government is standing idly by. “We need to do something, we’re not doing anything,” she says. Professor Alicia Munnell, who is now director of Boston College’s Centre for Retirement Research, tells BBC World Service’s In the Balance programme that most Americans’ voluntary 401(k) pension schemes are seriously under-funded. In a new book, Falling Short, she says the only answer is to work longer and save more. But it is part of a bigger global pensions gap between what is needed to fund pensions and what is actually available in private and public pension pots.

America’s 401(k) was introduced in 1978 as a tax-efficient way of encouraging individual citizens to save for retirement. But the average 401(k) fund, to which individuals and employers contribute, stands at $111,000. That’s about enough to provide just $400 (£256) a month in retirement. On the streets of New York, we questioned people on how confident they were about their retirement income. “I’d say fairly-to-very confident,” says Mark, aged 53 from Boston. “I think we’ve done our part, put as much dough aside as possible. “In the next five to seven years we should be able to save even more – we’ll have to.”

However, Prof Munnell says the first retirees who are going to rely solely on their 401(k) are going to be “stunned” at how little that average $111,000 balance provides them in terms of monthly income. “People are going to be shocked,” she says. Hannah, a 31-year-old New Yorker says: “I think it is getting to the point now in the economy where people my age are going to have to work until they die. “I don’t think social security is going to be able to do anything by the time I retire.” While Prof Munnell says that there will always be some kind of safety net in the US, “we need to put more money in to maintain current benefit levels”.

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And that collapse comes to you courtesy of Congress and Wall Street.

Michael Hudson: The War on Pensions – The US Budget Anti-Pension Law (NC)

On the Senate’s last day in session in December, it approved the government’s $1.1 trillion budget for coming fiscal year. Few people realize how radical the new U.S. budget law was. Budget laws are supposed to decide simply what to fund and what to cut. A budget is not supposed to make new law, or to rewrite the law. But that is what happened, and it was radical. Wall Street’s representatives in Congress – the Democratic leadership as well as Republicans – took the opportunity to create an artificial crisis. The press called this “holding the government hostage.” The House – backed by the Senate – said that it would shut the government down at some future date if two basic laws were not changed. Most of the attention has been paid to Elizabeth Warren’s eloquent attack on the government guaranteeing bank trades in derivatives.

Written by Citigroup lobbyists, this puts taxpayer funds behind future bank bailouts if banks make more bad bets on complex financial derivatives, such as packaged junk mortgage loans. Critics have focused on how there must be a loser for every winner in a derivatives contract. The problem is that if banks lose, the government will bail them out just as it did in 2008. Less attention has been paid to what happens if banks win. They will win largely in making bets against pension funds. Indeed, pension funds have not been treated well by Wall Street in recent years. They are in a bind. Pension funds will fall further and further behind what theyneed to pay retirees if they do not make the impossibly high returns of 8.5%.

The guiding philosophy of pension funds has been that instead of making employers pay enough to cover the pensions they have promised, funds can make money purely financially – by Wall Street sharpies. The problem is that safe interest rates today are less than 1% for Treasury bonds. Everyithing else – stocks, corporate bonds, and hedge fund derivatives – are much more risky. And when Goldman Sachs, or JPMorgan Chase draw up a derivative for a client, their aim is to make money for themselves, not for the client. So pension funds have been at the losing end. Most funds would have done better simply to turn their money over to Vanguard in an indexed fund, and saved management fees.

At the state and local levels, pension funds in New Jersey and other states threaten to go the way of Detroit pension funds – to be cut back so that bondholders can be paid. Many corporate pension funds also are behind, because companies are using their record profits to pay higher dividends and to buy back their stocks to create price gains for speculators. But the funds most under attack are union pension funds. These are the funds that Congress has gone after. The fight is not merely to scale back pension funds – and avoid the government’s Pension Benefit Guarantee Corp (PBGC) being bailed out – but to break the power of unions to attract members or to defend them.

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And wouldn’t you know, some try to attribute this to ‘increased confidence’.

New Consumer Debt Reaches Seven-Year High In UK (Guardian)

Consumer helplines have sounded a warning after Britons ran up their highest level of new debt in November for nearly seven years, with the month’s borrowing on credit cards, loans and overdrafts hitting more than £1.25bn. National Debtline and Ste%hange said the figures from the Bank of England showed a worrying rise in consumers’ reliance on credit, and warned they expected a rush of people seeking help when the first credit card bills of the year started to arrive. Banks and credit card companies have been jostling for business with offers to attract new customers: loan rates have plummeted while balance transfer deals on credit cards have become increasingly generous. The £150bn UK credit card industry is to come under investigation this month by the Financial Conduct Authority over accusations of aggressive marketing after the watchdog suggested it had been pushing “payday loans with plastic”.

The £1.25bn net increase in unsecured borrowing during November was the biggest rise since February 2008, when Northern Rock was nationalised as the credit crunch took hold. It was the third month out of five that consumers had taken on more than £1bn of new debt. More than £980m was taken out in loans and overdrafts during the month, sharply up from the monthly average of £728m over the previous six months. Credit card lending fell to £269m, from £399m in October, but remained above the average for the previous six months. The Bank of England said over the course of three months unsecured lending had grown at its most rapid pace since October 2005, and in November was up 6.9% compared with November 2013. Howard Archer, chief UK economist at IHS Economics, said the surge in retail sales around Black Friday was probably linked to the increase in borrowing – retail experts IMRG estimated £810m was spent online during the promotional day – but he added there were also likely to be other factors behind the rise in debt.

“Relatively high consumer confidence means people have become more prepared to borrow in recent months,” he said. “It also may well be that a significant amount of people have recently been borrowing more due to the squeeze on their purchasing power coming from extended low earnings growth.” The shadow consumer minister, Stella Creasy, said the UK had a “massive looming personal debt crisis” and many households were being forced to borrow to fund living costs. “They’re not buying big fancy TVs and posh holidays – they are borrowing to cover the gap between what they earn and what they need to pay for each month,” she said. Creasy said there was a “big gaping hole at the heart of our economy” being fuelled by borrowing, and tackling problem personal debt needed to be a political priority.

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In the US, it’s already taken over the government.

Right Wing In Europe Could Bring ‘Turmoil’ (CNBC)

European leaders have joined forces to warn of the rise of right-wing political movements on the continent, amid fears of “unrest and political turmoil” in the region if their growth goes unchecked. Speaking in her traditional New Year’s address, German Chancellor Angela Merkel warned against right-wing populism and criticized recent anti-Islamic protests in the country, saying they were driven by prejudice and a hatred of foreigners. And Merkel is not the only leader aware of rise of the right among voters across Europe. Merkel’s counterparts in France and Italy have both made recent comments about the unpalatable prominence of populist movements in their countries. In their new year addresses, French President Francois Hollande attacked what he called “dangerous” populist movements, and Giorgio Napolitano, the 89 year-old outgoing Italian President, warned there was “nothing more unrealistic or dangerous” than calls for Italy to leave the euro zone.

As well as opposing immigration, many of these movements also campaign against the European Union (EU) and the single currency union, the euro zone. Examples include the Alternative for Germany (AfD) and the U.K. Independence Party (UKIP), both of which have positioned themselves as euroskeptic alternatives to the mainstream parties. But more extremist right-wing groups are also gaining in popularity in some countries, with Golden Dawn in Greece getting a boost from anger at the country’s rising unemployment and tough austerity policies, implemented as part of economic reforms. The party is often described as neo-Nazi, although it rejects this label. In countries like France, where growth remains anaemic, the political elite could face real problems from parties like the National Front, Howard Goldring, managing director of Delmore Asset Management, warned.

“The National Front is doing quite well and they are playing on popular fears (over immigration and the economy),” he told CNBC on Friday. “It’s clear that France really has problems and the economy could slow down further and, therefore, you can expect more unrest and political turmoil.” The party’s current leader, Marine Le Pen, has tried to clean up the party’s image after taking over from her father Jean-Marie Le Pen, who made several anti-Semitic comments during his tenure of the party. It comes amid growing concerns about Europe’s tentative economic recovery. Eurozone GDP grew by just 0.2% in the third quarter, on the previous quarter, and inflation remained subdued at 0.3% in November on the back of a lower oil price.

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They still recall more than they produce?!

General Motors: A New Year, A New Series Of Recalls (Reuters)

General Motors began the new year by announcing three new vehicle recalls on Thursday, as the ignition switch crisis continued to dog the automaker after millions of vehicles were recalled in 2014. No crashes or injuries were reported in the latest round of recalls involving 83,572 sport-utility vehicles and pickup trucks. GM expects that fewer than 500 will be affected by the defect, an ignition lock actuator with an outer diameter that exceeds specifications. Still, the issue could spook consumers and investors. Ignition system problems were behind the record number of recalls made in 2014 by GM, which has struggled to rebuild its reputation following its 2009 bankruptcy. The recalls hit GM’s share price, which fell 14.6% during 2014, a year in which shares of rival Ford rose about 0.5%.

GM recalled more than 2.5 million vehicles in 2014 after accidents that caused more than 40 deaths. The compensation program, which is accepting claims until Jan. 31, has received more than 2,200 claims for injuries and deaths as a result of the issue. In the primary recall announced on Thursday, the outsized ignition lock actuator can lead to the ignition key getting stuck in the “start” position. If the vehicle is driven that way and experiences a “significant jarring event,” the ignition lock cylinder could move into the “accessory” position, affecting engine power, power steering and power braking. “Also, the timing of the key movement into the accessory position relative to crash sensing could result in the air bags not deploying in certain crashes,” company spokesperson Alan Alder said in a statement.

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“Investigators say they would have uncovered even more abuses if Petrobras hadn’t refused to provide key documents.”

Failure To Stop Petrobras Scandal Could Haunt Brazil’s Rousseff (Reuters)

When federal investigators first identified signs of corruption at Petrobras in 2009, Dilma Rousseff insisted Brazil’s state-run oil company had nothing to hide. “Petrobras has one of the most accurate accounting standards in the world,” said Rousseff, who was then chairwoman of its board and is now Brazil’s president. “If it wasn’t the case, investors would not be seeking out the company as one of the great investment targets.” Today, it’s clear her confidence was misplaced. Petrobras now acknowledges it overpaid on contracts for years. Prosecutors say engineering firms paid bribes to win Petrobras contracts, systematically overcharged it to the tune of billions of dollars and funneled a cut of the money to corrupt executives, vendors and political parties, including Rousseff’s ruling Workers’ Party.

A Reuters review of a 2009 federal investigation of Petrobras, and interviews with those who conducted it, indicates Rousseff missed opportunities to stop the graft before it erupted into a crisis so big it could push Brazil’s slow-growing economy back into recession next year. Rousseff says she did not know about the corruption, or participate in it, when she was Petrobras’ chairwoman from 2003 to 2010. Opposition leaders say they believe her and that she is unlikely to face impeachment. Polls show her popularity has suffered only slightly. Still, she faces mounting scrutiny over whether she did enough to halt the corruption at Brazil’s biggest company by revenue. The scandal could haunt her in her second term as president, which began on Thursday.

Petrobras’ stock has fallen nearly 50% in the last six months and its market value is down more than 80% from its peak in 2008. Two top former executives and three dozen other suspects allegedly involved in the scheme have been indicted. The accounting standards that Rousseff praised are now in such disrepute that independent auditors have refused to certify Petrobras’ quarterly results because, pending further investigation, they are unable to put a value on its assets.

Records from the Federal Audits Court, or TCU, show that investigators detected widespread over-charging on contracts and irregular tendering practices at major Petrobras projects. They included the Abreu e Lima refinery in northeast Brazil, the biggest single investment project in Petrobras’ history. The TCU advised both the government and Petrobras’ directors in a report that was sent directly to Rousseff and her board. Investigators say they would have uncovered even more abuses if Petrobras hadn’t refused to provide key documents. The TCU’s findings were “a clear warning sign of bigger problems and likely corruption,” Saulo Puttini, who was one of the auditing officials, told Reuters. “What’s happening now is not a surprise to us at all.”

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“.. if they can’t have the run of the place, they make sure that nobody else can either, by setting up a conflict scenario that nobody there can ever hope to resolve.”

The Imperial Collapse Playbook (Dmitry Orlov)

Some people enjoy having the Big Picture laid out in front of them—the biggest possible—on what is happening in the world at large, and I am happy to oblige. The largest development of 2014 is, very broadly, this: the Anglo-imperialists are finally being forced out of Eurasia. How can we tell? Well, here is the Big Picture—the biggest I could find. I found it thanks to Nikolai Starikov and a recent article of his. Now, let’s first define our terms. By Anglo-imperialists I mean the combination of Britain and the United States. The latter took over for the former as it failed, turning it into a protectorate. Now the latter is failing too, and there are no new up-and-coming Anglo-imperialists to take over for it.

But throughout this process their common playbook had remained the same: pseudoliberal pseudocapitalism for the insiders and military domination and economic exploitation for everyone else. Much more specifically, their playbook always called for a certain strategem to be executed whenever their plans to dominate and exploit any given country finally fail. On their way out, they do what they can to compromise and weaken the entity they leave behind, by inflicting a permanently oozing and festering political wound. “Poison all the wells” is the last thing on their pre-departure checklist.

• When the British got tossed out of their American Colonies, they did all they could, using a combination of import preferences and British “soft power,” to bolster the plantation economy of the American South, helping set it up as a sort of anti-United States, and the eventual result was the American Civil War. • When the British got tossed out of Ireland, they set up Belfast as a sort of anti-Ireland, with much blood shed as a result. • When the British got tossed out of the Middle East, they set up the State of Israel, then the US made it into its own protectorate, and it has been poisoning regional politics ever since. (Thanks to Kristina for pointing this out in the comments.) • When the British got tossed out of India, they set up Pakistan, as a sort of anti-India, precipitating a nasty hot war, followed by a frozen conflict over Kashmir. • When the US lost China to the Communists, they evacuated the Nationalists to Taiwan, and set it up as a sort of anti-China, and even gave it China’s seat at the United Nations.

The goal is always the same: if they can’t have the run of the place, they make sure that nobody else can either, by setting up a conflict scenario that nobody there can ever hope to resolve. And so if you see Anglo-imperialists going out of their way and spending lots of money to poison the political well somewhere in the world, you can be sure that they are on their way out. Simply put, they don’t spend lots of money to set up intractable problems for themselves to solve—it’s always done for the benefit of others.

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That bad is bad.

South Australia ‘Incredibly Dangerous’ Wildfires Worst Since 1983 (Bloomberg)

Wildfires raging east of South Australia’s capital Adelaide are the worst the region has seen in more than 30 years, damaging homes and prompting the government to warn of “incredibly dangerous” conditions. A major emergency was declared as South Australia Premier Jay Weatherill today urged residents to leave areas threatened by fires burning out of control for a second day. Blazes have also broken out in neighboring Victoria state. “It could be a catastrophic decision to leave late,” Weatherill said in a news conference broadcast on Sky TV. “We’re dealing with an incredibly dangerous fire” in and around the southern Mount Lofty Ranges, he said.

Conditions in the area are the worst since 1983, when 75 people in the two states died in what became known as the Ash Wednesday fires, South Australia Police Commissioner Gary Burns said at the news conference. Temperatures rose over central Australia in the past week and winds are pushing that hot air south, the Bureau of Meteorology said in a statement yesterday. It forecast temperatures of more than 40 degrees Celsius (104 degrees Fahrenheit) across the southern part of the country. The nation’s hot, dry climate makes wildfires a major risk in the southern hemisphere’s summer. In February 2009, bushfires across Victoria killed 173 people and destroyed 150 homes in the worst blazes in Australian history.

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