Apr 152017
 
 April 15, 2017  Posted by at 8:48 am Finance Tagged with: , , , , , , , , , , ,  6 Responses »
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Copenhagen 1965

 


US Urges China to Open Trade After Sparing It Manipulator Tag (BBG)
US: China, Germany Must Do More To Cut Trade Surpluses (AFP)
China Shadow Banking Rebounds In March, Household Loans Surge (R.)
Record High US Multi-Family Construction Set To Wreak Havoc On Rents (ZH)
Falling US Retail Sales Cast Doubt On Further Fed Interest Rate Rise (G.)
Leaked NSA Malware Threatens Windows Users Around The World (IC)
Hackers Release Files Indicating NSA Hacked SWIFT, Global Bank Transfers (R.)
The ‘Smoking-Gun’ Quote On The Recent Syrian Gas-Attack (Zuesse)
US Insurers Sue Saudis for $4.2 Billion Over 9/11 (TAM)
Understanding Land Value Taxation (Walker)
Le Pen Ready to Be ‘Crucified’ for France (BBG)
French Prosecutors Seek To Lift Le Pen Immunity Over Expenses Inquiry (AFP)
More Than 2,000 Migrants Rescued In Dramatic Day In Mediterranean (R.)

 

 

Step away from the confrontation and still get what you want. Maybe not that stupid.

US Urges China to Open Trade After Sparing It Manipulator Tag (BBG)

The U.S. stopped short of branding China a currency manipulator, but urged the world’s second-largest economy to let the yuan rise with market forces and embrace more trade. No major trading partner is manipulating its currency for an unfair trade advantage, according to the first foreign-currency report released by the Treasury Department under President Donald Trump on Friday. It kept China, South Korea, Japan, Taiwan, Germany and Switzerland on its foreign-exchange monitoring list. “China currently has an extremely large and persistent bilateral trade surplus with the United States, which underscores the need for further opening of the Chinese economy to American goods and services,” as well as quicker reforms to boost household consumption, according to the Treasury report.

Trump declared on Wednesday that he’ll back away from a campaign promise to name China a currency manipulator, a move that would have created friction between the world’s largest economies as they try to boost trade cooperation and address North Korea’s nuclear threat. Trump, in a Wall Street Journal interview, said China hasn’t manipulated the yuan for months, while accusing nations that he didn’t identify of devaluing their currencies and saying the dollar is getting too strong.

Read more …

Germany must increase domestic demand? How? Housing bubble?

US: China, Germany Must Do More To Cut Trade Surpluses (AFP)

Even though China has not moved to keep its currency weak in the past three years, the country “has a long track record of engaging in persistent, large-scale, one-way foreign exchange intervention, doing so for roughly a decade,” the Treasury Department said. That “distortion in the global trading system… imposed significant and long-lasting hardship on American workers and companies.” With a trade surplus in goods with the United States of $347 billion last year, and continued policies that restrict free trade and foreign investment, “Treasury will be scrutinizing China’s trade and currency practices very closely.” The large goods surplus “underscores the need for further opening of the Chinese economy to American goods and services, as well as faster reform to rebalance the Chinese economy toward greater household consumption.” Beijing also will need to prove that the recent stance of not trying to weaken the currency is “a durable policy shift,” even if the renminbi begins to appreciate again.

The Treasury Department said Germany should take steps, notably spending policies, “to encourage stronger domestic demand growth,” something the country’s trading partners and the IMF have been urging for some time. Increased demand “would place upward pressure on the euro… and help reduce its large external imbalances,” increasing domestic consumption, including of imported goods. Those imbalances include its $65 billion goods trade surplus with the United States last year, and what the department calls “the world?s largest current account surplus at close to $300 billion.” The report also called on Japan to do more “to revive domestic demand and combat low inflation while avoiding a return to export-led growth.” This would include more “flexible” government spending policies, and continued reforms to boost the labor market and increase productivity of the Japanese economy.

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“Social financing”. Sure. Sounds good, right? But it‘s all shadows.

China Shadow Banking Rebounds In March, Household Loans Surge (R.)

China’s banks unexpectedly extended less credit in March than in the previous month as the government tries to contain the risks from an explosive build-up in debt and an overheating housing market. But aggregate financing, which includes bank loans as well as off-balance sheet lending, surged in March and was a record in the first quarter, raising doubts about the effectiveness of official efforts so far to clamp down on risks in the financial system. A surge in household lending in March also added to worries about whether authorities will be able to get the frenzied property market under control, even as cities roll out increasingly stringent curbs on home buying.

The central bank has raised interest rates on money market instruments and special short- and mid-term loans several times in recent months, most recently in mid-March, to contain debt risks and discourage speculation, though it is treading cautiously to avoid hurting economic growth. Outstanding bank loans grew at the slowest pace since July 2002 in March at 12.4%, while M2 money supply growth hit a more than 6-month low, reflecting the moderately tighter policy stance by the People’s Bank of China (PBOC). On the surface, the level of March new loans fell, also suggesting authorities are making some headway in weaning borrowers off endless cheap credit and coaxing debt-laden companies to deleverage.

China’s banks made 1.02 trillion yuan ($148.15 billion) in new loans in March, data showed on Friday, down from 1.17 trillion yuan in February and well below the 1.25 trillion yuan that analysts had predicted in a Reuters poll. However, banks still extended the third highest loans on record for a single quarter, totaling 4.22 trillion yuan in January-March. The first quarter is usually the busiest of the year for Chinese banks, when they have a fresh annual quota and look to lock up key clients. Loans to households surged to 797.7 billion yuan in March, according to Reuters calculations using PBOC data, accounting for 78% of all new loans in the month. That was much higher than either January or February and even the 50% of new loans in 2016.

[..] China’s total social financing (TSF), a broad measure of credit and liquidity in the economy, rocketed to 2.12 trillion yuan in March from 1.15 trillion yuan in February. For the first quarter, TSF reached a record 6.93 trillion yuan – roughly equivalent to the size of Mexico’s economy – and well above last year’s first quarter total. For analysts, that suggests a surge in off-balance sheet lending, likely in the less regulated shadow banking system, despite repeated attempts by authorities to target riskier lending in past years. Loans to companies totaled 368.6 billion yuan in March, less than half the amount of household lending, PBOC data showed. That could be an ominous signal for the economy, unless firms were finding other sources of funding.

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Bubble dynamics.

Record High US Multi-Family Construction Set To Wreak Havoc On Rents (ZH)

Softening apartment rents, particularly in the massively over-priced, millennial safe-spaces of New York City and San Francisco, have been a frequent topic of conversation for us over the past several quarters…Now, a new report from Goldman’s Credit Strategy Team, led by Marty Young, helps to highlight some of the key data points that suggest that sinking rent will likely not be just an ephemeral problem. To start, an just like almost any bubble, sinking rents are the symptom of a massive, multi-year supply bubble in multi-family housing units sparked by, among other things, cheap borrowing costs for commercial builders. Per the chart below, multi-family units under construction is now at record highs and have eclipsed the previous bubble peak by nearly 40%.

Rents have already started to rollover but we suspect the correction has only just begun.

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Consumer spending falls = money velocity goes down = deflation.

Falling US Retail Sales Cast Doubt On Further Fed Interest Rate Rise (G.)

Falling retail sales and lower inflation in the US have added to signs that the world’s biggest economy has lost momentum in recent months, casting doubt over how many more times the Federal Reserve will raise interest rates this year. Stronger takings at clothing and electronics stores in March were not enough to offset a continued drop in demand for cars, according to figures from the US government (pdf). As a result, retail sales fell for the second month running. The 0.2% drop was deeper than forecasts in a Reuters poll of economists and followed a bigger than previously reported decline of 0.3% in February. Sales were also hurt by lower demand for building materials in March, chiming with a sharp slowdown in construction hiring as parts of the US were hit by severe snowstorms. Petrol station takings also dipped in March as fuel prices fell.

The few bright spots were a 2.6% rise in takings at electronics and appliance stores and a 1% rise in clothing sales. The drop in fuel prices in March echoed a pattern seen in the UK following a fall in global oil prices last month. Cheaper pump prices were also a key factor in softer US inflation. A measure of prices in the US fell for the first time in more than a year, dipping 0.3% in March, according to figures from the Labor Department. It said falling fuel prices and mobile phone charges drove the decline in the consumer price index (CPI) and were only partially offset by rising food prices. As a result, inflation – or the pace of price changes over a year – eased to 2.4% in March from 2.7% in February. Core inflation, which strips out volatile food and energy prices, eased to 2% from 2.2% in February and was the weakest since November 2015.

The retail sales and inflation data follow news of a sharp slowdown in job creation in the US in March as the poor weather, a government hiring freeze and a faltering retail sector all appeared to put a chill on President Donald Trump’s promise to boost hiring. But the unemployment rate declined to 4.5%, the lowest rate in a decade. The latest indications that the economy slowed in the opening months of the year will give policymakers at the US central bank more to debate as they decide when to next raise interest rates.

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“Hacker Fantastic @hackerfantastic: This is really bad, in about an hour or so any attacker can download simple toolkit to hack into Microsoft based computers around the globe.”

Leaked NSA Malware Threatens Windows Users Around The World (IC)

The ShadowBrokers, an entity previously confirmed by The Intercept to have leaked authentic malware used by the NSA to attack computers around the world, today released another cache of what appears to be extremely potent (and previously unknown) software capable of breaking into systems running Windows. The software could give nearly anyone with sufficient technical knowledge the ability to wreak havoc on millions of Microsoft users. The leak includes a litany of typically codenamed software “implants” with names like ODDJOB, ZIPPYBEER, and ESTEEMAUDIT, capable of breaking into — and in some cases seizing control of — computers running version of the Windows operating system earlier than the most recent Windows 10.

The vulnerable Windows versions ran more than 65% of desktop computers surfing the web last month, according to estimates from the tracking firm Net Market Share. The crown jewel of the implant collection appears to be a program named FUZZBUNCH, which essentially automates the deployment of NSA malware, and would allow a member of agency’s Tailored Access Operations group to more easily infect a target from their desk. According to security researcher and hacker Matthew Hickey, co-founder of Hacker House, the significance of what’s now publicly available, including “zero day” attacks on previously undisclosed vulnerabilities, cannot be overstated:

“I don’t think I have ever seen so much exploits and 0day [exploits] released at one time in my entire life,” he told The Intercept via Twitter DM, “and I have been involved in computer hacking and security for 20 years.” Affected computers will remain vulnerable until Microsoft releases patches for the zero-day vulnerabilities and, more crucially, until their owners then apply those patches. “This is as big as it gets,” Hickey said. “Nation-state attack tools are now in the hands of anyone who cares to download them…it’s literally a cyberweapon for hacking into computers…people will be using these attacks for years to come.”

Read more …

Russia and China are close to launching their own competitor to SWIFT. Good timing. This is nuts.

Hackers Release Files Indicating NSA Hacked SWIFT, Global Bank Transfers (R.)

Hackers released documents and files on Friday that cybersecurity experts said indicated the U.S. National Security Agency had accessed the SWIFT interbank messaging system, allowing it to monitor money flows among some Middle Eastern and Latin American banks. The release included computer code that could be adapted by criminals to break into SWIFT servers and monitor messaging activity, said Shane Shook, a cyber security consultant who has helped banks investigate breaches of their SWIFT systems. The documents and files were released by a group calling themselves The Shadow Brokers. Some of the records bear NSA seals, but Reuters could not confirm their authenticity. Also published were many programs for attacking various versions of the Windows operating system, at least some of which still work, researchers said.

In a statement to Reuters, Microsoft, maker of Windows, said it had not been warned by any part of the U.S. government that such files existed or had been stolen. “Other than reporters, no individual or organization has contacted us in relation to the materials released by Shadow Brokers,” the company said. The absence of warning is significant because the NSA knew for months about the Shadow Brokers breach, officials previously told Reuters. Under a White House process established by former President Barack Obama’s staff, companies were usually warned about dangerous flaws. Shook said criminal hackers could use the information released on Friday to hack into banks and steal money in operations mimicking a heist last year of $81 million from the Bangladesh central bank. “The release of these capabilities could enable fraud like we saw at Bangladesh Bank,” Shook said. The SWIFT messaging system is used by banks to transfer trillions of dollars each day.

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“..if those analysts were properly consulted about the claims in the White House document they would have not approved the document going forward.”

The ‘Smoking-Gun’ Quote On The Recent Syrian Gas-Attack (Zuesse)

After detailed decimation of President Trump’s ‘intelligence’ ‘justifying’ his invasion of Syria, the MIT specialist on such intelligence-analysis, Dr. Theodore Postol, concludes:

“I have worked with the intelligence community in the past, and I have grave concerns about the politicization of intelligence that seems to be occurring with more frequency in recent times – but I know that the intelligence community has highly capable analysts in it. And if those analysts were properly consulted about the claims in the White House document they would have not approved the document going forward. I am available to expand on these comments substantially. I have only had a few hours to quickly review the alleged White House intelligence report.

But a quick perusal shows without a lot of analysis that this report cannot be correct, and it also appears that this report was not properly vetted by the intelligence community. This is a very serious matter. President Obama was initially misinformed about supposed intelligence evidence that Syria was the perpetrator of the August 21, 2013 nerve agent attack in Damascus. This is a matter of public record. President Obama stated that his initially false understanding was that the intelligence clearly showed that Syria was the source of the nerve agent attack.

This false information was corrected when the then Director of National Intelligence, James Clapper, interrupted the President while he was in an intelligence briefing. According to President Obama, Mr. Clapper told the President that the intelligence that Syria was the perpetrator of the attack was “not a slamdunk.” The question that needs to be answered by our nation is how was the president initially misled about such a profoundly important intelligence finding?

The U.S. ‘news’media hid from the public Dr. Postol’s disproof of the Obama regime’s still-continuing assertions that the 21 August 2013 sarin attack was from Syria’s government instead of from the ‘moderate rebels’ (jihadists) whom the U.S. supported. Will they hide from the U.S. public his disproof of the U.S. regime’s latest such scam backing the actual perpetrators of a war-crime — will they do now as they did then?

This issue presents a challenge to the U.S. ‘news’ media, to finally show some integrity, some honor, and expose the operations of the gang at the U.S. government’s top, instead of simply continuing to pump that gang’s propaganda. Without the continuing cooperation of America’s ‘news’media, we would not now be heading toward World War III — global nuclear war. What would be the time when these ‘news’media will do their job, instead of do what they’re being paid to do, if that time is not now.

Read more …

Even more lobbyists needed?!

US Insurers Sue Saudis for $4.2 Billion Over 9/11 (TAM)

Last year’s Justice Against Sponsors of Terrorism Act (JASTA), a bill which allowed Americans to sue Saudi Arabia in US court over their involvement in 9/11, has yielded another major lawsuit yesterday, a $4.2 billion suit filed by over two dozen US insurers related to losses sustained because of the 2001 attack. The lawsuit is targeting a pair of Saudi banks, and a number of Saudi companies with ties to the bin Laden family, accusing them of various activities in support of al-Qaeda in the years ahead of 9/11, and subsequently having “aided and abetted” the attack. The biggest target is the Saudi National Commercial Bank, which is majority state-owned.

The Saudi government heavily pressured the Obama Administration to block the JASTA last year, threatening to crash the US treasury market if it led to lawsuits, but overwhelming Congressional support still got it passed into law. While there were more than a few lawsuits already filed in the past several weeks related to JASTA, this is by far the biggest, and most previous lawsuits are still in limbo as the court and lawyers try to combine them into various class action groups. Historically, US sovereign immunity laws have prevented suits against the Saudi government related to overseas terrorism. With the release of the Saudi-related portions of the 9/11 Report last year, however, such suits were inevitable, and the federal government could no longer protect the Saudis from litigation.

Read more …

Everybody should know this.

Understanding Land Value Taxation (Walker)

Back in the 18th and 19th centuries, economists took a dim view of landowners. Influential theorists like Adam Smith, David Ricardo and John Stuart Mill saw them as a drag on economic activity, primarily because they reduced the value of other people’s economic activity (through rent) without any incentive to make an economic contribution themselves. In the late 1800s, American social theorist and economist Henry George started a movement arguing for a single land value tax (LVT) – on the unimproved value of land – to replace other forms of taxation. It was rooted in the idea that if economic activity (labour, trade etc.) is the source of tax revenues, tax inevitably becomes a drag on the very thing that creates it. And while productive members of society earn money to pay their taxes, landowners are unproductive earners who pay their taxes through land rent, which is paid by people who generate economic activity.

Rent and taxes are a ‘double whammy’ on productive people. While productive members of society earn money to pay their taxes, landowners are unproductive earners who pay their taxes through land rent, which is paid by people who generate economic activity. That means rent – like taxes – is a drag on the economy. But unlike taxes, which can be used to stimulate economic activity through public spending, rent disappears into landlords’ pockets. So apart from the relatively small economic impact from landlords’ spending, their rent takes value out of the economy and delivers little value back to it. Understandably, the Georgists (Henry George’s LVT supporters) are still going strong today.

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The Vichy comment looks odd; why go there? But do remember: French polls are meaningless by now.

Le Pen Ready to Be ‘Crucified’ for France (BBG)

Far-right candidate Marine Le Pen pulled all the stops to stem her slide in the polls, saying she’s willing to be “crucified” for her stance on absolving France for the wartime deportation of Jews, and pledging to protect the country from Islamic fundamentalists. In a wide-ranging interview Friday on France Info radio nine days before the first round of the presidential vote, the 48-year-old anti-immigration candidate expressed disappointment at what she said was U.S. President Donald Trump going back on campaign promises, while focusing mainly on well-worn themes that most strike a chord with her electorate: Islam, immigration, national identity and terrorism.

“I don’t want France to be damaged, to be humiliated, that it be held responsible when it is not responsible,” Le Pen said. “People can crucify me, I will not change my mind, I will always defend France.” The National Front candidate’s lead in the polls has been whittled away over the last few weeks, leaving her struggling to regain momentum. First-round support for both Le Pen and centrist Emmanuel Macron slipped 0.5 points to respectively 23.5% and 22.5%, according to a daily rolling poll by Ifop on Thursday. Le Pen was at 26.5% in mid-March. [..] In the radio interview, Le Pen maintained her contention that France had no responsibility for the 1942 roundup of Jews in and around Paris by French police at the request of the German occupying forces to be sent to concentration camps.

The candidate, who first made that comment on April 9, was reverting to the long-established party line that shuns any hint of repentance. Le Pen said she is “extremely sensitive to the martyrdom of the Jews,” adding that the only issue was “juridical,” whether the Vichy regime was France or not. “I consider that Vichy was not France. French people can commit crimes without France being criminal.” In the interview, Le Pen criticized Trump for changing his mind on the U.S.’s global role after he said on Wednesday that the North Atlantic Treaty Organization was “no longer obsolete” in fighting terrorism. “Undeniably he is in contradiction with the commitments he had made,” Le Pen said. Trump had said in January that NATO was “obsolete.” Among her key proposals is for France to quit the alliance.

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9 days before an election. They’re trying to make her win?!

French Prosecutors Seek To Lift Le Pen Immunity Over Expenses Inquiry (AFP)

French prosecutors have asked the European parliament to lift the immunity of the far-right presidential candidate Marine Le Pen over an expenses scandal, deepening her legal woes on the eve of the election. The move comes just nine days before France heads to the polls for a highly unpredictable vote, with Le Pen – who heads the Eurosceptic Front National (FN) – one of the frontrunners in the 23 April first round. The request was made at the end of last month after Le Pen, who is a member of the European parliament, invoked her parliamentary immunity in refusing to attend questioning by investigating magistrates. The prosecutors also made a similar request regarding another MEP from Le Pen’s party, Marie-Christine Boutonnet, who also avoided questioning.

Le Pen, who has denied misusing parliamentary funds, shrugged off the move. “It’s totally normal procedure, I’m not surprised,” she told France Info radio. The case was triggered by a complaint from the European parliament, which accuses the FN of defrauding it to the tune of about €340,000 (£290,000). The parliament believes the party used funds allotted for parliamentary assistants to pay FN staff for party work in France. In February, it said it would start docking Le Pen’s pay unless she paid the money back. The allegations appear to have had little impact on Le Pen’s campaign, dwarfed by the bigger scandal engulfing her conservative rival François Fillon.

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A day like so many others.

More Than 2,000 Migrants Rescued In Dramatic Day In Mediterranean (R.)

More than 2,000 migrants trying to reach Europe were plucked from the Mediterranean on Friday in a series of dramatic rescues and one person was found dead, officials and witnesses said. An Italian coast guard spokesman said 19 rescue operations by the coast guard or ships operated by non-governmental organizations had saved a total of 2,074 migrants on 16 rubber dinghies and three small wooden boats. The medical charity Medecins Sans Frontieres (MSF) said in a tweet that one teenager was found dead in a rubber boat whose passengers were rescued by its ship Aquarius. “The sea continues to be a graveyard,” MSF said in a Tweet. The coast guard spokesman confirmed that one person had died but gave no details. MSF said two of their ships, Aquarius and Prudence, had rescued about 1,000 people in nine boats.

Desperate refugees struggled to stay afloat after they slid off their rubber boat during a rescue operation by the Phoenix, a ship of the rescue group Migrant Offshore Aid Station (MOAS). Video footage showed rescuers jumping into the water off the coast of Libya to help them. “In 19 years of covering the migration story, I have never experienced anything like today,” said Reuters photographer Darrin Zammit Lupi, who was aboard the Phoenix. In one operation, the Phoenix rescued 134 people, all from sub-Saharan counties, he said. Those rescued by the MOAS and MSF ships were transferred to Italian coast guard ships, which had rescued other migrants, to be taken to Italian ports. According to the International Organisation for Migration, nearly 32,000 migrants have arrived in Europe by sea so far this year. More than 650 have died or are missing.

Read more …

Apr 032017
 
 April 3, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , ,  1 Response »
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Paul Wolff Frankfurt Opera House 1934

 


‘Buy Property In Sydney And You’re ‘Pretty Well Set For Life’ (WS)
Sydney Property Prices Rise Almost 20% In Past 12 Months (G.)
Australia Sticks With Blunt Instruments To Battle Housing Bubble (R.)
A ‘Sleeping Beast’ In The Markets Is About To Be Unleashed – SocGen (BI)
Commercial Real Estate Is The Next ”Big Short” (F.)
Euro Is A ‘Knife In The Ribs’ Of The French Says Le Pen (R.)
ECB Leads The Cure For Euro-Pessimism (CNBC)
Scotland Yard Examines Allegations Of Saudi War Crimes In Yemen (G.)
Greek Households Spend €40 Less Per Month On Supermarket Purchases (KTG)
Greece To Accelerate Return Of Migrants To Turkey As Arrivals Pick Up (K.)

 

 

“Once you are in the Sydney housing market, you are pretty well set then for the rest of your life.”

‘Buy Property In Sydney And You’re ‘Pretty Well Set For Life’ (WS)

How far can a desperate government go to keep the whole overleveraged edifice of a housing bubble from tumbling down and doing God-knows-what to the economy and the banks? Australia is trying to find out. The housing bubble in Sydney and Melbourne, by now among the top in the world, is taking on grotesque proportions, not only in price increases, but also in political pronouncements. So much of the economy depends on this bubble that no politician can imagine bringing it down to earth. Prices for all types of homes in Sydney jumped 19% in March year-over-year, according to CoreLogic, with houses up nearly 20% and “units” (we’d call them condos) up 15%. Sydney’s home prices have nearly doubled since 2008. In Melbourne, overall home prices jumped 16%, with houses up 17%, and condos up 5%. The index for all dwellings in Canberra and Hobart also rose in the double-digits.

In Adelaide and Brisbane, prices rose in the mid-single digits. Perth and Darwin showed declines in the 4.5% range. The CoreLogic index is not based on sales pairs, such as the Case-Shiller index in the US, or on median prices, but on its own “hedonic methodology,” which, like the other two methods, has plenty of critics. The government has its own Residential Property Price Indexes. The latest edition, released on March 21, was for Q4 2016, so a little slow. Based on the median price, the index for Sydney jumped 10.3% and for Melbourne 10.8%. Real estate is highly leveraged, and household debt is at an all-time high. Wages even in Sydney haven’t risen at the same pace. So the inevitable is beginning to happen. Affordability becomes a political issue, and delinquencies become a financial issue.

[..] On February 24, Anthony Roberts, New South Wales Minister for Planning and Housing, was speaking at the launch of a 690-unit apartment development at Olympic Park, a suburb of Sydney, heaping praise on the developer for having committed to offer 60 units first to first-time buyers. A new policy on housing affordability would be announced in the “very near future,” Roberts said. But as a first step, he threw in an incentive for first-time buyers. Instead of the normal 10% down payment, they’d only need to make 5%. “This is the beginning, this is the start,” he said. And in hyping the Sydney housing market and the importance of getting in now or be priced out forever, he also said this: “This is about fairness, and this is about enabling people to get into the Sydney housing market. Once you are in the Sydney housing market, you are pretty well set then for the rest of your life.

Read more …

Get out while you can.

Sydney Property Prices Rise Almost 20% In Past 12 Months (G.)

Sydney property prices have increased by almost 20% in just 12 months, putting the city at the front of a nationwide trend that has seen dwelling values increase by 12.9% on average. Sydney house values soared by 19.65% in the past year, and unit values increased by 15.27%. New data from CoreLogic, released on Monday, shows house values in Melbourne (up 17.15%), Canberra (13.64%), and Hobart (11.05%) have followed Sydney’s rapid rise. Only homes in Perth (-4.68%) and Darwin (-4.41%) have bucked the trend, slipping backwards over the past year. CoreLogic’s five capital city aggregate – which includes Sydney, Melbourne, Brisbane and the Gold Coast, Adelaide and Perth – shows prices for houses and units rose 12.9% on average last year.

But the news comes as the ratings agency Moody’s warned an increasing number of borrowers have fallen behind on their mortgage and car repayments, saying more borrowers are set to join them amid rising underemployment, record-low wages growth and a more difficult housing market. On Monday, Moody’s said delinquencies for prime residential mortgage-backed securities increased to 1.61% in January, from 1.57% in December, while 30-day delinquencies for car loan asset-backed securities rose to 1.80%, from 1.54% over the same period. “Weaker economic conditions in states reliant on the mining industry, rising underemployment, weak wages growth and less favourable housing market conditions will drive delinquencies higher,” vice president and senior analyst Alena Chen said on Monday.

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More like no instruments at all: “..limit new interest-only loans to 30% of total new mortgage lending..”

Australia Sticks With Blunt Instruments To Battle Housing Bubble (R.)

In their struggle to cool red-hot property prices in Australia’s big cities, authorities are ratcheting up measures that could dent the whole market but avoiding more targeted steps that have had some success in New Zealand and China. Australian regulators first focused on reining in investment loans nationally in 2015, by imposing an annual limit of 10% on how much banks could expand their investor loan book. Those steps worked for a while, but the heat is on again in Sydney, where prices are rising almost 20% a year, having more than doubled since 2008, and Melbourne, where the pace is over 15%, according to property consultant Core Logic.

That and all-time high household debt prompted the Australian Prudential Regulatory Authority (APRA) to move again on Friday, asking banks to limit new interest-only loans to 30% of total new mortgage lending, from 40% now, and promising a lot of “monitoring”, “scrutinizing” and “observing”. Industry players doubt that will do the trick. “I personally don’t think this will have a material impact,” said Simon Orbell at mortgage broker Smartmove, as prices kept rising even though it was already a tough lending market. “Maybe more needs to be done,” he added. [..] There has been market speculation that the Reserve Bank of Australia will be forced to hike interest rates, a yet blunter instrument, though record low inflation and weak wages growth make that an unattractive option. There is also political resistance to measures that could make prices actually fall, with two thirds of households owning their homes.

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Too much uncertainty to unleash it.

A ‘Sleeping Beast’ In The Markets Is About To Be Unleashed – SocGen (BI)

The bond market has been quiet. Too quiet in fact. That’s about to change, says Societe Generale’s fixed income team led by Vincent Chaigneau. “Spring is likely to be more threatening for bond investors as US data improves, political risk in Europe ebbs and investors refocus on a slow central bank exits,” the team wrote in a note to clients on Thursday. The note is titled “The Sleeping Beast.” In the wake of the U.S. Presidential election, traders priced in the prospect that Donald Trump’s agenda of a protectionist trade policy, cutting taxes, rolling back regulations, and massive infrastructure would bring back inflation to the United States. Reflecting this, the yield on 10-year Treasurys rallied more than 80 basis points, reaching a high of 2.64%, in the weeks following the election.

But for the last few months, the yield has been trapped in a tight 35 basis point range as traders take a wait-and-see approach in regards to Trump’s ability to execute his proposed agenda. “We expect that to reverse in spring, especially if Trump proves a little more effective in pushing his agenda through Congress,” Societe Generale wrote. “Treasuries too present some seasonal patterns: the average of the past five years shows the 10yT reaching a low around mid-April before bearish forces start to take over.”

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America turns on the mall.

Commercial Real Estate Is The Next ”Big Short” (F.)

A small but growing group of hedge funds are positioning themselves to profit from the collapse of the real estate market. Sounds like 2007, right? It’s actually happening right now. But this time, hedge funds (along with Deutsche Bank and Morgan Stanley) aren’t targeting subprime mortgages—they’re going after commercial real estate. It’s no secret retailers and malls have been struggling for years, but it looks like the perfect storm is set to hit them in 2017. Bearish bets against commercial loans jumped 50% year-over-year in February—and with problems piling up for malls, it’s no wonder. Around $3.5 billion in retail loans were liquidated in 2016. Investment firm Gapstow Capital said losses on mall loans have been “meaningfully higher than in other areas.” This is because malls are reliant on retailers like Macy’s, J.C. Penny and Sears. Unfortunately for these landlords, their tenants’ businesses are failing, which brings us to…

As a result of falling sales, retailers are shutting up shop at a rate that has not been seen since the 2008 financial crisis.

…and they plan to close hundreds more over the coming years, which is very bad news for malls. Most malls are dependent on one or more of these big retailers. When anchor stores close, it reduces foot traffic, and that hurts other retailers. This begins a cycle of blight, leading other tenants to leave. Alder Hill (a hedge fund started by associates of billionaire David Tepper) is bearish on commercial loans and expects 2017 to be a “tipping point.” Morningstar Credit Ratings estimates roughly 40% of the loans due this year won’t be paid. This comes at a bad time for the industry. Commercial real estate prices have been on a tear since 2009, but with vacancies rising, prices have stagnated.

This, coupled with new rules that came into effect in December (which force banks to hold at least 5% of the loans they make on their books), has caused loan growth to stall. As a result, leading retail analyst Jan Rogers Kniffen expects around one-third of American malls to close in the coming years. So, what are the implications of this commercial collapse?

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But the French love the euro. Hard sell.

Euro Is A ‘Knife In The Ribs’ Of The French Says Le Pen (R.)

French presidential candidate Marine Le Pen told a political rally on Sunday that the euro currency which she wants France to ditch was like a knife in the ribs of the French people. The leader of the eurosceptic and anti-immigrant National Front (FN) also told the rally in the city of Bordeaux that the forthcoming election for president could herald a “change in civilization”. Encouraged by the unexpected election of Donald Trump in the United States and by Britain’s vote to leave the European Union, Le Pen hopes to profit from a similar populist momentum in France, though opinion polls suggest she will lose the May 7 run-off. “We are at the mercy of a currency adapted to Germany and not to our economy. The euro is mostly a knife stuck in our ribs to make us go where others want us to go,” Le Pen said to loud cheers and applause.

Reiterating her anti-globalization and anti-immigration views, she declared: “We do not want France to be open to all commercial and human flows, without protection and borders.” A government under Le Pen’s presidency would take France out of the euro zone and bring back a national currency, hold a referendum on its EU membership and slap taxes on imports and on companies hiring foreigners. Le Pen says she would curb migration, expel all illegal migrants and restrict certain rights now available to all residents, including free education, to French citizens. She hit out at her two main opponents in the French election, independent centrist Emmanuel Macron and conservative candidate Francois Fillon, saying they belonged to “the same system” “The system is panicking because it sees people are waking up,” she said.

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Draghi slays austerity?

ECB Leads The Cure For Euro-Pessimism (CNBC)

The euro-sclerosis and the euro-pessimism are only a few of the old neologisms that got a new lease on life thanks to “reformers” and “crisis managers” who devastated the euro area economy with their – take a deep breath – “austerity growth model,” consisting of deep public spending cuts, tax hikes, jobs-destroying structural reforms and a monetary policy that should look the other way. Predictably, the area’s economy took it on the chin and went down for the count, with millions of lives destroyed by soaring poverty and destitution – until the ECB stepped in to provide the antidote to that cruel nostrum and to begin a long process of healing and recovery.

The ECB’s intervention eventually stiffened the spines, and gave some oxygen, to scared and disoriented political leaders in France, Italy, Spain and Portugal – exactly one-half of the euro area’s GDP – who abandoned the fiscal madness and structural destruction to latch on to the life jacket thrown at them by their lender of last resort. The economic recovery we see now is a result of that policy mix. At 1.7%, the euro area growth last year matched the pace of the U.S. economy and seems poised for further gains in the months ahead. The ECB-driven recovery was also reflected in steadily rising asset values. As of last Friday, the euro area equity prices (Euro Stoxx 50 in dollar terms) were 17.3% above their year-earlier level, with nearly half of that increase (7.6%) recorded since the beginning of this year.

[..] France is the next political test with the first round of elections on April 23. Again, anybody betting against the euro and the EU will lose big. According to the French media, voters are largely indifferent toward the presidential candidates, but the economy is improving and low credit costs have unleashed a real estate boom that’s triggering solid consumer spending. The French are also great fans of the euro: An opinion poll published last Tuesday (March 25) shows that 75% of the French like the European currency, and half of them are pleased with the EU, although they believe that some of their neighbors were greater beneficiaries of the whole project. The French, of course, have Germany in mind. They are looking at Germany’s huge trade surpluses and the industrial takeover by the world-beating manufacturing companies across the Rhine.

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It should be investigating British war crimes.

Scotland Yard Examines Allegations Of Saudi War Crimes In Yemen (G.)

Scotland Yard is examining allegations of war crimes by Saudi Arabia in Yemen, the Guardian can reveal, triggering a possible diplomatic row with Britain on the eve of Theresa May’s visit to the Arab state. The Metropolitan police confirmed that their war crimes unit was assessing whether criminal prosecutions could be brought over Saudi Arabia’s devastating aerial campaign in Yemen. The force’s SO15 counter-terrorism unit revealed to a London human rights lawyer that it had launched a “scoping exercise” into the claims before Maj Gen Ahmed al-Asiri’s visit to the capital last week. The revelation comes as May plans to underline Britain’s close relationship with the Saudi royal family on her visit to the Arab state this week, in which tackling the terror threat from Islamic State will be a key factor.

Speaking in advance of the trip, in which she will also visit Jordan, the prime minister said she wanted to “herald a further intensification in relations between our countries and deepen true strategic partnerships”. She argued that the intelligence relationship with Saudi Arabia had been critical, potentially saving hundreds of lives in the UK, and claimed there were huge possibilities for closer trade links as the UK moves towards leaving the European Union. May plans to stress the need for collaboration in the wake of the Westminster terror attack, while also pledging humanitarian support to Jordan to help it handle the huge volumes of refugees displaced by the Syrian conflict.

But the trip comes under the shadow of a war in Yemen that has killed more than 10,000 civilians and displaced more than 3 million people. The Saudi-led coalition has been accused of killing thousands of civilians and triggering a humanitarian catastrophe in one of the region’s poorest countries. The UK, which along with the US supports the Saudis against the Houthis, has been urged to reconsider its arms exports to Saudi Arabia in light of the bloody air campaign.

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Austerity kills people and economies.

Greek Households Spend €40 Less Per Month On Supermarket Purchases (KTG)

A significant decrease of 13% has been recorded in the amount Greek households spend for daily purchases at the country’s supermarkets. This is the logical consequence caused by low wages, high unemployment rates and increased direct and indirect taxes. Factors that have lead to impoverishment of large groups of the Greek society. Worth mentioning are the extra charges (special consumption fees) imposed as of 1.1.2017 in a variety of supermarket products like coffee. Greek households spend monthly forty euros less for their shopping at the supermarket than in the previous year. The average monthly expenditure of households at the supermarket amounts to 274 euros from 310 last year.

According to research conducted by the Economic University of Athens, the expenditure decrease has been confirmed also by the turnover of the supermarkets. The decrease in sales was 10% in January 2017. The was a slight increase of 2.9% in February, but a serious decline of 15% in March. 63% of respondents said they buy fewer products. 45.8% said they restricted to what is necessary. At the same time, 54.4% said that buy cheaper products especially following a market investigation and that they chase discount offers and products of private label. 81.5% said that they compare prices before they decide which product they will pick up from the supermarket shelf.

99.2% of consumers stated that they do research before going to the supermarket, they know in advance what to buy and they avoid impulse purchases. 38% of respondents said that they would make fewer purchases in 2017, 5% that they will increase their purchases. 57% estimate that their purchases will remain unchanged. The average expenditure per supermarket visit remains almost unchanged. Expenditure in 2017 is at an average of €50.4 euros. It was at 49.5 euros in 2016. However, the frequency of visits has declined down to 6.8 visits per month from 8.5 visits last year.

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Yes, it can still get worse.

Greece To Accelerate Return Of Migrants To Turkey As Arrivals Pick Up (K.)

As the inflow of undocumented migrants to the islands of the eastern Aegean rises with the improving weather, the government is planning action to ease the pressure on increasingly overcrowded reception centers. In the coming days, Migration Minister Yiannis Mouzalas is expected to issue a circular, banning migrants who appeal against a rejection of their application for political asylum from a voluntary repatriation scheme being run by the International Organization for Migration (IOM). Meanwhile police on the islands are boosting efforts to locate and detain migrants who face deportation to Turkey in line with an agreement signed last year between Ankara and Brussels.

Last week, a new detention center opened on Kos, the function of which will be to detain migrants facing deportation. Others awaiting the outcome of asylum applications or inclusion in the IOM’s repatriation scheme are to remain in the island’s main reception center. A similar “closed” center for migrants awaiting deportation is operating on Lesvos. However, police face a problem on Chios, which has seen arrivals from Turkey intensify in recent days, and where local residents vehemently oppose the creation of such a center. A police official told Kathimerini that the main police precinct on the island is already full of migrants and there are no other facilities to accommodate new arrivals. “We don’t know what to do,” he said.

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Dec 082016
 
 December 8, 2016  Posted by at 9:58 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Jack Delano Cafe at truck drivers’ service station on U.S. 1, Washington DC 1940


Trump Bull Market Bounty Tops $1 Trillion (BBG)
Trump Win Set Off $2 Trillion Shock Rotation to Stocks From Debt (BBG)
Wall Street’s Calling the Sheep to the Slaughter – Again! (Stockman)
The Fed Shouldn’t Be Driving US Economy – Trump Advisor Judy Shelton (CNBC)
China’s Banks Are Hiding More Than $2 Trillion in Loans (WSJ)
China’s Foreign Reserves Down 25% Since 2014 (BBG)
China: World’s Top Oil Market Is Starting to Lose Its Sheen (BBG)
The Great ‘Living Within Our Means’ Con (Abc.au)
Australia Inexorably Marching Towards Recession (Mitchell)
Federal Judge Effectively Ends Recount In Michigan (BBG)
Boris Johnson: Saudi Arabia, Iran ‘Puppeteers’ In Middle East Proxy Wars (G.)
General Strike Shuts Down Greece on Thursday (R.)
EU To Set Greece Deadline For Forced Return Of Asylum Seekers (Pol.)
Greenland’s Ice-Free Past Exposes Sea Level Rise Danger (AFP)
Giraffes Face ‘Silent Extinction’ (BBC)

 

 

Don’t be fooled. It’s just keystrokes slushing around. Nobody produced anything.

Trump Bull Market Bounty Tops $1 Trillion (BBG)

Donald Trump is doing to U.S. equity bears what seven years of economic stimulus rarely could: shut them up. Two years of paralysis has for now ended in stocks, with more than $1 trillion added to shares values since Election Day and the DJIA looking bound for 20,000. Both the Dow and S&P 500 Index jumped to fresh records Wednesday, joined by transportation companies and small caps, while banks traded at eight-year highs. Wall Street stock forecasters, more pessimistic than any time since 2013 as recently as September, are suddenly falling over themselves to push up targets and explain a market where measures of anxiety are near five-year lows. The average call of bank prognosticators is for the S&P 500 to rally 3.4% next year, with strategists at JPMorgan and Bank of Montreal calling for even bigger gains.

For investors, the question is how much credence to put in analysts whose futility in sussing out Trump’s impact on share prices was rivaled only by the inaccuracy of political polls prior to his victory. Not only has he not been the disaster many of them warned about, the rally since he defeated Hillary Clinton is now the biggest for any new president since Ronald Reagan. “What we didn’t expect was the speed and the magnitude of the so-called ‘Trump Trade,’” Doug Ramsey at Leuthold Group wrote. “The consensus hope, which we share, is that tax reform and regulatory roll-back will extend and maybe enliven an economic recovery that’s already long in the tooth.” To be sure, pinpointing Trump’s role in the rally is an inexact science, and a case could be made that his election is coinciding with the consummation of the Fed’s efforts. Among other things, annualized GDP rose 3.2% in the third quarter, the most in two years, while unemployment hit a nine-year low in November.

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“..the great reflationary rotation trade..”

Trump Win Set Off $2 Trillion Shock Rotation to Stocks From Debt (BBG)

Donald Trump’s election win sent a $2 trillion shock wave through global markets over the past month. That’s how much equities’ global market value has jumped. And that’s about the size of the loss in worth of the Bloomberg Barclays Global Aggregate Index of bonds, over the worst month for global bonds in dollar terms on record. Other assets were roiled, too: the yen plunged the most in 21 years against the dollar. It all amounted to a complete reversal of the playbooks mapped out by a bevy of analysts and investors who had anticipated a Brexit-style rush for havens in the event of a surprise Republican presidential victory. Those projections did pan out – for about eight hours, when the yen and Treasuries advanced as the vote-count momentum favored Trump.

Then the great reflationary rotation trade started, as Carl Icahn started snapping up S&P 500 futures and other investors decided that the likely new U.S. leader’s promises to cut taxes, boost spending and slash regulation would revive inflation and economic growth. Oh, and potentially force more aggressive interest-rate increases from the Fed. How lasting a pattern the new market dynamics will be is an open question, with more than a month to go before Trump takes office and plenty of potential roadblocks to his fiscal and regulatory proposals in a fractious U.S. Congress. For now, eyes turn toward next week’s Fed meeting to set the tone for the outlook as far as monetary policy goes. “It’s astounding how big the move has been,” said James Audiss at Shaw and Partners. “It’s been incredible. Now it all hinges on the Fed and the pace of those rate hikes, but for now the markets are happy to be risk-on.”

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Stockman slams the whole thing. Not looking for (another) Washington job?

Wall Street’s Calling the Sheep to the Slaughter – Again! (Stockman)

I believe the shock of Donald Trump’s election will soon be vastly exceeded by an even more shocking shutdown of Washington governance within days of the inauguration. For the first time since the 1930s there will be a crash on Wall Street and a recession on main street, but the Imperial City will be powerless to remedy either. That’s because financial history is not circular; it’s cumulative and all the fiscal and monetary artifices, expedients and frauds that can be deployed by the state to maintain the illusion of prosperity and soaring financial asset prices will have finally been exhausted. With the Fed pitifully impaled on the zero bound for 96-months running, it has become evident to even the bubble vision cheerleaders that the massive monetary stimulus of the last two decades is over and done.

The only thing left in the Fed’s arsenal is sub-zero interest rates, and that option does not have even a remote prospect of getting off the ground. Donald Trump won the election against all odds, and that he did so on the back of a populist uprising that is unmitigated bad news for Wall Street. Brandishing whatever the present day equivalent of torches and pitchforks might be, the people will surely descend en masse on the Eccles Building if the Fed even hints at the possibility of imposing negative rates on savers and retirees. Nor can the market be rescued through the backdoor of some kind of antiseptic QE that showers gamblers with unspeakable windfalls and stir the populist political pot to a full boil. The obvious dead-end of monetary policy, in fact, is why there has been such frenzied rotation to the Trump reflation trade after the election.

The idea of a massive Trump stimulus was literally invented on the spot late on election night by Wall Street operators in order to attract gullible homegamers into the casino one last time. But the smart money will soon be done selling and the unvarnished Washington disaster looming dead ahead will come screaming back into view. Even if Donald Trump had a semi-coherent economic program, which he clearly doesn’t, there is not a chance that he could get it through the Congress.

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But it’s all that’s left! Shelton is another option for next Fed head.

The Fed Shouldn’t Be Driving US Economy – Trump Advisor Judy Shelton (CNBC)

The Federal Reserve shouldn’t be driving the United States economy because monetary stimulus is quite limited, Trump economic advisor Judy Shelton told CNBC on Wednesday. “What you want is productive growth and the kind of growth that is truly stimulated by tax reform, by regulatory reform, trade reform and important infrastructure projects to upgrade our ability to be more productive as a nation,” she said in an interview with CNBC’s “Closing Bell.” That’s what President-elect Donald Trump has pledged to do when he takes office, and the market apparently likes what it’s hearing. It has been rallying since Trump’s surprising win on Nov. 8, and on Wednesday the Dow Jones industrial average and S&P 500 hit all-time highs.

However, the Fed meets next week and it is widely believed it will hike interest rates. Shelton, though, doesn’t believe a small rate increase is going to derail the rally because it is already priced in. If there is turmoil, then “things are a lot more fragile than we thought,” she said. Shelton, co-director of the Sound Money Project at Atlas Network, is known to favor the gold standard and calls the U.S. monetary system an “anti-system.” She’s also been touted by some as a good candidate to fill empty Fed spots. Jim Grant, founder and editor of Grant’s Interest Rate Observer, told CNBC recently he likes Shelton as a replacement for Chair Janet Yellen when she retires in early 2018.

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It’s time someone takes a look at who’s behind the shadow banks.

China’s Banks Are Hiding More Than $2 Trillion in Loans (WSJ)

In 2014, the Chinese city of Haimen on the mouth of the Yangtze River set out to build a large apartment complex and turned to Bank of Nanjing for about $29 million in financing. The bank was happy to oblige but it didn’t call the money a loan, according to people familiar with the matter. It was added to Bank of Nanjing’s balance sheet as an “investment receivable,” a loosely regulated category of assets that allows bank officials to set aside little or nothing for potential losses. Bank officials aren’t shy about the accounting sleight of hand, which is rampant across China. The bank had about $39 billion in investment receivables in the third quarter, nearly as big as its loan portfolio, and profits have climbed by more than 20% a year.

As of June, 32 publicly traded Chinese banks had a total of $2 trillion in investment receivables as of June, up from $334 billion at the end of 2011, according to a tally by The Wall Street Journal of the latest available information from data provider Wind. The investments are equivalent to 20% of the same banks’ total loans in dollar terms, up from 6% at the end of 2011. The 32 banks have about 70% of all the banking assets in China. The surge shows how Chinese banks are trying to keep the credit spigot open to support the country’s slowing economy. Structuring financing deals as investments instead of loans frees up bank capital and makes it easier to extend loan deadlines or new credit to borrowers. The strategy has been especially popular at small and midsize banks, said executives and analysts.

The epidemic of investment receivables has created a parallel buildup of debt in addition to China’s rising official debt levels, now 2.5 times GDP. “The rapid growth in banks’ off-balance-sheet and investment activities, in essence, means hidden credit risks and could threaten financial safety,” said Shang Fulin, China’s top banking regulator, in an unusually blunt speech in September. Economists at Swiss bank UBS estimate as much as $2.4 trillion (16.5 trillion yuan) was “missing” from the broadest measurement of credit disclosed by China’s central bank last year, up from $712 billion (4.9 trillion yuan) in 2014. The discrepancy is largely because Chinese commercial banks use so-called shadow lenders to mask loans as investments, the economists said.

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That’s a lot.

China’s Foreign Reserves Down 25% Since 2014 (BBG)

China’s foreign currency reserves, the world’s largest, fell the most since January after the yuan declined to an eight-year low. • Reserves decreased $69.1 billion to $3.05 trillion in November, the People’s Bank of China said in a statement Wednesday • That compares with the median forecast of $3.06 trillion in a Bloomberg survey of economists • Decline was biggest since reserves tumbled $99.5 billion in January • The fifth-straight monthly decline brings the reduction in the stockpile to almost $1 trillion from a record $4 trillion in June 2014. While authorities have begun tightening capital controls, a $50,000 limit that Chinese citizens are allowed to convert from yuan annually will reset at the start of the new year, potentially adding depreciation pressure on the currency.

“Containing capital outflows is the key to keeping China’s systematic risk in check,” Harrison Hu, chief greater China economist at RBS in Singapore, wrote in a note. “Market turmoil one year earlier showed the strong feedback loop between capital flight and currency depreciation can destabilize China’s financial system and lead to escalating systemic risk.” “A combination of yuan weakness and a peak in the mainland property sector is conspiring to increase capital outflows,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. “Another month of falling reserves does little to inspire confidence, especially as households await the renewal of their FX quota at the start of 2017. Even so, with the yuan steady so far in December and capital controls in place, there’s reason to hope China’s reserve buffer will end the year on a more stable note.”

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The teapots are full. Also, at some point capital flight and foreign reserves will become part of this.

China: World’s Top Oil Market Is Starting to Lose Its Sheen (BBG)

One of the biggest engines soaking up the world’s oil is starting to sputter. Growth in crude imports by China, the second largest consumer after the U.S., will probably slow by more than 60% in 2017, according to a Bloomberg survey of analysts including FGE and Energy Aspects. Private refiners that helped boost purchases to record levels are expected to be constrained by tighter licenses and increased scrutiny on their taxes. At the same time, the current space available for stockpiles may run out. While OPEC’s deal to curb output may help erode a glut and lift prices, Chinese imports remain key for any sustained recovery. It’s the biggest buyer in Asia, the world’s top oil market, and its insatiable appetite was a significant driver for crude’s climb to more than $100 a barrel in the past decade.

[..] Concern about teapots’ creditworthiness and lack of experience in international trade are challenges, while the implementation of higher fuel-quality standards could force some to shut. The Chinese government has signaled its intention to slow new quota approvals as it assesses whether the teapots made good on their pledges to close outdated refining units or build storage facilities, according to JPMorgan, which predicts the Asian nation’s oil imports may stop expanding in 2017. Stockpiling may also slow. In 2016, a lot of China’s imports went into oil storage, said Amy Sun, an analyst with ICIS-China. “Going into next year, due to the slow construction of new capacity and already full tanks in current facilities, there will be limited space for further growth.”

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“..the Government cannot run out of money, and at times like this — when it saves instead of spending — the only thing that can make the economy grow is if we do the borrowing. And, unlike the Government, we as individuals can — and will — run out of cash.”

The Great ‘Living Within Our Means’ Con (Abc.au)

The greatest lie ever sold is that the Australian Government can run out of Australian dollars. This is exactly the lie Treasurer Scott Morrison wants you to believe as he rolls out the same old deception — deficit bad, surplus good — ahead of next year’s budget. Social Services Minister Christian Porter is relying on this myth as he tries to sell more cuts to the dole and other welfare benefits: by giving voters the impression that welfare bludgers are sending the country broke and that they have to be made to suffer in the cause of “budget repair”. If you feel like there is a disconnect between your bank balance and what you see and hear on television, you are not taking crazy pills.

“Smashed avo” commentators like Bernard Salt paint everyone from Generation X through to “The Millennials” as ingrates who are incapable of saving, while the Government takes a victory lap claiming 25 years of “unprecedented economic growth”. In reality, Australia is experiencing its first quarter of negative economic growth in five years and the weakest wage growth since the last recession. Official figures released yesterday by the ABS showed a 0.5% contraction in seasonally-adjusted GDP growth for the September quarter, dragging the yearly growth number down to 1.8%. The figures fell well shy of market expectations, with Bloomberg having forecasted a 0.1% contraction over the third quarter down from its previous forecast of 0.2% growth. For its part, the RBA has kept the official cash rate on hold again this week.


The ratio of disposable income to debt for households (released November 2, 2016). (ABS, RBA)

Meanwhile, homes are less affordable, jobs are less secure, a growing number of people are forced into part-time work, and more and more people are struggling to pay their bills and must therefore cope with a greater burden of debt. “There are more than 15% of willing labourers not working in one form or another,” economist Professor Bill Mitchell said. Saying things like “we have to live within our means” is telling voters the Government — which issues the dollar — can run out of its own money. But this is literally impossible. Our means as a country are limited to what we can produce using our effort, our skills and our technology. The Government cannot spend without limit, or it will cause inflation. But the Government cannot run out of money, and at times like this — when it saves instead of spending — the only thing that can make the economy grow is if we do the borrowing. And, unlike the Government, we as individuals can — and will — run out of cash.

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Not enough space here to do Bill Mitchell justice. Thorough.

Australia Inexorably Marching Towards Recession (Mitchell)

The following graph shows the quarterly percentage growth in real GDP over the last five years to the September-quarter 2016 (blue columns) and the ABS trend series (red line) superimposed. Growth was negative in the September-quarter 2016 – minus 0.5% (annualised minus 2%). The annual growth figure of 1.8% is down from 3.1% in the June-quarter and shows how far the economy has slipped. It is now well below trend growth and well below the figure required to maintain stable unemployment (much less reduce it). The annualised growth from this quarter (if continued) means Australia will enter a deep and totally unnecessary recession that has been chosen by the Federal Government, which claims it is intent on pursuing a fiscal surplus.

The automatic stabilisers are already working against that and the ABS announced yesterday that Taxation revenue fell a further 15.3% in the September-quarter against a very small increase in spending. In the June-quarter, it was the large boost in public sector infrastructure spending that saved the economy from negative growth such was the overall weakness of non-government spending. As we will see soon, that contribution turned negative and so went the aggregate growth position. While exports continued to grow (with an uptick in the terms of trade), the external sector overall subtracted from growth. Add to that the fact that domestic wages growth is flat and household indebtedness is at record levels and you have a fairly sober outlook.

If the government sector persists in implementing its planned spending cuts then recession looms for the Australian economy. The graph clearly shows that the trend has been downwards for 4-quarters now and will hit zero by the time we learn about the current December-quarter data unless there is a dramatic shift in government policy. It must announce renewed stimulus or face recession.

The following graph presents quarterly growth rates in trend GDP and hours worked using the National Accounts data for the last five years to the September-quarter 2016. You can see the major dislocation between the two measures that appeared in the middle of 2011 persisted throughout 2013 and has reasserted itself in recent quarters. The GDP growth has driven by capital-intensive exports and more recently, capital infrastructure growth, which is one reason why labour productivity growth had been strong and employment growth weak. Just in case you think the labour force data is suspect, the hours worked computed from that data is very similar to that computed from the National Accounts.

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Hard to keep track of this circus.

Federal Judge Effectively Ends Recount In Michigan (BBG)

A recount of presidential election ballots in Michigan was effectively halted after a federal judge deferred to a state court finding that losing Green Party candidate Jill Stein wasn’t an “aggrieved person.” U.S. District Judge Mark A. Goldsmith in Detroit ruled Monday that the recount could proceed, then reversed himself Wednesday after Republican backers of President-elect Donald Trump persuaded a state appeals panel that Stein wasn’t qualified to initiate the process because she had no chance of winning the election. Stein’s lawsuit was based on claims of potential hacking of electronic voting machines and reports of foreign interference in the election, particularly by Russia.

Stein has “not presented evidence of tampering or mistake,” Goldsmith wrote in Wednesday’s ruling. Instead, she has made “speculative claims going to the vulnerability of the voting machinery – but not actual injury,” he said. Stein’s attorneys had argued the Michigan Court of Appeals misinterpreted state law when it accepted a claim by state Attorney General Bill Schuette, a Republican, that Stein couldn’t petition for a recount because she wasn’t an “aggrieved person.” Goldsmith wrote that he was obligated to follow Michigan law, which permits a recount to an “aggrieved” candidate who stands a reasonable chance of winning an election “but for mistake or fraud.”

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Someone has to say it.

Boris Johnson: Saudi Arabia, Iran ‘Puppeteers’ In Middle East Proxy Wars (G.)

Boris Johnson accused Saudi Arabia of abusing Islam and acting as a puppeteer in proxy wars throughout the Middle East, in remarks that flout a longstanding Foreign Office convention not to criticise the UK’s allies in public. The foreign secretary told a conference in Rome last week that the behaviour of Saudi Arabia, and also Iran, was a tragedy, adding that there was an absence of visionary leadership in the region that was willing to reach out across the Sunni-Shia divide. At the event, Johnson said: “There are politicians who are twisting and abusing religion and different strains of the same religion in order to further their own political objectives. That’s one of the biggest political problems in the whole region. And the tragedy for me – and that’s why you have these proxy wars being fought the whole time in that area – is that there is not strong enough leadership in the countries themselves.”

The foreign secretary then identified Saudi Arabia and Iran specifically, saying: “That’s why you’ve got the Saudis, Iran, everybody, moving in, and puppeteering and playing proxy wars.” Johnson’s criticism of Saudi Arabia came as Theresa May returned from a prestigious two-day visit to the Gulf in which she lauded both the Saudi royal family for its visionary leadership, and the value of the 100-year-old alliance with the UK. Foreign Office ministers, aware of Saudi sensitivity to criticism and the strategic importance of the Gulf relationship, usually soft-pedal and focus on their path to reform. [..] The British defence industry is also heavily dependent on arms contracts with the Gulf states, and the Royal Navy has established a major naval base in Manama, the capital of Bahrain. Johnson is due to visit the region this weekend, when he will have to explain why he thinks the Gulf states are abusing Islam for political ends.

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It just goes on. And then one day this will not end well.

General Strike Shuts Down Greece on Thursday (R.)

Greeks went on strike on Thursday to protest planned labor reforms and painful austerity cuts demanded by the country’s EU and IMF lenders as part of a crucial bailout review. Passenger ships remained docked at ports, city transport was disrupted and local administration offices shut down as workers joined the 24-hour nationwide walkout called by the country’s largest private and public sector unions, GSEE and ADEDY. “The burden we carry is already unbearable,” said GSEE in a statement, calling lenders’ demands “irrational”. “The downturn must finally end,” its rally poster read. Workers and pensioners will march in central Athens later in the day. Turnout in street protests has been low since Greece signed up to a third international bailout in July 2015 after tough negotiations that almost forced it out of the eurozone.

Eurozone finance ministers said on Monday that Athens and its lenders needed to speed up the review which has hit a snag on labour reforms, including liberalising mass layoffs and reviving collective bargaining between employers and unions. Energy reforms and measures to plug a projected fiscal gap in 2018, when Greece’s bailout program expires, are also among thorny issues in the review which may resume next week. Prime Minister Alexis Tsipras hopes a deal can be reached by the end of the year for the country’s bonds to be included in the ECB’s bond buying program by March 2017. [..] In parliament, lawmakers debated more tax hikes and spending cuts as part of next year’s budget, which projects the economy will grow by 2.7% and attain a 2% of GDP primary surplus – excluding debt servicing costs.

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The peaks of NIMBY.

EU To Set Greece Deadline For Forced Return Of Asylum Seekers (Pol.)

The European Commission will set Greece a deadline on Thursday to fix its migration system and resume taking in asylum seekers from March next year, which would put an end to its six year-long exemption from the EU’s “Dublin rules” on asylum. Under an agreement signed in the Irish capital in 1990, member countries which are the first point of entry for people seeking asylum in the EU have an obligation to process their application, and take them back if they have travelled on to other EU countries without authorization. Transfers from other EU countries to Greece were suspended in 2011, however, after the European Court of Justice and the European Court of Human Rights ruled that conditions in Greek facilities for asylum seekers were unacceptable.

A new 17-page proposal from the Commission, set to be adopted on Thursday and obtained by POLITICO, says: “It is recommended that the transfer of asylum applicants to Greece … should be resumed.” Forcing Greece to assume its responsibilities is part of a wider effort to reduce controls at many of the EU’s internal borders that were reintroduced in response to the refugee crisis, causing the temporary suspension of Schengen, the passport-free travel zone. Countries that reimposed border controls, such as Austria, Germany and Denmark, are likely to only remove them if they can send back asylum seekers to the country where they first set foot in the EU. The current state of the Dublin system will be on EU leaders’ agenda at their summit in Brussels next week.

Prior to that, their interior ministers meet on Friday to discuss arrangements for dealing with asylum seekers, as well as a controversial Commission proposal for a permanent relocation system in the event of unusually high levels of refugee arrivals. The Greek government has its work cut out if it is to respond to the Commission’s request for a report by mid-February on improvements in the standard of accommodation for asylum seekers and the management of the asylum process. “In terms of quality, many of the reception facilities in Greece still fall short of the requirements,” says the Commission document, adding that there are particular problems on the Aegean islands, where reception centers “are not only overcrowded but have substandard material conditions in terms of sanitation and hygiene.”

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Instability is the key word.

Greenland’s Ice-Free Past Exposes Sea Level Rise Danger (AFP)

The massive Greenland ice sheet has melted away at least once during the last 1.4 million years, according to a study published on Wednesday, raising fears that manmade climate change could provoke dangerous sea levels. Bedrock samples retrieved through more than three kilometres (two miles) of ice reveal for the first time that the island’s surface was exposed directly to the atmosphere in the not-so-distant past. It may have been a single period of up to 280,000 years, or several shorter ones, researchers reported in the journal Nature. But either way the evidence shows that the island was largely ice-free. “Unfortunately, this makes the Greenland ice sheet look highly unstable,” said lead author Joerg Schaefer, a palaeoclimatologist at Columbia University in New York.

Covering an area larger than France, Spain and Germany combined, the northern hemisphere’s largest ice block on land is kilometres thick and holds enough frozen water to lift the world’s oceans by more than seven metres (24 feet). Even a couple of metres would swamp cities that are home to hundreds of millions of people and planted with many of the crops that feed them. Hence the sense of urgency among climate scientists trying to figure out just how sensitive the ice sheet is to global warming, which has already pushed temperatures in the Arctic region 2ºC (3.6ºF) above pre-industrial era levels – twice the global average. The rate of Greenland’s ice loss has doubled since the 1990s. In the last four years alone, the ice sheet has shed more than a trillion tonnes of mass, according to earlier research.

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“..giraffes are war fodder, a large animal, extremely curious that can feed a lot of people..”

Giraffes Face ‘Silent Extinction’ (BBC)

A dramatic drop in giraffe populations over the past 30 years has seen the world’s tallest land mammal classified as vulnerable to extinction. Numbers have gone from around 155,000 in 1985 to 97,000 in 2015 according to the International Union for the Conservation of Nature (IUCN). The iconic animal has declined because of habitat loss, poaching and civil unrest in many parts of Africa. Some populations are growing, mainly in southern parts of the continent. Until now, the conservation status of giraffes was considered of “least concern” by the IUCN. However in their latest global Red List of threatened species, the ungainly animal is now said to be “vulnerable”, meaning that over three generations, the population has declined by more that 30%.

According to Dr Julian Fennessy, who co-chairs the IUCN giraffe specialist group, the creatures are undergoing a “silent extinction”. “If you go on a safari, giraffes are everywhere,” he told BBC News. “While there have been great concern about elephants and rhinos, giraffes have gone under the radar but, unfortunately, their numbers have been plummeting, and this is something that we were a little shocked about, that they have declined by so much in so little time.” The rapid growth of human populations has seen the expansion of farming and other forms of development that has resulted in the fragmentation of the giraffe’s range in many parts of Africa. But civil unrest in parts of the continent has also taken its toll. “In these war torn areas, in northern Kenya, Somalia, and Ethiopia in the border area with South Sudan, essentially the giraffes are war fodder, a large animal, extremely curious that can feed a lot of people,” said Dr Fennessy.

Read more …

Oct 202016
 
 October 20, 2016  Posted by at 9:48 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Thomas Eakins Walt Whitman 1891


Fed Risks Repeating Lehman Blunder As US Recession Storm Gathers (AEP)
ECB Urges EU To Curb Virtual Money On Fear Of Losing Control (R.)
Saudi Arabia’s Bond: a Defining Trade for 2016 (WSJ)
How do Clinton and Trump’s Tax Plans Compare? (TF)
Trump is a Pink Elephant (Scott Adams)
California Launches Criminal Probe Into Wells Fargo Account Scandal (R.)
Who’s Powering the War on Cash? (DQ)
The Cult Of The Expert – And How It Collapsed (G.)
Theresa May To Tell EU Leaders ‘There Will Be No Second Referendum'(G.)
Australia Housing Boom Peak Has Passed – Morgan Stanley (BBG)
Did the White House Declare War on Russia? (Stephen F. Cohen)
What Obama’s Record Deportations Look Like (I’Cept)
Use Of Strongest Antibiotics Rises To Record Levels On European Farms (G.)

 

 

“The Bank for International Settlements estimates that 60pc of the world economy is locked into the US currency system, and that debts denominated in dollars outside US jurisdiction have ballooned to $9.8 trillion.”

Fed Risks Repeating Lehman Blunder As US Recession Storm Gathers (AEP)

The risk of a US recession next year is rising fast. The Federal Reserve has no margin for error. Liquidity is suddenly drying up. Early warning indicators from US ‘flow of funds’ data point to an incipent squeeze, the long-feared capitulation after five successive quarters of declining corporate profits. Yet the Fed is methodically draining money through ‘reverse repos’ regardless. It has set the course for a rise in interest rates in December and seems to be on automatic pilot. “We are seeing a serious deterioration on a monthly basis,” said Michael Howell from CrossBorder Capital, specialists in global liquidity. The signals lead the economic cycle by six to nine months. “We think the US is heading for recession by the Spring of 2017. It is absolutely bonkers for the Fed to even think about raising rates right now,” he said.

The growth rate of nominal GDP – a pure measure of the economy – has been in an unbroken fall since the start of the year, falling from 4.2pc to 2.5pc. It is close to stall speed, flirting with levels that have invariably led to recessions in the post-War era. “It is a little scary. When nominal GDP slows like that, you can be sure that financial stress will follow. Monetary policy is too tight and the slightest shock will tip the US into recession,” said Lars Christensen, from Markets and Money Advisory. If allowed to happen, it will be a deeply frightening experience, rocking the global system to its foundations. The Bank for International Settlements estimates that 60pc of the world economy is locked into the US currency system, and that debts denominated in dollars outside US jurisdiction have ballooned to $9.8 trillion.

The world has never before been so leveraged to dollar borrowing costs. BIS data show that debt ratios in both rich countries and emerging markets are roughly 35 percentage points of GDP higher than they were at the onset of the Lehman crisis. This time China cannot come to the rescue. Beijing has already pushed credit beyond safe limits to almost $30 trillion. Fitch Ratings suspects that bad loans in the Chinese banking system are ten times the official claim. The current arguments over Brexit would seem irrelevant in such circumstances, both because the City would be drawn into the flames and because the eurozone would face its own a shattering ordeal. Even a hint of coming trauma would detonate a crisis in Italy.

[..] The velocity of M1 money in the US has continued to slow, hitting a 40-year low of 5.75 over the summer, and markets are only just awakening to the unsettling thought that China’s latest boomlet has already topped out. Beijing is having to hit the brakes again. Crossborder said new rules for money market funds that came into force this month have complicated the picture, causing the stock of US commercial paper to shrivel by $200bn. Yet there are ways to filter out some of these effects. The plain fact is that 3-month lending rates in the off-shore ‘eurodollar’ markets in London have tripled since July to 0.93pc, sharply tightening conditions for global finance. Investors may have been too complacent in discounting these gyrations as part of a regulatory hiccup when something more sinister is emerging.

[..] Albert Edwards from Societe Generale says gross domestic income (GDI) was the most accurate gauge of the economy as the pre-Lehman crisis unfolded, and this measure has been flat for the last two quarters.”The pronounced weakness of GDI relative to GDP might be an ominous omen, for it may well be indicating that a US recession is already underway – just as it was in 2007,” he said.

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A central bank that tells politicians what legislation it desires can never again claim independence anymore.

ECB Urges EU To Curb Virtual Money On Fear Of Losing Control (R.)

The European Central Bank wants EU lawmakers to tighten proposed new rules on digital currencies such as bitcoin, fearing they might one day weaken its own control over money supply in the euro zone. The European Commission’s draft rules, aimed at fighting terrorism, require currency exchange platforms to increase checks on the identities of people exchanging virtual currencies for real ones and report suspicious transactions. In a legal opinion published on Tuesday, the ECB said EU institutions should not promote the use of digital currencies and should make clear they lack the legal status of currency or money.

“The reliance of economic actors on virtual currency units, if substantially increased in the future, could in principle affect the central banks’ control over the supply of money … although under current practice this risk is limited,” the ECB said in the opinion for the European Parliament and Council. “Thus (EU legislative bodies) should not seek in this particular context to promote a wider use of virtual currencies.” The ECB argues the Commission’s proposal does not go far enough as it does not cover the use of virtual money to buy goods and services. “Such transactions would not be covered by any of the control measures provided for in the proposal and could provide a means of financing illegal activities.”

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Dissaving.

Saudi Arabia’s Bond: a Defining Trade for 2016 (WSJ)

Want a single instrument that wraps together nearly every big political, financial and economic theme in today’s world? Saudi Arabia’s mammoth $17.5 billion bond issue, marking its debut in international markets, is it. The size of the deal is impressive but actually the least important thing about it. Big bond deals tend to build a momentum of their own. But it does speak to the search for yield. The $6.5 billion 30-year portion of Saudi Arabia’s bond is set to pay 2.1 percentage points more in yield than a comparable U.S. Treasury, or around 4.6%. That is a sizeable pickup in a world where developed-market bond yields are on the floor or in negative territory. That Saudi Arabia is doing the deal at all is a more telling factor: The oil bounty that has propelled the economy has run dry.

The 18-month-long rout in oil prices that started in 2014 sent the country hurtling from a budget surplus to a deficit in 2015 of 15.9% of GDP that is set to narrow only to 13% in 2016, according to the IMFd. In 2013, government debt stood at just 2.2% of GDP, according to Moody’s. By 2017, it is forecast to be 22.9%. The level isn’t a source of concern, but the swift change shows the country’s stark reversal of fortunes. In the near term, buyers of the bonds are betting largely on oil. Swings in the price are likely to have a direct impact on the perception of Saudi Arabia as a credit. The recovery in oil prices, which stand close to their high of the year, has eased concerns about financial stability and helps explain some of the enthusiasm for the deal. But further ahead, this is a bet on the ability and willingness of the country to transform itself while maintaining social and political stability.

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Explanations at the link. h/t Mish

How do Clinton and Trump’s Tax Plans Compare? (TF)

Both Hillary Clinton and Donald Trump have released tax plans during the campaign. The Tax Foundation has analyzed both the plans using our Taxes and Growth (TAG) model to estimate how their plans would impact taxpayers, federal revenues, and economic growth. Below, is a chart that contains all you need to know about the candidates’ plans.

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“..if you are afraid that Donald Trump is a racist/sexist clown with a dangerous temperament, you have been brainwashed by the best group of brainwashers in the business right now..”

Trump is a Pink Elephant (Scott Adams)

Here’s a little thought experiment for you: If a friend said he could see a pink elephant in the room, standing right in front of you, but you don’t see it, which one of you is hallucinating? Answer: The one who sees the pink elephant is hallucinating. Let’s try another one. If a friend tells you that you were both abducted by aliens last night but for some reason only he remembers it, which one of you hallucinated? Answer: The one who saw the aliens is hallucinating. Now let’s add some participants and try another one. If a crowd of people are pointing to a stain on the wall, and telling you it is talking to them, with a message from God, and you don’t see anything but a stain, who is hallucinating? Is it the majority who see the stain talking or the one person who does not? Answer: The people who see the stain talking are experiencing a group hallucination, which is more common than you think.

In nearly every scenario you can imagine, the person experiencing an unlikely addition to their reality is the one hallucinating. If all observers see the same addition to their reality, it might be real. But if even one participant can’t see the phenomenon – no matter how many can – it is almost certainly not real. Here I pause to remind new readers of this blog that I’m a trained hypnotist and a student of persuasion in all its forms. I’ve spent a lifetime trying to learn the tricks for discerning illusion from reality. And I’m here to tell you that if you are afraid that Donald Trump is a racist/sexist clown with a dangerous temperament, you have been brainwashed by the best group of brainwashers in the business right now: Team Clinton. They have cognitive psychologists such as Godzilla advising them. Allegedly.

I remind you that intelligence is not a defense against persuasion. No matter how smart you are, good persuaders can still make you see a pink elephant in a room where there is none (figuratively speaking). And Clinton’s team of persuaders has caused half of the country to see Trump as a racist/sexist Hitler with a dangerous temperament. That’s a pink elephant. As a public service (and I mean that literally) I have been trying to unhypnotize the country on this matter for the past year. I don’t do this because I prefer Trump’s policies or because I know who would do the best job as president. I do it because our system doesn’t work if you think there is a pink elephant in the room and there is not. That isn’t real choice. That is an illusion of choice.

Trump represents what is likely to be a once-in-a-lifetime opportunity to bring real change to a government that is bloated and self-serving. Reasonable people can disagree on policies and priorities. But Trump is the bigger agent for change, if that’s what you think the country needs. I want voters to see that choice for what it is. And it isn’t a pink elephant. If you are wondering why a socially liberal and well-educated cartoonist such as myself is not afraid of Trump, it’s because I don’t see the pink elephant. To me, all anti-Trumpers are experiencing a shared illusion.

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If you don’t even jail people for this kind of stuff, your justice system is fast eroding.

California Launches Criminal Probe Into Wells Fargo Account Scandal (R.)

The California Attorney General’s Office has launched a criminal investigation into Wells Fargo over allegations it opened millions of unauthorized customer accounts and credit cards, according to a seizure warrant seen by Reuters. Attorney General Kamala Harris authorized a seizure warrant against the bank that seeks customer records and other documents, saying there is probable cause to believe the bank committed felonies. The probe marks the latest setback for the bank in a growing scandal that led to the abrupt retirement of its chief executive officer, monetary penalties, compensation clawbacks, lost business and damage to its reputation.

[..] This is at least the second criminal probe to be opened into Wells Fargo since last month. In September a source told Reuters that federal prosecutors are also looking into the matter. An affidavit filed by Special Agent Supervisor James Hirt with the California Department of Justice reveals that interviews with possible victims of the fraud have already started. One victim, identified only as “Ms. B,” told the investigator that she had declined a request by a Wells Fargo teller in late 2011 or 2012 to open new accounts. But sometime in late 2013 or early 2014, she started to receive notices that she and her husband “allegedly owned on three life insurance policies held by the bank,” the affidavit says.

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Everyone with power is.

Who’s Powering the War on Cash? (DQ)

[..] cash’s days are numbered, as technological advances and changes in generational priorities dampen its allure. The world is brimming with individuals and institutions determined to put it out of its misery. Top of the list are the world’s central banks, which have the perfect motive for whacking cash: i.e. to make negative interest rates an eternal — or at least, more enduring — reality. And the only way to do that is to stop depositors from cashing out, as the Bank of England chief economist Andrew Hadlaine all but admitted in 2014. Japan and Europe are already deep into negative territory, and Fed Chair Janet Yellen has already said that the U.S. should be prepared for the same outcome. But as long as cash exists, there’s no way of preventing depositors from doing the logical thing – i.e. taking their money out of the bank and parking it where the erosive effects of NIRP can’t reach it.

Central banks are not the only ones who dream of a cash-free world. For credit card companies, cash is the ultimate rival. As such, it’s no surprise that the likes of Visa and MasterCard are among those pushing the hardest for a cashless economy. For banks, the benefits are no less obvious, including cost cuts, greater control over the flow of customer funds, and larger fees. As for politicians, Eurocrats and global plutocrats, including the senior servants of the IMF, World Bank and United Nations, they will enjoy even greater access to and dominion over the people’s funds. What better way of controlling the people than by controlling their access to the money they need to survive? It would amount to what Martin Armstrong calls “totalitarian control over the economy.”

These powerful agents have already created a perfect platform for achieving their dream: The Better Than Cash Alliance (BTCA), a UN-hosted partnership of governments, companies and international organizations. Its purpose, in its own words, is “to accelerate the transition from cash to digital payments globally through excellence in advocacy, knowledge and services to members.” The Better Than Cash Alliance’s membership list reads like a who’s who of some of the world’s most influential corporations and institutions. They include Coca Coca, Visa and Mastercard. Apple is, for now, conspicuously absent from the list, but in its place representing the tech industry is the Bill and Melinda Gates Foundation.

Also on the list are the Citi Foundation, the US Agency for International Development (USAID), and the World Saving Banks Institute, which represents 7,000 retail and savings banks worldwide. Member institutions range from powerful private foundations — including the Ford Foundation and the Clinton Development Initiative — to a bewildering alphabet soup of UN organizations, including WFP (the World Food Programme), UNFPA (the UN Population Fund), UNPD (the UN Development Program), IFAD (the International Fund for Agricultural Development) and UNCDF (the UN Capital Development Fund).

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Interesting theme, but in an article of this length, confining your self to central bankers only seems a shame.

The Cult Of The Expert – And How It Collapsed (G.)

When the history is written of the revolt against experts, September 2008 will be seen as a milestone. The $85bn rescue of the American International Group (AIG) dramatised the power of monetary gurus in all its anti-democratic majesty. The president and Congress could decide to borrow money, or raise it from taxpayers; the Fed could simply create it. And once the AIG rescue had legitimised the broadest possible use of this privilege, the Fed exploited it unflinchingly. Over the course of 2009, it injected a trillion dollars into the economy – a sum equivalent to nearly 30% of the federal budget – via its newly improvised policy of “quantitative easing”. Time magazine anointed Bernanke its person of the year. “The decisions he has made, and those he has yet to make, will shape the path of our prosperity, the direction of our politics and our relationship to the world,” the magazine declared admiringly.

The Fed’s swashbuckling example galvanized central bankers in all the big economies. Soon Europe saw the rise of its own path-shaping monetary chieftain, when Mario Draghi, president of the European Central Bank, defused panic in the eurozone in July 2012 with two magical sentences. “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” he vowed, adding, with a twist of Clint Eastwood menace, “And believe me, it will be enough.” For months, Europe’s elected leaders had waffled ineffectually, inviting hedge-fund speculators to test the cohesion of the eurozone. But now Draghi was announcing that he was badder than the baddest hedge-fund goon. Whatever it takes. Believe me.

In the summer of 2013, when Hollywood rolled out its latest Superman film, cartoonists quickly seized upon a gag that would soon become obvious. Caricatures depicted central-bank chieftains decked out in Superman outfits. One showed Bernanke ripping off his banker’s shirt and tie, exposing that thrilling S emblazoned on his vest. Another showed the bearded hero hurtling through space, red cape fluttering, right arm stretched forward, a powerful fist punching at the void in front of him. “Superman and Federal Reserve chairman Ben Bernanke are both mild-mannered,” a financial columnist deadpanned. “They are both calm, even in the face of global disasters. They are both sometimes said to be from other planets.”

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They’re going to roast her today, and not in a funny way.

Theresa May To Tell EU Leaders ‘There Will Be No Second Referendum'(G.)

Theresa May is to warn her 27 fellow European Union leaders over a working dinner in Brussels that Britain’s decision to leave is irreversible and there can be no second referendum. Thursday’s meeting of the European council will be the prime minister’s first opportunity to address the leaders of all the other member states since the UK voted to leave the European Union in June. Donald Tusk, the European council president, has insisted Britain’s future relationship with the EU will not be on the formal agenda for the two-day meeting, but he will give May the opportunity to set out the “current state of affairs in the country” over coffee at the end of the meal.

A No 10 source said she would tell her fellow EU leaders: “The British people have made a decision and it’s right and proper that that decision is honoured. There will be no second referendum. The priority now has got to be looking to the future, and the relationship between the UK, once we leave”. The source added that the prime minister would also seek to reassure the other member states, amid growing fears that Brexit could unleash political and economic instability in Britain and the rest of Europe. “She wants the outcome at the end of this process to be a strong UK, as a partner of a strong EU,” the source said. “She doesn’t want the process of the UK leaving to be damaging for the rest of the EU. She wants it to be a smooth, constructive, orderly process.”

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Painful times ahead.

Australia Housing Boom Peak Has Passed – Morgan Stanley (BBG)

Australia’s housing boom has passed its peak, with a looming apartment glut set to lead to a sharp slowdown in future developments, according to Morgan Stanley. The slowdown in construction will hurt economic growth, put 200,000 jobs at risk and prompt the central bank to resume cutting interest rates next year, Morgan Stanley analysts led by Daniel Blake said in a note dated Oct. 19. “We believe the growth contribution from the housing boom has already peaked and look for a plateau over 2017 and decline through 2018,” the analysts said. The housing industry is also facing a “more imminent credit crunch” for purchases and developments, they said. “The greatest vulnerability is settlement risk on the 160,000 apartments we forecast being completed through the end of 2017,” they said in the report.

“Listed developers report low failure rates currently, but also confirm credit availability has tightened, especially for foreign investors. Non-bank credit is moving to plug the gap at higher interest rates, but we expect some projects will land with the receiver.” Shares of developer Lendlease Group slumped as much as 5.5% in Sydney trading Thursday after the company flagged a slowdown in building activity, saying Sydney apartment activity is peaking and the Melbourne apartment sector is facing a high level of supply. In May, all 391 apartments offered by Lendlease at a project in Sydney were snapped up in just four hours. A national housing oversupply of about 100,000 dwellings will develop by 2018, Morgan Stanley said, as a glut of apartment projects are completed, particularly in Sydney and Melbourne.

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Cohen is the no. 1 American expert on Russia. Audio file at the link.

Did the White House Declare War on Russia? (Stephen F. Cohen)

Nation Contributing Editor Stephen F. Cohen and John Batchelor continue their weekly discussions of the new US-Russian Cold War. Cohen reports that a statement by Vice President Joe Biden on NBC’s Meet the Press on October 16, released on October 14, stunned Moscow (though it was scarcely noted in the American media). In response to a question about alleged Russian hacking of Democratic Party offices, in order to disrupt the presidential election and even throw it to Donald Trump, Biden said the Obama administration was preparing to send Putin a “message,” presumably in the form of some kind of cyber-attack.

The Kremlin spokesman and several leading Russian commentators characterized Biden’s announcement as a virtual “American declaration of war on Russia” and as the first ever in history. Cohen observed that at this fraught stage in the new US-Russian Cold War, Biden’s statement, which clearly had been planned by the White House, could scarcely have been more dangerous or reckless—especially considering that there is no actual evidence or logic for the two allegations against Russia that seem to have prompted it. Biden was reacting to official US charges of Kremlin hacking for political purposes. Cohen points out that in fact no actual evidence for this allegation has been produced, only suppositions or, as Glenn Greenwald has argued, “unproven assertions.”

While the US political-media establishment has uncritically stated the allegation as fact, a MIT expert, professor Theodore Postol, has written that there is “no technical way that the US intelligence community could know who did the hacking if it was done by sophisticated nation-state actors.” Instead, Cohen suggests, the charges, leveled daily by the Clinton campaign as part of its McCarthyite Kremlin-baiting of Donald Trump, are mostly political, and he laments the way US intelligence officials have permitted themselves to be used for this unprofessional purpose. Moreover, it is far from clear that the Kremlin actually favors Trump, despite Clinton’s campaign claims.

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“Obama is now on pace to deport more people than the sum of all 19 presidents who governed the United States from 1892-2000..”

What Obama’s Record Deportations Look Like (I’Cept)

Donald Trump noted during the third presidential debate that the Democratic president, Barack Obama has deported millions of people. Indeed, Obama has deported more people than any modern president. From January, at Fusion.net: “Donald Trump’s bilious blather about immigrants reminds us—more often than most people need reminding—that words matter. But the Obama administration’s recent wave of police-state raids on Central American women and children, whose only crime is poverty and a lack of proper paperwork, reminds us that actions matter too. When it comes to getting tough on immigration, Republican candidates talk the talk, but Obama walks the walk. Obama has deported more people than any U.S. president before him, and almost more than every other president combined from the 20th century.

“Immigration-flow numbers are staggering in both directions. In 2014, it’s estimated that more than 200,000 Central Americans tried to emigrate to the United States without documentation. But the Obama government has been deporting them as fast as it can. Since coming to office in 2009, Obama’s government has deported more than 2.5 million people—up 23% from the George W. Bush years. More shockingly, Obama is now on pace to deport more people than the sum of all 19 presidents who governed the United States from 1892-2000, according to government data.

“And he’s not done yet. With the clock ticking down his final months in office, Obama appears to be running up the score in an effort to protect his title as deporter-in-chief from future presidents. To pad the numbers, Homeland Security is now going after the lowest-hanging fruit: women and children who are seeking asylum from violence in Central America. “This is the only time I remember enforcement raids on families of women and children who are fleeing some of the most violent places on the planet,” says Royce Bernstein Murray, director of policy for the National Immigrant Justice Center.

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Intelligent species.

Use Of Strongest Antibiotics Rises To Record Levels On European Farms (G.)

Use of some of the strongest antibiotics available to treat life-threatening infections has risen to record levels on European farms, new data shows. The report reinforces concerns about the overuse of antibiotics on farms, following revelations from the Guardian of the presence of the superbug MRSA in UK-produced meat, in imported meat for sale in UK supermarkets, and on British farms. According to the data from the European Medicines Agency, medicines classified as “critically important in human medicine” by the World Health Organisation appear to be in frequent use on farm animals across the major countries of the EU, including the UK.

This comes in spite of WHO advice that, because of their importance, these drugs should be used only in the most extreme cases, if at all, in treating animals. The latest report from the EMA collates data from member states on the sales of antibiotics for veterinary purposes in 2014, and shows that antibiotic use on farms fell by about 2% on the previous year overall, and by as much as 12% in many countries. But this disguises the rise in the use of the strongest medicines, such as colistin, which is a last resort for life-threatening human illness. The percentage of antibiotics sales made up by the most potent antibiotics remained steady or in some cases increased slightly, indicating an increase in the amount of so-called critically important antibiotics used.

For instance, sales of fluoroquinolones – the newest versions of which are used to treat life-threatening illnesses including pneumonia and Legionnaire’s disease – stood at 141 tonnes across the countries surveyed in 2013, and rose to 172 tonnes in 2014. Sales of macrolides, also classed as critically important to human health, rose from 59 to 67 tonnes in the same period. This shows that efforts to prevent the drugs most crucial for human health from being used in farming are failing.

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Oct 082016
 
 October 8, 2016  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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DPC Royal Street, New Orleans 1900


US Consumer Borrowing Rises by Most in Nearly a Year (BBG)
US Consumer Credit Has Second Biggest Jump On Record (ZH)
US Payrolls Up 156K, Missing Expectations, Unemployment Rate Rises To 5.0% (ZH)
EU Leaders Line Up To Insist UK Will Pay A High Price For Brexit Stance (G.)
Worries Deepen That Globalization Is Hitting the Skids (WSJ)
Worries Grow That China Faces a Perilous Property Bubble (WSJ)
EU Imposes Import Duties Of Up To 73.7% On Cheap Chinese Steel (G.)
He’ll Likely Lose – But Trump Is The Final Warning To Elites (G&M)
Why Does This Happen on My Vacation? -The Trump Tapes (Scott Adams)
Hounds Hot On The Heels Of Poachers In Rhino Country (G.)
New Zealand Child Poverty A Source Of Deep Concern: UN (G.)
UN Watchdog Demands Saudis Stop Child Executions (AFP)

 

 

No deleveraging: Household debt rises 8.5% annualized.

US Consumer Borrowing Rises by Most in Nearly a Year (BBG)

Household borrowing increased in August at the fastest pace in almost a year, led by a jump in loans for school and automobile purchases. The $25.9 billion increase, or an annualized 8.5%, followed a revised $17.8 billion gain the prior month, Federal Reserve figures showed Friday. The median projection called for a $16.5 billion advance. Non-revolving credit, which includes car and educational loans, also posted the largest advance since September of last year. Steady hiring and income growth may be making Americans more willing to borrow, helping to sustain consumer spending and the economic expansion.

Non-revolving credit increased $20.2 billion, while revolving debt rose $5.6 billion during the month, the Fed’s report showed. Lending by the federal government, mostly for student loans, climbed $18.7 billion in August on an unadjusted basis as students prepared to return to school for the fall semester. The Fed’s consumer credit report doesn’t track debt secured by real estate, such as home equity lines of credit and home mortgages.

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Tyler on the household debt topic, delving a bit deeper, as in beyond seasonal adjustments.

US Consumer Credit Has Second Biggest Jump On Record (ZH)

It will likely not come as a big surprise that at a time when US personal savings are once again declining, perhaps as a result of soaring health insurance costs, that US consumers are forced to borrow increasingly more to make ends meet. And, as expected, the latest consumer credit report confirmed this, when moments ago the Federal Reserve announced that in August, total US credit surged by $25.9 billion on a seasonally adjusted basis, smashing expectations of a $16.5 billion increase, and the third biggest monthly jump since 2001.[..] what was perhaps most interesting is that on a non-seasonally adjusted basis, when removing the artificial Arima-X-13 seasonal factors, August consumer credit soared by a near record $46.8 billion, an absolute outlier month, and surpassed just once in history.

So for all those who, still, erroneous claim that US consumers are deleveraging, show them this chart, because the scramble if not so much into revolving debt then certainly into government-funded auto and student loans, is unlike anything ever seen. And speaking of just those two kinds of debt, here they are broken out: they have both never been higher.

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Last big jobs report before the elections (November’s will come too late to make much difference) is mixed, but certainly not very good.

US Payrolls Up 156K, Missing Expectations, Unemployment Rate Rises To 5.0% (ZH)

With Wall Street all bulled up on the economy, expecting a print of 175K while the whipser number was decidedly higher, and closer to 200K thanks to Goldman’s optimism, moments ago the BLS reported that in September the US created only 156K jobs, missing expectations, and down from the upward revised 167K in August, leaving the question of whether the Fed will hike imminently, unanswered. However, offsetting the September miss, last month’s disappointing print of 151K was revised to 167K. At the same time, the change in total nonfarm payroll employment for July was revised down from +275,000 to +252,000. With these revisions, employment gains in July and August combined were 7,000 less than previously reported.

Over the past 3 months, job gains have averaged 192,000 per month. The household survey employment number of 151.968MM was 354K bigger than last month, and pushed the annual increase higher by 2.0%, the biggest since March 2016. The unemployment rate, at 5.0%, and the number of unemployed persons, at 7.9 million, changed little in September, up 0.1% from August and the highest in 6 months. Both measures have shown little movement, on net, since August of last year. The participation rate rose by 0.1% t 62.9% as people not in the labor force declined by 207K.

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Which should make Britons very happy to leave that bunch of mobsters behind. Even if their own new ‘leaders’ are just as bad. But those you can vote out next time around.

EU Leaders Line Up To Insist UK Will Pay A High Price For Brexit Stance (G.)

Britain and the EU appear more bitterly divided over Brexit than at any time since the referendum, with European leaders ramping up their rhetoric after Theresa May signalled she would seek a clean break with the bloc. The prime minister’s Conservative conference speech, in which she indicated Britain would prioritise immigration control and restore the primacy of UK law to become an “independent, sovereign nation” without full access to the single market, drew a sharp response from continental capitals. In Paris, François Hollande said Britain must suffer the consequences of its decision. “The UK has decided to do a Brexit. I believe even a hard Brexit,” he said. “Well, then we must go all the way through the UK’s willingness to leave the EU. We have to have this firmness.”

If not, “we would jeopardise the fundamental principles of the EU”, the French president said on Thursday night. “Other countries would want to leave the EU to get the supposed advantages without the obligations.. There must be a threat, there must be a risk, there must be a price.” Hollande’s message was underlined on Friday by the president of the European commission, Jean-Claude Juncker, who said the 27 remaining member states must not give an inch in exit negotiations. “You can’t have one foot in and one foot out,” he said. “We must be unyielding on this point.” Britain risked “trampling everything that has been built” over six decades of European integration, he said.

In Berlin, Angela Merkel rammed home the same point. “If we don’t insist that full access to the single market is tied to complete acceptance of the four basic freedoms, then a process will spread across Europe whereby everyone does and is allowed what they want.”

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Turns out, globalization is just another religion. Hilarious that the CEO of United Parcel Service is quoted; yes, we understand they are all for ‘free’ trade, it’s what their business is based on.

Worries Deepen That Globalization Is Hitting the Skids (WSJ)

Global finance ministers and central bankers are descending on Washington this week with a central concern in mind: fear that the modern age of globalization is hitting a wall. Last year’s $646 billion in foreign direct investment in rich economies represents a 40% drop from the peak before the financial crisis. International lending, as measured by cross-border banking claims at the Bank for International Settlements, is down nearly $2.6 trillion, or 9%, over the past two years. International trade this year will grow at the slowest pace since 2007, according to the World Trade Organization, which has slashed its forecast for growth in global trade volumes to 1.7% in 2016 from a previous estimate in April of 2.8%.

Imports among the world’s 20 largest economies have fallen as a share of their GDP for four consecutive years, and growth in demand for shipping containers fell to 4% this year after four decades of double-digit expansion. As financial officials gather in the U.S. capital this week at semiannual meetings of the IMF and the World Bank, there is widespread concern that this global malaise could worsen if nations intentionally turn inward. Too many politicians are backing trade barriers in a misguided effort to boost national growth in the short term, said Roberto Azevedo, director general of the WTO. “The medicine that is being often prescribed is protectionism, and that is exactly the kind of medicine that is going to hurt the patient, not help him,” he said.

The head of the IMF, Christine Lagarde, also expressed concern over rising protectionism around the world, including in the U.S. “Curbing free trade would be stalling an engine that has brought unprecedented welfare gains around the world over many decades,” she said. The slower-than-expected economic activity is feeding a cycle of banks pulling back from international risk, companies hesitant to invest in new production, and governments issuing regulations—often linked to national security—favoring domestic producers. “Now that we’re in this 2% [growth] range in the U.S. and less than that in other countries, people are clinging more to the past and thinking more how to protect versus embracing the future,” said David Abney, CEO of United Parcel Service.

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“The reality speaks of morbid financial excess..” (BTW, two WSJ articles in a row that start with Worries, some that deepen, others grow -same thing)

Worries Grow That China Faces a Perilous Property Bubble (WSJ)

The latest buying frenzy began late last year, when Mr. Xi set a national goal of reducing the number of unsold homes in 2016. In the following months, cities rushed to relax home-purchase curbs that were put in place to discourage speculation during the last housing boom. Beijing also made it easier for homebuyers to access credit. The Chinese leadership’s hope was that modest borrowing by families and individuals would boost property sales and cut inventory, aiding related industries such as construction that, all told, account for about a fifth of China’s gross domestic product. It hasn’t gone as planned. Too much investment went into housing, economists say, aided by a series of central-bank easing measures since late 2014.

Government data show more than a third of new loans in the first half of 2016 went to housing. By comparison, an average 17.4% of new loans went to housing between 2010 and 2015, according to BNP Paribas. “The reality speaks of morbid financial excess,” said Harrison Hu at RBS. In July, six major cities showed home-price gains of more than 20% from the prior year; in August, 10 cities did. In the coastal city of Xiamen, prices skyrocketed 44.3%. Average new home prices across 70 Chinese cities in August rose far less, 7.5%, suggesting that many smaller cities are still struggling with too much inventory.

Chinese households’ leverage, meanwhile, is fast rising to dangerous levels. A study by China’s Haitong Securities shows that total home loans are expected to make up 30% China’s GDP this year, up from less than 20% three years ago. That is higher than Japan’s level during its property-bubble years in the late 1980s. One moderating factor: Most Chinese households pay down payments equal to about a third of the home’s value, making homeowners less vulnerable to price drops.

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Yeah, about that globalization thing… You know, protectionism and all that…

EU Imposes Import Duties Of Up To 73.7% On Cheap Chinese Steel (G.)

The European Union has slapped tariffs of up to 73.7% on Chinese steel after manufacturers were forced to cut jobs due falling prices and demand for the material amid an influx of cheap imports from Asia. Thousand of job have already been lost in the steel industry in Britain in the last year with thousands more at risk as the sector remains under pressure. Industry leaders have partly blamed the squeeze on the sector on China’s dumping of cheap steel in Europe as it struggles to find buyers for its products domestically. The EU has agreed to impose import duties of between 13.2% and 22.6% on Chinese hot-rolled steel, which is used in pipelines and gas containers, and 65.1% and 73.7% on heavy plates, which are used in civil engineering projects.

The state of the steel industry became part of the debate about Britain’s future in the EU before the referendum in June, with Brexiters claiming that the country would be better able to protect workers and introduce tariffs on Chinese imports if it voted to leave. UK Steel, the industry trade body, welcomed the speed at which the new EU tariffs had been introduced but warned that the levy on hot-rolled steel was not high enough, which could hurt Port Talbot, the biggest steelworks in Britain. Dominic King, head of policy and external affairs at UK Steel, said: “The speed at which tariffs have been imposed on dumped steel from China by the EU is very welcome. However, while we hope the tariffs for heavy plate are robust enough to ensure free and fair trade, the proposed levels for hot-rolled steel are not high enough, which might encourage China to continue dumping it on to the EU market.”

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I don’t think Trump will lose. But good perspective, from Canada.

He’ll Likely Lose – But Trump Is The Final Warning To Elites (G&M)

Donald Trump will probably lose the election. But he is a final warning. Unless political elites of both the left and the right become more humble, unless they once again ask themselves how their agendas will play in Peoria, the next rough beast might slouch over the corpse of the republic. “Will it play in Peoria?” goes back to the days of vaudeville. The city of 115,000 in central Illinois was once considered the ultimate focus group, the embodiment of Middle America, the place to test a joke or a soda or a social policy to learn what white folks without a fancy degree thought of it. Back in the day, you knew better than to defy the settled judgment of this ultimate test market. You went as far as Peoria would let you, and no further.

But we grew impatient. You have to fight Jim Crow, whatever Peoria thinks. Free trade will lift most boats, even if it swamps a few. The environment is too precious, and at too much risk, to go slow. Lower taxes and less red tape will help the economy grow, even if it profits some more than others. The left wanted social justice, protection for minorities, a cleaner environment. The right wanted lower taxes and trade deals. Despite the rhetoric, each accommodated the other. Republicans left the Democrats’ progressive policies largely intact; Democrats learned to embrace, or at least reluctantly accept, globalization. And everybody knew what was really going on in Washington. A tax break for you. A subsidy for me. You take care of my client and I’ll take care of yours. Deal? Then let’s celebrate. We’ll expense it.

What did the guy on the line think about this? The wife at Wal-mart? The folks at the ball park? No one really cared. Yeah, politicians chased their vote. But respect them, even defer to their collective wisdom? Not so much. The accommodation between left and right started unravelling in the 1980s. The Bork confirmation. The Thomas confirmation. Contract with America. Impeaching Bill Clinton. Iraq. Obama. The Tea Party. Gay marriage. And now the Democrats want to replace a black president with a woman? A CLINTON? Meanwhile, Peoria is hurting. The city is home to Caterpillar. But the heavy-equipment giant has outsourced most of its work force overseas or to so-called right-to-work states.

But what does Washington care? The left worries more about combatting global warming than about blue-collar workers with bad backs and no jobs. The right promises to retrain them, but somehow never gets around to it. The laid-off boys in the bars of Peoria blame the illegals, the only ones even more voiceless than themselves. They seethe at the Wall Street suits who destroyed the economy and got off scot-free. And what the hell is transgender, anyway? They look at their daughter’s report card. She’s only getting Cs. What future is there for anyone who’s only getting Cs?

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How wrong is Dlibert’s alter ego? “It is fair to assume that Bill and Hillary are about to experience the worst weeks of their lives.”

Why Does This Happen on My Vacation? -The Trump Tapes (Scott Adams)

By now you know about the Access Hollywood recording in which Donald Trump said bad things eleven years ago. Many of my readers asked me to weigh in. I’ll give you my thoughts, in no particular order.

1. If this were anyone else, the election would be over. But keep in mind that Trump doesn’t need to outrun the bear. He only needs to outrun his camping buddy. There is still plenty of time for him to dismantle Clinton. If you think things are interesting now, just wait. There is lots more entertainment coming.

2. This was not a Trump leak. No one would invite this sort of problem into a marriage.

3. I assume that publication of this recording was okayed by the Clinton campaign. And if not, the public will assume so anyway. That opens the door for Trump to attack in a proportionate way. No more mister-nice-guy. Gloves are off. Nothing is out of bounds. It is fair to assume that Bill and Hillary are about to experience the worst weeks of their lives.

4. If nothing new happens between now and election day, Clinton wins. The odds of nothing new happening in that timeframe is exactly zero.

5. I assume that 75% of male heads of state, including our own past presidents, are total dogs in their private lives. Like it or not, Trump is normal in that world.

6. As fictional mob boss Tony Soprano once said in an argument with his wife, “You knew what you were getting when you married me!” Likewise, Trump’s third wife, Melania, knew what she was getting. It would be naive to assume Trump violated their understanding.

7. Another rich, famous, tall, handsome married guy once told me that he can literally make-out and get handsy with any woman he wants, whether she is married or not, and she will be happy about it. I doubted his ridiculous claims until I witnessed it three separate times. So don’t assume the women were unwilling. (Has anyone come forward to complain about Trump?)

8. If the LGBTQ community wants to be a bit more inclusive, I don’t see why “polyamorous alpha male serial kisser” can’t be on the list. If you want to label Trump’s sexual behavior “abnormal” you’re on shaky ground.

9. Most men don’t talk like Trump. Most women don’t either. But based on my experience, I’m guessing a solid 20% of both genders say and do shockingly offensive things in private. Keep in mind that Billy Bush wasn’t shocked by it.

10. Most male Hollywood actors support Clinton. Those acting skills will come in handy because starting today they have to play the roles of people who do not talk and act exactly like Trump in private.

11. I’m adding context to the discussion, not condoning it. Trump is on his own to explain his behavior.

12. Clinton supporters hated Trump before this latest outrage. Trump supporters already assumed he was like this. Independents probably assumed it too. Before you make assumptions about how this changes the election, see if anyone you know changes their vote because of it. All I have seen so far is people laughing about it.

12. I hereby change my endorsement from Trump to Gary Johnson, just to get out of the blast zone. Others will be “parking” their vote with Johnson the same way. The “shy Trump supporter” demographic just tripled.

13. My prediction of a 98% chance of Trump winning stays the same. Clinton just took the fight to Trump’s home field. None of this was a case of clever strategy or persuasion on Trump’s part. But if the new battleground is spousal fidelity, you have to like Trump’s chances.

14. Trump wasn’t running for Pope. He never claimed moral authority. His proposition has been that he’s an asshole (essentially), but we need an asshole to fight ISIS, ignore lobbyists, and beat up Congress. Does it change anything to have confirmation that he is exactly what you thought he was?

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Stop bombing teh Middle East and send your troops to protect Afrian wildlife. Much better use of force. May actually save mankind instead of destroying it.

Hounds Hot On The Heels Of Poachers In Rhino Country (G.)

“I am ready to die for conserving the rhino,” says Wisdom Makhubele. But the brave young ranger now has another weapon in the war against rhino poaching: the extraordinary nose of tracking hounds. The trained dogs can run poachers to ground far faster than people, sometimes even being set free in packs and followed from helicopters. The new canine training unit at the Southern African Wildlife College (SAWC), near Acornhoek, opened earlier this year and dogs have already brought armed poachers to heel in Kruger national park, the epicentre of the rhino poaching crisis. At least 6,000 African rhinos have been slaughtered by poachers since 2008, to fuel the soaring demand for its horn in Asia, where it is highly valued as a supposed tonic and status symbol.

The rhino poaching epidemic across Africa has exploded in recent years, with annual increases in killings every year since 2009: 1,338 were slaughtered in 2015. It was a hot topic at the major wildlife trade summit in Johannesburg this week, where an attempt by Swaziland to legalise rhino horn trade was defeated. South Africa hosts more than 90% of the 20,000 surviving white rhinos and almost half the 4,800 remaining black rhinos and saw a slight dip in the slaughter in 2015, the first decrease in nine years. Over 70% of the rhino kills occur in Kruger and a sign on the way into the park reads “Poachers will be poached”. Dogs have been used for camp security for years, but the escalating poaching crisis has found them a new role.

“They are awesome – they are instinctive to tracking,” says Johan van Straaten, manager of the dog unit, which has been funded by WWF Nedbank Green Trust. “All these dogs can track, it’s in their genes. But we train them to track the scent we want. These dogs are imprinted on human scent, like narcotics dogs are on drugs.” [..] Being a ranger in the war on poaching can be deadly – more than 1,000 rangers were killed around the world in the last decade and many more injured. The danger follows the rangers home too. “They are targets and their families can be targets, that’s for certain,” says van Straaten. Makhubele comes from a local village. “People there know me and some of them are poachers, but I am not afraid,” he says. “This [rhino population] is our legacy and we have to look after it.”

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New Zealanders must stand up against their government. It’s very much your shame too.

New Zealand Child Poverty A Source Of Deep Concern: UN (G.)

The UN has said in a damning report that it is deeply concerned about New Zealand’s persistently high rates of child poverty. Unicef says 300,000 children – a third of New Zealand’s child population – now live below the poverty line. This is a rise of 45,000 in a year. Government representatives travelled to Geneva last month to present the country’s progress on its commitment to protecting the rights of the child to the UN. The UN committee’s report acknowledges widespread public debate and media attention on child poverty in New Zealand, but expresses serious concern about the government’s failure to address the issue systematically.

“The committee is deeply concerned about the enduring high prevalence of poverty among children,” the report says, highlighting “the effect of deprivation on children’s right to an adequate standard of living and access to adequate housing, with its negative impact on health, survival and development, and education”. The report expresses particular concern about the number of Maori and Pasifika children living in deprived circumstances. Both groups are disproportionately represented in child poverty statistics.

It calls for “urgent measures to address disparities in access to education, health services and a minimum standard of living for Maori and Pasifika children and their families” and says more effort should be invested in preserving Maori children’s cultural identity. The government of the National party is urged to take a systematic approach to tackling child poverty, and to establish a “national definition” to measure child poverty, something it has repeatedly refused to do. The Green party co-leader Metiria Turei welcomed the UN report. “The national government has repeatedly denied the seriousness of the problem and deserves the criticism it has received from the committee,” she said. “And that means thousands on NZ children are missing out on their chance for a decent life, especially Maori and Pasifika children.”

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What is more sickening, that the Saudis do this, or that we insist on continuing to call them our friends? “..the stoning, amputation and flogging of children..” does not belong in our world.

UN Watchdog Demands Saudis Stop Child Executions (AFP)

UN rights experts demanded Friday that Saudi Arabia immediately overturn laws allowing for the execution of children, and for punishments of minors including stonings, amputations and flogging. In a report on the plight of children in the wealthy Gulf state, a UN committee took Riyadh to task for allowing minors to be sentenced as adults, including to harsh corporal punishment and even the death penalty. The United Nations Committee on the Rights of the Child also criticised what it called Saudi Arabia’s systematic discrimination against girls, who are not considered full subjects, and who can be married off as early as nine years of age.

In its report, the committee expressed its “deepest concern” that Saudi Arabia “tries children above 15 years as adults and continues to sentence to death and to execute persons for offences that they allegedly committed when they were under the age of 18”. The committee, which is composed of 18 independent experts who monitor the implementation of the UN Convention on the Rights of the Child, pointed to a number of cases where minors had been sentenced to death. It said that at least four of the 47 people executed on January 2 this year were under 18 when they were sentenced to death.

And it demanded that Riyadh “immediately halt the execution” of those currently on death row who allegedly committed their crimes when they were minors, including Ali Mohammed Baqr al-Nimr, Abdullah Hasan al-Zaher, and Salman Bin Ameen Bin Salman Al-Qureish. Committee chairman Benyam Mezmur told reporters Saudi Arabia was only one of five countries, alongside China, Iran, Pakistan, and the Maldives, where child rights experts had ever needed to raise concerns about executions. “This is a very, very serious issue,” he said. The committee also demanded that Saudi Arabia immediately repeal laws permitting “the stoning, amputation and flogging of children”.

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Sep 242016
 
 September 24, 2016  Posted by at 8:28 am Finance Tagged with: , , , , , , , ,  Comments Off on Debt Rattle September 24 2016
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DPC “Unloading fish at ‘T’ wharf, Boston, Mass.” 1903

 


Austerity Only Benefits Germany But Destroys Europe, Renzi Says (BBG)
€18 In ECB QE Generated Just €1 In GDP Growth (ZH)
IMF Calls For More Greek Pension Cuts, Greater Debt Relief (Kath.)
Plunging Velocity of Money Closes Fed Window (Roberts)
Russia’s Central Bank Criticizes The Easy Money Policies Of Its Peers (CNBC)
BIS, OECD Warn On Canadian Housing Bubble Debt, See No Exit (WS)
Oil Slumps 4% As No Output Deal Expected For OPEC (R.)
Kingdom Comedown: Falling Oil Prices Shock Saudi Middle Class (WSJ)
Health Warning! “Realism” Virus Afflicting Mainstream Economists (Steve Keen)
Obama Vetoes 9/11 Saudi Bill, Sets Up Showdown With Congress (R.)
EU Refuses To Revise Canada CETA Trade Deal (BBC)
NATO’s Expansion Parade Makes America Less Secure (Forbes)

 

 

Renzi should have made these statements years ago. Now they look like cynical ways to get votes.

Austerity Only Benefits Germany But Destroys Europe, Renzi Says (BBG)

Italian Prime Minister Matteo Renzi had some fighting words for German leader Angela Merkel: Your obsession with austerity is strangling Europe and your country is the only one profiting. That view, held by others in the EU, rarely gets aired publicly quite so forcefully. Especially by Renzi, who until recently had deployed priceless ancient Roman art and Ferraris in some of Merkel’s recent visits to Italy. But Brexit, which exposed cracks in the European project, has made the EU more vulnerable to jabs. In New York for the United Nations General Assembly, while Merkel hung back at home to face an angry electorate, Renzi lashed out. “Stressing austerity means destroying Europe,” Renzi told an audience of policy experts at the Council on Foreign Relations.

”Which is the only country which receives an advantage from this strategy? The one which exports the most: Germany.” The 41-year-old premier has staked his political future on a referendum on constitutional reform that polls show he could narrowly lose. Confronted with an economy in trouble, he’s stepped up criticism of the EU’s rigid budget deficit limits and of the nations seen as wielding the most power in the 28-nation bloc: Germany and France. His appeal for more flexibility has grown more strident as pressure mounts for him to pick a date for when Italians will vote on cutting back the Senate with the aim of making governments more stable and simplifying the passage of legislation. The referendum is expected to take place by the end of the year, and Renzi has said he would quit if he loses.

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“..€80 billion have been wasted almost every month!..”

€18 In ECB QE Generated Just €1 In GDP Growth (ZH)

After almost two years of the quantitative easing program in the Euro Area, economic figures have remained very weak. As GEFIRA details, inflation is still fluctuating near zero, while GDP growth in the region has started to slow down instead of accelerating. According to the ECB data, to generate €1.0 of GDP growth, €18.5 had to be printed in the QE, which means that €80 billion have thus been wasted almost every month! This year, the ECB printed nearly €600 billion within the frame of asset purchase programme (QE). At the same time, GDP has increased by… €31 billion; even if up to the end of 2015 the ECB issued €650 billion during its QE program. Needless to say that the Greek debt is “only” €360 billion and there has been no chance of a relief, so far.

The question is where this money from the QE goes and who benefits from it. Clearly it is not the real sector, the so called Main Street of French, Italian or Portuguese cities (Greece is not under the QE program). European stocks are still weak, too, while stock exchanges in the USA are hitting their records. So, is the ECB serving Europeans?

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More pension cuts is an immoral demand.

IMF Calls For More Greek Pension Cuts, Greater Debt Relief (Kath.)

The International Monetary Fund called for Greece to cut pensions and taxes and for its lenders to provide significant debt relief in order for the country to make a convincing exit from the crisis. In its annual report on the Greek economy, following so-called Article Four consultations in Athens, the Fund described the country’s pension system as “unaffordable” despite recent reforms. It argued that the pension system’s deficit remains too high at 11%, compared to a 2.5% average in the eurozone, and that too much of a burden has been placed on Greeks currently in work, while existing pensioners have largely been protected. The Fund also said that Greece’s tax credit system was too generous, exempting around half of salary earners compared to a euro area average of 8%.

The IMF proposes a reduction in taxes and social security contributions, arguing that recent increases created incentives for undeclared work. “Greece needs less austerity, not more,” said IMF mission chief Delia Velculescu as she presented the report in a teleconference with journalists. The Fund, whose role in Greece’s third bailout program has yet to be clarified, also stressed the need for European lenders to deliver on their debt relief pledge as “growth prospects remain weak and subject to high downside risks.” “Even with full implementation of this demanding policy agenda, Greece requires substantial debt relief calibrated on credible fiscal and growth targets,” the report said.

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Plunging velocity is the most important deflation indicator.

Plunging Velocity of Money Closes Fed Window (Roberts)

The problem for the Federal Reserve remains the simple fact there is NO evidence that “Quantitative Easing” actually works as intended. The artificial suppression of interest rates was supposed to spur economic activity by encouraging lending activities through the banks. Such an outcome should have been witnessed by an increase in monetary velocity. As the velocity of money accelerates, demand rises and inflationary pressures increase. However, as you can clearly see, the demand for money has been on the decline since the turn of the century.

The surge in M2V during the 90’s was largely driven by the surge in household leverage as consumers turned to debt to fill the gap between falling wage growth and rising standards of living. The issue for the Fed is the decline in the “unemployment rate,” caused solely by the shrinking labor force, is obfuscating the difference between a “real” and “statistical” full employment level. While it is expected that millions of individuals will retire in the coming years ahead; the reality is that many of those “potential” retirees will continue to work throughout their retirement years. In turn, this will have an adverse effect by keeping the labor pool inflated and further suppressing future wage growth.

[..] It is quiet evident the financial markets, and by extension, the economy, have become tied to Central Bank interventions. As shown in the chart below, the correlations between Federal Reserve interventions and the markets is quite high. Of course, this was ALWAYS the intention of these monetary interventions. As Ben Bernanke suggested in 2010 as he launched the second round of Quantitative Easing, the goal of the program was to lift asset prices to spur consumer confidence thereby lifting economic growth. The problem was the lifting of asset prices acted as a massive wealth transfer from the middle class to the top-10% providing little catalyst for a broad-based economic recovery. Unwittingly, the Fed has now become co-dependent on the markets. If they move to tighten monetary policy, the market sells off impacting consumer confidence and pushes economic growth rates lower. With economic growth already running below 2%, there is very little leeway for the Fed to make a policy error at this juncture.

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The smartest kid on the block.

Russia’s Central Bank Criticizes The Easy Money Policies Of Its Peers (CNBC)

Russia’s economy is facing a different range of issues than those facing the U.S., Japan and the euro zone and so the central bank has to take a different approach, Russia’s central bank governor told CNBC, questioning whether other central banks still had the means to influence their economies. “Whether (other) central banks still have in their possession the types of tools to influence this situation (is the subject of a very broad discussion),” Russia Central Bank Governor Elvira Nabiullina told CNBC in Moscow. “Whether they are already finding themselves on the brink of negative interest rates and some are already in negative interest rate territory. These are most certainly not trivial problems. But as far as the Russian economy is concerned, we find ourselves in a totally different situation,” she said.

Nabiullina was critical of the environment of easy monetary policy that other central banks have created in recent years with their quantitative easing (QE) programs. These were aimed at boosting liquidity, investment and economic growth but they have not necessarily translated into investment in the real economy. Rather, there has been increased liquidity in financial markets, prompting concerns of an equity and bond bubble that will burst when QE programs are eventually wound down and monetary policy “normalized.” Nabiullina warned that “because of the continued easing of monetary policy in many countries there is also the possibility that a higher level of financial market volatility will persist.”

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Tragedy waiting in the wings.

BIS, OECD Warn On Canadian Housing Bubble Debt, See No Exit (WS)

Everyone is fretting about the Canadian house price bubble and the mountain of debt it generates – from the IMF on down to the regular Canadian. Now even the Bank for International Settlement (BIS) and the OECD warn about the risks. Every city has its own housing market, and some aren’t so hot. But in Vancouver and Toronto, all heck has broken loose in recent years. In Vancouver, for example, even as sales volume plunged 45% in August from a year ago – under the impact of the new 15% transfer tax aimed at Chinese non-resident investors – the “benchmark” price of a detached house soared by 35.8%, of an apartment by 26.9%, and of an attached house by 31.1%. Ludicrous price increases!

In Toronto, a similar scenario has been playing out, but not quite as wildly. In both cities, the median detached house now sells for well over C$1 million. Even the Bank of Canada has warned about them, though it has lowered rates last year to inflate the housing market further – instead of raising rate sharply, which would wring some speculative heat out of the system. But no one wants to deflate a housing bubble. During the Financial Crisis, when real estate prices in the US collapsed and returned, if only briefly, to something reflecting the old normal, Canadian home prices barely dipped before re-soaring. And this has been going on for years and years and years.

The OECD in its Interim Economic Outlook warned: “Over recent years, real house prices have been growing at a similar or higher pace than prior to the crisis in a number of countries, including Canada, the United Kingdom, and the United States. The rise in real estate prices has pushed up price-to-rent ratios to record highs in several advanced economies.” Canada stands out. Even on an inflation-adjusted basis, Canadian home prices have long ago shot through the roof. The OECD supplied this bone-chilling chart. The top line (orange) represents Canadian house price changes, adjusted for inflation.

[..] Real estate is highly leveraged. It’s funded with debt. Many folks cite down-payment requirements in rationalizing why the Canadian market cannot implode, and why, if it does implode, it won’t pose a problem for the banks. However, an entire industry has sprung up to help homebuyers get around the down-payment requirements. So household debt has been piling up for years, driven by mortgage debt. Statistics Canada reported two weeks ago that the ratio of household debt to disposable income has jumped to another record in the second quarter, to a breath-taking 167.6%:

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Even if there were a deal, global output would barely fall.

Oil Slumps 4% As No Output Deal Expected For OPEC (R.)

Oil prices tumbled 4% on Friday on signs Saudi Arabia and arch rival Iran were making little progress in achieving preliminary agreement ahead of talks by major crude exporters next week aimed at freezing production. Also weighing on sentiment was data showing the United States was on track to add the most number of oil rigs in a quarter since the crude price crash began two years ago. Lower equity prices on Wall Street and other world stock markets was another bearish factor. Brent crude futures settled down $1.76, or 3.7%, at $45.89 a barrel. For the week, it rose 0.3%, accounting for gains in the past two sessions. U.S. West Texas Intermediate (WTI) crude futures fell $1.84, or 4%, to settle at $44.48. On the week, WTI gained 3%.

Crude futures slumped after sources said Saudi Arabia did not expect a decision in Algeria where the OPEC and other big oil producers were to convene for Sept 26-28 talks. “The Algeria meeting is not a decision making meeting. It is for consultations,” a source familiar with Saudi oil officials’ thinking told Reuters. Earlier in the day, the market rallied when Reuters reported that Saudi Arabia had offered to reduce production if Iran caps its own output this year. Oil prices are typically volatile before OPEC talks and Friday’s session was tempered with caution despite market sentiment on a high this week after the U.S. government reported on Wednesday a third straight weekly drop in crude stockpiles. “A ‘No Deal’ result in our definition will be one where OPEC not only failed to get an explicit deal out of the meetings, but also failed to develop a forward plan,” Macquarie Capital said, referring to the Algeria talks. “This would be another epic fail by OPEC.”

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People keep on suggesting that SA has a choice, without acknowledging that any output cut would promptly be filled by some other producer. Cutting output equals losing market share.

Kingdom Comedown: Falling Oil Prices Shock Saudi Middle Class (WSJ)

[..] a sharp drop in the price of oil, Saudi Arabia’s main revenue source, has forced the government to withdraw some benefits this year—raising the cost of living in the kingdom and hurting its middle class, a part of society long insulated from such problems. Saudi Arabia heads into next week’s meeting of major oil producers in a tight spot. With a slowing economy and shrinking foreign reserves, the kingdom is coming under pressure to take steps that support the price of oil, as it did this month with an accord it struck with Russia. The sharp price drop is mainly because of a glut in the market, in part caused by Saudi Arabia itself. The world’s top oil producer continues to pump crude at record levels to defend its market share.

One option to lift prices that could work, some analysts say, is to freeze output at a certain level and exempt Iran from such a deal, given that its push to increase production to pre-sanction levels appears to have stalled in recent months. Saudi Arabia has previously refused to sign any deal that exempts arch-rival Iran. As its people start feeling the pain, that could change. The kingdom is grappling with major job losses among its construction workers—many from poorer countries—as some previously state-backed construction companies suffer from drying up government funding. Those spending cuts are now hitting the Saudi working middle class.

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Funny. What I wonder about is, the criticism of mainstream economics is going mainstream, but the ‘solutions’ are not the same.

Health Warning! “Realism” Virus Afflicting Mainstream Economists (Steve Keen)

Some papers that are remarkably critical of mainstream economics have been published recently, not by the usual suspects like myself, but by prominent mainstream economists: ex-Minneapolis Fed Chairman Narayana Kocherlokata, ex-IMF Chief Economist Olivier Blanchard, and current World Bank Chief Economist Paul Romer. I discuss these papers in a tongue-in-cheek introduction to another key problems of unrealism in economics–the absence of any role for energy in both Post Keynesian and Neoclassical production functions. I also address Olivier Blanchard’s desire for a “widely accepted analytical macroeconomic core”, explain the role of credit in aggregate demand and income, and identify the countries most likely to face a credit crunch in the near future. I gave this talk to staff and students of the EPOG program at the University of Paris 13 on Friday September 23rd.

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He’s stuck. Allowing it would open up one Pandora’s Box, not allowing it opens yet another.

Obama Vetoes 9/11 Saudi Bill, Sets Up Showdown With Congress (R.)

President Barack Obama on Friday vetoed legislation allowing families of victims of the Sept. 11 attacks to sue Saudi Arabia, which could prompt Congress to overturn his decision with a rare veto override, the first of his presidency. Obama said the Justice Against Sponsors of Terrorism Act would hurt U.S. national security and harm important alliances, while shifting crucial terrorism-related issues from policy officials into the hands of the courts. The bill passed the Senate and House of Representatives in reaction to long-running suspicions, denied by Saudi Arabia, that hijackers of the four U.S. jetliners that attacked the United States in 2001 were backed by the Saudi government. Fifteen of the 19 hijackers were Saudi nationals.

Obama said other countries could use the law, known as JASTA, as an excuse to sue U.S. diplomats, members of the military or companies – even for actions of foreign organizations that had received U.S. aid, equipment or training. “Removing sovereign immunity in U.S. courts from foreign governments that are not designated as state sponsors of terrorism, based solely on allegations that such foreign governments’ actions abroad had a connection to terrorism-related injuries on U.S. soil, threatens to undermine these longstanding principles that protect the United States, our forces, and our personnel,” Obama said in a statement. Senator Chuck Schumer, who co-wrote the legislation and has championed it, immediately made clear how difficult it will be for Obama to sustain the veto. Schumer issued a statement within moments of receiving the veto, promising that it would be “swiftly and soundly overturned.”

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Sure, why don’t you, against the will of your own people. Should work just fine.

EU Refuses To Revise Canada CETA Trade Deal (BBC)

The European Commission has ruled that a controversial EU-Canada free trade deal – CETA – cannot be renegotiated, despite much opposition in Europe. “CETA is done and we will not reopen it,” said EU Trade Commissioner Cecilia Malmstrom. Ms Malmstrom was speaking as EU trade ministers met in Slovakia to discuss CETA and a similar deal with the US, TTIP, which has also faced criticism. A draft CETA deal has been agreed, but parliaments could still delay it. Thousands of activists protested against CETA and TTIP in Germany on Saturday and thousands more in Brussels – outside the EU’s headquarters – on Tuesday. Activists fear that the deals could water down European standards in the key areas of workers’ rights, public health and the environment.

There is also great anxiety about proposed special courts where investors will be able to sue governments if they feel that legislation hurts their business unfairly. Critics say the mere existence of such courts – an alternative to national courts – will have a “chilling” effect on policymakers, leading to slacker regulation on the environment and welfare. Ms Malmstrom said CETA would dominate Friday’s meeting in Bratislava. The Commission hopes the deal can be signed with Canada at the end of October, so that it can then go to the European Parliament for ratification. But it will also need to be ratified by national parliaments across the EU. “What we are discussing with the Canadians is if we should make some clarifications, a declaration so that we can cover some of those concerns,” Ms Malmstrom said. She acknowledged fears in some countries that politicians might see their “the right to regulate” diluted. “Maybe that [right] needs to be even clearer in a declaration,” she said, admitting that the CETA negotiations were still “difficult”.

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Surprisingly lucid overview. Not everyone’s turned into a Putin basher yet.

NATO’s Expansion Parade Makes America Less Secure (Forbes)

The transatlantic alliance was created in 1949 to protect war-ravaged Western Europe from the Soviet Union, an opportunistic predator after its victory over Nazi Germany. The threat to America reflected both Moscow’s control over Eastern and Central Europe and the USSR’s role as an ideologically hostile peer competitor. The end of the Cold War changed everything. The Soviet subject nations were freed, a humanitarian bonanza. More important, the successor state of Russia went from hostile superpower to indifferent regional power. NATO lost its essential purpose, since the U.S. no longer needed to shield Western Europe from Moscow. Yet the alliance proved to be as resilient as other government bureaucracies. NATO officials desperately sought new reasons to exist.

Explained Vice President Al Gore: “Everyone realizes that a military alliance, when faced with a fundamental change in the threat for which it was founded, either must define a convincing new rationale or become decrepit.” The latter was viewed as inconceivable, not even worth considering. So the alliance expanded both its mission (to “out-of-area” activities) and membership (inducting former Warsaw Pact members). Washington’s military obligations multiplied even as the most important threat against it dissipated. Objections to this course were summarily rejected. Not a single Senator voted against admitting the three Baltic states. Then no one imagined that the U.S. might be expected to fight on their behalf. The alliance was seen as the international equivalent of a gentleman’s club, to which everyone who is someone belongs.

Those who pointed to possible conflicts with Moscow were dismissed as scaremongers. Expansion was expected to be all gain, no pain. Alas, Russia did not perceive moving the traditional anti-Moscow alliance up to its borders as a friendly act. Despite coming from the KGB, Vladimir Putin originally didn’t seem to bear the U.S. or West much animus. However, NATO compounded expansion with an unprovoked war against Serbia, a traditional Slavic ally of Moscow, and proposals to include Georgia and Ukraine, the latter which long had especially close historical, cultural, economic, and military ties with Russia. Over time Putin, as well as many of his countrymen, came to view the transatlantic alliance as a threat.

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Sep 222016
 
 September 22, 2016  Posted by at 8:24 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle September 22 2016
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Harris&Ewing Harding inauguration 1921


The Global Economic Outlook: Dark Clouds Ahead (Guardian Ed.)
UN Fears Third Leg Of Global Financial Crisis – With Epic Debt Defaults (AEP)
Major Trend Forecast For The Rest Of 2016 (Celente)
Report Highlights Rising US Poverty (D&C)
In Places With Fraying Social Fabric, a Political Backlash Rises (WSJ)
Greek Bakers Unite To Give Away Bread To Those Too Poor To Afford It (KTG)
Young Britons Live In ‘Suspended Adulthood’ (G.)
It’s Not Just Consumers That Are Living Paycheck To Paycheck (BBG)
Divided Fed Holds Fire, Signals 2016 Rate Increase Still Likely (BBG)
Bank of Japan’s Inflation Overshoot Deepens Policy Innovation (BBG)
Real Estate Gets Its Seat At The S&P 500 Table (Forbes)
With Mortgage Rates So Low, Why Are So Many People Still Renting? (Time)
House-Flippers Are Back, With Anonymous Funding (BBG)
China Chalks Up $667-Billion Debt Pile Over Toll Roads (R.)
Wells Fargo Too Arrogant To Own Up To Its Fraudulent Ways (WaPo)
27 US Senators Rebel Against Arming Saudi Arabia (I’Cept)
A First Step for Syria? Stop the Killing (Jimmy Carter)
Apologizing to My Daughter for the Last 15 Years of War (Van Buren)

 

 

Actually not all that bad from the Guardian Ed. staff. Though they predictably conclude with plain silliness: In the long run, this failed globalisation needs to be turned into something more sustainable and more inclusive, built on higher wages, robust tax systems and strong public safety nets.

The Global Economic Outlook: Dark Clouds Ahead (Guardian Ed.)

Eight years ago this month, a bank collapsed, Wall Street went into meltdown and the world economy plunged into crisis. Trillions were lost in output ($22tn in the US, within just five years), millions of workers were made redundant (8.8 million in America’s great recession, 1.2 million in the UK) and thousands of promises were made by politicians and policymakers – everyone from Barack Obama and Gordon Brown to David Cameron and Christine Lagarde – that things would change. Yet, nearly a decade later, what is most striking is how little has changed. In the US, the UK and the rest of the developed world, policymakers talk of the “new mediocre”, so tepid is economic performance. And in the developing world things look even worse.

Such is the message from two of the world’s leading economic thinktanks, the OECD and the UN Conference on Trade and Development (Unctad). Both their reports on Wednesday were thick with cloud and short on silver lining. Yes, the OECD believes that Brexit Britain will have a slightly easier time this year – but that will be followed by a far choppier 2017. And the Unctad report is even more troubling. The biggest single warning it makes is that the world is on the verge of “entering a third phase of the financial crisis”. What began in the US subprime housing market before roiling Europe’s governments is likely to rear its head again – this time in Latin America, Africa and other poor countries. What will do for them, believe the Unctad researchers, is what also did for America and Europe: debt.

Much of the cheap money created by the Fed, the BOE and the ECB has been pushed by financial speculators into the higher-yielding markets of South Africa, Brazil and India, among others. Economists at the Bank for International Settlements, the central banks’ central bank, reckon that $9.8tn was pumped out in foreign bank loans and bonds in the first half-decade after the Lehman Brothers collapse. Unctad calculates that around $7tn of that was pushed through to emerging markets. By any standards, that is a flood of credit – one that was encouraged by panicky policymakers.

Wasn’t it the turn of China and the rest to pick up the slack in the global economy? Except now developing countries are lumbered with a gigantic private debt mountain to pay down. The private, non-financial sector across the developing world has debt service obligations worth nearly 150% of its income. The comparable figure for the developed world, by contrast, is just above 80%. And now developing countries are hobbling along rather than sprinting ahead, while commodity prices have tanked. To make matters worse, companies will typically have borrowed in US dollars and invested in their local currencies – but the strength of the dollar will make those loans all the harder to repay.

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“What is clear is that world will soon need a massive and coordinated spending push by governments to create demand and bring the broken global system back into equilibrium. UNCTAD is entirely right about that. If this does not happen, it is sauve qui peut.”

UN Fears Third Leg Of Global Financial Crisis – With Epic Debt Defaults (AEP)

The third leg of the world’s intractable depression is yet to come. If trade economists at the United Nations are right, the next traumatic episode may entail the greatest debt jubilee in history. It may also prove to be the definitive crisis of globalized capitalism, the demise of the liberal free-market orthodoxies promoted for almost forty years by the Bretton Woods institutions, the OECD, and the Davos fraternity. “Alarm bells have been ringing over the explosion of corporate debt levels in emerging economies, which now exceed $25 trillion. Damaging deflationary spirals cannot be ruled out,” said the annual report of the UN Conference on Trade and Development (UNCTAD). We know already that the poisonous side-effect of zero rates and quantitative easing in the US, Europe, and Japan was to flood developing nations with cheap credit, upsetting their internal chemistry and drawing them into a snare.

What is less understood is just how destructive this has been. Much of the money was wasted, skewed towards “highly cyclical and rent-based sectors of limited strategic importance for catching up,” it said. Worse yet, these countries have imported the deformities of western finance before they are ready to cope with the consequences. This has undermined what UNCTAD calls the “profit-investment nexus” that ultimately drives growth and prosperity. The extraordinary result is that some countries are slipping backwards, victims of “premature deindustrialisation”. Many of them have fallen further behind the rich world than they were in 1980 despite opening up their economies and following the global policy script diligently.

The middle income trap closed in on Latin America and the non-oil states of the Middle East a long time ago, but now it is beginning to close in such countries as Malaysia and Thailand, and in some respects China. “The benefits of a rushed integration into international financial markets post-2008 are fast evaporating,” it said. Yet the suffocating liabilities built up over the QE years remain. UNCTAD says corporate debt in emerging markets has risen from 57pc to 104pc of GDP since the end of 2008, and much of this may have to written off unless there is a world policy revolution. “If the global economy were to slow down more sharply, a significant share of developing-country debt incurred since 2008 could become unpayable and exert considerable pressure on the financial system,” it said.

“There remains a risk of deflationary spirals in which capital flight, currency devaluations and collapsing asset prices would stymie growth and shrink government revenues. As capital begins to flow out, there is now a real danger of entering a third phase of the financial crisis which began in the US housing market in late 2007 before spreading to the European bond market,” it said. These are deeply-disturbing assertions. The combined US subprime and ‘Alt-A’ property exposure before the Lehman crisis was just $2 trillion, and Greece’s debts were trivial. What UNCTAD is talking about is an order of magnitude larger.

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Haven’t featured Celente in ages…

Major Trend Forecast For The Rest Of 2016 (Celente)

Central bank policies rule the financial world. Their never-in-the-history-of-the-world negative and historically low interest rate policies, plus massive government and corporate bond buying schemes have enriched equity markets but not the general economy… “In fact, what we have been forecasting and reporting since 2010, the Bank for International Settlements confirmed this week with its warning that central bank behavior, not economic fundamentals, hold sway over markets. Claudio Borio, head of the monetary and economic department of the BIS questioned whether “market prices fully reflect the risk ahead,” and “doubts about valuations seem to have taken hold in recent days.” Indeed true price discovery is dead.

Despite massive Federal Reserve intervention in the US that has driven the Dow and NASDAQ to new highs, S&P 500 companies reported five straight quarters of year-over-year declines. Also on the market fundamental front, with retail sales down 0.3% in August, there was no back-to-school-splurge. The service sector, the main economic driver of the United States economy, fell to its lowest level since 2010. Despite “experts” forecasting US GDP to rise 3% in 2016, it’s slogged along at an annualized 1% for the first two quarters. Just yesterday it was reported that housing starts in the US came in at an annualized rate of 1.14 million in August, well below the expected 1.19 million while construction permits fell 0.4% to a 1.14 million-unit rate last month.

And while President Obama chastised “Anyone claiming that America’s economy is in decline is peddling fiction,” US economic growth since the recession ended is tracking at its weakest pace of any expansion since 1949. As the BIS report concludes, “A more balanced policy mix is essential to bring the global economy into a more robust, balanced and sustainable expansion.” Yet, today, all equity eyes are concentrated more on central bank maneuvers than market fundamentals. In Japan, with new data showing exports falling 9.6% and imports down 17.3% in August, the focus is on what new schemes the Bank of Japan will invent to boost the economy despite its long proven track record of failure.

Similarly, later today in the US, the markets await news of if, and when, the Fed will raise interest rates. Yet, as the data proves since the Panic of ’08, central banks’ “policy mix” has failed …and we forecast despite pending measures, they will continue to fail to generate true economic growth. Thus we forecast continued equity market volatility with increasing prospects for a market meltdown.

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There should have been much more of this. People would have understood the world they live in so much better. The lack of this sort of analysis gives birth to Brexit and the Donald.

Report Highlights Rising US Poverty (D&C)

Among the troubling statistics in a new report released Tuesday was the rising concentration of poverty in city neighborhoods, and expanding number of census tracts where the poverty rate stood at 40% or higher. The count of high-poverty census tracts has nearly doubled in the city, from 19 to 37 since 2000. Fully one-third of Rochester residents live in poverty, and nearly another third require some outside assistance to get by, according to estimates in the ACT Rochester and Rochester Area Community Foundation update to its 2013 report on the state of poverty and self-sufficiency across the Greater Rochester region. The numbers are a near mirror-image of the suburbs, where more than two-thirds of residents are self-sufficient. And while the poverty rate in the nine-county Greater Rochester region continues to creep upward, it remains below state and national averages, the report shows.

“We don’t really have a poverty problem,” said Edward Doherty, a Strategic Community Intervention associate who served as project manager and editor of the report, and is active in local efforts to combat poverty. “We have a concentration of poverty problem.” Rochester has the third-highest concentration of poverty in the nation. And a significant segment of that population is female-headed families with children younger than 18. Though accounting for 17% of the population, the report found, the city has 36% of such households, and that population has a staggering poverty rate of 59.9%. Doing the math, the report estimates these families account for nearly half of all people living in poverty in the city, and these children account for more than 80% of all poor children in the city.

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This is changing the world, all over the world. Poverty and loss hidden from us by media and political propaganda.

In Places With Fraying Social Fabric, a Political Backlash Rises (WSJ)

Reading, Pa.— The buckling of social institutions fundamental to American civic life is deepening a sense of pessimism and disorientation, while adding fuel to this year’s rise of political populists like Donald Trump and Bernie Sanders. Here and across the U.S., key measures of civic engagement ranging from church attendance to civic-group membership to bowling-league participation to union activity are slipping. Unlocked doors have given way to anxiety about strangers. In Reading, tension between longtime white residents and Hispanic newcomers has added to the unease. For Mr. Martin, social and economic setbacks led him to support Mr. Sanders, who he figured would stick it to the big businesses Mr. Martin feels have sold out working people.

Other people here find resonance in Mr. Trump’s message that the U.S. has skidded so far off course that it needs to lock out immigrants and block imports to recover an era of greatness. “When you lose the family unit and you lose the church community, you are losing a whole lot,” says Bonnie Stock, a retired teacher in Reading and Trump supporter, who says the church where she was baptized is dying from lack of young members. “People are looking at Trump because most of us see this [country] isn’t working,” she says. Ms. Stock figures Mr. Trump’s business experience would help him better attack societal problems like drug addiction.

Across the U.S., the Republican presidential nominee has his firmest support among the white working class. In the Republican primaries, he carried all but nine of the country’s 156 counties where at least 85% of the adult population was whites without four-year college degrees. Mr. Trump won 64% of the vote in Berks and Schuylkill counties, where noncollege whites were 66% of the adult population as of 2014. In Berks County, once famous for the Reading Railroad stop on the Monopoly board game, social ills have been exacerbated by a 30% decline in manufacturing jobs and 6% fall in inflation-adjusted median income since 1995.

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In case you’re wondering why the Automatic Earth tries so hard to help the poorest Greeks. These are the very people your generous donations assist. The problem is their numbers are rising fast.

But we’re not going to give up. I’m breaking my head over the next steps in the process. We need to do something big for Christmas. Meanwhile, please keep donating through our Paypal widget, top left corner of the site, in amounts that end in $0.99 or $0.37.

Greek Bakers Unite To Give Away Bread To Those Too Poor To Afford It (KTG)

Did you know that there are people in Greece who cannot afford to buy even a loaf of bread at a cost of €0.60 – €0.70? Almost a year after Greece surrendered into the arms of the international lenders and the IMF and the austerity cuts started to affect people’s lives, a bakery in our neighborhood was offering a bread at a special price for pensioners and unemployed. The special price was just half a euro. At one point, I remember that more and more people were going to this bakery and asking for bread from the previous day for a couple of cents or even free of charge. Two days ago, the grim Greek reality hit me again. I was at the bakery sometime at noon. All different kinds of bread loafs were waiting for customers, nicely set in order, one by one, next to each other.

Yet, somewhere, in a corner at one of the lower shelves there was a group of breads: several loaves, long and round, white and wholewheat, a couple of baguettes. “What are these?” I asked the baker and he answered “This is bread from yesterday, for the poor. We give it free of charge.” He told me further, that he had 6-7 returning customers who come every second day for the bread from yesterday. Mostly elderly, pensioners. And “maybe 2-3 people per day,” people he does not know who just step in and ask for “old bread for free.” The problem of poverty is not widespread only in Athens, where the cost of living is much higher than in the countryside. Today, I read about the action of the Bakers’ Association in Kozani, in Northern Greece. Customers can buy extra bread for those in need, while the bakers will keep records of the “Bread on the waiting” – as they call their action – and give it to those who cannot afford it.

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As I’ve written before: and still everyone says they love their kids.

Young Britons Live In ‘Suspended Adulthood’ (G.)

Despair, worries about the future and financial pressures are taking a toll on millions of young Britons, according to a poll which found young women in particular were suffering. Low pay and lack of work in today’s Britain are resulting in “suspended adulthood”, with many living or moving back in with their parents and putting off having children, according to the poll of thousands of 18 to 30-year-olds. Large numbers describe themselves as worn down (42%), lacking self-confidence (47%) and feeling worried about the future (51%).

The Young Women’s Trust, the charity that commissioned the polling by Populus Data Solutions, warned that Britain was facing a “generation of young people in crisis” as it called on the government to take steps including creating a minister with responsibility for overall youth policy. Young women are being particularly affected. The percentage of women reporting that they lacked self-confidence was 54%, compared with 39% of young men. While four in 10 young people said they felt worn down, the percentage for young women was 46% compared with 38% of men. One in three said they were worried about their mental health, including 38% of young women and 29% of young men.

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US small business dances on the edge. They account for 50% of GDP and more than 50% of new job creation.

It’s Not Just Consumers That Are Living Paycheck To Paycheck (BBG)

As Federal Reserve officials gather to issue their monthly assessment of the world’s largest economy, a new study lays bare the extent to which many small firms are pressed for cash. “Most small businesses are operating on very small margins,” Diana Farrell, CEO of the JPMorgan Chase Institute, an in-house think tank that uses data from the bank to analyze the economy. “The small business sector is less full of future Googles and Ubers and tons and tons of very small operators living month to month,” she said in a phone interview. The companies in question may be small, but they represent an outsized share of the U.S. economy.

According to the Small Business and Entrepreneurship Council, they account for roughly 50% of GDP and more than 50% of new job creation — a metric that’s closely watched by the Fed in determining whether the economy can withstand a constriction in financing conditions. Yet even though they’re contributing a great deal to the economy there remains ignorance about their financial health, Farrell added. On average, the companies surveyed have just 27 days worth of cash reserves — or money to cover expenses if inflows suddenly stopped — according to the JPMorgan study, which analyzed 470 million transactions by 570,000 small business last year. Restaurants typically hold the smallest cash buffers, with just 16 days of reserves, while the real-estate sector boasts the biggest, at 47 days.

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These people get far too much attention. That makes them feel much too important. We should ignore them. After taking their undemocratic powers away.

Divided Fed Holds Fire, Signals 2016 Rate Increase Still Likely (BBG)

A divided Federal Reserve left its policy interest rate unchanged to await more evidence of progress toward its goals, while projecting that an increase is still likely by year-end. “Near-term risks to the economic outlook appear roughly balanced,” the Federal Open Market Committee said in its statement Wednesday after a two-day meeting in Washington. “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” The sixth straight hold extends U.S. central bankers’ run of getting cold feet amid risks from abroad and inconsistent signs of economic strength.

Now the focus will shift to December as the Fed’s likely last chance to raise interest rates in 2016 – a move that depends on how the economy, inflation and markets fare in the months surrounding a contentious presidential election. “The statement is much more hawkish than I thought it would be,” said Stephen Stanley at Amherst Pierpont Securities in New York, who said he expects a rate increase in December. “That just tells you they are revving up the engines.” Three officials, the most since December 2014, dissented in favor of a quarter-point hike. Esther George, president of the Kansas City Fed, voted against the decision for a second straight meeting. She was joined by Cleveland Fed President Loretta Mester – in her first dissent – and Eric Rosengren, head of the Boston Fed, whose previous dissents called for easier policy.

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Uh, no: The need for yet another overhaul of the BOJ’s policy framework [..] speaks to the deep-seated challenges facing policy makers. Actually, it speaks to the utter failure of all ‘policies’ up till now.

Bank of Japan’s Inflation Overshoot Deepens Policy Innovation (BBG)

The first major central bank to adopt quantitative easing in the modern era has innovated again. BOJ Governor Haruhiko Kuroda and his colleagues adopted a pledge of “overshooting” their 2% inflation target, an idea floated by central bankers including Federal Reserve Bank of Chicago President Charles Evans, but not formally adopted up to now. They also unveiled a strategy of targeting short- and longer-term rates to provide the economy with cheap borrowing costs. Since taking the helm in 2013, Kuroda had previously pursued a QE-on-steroids policy to shock Japan out of deflation. Yet after three and a half years, he was running into increasing concerns about the sustainability of the purchases of government bonds, which have run at about 15% of gross domestic product annually.

The adoption of a negative interest rate on some bank reserves resulted in an outcry from banks, and – for a time – an alarming plunge in yields even on longer-dated securities. The Federal Reserve had a cap on long-term yields back in the 1940s, as part of the U.S. government’s efforts to keep down wartime and postwar debt financing. But a strategy of targeting the yield curve as a reflation initiative is new to the major central banks of today. “The BOJ had to do something revolutionary out of necessity – they are concerned about sustainability,” said Yuji Shimanaka at Mitsubishi UFJ Morgan Stanley Securities. The need for yet another overhaul of the BOJ’s policy framework – this is the third iteration under Kuroda alone – speaks to the deep-seated challenges facing policy makers. Japan’s consumer prices slumped 0.5% in July from a year before, far from the 2% gains targeted “at the earliest possible time.”

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There are still scores of greater fools out there… This time lured by low rates.

Real Estate Gets Its Seat At The S&P 500 Table (Forbes)

In case you haven’t noticed, the S&P 500 Index is looking a little different these days. Once a sub-industry of the financial sector, real estate now has its own zip code in the universe of blue chip stocks. It’s the first time since 1999 that such a change has been made to the S&P’s composition. The new sector has a weighting of nearly 3%, all of it taken out of financials. Real estate’s promotion should attract more institutional and individual investors to the space. It tells them this is no longer a niche market but one with a distinct and significant presence, with its own unique business drivers.

This has been a long time coming, to be perfectly honest. Ever since the housing and financial crisis, real estate investment trusts (REITs) have been pulling in some serious cash as more become available for trading on the New York Stock Exchange and elsewhere. Altogether, REITs currently have a market cap of over $1 trillion, according to REIT.com. With investors on the hunt for yield, it’s not hard to see why. As of August 31, the FTSE NAREIT All Equity REITs Index yielded an average of 3.61%, compared to the S&P 500’s 2.11%. During 2015, stock exchange-listed REITs paid out a whopping $46.5 billion in dividends.

Looking just at the residential housing market, business is definitely booming. With 30-year mortgage rates at below 3.5%, the market is scorching hot in many parts of the U.S.—so much so, some builders are reporting a shortage in construction workers to meet demand. New construction starts rose to 1.2 million in July, beating analysts’ forecasts and suggesting the U.S. housing market appears to have finally made a full recovery eight years following the recession, with Bloomberg calling this the “strongest home sales since the start of the economic expansion.”

Trouble could be brewing, however. As I shared with you last month, millennials just aren’t buying homes at the same rate we’ve historically seen from 18- to 34-year-olds. There are many theories as to why this is, from millennials delaying starting families to focus on careers, to a loss of trust in homeownership as a reliable investment or even as an institution, to a preference to rent. This trend has contributed to the lowest U.S. homeownership rate in five decades. How can this be? How could there be both massive housing demand and yet declining home ownership?

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“On average, homeowners paid 28% more in mortgage payments than renters did in monthly rent.”

With Mortgage Rates So Low, Why Are So Many People Still Renting? (Time)

With interest rates lower than they have been for years, many people still find that renting is more budget-friendly than a monthly mortgage payment. This is not true in all parts of the U.S., but a study by Robert W. Baird & Co. shows that living in one of the biggest housing markets in the country is often more expensive. The study looked at 28 different cities, and found that U.S. homeowners in 24 of the cities paid more than those who rent. On average, homeowners paid 28% more in mortgage payments than renters did in monthly rent. The study looked at properties with ratings of four or five stars to keep variables to a minimum.

The study also made some assumptions, such as that all mortgages were 30-year fixed loans, that all homeowners made a down payment of 15%, and that all mortgages included private mortgage insurance, homeowners’ insurance, and taxes. Of the 28 different markets examined, it was more affordable to own than to rent in Baltimore, Maryland, Tampa, Florida, Jacksonville, Florida, and Norfolk/Richmond, Virginia. Of the remaining 24 cities, 15 showed a 20% or higher difference in the cost of renting versus the cost of owning. These differences were due to factors such as the increase in housing prices and the fact that there are few houses on the market in many of these areas.

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More fallout from the war on interest rates.

House-Flippers Are Back, With Anonymous Funding (BBG)

Alex Sifakis never raised this much money this fast. The house flipper from Jacksonville, Florida, crowdfunded nine deals totaling more than $9 million through RealtyShares over the last two and a half years. A July deal for $1 million took him just 12 hours. “Generally, raising money takes so much time,’’ said Sifakis, 33. “This offers so much flexibility and time savings. It’s so much better than going to family offices, banks or Wall Street firms.’’ House flippers and property developers are increasingly crowdfunding — tapping the virtual wallets of anonymous internet backers on platforms such as RealtyShares, LendingHome, PeerStreet and Patch of Land. For riskier ventures, such as building new homes and buying, renovating and selling existing ones, they’re finding quick financing can be easier to get online than from banks.

That’s contributed to an increase in home flipping. In the second quarter, 39,775 investors bought and sold at least one house, the most since 2007, according to ATTOM Data Solutions. The crowdfunding sites are part of the multibillion-dollar ecosystem of marketplace lenders, like LendingClub Corp. and Prosper Marketplace Inc., that match users who need money with people who want to provide it for anything from debt consolidation to elective medical procedures. That business hasn’t always run smoothly. LendingClub is going through a rough stretch after years of rapid growth. In May, its founder and chief executive officer resigned amid an internal probe into a botched loan sale, sending LendingClub’s shares tumbling. So far, there have been few defaults in real estate crowdfunding deals. When they happen, the platforms say they’ll pay investors the proceeds from property sales.

The business has other potential pitfalls. When it comes to real estate, faster isn’t always better. Wall Street’s home-mortgage machine of the mid-2000s valued speed over accuracy, with disastrous results, though most crowdfunding sites cater to investors and not homebuyers. Also, clicking for capital can be exploited by fraudsters who may not be who they say they are, according to Sara Hanks, co-founder and CEO of CrowdCheck, which provides due-diligence services for online investors. “We’ve seen some things where the entity that’s supposed to own the property doesn’t actually own it,’’ she said.

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“..40% of China’s expressways were built between 2010 and 2015..”

China Chalks Up $667-Billion Debt Pile Over Toll Roads (R.)

China’s toll roads have stacked up a debt pile of 4.45 trillion yuan ($666.96 billion), with almost 80% of their annual income last year going to repay loans, the transport ministry said, as the country accelerates road building. Beijing has cranked up state spending on infrastructure to support economic growth as private sector investment falters, and efforts to lure investors into private-public partnerships to build projects such as toll roads have had few successes. The ministry published the 2015 figures late on Tuesday in a report that comes as global investors express growing concern over China’s overall credit, much of which has gone to build infrastructure. The toll road network’s debt grew an annual 15.7% last year, far outpacing income growth of 4.6%, the ministry said in the report.

“Although China’s toll road debt is relatively large, this is just a phase,” state newspaper the People’s Daily quoted Sun Yonghong, an official of the ministry’s highway division, as saying. “In the long run, the risks are controllable.” About three-quarters of 2015 revenue of 409.78 billion yuan went to paying down debt and interest, as banks sought payment of the principal one year after project completions, Sun said. Toll roads make up less than 4% of China’s road network, which stretches 4.5 million km (2.8 million miles). Sun said much of the debt was incurred to build expressways, and accumulation would slow as the road network matured. Almost 40% of China’s expressways were built between 2010 and 2015, at a cost of 3.32 trillion yuan, about 2.23 trillion yuan of which was paid through loans, he said.

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Sickening.

Wells Fargo Too Arrogant To Own Up To Its Fraudulent Ways (WaPo)

The 2008 financial collapse was eight years ago this month — and the big banks are back to their old shenanigans. Venerable Wells Fargo has engaged in behavior that would have made a robber baron blush: It pressured low-wage workers with unrealistic sales targets, so these workers created 2 million bogus accounts over five years, causing customers to be hit with fees and damage to their credit ratings. About 5,300 workers have been fired and $185 million in penalties assessed to the bank, but not a single high-level executive has been sacked or even forced to give back the tens of millions of dollars in pay earned based on the fraud. When Wells Fargo chairman and CEO John Stumpf sat before the Senate Banking Committee this week, he represented a bank too big to fail, too sprawling to manage and too arrogant to own up to its failures.

Can’t Wells Fargo take back some of the executive payouts? “I’m not an expert in compensation,” Stumpf said. Would he commit to investigate whether the fraud began in earlier years? “I can’t tell you that today.” Did he learn about the fraud before reading about it in the Los Angeles Times? “I don’t remember the exact time frame.” Stumpf informed the senators that what Wells Fargo did “was not a scam,” disputed that “this is a massive fraud” and said he had no idea “why people did this.” Sen. Jerry Moran, R-Kan., encouraged Stumpf to “make certain that the employees are not the scapegoat for behavior at higher levels.” Stumpf repeated that “the 5,300, for whatever reason, they were dishonest, and I’m not scapegoating.” If high-level bankers didn’t go to prison for the subprime high jinks that caused the 2008 crash, it’s a safe bet that none will in the Wells Fargo scandal either.

But if arrogance were a criminal offense, Stumpf would be looking at a life sentence. The bank’s fraud, and the executive’s insolence, may have one salutary result: It takes off the agenda any plan to dismantle the Consumer Financial Protection Bureau, one of the post-2008 regulatory creations and a top target of Donald Trump and congressional Republicans. The Los Angeles city attorney and the Los Angeles Times may deserve more credit for exposing the wrongdoing, but the audacity at Wells Fargo shows that the industry isn’t about to police itself. Stumpf also managed to create rare bipartisan unity on the Banking Committee – in condemnation of his actions. Sherrod Brown, D-Ohio, was “stunned.” Dean Heller, R-Nev., compared him to Sgt. Schultz of “Hogan’s Heroes.” Robert Menendez, D-N.J., called the actions “despicable.” Patrick J. Toomey, R-Pa., told Stumpf: “This isn’t cross-selling, this is fraud.”

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“Let’s ask ourselves whether we are comfortable with the United States getting slowly, predictably, and all too quietly dragged into yet another war in the Middle East.”

27 US Senators Rebel Against Arming Saudi Arabia (I’Cept)

A Senate resolution opposing a $1.15 billion arms transfer to Saudi Arabia garnered support from 27 senators on Wednesday, a sign of growing unease about the increasing number of civilians being killed with U.S. weapons in Yemen. A procedural vote to table the resolution passed 71-27. The Obama administration announced the transfer last month, the same day the Saudi Arabian coalition bombed a potato chip factory in the besieged Yemeni capital. In the following week, the Saudi-led forces would go on to bomb a children’s school, the home of the school’s principal, a Doctors Without Borders hospital, and the bridge used to carry humanitarian aid into the capital. Saudi Arabia began bombing Yemen in March 2015, four months after Houthi rebels from Northern Yemen overran the capitol, Sanaa, and deposed the Saudi-backed ruler, Abdu Rabbu Mansour Hadi.

In addition to providing Saudi Arabia with intelligence and flying refueling missions for its air force, the United States has enabled the bombing campaign by supplying $20 billion in weapons over the past 18 months. In total, President Obama has sold more than $115 billion in weapons to the Saudi kingdom – more than any other president. After the White House failed to respond to a letter from 60 members of Congress requesting that the transfer be delayed, Sens. Chris Murphy, D-Conn., and Rand Paul, R-Ky., introduced a resolution condemning the arms sale. Paul and Murphy said they had planned to pursue binding legislation if their resolution was successful. “It’s time for the United States to press ‘pause’ on our arms sales to Saudi Arabia,” Murphy said. “Let’s ask ourselves whether we are comfortable with the United States getting slowly, predictably, and all too quietly dragged into yet another war in the Middle East.”

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Carter’s a real man. No Clinton, Bush or Obama is fit to shine his shoes.

A First Step for Syria? Stop the Killing (Jimmy Carter)

The announcement this month of a new cease-fire agreement in Syria is good news. But a lack of trust among the Syrian belligerents and their foreign supporters means this agreement, like the one that came before it, is vulnerable to collapse. It is already showing severe signs of strain. Over the weekend, the United States accidentally bombed Syrian government troops. On Monday, the Syrian military declared it would no longer respect the deal, resumed airstrikes on Aleppo, and even a humanitarian aid convoy was bombed. Still, there is reason for hope. If Russia and the United States were willing to come far enough in their negotiations to reach this deal, these setbacks can be overcome. The targeting of the humanitarian convoy, a war crime, should serve as an added impetus for the United States and Russia to recommit to the cease-fire.

The two parties were well aware of the difficulties as they spent a month negotiating the cease-fire’s terms. The agreement can be salvaged if all sides unite, for now, around a simple and undeniably important goal: Stop the killing. It may be more likely than it sounds. Reliable sources estimate the number of Syrians killed to date at almost half a million, with some two million more people wounded. Well over half of the country’s 22 million prewar population has been displaced. These shocking numbers alone should convince all concerned that war itself is the greatest violation of human rights and the ultimate enemy of Syria. If this cease-fire is to last, the United States and Russia must find ways to work beyond the lack of trust that undermined the previous cease-fire, in February.

The countrywide cessation of hostilities that began then started to crumble within two months, with battles in much of the countryside around Damascus, central and northern Syria, and Aleppo. The resumption of the conflict led in April to the suspension of UN-sponsored peace talks in Geneva. However, a strong effort was made earlier in the year when the United States and Russia pressed their respective allies to pause the fighting and give the negotiations a chance. But the American and Russian expectation that they reach an agreement on issues of transitional governance by Aug. 1 was unrealistic. After five years of killing, and before any semblance of trust could be established, pushing the Syrian parties and their supporters to agree on power-sharing was seen as too threatening by some and too inadequate by others. Unsurprisingly, they reverted to violence.

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A lovely letter.

Apologizing to My Daughter for the Last 15 Years of War (Van Buren)

I recently sent my last kid off for her senior year of college. There are rituals to such moments, and because dad-confessions are not among them, I just carried boxes and kept quiet. But what I really wanted to say to her — rather than see you later, call this weekend, do you need money? – was: I’m sorry. Like all parents in these situations, I was thinking about her future. And like all of America, in that future she won’t be able to escape what is now encompassed by the word “terrorism.” Terrorism is a nearly nonexistent danger for Americans. You have a greater chance of being hit by lightning, but fear doesn’t work that way. There’s no 24/7 coverage of global lightning strikes or “if you see something, say something” signs that encourage you to report thunderstorms.

So I felt no need to apologize for lightning. But terrorism? I really wanted to tell my daughter just how sorry I was that she would have to live in what 9/11 transformed into the most frightened country on Earth. Want the numbers? Some 40% of Americans believe the country is more vulnerable to terrorism than it was just after September 11, 2001 – the highest%age ever. Want the apocalyptic jab in the gut? Army Chief of Staff General Mark Milley said earlier this month that the threat remains just as grave: “Those people, those enemies, those members of that terrorist group, still intend – as they did on 9/11 – to destroy your freedoms, to kill you, kill your families, they still intend to destroy the United States of America.” All that fear turned us into an engine of chaos abroad, while consuming our freedoms at home.

And it saddens me that there was a different world, pre-9/11, which my daughter’s generation and all those who follow her will never know. [..] After the last cardboard boxes had been lugged up the stairs, I held back my tears until the very end. Hugging my daughter at that moment, I felt as if I wasn’t where I was standing but in a hundred other places. I wasn’t consoling a smart, proud, twenty-something woman, apprehensive about senior year, but an elementary school student going to bed on the night that would forever be known only as 9/11. Back home, the house is empty and quiet. Outside, the leaves have just a hint of yellow. At lunch, I had some late-season strawberries nearly sweet enough to confirm the existence of a higher power. I’m gonna really miss this summer.

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Aug 072016
 
 August 7, 2016  Posted by at 9:10 am Finance Tagged with: , , , , , , , , ,  1 Response »
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NPC KKK services, Capital Horse Show grounds, Arlington 1938


Globalization and its New Discontents (Stiglitz)
Brexit: This Backlash Has Been A Long Time Coming (O’Rourke)
The US LOST 1,030 Million Jobs in July -Teachers’ Summer Break- (Sanders)
China’s July Forex Reserves Fall To $3.20 Trillion (R.)
Bitcoin’s Latest Economic Problem – (Worstall)
Theft And Mayhem In The Bitcoin World (Coppola)
Over 100 Americans Are Rich Enough to Buy the Election Outright (I’Cept)
Frozen Loans Trigger Australian Property Funding Crisis (AFR)
First Sept 11, Now Saudi Arabia Linked To German Terrorist Attacks (ZH)
Obama Expands ISIS Bombing to 4th Country, the Media Barely Notice (Nation)
Behold, a Pale Horse and its Rider’s Name Was Death (PCR)

 

 

How obvious does it have to get?

Globalization and its New Discontents (Stiglitz)

Fifteen years ago, I wrote a little book, entitled Globalization and its Discontents, describing growing opposition in the developing world to globalizing reforms. It seemed a mystery: people in developing countries had been told that globalization would increase overall wellbeing. So why had so many people become so hostile to it? Now, globalization’s opponents in the emerging markets and developing countries have been joined by tens of millions in the advanced countries. Opinion polls, including a careful study by Stanley Greenberg and his associates for the Roosevelt Institute, show that trade is among the major sources of discontent for a large share of Americans. Similar views are apparent in Europe.

How can something that our political leaders – and many an economist – said would make everyone better off be so reviled? One answer occasionally heard from the neoliberal economists who advocated for these policies is that people are better off. They just don’t know it. Their discontent is a matter for psychiatrists, not economists. But income data suggest that it is the neoliberals who may benefit from therapy. Large segments of the population in advanced countries have not been doing well: in the US, the bottom 90% has endured income stagnation for a third of a century. Median income for full-time male workers is actually lower in real (inflation-adjusted) terms than it was 42 years ago. At the bottom, real wages are comparable to their level 60 years ago.

The effects of the economic pain and dislocation that many Americans are experiencing are even showing up in health statistics. For example, the economists Anne Case and Angus Deaton, this year’s Nobel laureate, have shown that life expectancy among segments of white Americans is declining. Things are a little better in Europe – but only a little better. [..] .. if globalization is to benefit most members of society, strong social-protection measures must be in place. The Scandinavians figured this out long ago; it was part of the social contract that maintained an open society – open to globalization and changes in technology. Neoliberals elsewhere have not – and now, in elections in the US and Europe, they are having their comeuppance.

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And everyone was busy doing something else. They still are by the looks of it.

Brexit: This Backlash Has Been A Long Time Coming (O’Rourke)

The main point of my 1999 book with Jeff Williamson was that globalisation produces both winners and losers, and that this can lead to an anti-globalisation backlash. We argued this based on late-19th century evidence. Then, the main losers from trade were European landowners, who found themselves competing with an elastic supply of cheap New World land. The result was that in Germany and France, Italy and Sweden, the move towards ever-freer trade that had been ongoing for several years was halted, and replaced by a shift towards protection that benefited not only agricultural interests, but industrial ones as well. Meanwhile, across the Atlantic, immigration restrictions were gradually tightened, as workers found themselves competing with European migrants coming from ever-poorer source countries.

While Jeff and I were firmly focused on economic history, we were writing with an eye on the ‘trade and wages’ debate that was raging during the 1990s. There was an obvious potential parallel between 19th-century European landowners, newly exposed to competition with elastic supplies of New World land, and late 20th-century OECD unskilled workers, newly exposed to competition with elastic supplies of Asian, and especially Chinese, labour. In our concluding chapter, we noted that economists who base their views of globalisation, convergence, inequality, and policy solely on the years since 1970 are making a great mistake. The globalisation experience of the Atlantic economy prior to the Great War speaks directly and eloquently to globalisation debates today – and the political lessons from this are sobering.

“Politicians, journalists, and market analysts have a tendency to extrapolate the immediate past into the indefinite future, and such thinking suggests that the world is irreversibly headed toward ever greater levels of economic integration. The historical record suggests the contrary.” “Unless politicians worry about who gains and who loses,î we continued, ìthey may be forced by the electorate to stop efforts to strengthen global economy links, and perhaps even to dismantle them … We hope that this book will help them to avoid that mistake – or remedy it.”

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Yup, it’s seasonal adjustments again.

The US LOST 1,030 Million Jobs in July -Teachers’ Summer Break- (Sanders)

To better understand the July Jobs report, one has to understand the seasonal adjustments that the Bureau of Labor Statistics employs. Nonfarm payroll jobs added in July on a seasonally adjusted basis were +255,000 in July. But the raw or NON seasonally adjusted numbers were -1,030,000 jobs. Or 1.03 million jobs lost.

Notice in the above chart that you get big downward dips in the nonfarm payroll numbers in January and July. And it repeats every year. For January, this is the release of seasonal employment for the holidays. For July, this is the transformation to summertime employment, mostly for teachers. Local government education NSA fell by -1,093,000 in July. Total PRIVATE jobs added amounted to +85,000. So, the BLS smoothes the data using Seasonal Adjustments since January temporary workers being terminated or teachers not working during the summer is hardly newsworthy or surprising. Food and drinking services actually fell by -35,000 jobs added. Bartender blues. The bottom line is that the July jobs report was all about teachers going on summer break and low wage jobs being added.

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The real interesting question is what channels are now used to get money out.

China’s July Forex Reserves Fall To $3.20 Trillion (R.)

China’s foreign exchange reserves fell to $3.20 trillion in July, central bank data showed on Sunday, in line with analyst expectations. Economists polled by Reuters had predicted reserves would fall to $3.20 trillion from $3.21 trillion at the end of June. China’s reserves, the largest in the world, fell by $4.10 billion in July. The reserves rose $13.4 billion in June, rebounding from a 5-year low in May. China’s gold reserves rose to $78.89 billion at the end of July, up from $77.43 billion at end-June, data published on the People’s Bank of China website showed. Net foreign exchange sales by the People’s Bank of China in June jumped to their highest in three months, as the central bank sought to shield the yuan from market volatility caused by Brexit.

China’s foreign exchange regulator recently said China would be able to keep cross-border capital flows steady given its relatively sound economic fundamentals, solid current account surplus and ample foreign exchange reserves. China’s foreign reserves fell by a record $513 billion last year after it devalued the yuan currency in August, sparking a flood of capital outflows that alarmed global markets. The yuan has eased another 2% this year and is hovering near six-year lows, but official data suggests speculative capital flight is under control for now, thanks to tighter capital controls and currency trading regulations. However, economists are divided over how much money is still flowing out of the country via other channels, with opaque policymaking and some inconsistency in the data raising suspicions that the fall in the yuan may be masking capital outflow pressure.

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When will the whole thing be declared a failure?

Bitcoin’s Latest Economic Problem – (Worstall)

[..] And that’s where Bitcoin has the problem, in that very existence of the blockchain: The first relates to the ongoing legal recourse rights of Bitfinex victims. Even though they may have lost their right to pursue Bitfinex for compensation, they are still going to be entitled to track the funds across the blockchain to seek recourse from whomsoever receives the bitcoins in their accounts. That’s good news for victims, but mostly likely very bad news for bitcoin’s fungible state and thus its status as a medium of exchange.

Just one successful claim by a victim who tracks his funds to an identifiable third party, and the precedent is set. Any exchanges dealing with bitcoin in a legitimate capacity would from then on be inclined to do much stronger due diligence on whether the bitcoins being deposited in their system were connected to ill-gotten gains. This in turn would open the door to the black-listing of funds that can not prove they were originated honestly via legitimate earnings. Of course, people should not steal things. And yet for a currency to work it has to be possible to take the currency at its face value. Thus it may well be that the bank robber paid you for his beer with stolen money but you got it fair and square and thus the bank doesn’t get it back as an when they find out.

Another way to put this is that the crime dies with the criminal. And yet the blockchain upends all of that. Because every transaction which any one bitcoin has been involved in is traceable. I’ve said before that bitcoin has significant economic problems associated with it. The most important being that it is a deliberately deflationary currency which is a really, really, terrible idea. But the more we wander through the actual use in the real world of this idea the more we find other problems with it. As here, that blockchain, the basic defining point of bitcoin in the first place, making it something which isn’t going to work well as a currency over time. Because that very blockchain means that we’ll not be able to make the necessary compromises about justice in favour of efficiency in the event of crime.

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Will a bunch of unknowns, likely Bitfinex insiders, get away with stealing $60 million?

Theft And Mayhem In The Bitcoin World (Coppola)

The schadenfreude of Bitcoin enthusiasts over Ethereum’s recent troubles ended abruptly last week. A major Bitcoin exchange, Bitfinex, was hacked and nearly 120,000 BTC (around $60m) was stolen. The price of Bitcoin promptly crashed, and Bitfinex was forced to suspend trading. Suddenly, Ethereum was not the only basket case cryptocurrency around. It appears that Bitfinex’s security was seriously compromised. Customer coins were held in individual wallets secured with a 2 of 3 multisig arrangement: keys were held by Bitfinex itself and Bitgo, a professional custodian and signatory, with a third (backup) key held in secure offline storage. Customers could not withdraw funds from the wallets until any borrowings had been cleared. It was, if you like, a form of escrow. And it should have been secure.

But it wasn’t. Somehow, the hacker managed to gain access to hundreds of customer wallets. Not only did the hacker gain access to the wallets, he/she also overrode Bitgo’s withdrawal limits. It was a well-planned and comprehensive security breach by someone who knew exactly what they were doing. Funds were moved to thousands of addresses over a short period of time. Bitfinex, it seems, was powerless to stop it. This is one of the largest Bitcoin heists ever, dwarfed only by Mt. Gox in 2014. It is comparable in size to Ethereum’s DAO theft only a couple of weeks ago. And it is going to result in a lot of people losing a lot of money. All of Bitfinex’s customers, in fact. The company has announced a haircut of 36.067% across the board:

“After much thought, analysis, and consultation, we have arrived at the conclusion that losses must be generalized across all accounts and assets. This is the closest approximation to what would happen in a liquidation context. Upon logging into the platform, customers will see that they have experienced a generalized loss percentage of 36.067%. In a later announcement we will explain in full detail the methodology used to compute these losses.” Although the loss is estimated as the amount the customers would receive if the company were liquidated, this is a bail-in. Bitfinex has no plans to cease trading: “We intend to come online within 24-48 hours with limited platform functionality. Additional announcements will be made as we progressively enable more platform features and return to full operations.”

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Club 106.

Over 100 Americans Are Rich Enough to Buy the Election Outright (I’Cept)

Two billion dollars, the estimated cost of this year’s presidential election, is big money, but it is not huge money. Two billion is one-tenth of NASA’s annual budget, one-twentieth of the Harvard endowment, one-thirtieth of the personal wealth of Warren Buffett. Buffett is number two on the 2015 Forbes list of 106 Americans who hold personal fortunes of $5 billion or more, the Club of 106. These billionaires are rich enough to pay for the campaigns of both Hillary Clinton and Donald Trump and still have $3 billion left over. A lot of the money in Club 106 is family money. The Club includes two Kochs, four Waltons, three Marses, two Newhouses, and three Ziffs. Donald Trump was also born into big money. With a supposed net worth of $4.5 billion, he is brushing up against the velvet rope outside of Club 106.

The Clintons, both born to families with ordinary incomes, are now worth around $110 million, which puts them way off from Club 106 and pretty far from you and me as well. In the political off-season the Clintons have borrowed private jets from friends and relied on book advances and speaking fees to maintain two residences, to summer in East Hampton, and reportedly to help their daughter and son-in-law purchase a $10 million Manhattan apartment. The Obamas will soon be devising their own approach to making their way in a billionaire’s world with a mere $20 million. At least four of the members of Club 106 (Buffett, the Kochs, Bloomberg) have openly voiced their thoughts on who should be president.

Five members (Soros, Simons, Cohen, Ellison, Bloomberg) are among the top 25 donors to the outside groups that have poured tens of millions of dollars into the campaign. Seven members (Bezos, Zuckerberg, Page, Brin, Murdoch, the Newhouses, Bloomberg) own large media and internet companies — Amazon, the Washington Post, Facebook, Google, Fox News, the New York Post, the Wall Street Journal, Condé Nast, Bloomberg — with the power to shape public opinion. (By way of disclosure, an eighth member, Pierre Omidyar, founded The Intercept’s parent company, First Look Media.)

For the Club of 106, elections are a game they can easily afford to play.

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From July 25, but interesting enough.

Frozen Loans Trigger Australian Property Funding Crisis (AFR)

Off-the-plan buyers of Australian apartments are in crisis as tough new borrowing rules mean thousands of investors who have paid a deposit are struggling to complete their purchases, according to local and overseas mortgage brokers and financiers. Shanghai-based financiers claim their Chinese clients’ funding from Australian banks has been frozen and they face foreclosure – or usurious interest rates – from private financiers. Australian financiers claim their local clients, many of them Asian, have had their settlements deferred by three months to find alternative funding. “All the deals have been frozen,” said Mark Yin, an agent with Shanghai-based Home Tree Group, about his Shanghai clients’ funding with Australian banks. “We are now looking for finance all over the world.”

Mr Yin said this represented nearly 100 per cent of his clients who were waiting for properties to be completed in Australia and that most of the apartments were in the Melbourne CBD. Melbourne-based Marshall Condon, CEO of mortgage broker Neue Black and who also has off-shore and local Asian investors, added: “In the next three to 12 months, many investors will be applying for funding to complete their deals, however, they will be become increasingly concerned as they discover funding is limited.” Billions of dollars has been invested in tens-of-thousands of high-rise apartments that are reshaping the skylines of the nation’s major capitals, particularly Melbourne, Sydney and Brisbane. Most have been sold off-the-plan, which means purchasers buy off the blueprint with a deposit and complete when it is built, which requires a second valuation and financing commitment by the lender.

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“..both men were not only influenced by but also took instructions from people, as yet unidentified, up until the attacks..”

First Sept 11, Now Saudi Arabia Linked To German Terrorist Attacks (ZH)

Several weeks after the US government finally released a redacted version of the secret “28 pages”, which confirmed Saudi Arabia’s key role behind the September 11 attack, even as both the Obama administration and Saudi Arabia claimed no such connection exists (when it clearly did for anyone who actually read the disclosure), a trail has now emerged linking the recent surge in deadly terrorist attacks in Germany to Saudi Arabia. According to Der Spiegel, both the terrorist from the Wurzburg train axe attack, and the Ansbach suicide bomber who blew up an explosive-filled backpack, had multiple chat contacts with persons in Saudi Arabia.

As a result, Reuters adds, Saudi authorities are now in contact with their German colleagues, responding to these potentially explosive new findings which once again implicate the Saudi state with more state-sponsored terrirms, and show at least two attackers were in close contact via a chat conversation with possible Islamic State backers from Saudi Arabia. Traces of the chat, which investigators have been able to reconstruct, indicate that both men were not only influenced by but also took instructions from people, as yet unidentified, up until the attacks, the report said. It may not come as a surprise that the state exposed as facilitating and coordinating the September 11 terrorist attack, and which admitted to have created the Islamic States (with US knowledge), is now trying to provoke a terrorist backlash in Europe too.

Recall that after the Iraqi city of Mosul fell to a lightning Isis offensive in 2014, the late Prince Saud al-Faisal, then the Saudi foreign minister when speaking to John Kerry admitted that “Daesh [Isis] is our [Sunni] response to your support for the Da’wa” — the Tehran-aligned Shia Islamist ruling party of Iraq. One can only speculate what Saudi Arabia is “responding” to with the recent surge in European terrorist attacks. For now, however, the all too “generous” Saudi government has “offered to help German investigators find those behind Islamist bomb and ax attacks in July”, Spiegel adds. We can only imagine how accurate Saudi “findings” will be, especially if – like in the case of Sept 11 – those involved include members from the very top of Saudi power echelons.

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“A campaign that began two years ago this Sunday has now, 50,000 bombs and 25,000 dead ISIS fighters later, expanded to a whole new continent.”

Obama Expands ISIS Bombing to 4th Country, the Media Barely Notice (Nation)

The Obama administration announced on Monday the beginning of US air strikes in Libya against ISIS targets, marking the fourth country the United States is currently bombing with the goal of “degrading and destroying” the terror group. A campaign that began two years ago this Sunday has now, 50,000 bombs and 25,000 dead ISIS fighters later, expanded to a whole new continent. You’d hardly notice, however, if you followed US media. While the air strikes themselves were reported by most major outlets, they were done so in a matter-of-fact way, and only graced the front pages of major American newspapers for one day.

[..] The question pundits should be asking themselves is this: Had Obama announced on August 7, 2014, that he planned on bombing four countries and deploying troops to two of them to fight a war with “no end point,” would the American public have gone along with it? Probably not. To authorize his perma-campaign, Obama’s administration has dubiously invoked the 15-year-old, one-page Authorization for Use of Military Force, passed three days after 9/11. The president has to do this, the White House and friendly media claim, because Congress “refuses” to act to authorize the war (notice that’s a rubber-stamp question of when, not if). But such apologism largely rests on a tautology: Congress doesn’t have a sense of urgency to authorize the war because the public doesn’t, and the public doesn’t because the media have yawned with each new iteration.

What’s lacking is what screenwriters call “an inciting incident.” There’s no clear-cut moment the war is launched, it just gradually expands, and because media are driven by Hollywood narratives, they are victims to the absence of a clear first act. This was, to a lesser extent, the problem with the last bombing of Libya, in 2011. What was pitched to the American public then was a limited, UN-mandated no-fly zone to protect civilians (that even the likes of Noam Chomsky backed), which quickly morphed, unceremoniously, into all-out, NATO-led regime change three weeks later. Then, as now, there was no public debate, no media coming-to-Jesus moment. Obama just asserted the escalation as the obvious next step, and almost everyone just sort of went along—an ethos summed up in Eric Posner’s hot take at Slate the day after Obama expanded the ISIS war to Syria: “Obama Can Bomb Pretty Much Anything He Wants To.”

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“Is it possible that Washington did not want to clear ISIL out of Iraq because Washington intended to use ISIL to clear Assad out of Syria?”

Behold, a Pale Horse and its Rider’s Name Was Death (PCR)

I just listened to Obama give Washington’s account of the situation with ISIL in Iraq and Syria. In Obama’s account, Washington is defeating ISIL in Iraq, but Russia and Assad are defeating the Syrian people in Syria. Obama denounced Russia and the Syrian government—but not ISIL—as barbaric. The message was clear: Washington still intends to overthrow Assad and turn Syria into another Libya and another Iraq, formerly stable and prosperous countries where war now rages continually. It sickens me to hear the President of the United States lie and construct a false reality, so I turned off the broadcast. I believe it was a press conference, and I am confident that no meaningful questions were asked.

If Helen Thomas were still there, she would ask the Liar-in-Chief what went wrong with Washington’s policy in Iraq. We were promised that a low-cost “cakewalk” war of three or six weeks duration would bring “freedom and democracy” to Iraq. Why is it that 13 years later Iraq is a hellhole of war and destruction? What happened to the “freedom and democracy?” And the “Cakewalk”? You can bet your life that no presstitute asked Obama this question. No one asked the Liar-in-Chief why the Russians and Syrians could clear ISIL out of most of Syria in a couple of months, but Washington has been struggling for several years to clear ISIL out of Iraq. Is it possible that Washington did not want to clear ISIL out of Iraq because Washington intended to use ISIL to clear Assad out of Syria?

No one asked the Liar-in-Chief why Washington sent ISIL to Syria and Iraq in the first place, or why the Syrians and Russians keep finding US weapons In ISIL’s military depots, or why Washington’s allies were funding ISIL by purchasing the oil ISIL is stealing from Iraq. It seems to be the case that ISIL originated in the mercenaries that Washington organized to overthrow Gaddafi in Libya and were sent to Syria to overthrow Assad when the UK Parliament refused to participate in Washington’s invasion of Syria and the Russians put a stop to it.

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Jun 062016
 
 June 6, 2016  Posted by at 8:38 am Finance Tagged with: , , , , , , , , ,  12 Responses »
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Goldman Finds That China’s Debt Is Far Greater Than Anyone Thought (ZH)
World’s Most Battered Market Is the Worst Place to Find Bargains (BBG)
China’s Hidden Unemployment Rate (BBG)
China’s Factory to the World Is in a Race to Survive (BBG)
BOJ Board Member Warns Of “2003 Shock” Historic Bond Market Collapse (ZH)
As Iran’s Oil Exports Surge, International Tankers Help Ship Its Fuel (R.)
Saudi Arabia Races Through Financial Toolkit to Raise Funds (BBG)
If Wind/Solar Is So Cheap, Why Require Government Subsidy? (SL)
Pound Tumbles, Volatility Jumps After Polls Show Brexit Momentum (BBG)
Constitutional Crisis: Pro-Remain MPs Consider Pre-Empting Brexit Vote (BBC)
Brexit May Seem Like The West’s Biggest Problem. But Look At The US Economy (G.)
‘Brexit Voters Succumbing To Impulse Irritation And Anger’ (AEP)
Erdogan: Childless Women Deficient, Incomplete: Have At Least 3 (AFP)
Turkey Shelves Refugee ‘Readmission’ Deal With EU (DS)

Well, I’ve pointed a zillion times to the size and power of China’s shadow banks. And here you go…

Goldman Finds That China’s Debt Is Far Greater Than Anyone Thought (ZH)

In an analysis conducted by Goldman’s MK Tang, the strategist notes that a frequent inquiry from investors in recent months is how much credit has actually been extended to Chinese households and corporates. He explains that this arises from debates about the accuracy of the commonly used credit data (i.e., total social financing (TSF)) in light of an apparent rise in financial institutions’ (FI) shadow lending activity (as well as due to the ongoing municipal bond swap program). Tang adds that while it is clear that banks’ investment assets and claims on other FIs have surged, it is unclear how much of that reflects opaque loans, and also how much such loans and off-balance sheet credit are not included in TSF. By the very nature of shadow lending, it is almost impossible to reach a conclusion on these issues based on FIs’ asset information.

Goldman circumvents these data complications by instead focusing on the “money” concept, a mirror image to credit on FIs’ funding side. The idea is that money is created largely only when credit is extended—hence an effective gauge of “money” can give a good sense of the size of credit. We construct our own money flow measure, specifically following and quantifying the money flow from households/corporates. Goldman finds something stunning: true credit creation in China was vastly greater than even the comprehensive Total Social Financing series. To wit: “a substantial amount of money was created last year, evidencing a very large supply of credit, to the tune of RMB 25tn (36% of 2015 GDP). This is about RMB 6tn (or 9pp of GDP) higher than implied by TSF data (even after adjusting for municipal bond swaps). Divergence from TSF has been particularly notable since Q2 last year after a major dovish shift in policy stance.”

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China stocks are already down 40% in 12 months, but look down below.

World’s Most Battered Market Is the Worst Place to Find Bargains (BBG)

It’s going to take more than the world’s deepest stock-market selloff to turn China into a destination for international bargain hunters. Even after a 40% tumble in the Shanghai Composite Index over the past 12 months, valuations for China’s domestic A shares are three times as expensive as every other major market worldwide. The median price-to-earnings ratio on the nation’s exchanges is 59, higher than that of U.S. technology shares at the height of the dot-com boom in 2000. One year after China’s equity bubble peaked, valuations have yet to fall back to earth as government intervention keeps stock prices elevated at a time of shrinking corporate profits.

For money managers at Silvercrest Asset Management and Blackfriars Asset Management who predicted last year’s selloff, China’s weak economic growth and fragile investor sentiment mean it’s too early to jump back into the $6 trillion market. “We do not own any A shares,” said Tony Hann, the London-based head of equities at Blackfriars, which oversees about $270 million. The firm’s Oriental Focus Fund has outperformed 83% of peers this year. “The bull case seems to be that I can buy at this P/E because someone else will buy it from me at a higher P/E. The biggest risk is that investor psychology on the mainland changes.”

There’s plenty for investors to be worried about. After expanding at the weakest pace since 1990 last year, China’s economy shows few signs of recovery. Earnings at Shanghai Composite companies have declined by 13% since last June, while corporate defaults are spreading and the yuan is trading near a five-year low.

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Debt is hidden, losses are hidden, unemployment is hidden.

China’s Hidden Unemployment Rate (BBG)

China’s authorities may face a bigger worry than slowing economic growth. The jobless rate may be three times the official estimate, according to a new report by Fathom Consulting, whose China’s Underemployment Indicator has tripled to 12.9% since 2012 even while the official jobless rate has hovered near 4% for five years. The weakening labor market may explain China’s decision to uncork the credit spigots and revive old growth drivers in an effort to stabilize the world’s no. 2 economy. Leaders have stressed that keeping employment stable is a top priority. Fathom’s data shows that while mass layoffs haven’t materialized, the number of people not working at full capacity or hours has increased. “The degree of slack has surged in recent years,” analysts at the London-based firm wrote.

“China has a substantial hidden unemployment problem, in our view, and that explains why the authorities have come under so much pressure to re-start the old growth engines.” Leaders of the world’s most populous nation have promised to slash excess capacity in coal mines and steel mills while at the same time ensuring that the economy grows by at least 6.5% this year. Across the nation, state-backed ‘zombie’ factories are being kept alive by local governments to keep a lid on any social unrest. To keep the plants ticking over, employees in some cases have been asked to work half the time for half the pay. The official registered unemployment gauge is notorious for not changing during economic cycles. It’s compiled from the number of people who register at local governments for unemployment benefits, which excludes most of the nation’s more than 270 million migrant workers.

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China as a robotics guinea pig. What could go wrong?

China’s Factory to the World Is in a Race to Survive (BBG)

China’s shift to consumption and services lies at the heart of Xi’s quest for new growth drivers to escape the middle-income trap, when productivity and profit margins fail to keep up with wage growth. That’s spurred provincial leaders to encourage cities to attract new businesses and upgrade factories, headlined by the aphorisms that China’s administrators are fond of. “Empty the cages to welcome better birds,” demanded former Guangdong Communist Party Chief Wang Yang, meaning let the old industries leave and replace them with new, higher-value ones.

“Replace humans with robots,” added his successor, Hu Chunhua, 53, one of the youngest members of the Politburo, in a 950 billion yuan ($144 billion) plan to upgrade 2,000 companies in three years, the official Guangzhou Daily reported in March 2015, adding that the move is not expected to cause heavy layoffs. Dongguan replaced 43,684 workers with robots in 2015, cutting costs at those factories by nearly 10%, according to the local government. Lu Miao, a vice general manager of Lyric Robot in Guangdong’s Huizhou city, said the government pays as much as 50,000 yuan to Lyric’s customers for each robot they use to replace workers. “The government at all levels in Guangdong has been encouraging companies to replace human workers as rapidly as possible,” said Lu. “I can see our business increasing more than 50% this year.”

The ultimate result is so-called “dark factories” that don’t need lighting because only robots work on the production line. TCL has such a plant making LCD displays, Li said in an interview at the company’s headquarters in Huizhou, about an hour’s drive from Dongguan. “For society at large, some workers will be laid off,” said Huizhou Mayor Mai Jiaomeng. “But it’s good for companies to improve their competitiveness.” Local officials say the layoffs are under control, but are reluctant to provide details on how many plants have shut or moved away. A municipal report from Shenzhen in January said that the city has “washed out” or “transformed” more than 17,000 low-end factories over the past five years.

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Looks inevitable, just a question of where on the globe it will begin.

BOJ Board Member Warns Of “2003 Shock” Historic Bond Market Collapse (ZH)

In a somewhat shocking break from the age-old tradition of lying and obfuscation, Bank of Japan policy board member Takehiro Sato raised significant concerns about global financial stability in a speech last week. In addition to raising concerns about Japanese economic fragility, Sato warned that due to the impact of negative interest rates, he “detected a vulnerability similar to that seen before the so-called VaR (Value at Risk) shock in 2003.”

Financial institutions are facing the risk of a negative spread for marginal assets due to the extreme flattening of the yield curve and the drop in the yield on government bonds in short- to long-term zones into negative territory. When there is a negative spread, shrinking the balance sheet, rather than expanding it, would be a reasonable business decision. In the future, this may prompt an increasing number of financial institutions to take such actions as restraining loans to borrowers with potentially high credit costs and raising interest rates on loans to firms with poor access to finance.

…a weakening of the financial intermediary functioning could affect the financial system’s resilience against shocks in times of stress. In addition, an excessive drop in bond yields in the super-long-term zone could also make the financial system vulnerable by increasing the risk of a buildup of financial imbalances in the system.

There is also the risk that financial institutions that have problems in terms of profitability or fiscal soundness will make loans and investment without adequate risk valuation. From financial institutions’ recent move to purchase super-long-term bonds in pursuit of tiny positive yield, I detect a vulnerability similar to that seen before the so-called VaR (Value at Risk) shock in 2003.

Simply put, as Bloomberg notes, Sato is concerned the government bond market is heading for an historic collapse after 10-year yields plunged below zero, forcing banks to pile into super-long-term bonds in pursuit of tiny positive yields. This is creating huge concentrated positions with increasing duration risk (as we detailed previously), causing a vulnerability “similar to that seen before the so-called VaR (Value at Risk) shock in 2003,” when an initial jump in yields triggered a spectacular sell-off by breaching banks’ models for estimating potential losses.

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Reuniting OPEC.

As Iran’s Oil Exports Surge, International Tankers Help Ship Its Fuel (R.)

More than 25 European and Asian-owned supertankers are shipping Iranian oil, data seen by Reuters shows, allowing Tehran to ramp up exports much faster than analysts had expected following the lifting of sanctions in January. Iran was struggling as recently as April to find partners to ship its oil, but after an agreement on a temporary insurance fix more than a third of Iran’s crude shipments are now being handled by foreign vessels. “Charterers are buying cargo from Iran and the rest of the world is OK with that,” said Odysseus Valatsas, chartering manager at Dynacom Tankers Management. Greek owner Dynacom has fixed three of its supertankers to carry Iranian crude.

Some international shipowners remain reluctant to handle Iranian oil, however, due mainly to some U.S. restrictions on Tehran that remain and prohibit any trade in dollars or the involvement of U.S. firms, including banks and reinsurers. Iran is seeking to make up for lost trade following the lifting of sanctions imposed in 2011 and 2012 over its nuclear program. Port loading data seen by Reuters, as well as live shipping data, shows at least 26 foreign tankers with capacity to carry more than 25 million barrels of light and heavy crude oil, as well as fuel oil, have either loaded crude or fuel oil in the last two weeks or are about load at Iran’s Kharg Island and Bandar Mahshahr terminals.

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One more major price drop and we have panic.

Saudi Arabia Races Through Financial Toolkit to Raise Funds (BBG)

Saudi Arabia’s plans to bolster its finances are taking on a new sense of urgency as lower oil prices put the economy under more strain than at any other time in the past decade. In recent weeks, the kingdom raised a $10 billion loan, clamped down on currency speculators and informed banks of plans to raise as much as $15 billion in its first international bond sale, people with knowledge of the matter said. It’s also said to be contemplating IOUs to pay contractor bills and hired HSBC Holdings Plc banker Fahad Al Saif to set up a new debt office. The speed of the measures underscores Deputy Crown Prince Mohammed bin Salman’s urgency to shore up the country’s finances as an era of oil-fueled abundance falters.

Though currency reserves remain strong – among the world’s largest – net foreign assets are at a four-year low after declining for 15 months in a row and the kingdom may post a budget deficit of about 13.5% of economic output this year. “The pace of the decline in Saudi Arabia’s foreign assets is faster than in previous oil downturns and the period over which they’ve been falling is longer,” Raza Agha, VTB Capital’s chief economist for the Middle East and Africa, said by e-mail. “This generates a real sense of urgency to get the ball rolling in raising external funding.”

Five years ago, oil surged to more than $100 a barrel, adding billions of dollars to the country’s reserves. The windfall allowed the kingdom to slash its debt and post an average budget surplus of 8.2% between 2000 and 2012, according to International Monetary Fund data. Now, with crude having tumbled about 50%, the country is moving to sell assets and find other ways to raise funds.

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Just a cute graph.

If Wind/Solar Is So Cheap, Why Require Government Subsidy? (SL)

I don’t have an inherent dislike of solar and wind energy, but I am suspicious of the way they are being pushed. Here’s an example: Renewable energy advocates such as Tony Seba are talking about how solar and battery technology will enable exponential uptake in renewable technology, and that people won’t want to invest in a thermal power plant anymore. But on the other hand: Renewable advocates want government legislation to support their chosen renewable energy targets. e.g. “50% renewable energy would put Australia in line with leading nations” at the Conversation. Or another example might be where energy companies are talking about how the government has to ‘support the transition’ in this AFR article: AGL says government must support power industry exit from coal.

But wait a minute, if wind and solar are truly so amazing and so cheap – why does the government need to get involved? Why wouldn’t these renewable energy companies and advocates find a way to profitably do it and not make any fuss about wanting governmental regulation/subsidies? Borrowing from Mark Perry’s excellent Venn diagram idea over at AEI Carpe Diem blog: (Could it be that renewable advocates are using the government to push renewable energy cost and risk onto taxpayers?)

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17 days still to go. Brace for increased madness. it’s going to be so much fun.

Pound Tumbles, Volatility Jumps After Polls Show Brexit Momentum (BBG)

The pound slumped to a three-week low after polls showed more Britons favor exiting the European Union, reviving concern a June 23 referendum will throw global markets into turmoil and undermine confidence in the 28-nation trading bloc. Sterling weakened against all 10 developed-market peers after two surveys showed more voters were willing to vote to leave the EU than those wishing to stay. A gauge of the currency’s expected swings against the dollar during the next month surged to a seven-year high. The Bank of England has said uncertainty surrounding the referendum vote is damping U.K. growth, while global institutions including the IMF and OECD are warning of dire fallout if Britain votes to quit the EU.

Federal Reserve Bank of Chicago President Charles Evans said the referendum is undermining confidence in the outlook at a time when the international economy is already losing momentum. “A ‘Leave’ vote would expose a host of uncertainties,” said Sue Trinh at Royal Bank of Canada in Hong Kong. “It would be more negative for the euro and the EU since the issue will drag on for other members.” A YouGov poll for television network ITV found 45% would choose ‘Leave,’ compared with 41% picking ‘Remain.’ A separate survey by global market research company TNS showed 43% for ‘Leave’ and 41% for ‘Remain.’

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Well, that seems modeled after the EU’s attitude towards democracy alright. They fit right in.

Constitutional Crisis: Pro-Remain MPs Consider Pre-Empting Brexit Vote (BBC)

Pro-Remain MPs are considering using their Commons majority to keep Britain inside the EU single market if there is a vote for Brexit, the BBC has learned. The MPs fear a post-Brexit government might negotiate a limited free trade deal with the EU, which they say would damage the UK’s economy. There is a pro-Remain majority in the House of Commons of 454 MPs to 147. A Vote Leave campaign spokesman said MPs will not be able to “defy the will of the electorate” on key issues. The single market guarantees the free movement of goods, people, services and capital. The BBC has learned pro-Remain MPs would use their voting power in the House of Commons to protect what they see as the economic benefits of a single market, which gives the UK access to 500 million consumers.

Staying inside the single market would mean Britain would have to keep its borders open to EU workers and continue paying into EU coffers. Ministers have told the BBC they expect pro-EU MPs to conduct what one called a “reverse Maastricht” process – a reference to the long parliamentary campaign fought by Tory eurosceptic MPs in the 1990s against legislation deepening EU integration. Like then as now, the Conservative government has a small working majority of just 17. They say it would be legitimate for MPs to push for the UK to stay in the single market because the Leave campaign has refused to spell out what trading relationship it wants the UK to have with the EU in the future. As such, a post-Brexit government could not claim it had a popular mandate for a particular model.

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Equal partners.

Brexit May Seem Like The West’s Biggest Problem. But Look At The US Economy (G.)

Britain is trapped in its own little Brexit bubble. For the next two and a half weeks, the country will be obsessed with the result of the referendum on 23 June. Nothing that is going on in the rest of the world will get much of a look-in. But beyond these shores, things are happening. The authorities in China are desperately trying to shore up growth. Eurozone finance ministers have all but guaranteed that, sooner or later, the Greek crisis will flare up again. Most pressingly, the US economy looks to be heading for serious trouble. Make no mistake, the jobs report issued in Washington on Friday was a shocker. Wall Street had been expecting the non-farm payroll – the benchmark for the strength of the US labour market – to increase by 164,000. The actual figure was 38,000, the smallest monthly increase since September 2010.

True, the total was slightly distorted because 35,000 striking workers at Verizon were counted as jobless because they were not being paid. But that still would have meant an NFP increase of just 73,000. The weak jobs report comes at a particularly sensitive time because America’s central bank, the Federal Reserve, has been softening the markets up for an increase in interest rates, either this month or next. Any such move is now out of the question. US borrowing costs will not be going up again until the autumn at the earliest. This is all rather chastening for the Fed. When it raised interest rates in December for the first time since the Great Recession, the central bank signalled that there would be four more increases during the course of 2016.

Financial markets subsequently went into freefall during the early weeks of the year, forcing the Fed into a crash rethink. In March, it indicated that the number of 2016 rate increases had been halved from four to two – but the guidance was promptly ignored by traders, who based their decisions on the assumption that there would be no further tightening of policy by the Fed until 2017. With its reputation at stake, the Fed has gone out of its way since March to convince the markets that it was serious about two rate rises in 2016. Really, really it was. Janet Yellen, the Fed’s chair, told Wall Street that it might be “confused” about the way the central bank was going about its business.

Yet if anyone is confused it is Yellen, not the markets, which have rightly calculated that the Fed is all talk and should be judged by what it does and not by what it says. Here’s the position. The US economy grew at an annualised rate of 0.8% in the first quarter of 2016, which was not just weaker than the UK but substantially worse than the eurozone. Friday’s May payrolls were not a one-off, since the totals for March and April were revised downwards by a combined 59,000.

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Not quite sure what Ambrose intends here, but yeah, Britons’ dislike of Cameron, Major and any and all EU mouthpieces may well decide the issue.

‘Brexit Voters Succumbing To Impulse Irritation And Anger’ (AEP)

British voters are succumbing to impulsive gut feelings and irrational reflexes in the Brexit campaign with little regard for the enormous consequences down the road, the world’s most influential psychologist has warned. Daniel Kahneman, the Israeli Nobel laureate and father of behavioural economics, said the referendum debate is being driven by a destructive psychological process, one that could lead to a grave misjudgment and a downward spiral for British society. “The major impression one gets observing the debate is that the reasons for exit are clearly emotional,” he said. “The arguments look odd: they look short-term and based on irritation and anger. These seem to be powerful enough that they may lead to Brexit,” he said, speaking to The Telegraph at the Amundi world investment forum in Paris.

The counter-critique is that the Remain campaign is equally degrading the debate, playing on visceral reactions and ephemeral issues of the day. In a sense the two sides are egging each other on. That is the sociological fascination of it. Professor Kahneman, who survived the Nazi occupation of France as a Jewish child in the Second World War, said the risk is that the British people will be swept along by emotion and lash out later at scapegoats if EU withdrawal proves to be a disastrous strategic error. “They won’t regret it because regret is rare. They’ll find a way to explain what happened and blame somebody. That is the general pattern when things go wrong and people are afraid,” he said. The refusal to face up to the implications of what is really at stake in the referendum comes as no surprise to a man imbued with deep sense of anthropological pessimism.

His life’s work is anchored in studies showing that people are irrational. They are prone to cognitive biases and “systematic errors in thinking”, made worse by chronic over-confidence in their own judgment – and the less intelligent they are, the more militantly certain they tend to be. People do not always act in their own economic self-interest. Nor do they strive to maximize “utility’ and minimize risk, contrary to the assumptions of efficient market theory and the core premises of the economics profession. “People are myopic. Our brain circuits respond to immediate consequences,” he said.

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Added for entertainment value. BTW, what century is this?

Erdogan: Childless Women Deficient, Incomplete: Have At Least 3 (AFP)

President Recep Tayyip Erdogan on Sunday urged Turkish women to have at least three children, saying a woman’s life was “incomplete” if she failed to have offspring. Erdogan’s comments were the latest in a series of controversial remarks aimed at encouraging women to help boost Turkey’s population, which had already risen exponentially in the last years. The president emphasised he was a strong supporter of women having careers but emphasised that this should not be an “obstacle” to having children. “Rejecting motherhood means giving up on humanity,” Erdogan said in a speech marking the opening of the new building of Turkey’s Women’s and Democracy Association (KADEM). “I would recommend having at least three children,” added the president.

“The fact that a woman is attatched to her professional life should not prevent her from being a mother,” he added, saying that Turkey had taken “important steps” to support working mothers. Erdogan had on Monday said that family planning and contraception were not for Muslim families, prompting fury among women’s activists. In his speech Sunday he went on to add: “A woman who says ‘because I am working I will not be a mother’ is actually denying her feminity.” “A women who rejects motherhood, who refrains from being around the house, however successful her working life is, is deficient, is incomplete,” he added.

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And there we go.

Turkey Shelves Refugee ‘Readmission’ Deal With EU (DS)

The agreement between Turkey and the EU that will facilitate visa liberalization for Turkish nationals and allow readmission of Syrian refugees who enter Europe illegally is practically shelved due to ongoing disagreements, according to sources from the Foreign Ministry. The Turkey-EU agreement that will pave the way for visa liberalization was initially signed on Dec. 16, 2013 and was later included in the comprehensive refugee deal by both parties. Although Brussels says the deal will succeed, it also requires Turkey to meet the EU’s 72 benchmarks, which include narrowing its counterterrorism laws.

Turkey’s Aksam daily reported over the weekend that a senior official from the Foreign Ministry said Turkey has used its administrative measures correctly to temporarily suspend the Readmission Agreement, which will return undocumented, illegal refugees who enter Europe via Turkey in exchange for registered migrants. Sources from the Foreign Ministry who spoke to Daily Sabah yesterday said: “In order for the Readmission Agreement to be successfully fulfilled, a Cabinet decision approving the bill published in the Official Gazette must be announced.” Such an approval is not expected anytime soon. Although the European Commission had announced early last week that the Readmission Agreement would come into full force as of June 1, Ankara asserted that “the EU has failed to fulfill its duties resulting from the agreement,” stressing that it suspended the Readmission Agreement as part of administrative measures.

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 May 31, 2016  Posted by at 9:14 am Finance Tagged with: , , , , , , ,  6 Responses »
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Jack Delano Long stairway in mill district of Pittsburgh, Pennsylvania 1940


Mizuho Chief: Tax Delay Means Abenomics Has Failed (WSJ)
One-Minute Plunge Sends Chinese Stock Futures Down by 10% Limit (BBG)
The Big Short Is Back in Chinese Stocks (BBG)
You’re Witnessing The Death Of Neoliberalism – From Within (G.)
Australia’s Big Four Banks Are Much More Vulnerable Than They Appear (Das)
Ceta: The Trade Deal That’s Already Signed (G.)
Britain Is ‘World’s Most Corrupt Country’, Says Italian Mafia Expert (ES)
The Untold Story Behind Saudi Arabia’s 41-Year US Debt Secret (BBG)
Eric Holder Says Edward Snowden Performed A ‘Public Service’ (CNN)
Vague Promises of Debt Relief for Greece (NY Times Ed.)
Glitch In Greek Bailout Talks Fuels Fears Of Delay (Kath.)
German Unemployment Rate Falls to Record Low (BBG)
Majority Of Athens Homeless Ended Up On Street In Past 5 Years (Kath.)
More Than 45 Million Trapped In Modern Slavery (AFP)

Damned if you do, doomed if you don’t.

Mizuho Chief: Tax Delay Means Abenomics Has Failed (WSJ)

The chief of Mizuho Financial Group said Japan risks a credit-rating downgrade if Prime Minister Shinzo Abe delays a scheduled sales-tax increase without explaining how the government plans to cut its deficit. Yasuhiro Sato, president of Japan’s second-largest bank by assets, said Mr. Abe’s framing of such a decision would determine whether it sparked concerns about the government’s credibility regarding its plans for fiscal consolidation. “The worst scenario is [the government] will just announce a delay in the tax increase. That could send a message that Abenomics has failed or Japan is heading for a fiscal danger zone and then it will harm Japanese government bonds’ credit ratings,” Mr. Sato said in an interview, referring to the prime minister’s growth program.

Mr. Abe acknowledged for the first time Friday that he was considering delaying an increase in the sales tax to 10% from 8% scheduled to take effect in April next year. He said he would decide before an upper house election to be held in July, but Japanese media have reported that a decision could come this week. Mr. Abe has delayed the tax increase once, after the rise to 8% in April 2014 derailed an economic recovery. Consumer spending has yet to fully rebound, and some economists say the prospect of another tax increase next year is already weighing on spending. Mr. Sato acknowledged that raising the tax again would pose a risk to Japan’s economy. “There will be a risk in either case of raising the tax or not, so as long as the government demonstrates a clear road map for fiscal reconstruction, Japanese credibility likely won’t be hurt so much,” he said.

Some bankers say Japan could damage its international credibility if it fails to raise taxes on schedule. The tax increases are part of long-standing efforts to reach a primary government surplus by 2020. A primary surplus is a balanced budget excluding interest payments on government debt. Japan’s government debt is among the largest in the world relative to the size of its economy. Moody’s Investors Service said in a March report, “Postponing the next [sales-tax] increase regardless of the reason would pose a big fiscal burden for Japan.”

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Last year, “Volumes shrank by more than 90% from their peak”. But there’s simply money in shorting China; you can’t stop that.

One-Minute Plunge Sends Chinese Stock Futures Down by 10% Limit (BBG)

Chinese stock-index futures plunged by the daily limit before snapping back in less than a minute, the second sudden swing to rattle traders this month. Contracts on the CSI 300 Index dropped as much as 10% at 10:42 a.m. local time, recovering almost all of the losses in the same minute. More than 1,500 June contracts changed hands in that period, the most all day, according to data compiled by Bloomberg. The China Financial Futures Exchange is investigating the tumble, said people familiar with the matter, who asked not to be named because they aren’t authorized to speak publicly. The swing follows a similarly unexplained drop in Hang Seng China Enterprises Index futures in Hong Kong on May 16, a move that heightened anxiety among investors facing slower Chinese economic growth and a weakening yuan.

Volume in China’s stock-index futures market, which was the world’s most active as recently as July, has all but dried up after authorities clamped down on what they deemed excessive speculation during the nation’s $5 trillion equity crash last summer. Tuesday’s volatility had little impact on the underlying CSI 300, which rose 3%. “Liquidity in the market is really thin at the moment,” Fang Shisheng at Orient Securities said by phone. “So the market will very likely see big swings if a big order comes in. The order looks like it’s from a hedger.” Chinese policy makers restricted activity in the futures market last summer because selling the contracts is one of the easiest ways for investors to make large wagers against stocks. Volumes shrank by more than 90% from their peak after officials raised margin requirements, tightened position limits and started a police probe into bearish wagers.

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Xi Jinping is one nervous man right now.

The Big Short Is Back in Chinese Stocks (BBG)

Chinese equities are once again in the cross hairs of short sellers. Short interest in one of the largest Hong Kong exchange-traded funds tracking domestic Chinese stocks has surged fivefold this month to its highest level in a year, according to data compiled by Markit and Bloomberg. The last time bearish bets were so elevated, such pessimism proved well-founded as China’s bull market turned into a $5 trillion rout. While trading in the Shanghai Composite has become subdued this month amid suspected state intervention, pessimists are betting that equities face renewed selling amid a slumping yuan. The Chinese currency is heading for its biggest monthly loss since last year’s devaluation as the nation’s economic outlook worsens and the Fed prepares to raise borrowing costs, driving a rally in the dollar.

“Some macro funds are seeking opportunities to short index futures to play the currency movement,” said Wenjie Lu at UBS. “A higher chance of a Fed rate hike means there’s pressure for the yuan to soften.” Short interest in the CSOP FTSE China A50 ETF climbed to 6.1% on May 25, the highest level since April 2015, two months before Chinese equities peaked, and up from 1.3% at the end of last month. Bearish bets in the U.S. traded iShares China Large-Cap ETF jumped to a two-year high of 18% of shares outstanding on the same day, up from 3% a month ago. Even as Chinese equities rallied on Tuesday, traders were rattled by a sudden plunge in index futures. Contracts on the CSI 300 Index dropped as much as 10% at around 10:42 a.m. local time, recovering almost all of the losses in the same minute. The move had little effect on the underlying stock gauge, which rose 2.6% at the break.

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I think there’s more to it than that.

You’re Witnessing The Death Of Neoliberalism – From Within (G.)

You hear it when the Bank of England’s Mark Carney sounds the alarm about “a low-growth, low-inflation, low-interest-rate equilibrium”. Or when the Bank of International Settlements, the central bank’s central bank, warns that “the global economy seems unable to return to sustainable and balanced growth”. And you saw it most clearly last Thursday from the IMF. What makes the fund’s intervention so remarkable is not what is being said – but who is saying it and just how bluntly. In the IMF’s flagship publication, three of its top economists have written an essay titled “Neoliberalism: Oversold?”. The very headline delivers a jolt. For so long mainstream economists and policymakers have denied the very existence of such a thing as neoliberalism, dismissing it as an insult invented by gap-toothed malcontents who understand neither economics nor capitalism.

Now here comes the IMF, describing how a “neoliberal agenda” has spread across the globe in the past 30 years. What they mean is that more and more states have remade their social and political institutions into pale copies of the market. Two British examples, suggests Will Davies – author of the Limits of Neoliberalism – would be the NHS and universities “where classrooms are being transformed into supermarkets”. In this way, the public sector is replaced by private companies, and democracy is supplanted by mere competition. The results, the IMF researchers concede, have been terrible. Neoliberalism hasn’t delivered economic growth – it has only made a few people a lot better off. It causes epic crashes that leave behind human wreckage and cost billions to clean up, a finding with which most residents of food bank Britain would agree.

And while George Osborne might justify austerity as “fixing the roof while the sun is shining”, the fund team defines it as “curbing the size of the state … another aspect of the neoliberal agenda”. And, they say, its costs “could be large – much larger than the benefit”. Two things need to be borne in mind here. First, this study comes from the IMF’s research division – not from those staffers who fly into bankrupt countries, haggle over loan terms with cash-strapped governments and administer the fiscal waterboarding. Since 2008, a big gap has opened up between what the IMF thinks and what it does. Second, while the researchers go much further than fund watchers might have believed, they leave in some all-important get-out clauses.

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You kidding me? They’re overloaded to their necks in overvalued property loans.

Australia’s Big Four Banks Are Much More Vulnerable Than They Appear (Das)

Today they face little competition in their home market and have benefited tremendously from Australia’s strong growth, underpinned by China’s seemingly insatiable demand for the country’s gas, coal, iron ore and other raw materials. During the 2012 European debt crisis, Australia’s banks were worth more than all of Europe’s. But Australian financial institutions have made the same fundamental mistake the rest of the country has, assuming that growth based on “houses and holes” – rising property prices and resources buried underground – can continue indefinitely. In fact, despite a recent rebound in Chinese demand, commodities prices look set to remain weak for the foreseeable future. Banks’ exposure to the slowing natural resources sector has reached nearly $70 billion in loans outstanding – worryingly large relative to their capital resources.

If anything, their exposure to the property sector is even more dangerous. Mortgages make up a much bigger proportion of bank portfolios than before – more than half, double the level in the 1990s. And they’re riskier than they used to be: many loans are interest-only, while around 80% have variable rates. With a downturn likely – everything from price-to-income to price-to-rent ratios suggests houses are massively overvalued – losses are likely to rise, especially if economy activity weakens. Australian banks are also more vulnerable to outside shocks than they may first appear. Their loan-to-deposit ratio is about 110%. Domestic deposits fund only around 60% of bank assets; the rest of their financing has to come from overseas. While that hasn’t been a problem recently, Australia’s external position is deteriorating.

The current account deficit is expected to climb to 4.75% in the year ending June 30. Weak terms of trade, a rising budget deficit, slower growth and a falling currency are likely to drive up the cost of funds. If Australia’s economy or the financial sector’s performance falters, or international markets are disrupted, banks’ access to external funds could be threatened.

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“..only 18% of Americans and 17% of Germans support TTIP..”

Ceta: The Trade Deal That’s Already Signed (G.)

The US-Europe deal TTIP (the Transatlantic Trade and Investment Partnership) is the best known of these so-called “new generation” trade deals and has inspired a movement. More than 3 million Europeans have signed Europe’s biggest petition to oppose TTIP, while 250,000 Germans took to the streets of Berlin last autumn to try to bring this deal down. A new opinion poll shows only 18% of Americans and 17% of Germans support TTIP, down from 53% and 55% just two years ago. But TTIP is not alone. Its smaller sister deal between the EU and Canada is called Ceta (the Comprehensive Economic and Trade Agreement). Ceta is just as dangerous as TTIP; indeed it’s in the vanguard of TTIP-style deals, because it’s already been signed by the European commission and the Canadian government. It now awaits ratification over the next 12 months.

The one positive thing about Ceta is that it has already been signed and that means that we’re allowed to see it. Its 1,500 pages show us that it’s a threat to not only our food standards, but also the battle against climate change, our ability to regulate big banks to prevent another crash and our power to renationalise industries. Like the US deal, Ceta contains a new legal system, open only to foreign corporations and investors. Should the British government make a decision, say, to outlaw dangerous chemicals, improve food safety or put cigarettes in plain packaging, a Canadian company can sue the British government for “unfairness”. And by unfairness this simply means they can’t make as much profit as they expected. The “trial” would be held as a special tribunal, overseen by corporate lawyers.

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Would anyone doubt it?

Britain Is ‘World’s Most Corrupt Country’, Says Italian Mafia Expert (ES)

Britain has been described as the most corrupt country in the world, according to a journalist and expert on the Italian Mafia. Roberto Saviano, who wrote best-selling exposés Gomorrah and ZeroZeroZero, made the claim at the Hay Literary Festival. The 36-year-old has been living under police protection for 10 years since revelations were published about members of the Camorra, a Neapolitan branch of the mafia. Mr Saviano told the audience at Hay-on-Wye: “If I asked you what is the most corrupt place on Earth you might tell me well it’s Afghanistan, maybe Greece, Nigeria, the South of Italy and I will tell you it’s the UK. “It’s not the bureaucracy, it’s not the police, it’s not the politics but what is corrupt is the financial capital. 90% of the owners of capital in London have their headquarters offshore.

“Jersey and the Cayman’s are the access gates to criminal capital in Europe and the UK is the country that allows it. “That is why it is important why it is so crucial for me to be here today and to talk to you because I want to tell you, this is about you, this is about your life, this is about your government.” David Cameron came under pressure for the UK to reform offshore tax havens operating on British overseas territories at an anti-corruption summit earlier this month. Mr Saviano also weighed in on the EU referendum debate, warning a vote to leave the union would see Britain even more exposed to organised crime. He added: “Leaving the EU means allowing this to take place. It means allowing the Qatari societies, the Mexican cartels, the Russian Mafia to gain even more power and HSBC has paid £2 billion in fines to the US government, because it confessed that it had laundered money coming from the cartels and the Iranian companies. “We have proof, we have evidence.”

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How power rules.

The Untold Story Behind Saudi Arabia’s 41-Year US Debt Secret (BBG)

Failure was not an option. It was July 1974. A steady predawn drizzle had given way to overcast skies when William Simon, newly appointed U.S. Treasury secretary, and his deputy, Gerry Parsky, stepped onto an 8 a.m. flight from Andrews Air Force Base. On board, the mood was tense. That year, the oil crisis had hit home. An embargo by OPEC’s Arab nations—payback for U.S. military aid to the Israelis during the Yom Kippur War—quadrupled oil prices. Inflation soared, the stock market crashed, and the U.S. economy was in a tailspin. Officially, Simon’s two-week trip was billed as a tour of economic diplomacy across Europe and the Middle East, full of the customary meet-and-greets and evening banquets.

But the real mission, kept in strict confidence within President Richard Nixon’s inner circle, would take place during a four-day layover in the coastal city of Jeddah, Saudi Arabia. The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world. It “wasn’t a question of whether it could be done or it couldn’t be done,” said Parsky, 73, one of the few officials with Simon during the Saudi talks.

At first blush, Simon, who had just done a stint as Nixon’s energy czar, seemed ill-suited for such delicate diplomacy. Before being tapped by Nixon, the chain-smoking New Jersey native ran the vaunted Treasuries desk at Salomon Brothers. To career bureaucrats, the brash Wall Street bond trader—who once compared himself to Genghis Khan—had a temper and an outsize ego that was painfully out of step in Washington. Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.” But Simon, better than anyone else, understood the appeal of U.S. government debt and how to sell the Saudis on the idea that America was the safest place to park their petrodollars.

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Inappropriate, illegal, and a public service, all at the same time.

Eric Holder Says Edward Snowden Performed A ‘Public Service’ (CNN)

Former U.S. Attorney General Eric Holder says Edward Snowden performed a “public service” by triggering a debate over surveillance techniques, but still must pay a penalty for illegally leaking a trove of classified intelligence documents. “We can certainly argue about the way in which Snowden did what he did, but I think that he actually performed a public service by raising the debate that we engaged in and by the changes that we made,” Holder told David Axelrod on “The Axe Files,” a podcast produced by CNN and the University of Chicago Institute of Politics. “Now I would say that doing what he did – and the way he did it – was inappropriate and illegal,” Holder added. Holder said Snowden jeopardized America’s security interests by leaking classified information while working as a contractor for the National Security Agency in 2013.

“He harmed American interests,” said Holder, who was at the helm of the Justice Department when Snowden leaked U.S. surveillance secrets. “I know there are ways in which certain of our agents were put at risk, relationships with other countries were harmed, our ability to keep the American people safe was compromised. There were all kinds of re-dos that had to be put in place as a result of what he did, and while those things were being done we were blind in certain really critical areas. So what he did was not without consequence.” Snowden, who has spent the last few years in exile in Russia, should return to the U.S. to deal with the consequences, Holder noted. “I think that he’s got to make a decision. He’s broken the law in my view. He needs to get lawyers, come on back, and decide, see what he wants to do: Go to trial, try to cut a deal. I think there has to be a consequence for what he has done.”

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Times editors’ curious timing.

Vague Promises of Debt Relief for Greece (NY Times Ed.)

European leaders congratulated themselves last week for reaching an agreement to provide more loans to Greece and eventually ease the terms of the country’s huge debt. But there is little to celebrate. Greece is bankrupt in all but name. The country has a debt of more than €300 billion, or about 180% of its GDP, a sum it cannot hope to repay in full. Most of that money is owed to Germany, France, Italy and other countries in the eurozone. After an 11-hour meeting last week, the eurozone finance ministers said that they would lend another €7.5 billion to Greece next month to help it pay off debt and grant it some relief, possibly including lower interest rates and extended payment periods, but not until mid-2018.

The reality is that Greece can’t be squeezed any harder. But the finance ministers are seeking still more spending cuts and increased taxes. They want to see a budget surplus of 3.5% of GDP before interest payments by 2018. A stable and fast-growing country might be able to hit that target, but it is preposterous to expect that from Greece. The IMF wants to see a more realistic surplus of 1.5%. Delaying meaningful debt relief until 2018 will further harm the struggling Greek economy. The Greek unemployment rate was 24.4% in January, and Greece’s economy shrunk in the first three months of the year. The I.M.F., which has also lent Greece money, recently estimated that at its current trajectory, the country’s debt would eventually grow to 250% of GDP.

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Forcing Greece into foolish measures: “..Schaeuble described the decision to raise value-added tax in Greece as “economic foolishness” but noted that Athens was obliged to take that route due to a revenue shortfall.”

Glitch In Greek Bailout Talks Fuels Fears Of Delay (Kath.)

There was fresh concern on Monday that there could be further delays in the disbursement of much-need bailout money to Greece owing to a disagreement between Athens and its creditors, who have demanded changes to prior actions passed in Parliament earlier this month. EU officials on Monday appeared to dismiss Greece’s refusal to implement some of these changes, saying that these are issues that have already been agreed with the Greek government. The country’s lenders had given the green light for the disbursement of a tranche of 10.3 billion euros last week, on the condition the government made amendments to recent legislation it passed on pension, bad loans and privatizations.

However, Finance Minister Euclid Tsakalotos had informed the European Commission representative and the IMF in a letter last week that their demands could not be met, neither could Athens fulfill the demands enshrined in the bailout deal signed last summer to privatize ADMIE, the country’s grid operator, and to freeze the wages of essential services, like those of the coast guard and police. Greece desperately needs the new bailout money to pay state arrears as well as debt repayments to the IMF and European Central Bank in the coming weeks. There were reports on Monday that the government is planning to submit its own amendments on Wednesday to Parliament. If the disagreement between Greece and its creditors persists, then it is likely it will be discussed at the Euro Working Group on Thursday.

In comments on Monday, German Finance Minister Wolfgang Schaeuble described the decision to raise value-added tax in Greece as “economic foolishness” but noted that Athens was obliged to take that route due to a revenue shortfall. “This is why Greece needs an effective public administration,” Schaeuble told a conference on fiscal sustainability, observing that Greek tax collection must be improved to bring in the higher revenues that are being targeted.

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Germany has exported its unemployment to Greece and Spain.

German Unemployment Rate Falls to Record Low (BBG)

German unemployment declined more than economists estimated, pushing the jobless rate to the lowest level since reunification. The number of people out of work fell by a seasonally adjusted 11,000 to 2.695 million in May, data from the Federal Labor Agency in Nuremberg showed on Tuesday. The median estimate in a Bloomberg survey was for a decline of 5,000. The jobless rate dropped to 6.1 percent. The report comes two days before ECB officials convene in Vienna to set monetary policy and assess whether they’ve done enough to sustain an economic recovery in the 19-nation euro region.

The ECB is expected to keep its stimulus plan unchanged after President Mario Draghi announced an expansion of quantitative easing by a third to €80 billion in March and cut the deposit rate further below zero. Unemployment dropped by 8,000 in western Germany and declined by 3,000 in the eastern part of the country, the report showed. Growth momentum in Europe’s largest economy remains strong after gross domestic product expanded at the fastest pace in two years in the first quarter. German business sentiment rose to the highest level in five months in May and consumer prices unexpectedly halted their decline. The Bundesbank predicts the economy will retain its underlying strength, even though expansion will probably slow somewhat this quarter.

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Obviously not a surprise for me, or Automatic Earth readers. And lest we forget: Norway does a lot of good in silence. But more austerity is definitely not going to fix anything at all.

Majority Of Athens Homeless Ended Up On Street In Past 5 Years (Kath.)

71% of the Greek capital’s homeless population has ended up on the streets in the last five years and 21.7% in the last year alone, a study by the City of Athens’s Homeless Shelter (KYADA), funded by the Norwegian government and other European countries, has found. According to the study, which was conducted as part of the “Fighting Poverty and Social Exclusion” program and whose findings were presented by Athens Mayor Giorgos Kaminis on Monday evening, 62% of the capital’s homeless are Greeks, the overwhelming majority (85.4%) are men and most (57%) are aged between 35-55. Of the 451 respondents questioned by KYADA workers from March 2015 until the same month this year, 47% said they ended up on the street after losing their job and 29% said they do not want to move to a shelter or other organized facility.

Less than half of the respondents (41.2%) admitted to using drugs, 7.3% to alcohol and 2% to both. Kaminis also said that in the one-year period, the solidarity program helped distribute 46,156 supermarket food coupons worth around 1.85 million euros to nearly 9,000 beneficiaries in over 3,700 families. “Through its social structures and strong alliances with agencies, partners and simple citizens, the City of Athens help give support to more than 25,000 residents,” Kaminis said at the presentation, which was also attended by Norwegian Ambassador to Athens Jorn Eugene Gjelstad.

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Who we are. Not including debt slaves.

More Than 45 Million Trapped In Modern Slavery (AFP)

More than 45 million men, women and children globally are trapped in modern slavery, far more than previously thought, with two-thirds in the Asia-Pacific, a study showed Tuesday. The details were revealed in the 2016 Global Slavery Index, a research report by the Walk Free Foundation, an initiative set up by Australian billionaire mining magnate and philanthropist Andrew Forrest in 2012 to draw attention to the issue. It compiled information from 167 countries with 42,000 interviews in 53 languages to determine the prevalence of the issue and government responses. It suggested that there were 28% more slaves than estimated two years ago, a revision reached through better data collection and research methods.

The report said India had the highest number of people trapped in slavery at 18.35 million, while North Korea had the highest incidence (4.37% of the population) and the weakest government response. Modern slavery refers to situations of exploitation that a person cannot leave because of threats, violence, coercion, abuse of power or deception. They may be held in debt bondage on fishing boats, against their will as domestic servants or trapped in brothels. Some 124 countries have criminalised human trafficking in line with the UN Trafficking Protocol and 96 have developed national action plans to coordinate the government response.

In terms of absolute numbers, Asian countries occupy the top five for people trapped in slavery. Behind India was China (3.39 million), Pakistan (2.13 million), Bangladesh (1.53 million) and Uzbekistan (1.23 million). As a %age of the population, Uzbekistan (3.97%) and Cambodia (1.65%) trailed North Korea, which the study said was the only nation in the world that has not explicitly criminalised any form of modern slavery.

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