Apr 252017
 
 April 25, 2017  Posted by at 7:59 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Pablo Picasso Self portrait 1972

 


Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)
Trump Summons Entire Senate To White House Briefing On North Korea (G.)
Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)
The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)
Canadians’ Confidence In Housing Hits Record High (HPoC)
Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)
Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)
Rising Defaults In China Reveal Hidden Debt (BBG)
China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)
Naked Selfies Used As Collateral For Chinese Loans (AFP)
Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)
Ontario To Pay Guaranteed Incomes To The Poor (AFP)
Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)
At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

 

 

They’ve been doing this forever: “..the fight is the “longest-running battle since the Trojan War.”

Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)

U.S. President Donald Trump intensified a trade dispute with Canada, slapping tariffs of up to 24% on imported softwood lumber in a move that drew swift criticism from the Canadian government, which vowed to sue if needed. Trump announced the new tariff at a White House gathering of conservative journalists, shortly before the Commerce Department said it would impose countervailing duties ranging from 3% to 24.1% on Canadian lumber producers including West Fraser Timber. “We’re going to be putting a 20% tax on softwood lumber coming in – tariff on softwood coming into the United States from Canada,” Trump said Monday, according to a tweet by Charlie Spiering at Breitbart News. A White House official confirmed the comment.

The step escalates an economic battle among neighboring countries that normally have one of the friendliest international relationships in the world. U.S. Commerce Secretary Wilbur Ross amplified Trump’s remarks in a statement afterward that also referenced a fight over a new Canadian milk policy that U.S. producers say violates Nafta. “It has been a bad week for U.S.-Canada trade relations,” Ross said, adding “it became apparent that Canada intends to effectively cut off the last dairy products being exported from the United States.” He said the Commerce Department “determined a need” because of unfair Canadian subsidies to the lumber industry to impose “countervailing duties of roughly one billion dollars.” In a dig at NAFTA, which Trump has said he wants to renegotiate, Ross added, “This is not our idea of a properly functioning Free Trade Agreement.”

[..] The so-called countervailing duties, which counter what the U.S. considers Canadian subsidies, came in below some analyst expectations. CIBC analyst Hamir Patel forecast the initial combined countervailing and anti-dumping duties could reach 45 to 55%, he said in an April 23 note. The U.S. may also apply anti-dumping duties if it determines Canadian firms are selling for below costs. That decision is expected in June. “It definitely could’ve been a heck of a lot worse,” Kevin Mason at ERA Forest Products Research said by phone. “I think a lot of people were bracing for a higher duty.”

[..] Most of the softwood in Canada is owned by provincial governments, which set prices to cut trees on their land, while in the U.S. it’s generally harvested from private property. The fees charged by Canadian governments are below market rates, creating an unfair advantage, U.S. producers say. Canada disputes that. Robert Lighthizer, Trump’s nominee to be the next U.S. Trade Representative, said at his confirmation hearing last month that he views the lumber dispute as the top trade issue between the U.S. and Canada. Oregon Democratic Senator Ron Wyden told Lighthizer the fight is the “longest-running battle since the Trojan War.”

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Huffin’-and-a-puffin’.

Trump Summons Entire Senate To White House Briefing On North Korea (G.)

The entire US Senate will go to the White House on Wednesday to be briefed by senior administration officials about the brewing confrontation with North Korea. The unusual briefing underlines the urgency with which the Trump administration is treating the threat posed by Pyongyang’s continuing development of nuclear weapons and missile technology. It follows a lunch meeting Trump held with ambassadors from UN member states on the security council on Monday where he emphasised US resolve to stop North Korea’s progress. “The status quo in North Korea is unacceptable and the council must be prepared to impose additional and stronger sanctions on North Korean nuclear and ballistic missile programs,” Trump said at the meeting. “North Korea is a big world problem, and it’s a problem we have to finally solve.”

On Friday the US secretary of state, Rex Tillerson, is due to chair a security council foreign ministers’ meeting on the issue in New York, at which the state department said he would call once more for the full implementation of existing UN sanctions or new measures in the event of further nuclear or missile tests. “This meeting will give the security council the opportunity to discuss ways to maximise the impact of existing security council measures and to show their resolve to response further provocations with appropriate new measures,” said Mark Toner, state department spokesman. Senators are to be briefed by the defence secretary, James Mattis, and Tillerson on Wednesday. Such briefings for the entire senate are not unprecedented but it is very rare for them to take place in the White House, which does not have large secure facilities for such classified sessions as Congress.

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Not going to be easy. Trump’s too desperate to get a deal done.

Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)

President Donald Trump will call for cutting taxes for individuals and lowering the corporate rate to 15% to fulfill a promise he made during his campaign, according to a White House official. The president on Wednesday plans to make public the broad outlines of what he wants to change in the tax code, though the details likely will be left until later negotiations among congressional leaders and officials from Treasury. Trump’s top economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin will brief House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and the leaders of congressional tax-writing committees – House Ways and Means Committee Chairman Kevin Brady and Senate Finance Committee Chairman Orrin Hatch.

While Trump and Ryan broadly agree on sharply cutting individual income and corporate taxes, there are areas of disagreement between the two. On the campaign, Trump called for a corporate tax rate of 15%; Ryan wants 20%, and he has warned that cutting it an additional 5 percentage points could prevent the ultimate tax plan from being revenue neutral. Without Democratic support, a plan would have to be revenue neutral to meet the criteria set by lawmakers to make tax changes permanent. “I’m not sure he’s going to be able to get away with that,” Hatch told reporters Monday. “You can’t very well balance the budget that way.”

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Demand goes down because people have less money to spend. All the rest is humbug.

The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)

Lackluster gasoline demand is once again raising concerns that the oil market won’t be able to escape the doldrums. Demand for U.S. gasoline has recovered since January, but remained below 2016 levels throughout much of this year. Now, analysts are worried weak consumption will cause gasoline stockpiles to keep building and eventually result in weaker crude oil demand and pricing. U.S. gasoline futures were down more than 1% on Monday, reflecting demand concerns as refiners emerge from the winter maintenance season and prepare to turn out more fuel. Meanwhile, U.S. crude settled 39 cents lower at $49.23, extending last week’s deep losses. “As gas prices drop, that creates an undertow for the entire crude oil market,” said Tom Kloza, global head of energy analysis at Oil Price Information Service.

Part of the problem is a tough comparison with extraordinarily low gasoline prices last year. The national average gasoline price on Monday was nearly 28 cents above last year’s level, according to GasBuddy.com. “I’m in the camp that says last year was a little bit of the anomaly,” Kloza said. “Gas was so cheap that we drove a little bit more almost capriciously. This year, I just don’t think it’s going to happen.” In a troubling sign, the nation’s gasoline station operators have reported at industry conferences that their sales are down 1.5 to 2% this year, according to Andy Lipow, president of Lipow Oil Associates. “When you hear retailers telling you that their demand is down you’ve got to be a believer,” he told CNBC. Lipow said he fears that trend will carry through for the balance of 2017. Demand is certain to rise as the summer driving season ramps up, but Lipow sees stockpiles remaining relatively high.

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Stark raving madness. A housing market that is rising at ‘only’ 9.5% per year is labeled ‘rational’.

Canadians’ Confidence In Housing Hits Record High (HPoC)

The experts are getting louder in their warnings that a housing bubble has formed in some parts of Canada, but Canadians don’t seem worried. In fact, confidence in the housing market hit a record high in the latest weekly Bloomberg-Nanos index — even as respondents turned negative on their own personal finances. The survey found 48.5% of Canadians expect house prices to rise in the next six months, the highest level recorded in the survey since 2008. Fewer than 11% expect to see house prices decrease. “Bullish sentiment on real estate in Canada continues to drive consumer confidence,” pollster Nik Nanos said in a statement. “Household expectations have improved by roughly 10% since the start of the year as the effects of the oil price shock have stabilized and the focus has moved toward rising property values,” Bloomberg economist Robert Lawrie said.

“In recent weeks, however, consumer sentiment regarding personal finances began drifting lower, with extended household balance sheets perhaps the next focus of concern for policymakers.” High debt levels are precisely why many market observers are growing concerned about Canada’s priciest housing markets, namely the Toronto and Vancouver regions. House prices in Toronto jumped 33% in March from a year earlier, to an average of $916,567. While Vancouver’s house prices have moderated over the past six months, they remain elevated, with the benchmark price at $919,300 in March.

National Bank of Canada, which co-publishes the Teranet house price index, warned recently that “irrational exuberance” may be setting into some Canadian housing markets, noting that more than half of Canada’s regional markets are seeing price growth above 10% annually. With mortgages ballooning, Canadian household debt has repeatedly hit record highs in recent years, and now stands at $1.67 of debt for every dollar of disposable income. Those elevated debt levels are the main reason one why the Bank for International Settlements (BIS), a Geneva-based “central bank of central banks,” warned recently that Canada has the second-highest risk of a financial crisis, behind only China.

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Essential and repeated here a 1000 times: “Bubbles have a habit of overshooting on the downside when they finally burst.”

Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)

A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class. Take a quick look at the Case-Shiller Home Price Index charts for San Francisco, Seattle and Portland, OR. Each now exceeds its previous Housing Bubble #1 peak:

It seems housing bubbles take about 5 to 6 years to reach their bubble peaks, and about half that time to retrace much or all of the gains. Bubbles have a habit of overshooting on the downside when they finally burst. The Federal Reserve acted quickly in 2009-10 to re-inflate the housing bubble by lowering interest rates to near-zero and buying over $1 trillion of mortgage-backed securities. When bubbles are followed by echo-bubbles, the bursting of the second bubble tends to signal the end of the speculative cycle in that asset class. There is no fundamental reason why housing could not round-trip to levels below the 2011 post-bubble #1 trough.

Consider the fundamentals of China’s remarkable housing bubble. The consensus view is: sure, China’s housing prices could fall modestly, but since Chinese households buy homes with cash or large down payments, this decline won’t trigger a banking crisis like America’s housing bubble did in 2008. The problem isn’t a banking crisis; it’s a loss of household wealth, the reversal of the wealth effect and the decimation of local government budgets and the construction sector. China is uniquely dependent on housing and real estate development. This makes it uniquely vulnerable to any slowdown in construction and sales of new housing. About 15% of China’s GDP is housing-related. This is extraordinarily high. In the 2003-08 housing bubble, housing’s share of U.S. GDP barely cracked 5%. Of even greater concern, local governments in China depend on land development sales for roughly 2/3 of their revenues.

If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble. Oops, did I say bubble? I meant “normal market in action.”

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“..we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops.”

Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)

Between autumn 1977 and Christmas 1979, interest rates rose from 5% to 17%. If you were a young boomer whose biggest cost was a variable rate mortgage, that would have hurt. In 2009, by contrast, interest rates were cut to a record low of 0.5%, and stayed there for the better part of a decade. When eventually they did move again, it was down. You don’t know you’re born. Except, of course, you do – because, if you’re reading this and you’re under 40, there’s a pretty good chance you’re still stuck paying rent. Yes, interest rates are low; no, this is not particularly helpful. Even if you do have a mortgage, it’s probably a fixed rate one because, let’s be honest, those rates are going up again one day. But not, it seems, today. The Yorkshire Building Society has just launched a new mortgage that charges an interest rate of just 0.89%. “We are very pleased to offer borrowers the lowest mortgage rate ever available,” said a spokesman.

“The cost of funding has fallen in recent weeks and, as a financially strong building society with no external shareholders to satisfy, we have the ability to pass this on to borrowers.” (“We used to dream of mortgages at under 1%,” say the boomers.) So does that means that owning a home is now cheaper than it’s ever been? Well, no, of course not. For one thing, this isn’t a fixed rate deal. It’s actually a (bear with me on this) two-year-long discount of 3.85% to the standard variable rate (SVR) of 4.74%. That means it’s very, very unfixed indeed: a normal tracker mortgage moves in response to Bank of England rates; an SVR one moves in response to the lender’s whims. Accepting this mortgage means placing a bet that the Yorkshire Building Society will be nice to you. It also comes with an unusually high arrangement fee of £1,495, but this shouldn’t bother you, because you probably can’t get that rate anyway. To even be considered, you need a deposit worth 35% of the value of your home.

[..] But there’s another, more sinister, reading of the recent rash of ultra-low mortgage rates: it suggests we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops. But bubbles tend to burst. Prices can’t rise forever: one day, interest rates must surely rise. When the inevitable happens, there is a danger that those who took advantage of this deal may find their equity wiped out – and the rate they’re paying will shoot through the roof.

That would obviously be very sad for those who are affected; for those shut out of home ownership, though, it may be no bad thing. That’s because nine years of record-low interest rates have probably contributed to the fact that house prices have soared out of reach; and higher prices have meant increasingly unattainable deposits. A rise in interest rates could, paradoxically, make housing more affordable.

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Companies guaranteeing each other’s crappy debt. What could go wrong? Problem is, Beijing had let them do it for years.

Rising Defaults In China Reveal Hidden Debt (BBG)

Rising defaults in China are unearthing hidden debt at companies across the country. Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains. China’s banking regulator has ordered checks of such cross-guaranteed loans, Caixin reported Friday. Scrutiny is mounting after a corn oil producer in the eastern province of Shandong said last month it had guaranteed debt of a neighboring aluminum product manufacturer which is now stuck in a cash crunch.

Just days before that, a local government financing vehicle in China’s southwest had to repay an auto parts maker’s loans it had guaranteed after the latter defaulted. “Disclosure of such guarantees isn’t timely,” said Qiu Xinhong at Shenzhen-based First State Cinda. “Sometimes, it’s like a buried mine and you don’t know when the risks will explode.” This debt minefield could be big. The amount of loan guarantees at privately held firms in China is equivalent to 11% of their equity, and at LGFVs is 18%, according to Citic Securities. The load is even heavier at weaker borrowers. About 44% of issuers rated lower than AA- have a ratio of more than 30%, according to Everbright Securities. The phenomenon is less common in the U.S. because banks don’t require such guarantees to offer loans, according to Fitch Ratings.

“If companies in the same region offer a huge amount of guarantees for each other’s debt, it would form a guarantee web and deepen interconnections among the companies,” said Gang Meng, director of rating at Golden Credit Rating International Co. in Beijing. “If one company has to repay debt for its guaranteed company, risks would quickly ripple to other companies in the web, which will result in a butterfly effect.” [..] Guarantors don’t mark the pledges on their balance sheets and often disclose them only on an annual basis. Such shadow debts pose rising risks after central bank tightening pushed up onshore corporate bond yields to two-year highs and defaults on local notes surged to a record.

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The distinction between state banks and shadows has become very murky.

China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)

A $1.7 trillion source of inflows into Chinese markets has suddenly switched into reverse, roiling the nation’s money management industry and sending local bonds and stocks to their biggest losses of the year. The turbulence has centered on so-called entrusted investments – funds that Chinese banks farm out to external asset managers. After years of funneling money into such investments, banks are now pulling back in response to a series of regulatory guidelines over the past three weeks that put a spotlight on the risks. Critics have blamed entrusted managers for adding leverage to China’s financial system and reducing transparency.

The banks’ withdrawals helped erase $315 billion of stock market value over the past six days and sent bond yields to the highest level in nearly two years, highlighting the challenge for Chinese authorities as they try to rein in shadow banking activity without destabilizing financial markets. While the government has plenty of firepower to prop up asset prices if it wants to, forecasters at Australia & New Zealand Banking predict the selloff will deepen this year. “We are seeing an exodus of funds,” said He Qian at HFT Investment Management, which oversaw about 189 billion yuan ($27.5 billion) as of last year. He was one of about half-a-dozen asset managers and analysts who said banks have started scaling back their entrusted investments.

The arrangements have become an important part of China’s shadow finance system. When banks sell wealth-management products – the ubiquitous savings vehicles that offer higher yields than deposits – the firms sometimes farm out client money to entrusted managers such as hedge funds and mutual funds. The managers invest the cash in bonds, stocks and other securities, hoping to generate enough income to cover the banks’ promised returns to WMP clients – plus some extra for themselves.

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You better look good than feel good.

Naked Selfies Used As Collateral For Chinese Loans (AFP)

Hundreds of photos and videos of naked women used as collateral for loans on a Chinese online lending service have leaked onto the web, highlighting regulatory problems in the fast-growing peer-to-peer marketplace. A 10-gigabyte file posted on the internet exposed the personal details of more than 160 young women who were asked to provide the explicit material to secure money through online lending platform Jiedaibao. Launched by JD Capital in 2015, Jiedaibao allows lenders to operate anonymously but requires borrowers to reveal their real names when making transactions. Loan amounts and interest rates can be customised to meet the needs of users – often people who have a hard time accessing loans through more traditional financial institutions, like banks.

Interest on the “nude loans” reached an astonishing 30% a week, according to the Global Times newspaper. Lenders told female borrowers that if they failed to repay the loans, their nude photos would be sent to their families and friends, whose information was also required for some transactions, the article said. Material in the file put on the web last Wednesday showed some borrowers also promised to repay loans with sexual favours, according to screen captures posted on social media websites. In a statement on its official Twitter-like Weibo account, Jiedaibao said it had tracked down the accounts of several borrowers through photos and ID information circulated online and had frozen the suspected lenders’ accounts. “The ‘nude loans’ deals were mainly initiated and completed offline, and Jiedaibao only played the role of a money transfer platform in the deals,” the statement said.

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Derivatives used this way are instruments of massive wealth destruction. Why use different rates for each side of the deal? “..the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate..”

Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)

Derivatives burdened Italy’s public debt again last year for a record amount of €8.3 billion ($9 billion), making the country the biggest swaps loser in the euro region. Losses related to swaps held by the nation added €4.25 billion to the country’s debt while net liabilities’ burden totaled €4.07 billion, based on data released Monday by EU statistics office Eurostat. In the 2012-2016 period, the burden totaled €29.6 billion, also a euro-area record. Italy’s derivative-related losses and net liabilities were higher than those for the whole euro region combined both in 2016 and in the five-year period as some countries actually saw the swaps helping to alleviate their debts. Governments across the euro region have used derivatives to manage their debt-financing costs and to hedge against sudden changes in rates and excessive exchange-rate volatility.

Those deals have sometimes backfired with the effect of pushing nations’ debts even higher. In the existing interest-rate swaps the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate,” the government said earlier this month in an annex to its annual Economic and Financial Document. Since starting from November 2015, the Euribor stayed negative and the impact on the flow indexed to that rate was that the Treasury had to pay money to its counterparts, instead of being paid by them, the document also said. Italy’s public debt rose last year to €2.2 trillion, or 132.6% of the country’s GDP, Eurostat said in a separate report on Monday.

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it’s important to get it right.

Ontario To Pay Guaranteed Incomes To The Poor (AFP)

Ontario has launched a pilot program to provide a guaranteed basic income to a few thousand people to test its effects on recipients and public finances, the Canadian province announced on Monday. Provincial premier Kathleen Wynne said the program would provide a “basic income” for three years to 4,000 people living under the poverty line. “We want to find out whether a basic income makes a positive impact in people’s lives,” Ms Wynne said, adding that “everyone should benefit from Ontario’s economic growth.” Income support payments will be as high as Can$16,989 (£9,800) a year for an individual, or Can$24,027 for a couple, plus an additional Can$6,000 for the disabled.

The figures will be reduced for those holding part-time jobs – they will receive 50 cents less for each dollar earned. As a concrete example, a single person with a yearly salary of Can$10,000 will receive an additional payment of Can$11,989. The 4,000 participants, aged 18 to 65, have been chosen at random in three cities: Hamilton and Lindsay in the Toronto suburbs and Thunder Bay in the province’s west. The province estimates the cost of the program at Can$50 million a year. Ontario is the most heavily populated Canadian province, with 38% of the country’s 36.5 million inhabitants. 13% of Ontario residents live below the poverty line, according to Statistics Canada.

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What the FBI did has already been declared illegal in New Zealand courts.

Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)

FBI Director James Comey is currently in New Zealand and if Kim Dotcom has his way, Comey could find himself being questioned by the New Zealand police. The internet entrepreneur, who is wanted by the United States on multiple charges including fraud and copyright infringement, filed a complaint with the police Tuesday against the FBI director for what Dotcom called theft of his data by the agency. The alleged theft happened when the police raided Dotcom’s home Jan. 20, 2012, as part of investigations instigated by the U.S. The charges against him are based on the now-defunct website Megaupload that he operated, where users could share content with each other.

Some of that content was illegal to share, but according to New Zealand laws, internet service providers are not held responsible for the actions of their users. In his complaint Tuesday, Dotcom’s lawyer urged the police to urgently question Comey, who is in New Zealand for a conference. The grounds for the complaint are that the FBI received copies of data that was taken from Dotcom’s home during the 2012 raid, an act which courts in the country have held to be illegal, according to the complaint.

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The value you put on someone else’s life inevitably becomes the value of your own life.

At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

At least 16 people, including two children, drowned after an inflatable boat carrying refugees and migrants sank off Greece’s Lesbos island, authorities said on Monday. They are believed to be the first confirmed deaths in Greek waters this year of migrants or refugees making the short but dangerous crossing from Turkey on overcrowded rubber dinghies. Nine bodies were recovered in Greek territory and another seven in Turkish waters, Greek and Turkish coastguard officials said. Two survivors have been rescued. The two women, one of whom is pregnant, told the United Nations refugee agency UNHCR that 20 to 25 people were on board when the dinghy capsized around 1900 GMT on Sunday. The women are from Cameroon and the Democratic Republic of Congo.

Though fewer than 10 nautical miles separate Lesbos from Turkish shores, hundreds of people have drowned trying to make the crossing since Europe’s refugee crisis began in 2015. In that year, Lesbos was the main gateway into the European Union for nearly a million Syrians, Iraqis and Afghans. But a deal in March 2016 between the EU and Ankara has largely closed that route. Just over 4,800 people have crossed to Greece from Turkey this year, according to UNHCR data. An average of 20 arrive on Greek islands each day. “The number of people crossing the Aegean to Greece has dropped drastically over the past year, but this tragic incident shows that the dangers and the risk of losing one’s life remains very real,” said Philippe Leclerc, UNHCR Greece representative.

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Apr 192017
 
 April 19, 2017  Posted by at 9:06 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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Jan van Eyck Saint Barbara 1437

 


The Great Western Economic Depression (Nielson)
How Western Civilisation Could Collapse (BBC)
Why the Federal Reserve Is Bad for America (DDMB)
Trump’s New Problem: Americans Aren’t Shopping (CNN)
British PM Wants Election Now, Before Cost of Brexit Becomes Clear (ICept)
UK Tory MPs Still Under Investigation For Election Fraud (Can.)
China’s $8.5 Trillion Shadow Bank Industry Is Back in Full Swing (BBG)
So China’s Authorities Crack Down on Housing Speculation? (WS)
Subsidiarity – A European Union Smokescreen To Justify Failure (Bilbo)
Greece’s Migration Policy Ministry to Spread Migrants in Small Towns (GR)
How the Greek Crisis is Profitable for the International Monetary Fund (GR)
Key South Africa Leopard Population Crashing (AFP)

 

 

“Consider 0% and near-zero interest rates to be the economic equivalent of a defibrillator: the most-extreme, last-resort attempt to “stimulate” the human body when it is near death. Our economies have had this economic defibrillator attached to them for more than eight years – without the slightest glimmer of life.”

The Great Western Economic Depression (Nielson)

Western economies are “recovering”. How do we know this? We are told this, over and over and over again by our governments. Then this assertion is repeated thousands of times more by the dutiful parrots of the Corporate media. The problem is that in the real world there is not a shred of evidence to support this assertion. In the U.S.; ridiculous official lies were created claiming the creation of 15 million new jobs. In reality, there are three millionless Americans with jobs today than at the official end of the “recession”. These imaginary jobs are invented by assorted statistical frauds, with the primary deceit being so-called “seasonal adjustments”. To be legitimate, all seasonal adjustments must to net to zero at the end of each year. Instead, in the U.S.A., the biggest job creator in the nation every year is the calendar.

Beyond the grandiose but absurd claims of new jobs in the U.S., there have been few signs of economic health across the Corrupt West. Despite this, these traitorous regimes continue the pretense that their horrific mismanagement of our economies is making things better rather than worse. There are numerous subtle means of demonstrating that Western economies have never been in more calamitous ill health than they are today. Fortunately, there are also two very large and important indicators which provide absolute proof that all of the economies of the Corrupt West are in a Greater Depression: interest rates and energy demand. Regular readers have often seen the observation in these commentaries that interest rates across the West have never been this low for this long in the entire history of these nations – not even close. Why not? Two reasons:

1) Interest rates this low have always been perceived (by our governments and all legitimate economic commentators) as being so reckless that any short-term benefit from such rates would have been more than offset by long-term harm.

2) The reason why our governments have always deemed interest rates this low to be reckless is that in remotely healthy economies such rates would cause these economies to “over-heat” so rapidly and extremely that they would reach unsustainable levels of production and demand.

Are our economies over-heating? No. Nothing could be further from the truth. We see nothing but over-capacity all around us: one hundred million permanently unemployed people across the West, relentless business closures, declining real wages, and near-empty shopping malls (in “consumer economies”). Interest rates this low are supposed to cause such rapid business expansion that the economy suffers from a labour shortage. Why are there a hundred million people unemployed across the West instead of labour shortages? Regular readers have seen this question answered in the past in the form of a metaphor.

Consider 0% and near-zero interest rates to be the economic equivalent of a defibrillator: the most-extreme, last-resort attempt to “stimulate” the human body when it is near death. Our economies have had this economic defibrillator attached to them for more than eight years – without the slightest glimmer of life. What would happen to a human body if it was defibrillated continuously for more than eight years? Charred meat. This is what Western economies have become: charred meat.

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Bit bland, because BBC. But useful to note that inequality collapses civilizations.

How Western Civilisation Could Collapse (BBC)

While it’s impossible to predict the future with certainty, mathematics, science and history can provide hints about the prospects of Western societies for long-term continuation. Safa Motesharrei, a systems scientist at the University of Maryland, uses computer models to gain a deeper understanding of the mechanisms that can lead to local or global sustainability or collapse. According to findings that Motesharrei and his colleagues published in 2014, there are two factors that matter: ecological strain and economic stratification. The ecological category is the more widely understood and recognised path to potential doom, especially in terms of depletion of natural resources such as groundwater, soil, fisheries and forests – all of which could be worsened by climate change.

That economic stratification may lead to collapse on its own, on the other hand, came as more of a surprise to Motesharrei and his colleagues. Under this scenario, elites push society toward instability and eventual collapse by hoarding huge quantities of wealth and resources, and leaving little or none for commoners who vastly outnumber them yet support them with labour. Eventually, the working population crashes because the portion of wealth allocated to them is not enough, followed by collapse of the elites due to the absence of labour. The inequalities we see today both within and between countries already point to such disparities.

For example, the top 10% of global income earners are responsible for almost as much total greenhouse gas emissions as the bottom 90% combined. Similarly, about half the world’s population lives on less than $3 per day. For both scenarios, the models define a carrying capacity – a total population level that a given environment’s resources can sustain over the long term. If the carrying capacity is overshot by too much, collapse becomes inevitable. That fate is avoidable, however. “If we make rational choices to reduce factors such as inequality, explosive population growth, the rate at which we deplete natural resources and the rate of pollution – all perfectly doable things – then we can avoid collapse and stabilise onto a sustainable trajectory,” Motesharrei said. “But we cannot wait forever to make those decisions.”

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Seeing the world through beer goggles.

Why the Federal Reserve Is Bad for America (DDMB)

Commercial real estate and bonds are more overvalued than at any time in history and stocks are trading at their priciest level save one period, the late 1990s before the dotcom implosion. The beer goggles, it would seem, have blinded investors to the bubble wrap that’s enveloped their portfolios. There are a few brave souls at the Fed who have raised a red flag. On March 22nd, Boston Fed President Eric Rosengren warned, “…we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn.”

Wiser words, especially given so few who recall that it was not the decline in oil prices that made the late 1980s such a painful period for the economy, but rather the crash in commercial real estate the energy crunch catalyzed. Underlying the multiple overheating markets is a persistent underappreciation of financial instability among Fed policymakers. The institution, overladen as it is with PhD economists, has yet to revisit the models that drive its setting of interest rate policy. Had the Fed’s inflation metrics taken into account runaway stock prices in the late 1990s and skyrocketing home prices in the early 2000s, it’s likely they would have intervened to tighten financial conditions much sooner than they did. Revisiting the wisdom of former Fed chair McChesney Martin is useful:

The danger with these econometricians is they don’t know their own limitations, and they have a far greater sense of confidence in their analyses than I have found to be warranted. Such people are not dangerous to me because I understand their limitations.

They are, however, dangerous to people like you and the politicians because you don’t know their limitations, and you are impressed and confused by the elaborate models and mathematics. The flaws in these analyses are almost always embedded in the assumptions on which they are based. And that is where broader wisdom is required, a wisdom that these mathematicians generally do not have.

You always want these technical experts on tap in positions like this, but never on top. The hope is that President Donald Trump heeds McChesney Martin’s 1970s-era wisdom, that he respects the wishes of those who originally envisioned the Fed as an appreciably more intellectually diverse entity. After all, the original 1913 Federal Reserve Act requires the president to appoint leaders across a diversity of industries.

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How is it possible that these people completely miss out on the reason why? Which is: they have no money to spend. They’re not stingy, or skeptical, they’re simply poor.

Trump’s New Problem: Americans Aren’t Shopping (CNN)

President Trump keeps pushing “Buy American.” He’s planning to tout it again at a stop in Wisconsin on Tuesday. But the alarming reality is Americans aren’t spending much money on anything right now, regardless of where it’s made. Retail sales declined in February and March from the prior month, according the Commerce Department. Shoppers haven’t been this stingy since early 2015, and it’s likely to hurt the economy. The U.S. is on track for very sluggish 0.5% growth in the first three months this year, according to the latest estimates from Macroeconomic Advisers and the Atlanta Federal Reserve. That falls massively short of the 4% growth that Trump has promised. Trump loves to plug how Americans’ confidence in the economy has skyrocketed since he won the election. He’s right.

Consumers, businesses (big and small) and investors are all feeling a lot more optimistic, according to various surveys. But all that enthusiasm isn’t translating into more shopping, which drives the U.S. economy. About 70% of the American economy comes from people buying stuff. Kate Warne, a long-time investment strategist at Edward Jones, calls this the era of “skeptical optimism.” “People are more optimistic, but they’re skeptically optimistic,” Warne told CNNMoney. “I don’t think they are confident yet that things will change as much as they would like them too.” [..] Another twist is that Republicans are a lot more optimistic than Democrats. [..] Overall, the University of Michigan index of consumer confidence has jumped from 87 in October to 98 today. But that headline figure masks a wild division.

Democrats believe “a deep recession” is coming under Trump (their confidence index is a mere 55), while Republicans expected a “new era of robust economic growth” (their index level is a sky-high 122). Independents are in between, as you might expect. If half the country thinks recession is near, that might explain why retail sales are slowing, or even showing some signs of decline.

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Good observation. But a good chance for May’s opponents.

British PM Wants Election Now, Before Cost of Brexit Becomes Clear (ICept)

Prime Minister Theresa May, who was actually against Brexit before she was for it, made another dramatic U-turn on Tuesday, declaring that Britain needs to elect a new Parliament in June, three years ahead of schedule, despite her clear promise not to call an election when she campaigned to succeed David Cameron last year. Her decision to subject Britons to a third national election campaign in just over two years — after the 2015 general election and the referendum on exiting the European Union ten months ago — was met with something less than enthusiasm by many voters. In her address to the nation, May claimed that a fresh election was necessary to keep opposition parties from obstructing her Conservative government during negotiations over Britain’s withdrawal from the European Union.

That argument rang hollow, however, given that the opposition Labour Party had just voted for the government’s bill to begin the process of leaving the E.U. and is not campaigning to overturn the results of last year’s referendum. To most political observers, it was clear that May’s decision was driven by something else: a desire to capitalize on the unprecedented weakness of the Labour Party, which is divided over Brexit, and its own leader, Jeremy Corbyn, and has trailed the Conservatives by up to 21 points in recent polls. As the writer Robert Harris and the broadcaster James O’Brien suggested, it might also be in May’s own self-interest, and that of her party, to ask the nation for a five-year term now, before the costs of Brexit become apparent. Although even many die-hard Labour supporters seemed resigned to defeat, some on the left welcomed the chance to vote against what they see as the potentially disastrous policy of a complete break with Europe.

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What is this, Brazil?

20 UK Tory MPs Still Under Investigation For Election Fraud (Can.)

Theresa May has announced a snap election on 8 June 2017. But as the country prepares for another election campaign, it’s important to remember that MPs in her party are being investigated for election fraud for the 2015 general election. And given the mainstream media’s reluctance to report the issue, we need to ensure it is kept firmly on the agenda. 12 police forces have submitted files to the Crown Prosecution Service (CPS) over allegations that up to 20 MPs and/or their agents broke election spending limits in the 2015 election. The CPS is deciding whether charges should be brought. And a decision is expected soon – and is likely to come during the election campaign. The allegations centre around the ‘battle bus’ campaign, and associated expenses such as hotel rooms.

Many argue that the campaign promoted prospective local MPs in key seats. Under election law, any expenditure which promotes a local candidate should be covered locally. But the ‘battle bus’ and associated costs were declared nationally. Each constituency has a fixed amount of money it can spend locally. And including the ‘battle bus’ expenditure would have meant many candidates overspent. Additionally, the Election Commission has fined the Conservatives £70,000 for multiple breaches in connection to election spending during the 2015 campaign. But it isn’t just the ‘battle bus’ campaigns where the Conservatives have been accused of fraud. As The Canary previously reported, there are questions over how the party used social media and, particularly, Facebook, to target voters.

A report by the London School of Economics has also warned [pdf] that Facebook targeting opens the door to electoral fraud: “The ability to target specific people within a particular geographic area gives parties the opportunity to focus their attention on marginal voters within marginal constituencies. This means, in practice, that parties can direct significant effort – and therefore spending – at a small number of crucial seats. Yet, though the social media spending may be targeted directly at those constituencies, and at particular voters within those constituencies, the spending can currently be defined as national, for which limits are set far higher than for constituency spending.”

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“..the property and construction industries, which contribute about 25 to 30% of China’s economic output..”

China’s $8.5 Trillion Shadow Bank Industry Is Back in Full Swing (BBG)

China’s shadow banking is back in full swing, an unintended side effect of the government’s campaign against financial leverage, which has curbed traditional lending and squeezed bond financing. Data from the central bank Friday showed that off-balance sheet lending surged 754 billion yuan ($109 billion) in March, taking the first quarter’s total increase to a record 2.05 trillion yuan. Efforts by the People’s Bank of China to curb fresh lending may have prompted borrowers, especially real estate developers, to resort to alternative forms of financing, said Xu Gao at Everbright Securities. Since late last year, the PBOC and regulators have taken steps to rein in risks to China’s financial system, including raising short-term interest rates, clamping down on leverage in the bond market, and curbing funding for property speculation.

The measures have sent debt-reliant borrowers scurrying to shadow financing, an industry Moody’s Investors Service estimates is worth about $8.5 trillion, and another area where regulators are trying to reduce risk. “You must tread a fine line,” said Everbright’s Xu. “Choking the bond market to death doesn’t mean the financing needs will be curbed as well. Instead, it will drive funding to areas that are more unreachable for the regulators. At the end of the day, risks may be declining in the bond market, but in the overall financial system, they would be rising.” The PBOC in January ordered the nation’s lenders to strictly control new loans in the first quarter of the year, putting a particular emphasis on mortgage lending to contain runaway home prices.

The move saw banks extending 4.22 trillion yuan of new loans in the first quarter, 8.5% less than the same period in 2016. It was the first year-on-year decline since 2011. The government is trying to contain the possibility of a shock emanating from the property and construction industries, which contribute about 25 to 30% of China’s economic output, Moody’s estimates. The increasing role of shadow banks as providers of finance is among characteristics that have raised the financial system’s vulnerability to a property-related shock, Moody’s said in a March report. In a move to curb shadow banking, financial regulators are working together to draft sweeping new rules for asset-management products, people familiar with the matter said in February.

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Cracking down on what is 25-30% of your economy?!

So China’s Authorities Crack Down on Housing Speculation? (WS)

Dozens of cities have imposed ever tougher buying restrictions, more stringent down-payment requirements especially for second homes, stricter resale limits, etc. etc., and they’ve redoubled their efforts since mid-March when it became apparent that the prior redoubled efforts had not produced results, as people figured out how to get around them. But China depends heavily on property development and property speculation for its economic growth, and no one really wants to bring it down: The National Bureau of Statistics (NBS) reported on Monday that first-quarter growth in property investment – residential, commercial, and office spaces combined – soared 9.1%. This red-hot property sector, and the 40 other sectors that are directly affected by it, drove China’s official GDP growth in Q1 to 6.9%.

As always, analysts keep saying that it would take a few more months for the restrictions to take effect and start cooling the market. That line was once again repeated on Monday, officially: “Because the latest round of cooling measures came out after March 17, their impact on the entire economy including home prices may show in April or later,” Mao Shengyong, a spokesman for the NBS said at a briefing, according to Reuters. Houses are for habitation, not for speculative investment, he said. That would be a novel concept in these crazy times. But who really wants to cool the market, when state-owned developers and state-owned banks are firing it up? Yet, everyone sees the risks. Reuters: “Most analysts agree an overheating property market poses the single biggest risk to China’s economic growth, with increasingly tough government measures to cool soaring prices raising the risk of a nasty crash.”

But the cooling off is not happening yet. New construction measured in floor space soared 11.6% in the first quarter, year-over-year, the NBS reported, and sales jumped 19.5%, though that growth rate was down a notch from the year 2016, when sales at soared 22.5%, the highest in seven years, as the boom in first-tier cities was spilling into second- and third-tier cities. With state-owned developers, funded by state-owned banks, firing up much of the show, and with speculators, who assume the government has their back, running wild in a gushing celebration of ever-soaring prices and huge automatic profits, there’s little chance that this scheme that has already transcended irrational exuberance will simply “cool” to a level of “stability,” and plateau somewhere soon, as it is hoped. Phenomenal bubbles like this don’t go quietly.

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“The Oxford Dictionary defines subsidiarity as “(in politics) the principle that a central authority should have a subsidiary function, performing only those tasks which cannot be performed at a more local level”

Subsidiarity – A European Union Smokescreen To Justify Failure (Bilbo)

One of the various smokescreens that were erected by the European Commission and the bevy of economists that it either paid or were ideologically aligned to justify the design of the monetary union around the time of the Maastricht process was the concept of subsidiarity. In 1993, the Centre for Economic Policy Research (a European-based research confederation) published its Annual Report – Making Sense of Subsidiarity: How Much Centralization for Europe? – which attempted to justify (ex post) the decisions imported from the 1989 Delors Report into the Maastricht Treaty that eschewed the creation of a federal fiscal capacity.

It was one of many reports at the time by pro-Maastricht economists that influenced the political process and pushed the European nations on their inevitable journey to the edge of the ‘plank’ – teetering on the edge of destruction and being saved only because the European Central Bank has violated the spirit of the restrictions that a misapplication of the subsidiarity principle had created. It is interesting to reflect on these earlier reports. We find that the important issues they ignored remain the central issues today and predicate against the monetary union ever being a success. One of the authors of the 1993 Report, Jean-Pierre Danthine has recently reflected on the work some 25 years after its publication.

In his Op Ed (April 12, 2017) – Subsidiarity: The forgotten concept at the core of Europe’s existential crisis – he argues that “the disenchantment with Europe can arguably be traced to the failed application of the subsidiarity principle that was enshrined in the Maastricht Treaty.” He recognises that: “Europe’s deep-seated institutional design problem is tied to the inevitable trade-off between efficiency-enhancing centralisation and democracy-enhancing sovereignty.” Let’s go back to the Delors Report 1989, which I argue in my book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – misapplied the concept of subsidiarity. It is clear from the historical record that the Delors Committee mainly relied on the concept of subsidiarity to justify the absence of a European-level fiscal function in the plan it outlined for monetary union.

The term, subsidiarity, a long-standing concept in political theory (as far back to Aristotle), entered the European dialogue in 1989 as part of a new ‘Eurolanguage’ as the political leaders were intent on pushing through the economic and monetary union. The Oxford Dictionary defines subsidiarity as “(in politics) the principle that a central authority should have a subsidiary function, performing only those tasks which cannot be performed at a more local level”. The concept was popularised by the Roman Catholic Church in the 1931 encyclical, Quadragesimo Anno, which pronounced that: “It is a fundamental principle of social philosophy, fixed and unchangeable, that one should not withdraw from individuals and commit to the community what they can accomplish by their own enterprise and/or industry.”

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An ‘everybody gets rich’ scheme.

Greece’s Migration Policy Ministry to Spread Migrants in Small Towns (GR)

The Migration Policy Ministry is developing a plan to spread about 20,000 migrants in small towns and rural communities across Greece, offering economic incentives to locals. According to a Proto Thema report, the project has been implemented in the town of Livadia with relative success. Now the ministry is looking for similar communities (with populations of 10,000-15,000) that have economic problems. According to the plan, such communities can accommodate 500-1,500 migrants in rented homes, while migrants can buy food and services using coupons provided by the State and the UNHCR. As authorities expect that some communities will be hostile to Muslim migrants, the ministry aims at counter-balancing religious differences and possible frictions by offering strong financial incentives to boost the ailing local economies.

The project will be extended in towns of Epirus, Western Macedonia and North-Western Greece that have high unemployment rates, provided that they are not located close to international borders. The Migration Policy Ministry also plans to offer high wages to people who wish to work in the migrant hospitality infrastructure. According to the Proto Thema report, a project coordinator working in Livadia right now earns an annual salary of 24,933 euros and a housing program director earns 22,666, wages that are double of that of an average public sector employee. Similar wages are offered to people who wish to work with migrants. The report says that such wages and overall economic incentives aim at mitigating any reactions by locals. Characteristically, the report says, apartments of 60-90 square meters in Livadia are rented for around 400 euros, again, a price above an average rental.

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“Interest rates of 3.6% for a super senior risk free lender were almost three times as high as the more junior ESM loans..”

How the Greek Crisis is Profitable for the International Monetary Fund (GR)

The relationship between Greece and the International Monetary Fund has been, from the start, very contentious to say the least. There is no question that Greece needs to build the trust and confidence of taxpayers and the global capital markets. But, the IMF advice more often than not seems to be more political or ideological than practical. However, the IMF should not be used as a scapegoat for successive Greek governments disappointing performance in building trust and confidence. The EC, especially Germany, enlisted the IMF to act as a foil for any failed policies, arguably smart political insurance. As the political foil, the IMF was provided with a cash cow to milk: Greece. And, milk Greece it has.

Greece has paid almost €4 billion in fees and interest to the IMF since the start of the programme. Interest rates of 3.6% for a super senior risk free lender were almost three times as high as the more junior ESM loans. Greece payments are so important to the IMF that they were 118% of IMF’s operating profit. Since 2010, IMF personnel expense have increased 48% compared to a decline of 8% in the prior seven years. And, not to go unnoticed, the IMF newly refurbished headquarters is 31% over budget at $562 million. With 97% of IMF’s cost now essentially fixed, losing Greece, Portugal, and Ireland, would cause massive financial trauma at the IMF and may well render it insolvent. So, the obvious question is: does the IMF have an incentive to keep Greece in crisis to protect its own financial survival and continue to milk the Greek cow?

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How many will just glance over a story like this? In only a few years, species are pushed over a cliff.

Key South Africa Leopard Population Crashing (AFP)

The leopard population in a region of South Africa once thick with the big cats is crashing, and could be wiped out within a few years, scientists warned on Wednesday. Illegal killing of leopards in the Soutpansberg Mountains has reduced their numbers by two-thirds in the last decade, the researchers reported in the Royal Society Open Science journal. “If things don’t change, we predict leopards will essentially disappear from the area by about 2020,” lead author Samual Williams, a conservation biologist at Durham University in England, told AFP. “This is especially alarming given that, in 2008, this area had one of the highest leopard densities in Africa.” The number of leopards in the wild worldwide is not known, but is diminishing elsewhere as well. The “best estimate” for all of South Africa, said Williams, is about 4,500.

What is certain, however, is that the regions these predators roam has shrunk drastically over the last two centuries. The historic range of Panthera pardus, which includes more than half-a-dozen sub-species, covered large swathes of Africa and Asia, and extended well into the Arabian Peninsula. Leopards once roamed the forests of Sri Lanka and Java unchallenged. Today, they occupy barely a quarter of this territory, with some sub-species teetering on the brink of extinction, trapped in 1 or 2% of their original habitat. Leopards were classified last year as “vulnerable” to extinction on the International Union for the Conservation of Nature’s Red List of endangered species, which tracks the survival status of animals and plants.

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Apr 052017
 
 April 5, 2017  Posted by at 8:43 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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DPC Times Square seen from Broadway 1908

 


JPMorgan CEO Jamie Dimon Warns ‘Something Is Wrong’ With the US (BBG)
US Housing Boom Is Anything But as Ownership Loses Appeal (A. Gary Shilling)
Young Americans Are Killing Marriage (BBG)
The Comex Is The World’s Most Corrupted Market (IRD)
The Real Russiagate (Paul Craig Roberts – Michael Hudson)
Fed Leak Probe Dooms Lacker But Leaves Key Question: Who Leaked? (BBG)
I Tried To Ask Yellen About The Fed Leak (Da Costa)
Australia’s Household Debt Crisis Is Worse Than Ever (Abc.au)
Australian Economy At Risk As Debt Bomb Grows (Aus.)
Chinese Brokers Are Muscling in on Asia’s Junk Bond Underwriters
Zombie Nation: In Japan, Zero Public Companies Went Bust in 2016 (BBG)
The World’s Best Economist (PCR)
New Zealand Post To Deliver KFC (AFP)

 

 

Actually, a lot is wrong. Including Dimon talking his book and people thinking he’s doing something else, like trying to help anyone other than himself.

JPMorgan CEO Jamie Dimon Warns ‘Something Is Wrong’ With the US (BBG)

JPMorgan CEO Jamie Dimon has two big pronouncements as the Trump administration starts reshaping the government: “The United States of America is truly an exceptional country,” and “it is clear that something is wrong.” Dimon, leader of world’s most valuable bank and a counselor to the new president, used his 45-page annual letter to shareholders on Tuesday to list ways America is stronger than ever – before jumping into a much longer list of self-inflicted problems that he said was “upsetting” to write. Here’s the start: Since the turn of the century, the U.S. has dumped trillions of dollars into wars, piled huge debt onto students, forced legions of foreigners to leave after getting advanced degrees, driven millions of Americans out of the workplace with felonies for sometimes minor offenses and hobbled the housing market with hastily crafted layers of rules.

Dimon, who sits on Donald Trump’s business forum aimed at boosting job growth, is renowned for his optimism and has been voicing support this year for parts of the president’s business agenda. In February, Dimon predicted the U.S. would have a bright economic future if the new administration carries out plans to overhaul taxes, rein in rules and boost infrastructure investment. In an interview last month, he credited Trump with boosting consumer and business confidence in growth, and reawakening “animal spirits.” But on Tuesday, reasons for concern kept coming. Labor market participation is low, Dimon wrote. Inner-city schools are failing poor kids. High schools and vocational schools aren’t providing skills to get decent jobs. Infrastructure planning and spending is so anemic that the U.S. hasn’t built a major airport in more than 20 years.

Corporate taxes are so onerous it’s driving capital and brains overseas. Regulation is excessive. “It is understandable why so many are angry at the leaders of America’s institutions, including businesses, schools and governments,” Dimon, 61, summarized. “This can understandably lead to disenchantment with trade, globalization and even our free enterprise system, which for so many people seems not to have worked.”

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I like Shilling. But this reeks of nonsense. It’s not about appeal, it’s about getting poorer.

US Housing Boom Is Anything But as Ownership Loses Appeal (A. Gary Shilling)

By many measures, the U.S. housing market seems in very good shape. The National Association of Realtors in Washington said last week that contracts to buy existing homes jumped 5.5% in February, the biggest increase since July 2010. Fannie Mae’s National Housing Survey showed that Americans expect home prices to rise a robust 3.2% over the next year as its sentiment index reached a record high. So, are boom times ahead for housing? Not quite. To understand why, it helps to revisit recent history. The housing bubble of the early 2000s was driven by subprime mortgages and other loose-lending practices. The subsequent collapse left many potential new homeowners with inadequate credit scores, not enough money for a down payment and insufficient job security to buy a house.

They also saw, for the first time since the 1930s, that not only house prices fall nationwide, but nosedive by a third. Homeownership plunged and those who did form households moved into rental apartments instead of single-family houses. That drove rental vacancy rates down and starts of multi-family housing – about two-thirds of which are rentals – up to 396,000 units, more than the earlier norm of 300,000 starts at annual rates. But single-family housing starts – even with the rebound to an 872,000 annual rate from the bottom of about 400,000 – are still far below the pre-housing bubble average of more than 1 million. Despite the recovery in house prices, rents have risen at a much faster pace. As a share of median income, rents have jumped while mortgage costs have fallen. The latest data from the National Association of Realtors show its Housing Affordability Index was up 52% in the fourth quarter of 2016 from the early 2007 low.

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Yesterday we saw IMF head Lagarde saying the loss of productivity can be solved with education. But the younger have had a boatload more education than their parents.

Young Americans Are Killing Marriage (BBG)

There’s no shortage of theories as to how and why today’s young people differ from their parents. As marketing consultants never cease to point out, baby boomers and millennials appear to have starkly different attitudes about pretty much everything, from money and sports to breakfast and lunch. New research tries to ground those observations in solid data. The National Center for Family and Marriage Research at Bowling Green State University set out to compare 25- to 34-year-olds in 1980—baby boomers—with the same age group today. Researcher Lydia Anderson compared U.S. Census data from 1980 with the most recent American Community Survey data in 2015. The results reveal some stark differences in how young Americans are living today, compared with three or four decades ago.

In 1980, two-thirds of 25- to 34-year-olds were already married. One in eight had already been married and divorced. In 2015, just two in five millennials were married, and only 7% had been divorced. Baby boomers’ eagerness to get married meant they were far more likely than today’s young people to live on their own. Anderson looked at the share of each generation living independently, either as heads of their own household or in married couples. The chance that Americans in their late twenties and early thirties live with parents or grandparents has more than doubled. In 1980, just 9% of 25- to 34-year-olds were doing so. In 2015, 22% lived with parents or grandparents. Millennials are also less likely than boomers to be living with kids—and to be homeowners.

It’s easy to look at these figures and say millennials are lagging behind their boomer parents. However, even as young Americans delay marriage, kids, and homeownership, they’re ahead of their parents by one measure: education.

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Dazzling. “Historically, when the amount of paper exceeds the amount of underlying commodity that is available for delivery by more than 20-30%, the CFTC intervenes by investigating the possibility of market manipulation. But never with gold and silver.”

The Comex Is The World’s Most Corrupted Market (IRD)

If you were to poll the public about comparing the investment returns between gold, silver and stocks during the first quarter of 2017, it’s highly probable that the majority of the populace would respond that the S&P 500 outperformed the precious metals. That’s a result of the mainstream media’s unwillingness to report on the precious metals market other than to disparage it as an investment. In reality, among silver, gold, the Nasdaq 100 and the S&P 500, the S&P 500 had the lowest ROR in Q1. Silver led the pack at 14%, followed by tech-heavy Nasdaq 100 at 11.1%, gold at 8.6% and the S&P 500 at 4.8%. Put that in your pipe and smoke it, Cramer. Imagine the performance gold and silver would have turned in if the Comex was prevented from creating paper gold and silver in amounts that exceeded the quantity of gold and silver sitting in the Comex vaults.

As an example, as of Friday the Comex is reporting 949k ozs of gold in the registered accounts of the Comex vaults and 9 million ozs of total gold. Yet, the open interest in paper gold contracts as of Friday totaled 41.7 million ozs. This is 44x more paper gold than the amount of physical that has been designated – “registered” – as available for delivery. It’s 4.6x more than the total amount of gold sitting on Comex vaults. With silver the situation is even more extreme. The Comex is reporting 29.5 million ozs of silver as registered and 190.2 million total ozs. Yet, the open interest in paper silver is a staggering 1.08 billion ozs. 1.08 billion ozs of silver is more silver than the world mines in a year. The paper silver open interest is 5x greater than the total amount of silver held in Comex vaults; it’s an astonishing 37x more than the amount of silver that is available to be delivered.

This degree of imbalance between the open interest in CME futures contracts in relation to the amount of the underlying physical commodity represented by those contracts never occurs in any other CME commodity – ever. Historically, when the amount of paper exceeds the amount of underlying commodity that is available for delivery by more than 20-30%, the CFTC intervenes by investigating the possibility of market manipulation. But never with gold and silver. The Comex is perhaps the most corrupted securities market in history. It is emblematic of the fraud and corruption that has engulfed the entire U.S. financial and political system. The U.S. Government has now issued $20 trillion in Treasury debt for which it has no intention of every redeeming. It’s issued over $100 trillion in unfunded liabilities (entitlements, pensions, etc) for which default is not a matter of “if” but of “when.”

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“..We are now in a position to see the real story behind “Russiagate.” It’s not about Russia, except incidentally…”

The Real Russiagate (Paul Craig Roberts – Michael Hudson)

Wall Street Journal editorialist Kimberley A. Strassel poses the real question: Why hasn’t the Trump administration had the Secret Service arrest Comey, Brennan, Schiff, the DNC and Hillary for trying to overthrow the President of the United States? “Mr. Nunes has said he has seen proof that the Obama White House surveilled the incoming administration—on subjects that had nothing to do with Russia—and that it further unmasked (identified by name) transition officials. This goes far beyond a mere scandal. It’s a potential crime.” What we are watching is turning out to be traces of a plot against a government elected by the American people. Attempts by House national security committee Chairman Devin Nunes have been countered with demands by his potential victims to recuse himself so as to stop his exposé of how “Team Obama was spying broadly on the incoming administration.”

[..] We are now in a position to see the real story behind “Russiagate.” It’s not about Russia, except incidentally. The Obama regime abused the government’s surveillance powers and spied on Donald Trump and other Republicans in order to build a dossier for the DNC to leak to the press in an attempt to slander or compromise Trump and throw the election to Hillary. They’ve been caught, but we can now see that they took steps to protect themselves against this. They prepared a cover story. They pretend they were not spying on Trump, but on Russians – which only by fortuitous happenchance turned up incriminating smoke against Trump. This cover story was buttressed by the fake news story prepared by former MI6 freelancer Christopher Steele.

As Whitney reports, Steele “was hired as an opposition researcher last June to dig up derogatory information on Donald Trump.” Unvetted and unverified information paid for by so-called informants “somehow” found its way into U.S. intelligence agency reports. These reports were then leaked to Democrat-friendly media. This is where the crime lies. Obama regime and DNC were using these agencies for domestic political use, KGB style. The Obama/Clinton cover story is now falling to pieces. That explains the desperation in the attack by Adam Schiff, the ranking Democrat on the House Intelligence Committee, on Committee Chairman Devin Nunes to stop the exposure. Russiagate is not a Trump/Putin collusion but a domestic spy job carried out by Democrats. Law requires Trump to arrest those responsible and to put them on trial for treason and conspiracy to overthrow the government of the United States.

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They end the investigation without answering the question that started it?!

Fed Leak Probe Dooms Lacker But Leaves Key Question: Who Leaked? (BBG)

The Federal Reserve’s inspector general says it will be ending its investigation into the 2012 release of confidential information. Even after the scandal cut short the career of one top Fed official, the answer to the most important question remains a mystery. Who did the initial leaking? Richmond Fed President Jeffrey Lacker resigned abruptly Tuesday as he announced his role in the unauthorized disclosure of information to Medley Global Advisors about policy options that the central bank was considering in 2012. His explanation suggested he was confirming facts the Medley analyst already knew. It was a sudden career stop for a Fed president who was frequently in opposition to the Fed board consensus on interest-rate policy, and the news will likely revive questions in Congress about the value of the central bank’s discretion and transparency.

“The story is not over today,” said Andrew Levin, a professor at Dartmouth College who was previously a special adviser at the Fed board and helped then-Vice Chair Janet Yellen develop the Fed’s policy on external communication. “There are a number of distinct details that suggest that Lacker wasn’t the main source of information.” Aaron Klein, a fellow at the Brookings Institution and the former chief economist on the Senate Banking Committee, said the Lacker statement “is not a full and complete accounting of what happened.” “The Fed, internally and its inspector general, would be wise to fully explore every aspect of what happened here because today’s actions and statements by Lacker raise more questions than they answer,” he said.

[..] Lacker’s carefully worded statement, distributed by his attorney, said he “crossed the line to confirming information that should have remained confidential.” The investigation into Lacker has concluded and no charges will be brought against him, the attorney said. He also said the Medley analyst “introduced into the conversation an important non-public detail” about one of the policy options under consideration. Lacker says he didn’t decline to comment “and the interview continued.” His statement doesn’t suggest that he tipped the Medley analyst initially. Indeed, the Fed board’s own investigation said “a few Federal Reserve personnel” had contact with the Medley analyst.

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Lacker the only leaker? Doesn’t quite look that way.

I Tried To Ask Yellen About The Fed Leak (Da Costa)

I once asked Janet Yellen a rather straightforward question that would echo for much longer than I expected. It was March 2015, and the Federal Reserve was under pressure from Congress to reveal details about an internal investigation into how key details of its interest rate policy deliberations had made their way into a report by a private sector firm. I was a reporter at the Wall Street Journal, and I asked the following at a press conference:

Let’s make something clear: Like any journalist, I love a good leak. But this was not your typical leak of important information to a journalist who then reported it to the public. This was the sharing of private, market-sensitive details with a private party – Medley Global Advisors – which then shared that information with its clients. The leak, it should be noted, happened all the way back in 2012 but it was still being discussed in 2015 because – despite the Fed’s internal investigation – nobody seemed to have gotten to the bottom of what had happened. And back in 2012, any read on what the Federal Reserve might do to suppress interest rates as the US economy continued to crawl out of the Great Recession, could lead to huge profits for the traders who bet on such things. These days, traders are thinking about the next rate hike.

Back then, interest rates were already at zero and the real insight gleaned from Medley’s report was how aggressively the Fed would work to keep them there by using its balance sheet. My question to Yellen had to do with basic public trust in the Fed. Why should the American people believe the central bank is working in its best interests if policymakers chat privately with movers and shakers on Wall Street? This was an alarming trend I had been reporting on since 2010, when I co-authored a report for Reuters entitled “Cozying up to big investors at Club Fed.” In it, my colleagues and I detailed other instances of market-moving information inappropriately being shared with investors, a trend we first observed when Fed officials speaking to bankers and hedge fund managers at conferences would suddenly go silent when a reporter walked by.

After the Yellen press conference, I took two weeks of paid leave for the birth of my daughter. When I returned, my editor at the paper told me I would no longer be attending Fed press conferences. No reason was given, and I left the job a few months later. Market bloggers speculated the Fed had “banned” me from the press conference. I have no reason to think that was the case because the central bank let me back in as soon as I changed news organizations. Fast-forward to April 4, 2017: Richmond Fed President Jeffrey Lacker resigns abruptly after admitting he was a source of the leak. As soon as I saw the news, the whole press conference incident flashed before my eyes. But Lacker’s admission that the Medley leak originated with him doesn’t entirely settle the matter. We know Yellen also met with Medley herself. Why? What did she say to them? Former Fed economist and Treasury official Seth Carpenter was also under scrutiny on the issue. What were the results of the Fed’s own investigation? And of Congress’?

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Meanwhile in the gutter….

Australia’s Household Debt Crisis Is Worse Than Ever (Abc.au)

Mr Russell told me there had been a big increase in debt-distressed Australians calling the [National Debt] helpline in recent months unable to pay their utilities bills. Naturally, he explained, rent and mortgage repayments take priority over the utilities bills because, in the order of survival priorities, you first need a roof over your head. Generally speaking, though, the National Debt helpline told me the rising cost of living is becoming crippling. Utilities bills, mortgage repayments and credit card debt, are all contributing to household financial stress. Last year over 150,000 calls were made to the National Debt Helpline. This year, monthly call volumes for the helpline are already 20% higher, compared to 2016. Based on current call volumes, the NDH predicts that there will be over 182,000 calls this year.

Martin North is the principal of financial research firm Digital Finance Analytics. He crunched the numbers and calculated that, in March, of the 3.1 million mortgaged households, around 22% were in “mild mortgage stress”. That’s up 1.5% on February, and is directly related to the even the smallest of interest rate increases by some of the big four banks. That means those households are managing to make their mortgage repayments, but only by cutting back on other expenditure, or putting more on credit cards, and generally hunkering down. Then there are those Australians under extreme levels of financial stress. Data from Digital Finance Analytics show 1% of households are in severe stress. That means they’re behind with their repayments, and are trying to dig their way out by refinancing, selling their property, or seeking help from services like the National Debt Helpline.

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Ha ha: “Our banks are resilient and they are soundly capitalised,” he said.”

Australian Economy At Risk As Debt Bomb Grows (Aus.)

The rampant debt-fuelled surge in the Sydney and Melbourne property markets will threaten the health of the national economy if it continues, Reserve Bank governor Philip Lowe has warned. However, Treasurer Scott Morrison has talked down drastic action on house prices after a “strong intervention” from Dr Lowe. The RBA is worried that housing debts are rising more than twice as fast as household incomes and that banks are lending to people who cannot afford to repay their debts. The concern has been that the longer the recent trends continued, the greater the risk to the future health of the Australian economy, Dr Lowe told a business dinner in Melbourne last night. “Stretched balance sheets make for more volatility when things turn down.” “For many people, the high debt levels and low wage growth are a sobering combination.”

The chairman of the government’s Financial System Inquiry, former Future Fund chairman David Murray, yesterday sounded a further alarm on the housing boom, saying a crisis on the scale of the 1890s great property collapse could not be ruled out. “What people should do is look at the 1890s, which was caused by a housing land boom,” he told The Australian. “To say it won’t happen and simply ignore it is wrong.” Half of the nation’s banks closed their doors following the 1890s crash. “Many people say a crisis has a low probability of occurrence, but the problem with that view is that whatever the probability, the severity can be very high if it occurs”, Mr Murray, who is also a former Commonwealth Bank chief executive, said. “It shouldn t be allowed to grow & it’s too big a risk to take.”

[..] House prices in Australia’s capital cities have risen 12.9% compared with this time last year, with a surge of 18.9% in Sydney and 15.9% in Melbourne, according to data released on Monday by property analytics firm CoreLogic. [..] Dr Lowe dismissed fears that the banks would be undermined by a housing downturn, saying the Council of Financial Regulators did not believe the boom was a threat to financial stability. “Our banks are resilient and they are soundly capitalised,” he said.

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In China, the shadow banks are taking over…

Chinese Brokers Are Muscling in on Asia’s Junk Bond Underwriters

China’s brokerages are out-muscling global investment banks to win more underwriting business in Asia’s junk bond market amid record offerings, as they increasingly help borrowers from the nation raise foreign currency debt. Haitong Securities topped the league table for high-yield notes denominated in dollars, euro and yen from companies in Asia excluding Japan in the first quarter, according to data compiled by Bloomberg. China Merchants Securities moved up four places to fifth. While HSBC rose three places to second, Standard Chartered and UBS slid to eighth and 11th from first and second in the first quarter of 2016. Junk bonds offer more lucrative fees than high-grade bonds, giving an extra boost to financial institutions that can expand in the business.

As Chinese firms have flocked to the offshore high-yield market, mainland banks and brokerage firms have grabbed market share away from international peers. Issuance of junk notes in dollars, euro and yen from Asia excluding Japan swelled to a record $14.6 billion in the first quarter, with nearly 70% from Chinese companies. “It’s increasingly competitive and Chinese banks are effectively buying market share with their balance sheet,” said Veronique Lafon-Vinais at the Hong Kong University of Science and Technology. Alexi Chan, global co-head of debt capital markets at HSBC, said that the significant rise in Asia high-yield bond sales reflected the “constructive market sentiment” and “positive outlook for China’s economy.”

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… and in Japan, the zombies take over.

Zombie Nation: In Japan, Zero Public Companies Went Bust in 2016 (BBG)

Corporate Japan achieved a rare feat in the fiscal year that ended last week. Not one of its almost 4,000 publicly-traded firms filed for bankruptcy protection. Yet that’s no reason to celebrate, according to analysts who see Japan’s easy credit conditions standing in the way of a much-needed, corporate restructuring to flush out failing companies and make room for new businesses. “It’s totally unhealthy,” says Martin Schulz, an economist at Fujitsu Research Institute in Tokyo. “Japan’s business cycle isn’t working. When no old companies go out of business, no new ones can come in because there isn’t room. The old companies will always compete on price, simply because they can.”

The last time not a single Japanese corporate titan went belly up was a four-year stretch 26 years ago, according to a report published this week by research firm Teikoku Databank. Back then, though, an overheated Japanese economy averaged 5.5% growth per year and then hit a wall when stock and real estate asset bubbles burst. This time, ultra-low interest rates and government loan guarantees left over from the global financial crisis are keeping companies afloat. Prime Minister Shinzo Abe touts fewer business failures as an economic success, but critics say too-easy credit is keeping “zombie” firms alive, worsening labor shortages, and excess competition is putting downward pressure on prices.

The Austrian economist Joseph Schumpeter in 1942 coined the term “creative destruction” to describe the messy way that capitalism reinvents itself. Japan may be stuck in a rut because it refuses to take the economic pain needed for a revival. Yet it’s hardly the only country keeping companies on life support. A January study by the OECD blamed zombies – defined as firms with persistent difficulties paying interest on debt – for slowing productivity, and thus causing sluggish growth, in the developed world. In South Korea, where the shipping industry has been hit by slumping global trade, state-run banks last month agreed to lend Daewoo Shipbuilding $2.6 billion and swap debt for equity to prevent a default. It was the second time in less than two years that the troubled shipbuilder was bailed out.

In China, roughly 10% of the country’s publicly-traded companies are “among the walking dead,” being kept alive by continuous support from government and banks, according to research by He Fan, an economist at Beijing’s Renmin University. Banks keep lending, often because they don’t want to own up to their bad debts. Meanwhile, the government fears the unemployment that would result if so many troubled firms were left to wither away.

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“..the owners of property along the subway line experience a rise in property values. They owe their increased wealth and their increased incomes from the rental values of their properties to the expenditure of taxpayer dollars. If these gains were taxed away, the subway line could have been financed without taxpayers’ money.”

The World’s Best Economist (PCR)

If you want to learn real economics instead of neoliberal junk economics, read Michael Hudson’s books. What you will learn is that neoliberal economics is an apology for the rentier class and the large banks that have succeeded in financializing the economy, shifting consumer spending power from the purchase of goods and services that drive the real economy to the payment of interest and fees to banks. His latest book is J is for Junk Economics. It is written in the form of a dictionary, but the definitions give you the precise meaning of economic terms, the history of economic concepts, and describe the transformation of economics from classical economics, where the emphasis was on taxing incomes that are not the product of the production of goods and services, to neoliberal economics, which rests on the taxation of labor and production.

This is an important difference that is not easy to understand. Classical economists defined “unearned income” as “economic rent.” This is not the rent that you pay for your apartment. Economic rent is an income stream that has no counterpart in cost incurred by the receipient of the income stream. For example, when a public authority, say the city of Alexandria, Virginia, decides to connect Alexandria with Washington, D.C., and with itself, with a subway paid for with public money, the owners of property along the subway line experience a rise in property values. They owe their increased wealth and their increased incomes from the rental values of their properties to the expenditure of taxpayer dollars. If these gains were taxed away, the subway line could have been financed without taxpayers’ money.

It is these gains in value produced by the subway, or by a taxpayer-financed road across property, or by having beachfront property instead of property off the beach, or by having property on the sunny side of the street in a business area that are “economic rents.” Monopoly profits due to a unique positioning are also economic rents. Hudson adds to these rents the interest that governments pay to bondholders when governments can avoid the issuance of bonds by printing money instead of bonds. When governments allow private banks to create the money with which to purchase the government’s bonds, the governments create liabilities for taxpayers than are easily avoidable if, instead, government created the money themselves to finance their projects. The buildup of public debt is entirely unnecessary.

No less money is created by the banks that buy government bonds than would be created if the government printed money instead of bonds. The inability of neoliberal economics to differentiate income streams that are economic rents with no cost of production from produced output makes the National Income and Product Accounts, the main source of data on economic activity in the US, extremely misleading. The economy can be said to be growing because public debt-financed investment projects raise the rents along subway lines. “Free market” economists today are different from the classical free market economists. Classical economists, such as Adam Smith, understood a free market to be one in which taxation freed the economy from untaxed economic rents. In neoliberal economics, Hudson explains, “free market” means freedom for rent extraction free of government taxation and regulation. This is a huge difference.

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I got nothing. We’re doomed.

New Zealand Post To Deliver KFC (AFP)

New Zealand Post has announced its couriers will home-deliver KFC fast food, in a trial that could provide a recipe for success as letter volumes continue to dwindle. Under a pilot scheme that started this week in the North Island town of Tauranga, KFC customers can order online and have their food delivered by NZ Post drivers. KFC operator Restaurant Brands NZ said that while it knew how to produce food, it had no experience in logistics, making the postal service a natural fit. “NZ Post has an extensive delivery distribution network around New Zealand, and KFC is available in most towns nationwide,” chief executive Ian Letele said.

“With the support of NZ Post, we hope to service the home delivery needs of many more KFC customers throughout New Zealand.” New Zealand Post has struggled in the digital age as email and texts have replaced traditional “snail mail”. The state-owned service slashed 2,000 jobs, or 20% of its workforce in 2013, and two years later moved to three-day-a-week deliveries, down from six. It said in its last financial statement that the fall in letter deliveries meant it was losing up to NZ$30 million ($21 million) a year in revenue. However, it said parcel volumes were up due to rising online orders and NZ Post was concentrating on capturing more e-commerce business.

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Mar 292017
 
 March 29, 2017  Posted by at 9:06 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Dismantling clock outside Daily Telegraph building, Fleet Street, London, 1930

 


Jim Rogers Says Fed Has No Clue, Will ‘Ruin Us All’ (BBG)
Article 50: British PM May Signs Letter That Will Trigger Brexit (BBC)
Scottish Parliament Votes For Second Independence Referendum (G.)
Why Brexit Is Best for Britain: The Left-Wing Case (NYT)
ECB Needs Democratic Oversight If The Euro Is To Survive (TI)
12 People, Things That Ruined The EU (Pol.)
Le Pen Victory Five Times As Dangerous As Greek Meltdown – UBS (CNBC)
China Is Desperately Trying To Save A Too Big To Fail Dairy Company (Qz)
Huishan Dairy Turmoil Highlights China’s $8 Trillion Shadow Loan Risk (BBG)
Hong Kong Underground Banks Cash In On Flood Of Money Out Of China (BBG)
A World Without Retirement (G.)
Germany Questions Erdogan’s Turkey ‘Coup’ Narrative (BBC)
Central Europe’s Leaders Reject EU’s Relocation Of Refugees (AP)

 

 

Just so you know. Motorcycle Boy.

Jim Rogers Says Fed Has No Clue, Will ‘Ruin Us All’ (BBG)

Jim Rogers, chairman at Rogers Holdings, explains what the Federal Reserve did wrong in response to the financial crisis and how their mistakes spread to global central banks. Jane Foley, senior FX strategist at Rabobank, joins the conversation with Bloomberg’s Francine Lacqua on “Bloomberg Surveillance.”

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Nothing to fear but…

Article 50: British PM May Signs Letter That Will Trigger Brexit (BBC)

Theresa May has signed the letter that will formally begin the UK’s departure from the European Union. Giving official notice under Article 50 of the Lisbon Treaty, it will be delivered to European Council president Donald Tusk later. In a statement in the Commons, the prime minister will then tell MPs this marks “the moment for the country to come together”. It follows June’s referendum which resulted in a vote to leave the EU. Mrs May’s letter will be delivered at 12:30 BST on Wednesday by the British ambassador to the EU, Sir Tim Barrow. The prime minister, who will chair a cabinet meeting in the morning, will then make a statement to MPs confirming the countdown to the UK’s departure from the EU is under way.

She will promise to “represent every person in the whole United Kingdom” during the negotiations – including EU nationals, whose status after Brexit has yet to be settled. “It is my fierce determination to get the right deal for every single person in this country,” she will say. “For, as we face the opportunities ahead of us on this momentous journey, our shared values, interests and ambitions can – and must – bring us together.” Attempting to move on from the divisions of June’s referendum, Mrs May will add: “We are one great union of people and nations with a proud history and a bright future. “And, now that the decision has been made to leave the EU, it is time to come together.”


Guardian front page today. Got to wonder why they left off Greece.

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How many referendums will it take in the end?

Scottish Parliament Votes For Second Independence Referendum (G.)

Nicola Sturgeon has won a key Holyrood vote on her plans for a second independence referendum, triggering accusations from UK ministers that her demands are premature. Sturgeon won by a 10-vote majority after the Scottish Greens backed her proposals to formally request from the UK government the powers to stage a fresh independence vote at around the time Britain leaves the EU, in spring 2019. She is due to write to Theresa May later this week, asking for Westminster to hand Holyrood the temporary powers to stage the referendum under a section 30 order. She said she would avoid writing until the prime minister had invoked article 50 to trigger the Brexit process, which she is expected to do on Wednesday. “It is not my intention to do so confrontationally, instead I only seek sensible discussion,” Sturgeon told MSPs.

The vote, which split the Scottish parliament cleanly between pro- and anti-independence parties, deepened the dispute between the two governments over both the need for and the timing of the vote. David Mundell, the Scottish secretary, told the BBC the answer to Sturgeon’s request would be no. “We won’t be entering any negotiations at all until the Brexit process is complete,” he said. “Now is the time for the Scottish government to come together with the UK government, work together to get the best possible deal for the UK, and that means Scotland, as we leave the EU.” Mundell rejected Sturgeon’s claims that May had told her the terms of the UK’s departure from the EU and its new trade deal would be clear in about 18 months. Sturgeon said that timeframe matched her preference for a referendum just as the UK quits the EU in March 2019. He said it was too early to say how quickly a Brexit deal could be concluded or whether transitional arrangements were needed.

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“We don’t change our position according to elections..”

Why Brexit Is Best for Britain: The Left-Wing Case (NYT)

Ms. Watkins is a “Lexiteer,” as left-wing supporters of ‘Brexit’ like me are known. We were hardly a significant force among the 52% of Britons who voted to leave in the referendum of June 23. But we were an influence. A counterweight to the anti-immigrant fear mongering of the former leader of the right-wing U.K. Independence Party, Nigel Farage, Lexiteers argued a left-wing, democratic and internationalist case for Brexit. The position was expressed crisply by Perry Anderson, the former longtime editor of New Left Review: “The E.U. is now widely seen for what it has become: an oligarchic structure, riddled with corruption, built on a denial of any sort of popular sovereignty, enforcing a bitter economic regime of privilege for the few and duress for the many.”

Although Lexiteers have little patience for the national nihilism of “Davos Man,” the globalist elite, we are no xenophobes. We voted Leave because we believe it is essential to preserve the two things we value most: a democratic political system and a social-democratic society. We fear that the European Union’s authoritarian project of neoliberal integration is a breeding ground for the far right. By sealing off so much policy, including the imposition of long-term austerity measures and mass immigration, from the democratic process, the union has broken the contract between mainstream national politicians and their voters. This has opened the door to right-wing populists who claim to represent “the people,” already angry at austerity, against the immigrant.

It was the free-market economist Friedrich Hayek, the intellectual architect of neoliberalism, who called in 1939 for “interstate federalism” in Europe to prevent voters from using democracy to interfere with the operation of the free market. Simply put, as Jean-Claude Juncker, the president of the European Commission (the union’s executive body), did: “There can be no democratic choice against the European treaties.” The union’s structures and treaties are designed accordingly. The European Commission is appointed, not elected, and it is proudly unaccountable to any electorate. “We don’t change our position according to elections” was how the commission’s vice president Jyrki Katainen greeted the victory of the anti-austerity party Syriza in Greece in 2015.

The European Parliament is not a real parliament. It is not a legislature; its deputies neither offer manifestoes nor carry out the ideas they propose to voters. Elections in improbably large constituencies, with pitifully low turnouts, change nothing. As a Parliament staff member said at the European Research Seminar at the London School of Economics, “The only people who listen to M.E.P.s are the interpreters,” referring to the members of the Parliament. The European Council, an intergovernmental body where decisive legislative power actually lies, especially for Chancellor Angela Merkel of Germany, comprises member countries’ heads of state, who generally meet just four times a year. They are not directly elected by the inhabitants of the nations whose fate they decide. As for the union principle of “subsidiarity,” a supposed preference for decentralized governance, it is ignored in all practical matters.


Oh, those days of innocence …

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Fine, but who’s going to do it? The ECB is independent?!

ECB Needs Democratic Oversight If The Euro Is To Survive (TI)

The ECB urgently needs to increase democratic oversight and accountability if the euro is to survive the next crisis, according to a new report on the Bank’s governance by Transparency International EU entitled “Two sides of the same coin? Independence and accountability at the ECB”. The report finds that a lack of political leadership and decisive reform has led the ECB to stray into the area of political decision-making, without appropriate democratic scrutiny. This has been accompanied by a marked decline in public trust at a time when the ECB has been granted extensive new powers to supervise major European banks.

“While the ECB has saved the single currency more than once, the absence of a Eurozone finance ministry as counterpart to the ECB means that the Bank has had to stretch its mandate to breaking point,” said Leo Hoffmann-Axthelm, Research and Advocacy Coordinator at Transparency International EU. “If the euro is to survive the next crisis, then EU Member States need to stop hiding behind the technocrats at the ECB, overcome political inertia and get serious about reforming the Eurozone”, continued Hoffmann-Axthelm. The report finds that preserving the ECB’s independence limits its accountability to citizens, and recommends that the Bank should compensate this by increasing its transparency. The ECB should take immediate steps, such as automatically publishing its decisions and opinions and being more open about the political choices it faces, rather than insisting its decisions are purely technical.

For example, at the height of the Greece crisis in 2015 the ECB repeatedly limited the ceiling on Emergency Liquidity Assistance for the country’s banks without publicly announcing it. The ECB’s discretionary powers allowed it to put pressure on Greek banks while negotiating bailout reforms with the Greek government as part of the Troika of international creditors. Similar dynamics could play out in the upcoming negotiations with Greece, and with the current recapitalisation of Italian lender Monte dei Paschi di Siena, which threaten the Eurozone’s current fragile stability, according to the group. “Clearly decisions which affect the fate of whole economies should have some kind of democratic oversight. The ECB should not be in a position to pull the plug on a country’s euro membership, a decision ultimately down to democratically elected politicians”, said Hoffmann-Axthelm.

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An entertaining and educational list.

12 People, Things That Ruined The EU (Pol.)

Last weekend, European leaders gathered in Rome for the 60th anniversary of the Treaty of Rome. They discussed, not for the first time, how to get the EU back on track. And they told each other they are still committed to the Union and believe in its future. (We’ve heard that one before, too.) But let’s just suppose that, when the European leaders sat down for lunch at the Quirinal Palace, some of them had a little too much of the pinot grigio and waxed nostalgic about the days when the idea of a united Europe was still young and promising and beautiful. And then they talked about this week and how British Prime Minister Theresa May would send her goodbye letter and they started slurring their words, saying Grexit, Brexit, Frexit, and they finally admitted to each other that something has gone horribly wrong. When they stood up and got ready to leave, they were devastated, saying to each other: “Good God, how did it come this and, more importantly, who is to blame?” We’ve gathered a dozen suggestions.

1. Zeus Whenever Europe is in trouble, its advocates claim the EU lacks a proper narrative. The whole idea of an “ever-closer union” is still a fine one, they argue, and the only thing that’s needed for people to understand it is a memorable story. The most memorable story about Europe, of course, is the one about Zeus. The Greek God disguised himself as a white bull in order to approach a beautiful girl called Europa. When Europa, perhaps naively, climbed on his back, the God-turned-bull abducted and ravished her. No need to take the story too literally when analyzing the EU’s current malaise (no white bulls there). But it is good to keep in mind that Europe’s founding myth doesn’t exactly bode well for its future. If negative narratives about the EU seem to resonate far more than positive ones, maybe it’s because the Greek gods loaded the dice.

2. Edith Cresson Going straight from Zeus, ruler of Mount Olympus, to good old Edith Cresson may seem a bit of a stretch. But as a strong contender for the title of worst European commissioner ever, the Frenchwoman does have a claim to fame, too. In the early 1990s, Cresson was a French prime minister who quickly fell out of favor and was forced to resign after less than a year in office. That apparently qualified her for a high-powered job in Brussels. As commissioner for science, research and development, Cresson famously paid her dentist to be a scientific adviser. In 1999, allegations of fraud intended to target Cresson ended up bringing down the entire Commission. To put it crudely: Cresson did to the EU what Zeus did to Europa.

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Le Pen won’t ruin the EU. That’s already been done.

Le Pen Victory Five Times As Dangerous As Greek Meltdown – UBS (CNBC)

Europe could be on track to encounter a shock wave up to five times as turbulent as the start of the euro zone debt crisis if French presidential candidate Marine Le Pen was able to secure victory in May, according to a team of UBS analysts. Strategists at the Swiss banking giant stressed the prominence of the anti-immigration and anti-European Union National Front leader meant France’s fast approaching general election would be the most serious political risk event in the region this year. Le Pen, who leads in the latest opinion polls, has vowed to renegotiate the terms of France’s membership of the EU and ditch the single currency if elected as the country’s new premier in just over two months’ time.

“The systemic importance of France for the European project is such that the margin for damage limitation may well be a lot thinner than has been the case in Greece in the past or could be the case for Spain or Italy even,” UBS analysts said in a note. The bank predicted the shock of a Le Pen victory on sovereign spreads could be as dramatic as when Spain and Italy appeared to be on the brink of financial collapse in 2012. UBS forecast a move of up to 500 basis points in sovereign spreads if Le Pen entered the Élysée Palace in early May. In comparison to a peripheral economy such as Greece, when Athens was on the brink of financial collapse in 2010, sovereign spreads widened by around 100 basis points. “It is certainly arguable that risks to the euro zone’s cohesion emanating from the core are by definition more severe and harder to diffuse than those emanating from the periphery,” UBS analysts added.

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A curious case. Shares fell 85% (indefinite trading halt) and nobody seems to know why.

China Is Desperately Trying To Save A Too Big To Fail Dairy Company (Qz)

A mysterious collapse in a Chinese dairy maker’s shares last week has renewed fears that China’s financial system is so shaky that authorities can do nothing but to muddle through a credit crunch. Shares of China Huishan Dairy Holdings plunged 85% in an hour on March 24, wiping more than $4 billion from its market value. The crash, the biggest-ever intraday fall in Hong Kong, prompted an indefinite trading halt. It also caused collateral damage to firms linked to the Liaoning-based company, which has more than 11,600 employees and operates the largest number of dairy farms in China. Market observers are still trying to figure out what exactly triggered the sudden sell-off. A company statement filed to the Hong Kong stock exchange March 28 unearthed at least part of the mystery.

In its first public comments since the stock crash, Huishan confirmed media reports that it had missed interest payments to its creditors, and that on March 23 the Liaoning provincial government held a meeting with the company and its 20-plus creditor banks to discuss remedies. According to the statement, the Liaoning government proposed an “action plan” to solve any overdue interest payments within two weeks and to help improve Huishan’s liquidity position within a month. Some creditors—including Bank of China and Jilin Jiutai Rural Commercial Bank—pledged in the meeting that they “would continue to have confidence in the Group [Huishan] which has over 60 years of operating history,” said the statement. The company also dismissed previous reports that it had issued fake invoices, and that chairman and controlling shareholder Yang Kai had misappropriated funds to invest in real estate in Shenyang, Liaoning’s capital.

The statement confirmed that Yang’s wife Ge Kun, who is also an executive director in charge of relationships with the company’s principal bankers, has been out of contact since March 21, the same day that Yang learned of the late payments. Financial news outlet Caixin revealed more details (link in Chinese) about the bailout package, based on an interview with creditor Hongling Capital head Zhou Shiping, who was at the March 23 meeting. The Liaoning government will pay over 90 million yuan ($13 million) for land owned by Huishan to inject cash into the company. It also ordered financial institutions involved not to downgrade the company’s credit rating or file lawsuits against it.

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Huishan is a bunch of highly leveraged shadow cows.

Huishan Dairy Turmoil Highlights China’s $8 Trillion Shadow Loan Risk (BBG)

Turmoil at a small Chinese dairy company is shedding rare light on the final destination for some of the country’s estimated $8 trillion of shadow banking loans. Jilin Jiutai Rural Commercial Bank, a major creditor to embattled China Huishan Dairy., said late Tuesday it has extended a total of 1.35 billion yuan ($196 million) in credit to the dairy producer, including 750 million yuan through the purchase of investment receivables from a finance lease company. Investment receivables – a category that can include using wealth-management products, asset-management plans and trust-beneficiary rights to disguise what are in effect loans – allow banks to reduce the amount of cash they need to set aside for capital and provisions for loan losses.

The practice of recording loan-type exposures on balance sheets under categories including investment receivables has allowed hundreds of smaller Chinese banks to boost assets and profits. At the same time, it has created opaque risks that could lead to failures, bailouts or liquidity shocks with the potential to jolt national and global markets. The external public relations agency for Jiutai didn’t immediately reply to an email seeking comment. The bank doesn’t appear to have broken any disclosure rules on its receivables. China’s shadow banking system could lead to losses of $375 billion, CLSA estimated in September. The brokerage said such financing expanded at an annual 30% pace from 2011 through 2015 to reach 54 trillion yuan, or 79% of the nation’s GDP. But details have rarely surfaced on the specifics of individual shadow banking arrangements.

“Chinese banks are lending more and more money to companies in recent years through investment receivables, partly to circumvent regulatory or internal rules,” said Yulia Wan, a Shanghai-based banking analyst at Moody’s Investors Service. Lenders don’t disclose enough information about where the money goes, according to Wan. In addition, the banks usually don’t provision enough for such exposures, and they fund the transactions through short-term borrowing from other financial institutions, Wan said. “This practice poses risks to both investors and banks themselves.”

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People will find a way. And then so will the money.

Hong Kong Underground Banks Cash In On Flood Of Money Out Of China (BBG)

Business is good, but Dickson Chan is worried. The Hong Kong money changer saw remittances from mainland China increase by 10% to 20% last month from the end of 2016, yet he is not sure how long the operation can last. The company he works for, Professional Foreign Currency Exchange, helps clients move cash between China and Hong Kong with a bank account in each place by squaring opposing transactions. “Now people feel that the Chinese government may tighten capital controls further and it wants more yuan depreciation, so many clients want to transfer money to Hong Kong more quickly,” Chan said from his store, located in the basement of a drab mall in Causeway Bay, the world’s second-priciest retail district. “We’re worried the Chinese government will introduce some regulations to ban this business, so now although we’re still doing it, we’re trying to raise revenues from other currencies.”

The fate of Hong Kong’s money changers shows both the reach of Chinese authorities, and the limits to their power. While a determined crackdown could kill the industry, such a response would risk spooking China’s citizens and exacerbating outflow pressures. The exodus of funds from Asia’s largest economy has spurred three years of yuan depreciation that at times roiled global markets and influenced monetary policies worldwide, and pushed up asset prices in cities from Hong Kong to Vancouver. An estimated $1.8 trillion has left Asia’s largest economy from the start of 2015 through January 2017, as the yuan lost almost 10% and returns on onshore assets dropped amid slowing economic growth. To stem the flows, the authorities have tightened capital curbs, stepping up scrutiny of residents’ foreign-currency purchases and limiting insurance buying in Hong Kong.Money changers in Hong Kong provide ways to sidestep such restrictions.

Once the cash reaches the semi-autonomous Chinese city, which has no capital controls, it can go almost anywhere. Hong Kong’s shopping districts are dotted with money changers advertising their remittance services and yuan conversion rates in simplified Chinese characters typically used on the mainland. There are 1,891 licensed money operators in the city, Hong Kong customs data show. Money changers or remittance firms need to obtain a license from the government, which requires the companies to conduct customer due diligence and keep records. As part of a sweeping effort to contain outflows, just before the new year, Chinese regulators boosted disclosure requirements for citizens converting yuan into foreign exchange — while retaining the $50,000 annual quota. Authorities busted at least 380 cases of major underground banking involving more than 900 billion yuan ($131 billion) of funds last year.

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A bit shaky in predictions etc., but this is very much is where we’re going. Retirement was an anomaly.

A World Without Retirement (G.)

We are entering the age of no retirement. The journey into that chilling reality is not a long one: the first generation who will experience it are now in their 40s and 50s. They grew up assuming they could expect the kind of retirement their parents enjoyed – stopping work in their mid-60s on a generous income, with time and good health enough to fulfil long-held dreams. For them, it may already be too late to make the changes necessary to retire at all. In 2010, British women got their state pension at 60 and men got theirs at 65. By October 2020, both sexes will have to wait until they are 66. By 2028, the age will rise again, to 67. And the creep will continue. By the early 2060s, people will still be working in their 70s, but according to research, we will all need to keep working into our 80s if we want to enjoy the same standard of retirement as our parents.

This is what a world without retirement looks like. Workers will be unable to down tools, even when they can barely hold them with hands gnarled by age-related arthritis. The raising of the state retirement age will create a new social inequality. Those living in areas in which the average life expectancy is lower than the state retirement age (south-east England has the highest average life expectancy, Scotland the lowest) will subsidise those better off by dying before they can claim the pension they have contributed to throughout their lives. In other words, wealthier people become beneficiaries of what remains of the welfare state. Retirement is likely to be sustained in recognisable form in the short and medium term. Looming on the horizon, however, is a complete dismantling of this safety net.

For those of pensionable age who cannot afford to retire, but cannot continue working – because of poor health, or ageing parents who need care, or because potential employers would rather hire younger workers – the great progress Britain has made in tackling poverty among the elderly over the last two decades will be reversed. This group is liable to suffer the sort of widespread poverty not seen in Britain for 30 to 40 years. Many now in their 20s will be unable to save throughout their youth and middle age because of increasingly casualised employment, student debt and rising property prices. By the time they are old, members of this new generation of poor pensioners are liable to be, on average, far worse off than the average poor pensioner today.

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The strongest wording I’ve seen to date.

Germany Questions Erdogan’s Turkey ‘Coup’ Narrative (BBC)

German Interior Minister Thomas De Maiziere has said Turkey will not be allowed to spy on Turks living in Germany. Reports say the head of Turkey’s intelligence service handed a list of people suspected of opposition sympathies to his German counterpart. The list is said to include surveillance photos and personal data. Germany and other EU states have banned local rallies in support of Turkish President Recep Tayyip Erdogan. Turkish ministers have been seeking to campaign among ethnic Turks in a referendum on 16 April on increasing his powers. Some 41,000 people have been arrested in Turkey since a coup was defeated in July of last year.

According to Germany’s Sueddeutsche Zeitung newspaper and several public broadcasters, the head of Turkey’s intelligence service MIT, Hakan Fidan, handed Bruno Kahl a list of 300 individuals and 200 organisations thought to be linked to the Gulen movement at a security conference in Munich in February The apparent aim was to persuade Germany’s authorities to help their Turkish counterparts but the result was that the individuals were warned not to travel to Turkey or visit Turkish diplomatic addresses within Germany, home to 1.4 million voters eligible to vote in the referendum. Mr De Maiziere said the reports were unsurprising.

“We have repeatedly told Turkey that something like this is unacceptable,” he said. “No matter what position someone may have on the Gulen movement, here German jurisdiction applies and citizens will not be spied on by foreign countries.” [..] “Outside Turkey I don’t think anyone believes that the Gulen movement was behind the attempted putsch,” said German spy chief Hans-Georg Maassen. “At any rate I don’t know anyone outside Turkey who has been convinced by the Turkish government.” And Lower Saxony Interior Minister Boris Pistorius went further, saying, “We have to say very clearly that it involves a fear of conspiracy you can class as paranoid.”

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And Brussels is toothless. But it will all come down on Greece anyway, so why bother?

Central Europe’s Leaders Reject EU’s Relocation Of Refugees (AP)

Leaders from Central Europe said Tuesday they reject a European Union policy that calls for all member states to receive migrants, protesting suggestions that the level of their compliance could be linked to the availability of EU funds to them. A meeting in Warsaw of the so-called Visegrad Group brought together Poland’s Prime Minister Beata Szydlo and her counterparts from Hungary, Slovakia and the Czech Republic for talks including EUs migrant policies and a plan of sharing some 160,000 migrants among member states to ease the migrant wave pressure on Greece and Italy.

The EU recently warned of financial consequences to those who do not comply. Central European leaders said they reject the relocation plan and will not yield under the financial pressure, which they called an attempt at blackmail. Hungary’s Prime Minister Viktor Orban said his country was further sealing its borders and tightening regulations to block access to any more migrants. The Visegrad Group aspires to have a greater role in EU policies while at the same time makes a point of criticizing the bloc’s decisions. [AP]

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Mar 232017
 
 March 23, 2017  Posted by at 9:18 am Finance Tagged with: , , , , , , , , , ,  6 Responses »
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Unknown GMC truck Associated Oil fuel tanker, San Francisco 1935

 


I Don’t Think The US Should Remain As One Political Entity – Casey (IM)
Trump Tantrum Looms On Wall Street If Healthcare Effort Stalls (R.)
The US Student Debt Bubble Is Even Bigger Than The Subprime Fiasco (Black)
US Auto-Loan Quality To Deteriorate Further, Forcing Tighter Underwriting (MW)
Oil Price Drops Below $50 For First Time Since OPEC Deal (Tel.)
China Shadow Banks Hit by Record Premium for One-Week Cash (ZH)
Zombie Companies are China’s Real Problem (BBG)
China Debt Risks Go Global Amid Record Junk Sales Abroad (BBG)
A Fake $3.6 Trillion Deal Is Easy to Sneak Past the SEC
Elite Economists: Often Wrong, Never In Doubt (720G)
Trump the Destroyer (Matt Taibbi)
Erdogan Warns Europeans ‘Will Not Walk Safely’ If Attitude Persists (R.)
Lavish EU Rome Treaty Summit Will Skirt Issues in Stumbling Italy (BBG)
Greek Consumption Slumps Further In 2017 (K.)
Nine Years Later, Greece Is Still In A Debt Crisis.. (Black)
In Greece, Europe’s New Rules Strip Refugees Of Right To Seek Protection (K.)

 

 

So there.

I Don’t Think The US Should Remain As One Political Entity – Casey (IM)

What’s going on in the US now is a culture clash. The people that live in the so-called “red counties” that voted for Trump—which is the vast majority of the geographical area of the US, flyover country—are aligned against the people that live in the blue counties, the coasts and big cities. They don’t just dislike each other and disagree on politics; they can no longer even have a conversation. They hate each other on a visceral gut level. They have totally different world views. It’s a culture clash. I’ve never seen anything like this in my lifetime.

There hasn’t been anything like this since the War Between the States, which shouldn’t be called “The Civil War,” because it wasn’t a civil war. A civil war is where two groups try to take over the same government. It was a war of secession, where one group simply tries to leave. We might have something like that again, hopefully nonviolent this time. I don’t think the US should any longer remain as one political entity. It should break up so that people with one cultural view can join that group and the others join other groups. National unity is an anachronism.

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Credibility.

Trump Tantrum Looms On Wall Street If Healthcare Effort Stalls (R.)

The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration’s healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth. Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a healthcare bill a litmus test which could give stock investors another reason to sell. “If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades,” said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital. U.S. stocks rallied after the November presidential election, with the S&P 500 posting a string of record highs up to earlier this month, on bets that the pro-growth Trump agenda would be quickly pushed by a Republican Party with majorities in both chambers of Congress.

The S&P 500 ended slightly higher on Wednesday, the day before a floor vote on Trump’s healthcare proposal scheduled in the House of Representatives. On Tuesday, stocks had the biggest one-day drop since before Trump won the election, on concerns about opposition to the bill. Investors extrapolated that a stalling bill could mean uphill battles for other Trump proposals. Trump and Republican congressional leaders appeared to be losing the battle to get enough support to pass it. Any hint of further trouble for Trump’s agenda, especially his proposed tax cut, could precipitate a stock market correction, said Byron Wien, veteran investor and vice chairman of Blackstone Advisory Partners. “The fact that they are having trouble with (healthcare repeal) casts a shadow over the tax cut and the tax cut was supposed to be the principal fiscal stimulus for the improvement in real GDP,” Wien said. “Without that improvement in GDP, earnings aren’t going to be there and the market is vulnerable.”

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“This is particularly interesting because student loans essentially have no collateral.”

The US Student Debt Bubble Is Even Bigger Than The Subprime Fiasco (Black)

In 1988, a bank called Guardian Savings and Loan made financial history by issuing the first ever “subprime” mortgage bond. The idea was revolutionary. The bank essentially took all the mortgages they had loaned to borrowers with bad credit, and pooled everything together into a giant bond that they could then sell to other banks and investors. The idea caught on, and pretty soon, everyone was doing it. As Bethany McLean and Joe Nocera describe in their excellent history of the financial crisis (All the Devils are Here), the first subprime bubble hit in the 1990s. Early subprime lenders like First Alliance Mortgage Company (FAMCO) had spent years making aggressive loans to people with bad credit, and eventually the consequences caught up with them. FAMCO declared bankruptcy in 2000, and many of its competitors went bust as well.

Wall Street claimed that it had learned its lesson, and the government gave them all a slap on the wrist. But it didn’t take very long for the madness to start again. By 2002, banks were already loaning money to high-risk borrowers. And by 2005, all conservative lending standards had been abandoned. Borrowers with pitiful credit and no job could borrow vast sums of money to buy a house without putting down a single penny. It was madness. By 2007, the total value of these subprime loans hit a whopping $1.3 trillion. Remember that number. And of course, we know what happened the next year: the entire financial system came crashing down. Duh. It turned out that making $1.3 trillion worth of idiotic loans wasn’t such a good idea. By 2009, 50% of those subprime mortgages were “underwater”, meaning that borrowers owed more money on the mortgage than the home was worth.

In fact, delinquency rates for ALL mortgages across the country peaked at 11.5% in 2010, which only extended the crisis. But hey, at least that’s never going to happen again. Except… I was looking at some data the other day in a slightly different market: student loans. Over the last decade or so, there’s been an absolute explosion in student loans, growing from $260 billion in 2004 to $1.31 trillion last year. So, the total value of student loans in America today is LARGER than the total value of subprime loans at the peak of the financial bubble. And just like the subprime mortgages, many student loans are in default. According to the Fed’s most recent Household Debt and Credit Report, the student loan default rate is 11.2%, almost the same as the peak mortgage default rate in 2010. This is particularly interesting because student loans essentially have no collateral. Lenders make loans to students… but it’s not like the students have to pony up their iPhones as security.

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You have to wonder what exactly is keeping the US economy afloat.

US Auto-Loan Quality To Deteriorate Further, Forcing Tighter Underwriting (MW)

Auto loan and lease credit performance will continue to deteriorate in 2017, led by the vulnerable subprime sector, Fitch Ratings said in a report released Wednesday. “Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years,” said Michael Taiano, a director at the credit-ratings agency. Banks are starting to lose market share to captive auto finance companies and credit unions as they begin to tighten underwriting standards in response to deteriorating asset quality, Fitch said. According to the Federal Reserve’s January 2017 senior loan officer survey, 11.6% of respondents (net of those who eased) reported tightening standards, compared with the five-year average of 6.1%.

“This trend is consistent with comments made by several banks on earnings conference calls over the past couple of quarters,” Fitch said in the report. Fitch considers continued tightening by auto lenders as a credit-positive but it’s also paying attention to market nuances. The tightening, to date, primarily relates to pricing and loan-to-value (how much is still owed on the car compared to its resale value), but average loan terms continue to extend into the 72- to 84-month category. “The tightening of underwriting standards is likely a response to expected deterioration in used vehicle prices and the weaker credit performance experienced in the subprime segment,” added Taiano. Used-car price declines have accelerated more recently, which will likely pressure recovery values on defaulted loans and lease residuals, the analysts said.

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Might as well call off the theater.

Oil Price Drops Below $50 For First Time Since OPEC Deal (Tel.)

The oil price has fallen back below the key $50 a barrel mark for the first time since November after surging US oil supplies dealt a blow to OPEC’s plan to erode the global oversupply of crude. The flagging oil price bounded above $50 a barrel late last year after a historic co-operation deal between OPEC and the world’s largest oil producers outside of the cartel to limit output for the first half of this year. The November deal was the first action taken by the group to limit supply for over eight years but since then the quicker than expected return of fracking rigs across the US has punctured the buoyant market sentiment of recent months. Brent crude prices peaked at $56 a barrel earlier this year and were still above $52 this week.

But by Wednesday the price fell to just above $50 a barrel and briefly broke below the important psychological level to $49.86 on Wednesday afternoon. Market analysts fear that a more sustained period below $50 could trigger a sell-off from hedge funds which would drive even greater losses in the market. The price plunge was sparked by the latest weekly US stockpile data which revealed a bigger than expected increase of 5 million barrels a day compared to a forecast rise of 1.8 million barrels. The flood of US shale emerged a day after Libya announced that would increase its output to take advantage of higher revenues from its oil exports. “The market is increasingly worried that the continued overhang of supply is not being brought down fast enough,” said Ole Hansen, a commodities analyst with SaxoBank.

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Beijing forced to save the shadows.

China Shadow Banks Hit by Record Premium for One-Week Cash (ZH)

During the so-called Chinese Banking Liquidity Crisis of 2013, the relative cost of funds for non-bank institutions spiked to 100bps. So, the fact that the ‘shadow banking’ liquidity premium has exploded to almost 250 points – by far a record – in the last few days should indicate just how stressed Chinese money markets are. While interbank borrowing rates have climbed across the board, the surge has been unusually steep for non-bank institutions, including securities companies and investment firms. They’re now paying what amounts to a record premium for short-term funds relative to large Chinese banks, according to data compiled by Bloomberg.

The premium is reflected in the gap between China’s seven-day repurchase rate fixing and the weighted average rate, which, by Bloomberg notes, widened to as much as 2.47 percentage points on Wednesday after some small lenders were said to miss payments in the interbank market. Non-bank borrowers tend to have a greater influence on the fixing, while large banks have more sway over the weighted average. “It’s more expensive and difficult for non-bank financial institutions to get funding in the market,” said Becky Liu at Standard Chartered. “Bigger lenders who have access to regulatory funding are not lending much of the money out.” Without access to deposits or central bank liquidity facilities, many of China’s non-bank institutions must rely on volatile money markets. As Bloomberg points out, The People’s Bank of China has been guiding those rates higher in recent months to encourage a reduction of leverage, while also stepping in at times to prevent a liquidity crunch.

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State owned zombies.

Zombie Companies are China’s Real Problem (BBG)

China needs to take on its state-owned “zombie companies,” which keep borrowing even though they aren’t earning enough to repay loans or interest, says Nicholas Lardy of the Peterson Institute for International Economics. “That’s where the real problem is,” Lardy said Thursday in a Bloomberg Television interview from the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. “It’s a component of the run-up in debt that they really have to focus on.” While flagging this concern, Lardy, a senior fellow at Peterson in Washington and author of “Markets Over Mao: The Rise of Private Business in China,” said anxiety over China’s debt growth is overstated. Household deposits will continue to underpin the banking and financial system, which means the situation with zombie firms is unlikely to reach a critical point.

Household savings are “very sticky, they’re not going anywhere, and the central bank can come in to the rescue if there are problems,” he said. Chinese corporate profits will probably continue to recover this year and after-tax earnings needed to service the debt load is improving, Lardy said. Another positive sign is a slowdown in the buildup of debt outstanding to non-financial companies. The combination of that slackening and companies’ increasing earning power “is improving the overall situation,” he said. When it comes to U.S. President Donald Trump’s negative rhetoric on China, the country’s leaders deserve “very high marks so far” for their cool reaction. “They’ve been waiting to see what Mr. Trump is actually going to do as opposed to what he’s talked about, so they haven’t overreacted,” he said. “They’ve made very careful preparations for the worst case if Trump does move in a very strong protectionist direction.”

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Zombies and junk.

China Debt Risks Go Global Amid Record Junk Sales Abroad (BBG)

China’s riskiest corporate borrowers are raising an unprecedented amount of debt overseas, leaving global investors to shoulder more credit risks after onshore defaults quadrupled in 2016. Junk-rated firms, most of which are property developers, have sold $6.1 billion of dollar bonds since Dec. 31, a record quarter, data compiled by Bloomberg show. In contrast, such borrowers have slashed fundraising at home as the central bank pushes up borrowing costs and regulators curb real estate financing. Onshore yuan note offerings by companies with local ratings of AA, considered junk in China, fell this quarter to the least since 2011 at 31.3 billion yuan ($4.54 billion). Global investors desperate for yield have lapped up offerings from China. Rates on dollar junk notes from the nation have dropped 81 basis points this year to 6.11%, near a record low, according to a Bank of America Merrill Lynch index.

Some investors have warned of froth. Goldman Sachs Group Inc. said last month that it sees little value in the country’s high-yield property bonds. Hedge fund Double Haven Capital (Hong Kong) has said it is betting against Chinese junk securities. “Today’s market valuations are tight and investors are focusing on yields without taking into account credit risks,” said Raja Mukherji at PIMCO. “That’s where I see a lot of risk, where investors are not differentiating on credit quality on a risk-adjusted basis.” Lower-rated issuers turning to dollar debt after scrapping financing at home include Shandong Yuhuang Chemical on China’s east coast. The chemical firm canceled a 500 million yuan local bond sale in January citing “insufficient demand.” It then issued $300 million of three-year bonds at 6.625% this week. Some developers have grown desperate for cash as regulators tighten housing curbs and restrict their domestic fundraising. That’s raising concern among international investors in China’s real estate sector who have been burned before.

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Priceless humor: “Congress has already raised the alarm.” After three decades, that is.

A Fake $3.6 Trillion Deal Is Easy to Sneak Past the SEC

A few hours after the New York market close on Feb. 1, an obscure Chicago artist by the name of Antonio Lee told the world he had become the world’s richest man. The 32-year-old painter said Google’s parent, Alphabet Inc., had bought his art company in exchange for a chunk of stock that made him wealthier than Bill Gates, Warren Buffett and Jeff Bezos – combined. Of course, none of it was true. Yet, on that day, Lee managed to issue his fabricated report in the most authoritative of places: The U.S. Securities and Exchange Commission’s Edgar database – the foundation of hundreds of billions of dollars in financial transactions each day. For more than three decades, the SEC has accepted online submissions of regulatory filings – basically, no questions asked.

As many as 800,000 forms are filed each year, or about 3,000 per weekday. But, in a little known vulnerability at the heart of American capitalism, the government doesn’t vet them, and rarely even takes down those known to be shams. “The SEC can’t stop them,” said Lawrence West, a former SEC associate enforcement director. “They can only punish the filer afterward and remove the filing from the system. So, caveat lector – let the reader beware.” Congress has already raised the alarm. For its part, the SEC, which declined to comment, has said those who make filings are responsible for their truthfulness and that only a handful have been reported as bogus. Submitting false information exposes the culprit to SEC civil-fraud charges, or even federal criminal prosecution.

On May 14, 2015, Nedko Nedev, a dual citizen of the United States and Bulgaria, filed an SEC form indicating he was making a tender offer – an outright purchase – for Avon, the cosmetics company. Avon’s shares jumped 20% before trading was halted, and the company denied the news. (A federal grand jury later indicted Nedev on market manipulation and other charges.) After the fraudulent Avon filing, U.S. Senator Chuck Grassley, the Iowa Republican and former chairman of the Finance Committee, told the SEC it must review its posting standards. “This pattern of fraudulent conduct is troubling, especially in light of the relative ease in which a fake posting can be made,” Grassley wrote in a letter to the agency. In response, Mary Jo White, who then chaired the SEC, said it wouldn’t be feasible to check information. She noted that there were on average 125 first-time filers daily in 2014, and the agency was studying whether its authentication process could be strengthened without delaying disclosure of key information to investors.

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Only a major reset will do.

Elite Economists: Often Wrong, Never In Doubt (720G)

Since the U.S. economic recovery from the 2008 financial crisis, institutional economists began each subsequent year outlining their well-paid view of how things will transpire over the course of the coming 12-months. Like a broken record, they have continually over-estimated expectations for growth, inflation, consumer spending and capital expenditures. Their optimistic biases were based on the eventual success of the Federal Reserve’s (Fed) plan to restart the economy by encouraging the assumption of more debt by consumers and corporations alike. But in 2017, something important changed. For the first time since the financial crisis, there will be a new administration in power directing public policy, and the new regime could not be more different from the one that just departed. This is important because of the ubiquitous influence of politics.

The anxiety and uncertainties of those first few years following the worst recession since the Great Depression gradually gave way to an uncomfortable stability. The anxieties of losing jobs and homes subsided but yielded to the frustration of always remaining a step or two behind prosperity. While job prospects slowly improved, wages did not. Business did not boom as is normally the case within a few quarters of a recovery, and the cost of education and health care stole what little ground most Americans thought they were making. Politics was at work in ways with which many were pleased, but many more were not. If that were not the case, then Donald Trump probably would not be the 45th President of the United States. Within hours of Donald Trump’s victory, U.S. markets began to anticipate, for the first time since the financial crisis, an escape hatch out of financial repression and regulatory oppression.

As shown below, an element of economic and financial optimism that had been missing since at least 2008 began to re-emerge. What the Fed struggled to manufacture in eight years of extraordinary monetary policy actions, the election of Donald Trump accomplished quite literally overnight. Expectations for a dramatic change in public policy under a new administration radically improved sentiment. Whether or not these changes are durable will depend upon the economy’s ability to match expectations.

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I find the Trump bashing parade very tiresome, but Matt’s funny.

Trump the Destroyer (Matt Taibbi)

There is no other story in the world, no other show to watch. The first and most notable consequence of Trump’s administration is that his ability to generate celebrity has massively increased, his persona now turbocharged by the vast powers of the presidency. Trump has always been a reality star without peer, but now the most powerful man on Earth is prisoner to his talents as an attention-generation machine. Worse, he is leader of a society incapable of discouraging him. The numbers bear out that we are living through a severely amplified déjà vu of last year’s media-Trump codependent lunacies. TV-news viewership traditionally plummets after a presidential election, but under Trump, it’s soaring. Ratings since November for the major cable news networks are up an astonishing 50% in some cases, with CNN expecting to improve on its record 2016 to make a billion dollars – that’s billion with a “b” – in profits this year.

Even the long-suffering newspaper business is crawling off its deathbed, with The New York Times adding 132,000 subscribers in the first 18 days after the election. If Trump really hates the press, being the first person in decades to reverse the industry’s seemingly inexorable financial decline sure is a funny way of showing it. On the campaign trail, ballooning celebrity equaled victory. But as the country is finding out, fame and governance have nothing to do with one another. Trump! is bigger than ever. But the Trump presidency is fast withering on the vine in a bizarre, Dorian Gray-style inverse correlation. Which would be a problem for Trump, if he cared. But does he? During the election, Trump exploded every idea we ever had about how politics is supposed to work. The easiest marks in his con-artist conquest of the system were the people who kept trying to measure him according to conventional standards of candidate behavior.

You remember the Beltway priests who said no one could ever win the White House by insulting women, the disabled, veterans, Hispanics, “the blacks,” by using a Charlie Chan voice to talk about Asians, etc. Now he’s in office and we’re again facing the trap of conventional assumptions. Surely Trump wants to rule? It couldn’t be that the presidency is just a puppy Trump never intended to care for, could it? Toward the end of his CPAC speech, following a fusillade of anti-media tirades that will dominate the headlines for days, Trump, in an offhand voice, casually mentions what a chore the presidency can be. “I still don’t have my Cabinet approved,” he sighs. In truth, Trump does have much of his team approved. In the early days of his administration, while his Democratic opposition was still reeling from November’s defeat, Trump managed to stuff the top of his Cabinet with a jaw-dropping collection of perverts, tyrants and imbeciles, the likes of which Washington has never seen.

En route to taking this crucial first beachhead in his invasion of the capital, Trump did what he always does: stoked chaos, created hurricanes of misdirection, ignored rules and dared the system of checks and balances to stop him. By conventional standards, the system held up fairly well. But this is not a conventional president. He was a new kind of candidate and now is a new kind of leader: one who stumbles like a drunk up Capitol Hill, but manages even in defeat to continually pull the country in his direction, transforming not our laws but our consciousness, one shriveling brain cell at a time.

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Tourism is a very big source of income for Turkey. Erdogan’s killing it off with a vengeance.

Erdogan Warns Europeans ‘Will Not Walk Safely’ If Attitude Persists (R.)

President Tayyip Erdogan said on Wednesday that Europeans would not be able to walk safely on the streets if they kept up their current attitude toward Turkey, his latest salvo in a row over campaigning by Turkish politicians in Europe. Turkey has been embroiled in a dispute with Germany and the Netherlands over campaign appearances by Turkish officials seeking to drum up support for an April 16 referendum that could boost Erdogan’s powers. Ankara has accused its European allies of using “Nazi methods” by banning Turkish ministers from addressing rallies in Europe over security concerns. The comments have led to a sharp deterioration in ties with the European Union, which Turkey still aspires to join.

“Turkey is not a country you can pull and push around, not a country whose citizens you can drag on the ground,” Erdogan said at an event for Turkish journalists in Ankara, in comments broadcast live on national television. “If Europe continues this way, no European in any part of the world can walk safely on the streets. Europe will be damaged by this. We, as Turkey, call on Europe to respect human rights and democracy,” he said. Germany’s Frank-Walter Steinmeier used his first speech as president on Wednesday to warn Erdogan that he risked destroying everything his country had achieved in recent years, and that he risked damaging diplomatic ties. “The way we look (at Turkey) is characterized by worry, that everything that has been built up over years and decades is collapsing,” Steinmeier said in his inaugural speech in the largely ceremonial role. He called for an end to the “unspeakable Nazi comparisons.”

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Can’t let a little crisis get in the way of your champagne and caviar.

Lavish EU Rome Treaty Summit Will Skirt Issues in Stumbling Italy (BBG)

As leaders celebrate the European Union’s 60th birthday in Rome this weekend, the host nation may be hoping that a pomp-filled ceremony distracts from any probing questions. Overshadowed by the sting of Brexit and elections in the Netherlands, France and Germany, Italy’s lingering problems have left it as the weak link among Europe’s powerhouse economies. It’s stumbling through a stop-start slow recovery from a record-long recession, unemployment is twice that of Germany’s, and voters, weary of EU institutions, are flirting with the same kind of populism grabbing attention elsewhere. The gathering on Saturday on the city’s Capitol hill is to celebrate the Treaty of Rome, the bedrock agreement signed on March 25, 1957 for what is now the EU.

From its beginnings as the European Economic Community – with Italy among the six founding members – it has since grown to a union of 28 nations stretching 4,000 kilometers from Ireland in the northwest to Cyprus in the southeast. The U.K. is heading toward a lengthy exit from the EU known as Brexit, raising questions among the remaining 27 about the bloc’s long-term future. “Italy was until very recently at the forefront of the European integration process,” Luigi Zingales, professor of finance at University of Chicago Booth School of Business, said in an interview. “Today it’s undoubtedly Europe’s weakest link.” The economy grew just 0.9% last year, below the euro area’s 1.7%, and unemployment is at 11.9%. A recent EU poll put Italy as the monetary union’s second-most euro-skeptic state after Cyprus with only 41% saying the single currency is “a good thing.” The average in the 19-member euro area is 56%.

That widespread disenchantment may be felt at elections due in about one year. A poll published on Tuesday by Corriere della Sera put support for the Five Star Movement, which calls for a referendum to ditch the euro, at a record 32.3%, well ahead of the ruling Democratic Party. Summit host Prime Minister Paolo Gentiloni has only been in power since December, when Matteo Renzi resigned after losing a constitutional reform referendum. For Zingales, Italy has problems that European policy makers “would rather not talk about now as they don’t want to scare people.” That’s because across the bloc, politicians are still fighting voter resentment over the loss of wealth since the financial crisis, bitterness about bailouts and anger over a perceived increase in inequality. “Sixty years after the signing of the Treaties of Rome, the risk of political paralysis in Europe has never been greater,” Bank of Italy Governor Ignazio Visco told a conference in Rome this month.

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The EU can celebrate only because it’s murdering one of its members. Greece needs stimulus but gets the opposite.

Greek Consumption Slumps Further In 2017 (K.)

The year has started with some alarm bells regarding the course of consumer spending, generating concern not only about the impact on the supermarket sector and industry, but also on the economy in general. In the first week of March the year-on-year drop in supermarket turnover amounted to 15%, while in January the decline had come to 10%. Shrinking consumption is a sure sign that the economic contraction will be extended into another year, given its important role in the economy. The new indirect taxes on a number of commodities, the increased social security contributions, the persistently high unemployment and the ongoing uncertainty over the bailout review talks have hurt consumer confidence and eroded disposable incomes.

In this context, it will be exceptionally difficult to achieve the fiscal targets, especially if the uncertainty goes on or is ended with the imposition of additional austerity measures that would only see incomes shrink further. According to projections by IRI market researchers, supermarket sales in 2017 are expected to decline 3.6% from last year, with the worst-case scenario pointing to a 4.4% drop. Supermarket sales turnover dropped at the steepest rate seen in the crisis years in 2016, down 6.5%, after falling 2.1% in 2015, 1.4% in 2014, 3.5% in 2013 and 3.4% in 2012.

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“For a continent that has been at war with itself for 10 centuries and only managed to play nice for the last 30 or so years, it’s foolish to expect these bailouts to last forever.”

Nine Years Later, Greece Is Still In A Debt Crisis.. (Black)

Greece has had nine different governments since 2009. At least thirteen austerity measures. Multiple bailouts. Severe capital controls. And a full-out debt restructuring in which creditors accepted a 50% loss. Yet despite all these measures GREECE IS STILL IN A DEBT CRISIS. Right now, in fact, Greece is careening towards another major chapter in its never-ending debt drama. Just like the United States, the Greek government is set to run out of money (yet again) in a few months and is in need of a fresh bailout from the IMF and EU. (The EU is code for “Germany”…) Without another bailout, Greece will go bust in July– this is basic arithmetic, not some wild theory. And this matters. If Greece defaults, everyone dumb enough to have loaned them money will take a BIG hit. This includes a multitude of banks across Germany, Austria, France, and the rest of Europe.

Many of those banks already have extremely low levels of capital and simply cannot afford a major loss. (Last year, for example, the IMF specifically singled out Germany’s Deutsche Bank as being the top contributor to systemic risk in the global financial system.) So a Greek default poses as major risk to a number of those banks. More importantly, due to the interconnectedness of the financial system, a Greek default poses a major risk to anyone with exposure to those banks. Think about it like this: if Greece defaults and Bank A goes down, then Bank A will no longer be able to meet its obligations to Bank B. Bank B will suffer a loss as well. A single event can set off a chain reaction, what’s called ‘contagion’ in finance. And it’s possible that Greece could be that event. This is what European officials have been so desperate to prevent for the last nine years, and why they’ve always come to the rescue with a bailout.

It has nothing to do with community or generosity. They’re hopelessly trying to prevent another 2008-style meltdown of the financial system. But their measures have limits. How much longer do Greek citizens accept being vassals of Germany, suffering through debilitating capital controls and austerity measures? How much longer do German taxpayers continue forking over their hard-earned wages to bail out Greek retirees? After all, they’ve spent nine years trying to ‘fix’ Greece, and the situation has only become worse. For a continent that has been at war with itself for 10 centuries and only managed to play nice for the last 30 or so years, it’s foolish to expect these bailouts to last forever. And whether it’s this July or some date in the future, Greece could end up being the catalyst which sets off a chain reaction on both sides of the Atlantic.

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It’s time for lawyers to step in.

In Greece, Europe’s New Rules Strip Refugees Of Right To Seek Protection (K.)

EU leaders are celebrating a year since they carved out the agreement with Turkey that stemmed the flood of refugees seeking to escape war and strife on Europe’s doorstep. But the importance of the agreement goes far beyond the fact that it has contributed to deterring refugees from coming to Greece. At the Norwegian Refugee Council, we fear that the system Europe is putting in place in Greece is slowly stripping people of their right to seek international protection. Greece took the positive step to enshrine in law some key checks and balances to protect the vulnerable – a victim of torture, a disabled person, an unaccompanied child – so they could have their asylum case heard on the Greek mainland rather than remaining on the islands.

But a European Commission action plan is putting Greece under pressure to change safeguards enshrined in Greek law. NRC, along with other human rights and humanitarian organizations, wrote an open letter to the Greek Parliament this month urging lawmakers to keep that protection for those most in need. Importantly, this is just another quiet example of how what is happening in Greece is setting precedents that may irrevocably change the 1951 Refugee Convention. Europe is testing things out in Greece. [..] It was Europe and its postwar crisis that led to the 1951 convention that protects those displaced by war. Now that convention risks expiring on the doorstep of the same continent that gave birth to it – Europe is in danger of becoming, as NRC’s Secretary-General Jan Egeland has said, the convention’s “burial agent.”

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Jan 272017
 
 January 27, 2017  Posted by at 10:11 am Finance Tagged with: , , , , , , , , , , ,  13 Responses »
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Kathimerini Trump and Evolution Jan 25 2017


Theresa May: US and UK Will No Longer Invade Foreign Countries (Ind.)
Donald Trump’s Plan For China Relations Is To Be Unpredictable (G.)
Wave Of US State Department Personnel Resign, Are Fired (ZH)
How America Could Collapse (Nation)
Outrage Dilution (Adams)
How America Lost Its Identity – Megalomania & Small-Mindedness (Spiegel)
Obama Bequeaths A More Dangerous World (Parry)
China’s Shadow Banking Crusade Risks Bond Market Crash (R.)
China’s Army of Global Homebuyers Is Suddenly Short on Cash (BBG)
Lurching Towards the New Paradigm (Art+M)
Greece Creditors Demand Legislation Of Reforms For 2018-19 (Kath.)
Greek Supreme Court Rules Against Extraditing Eight Turkish Soldiers (WSJ)
EU Looks To Camps In Africa To Cut Immigration (R.)
Europe’s Crackdown On African Immigration Is Hitting Vulnerable Refugees (G.)
EU’s Mishandled Millions Not Reaching Refugees (DW)

 

 

If it could only be true. Between this from Theresa May, and the disappearance of Victoria Nuland, not such a bad day. But I find it hard to go through all the ‘serious’ press who report on things like the US spelling Theresa without the ‘h’. Is that worth paying a journalist for? That’s the best you got? Then again, I did like the person on twitter pointing out that Teresa May is the name of a pornstar, and wondering who Trump thought he was going to meet.

Theresa May: US and UK Will No Longer Invade Foreign Countries (Ind.)

Britain and the US will never again invade sovereign foreign countries “in an attempt to make the world in their own image,” Theresa May told Republican policymakers in Philadelphia. The Prime Minister vowed never to repeat the “failed policies of the past” in reference to Western military intervention in Iraq and Afghanistan, breaking from the “liberal intervention” principle established by Tony Blair. Referencing the “special relationship” between the UK and US, Ms May also stressed the importance of cooperation between the two countries to meet their “obligations of leadership” and “stand up for our interests”. “It is in our interests – those of Britain and America together – to stand strong together to defend our values, our interests and the very ideas in which we believe,” she said.

“This cannot mean a return to the failed policies of the past. The days of Britain and America intervening in sovereign countries in an attempt to remake the world in our own image are over.” However she called for “strong, smart and hard-headed” actions to stand up for Western principles, adding: “Nor can we afford to stand idly by when the threat is real and when it is in our own interests to intervene.” She also pledged support to Mr Trump in the continued fight against the “new enemies of the west and our values”. Ms May said it was a “priority” to push back on “Iran’s aggressive efforts” to increase its “arc of influence from Tehran through to the Mediterranean”. However, she defended the nuclear deal brokered by Barack Obama despite threats from Mr Trump that he would rip up the agreement, saying it had been successful in neutralising a potential threat. [..] “With President Putin, my advice is to engage but beware.”

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What’s that worth if you announce it, though?

Donald Trump’s Plan For China Relations Is To Be Unpredictable (G.)

Donald Trump’s game plan for relations with China is to use unpredictability as a means of wrong-footing the country’s Communist party leaders and extracting economic concessions, a prominent adviser has said. Since his election, Trump and his team have repeatedly discombobulated the Chinese government with a series of interventions on sensitive issues such as the South China Sea, US relations with Taiwan and China’s alleged manipulation of its currency, the yuan. Those moves have unsettled and angered Beijing, which had expected Trump to tone down his anti-China rhetoric after his victory. In an interview with China’s state-run broadcaster, Michael Pillsbury, a former Pentagon official and longtime China scholar, suggested Trump’s decision to repeatedly tweak Beijing’s nose was part of a calculated strategy.

The US president believed the Chinese were “the best negotiators in the whole world, so to get an advantage he wants to be unpredictable in the eyes of the Chinese government,” Pillsbury told CGTN, an international mouthpiece for the Chinese government that was formerly called CCTV. “I think he has succeeded in this, don’t you?” Pillsbury, a fluent Mandarin speaker who is known for his contacts within China’s People’s Liberation Army and has been advising Trump’s team, said the president had outlined this strategy in his most recent book, Great Again: How To Fix Our Crippled America. In it Trump writes: “The element of surprise wins battles. So I don’t tell the other side what I’m doing, I don’t warn them, and I don’t let them fit me comfortably into a predictable pattern … I like being unpredictable. It keeps them off balance.”

In a chapter on foreign policy, Trump accuses his predecessors of “rolling over” for Beijing and hints it will be one of the main targets of his strategy. “There are people who wish I wouldn’t refer to China as our enemy. But that’s exactly what they are,” Trump writes. China specialists on both sides of the Pacific fear relations between Beijing and Washington could deteriorate rapidly under Trump, increasing the risks of a potentially calamitous great power conflict. However, Pillsbury, who has written a book about a supposed Chinese plot to become the world’s preeminent military, political and economic power by 2049, claimed ties could warm. “I say the road to making America great again runs through Beijing,” he told CGTN, calling for greater Chinese investment in the US.

“It can be win-win. I think it will be win-win,” Pillsbury said, using one of the favourite phrases of Chinese diplomats. Another China scholar who is understood to have offered advice to Trump’s team also said this week that he believed an improved relationship was on the cards. “I don’t quite understand why people seem to be operating under the assumption that the relationship with China was good and now all of a sudden it is going to change to be less good,” Daniel Blumenthal, the director of Asian Studies at the American Enterprise Institute told the Guardian.

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Bit confusing who left of their own accord and who got a pink slip. Been a thorough clean-up. Getting rid of Victoria Nuland is worth just about any price.

Wave Of US State Department Personnel Resign, Are Fired (ZH)

Update: according to a CNN report – so as always take with lots of salt – the story has shifted materially, because according to two senior administration officials, it wasn’t a resignation by the State Department officials, but more of a termination: “the Trump administration told four top State Department management officials that their services were no longer needed as part of an effort to “clean house” at Foggy Bottom.”

Patrick Kennedy, who served for nine years as the undersecretary for management, Assistant Secretaries for Administration and Consular Affairs Michele Bond and Joyce Anne Barr, and Ambassador Gentry Smith, director of the Office for Foreign Missions, were sent letters by the White House that their service was no longer required, the sources told CNN. All four, career officers serving in positions appointed by the President, submitted letters of resignation per tradition at the beginning of a new administration. The letters from the White House said that their resignations were accepted and they were thanked for their service.

The White House usually asks career officials in such positions to stay on for a few months until their successors are confirmed. “Any implication that that these four people quit is wrong,” one senior State Department official said. “These people are loyal to the secretary, the President and to the State Department. There is just not any attempt here to dis the President. People are not quitting and running away in disgust. This is the White House cleaning house.” Mark Toner, the State Department’s acting spokesman, said in a statement that “These positions are political appointments, and require the President to nominate and the Senate to confirm them in these roles. They are not career appointments but of limited term.”

A second official echoed that the move appeared to be an effort by the new administration to “clean house” among the State Department’s top leadership. “The department will not collapse,” the second official said. “Everyone has good deputies. It’s a huge institutional loss, but the department has excellent subordinates and the career people will step up. They will take up the responsibility.” Victoria Nuland, the State Department’s assistant secretary for Europe, was also not asked to stay on. The following org charts breaks out the unfilled appointee positions, in blue, while the red crosses show the resignations.

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America has killed its resilience and redundancy, its back-up system. All western nations have. Best argument for protectionism: produce your own essentials.

How America Could Collapse (Nation)

A few months ago, a friend in the entertainment industry told me of a new business model in Hollywood: hoarding videotapes. Apparently, the earthquake in Japan knocked offline a Sony factory that makes certain types of tape. That factory was also in the tsunami zone, so now there’s a serious tape shortage threatening the television industry. The NBA scrambled to get enough tape to broadcast the NBA finals; one executive told the Hollywood Reporter, “It’s like a bank run.” In the last few years, economists have spent a lot of time and energy thinking about bank runs. A bank run happens when depositors think a bank is weak and scramble to get their money out before it collapses. “Tight coupling” of financial institutions, like when banks are overly dependent on each other, can create a cascading series of problems for the system itself.

We saw this with Lehman Brothers when it went bankrupt. Its AAA-rated debt instruments lost value unexpectedly; that caused money market funds that held those presumably safe bonds to suddenly lose value. A shadow bank run was the result, as investors rushed to withdraw from the money market funds. Worryingly, there’s been very little consideration of how systemic collapses can happen in another, perhaps more dangerous realm—the industrial supply system that keeps us in everything from medicine to food to cars to, yes, videotape. In 2004, for instance, England closed one single factory, which caused the United States to lose half of its flu vaccine supply. Barry Lynn of the New America Foundation has been studying industrial supply shocks since 1999, when he noticed that global computer chip production was concentrated in Taiwan.

After a severe earthquake in that country, the global computer industry nearly shut down, crashing the stocks of large computer makers. This level of concentration of the production of key components in a globalized economy is a new phenomenon. Lynn’s work points to the highly dangerous side of globalization, the flip side of a hyper-efficient global supply chain. When one link in that chain is broken, there is no fallback. Lynn has continued to study industrial supply shocks and says, “What I have found most interesting recently is the apparent role supply chain shocks played in triggering a synchronized slowdown of industrial economies in April—production down (in USA, China, Europe, Southeast Asia), jobs down, demand down, GDP numbers down—due almost entirely to the loss of a single factory that makes microcontroller chips for cars.”

[..] There’s a good amount of grumbling about the state of American infrastructure—collapsing bridges, high-speed rail, etc. But American infrastructure is not just about public goods, it’s about how the corporations that enforce, inform and organize economic activity are themselves organized. Are they doing productive research? Are they spreading knowledge and know-how to people who will use it responsibly? Are they creating prosperity or extracting wealth using raw power? And most importantly, are they contributing to the robustness of our society, such that we can survive and thrive in the normal course of emergencies? The answer to all of these questions right now is “no.” And while this may not be hitting the elite segments of the economy right now, there will be no escape from a flu pandemic or significant food shortage. The re-engineering of our global supply chain needs to happen—and it will happen, either through good leadership or through collapse.

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As much as people may dislike Scott Adams, he has a story to tell that many do not understand but should.

Outrage Dilution (Adams)

I’m having a fun time watching President Trump flood the news cycle with so many stories and outrages that no one can keep up. Here’s how the math of persuasion works in this situation: 1 outrage out of 3 headlines in a week: Bad Persuasion. 25 outrages out of 25 headlines in a week: Excellent Persuasion. At the moment there are so many outrages, executive orders, protests, and controversies that none of them can get enough oxygen in our brains. I can’t obsess about problem X because the rest of the alphabet is coming at me at the same time. When you encounter a situation that is working great except for one identifiable problem, you can focus on the problem and try to fix it. But if you have a dozen complaints at the same time, none of them looks special. The whole situation just looks confusing, and you don’t know where to start. So you wait and see what happens.

Humans need contrast in order to make solid decisions that turn into action. Trump removed all of your contrast by providing multiple outrages of similar energy. You’re probably seeing the best persuasion you will ever see from a new president. Instead of dribbling out one headline at a time, so the vultures and critics can focus their fire, Trump has flooded the playing field. You don’t know where to aim your outrage. He’s creating so many opportunities for disagreement that it’s mentally exhausting. Literally. He’s wearing down the critics, replacing their specific complaints with entire encyclopedias of complaints. And when Trump has created a hundred reasons to complain, do you know what impression will be left with the public? He sure got a lot done. Even if you don’t like it. In only a few days, Trump has made us question what-the-hell every other president was doing during their first weeks in office. Were they even trying?

For a fun party trick, ask your most liberal friends if they think the Federal government should have a say in whether a woman gets an abortion or not. When they say the Federal government should stay out of that decision, inform them that President Trump shares their opinion. He doesn’t want the Federal government to be in the business of making health care choices for women. He prefers leaving that decision to the woman, her doctor, and state laws.

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Not bad at all from Der Spiegel.

How America Lost Its Identity – Megalomania & Small-Mindedness (Spiegel)

On a frigid January evening one year ago, I was standing in a line of around 1,000 people in Burlington, Vermont, to see Donald Trump. I reported my very first story on the United States in 1991 and had been living in the country since 2013. I thought I knew the country well. But on that evening in January, I realized that I had been mistaken. Burlington lay under a blanket of snow and next to me in line stood Mary and Tim Loyer, both wrapped in dark-blue parkas. Mary was unemployed and her son Tim had a job at a bar. Both told me they were Bernie Sanders supporters. Tim said he was particularly bothered by the power held by large companies, that the division of wealth was unfair and that people like him no longer had opportunities to improve their lives. It was the anthem of the working class.

When asked what he found attractive about Trump, Tim said: “Bernie and Trump are the only politicians who say what they’re thinking and do what they say,” as his mother Mary nodded along. Hillary Clinton, by contrast, is corrupt, he said. In an election pitting Trump against Clinton, Tim said he would not vote for Clinton. Again, Mary nodded. At the entrance, security personnel patted us down and asked if we were planning on voting for Trump. Only those who said yes were allowed to proceed. When Trump began speaking, a demonstrator stood up and yelled that Trump was a racist. The candidate paused, shook his fist and demanded that security throw the protester out. “Keep his coat. Confiscate his coat,” Trump said from the stage. It was 21 degrees Fahrenheit (-6 degrees Celsius) outside.

Trump snarled as his fans jumped to their feet hooting and jeering. One was reminded of a lynch mob. I learned three things on that evening in Burlington: In the fatherland of capitalism, anger with the elite is so vast that even leftists would rather vote for a narcissist billionaire than a veteran of the political establishment. In a country that values freedom of opinion higher than almost any other country in the world, there were now attitude tests prior to admission to political rallies. And many Americans, who are otherwise so polite, lose all restraint when confronted by those who think differently. Everything that I associated with America seemed no longer to apply on that evening in Burlington. What had happened to this once-proud country?

I found answers to this question on a journey through American society – to places like Vermont, Maryland, Rhode Island and Virginia. Those are just a few of the places I have visited in the last four years – places where those symptoms could be seen that together add up to the huge crisis that has gripped America. This self-confident country that has spent decades exporting its values with imperialist hubris has lost its identity. Democratic capitalism no longer works well enough to keep together a country of 325 million people and to guarantee domestic peace. The United States is not alone in having been struck by this identity crisis: It has also hit the United Kingdom, France, Germany and other countries. But America, where capitalism flourishes to a greater degree than anywhere else, has been hit the hardest of all.

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Not Robert Parry’s strongest effort, he seems to want to stick to two contradictory stories at the same time: is Obama a closet neocon or is he a coward?

Obama Bequeaths A More Dangerous World (Parry)

[..] perhaps Obama’s most dangerous legacy is the New Cold War with Russia, which began in earnest when Washington’s neocons struck back against Moscow for its cooperation with Obama in getting Syria to surrender its chemical weapons (which short-circuited neocon hopes to bomb the Syrian military) and in persuading Iran to accept tight limits on its nuclear program (another obstacle to a neocon bombing plan). In both cases, the neocons were bent on “regime change,” or at least a destructive bombing operation in line with Israeli and Saudi hostility toward Syria and Iran. But the biggest challenge to these schemes was the positive relationship that had developed between Obama and Russian President Vladimir Putin. So, that relationship had to be shattered and the wedge that the neocons found handy was Ukraine.

By September 2013, Carl Gershman, the neocon president of the U.S.-government-funded National Endowment for Democracy, had identified Ukraine as “the biggest prize” and a steppingstone toward the ultimate goal of ousting Putin. By late fall 2013 and winter 2014, neocons inside the U.S. government, including Sen. John McCain and Assistant Secretary of State for European Affairs Victoria Nuland, were actively agitating for a “regime change” in Ukraine, a putsch against elected President Viktor Yanukovych that was carried out on Feb. 22, 2014. This operation on Russia’s border provoked an immediate reaction from the Kremlin, which then supported ethnic-Russian Ukrainians who had voted heavily for Yanukovych and who objected to the coup regime in Kiev. The neocon-dominated U.S. mainstream media, of course, portrayed the Ukrainian conflict as a simple case of “Russian aggression,” and Obama fell in line with this propaganda narrative.

After his relationship with Putin had deteriorated over the ensuring two-plus years, Obama chose to escalate the New Cold War in his final weeks in office by having U.S. intelligence agencies leak unsubstantiated claims that Putin interfered in the U.S. presidential election by hacking and publicizing Democratic emails that helped Trump and hurt Hillary Clinton. The CIA also put in play salacious rumors about the Kremlin blackmailing Trump over a supposed video of him cavorting with prostitutes in a Moscow hotel. And, according to The Wall Street Journal, U.S. counterintelligence agents investigated communications between retired Gen. Michael Flynn, Trump’s national security advisor, and Russian officials. In the New McCarthyism that now surrounds the New Cold War, any conversation with Russians apparently puts an American under suspicion for treason.

The anti-Russian frenzy also pulled in The New York Times, The Washington Post and virtually the entire mainstream media, which now treat any dissent from the official U.S. narratives condemning Moscow as prima facie evidence that you are part of a Russian propaganda apparatus. Even some “progressive” publications have joined this stampede because they so despise Trump that they will tout any accusation to damage his presidency.

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Scary insane: “..WMPs jumped 42% year-on-year to 26 trillion yuan ($3.8 trillion) at the end of June, doubling in just two years.”

China’s Shadow Banking Crusade Risks Bond Market Crash (R.)

China’s campaign to cut high debt levels in its economy is aiming this year to shrink the $3 trillion shadow banking sector, which could drain a critical source of income for the country’s banks and of funding for its fragile bond market. Shadow banking, a term for financial agents that perform bank-like activity but are not regulated as banks, has boomed in China, the world’s second-largest economy, as a way of circumventing government’s tight controls on lending. It has been a key driver of the breakneck growth in debt in the economy, which UBS says rose to 277% of GDP from 254% in 2016, and is now a target as Beijing tries to reduce that figure before it destabilizes the economy.

But with banks’ shadow banking business accounting for about a fifth of total outstanding loans, analysts fear that the unintended consequences of government efforts could trigger the fate it seeks to avoid. “We see a policy-induced drastic deleveraging in shadow banking as a policy miscalculation that could trigger unexpected tail risks for the banking sector,” said Liao Qiang, credit analyst at S&P Global Ratings. Investors’ concerns stem from new rules this month that put lenders’ wealth management products (WMPs), the biggest component of shadow banking, under the scrutiny of the People’s Bank of China (PBOC) for the first time and into its calculations on prudence, capital adequacy and loan growth guidelines.

According to the latest official data, WMPs jumped 42% year-on-year to 26 trillion yuan ($3.8 trillion) at the end of June, doubling in just two years. WMPs are typically kept off banks’ balance sheets, making it difficult for regulators to assess the stability of a banking sector reliant upon them for growth. And just as in the global financial crisis of 2008, banks’ interconnectedness amplifies the risks. Banks are increasingly buying into each other’s WMPs, such that interbank WMPs hit 4 trillion yuan in June, a doubling from two years ago.

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Wonder how this connects to the shadow banks.

China’s Army of Global Homebuyers Is Suddenly Short on Cash (BBG)

China’s escalating crackdown on capital outflows is sending shudders through property markets around the world. In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments. In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point. “Everything changed’’ as it became more difficult to send money offshore, said Coco Tan, a broker associate at Keller Williams in Cupertino, California. Less than a month after China announced fresh curbs on overseas payments, anecdotal reports from realtors, homeowners and developers suggest the restrictions are already weighing on the world’s biggest real estate buying spree.

While no one expects Chinese demand to disappear anytime soon, the clampdown is deterring first-time buyers who lack offshore assets and the expertise to skirt tighter capital controls. “If it’s too difficult, I’m out,’’ said Mr. Zheng, 66, a retired civil servant in Shanghai who declined to give his first name to avoid attracting regulatory scrutiny. He may abandon a 2.4 million yuan ($348,903) home purchase in western Melbourne, even after shelling out a 300,000 yuan deposit last August. He’s due to make another big payment next month. The change spooking Zheng and his compatriots came in a statement from the State Administration of Foreign Exchange on Dec. 31, hours before the reset of Chinese citizens’ annual foreign currency quotas.

Among other requirements, SAFE said all buyers of foreign exchange must now sign a pledge that they won’t use their $50,000 quotas for offshore property investment. Violators will be added to a government watch list, denied access to foreign currency for three years and subjected to money-laundering investigations, SAFE said. “A lot of clients are worried and have started hesitating,’’ said Wang Ning, vice president of the international department at Fang Holdings, China’s most popular property website.

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A pity this ends in a political rant, the first part is interesting.

Lurching Towards the New Paradigm (Art+M)

The world heaved under the sudden weight of its own nervous system. Lit up and lashed to the planet in only a few decades, we lost our bearings in the paradox of connectivity: minute detail of every moment yet removed from any tangible presence, our animal bandwidth compressed to sound and vision, crowded and alone. We got connected and it’s terrifying. Direct confrontation with The Other. Massive social relativism. A fractal collage of affinity networks and sub genres and Things That Seem Really Different. Nature red in tooth and claw, in full glorious monstrosity. And now it’s like “oh shit you mean we’re responsible for all of this??” The Web is a planetary architecture that compresses and distributes information. There’s only so much bandwidth and the Web is just one modality of acting in the world.

The network compresses physical experience from 5 senses to mostly one. The lo-fidelity of text invites us to project our fears and insecurities on vagaries stripped of all the social cues we use to interrogate communication. No tone of voice, no body language, no skin flush or eye contact or simple touch. We get complete vision at the expense of physical connection. We casually act like monsters when online, say terrible things, things we would never say to someone’s face. We’d see their hurt, feel their anger. Yet, such is the new asymmetry of power that dateless trolls can destroy lives from the safety of their parents’ basement. It turns out social media is pretty sociopathic. But this couch is pretty comfortable and many of us in the developed world enjoy tremendous security, all things being equal.

Our relentless sapien modeling no longer frets about saber toothed beasts rumbling in the brush to devour us, but abstracts those same spirits, those hopes and fears, into the characters and dramatic occurrences that enchant our fickle minds. So we sat on the couch and projected ourselves into the astral theater of television. The Gods we looked to for hope and guidance, for rules and consequences, those gods became priests, then politicians, and then celebrities. The Stars of the Silver Screen. Then we broke open the screen, tore apart the TV and unbundled its business entanglements and made it so we could all walk onto the soundstage and stand beneath those glowing lights, big smile, ready to share ourselves with the masses. On the way to Godhead we are tempted by Stardom.

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The longer this takes, and there’s no end in sight, the more I’ll be thinking of the Treaty of Versailles. It won’t lead to a new Hitler, but the risk of destabilizing the entire region is very real. Destroying a country is always a bad idea, destroying a member of your own union is much worse. And entirelu unnecessary too.

Greece Creditors Demand Legislation Of Reforms For 2018-19 (Kath.)

Eurozone finance ministers turned the heat up on Athens on Thursday, demanding that it legislates measures now for the period after 2018, when the country’s bailout ends, dashing the government’s hopes of a swift conclusion to the second review of its third bailout. The Eurogroup in Brussels, which the government hoped would pave the way for the return to Athens of the representatives of the country’s quartet of creditors to continue talks, was held just two days after the emphatic refusal by Prime Minister Alexis Tsipras to enact any further measures now. Finance Minister Euclid Tsakalotos said the demands by the IMF went “well beyond the European framework of democracy.”

“It’s not correct to ask a country in a program to legislate two to three years beforehand what it will do in 2019,” he said after the Eurogroup. Moreover, what is worrisome for the leftist-led government is that Greece appears to have lost the support of the European Commission, which aligned itself with the demands made by the IMF and German Finance Minister Wolfgang Schaeuble for Athens to legislate measures now for the period after 2018. However, Eurogroup chief Jeroen Dijsselbloem said that completing the review is “in everybody’s interest,” adding that Greece’s creditors remain committed to continuing talks, and that eurozone finance ministers want to expedite procedures that will allow creditor representatives to return to Athens “as quick as possible.” The good news, he said, was that the Greek economy is recovering fiscally, and that state revenues were higher than expected.

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The only possible decision. Time for the EU to stand up for Greece. Yeah, right.

Greek Supreme Court Rules Against Extraditing Eight Turkish Soldiers (WSJ)

Greece’s Supreme Court rejected an extradition request for eight Turkish military officers who fled to Greece after a failed coup, a decision that Turkey warned would hurt the countries’ relations. The court ruled that the servicemen wouldn’t get a fair trial in Turkey and that their extradition could put their lives at risk while exposing them to torture or degrading treatment. The decision is final and cannot be appealed. “We protest this judgment which prevents these individuals who actively participated in the coup attempt which targeted the democratic order in Turkey, killed 248 members of our security forces and civilians, wounded 2193 of our citizens and attempted against the life of our President, to be brought before the independent Turkish judiciary,” Turkey’s foreign ministry said in a written statement in English.

The Turkish statement accused Greece of sheltering “putschists” and said it that in light of a decision “taken for political motives,” Turkey will evaluate bilateral ties, including cooperation against terrorism. The eight officers, with ranks up to the level of major, flew by helicopter to the northern Greek city of Alexandroupolis the day after the July 15 coup attempt in Turkey. The Turkish government requested the rapid extradition of the men, whom it has described as “traitors,” to face charges of trying to overthrow the democratic constitution. The eight men deny the charges. They say they were unaware of the coup attempt until it was under way and fled to Greece to escape violent reprisals against soldiers after the coup failed. Greek intellectuals and activists, including prominent author Apostolos Doxiadis, campaigned forcefully against the men’s extradition in recent weeks, turning the men’s plight into a high-profile political issue.

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Like Trump’s ‘safe places’. In other words, rebuild what you destroyed. Not going to happen. They’ll just throw billions at it and hope it disappears. It won’t. But then they can say they tried the best they could.

EU Looks To Camps In Africa To Cut Immigration (R.)

EU interior ministers will consider plans on Thursday to finance camps in Africa where the UN refugee agency and aid groups would process migrants to prevent them trying to cross the Mediterranean to Europe. The sea crossing from Libya to Italy, operated by people smugglers, is now the main route for migrants seeking better lives in wealthy Europe, but the EU wants to shut it down and admit only refugees. More than 4,500 people are known to have drowned last year alone trying to make the crossing. The European Union has deployed a naval mission in the Mediterranean and is training the Libyan coastguard to cut the numbers attempting the journey. Now it also wants to return migrants plucked from the sea to where they came from. “The idea is to send them to a safe place, without bringing them into Europe,” German Interior Minister Thomas de Maiziere told reporters as he arrived for the talks in the Maltese capital Valletta.

“The people taken up by the smugglers need to be saved and brought to a safe place, but then from this safe place outside Europe we would bring into Europe only those who require protection,” he said. The camps in Libya or its neighbors would be run by the UN refugee agency UNHCR or the International Organization for Migration (IOM), which would screen the migrants and help return those not eligible for asylum to their home countries. Most of those taking the Libya-Italy route are regarded as economic migrants with no chance of winning asylum in the EU. Since the influx of more than a million people in 2015, many of them fleeing the Syrian conflict, the EU has tightened border controls, making it increasingly hard for migrants and asylum seekers alike to enter the 28-nation bloc.

It is also offering money and assistance to countries along the migration routes in the hope that fewer people will seek to leave their homes or will be stopped on the way before they embark for Europe. The idea of financing camps in Africa enjoys wide political backing in the EU, but poses legal and security challenges. Libya sank into chaos following the 2011 overthrow of veteran ruler Muammar Gaddafi, and the new UN-backed government in Tripoli exercises no control over its territory. Such lawlessness means returning people to Libya would likely violate international law, which prohibits sending people back to a place where their lives could be in danger. That is why the EU needs the UNHCR and IOM to create sites there that could be deemed as meeting international humanitarian standards. It is an effort to replicate parts of existing agreements the EU has with Turkey, Jordan and Lebanon, which host several million Syrian refugees in camps on their soil.

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“The German magazine Der Spiegel revealed a warning from the European commission that “under no circumstances” should the public learn what was said during talks held in March last year.”

Europe’s Crackdown On African Immigration Is Hitting Vulnerable Refugees (G.)

Documents cited in the Guardian on Monday showing that the UK government downplayed the risk of human rights abuses in Eritrea in an attempt to reduce asylum-seeker numbers are the latest indication of Britain’s determination to reduce African immigration. But this is a Europe-wide initiative, co-ordinated in Brussels. With French, German, Dutch and Italian elections later this year, there is intense pressure across the European Union to cut the flows of refugees and migrants across the Mediterranean. European plans to deal with the question have been veiled in secrecy, since they involve close cooperation with some of Africa’s most notorious dictatorships.

The German magazine Der Spiegel revealed a warning from the European commission that “under no circumstances” should the public learn what was said during talks held in March last year. A member of staff working for Federica Mogherini, the EU high representative for foreign affairs, warned of the risk to Europe’s reputation. Plans are being formulated under arrangements agreed between the EU and African leaders in Malta in November 2015. These called for close cooperation between European security services and those of African states. Among those around the table at Valletta were representatives of repressive regimes in Sudan (whose president, Omar al-Bashir, is wanted by the International Criminal Court for war crimes) and Eritrea, which has been accused of crimes against humanity.

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Everybody accuses the other. Meanwhile, it’s going to be very cold again in Greece this weekend.

EU’s Mishandled Millions Not Reaching Refugees (DW)

On January 18, Dimitris Avramopoulos, European Commissioner for Migration, arrived on the Greek island of Lesbos. The reason for his visit was simple, if disheartening: a wave of bitterly cold weather had blanketed much of Greece in snow, and with it the country’s refugee camps. In the world’s richest continent, images emerged of refugees – many of them children, elderly or disabled -battling sub-zero temperatures with little more protection than tents and blankets. A few days earlier Ioannis Mouzalas, the country’s Minister for Migration, had stated, “No refugee or migrant is in the cold.” Avramopoulos called on authorities and NGOs to do more. Pointedly he noted that Greece was the single biggest recipient of EU Home Affairs funding, with €1 billion ($1.1 billion) made available over two years in financial support.

So where has the money gone? And why has the country proven unable to provide rudimentary living conditions for many of the roughly 50,000 refugees? The fact is that the €1 billion figure touted by Avramopoulos conflates a number of funds many of which have not yet been spent. Nevertheless the funds that have already been awarded to the government or NGOs remain substantial. Since the start of 2015, the Greek government, according to data from the European Commission and the Greek Ministry of Development, has absorbed 179 million euros of emergency funds from the Directorate General of Home Affairs (DG HOME). This is in addition to €60 million from the €509 million of long-term funding allocated to Greece for the period 2014-2020.

Meanwhile the UNHCR, the European Asylum Support Office (EASO) and the International Organization for Migration (IOM) have received €175 million from DG HOME’s emergency funds. An additional €186 million of emergency funding has also been contracted to a number of major NGO’s for humanitarian assistance in Greece from the Directorate General for European Civil Protection and Humanitarian Aid Operations (DG ECHO) for projects starting in 2016. An additional €500 million has been earmarked for this fund until 2018.

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Jan 102017
 
 January 10, 2017  Posted by at 11:07 am Finance Tagged with: , , , , , , , ,  4 Responses »
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Jack Delano Truck service station on U.S. 1, NY Avenue, Washington, DC 1940


Pity the Sad Legacy of Barack Obama (Cornel West)
State Dep.: Presenting Evidence Of Russian Hacking Would Be Irresponsible (ZH)
Breakaway Senate Republicans Push to Delay Obamacare Repeal (BBG)
If Trump Tries To Lower Drug Prices, God Help Him: Top Medicare Official (MW)
Democrats Seek 9/11-Style Commission To Investigate Russian Hacking (G.)
Jeremy Corbyn: UK Can Be Better Off Out Of The EU (G.)
Britain’s Dangerous Post-Brexit Borrowing Binge (BBG)
Shadow Lending Leaves Chinese Banks Looking Exposed (BBG)
Thousands Of US Troops Arrive In Europe (ZH)
Top Economists Grapple With Public Disdain (WSJ)
The Harsh Reality (Kath.)
European Commission: ‘Untenable’ Situation In Greek Refugee Camps (AP)

 

 

“..a depressing decline in the highest office of the most powerful empire in the history of the world.”

Pity the Sad Legacy of Barack Obama (Cornel West)

Eight years ago the world was on the brink of a grand celebration: the inauguration of a brilliant and charismatic black president of the United States of America. Today we are on the edge of an abyss: the installation of a mendacious and cathartic white president who will replace him. This is a depressing decline in the highest office of the most powerful empire in the history of the world. It could easily produce a pervasive cynicism and poisonous nihilism. Is there really any hope for truth and justice in this decadent time? Does America even have the capacity to be honest about itself and come to terms with its self-destructive addiction to money-worship and cowardly xenophobia?

Ralph Waldo Emerson and Herman Melville – the two great public intellectuals of 19th-century America – wrestled with similar questions and reached the same conclusion as Heraclitus: character is destiny (“sow a character and you reap a destiny”). The age of Barack Obama may have been our last chance to break from our neoliberal soulcraft. We are rooted in market-driven brands that shun integrity and profit-driven policies that trump public goods. Our “post-integrity” and “post-truth” world is suffocated by entertaining brands and money-making activities that have little or nothing to do with truth, integrity or the long-term survival of the planet. We are witnessing the postmodern version of the full-scale gangsterization of the world. The reign of Obama did not produce the nightmare of Donald Trump – but it did contribute to it. And those Obama cheerleaders who refused to make him accountable bear some responsibility.

A few of us begged and pleaded with Obama to break with the Wall Street priorities and bail out Main Street. But he followed the advice of his “smart” neoliberal advisers to bail out Wall Street. In March 2009, Obama met with Wall Street leaders. He proclaimed: I stand between you and the pitchforks. I am on your side and I will protect you, he promised them. And not one Wall Street criminal executive went to jail. We called for the accountability of US torturers of innocent Muslims and the transparency of US drone strikes killing innocent civilians. Obama’s administration told us no civilians had been killed. And then we were told a few had been killed. And then told maybe 65 or so had been killed. Yet when an American civilian, Warren Weinstein, was killed in 2015 there was an immediate press conference with deep apologies and financial compensation. And today we still don’t know how many have had their lives taken away.

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Because the 9/11 commission was so successful?

Democrats Seek 9/11-Style Commission To Investigate Russian Hacking (G.)

Democratic members of the US Congress called on Monday for the creation of an independent commission to investigate Russia’s attempts to intervene in the 2016 election, similar to the September 11 panel that investigated the 2001 attacks on the United States. Their “Protecting our Democracy Act” would create a 12-member, bipartisan independent panel to interview witnesses, obtain documents, issue subpoenas and receive public testimony to examine attempts by Moscow and any other entities to influence the election. The panel members would not be members of Congress. The legislation is one of many calls by lawmakers to look into Russian involvement in the contest, in which Republican Donald Trump defeated Democrat Hillary Clinton in the White House race, confounding opinion polls.

Republicans also kept control of the Senate and House of Representatives by larger-than-expected margins. US intelligence agencies on Friday released a report saying that President Vladimir Putin of Russia ordered an effort to help Trump’s electoral chances by discrediting Clinton. Russia has denied the hacking allegations. A Kremlin spokesman said on Monday they were “reminiscent of a witch-hunt”. “There is no question that Russia attacked us,” Senator Ben Cardin, the top Democrat on the Senate foreign relations committee, told a news conference. Versions of the bill were introduced in both the Senate and House. In the Senate it has 10 sponsors. In the House it is backed by every member of the Democratic caucus, said Representative Elijah Cummings, the top Democrat on the House oversight committee. However, no Republicans currently back the bill, so its prospects are dim, given Republican control of both houses of Congress.

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And then after that commission is done investogating, they won’t tell anyone?

State Dep.: Presenting Evidence Of Russian Hacking Would Be Irresponsible (ZH)

One recurring lament throughout the theatrically dramatic campaign involving reports and emotional appeals by US intelligence agencies such as the CIA (whose primary function is the creation of disinformation) to ordinary Americans, that Russia had “hacked the US presidential election” is that for all the bluster and “conviction”, there has been zero evidence. And, as it turns out, there won’t be any, because according to the US State Department, US intelligence agencies were right to not reveal evidence of their proof that Russia interfered in US elections, and comparisons with intelligence reports that Iraq had WMDs were not relevant in the current year.

Asked by RT’s Gayane Chichakyan if Friday’s public intelligence report should have contained any proof of Russian intervention, State Department spokesman John Kirby said that no one should be surprised that US intelligence agencies were keeping evidence secret in order to protect sources and methods. “Most American people understand that they have the responsibility to protect their sources and methods,” Kirby said, adding it would be “irresponsible” to do otherwise. Actually, with the Iraq WMD fiasco strill fresh in “American people’s” minds, it is irresponsible to think most Americans are still naive idiots who will believe whatever the “intelligence agencies” will tell them.

Alas, none of that has filtered through to the appropriate authorities, and Kirby said that it was “up to the agencies to decide which information they share with the public. We rely on them to make that determination for themselves.” And, in this case, it meant sharing no information at all. The assessment in Friday’s report was made “by all 17 intelligence communities. All of them came to the same basic conclusion: that Russia interfered in the US election,” Kirby said. “All of our intelligence communities came to the same basic conclusion, over and over again.” They just couldn’t prove it, instead hoping that by repeating the same statement over and over would be sufficient.

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Get an alternative is place first, makes sense.

Breakaway Senate Republicans Push to Delay Obamacare Repeal (BBG)

A breakaway group of five moderate Senate Republicans pushed Monday to delay a bill repealing Obamacare until March — potentially enough pressure to force the party’s leadership to comply. The step is the latest sign of some Republicans’ growing uneasiness about their leadership’s plan to repeal the law with no consensus on a replacement as part of an effort to deliver swiftly on one of President-elect Donald Trump’s top campaign promises. Senators Bob Corker of Tennessee, Rob Portman of Ohio, Susan Collins of Maine, Bill Cassidy of Louisiana and Lisa Murkowski of Alaska offered an amendment Monday to the budget resolution that would extend the target date for the committees to write an Obamacare repeal bill to March 3 from Jan. 27.

“As President-elect Trump has stated, repeal and replace should take place simultaneously, and this amendment will give the incoming administration more time to outline its priorities,” Corker said in a statement. “By extending the deadline for budget reconciliation instructions until March, Congress and the incoming administration will each have additional time to get the policy right.” With Democrats opposed to a straight repeal bill, Republicans can lose no more than one backer if they want to fast-track their approach before Trump takes office. Republican leaders in the Senate are hoping to adopt the budget resolution – which would allow an Obamacare repeal bill to pass with 50 votes and escape a Senate filibuster – early Thursday after a marathon session of amendment votes.

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The power of the US pharmaceutical industry is scary.

If Trump Tries To Lower Drug Prices, God Help Him: Top Medicare Official (MW)

President-elect Donald Trump said on the campaign trail that Medicare should negotiate for lower drug prices. “God help him,” Acting Centers for Medicare and Medicaid Administrator Andy Slavitt said at the JP Morgan Health Care Conference in San Francisco on Monday. “He’s not wrong, but you need a lot of … to coin a phrase that’s been used, a fair amount of stamina if you are going to deal with the pharmaceutical industry on this topic.” Drug-pricing talk has been in the air at the JP Morgan conference, with a new administration about to take office and adding tremendous regulatory uncertainty to this sector. Despite critical comments made during election season, the president-elect has largely been seen by pharmaceutical and biotechnology companies as a positive, deregulatory force for their industry.

But the issue, still very much in the public eye, may not be off the table. Trump vowed to “bring drug prices down” in December comments to Time. The U.S. pays far more than other countries for pharmaceutical drugs, and has for a long time. “If [Trump] has the stamina he will see two things… the American public is being taken advantage of. And secondly, we are funding the R&D for free riders across the world,” Slavitt said. “And I don’t think the president-elect… is going to take too well to that.” While other countries use government negotiations to bring down drug costs, the tactic is often seen as anathema to the American free-market system. But, “this is a topic that will eventually be dealt with,” Slavitt predicted. “It’s easier to deal with this in 2017 than it will be in 2021 or 2022, when it is crippling the finances of health care.”

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Too many people are already invested in the opposite idea.

Jeremy Corbyn: UK Can Be Better Off Out Of The EU (G.)

Jeremy Corbyn will use his first speech of 2017 to claim that Britain can be better off outside the EU and insist that the Labour party has no principled objection to ending the free movement of European workers in the UK. Setting out his party’s pitch on Brexit in the year that Theresa May will trigger article 50, the Labour leader will also reach for the language of leave campaigners by promising to deliver on a pledge to spend millions of pounds extra on the NHS every week. He will say Labour’s priority in EU negotiations will remain full access to the European single market, but that his party wants “managed migration” and to repatriate powers from Brussels that would allow governments to intervene in struggling industries such as steel.

Sources suggested that the economic demands were about tariff-free access to the single market, rather than membership that they argued did not exist. Corbyn’s speech and planned media appearances represent the first example of a new anti-establishment drive designed by strategists to emphasise and spread his image as a leftwing populist to a new set of voters. They hope the revamp will help overturn poor poll ratings across the country, particularly with a looming byelection in Copeland, Cumbria. Speaking in Peterborough, chosen because it is a marginal Tory seat that voted heavily in favour of Brexit, and which Labour is targeting, Corbyn will lay into May’s failure to reveal any Brexit planning, and say that Labour will not give the government a free pass in the negotiations.

After comparing the prime minister’s refusal to offer MPs a vote on the final Brexit deal to the behaviour of Henry VIII in a Guardian interview, Corbyn will say: “Not since the second world war has Britain’s ruling elite so recklessly put the country in such an exposed position without a plan.”

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This should scare people.

Britain’s Dangerous Post-Brexit Borrowing Binge (BBG)

For the U.K. economy, the good news is that following the Brexit vote, the sky hasn’t fallen as many predicted; on the contrary, it’s been a period of unexpected fair weather. The bad news is that the benign outlook is encouraging a surge in borrowing, leaving households vulnerable if the Bank of England decides to tighten monetary policy. Andy Haldane, the chief economist at the central bank, said last week that as far as the British consumer is concerned, “it’s almost as though the referendum had not taken place.” That, he says, helps explain why the central bank’s gloomy prognosis of what a vote to leave the European Union would do to the economy has thus far turned out to be wrong. The nation appears to have been in celebratory mood this Christmas.

Credit-card company Visa said on Monday that U.K. spending jumped 2.6% in December from a year earlier, led by a 7.3% jump in hotels, restaurants and bars. In the final three months of 2016, overall spending posted its strongest growth in two years, Visa said. Britons have been loading up on debt. At the start of 2000, households had debts about equivalent to their disposable income. The ratio surged in the following years, peaking at 160% in the first quarter of 2008. As the financial crisis took its toll, people scaled back on borrowing, and the ratio had dropped to about 137% by September 2015. But it then rose for four consecutive quarters, with the most recently available figures showing a jump to 143% in the third quarter of last year:

As the chart shows, Brits are more indebted than their peers in either the U.S. or the euro zone. Perhaps unsurprisingly, while British households are still making their payments on secured loans such as mortgages, defaults on unsecured loans surged as the total debt burden climbed:

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“Of late [..] liquidity in China has been a mere accounting artifact.”

Shadow Lending Leaves Chinese Banks Looking Exposed (BBG)

In their obsession with China’s falling foreign-exchange reserves, investors may be ignoring a more painful Catch-22: a growing shortage of bank deposits. Left unaddressed, the lenders’ liquidity squeeze could leave them dangerously exposed to fickle wholesale financing, while trying to ease the shortage could worsen capital flight. Take Bank of Jinzhou. With just 0.3% of the $22 trillion in assets of the 35 publicly traded Chinese lenders, the bank appears remarkably liquid. Its 57% loan-to-deposit ratio in June was below the median reading of 67%. The Hong Kong-listed institution’s 200 billion yuan ($30 billion) deposit base offered ample support to a loan portfolio only a little higher than half that amount.

Of late, however, liquidity in China has been a mere accounting artifact. Customers’ deposits aren’t sufficient to finance Bank of Jinzhou’s 213 billion yuan in shadow loans, which are debt securities that the lender classifies as receivables. To make up the shortfall, it has borrowed 142 billion yuan from other financial institutions. Of this, as much as 78% is short-term financing. After adjusting for shadow lending, S&P Global Ratings pegged Bank of Jinzhou’s loan-to-deposit ratio at the end of 2015 at 153%. Bank of Jinzhou is hardly the only Chinese bank flirting with illiquidity: Almost all are sitting on a pile of debt masquerading as receivables.

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Nobel Peace Prize.

Thousands Of US Troops Arrive In Europe (ZH)

Just days after we reported that the US had begun deploying some 2,800 tanks, trucks and other military equipment to Germany, from where they would be transported by rail and road to Eastern Europe as part of a buildup of NATO reinforcements against “Russian expansion”, the next US deployment has made its way to Europe over the weekend, when some 4,000 US troops arrived in the German port of Bremerheven, on their way to Wroclaw, Poland under a planned NATO operation to “reassure the alliance’s Eastern European allies” in the face of what NATO has dubbed mounting Russian aggression. The American soldiers landed in Wroclaw, home to a key Nato and Polish air base in south-west Poland.

The troops will be followed by the roughly 2,800 tanks and other pieces of military equipment which are currently en route from Germany. The delivery of US Abrams tanks, Paladin artillery, and Bradley fighting vehicles, as well as supporting troops, marks a new phase of America’s continuous presence in Europe, which will now be based on a nine-month rotation. Why provoke Russia with yet another mass deployment? Because as NATO Major General Timothy McGuire told reporters, last week, when asked if the large deployment was meant to send a message to Russia, “The best way to maintain the peace is through preparation.” And while we are quoting, here is another good line from the movie Spice Like Us: “A weapon unused is a useless weapon.” The US military industrial complex is doing everything in its power to make sure a lot of weapons are used in the future.

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The priesthood is aghast.

Top Economists Grapple With Public Disdain (WSJ)

The nation’s leading economists are suffering an identity crisis as many of the institutions they helped build and causes they advanced have come in for public scorn and rejection at the ballot box. The angst was on display this weekend at the annual conference of the American Economic Association, the profession’s largest gathering. The conference is a showcase for agenda-setting research, a giant job fair for the nation’s most promising young economists and, this year, the site of endless discussion about how to rebuild trust in the discipline. Many academic economists have been champions of free trade and globalization, ideas under assault among rising populist movements in advanced economies around the world.

The rise of President-elect Donald Trump, with his fierce rhetoric against elites, in particular, left many at this conference questioning their place in the world. “The economic elite did many things to undermine their credibility while people’s economic fortunes were taking a turn for the worse,” said Steven Davis, an economist at the University of Chicago. But a road map for regaining trust is elusive. “I used to think facts and analysis will ultimately carry the day but now I’m not quite sure.” [..] Surveys from the Pew Research Center have documented dwindling support for free trade. In 2014, 60% of Democratic voters and 55% of Republican voters supported such trade agreements. In an October survey, however, support among Democrats had fallen to 56% and support among Republicans had nose-dived to 24%.

Over a billion people moved out of poverty in developing countries in the last 25 years, lifted in part by global trade and other economic prescriptions, but those same policies created winners and losers in the West. Another Pew study last year compared views of whether it was good for the U.S. to be so involved in the global economy: 86% of scholars said it was good, and just 2% bad. Among the general public, 49% thought it was bad, and just 44% good.

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A lot of snow in Athens overnight. Very cold too. It’s worse on the islands. And all we get is blame games.

The Harsh Reality (Kath.)

The refugees and migrants, thousands of people from Asia and Africa who are wintering in Greece in the hope that their dream will come true and that they will move on to central and northern Europe (imagined as hospitable by need) are harboring no illusions about this country. Greece is a country with real problems: economic, social and now weather-related. These people have to put up with the same problems as we do but the place where they are doing it from is far more difficult: They have no safe accommodation, no money and limited freedom. The additional shows of solidarity that may have come with the holiday season (even if mere publicity stunts designed for the television cameras) were soon to be wiped out by the cold snap, which also affected the islands of the Aegean. There will be no such thing as halcyon days for these people.

Official assurances by government officials that the authorities managed to provide warm and safe shelter for all asylum seekers and migrants offer little comfort, as no amount of political will, or plain desire for that matter, can reverse the situation on the ground. The problems faced by the refugee population are not tackled by prohibiting photographers from documenting the situation inside the Moria camp on Lesvos island. You cannot remedy reality by banning its representation. Is it that we do not want to taint the nation’s image in the eyes of our European partners? But the image of Greece is only part of the bigger European image. What is now happening at Moria, or any other migrant camp in Greece or Italy, is not disconnected from the values and priorities in the rest of Europe, in Poland, Austria, Slovakia or Denmark.

European Union countries, which had pledged to take in 160,000 people from Greece and Italy, have so far absorbed below 5% of that figure. Just 6,212 lucky few have been relocated from Greece and 1,950 from Italy, making a total of 8,162. The inaction, the indifference and the amoralistic policy of Europe (which is also fed by electoral concerns and growing far-right intolerance) should not serve as an alibi for the Greek government. In dealing with the migrant crisis, the SYRIZA-led administration has reacted without a clear plan or good coordination with other governments. And one last thing: The decision of Lesvos’s hoteliers to close their doors to refugees and migrants is barely in line with all the idealized rhetoric about a community’s obligations toward a supplicant – and it seems even more out of line under the existing circumstances.

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The EU hands 10s of millions in taxpayer funds to NGOs. As these fail to do what they receive the money for, it’s back to blaming Greece.

European Commission: ‘Untenable’ Situation In Greek Refugee Camps (AP)

The European Commission says conditions for refugees on Greek islands and in other camps where they are housed in tents despite severe cold weather, is “untenable.” Heavy snowfall has hit large swaths of Greece, including the eastern Aegean islands where thousands of refugees are stranded. Giorgos Kyritsis, spokesman for the government’s crisis committee on migration, told Greece’s Skai television that just under 1,000 people remain housed in tents on the islands. The severe weather had been forecast well in advance, and the government has come under fire for not acting fast enough to ensure all refugees are adequately housed. Commission spokeswoman Natasha Bertaud said the commission “is aware that the situation is currently untenable, but we also have to be clear” that conditions in reception centers are the responsibility of Greek authorities.


January 10 : homeless man sleeps on Athens beach Photo: Eurokinisi

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Aug 232016
 
 August 23, 2016  Posted by at 9:04 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle August 23 2016
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DPC ‘On the beach, Palm Beach’ 1905


Emerging Market Debt Up 24% In 2015 To $18 Trillion (VW)
China Caught In ‘Dead Money’ Trap; PBOC Pleads For Fiscal Stimulus (AEP)
China’s Best-Performing Bank A ‘Mirage’ Of Shadow Lending (BBG)
More Than 1.5 Million UK Households In Extreme Debt (G.)
Monetary Policy Has Nationalized The Japan Stock Market (CNBC)
Bank of Japan’s Rush Into Stocks Raises Fears Of Market Distortions (R.)
Fed Admits $4 Trillion More In QE Needed In Case Of “Economic Shock” (ZH)
Deutsche Bank’s $10-Billion Scandal (New Yorker)
Goldman Says It’s Too Late to Chase the Booming Real Estate Sector (BBG)
Congressman Seeks to “Stop Madness” of US Support for Saudi War in Yemen (IC)
Hillary Emails Recovered By FBI To Be Released Just Before Election Day (G.)
Chaffetz: FBI’s Notes From Clinton Interview Keep Changing (WE)
Foundation Ties Bedevil Hillary Clinton’s Presidential Campaign (NYT)
US Banks Want To Cut Branches, But Customers Keep Coming (R.)
Dark Dynamics (Jim Kunstler)
From The Destruction Of Greece To Democracy In Europe (Galbraith)
Coast Guard Fired at Migrant Boats, European Border Agency Documents Show (IC)
Greece Plans New Refugee Centers As New Arrivals Soar (Kath.)

 

 

“Unsurprisingly, China was responsible for almost all of the growth in debt last year.”

Emerging Market Debt Up 24% In 2015 To $18 Trillion (VW)

Alongside gold and developed market Sovereign bonds, developed market equities and bonds have been some of the hottest trades this year. According to Bank of America’s “Flow Show” report published at the end of last week, around $2 billion flowed into emerging market debt funds over the last week. This marks the seventh straight week of inflows into such funds. Over this period, more than $20 billion has been invested in emerging market bond funds, the largest amount on record. Meanwhile and $5 billion found its way into emerging market stock funds last week, taking the seven-week total to $14.6 billion for emerging market equity funds, a near two-year high.

Emerging market debt funds have become a hot commodity this year as the yields on developed market bonds plunge to levels that offer little in the way of return. Bond funds have attracted $138 billion so far this year. On the other hand, equity funds have seen outflows of $128 billion since the start of 2016 (all of these outflows come from mutual funds, low-cost equity ETF have attracted $52.5 billion of assets so far this year). It seems that emerging markets are only too happy to generate more debt to meet the increasing demand for investors. According to research from Bank of America’s quantitative fixed income strategist Jane Brauer, last year the total value of global emerging market outstanding debt rose to $18.2 trillion, up around $2 trillion year-on-year.

In local currency terms this gain is 24% but in US dollar terms, thanks to dollar depreciation, the rise in debt looks much more subdued at only 12%. For 2014 the total value of global emerging market outstanding debt grew by 12% year-on-year and on average the emerging market debt stock has increased by approximately 14% per annum since the year 2000. Unsurprisingly, China was responsible for almost all of the growth in debt last year. China total debt rose by $2 trillion during 2015. China domestic debt skyrocketed by 30% in 2015 in US dollar terms, with the government and financial institutions local debt components both increasing 36%.

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The more central banks print, the more trust evaporates.

China Caught In ‘Dead Money’ Trap; PBOC Pleads For Fiscal Stimulus (AEP)

China is at mounting risk of a Japanese-style “liquidity trap” as monetary policy loses traction and the economy approaches credit exhaustion, forcing a shift towards Keynesian fiscal stimulus. Officials at the PBOC have begun to call for a fundamental change in strategy, warning that interest rate cuts have become an increasingly blunt tool. They cannot easily stop companies hoarding cash or halt the slide in private investment. Sheng Songcheng, the PBOC’s head of analysis, set off a storm last month by warning that the economy had “started to show some signs of being caught in a liquidity trap”. He has since stepped up his pleas for action by the fiscal authorities to relieve the burden on the central bank, a Chinese variant of the parallel drama that is being played out in Europe and Japan.

Mr Sheng told China Business News on Monday that the country has a very low reliance on foreign borrowing and can easily afford to shore up the economy with a Keynesian boost. “China can let its deficit-to-GDP ratio rise to over 3pc or even 5pc in the long run. It can spur growth more effectively by lowering corporate taxes than by cutting the interest rate,” he said. The powerful State Council has now joined the chorus with calls this week for a $75bn cut in business taxes to boost confidence and channel stimulus to the productive economy. Caixin magazine said Chinese companies are hoarding record sums of “dead money” rather than spending it. The growth rate of private investment has dropped to 2.1pc over the last seven months, the lowest since the global financial crisis. The central bank is effectively ‘pushing on a string’, an expression coined by John Maynard Keynes in the 1930s.

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But most of the shadow loans are not inside the banks.

China’s Best-Performing Bank A ‘Mirage’ Of Shadow Lending (BBG)

The best-performing bank in China is in a struggling city in the northeast where weeds sprout alongside the concrete skeletons of high rises in an industrial zone that mostly looks like a ghost town. Steel plants have laid off tens of thousands of workers. Cranes stand idle on construction sites. Wipe away a spiderweb on a dirty glass door at an empty complex with smashed windows and there’s a notice from the local government demanding rent unpaid since November 2014. Yet the Bank of Tangshan’s financial statements hardly reflect these realities. Instead, this small lender reports the fastest growth of 156 Chinese financial institutions and the lowest level of bad loans, a mere 0.06%. Its profit jumped 436% in two years and assets soared almost 400% since the start of 2014 to 177.9 billion yuan ($26.7 billion).

It’s largely driven by shadow lending. The bank is the most prominent example of the off-loan-book wizardry that’s turbo-charging some of China’s small and mid-sized banks, creating opaque risks that could lead to failures, bailouts or liquidity shocks that jolt the nation and global markets in the years ahead. “It’s a mirage built upon risks,” said He Xuanlai, of Commerzbank. The Singapore-based analyst cited smaller banks’ use of so-called “investment receivables” — including asset management plans and wealth management products — to boost lending without facing requirements to bolster capital and loan-loss provisions. “It’s hard to assess the banks’ true asset quality.”

This form of shadow lending is so widespread that a survey of 26 banks by Moody’s Investors Service found that they’d quadrupled use of the products since 2012, with small and mid-sized lenders contributing an outsize share. The IMF estimates that Chinese banks held $2.3 trillion of shadow credit products at the end of last year, adding to a build-up that could pose “substantial risks” to the financial system. Some little-known Chinese banks have already been quietly bailed out, UBS said.

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What caused Brexit.

More Than 1.5 Million UK Households In Extreme Debt (G.)

About 1.6m UK households are living in extreme debt, according to a report by the TUC, which says official figures underestimate the intense burden of repayment on many families and individuals. Contrary to official data, which suggests that households have been repaying debt accumulated before the financial crisis, the Britain in the Red report says households are finding it harder than ever to cope as wages have fallen. “More than 1m families with a household income below £30,000 are in extreme debt and ongoing wage stagnation is making the problem worse,” the report says. Total unsecured debt, including car loans and credit cards, but excluding mortgages, for UK households rose by £48bn between 2012 and 2015 to £353bn.

As wages declined, the real burden of repaying debt became tougher. The TUC said 3.2m households are in problem debt, defined as spending more than 25% of total household income on unsecured debt repayments. About 1.6m households are in extreme debt, paying out 40% or more of household income to creditors. The problem is growing fastest among the working poor, people with jobs but insufficient pay to stay financially afloat. OECD figures show that UK real wages fell by 10.4% between 2007 and 2015, making the task of keeping up debt repayments harder. In 2015, 9% of low-income households with an adult in employment were in extreme problem debt, almost double the figure of 5% in 2014, the report found.

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One day you’ll find out how insane this is.

Monetary Policy Has Nationalized The Japan Stock Market (CNBC)

Even a resurgent yen hasn’t dampened Japan’s stock rally over the past couple months, but that’s not necessarily because investors like the market. The Nikkei 225 index has surged around 10% since late June, even as the yen has climbed against the dollar, with the pair testing levels under 100. Normally this would be bad news for stocks as a stronger yen is a negative for exporters as it reduces their overseas profits when converted to local currency. So what explains the buoyant stock market? Analysts attributed the gains to the Bank of Japan (BOJ), not fundamentals.

In a report titled, “BOJ nationalizing the stock market,” Nicholas Smith, an analyst at CLSA, said that the central bank’s exchange-traded fund (ETF) buying program was distorting the market. At its late July meeting, the BOJ said it would increase its ETF purchases so that their amount outstanding will rise at an annual pace of 6 trillion yen ($56.7 billion), from 3.3 trillion yen previously. Those purchases were particularly distorting to the market because they focused largely on funds tracking the Nikkei 225 index, Smith said in a note dated Sunday, estimating that more than half of the BOJ’s ETF buying was likely in Nikkei-tied funds.

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Kuroda and Abe are destroying their own markets by destroying price discovery.

Bank of Japan’s Rush Into Stocks Raises Fears Of Market Distortions (R.)

The Bank of Japan’s near doubling of its purchases of Tokyo shares is causing investors to worry the central bank will dominate financial markets, which could lead to price distortions as it continues to grease the economy. The BOJ’s buying spree will make it harder for investors to sift good companies from bad, and raises a host of other problems including misallocating capital, making equities trading more speculative and reducing incentives for companies to meet shareholder needs, analysts say. More than three years of massive monetary stimulus has already resulted in the central bank cornering the Japanese government bond (JGB) market and distorting interest rates. “The increased BOJ purchasing provides a very favorable demand environment for listed equities,” said Michael Kretschmer, CIO at Pelargos Capital in the Hague.

“Nevertheless, in the long run we strongly doubt these type of monetary gimmicks aimed at price setting of risk assets can have a sustained positive impact on economic growth.” The BOJ doesn’t dominate the stock market as it does JGBs, but its revved up buying of index-based shares has shifted attention to the central bank’s behavior and away from how companies perform. [..] Some liken the increased purchases by the BOJ – the only central bank in the world that buys stocks at the moment – to failed government efforts over more than two decades to prop up the market by pressing government-related financial institutions to buy after the bursting of the late-1980s asset bubble.

[..] With foreign investors largely staying away, disappointed at the lack of progress in Japan’s structural reforms, the BOJ is almost sure to be the biggest buyer on the Tokyo Stock Exchange for the foreseeable future. “The market is driven completely by the BOJ’s buying rather than views on each companies’ earnings,” said a fund manager at a Japanese asset management firm.

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“..the Fed is already factoring in a scenario in which a shock to the economy leads to additional QE of either $2 trillion, or in a worst case scenario, $4 trillion..”

Fed Admits $4 Trillion More In QE Needed In Case Of “Economic Shock” (ZH)

In a Fed Staff working paper released over the weekend titled “Gauging the Ability of the FOMC to Respond to Future Recessions” and penned by deputy director of the division of research and statistics at the Fed, the author concludes that “simulations of the FRB/US model of a severe recession suggest that large-scale asset purchases and forward guidance about the future path of the federal funds rate should be able to provide enough additional accommodation to fully compensate for a more limited [ability] to cut short-term interest rates in most, but probably not all, circumstances.” So far so good, however, there are some notable problems with the paper’s assumptions, as Citi head of G10 FX, Steven Englander, observes.

He writes that the paper’s basic framework is to take the standard US economic model used by the Fed, give it a negative shock big enough to push the unemployment rate up by 5%age points (big but not unprecedented over the last 50 years) and deploying the Fed’s policy rate, QE and forward guidance tools to see if they are adequate to get the economy back on track. Negative rates and helicopter money are not used. The two simulations assume: 1) the economy is in equilibrium initially with inflation at 2%, r* at 1%, so equilibrium nominal fed funds is 3%; 2) the economy is in equilibrium initially with inflation at 2%, r* at zero (secular stagnation) and equilibrium nominal fed funds at 2%.

He compares three policy approaches. The first assumes a linear world where fed funds can go into negative territory but there is no breakdown in the structure of economic relationships. It is probably not a realistic view of policy ineffectiveness at negative rates, but it is mean to be a baseline. The second just takes fed funds down to zero and keeps it there long enough for unemployment to return to baseline. “The third takes fed funds down to zero and augments it with additional $ 2trn of QE and forward guidance. A variation on the third policy response function doubles the amount of QE in the second simulation.” In other words, the Fed is already factoring in a scenario in which a shock to the economy leads to additional QE of either $2 trillion, or in a worst case scenario, $4 trillion, effectively doubling the current size of the Fed’s balance sheet.

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Mirror trades designed to get capital out of Russia. Nice piece.

Deutsche Bank’s $10-Billion Scandal (New Yorker)

Deutsche Bank is an unwieldy institution with headquarters in Frankfurt and about a hundred thousand employees in seventy countries. When it was founded, in 1870, its stated purpose was to facilitate trade between Germany and other countries. It soon established footholds in Shanghai, London, and Buenos Aires. In 1881, the bank arrived in Russia, financing railways commissioned by Alexander III. It has operated there ever since. During the Nazi era, Deutsche Bank sullied its reputation by financing Hitler’s regime and purchasing stolen Jewish gold. After the war, the bank concentrated on its domestic market, playing a significant role in Germany’s so-called economic miracle, in which the country regained its position as the most potent state in Europe.

After the deregulation of the U.S. and U.K. financial markets, in the nineteen-eighties, Deutsche Bank refreshed its overseas ambitions, acquiring prominent investment banks: the London firm Morgan Grenfell, in 1989, and the American firm Bankers Trust, in 1998. By the new millennium, Deutsche Bank had become one of the world’s ten largest banks. In October, 2001, it débuted on the New York Stock Exchange. Although the bank’s headquarters remained in Germany, power migrated from conservative Frankfurt to London, the investment-banking hub where the most lavish profits were generated. The assimilation of different banking cultures was not always successful. In the nineties, when hundreds of Americans went to work for Deutsche Bank in London, German managers had to place a sign in the entrance hall spelling out “Deutsche” phonetically, because many Americans called their employer “Douche Bank.”

In 2007, the bank’s share price hit an all-time peak: a hundred and fifty-nine dollars. But as it grew fast it also grew loose. Before the housing market collapsed in the United States, in 2008, sparking a global financial crisis, Deutsche Bank created about thirty-two billion dollars’ worth of collateralized debt obligations, which helped to inflate the housing bubble. In 2010, Deutsche Bank’s own staff accused it of having masked twelve billion dollars’ worth of losses. Eric Ben-Artzi, a former risk analyst, was one of three whistle-blowers. He told the SEC that, had the bank’s true financial health been known in 2008, it might have folded, as Lehman Brothers had. Last year, Deutsche Bank paid the SEC a $55 million fine but admitted no wrongdoing. Ben-Artzi told me that bank executives had incurred a tiny penalty for a huge crime. “There was cultural criminality,” he said. “Deutsche Bank was structurally designed by management to allow corrupt individuals to commit fraud.”

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When has that ever stopped the greater fool?

Goldman Says It’s Too Late to Chase the Booming Real Estate Sector (BBG)

Real estate stocks were a buying opportunity a few years ago, but at this point Goldman Sachs says the area is too risky for investors. At the end of this month, Real Estate will separate from Financials to become its own sector in the S&P 500. While those stocks have outpaced the S&P 500 so far in 2016, analysts led by David Kostin at Goldman Sachs say there are a lot of challenges, and they are not recommending investors try to make up for the missed gains. “Real Estate has outpaced the S&P 500 by 156 basis points year-to-date, which has hurt large-cap mutual fund returns given their underweight allocation to the sector,” Kostin and company write.

One thing that could help the new sector, however, is that even if those fund managers just move from underweight to neutral, there could be a big inflow of funds. According to Goldman, close to half of large-cap core funds managers have zero exposure to the sector. The analysts forecast as much as $19 billion in new demand, as funds that aren’t currently in real estate try to play catch up. That may be good enough not to slap a sell rating on these stocks, but it isn’t enough to give them a buy rating. “Looking forward, we recommend a Neutral weighting to the Real Estate sector given slowing top-line revenue growth, average relative valuation, and risks from a higher interest rate environment,” they conclude.

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“I taught the law of war when I was on active duty [..] You can’t kill children, newlyweds, doctors and patients – those are exempt targets under the law of war..”

Congressman Seeks to “Stop Madness” of US Support for Saudi War in Yemen (IC)

For months, a California congressman has been trying to get Obama administration officials to reconsider U.S. backing for the Saudi-led war in Yemen. And for months, he has been given the runaround. Ted Lieu, a Democrat representing Los Angeles County, served in the Air Force and is a colonel in the Air Force Reserves. The brutal bombing of civilian areas with U.S.-supplied planes and weapons has led him to act when most of his colleagues have stayed silent. “I taught the law of war when I was on active duty,” he told The Intercept. “You can’t kill children, newlyweds, doctors and patients – those are exempt targets under the law of war, and the coalition has been repeatedly striking civilians,” he said. “So it is very disturbing to me. It is even worse that the U.S. is aiding this coalition.”

But he and a very few other lawmakers who have tried to take bipartisan action to stop U.S. support for the campaign are a lonely bunch. “Many in Congress have been hesitant to criticize the Saudis’ operational conduct in Yemen,” Lieu said. He didn’t say more about that. The matter has gotten ever more urgent since August 7, when the Saudi-led coalition relaunched an aggressive campaign of attacks after Houthi rebels in Yemen rejected a one-sided peace deal. More than 60 Yemeni civilians have been killed in at least five attacks on civilian areas since the new bombing campaign began. On August 13, the coalition bombed a school in Haydan, Yemen, killing at least 10 children and injuring 28 more.

Lieu released a statement two days later, harshly condemning the attack. “The indiscriminate civilian killings by Saudi Arabia look like war crimes to me. In this case, children as young as 8 were killed by Saudi Arabian air strikes,” he wrote. “By assisting Saudi Arabia, the United States is aiding and abetting what appears to be war crimes in Yemen,” Lieu added. “The administration must stop enabling this madness now.” Then, mere minutes after his office sent out the statement about the August 13 attack, another tragedy started making headlines: The coalition had just bombed a hospital operated by the international medical humanitarian group Doctors Without Borders (MSF), killing 19.

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Something tells me this is not a done deal.

Hillary Emails Recovered By FBI To Be Released Just Before Election Day (G.)

Nearly 15,000 emails recovered by the FBI from the private server used by Hillary Clinton when she was secretary of state are set to be made public just before the presidential election in November, it emerged in court on Monday. The state department said it was reviewing 14,900 documents that came to light in the now-closed investigation into the handling of sensitive information that flowed through the server in question. That is a major addition to the 30,000 emails that Clinton’s lawyers considered work-related and returned to the department in December 2014. The FBI cleared Clinton of criminal conduct but found her to have have been “extremely careless”, and the saga continues to dog her.

On 5 August the FBI completed a transfer of several thousand previously undisclosed work-related emails for the state department to review and publish. Responding to the news, the Republican National Committee chairman, Reince Priebus, said Clinton “seems incapable of telling the truth”. State lawyers told federal judge James Boasberg on Monday they expected to release the emails in batches on 14, 21 and 28 October and 4 November. The election, against Republican nominee Donald Trump, takes place on 8 November. Boasberg ordered that the department should aim for a more ambitious deadline. The judge set another hearing for 22 September, so progress can be reviewed.

Tom Fitton, president of the conservative legal group Judicial Watch, which brought the case under a Freedom of Information Act (Foia) request, tweeted: “FBI found almost 15,000 new Clinton documents. When will state release them?” Another federal judge, Emmet Sullivan, last week ordered Clinton to answer written questions from Judicial Watch. Her answers are not due until after the presidential election.

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“The Oversight committee is slated to hold a hearing next month to look at the possibility of bringing perjury charges against the former secretary of state. FBI Director James Comey has been named as a possible witness.”

Chaffetz: FBI’s Notes From Clinton Interview Keep Changing (WE)

The FBI has handed Congress two copies of notes from its interview with Hillary Clinton about her private email server, but according to the chairman of the House Oversight Committee, the two sets of notes aren’t consistent with each other. “The … thing that is stunning to me, which I found out last night, is the FBI gave us one set of documents. Then we asked them, and they … gave us a second copy in a classified setting. But they’re different,” said committee Chairman Rep. Jason Chaffetz in a Monday morning interview on MSNBC. The Utah Republican said he had no explanation, and that he would have to seek one from the FBI. “We have a second set of documents that’s now different. You turn them page by page, and they’re different. I don’t know why that happens,” Chaffetz added.

Chaffetz said there was “new information” in the second set of documents, which has left the committee confused. “So we’re going back to square one. We’ve only had them for days, but still, the second copy is different from the first copy. Why is that?” he asked. Asked whether he would pursue perjury charges against Clinton for making misleading statements to Congress, Chaffetz demurred, but did criticize the FBI. “I’m stunned the FBI director came before Congress and testified that during their year-long investigation, they never looked at the under oath testimony from Hillary Clinton.” “You’re kidding me? You’re doing an investigation about the email scandal, and you never look at what she said under oath? Politicians lie, but when you’re under oath, you can’t do that,” Chaffetz said.

The Oversight committee is slated to hold a hearing next month to look at the possibility of bringing perjury charges against the former secretary of state. FBI Director James Comey has been named as a possible witness. It would the second time in as many months that Comey has been called before Congress to explain the investigation into Clinton’s emails.

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Emails, Clinton Foundation, I still can’t see how she would be electable. Time to bring in Joe Biden?

Foundation Ties Bedevil Hillary Clinton’s Presidential Campaign (NYT)

The kingdom of Saudi Arabia donated more than $10 million. Through a foundation, so did the son-in-law of a former Ukrainian president whose government was widely criticized for corruption and the murder of journalists. A Lebanese-Nigerian developer with vast business interests contributed as much as $5 million. For years the Bill, Hillary and Chelsea Clinton Foundation thrived largely on the generosity of foreign donors and individuals who gave hundreds of millions of dollars to the global charity. But now, as Mrs. Clinton seeks the White House, the funding of the sprawling philanthropy has become an Achilles’ heel for her campaign and, if she is victorious, potentially her administration as well.

With Mrs. Clinton facing accusations of favoritism toward Clinton Foundation donors during her time as secretary of state, former President Bill Clinton told foundation employees on Thursday that the organization would no longer accept foreign or corporate donations should Mrs. Clinton win in November. But while the move could avoid the awkwardness of Mr. Clinton jetting around the world asking for money while his wife is president, it did not resolve a more pressing question: how her administration would handle longtime donors seeking help from the United States, or whose interests might conflict with the country’s own.

The Clinton Foundation has accepted tens of millions of dollars from countries that the State Department — before, during and after Mrs. Clinton’s time as secretary — criticized for their records on sex discrimination and other human-rights issues. The countries include Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, Brunei and Algeria. Saudi Arabia has been a particularly generous benefactor. The kingdom gave between $10 million and $25 million to the Clinton Foundation. (Donations are typically reported in broad ranges, not specific amounts.) At least $1 million more was donated by Friends of Saudi Arabia, which was co-founded by a Saudi prince.

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Germany’s call yesterday for people to hoard cash changes this game.

US Banks Want To Cut Branches, But Customers Keep Coming (R.)

Despite banks’ nudging toward online tools, many U.S. customers are not ready to give up regular visits to their nearest branch, complicating the industry’s efforts to slim down. U.S. banks have trimmed the number of branches by 6% since it peaked in 2009, according to Federal Deposit Insurance Corp data. The 93,283 branches open at the end of last year was the lowest level in a decade. Yet analysts who have examined the data say banks should have done more to offset the pressure on revenue from low interest rates and regulatory demands. The number of FDIC-insured banks has fallen by more than 25% over that time even as industry assets have grown, indicating room for greater branch consolidation.

Bank executives argue, however, that branches remain crucial for acquiring new customers and doing more business with existing ones. Closures, they say, would hurt revenue more than help reduce costs. “Our customers still want to visit us,” Jonathan Velline, Wells Fargo’s head of ATM and store strategy, told Reuters in an interview. “They’re still coming to our stores and our ATMs at pretty consistent rates.” Bankers across the industry share that view. They say online banking complements traditional services for U.S. customers, but few have gone fully digital.

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Jim gets back to basics: oil was always a one-off, and there are no replacements.

Dark Dynamics (Jim Kunstler)

What the world is witnessing, without actually paying much attention, is the death of our debt-based economy — that is, borrowing the means to thrive in the now from a future that can’t really furnish it anymore. The illusion that the future would always provide was a legacy of the cheap energy era. That era ended in 2005. The basic promise is broken and with it the premise for living as we had been. The energy available today, especially oil, is no longer cheap enough to run the industrial economies designed to run on it. Any way that you look at the dynamic, Modernity loses. With oil under $50 a barrel, and gasoline under $3 a gallon (back east), the public apparently thinks that the Peak Oil story is dead and gone.

But when it costs $75 a barrel to pull the stuff out of the ground, and the stuff only sells for $47 a barrel, the oil companies’ business model doesn’t really work. The shale oil companies especially have been gaming the system by issuing bonds that pay relatively high interest rates in an investment climate where almost nothing else offers enough yield to live on, especially for pension funds and insurance companies. Two little upward bumps this year in the price of oil toward the $50 range prompted a wish that the good old days of high-priced oil were coming back, that the oil business would be profitable again. The trouble is that high oil prices – say, over $100 a barrel, as it was in 2014 – crush advanced economies, so that demand for oil crashes, and with it productive activity.

Without productivity, the debts issued by companies (and even governments) don’t get repaid. There really is no “sweet spot” in this energy cost equation. A lot of wishful thinkers would like to believe that you can run contemporary life on something beside oil. But the usual “solutions,” solar and wind energy, don’t pencil out, especially when you consider that the hardware for running them – the photovoltaics, charge controllers, batteries, turbines, and blades, can’t be mass-produced and distributed without the very fossil fuels they are supposed to replace.

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James Galbraith runs with Yanis’ ideas for DiEM25.

From The Destruction Of Greece To Democracy In Europe (Galbraith)

In Protesting the Treaty of Versailles ending World War I, John Maynard Keynes wrote: “The policy . . . of depriving the lives of millions of human beings, of depriving a whole nation of happiness should be abhorrent and detestable — abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilized life of Europe.” Last year’s third bailout of Greece, imposed by Europe and the International Monetrary Fund, does to Greece what Versailles did to Germany: It strips assets to satisfy debts. Germany lost its merchant marine, its rolling stock, its colonies, and its coal; Greece has lost its seaports, its airports — the profitable ones — and is set to sell off its beaches, the public asset that is a uniquely Greek glory.

Private businesses are being forced into bankruptcy to make way for European chains; private citizens are being forced into foreclosure on their homes. It’s a land grab. And for what? To satisfy old public debts, incurred for tanks, submarines, the Olympics, big construction projects outsourced to German firms, and to hide deficits in health care, with creditor connivance — a quagmire of graft to support an illusion, that Greece could “compete” as part of the euro. Already in 2010 the IMF knew it was breaking its own rules by pretending that Greece could recover quickly, sustain a huge primary surplus, and repay its debts. Why? To help save French and German banks, which the IMF’s sainted managing director, Dominique Strauss-Kahn, wanted to do, because he wanted to be president of France.

Europe crushed the Greek resistance in 2015. Not because Wolfgang Schäuble, the German finance minister, thought his economic plan would work; he candidly told the Greek finance minister, Yanis Varoufakis, that “as a patriot” he would not sign it himself. But Germany wants to impose its order on Italy and on France, where civil society continues to fight back. And Chancellor Angela Merkel could not admit to her voters, or to fellow Europeans from Slovakia to Portugal, that back in 2010 she’d saved Germany’s banks by saddling them with Greek debts that could never be paid. Greece was given collective punishment as a lesson. It was done to show that “there is no alternative.” It was done to stop any other attempt to develop, articulate, and defend a more rational policy. It was done to protect the power of the ECB, the German government in Europe, and the policy-making authority, in face of a long record of failure, of the IMF.

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Routine procedure.

Coast Guard Fired at Migrant Boats, European Border Agency Documents Show (IC)

On a smuggler’s boat from Turkey two years ago, 19-year-old Rawan watched the passengers start to panic as a Greek coast guard vessel approached them head on, circling twice. Rawan heard two gunshots ring out from the Greek patrol. Fearing arrest, the driver of Rawan’s boat, a Turkish fisherman, turned the vehicle around to flee back to Turkey. Then Rawan heard more shots. When the bullet hit her in the lower back, at first she felt nothing. Then, Rawan says, it felt like fire. Rawan’s husband had made it to Germany a year earlier; both were fleeing their home in Damascus, Syria. Rawan and 12 other Syrians were headed for the Greek island of Chios on a small fiberglass boat, much faster than the inflatable dinghies that many refugees use for the 5-mile crossing.

Before the shots, Rawan heard “stop” blare over a loudspeaker on the coast guard vessel. She and four others were in the forward compartment of the boat, and more people were sitting in the back near the outboard engine. Rawan’s father-in-law, Adnan Akil, was also shot in the lower back, and Amjad A., another Syrian refugee who asked that only his first name and last initial be used, was shot in the shoulder. Akil says he clearly remembers the chain of events leading up to the shooting. One officer had a pistol, the other had a submachine gun. Akil, Rawan, and other witnesses say they heard one officer shoot in automatic bursts. “We were shouting and screaming for the driver to stop,” remembers Braa Abosaleh, another Syrian refugee who was on the boat that day.

When the driver didn’t stop, the coast guard rammed their boat from the back right side. Akil and Rawan remember the driver stopping the boat, pretending he was going to surrender. As the officers put down their weapons and approached, the driver fired up the engine again and turned back toward Turkey. This time, the coast guard shot directly at the fleeing boat.

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I fear for Greece between now and (into) 2017.

Greece Plans New Refugee Centers As New Arrivals Soar (Kath.)

Greek authorities hope that the construction of a new migrant reception center in Thiva, central Greece, which is set to be completed in the coming days, will ease congestion in camps on the country’s eastern Aegean islands, while plans are also under way to open a refugee facility on Crete. “The situation on the islands is only marginally under control,” a source inside the Public Order Ministry told Kathimerini on condition of anonymity on Monday. Authorities are said to be drawing up plans to create so-called “closed-structure” detention camps on the islands to separate individuals who are scheduled to be repatriated – as well as troublemakers – from those who have passed a first screening in their claim for international protection.

Meanwhile, migrants with a criminal past will be transferred from the islands to pre-departure centers on mainland Greece. About 300 individuals have already been transferred and another 100 are to follow in the coming days. Less straightforward are the government’s plans to construct migrant reception facilities on the island of Crete. Officials at the Ministry for Immigration Policy told Kathimerini that, by the end of September, local authorities are expected to propose sites where these facilities could be built. “Any plans are to take effect as of November, after the island’s tourism season has drawn to a close,” an unnamed official said.

Read more …

Aug 142016
 
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Harris&Ewing Goat team, Washington, DC 1917


Silicon Valley May Get Hit By China’s ‘Virtual Reality’ Economy (CNBC)
High-Risk ‘Shadow’ Credit in China Put at $2.9 Trillion by IMF (BBG)
Insanity, Oddities and Dark Clouds in Credit-Land (AM)
The Next President Should Forgive All Student Loans (TIME)
The Big Idea about Private Debt (Steve Keen)
How to Break the Power of Money (Korten)
TTIP: The Suicide of Nations (PCR)
How Global Elites Forsake Their Countrymen (Noonan)
Megaupload’s Dotcom To Seek A Review Of US Court’s Forfeiture Ruling (R.)
A Year After The Crisis Was Declared Over, Greece Is Still Spiralling Down (G.)
The Greek Crisis Will Flare Up Again. And Why Should It Not? (G.)
Aid and Attention Dwindling, Refugee Crisis Intensifies in Greece (NYT)
Germany To Send 3,000 Refugees Back To Greece (KTG)

 

 

Virtual money economy.

Silicon Valley May Get Hit By China’s ‘Virtual Reality’ Economy (CNBC)

“Japan 25 years ago and China now were both debt [and] currency fueled flood of cash into U.S. assets inflating both valuations and fears,” Josh Wolfe, co-founder and managing partner of Lux Capital, a $700 million venture capital firm, told CNBC via email this week. Like other skeptical investors, Wolfe believes there are “really two Chinas: A high growth tech and biotech driven economy conflated with a levered old asset state owned influenced burden of very bad decision making and governance.” China’s high debt, slowing growth and appetite for U.S. assets—the country already owns trillions in U.S. Treasuries and dollars—raises the stakes for tech companies if the country’s fortunes should suddenly reverse.

Of the nearly $60 billion that the National Venture Capital Association says was invested in U.S. startups last year, about a quarter of those flows came from one destination: China. Along with art and high end real estate, tech ventures have been the primary recipient of China’s largesse. Meanwhile, 2016 has already exceeded last year’s record flow of Chinese capital, according to recent figures from The Rhodium Group. Wolfe told CNBC that Chinese investors “are fleeing a virtual reality economy in China and funding virtual reality startups in the U.S. They seem to be choosing illiquidity and uncertainty, denominated in dollars over liquidity and certainty of devaluation denominated in yuan.”

China’s slowing economy has reverberated across the globe, sending commodities reeling and giving investors fright. That pain is far from over: The IMF warned on Friday that China’s real GDP could sink below 6% in 2020. If Chinese interest rates rise or liquidity tightens, the flood of money threatens to do “what all excesses do: reverse or stop,” said Lux Capital’s Wolfe. “As the China bubble pops, it has been commodities and commodity exporting countries in the first wave, then banks and non-performing loans, then it will be the assets they financed or were secured by.”

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Yuan+Junk=Yunk.

High-Risk ‘Shadow’ Credit in China Put at $2.9 Trillion by IMF (BBG)

IMF staff said that 19 trillion yuan ($2.9 trillion) of Chinese “shadow” credit products are high-risk compared with corporate loans and highlighted the danger that defaults could lead to liquidity shocks. The investment products are structured by the likes of trust and securities companies and based on equities or on debt – typically loans – that isn’t traded, staff members John Caparusso and Kai Yan said in a report released Friday. The commentary highlighted the potential for risks bigger to the nation’s financial stability than from companies’ loan defaults. While loan losses can be realized gradually, defaults on the shadow products could trigger risk aversion that’s harder to manage, the report said.

The “high-risk” products offer yields of 11% to 14%, compared with 6% on loans and 3% to 4% on bonds, the commentary said. The lowest-quality of these products are based on “nonstandard credit assets,” typically loans, it said. In a separate document in a bundle released by the IMF, the Chinese banking regulator was cited as saying that banks’ exposures to “nonstandard credit assets” were a key concern, with moves already made to require higher provisioning against such exposures than for regular loans.

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“Foreign buying of US assets very often reaches record highs prior to major financial accidents.”

Insanity, Oddities and Dark Clouds in Credit-Land (AM)

Bond markets are certainly displaying a lot of enthusiasm at the moment – and it doesn’t matter which bonds one looks at, as the famous “hunt for yield” continues to obliterate interest returns across the board like a steamroller. Corporate and government debt have been soaring for years, but investor appetite for such debt has evidently grown even more. A huge mountain of interest-free risk has accumulated in investor portfolios and on bank balance sheets. Globally, more than $13 trillion in sovereign bonds trade at negative yields to maturity. In spite of soaring defaults, junk bond yields have collapsed again as well. In short, insanity rules in the bond markets. A recent article in the FT informs us of “a wave of foreign demand for US corporate debt”:

“Record-low interest rates are no barrier for US companies finding buyers for their debt thanks to a relentless global quest for fixed returns that shows little sign of easing. The pace of US corporate debt sales – which has not been fast enough to quench investor demand – is expected to continue unabated driven by foreign buyers in a world where roughly $13tn of sovereign and corporate debt trades in negative territory. “It is a low return world,” says Ed Campbell, a portfolio manager with asset manager QMA. “You don’t have a lot of asset classes that are attractive and there is a flight to quality where the US is outperforming.” More than $2.3tn of dollar-denominated debt has been issued by companies and banks since the year began, including three of the ten largest corporate bond sales on record, Dealogic data show.”

This not only shows that “investors” (we use the term loosely) are insane, it also happens to be a contrary indicator. Foreign buying of US assets very often reaches record highs prior to major financial accidents. Is this really a “flight to quality?” Corporate defaults are currently at the highest level since 2009, with US defaults clearly leading the pack:

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And what should(s)he do for everyone else who’s in trouble? Can’t very well help only students.

The Next President Should Forgive All Student Loans (TIME)

If Hillary Clinton is to win this November, she needs to motivate the electorate to come out to vote for something more than a justified aversion to Donald Trump. Particularly for younger voters and voters with families, she has to capture their imaginations with a bold, simple, and common sense proposal to address one of the most critical financial and social problems currently facing a generation: the student loan crisis. And she needs to do so in a way that can do the most immediate good for the nation at large. First, all outstanding student loan debt should be forgiven. Second, a new loan program should be created that is tied to incentives for college graduates to choose careers in public service and which indexes repayment to income.

Current outstanding student loans amount to 1.3 trillion dollars, roughly 10% of all household debt. Student loan debt is larger than either car loans or credit card debt. Forty-two million Americans hold student loan debt. Student debt has been a drag on younger generations’ incomes and has contributed to the stagnation in middle class earnings. The average debt at graduation has skyrocketed from $10,000 in 1993 to more than $35,000 in 2016. Furthermore, the federal government has set interest rates on student loans at twice the current market rate of other types of loans. Going to college should not be a profit center for Wall Street and the federal government.

By forgiving student loan debt—which is largely held by the government—a tremendous economic stimulus would be generated, whose beneficiaries are people, not banks. The cost is comparable to the stimulus program created in the wake of the financial crisis of 2008, and, in this case, Main Street and not Wall Street will benefit. Quickly, more than two generations of Americans would be able to invest in homes and develop and support families. And the Americans who benefit are those who have obtained education and skills, but whose careers have been hobbled by an inordinate amount of debt.

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Private debt sinks societies. For no good reason. Make forgiving student debt part of a modern jubilee?!

The Big Idea about Private Debt (Steve Keen)

This is a talk I gave to the Northern Ireland Big Ideas Event organised by NICVA: the “Northern Ireland Council for Voluntary Action” (http://www.nicva.org/event/big-ideas-…). Unfortunately I ran out of time to finish my presentation on why a “Modern Debt Jubilee” is needed to escape from the current economic state of credit stagnation, but I covered why it is this–and not “secular stagnation” that explains the prevalence of low rates of economic growth globally.

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True but not strong.

How to Break the Power of Money (Korten)

Our current political chaos has a simple explanation. The economic system is driving environmental collapse, economic desperation, political corruption, and financial instability. And it isn’t working for the vast majority of people. It serves mainly the interests of a financial oligarchy that in the United States dominates the establishment wings of both the Republican and Democratic parties. So voters are rebelling against those wings of both parties—and for good reason. As a society we confront a simple truth. An economic system based on the false idea that money is wealth—and the false promise that maximizing financial returns to the holders of financial assets will maximize the well-being of all—inevitably does exactly what it is designed to do:

1. Those who have financial assets and benefit from Wall Street’s financial games get steadily richer and more powerful. 2. The winners use the power of their financial assets to buy political favor and to hold government hostage by threatening to move jobs and tax revenue to friendlier states and countries. 3. The winners then use this political power to extract public subsidies, avoid taxes, and externalize environmental, labor, health, and safety costs to further increase their financial returns and buy more political power. This results in a vicious cycle of an ever greater concentration of wealth and power in the hands of those who demonstrate the least regard for the health and well-being of others and the living Earth, on which all depend.

Fewer and fewer people have more and more power and society pays the price. A different result requires a different system, and the leadership for change is coming, as it must, from those for whom the current system does not work.

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“The agreements make global corporations immune to laws and regulations that can be said to adversely impact their profits.”

TTIP: The Suicide of Nations (PCR)

The TransAtlantic and TransPacific “partnerships” are the economic and financial counterpart to Washington’s military and foreign policy push for world hegemony. TTIP and TPP are neither partnerships nor trade agreements. They are instruments of financial imperialism that, if they come into effect, subordinate the sovereignty of countries to the profits of global corporations. The reason the “partnerships” are negotiated in secrecy without public discussions and the participation of the national legislatures is that the so-called agreements cannot stand the light of day. The reason is simple. The agreements make global corporations immune to laws and regulations that can be said to adversely impact their profits.

It makes no difference whether the laws protect the environment, the safety of food and workers or are part of the social fabric. If the laws impose costs that reduce profits, corporations can sue the governments in “corporate tribunals” in which the corporations themselves serve as judge and jury. This is no joke. Public Citizen reports that the agreements would greatly expand the privileges given to foreign corporations by the North American Free Trade Agreement under which $350 million has been paid out by governments to corporations because of costs of complying with toxic waste and logging rules, with $13 billion in claims pending.

Economist Michael Hudson cites a British study that public provision of health care, such as the UK’s National Health Service, is a TTIP target on the grounds that not only health care regulations but also public provision of health care harms the commercial interests of corporations. TTIP and TPP are tools for disenfranchising electorates and overturning democratic outcomes and for looting taxpayers via damage suits against governments for the costs of complying with health, safety, environmental, and social laws and regulations. The agreements place corporations above the laws of countries. The agreements have the potential of producing a worldwide sweatshop with starvation wages devoid of environmental and safety legislation.

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Curious ideas when coming from the Wall Street Journal.

How Global Elites Forsake Their Countrymen (Noonan)

On Wall Street, where they used to make statesmen, they now barely make citizens. CEOs are consumed with short-term thinking, stock prices, quarterly profits. They don’t really believe that they have to be involved with “America” now; they see their job as thinking globally and meeting shareholder expectations. In Silicon Valley the idea of “the national interest” is not much discussed. They adhere to higher, more abstract, more global values. They’re not about America, they’re about … well, I suppose they’d say the future. In Hollywood the wealthy protect their own children from cultural decay, from the sick images they create for all the screens, but they don’t mind if poor, unparented children from broken-up families get those messages and, in the way of things, act on them down the road.

From what I’ve seen of those in power throughout business and politics now, the people of your country are not your countrymen, they’re aliens whose bizarre emotions you must attempt occasionally to anticipate and manage. In Manhattan, my little island off the continent, I see the children of the global business elite marry each other and settle in London or New York or Mumbai. They send their children to the same schools and are alert to all class markers. And those elites, of Mumbai and Manhattan, do not often identify with, or see a connection to or an obligation toward, the rough, struggling people who live at the bottom in their countries. In fact, they fear them, and often devise ways, when home, of not having their wealth and worldly success fully noticed.

Affluence detaches, power adds distance to experience. I don’t have it fully right in my mind but something big is happening here with this division between the leaders and the led. It is very much a feature of our age. But it is odd that our elites have abandoned or are abandoning the idea that they belong to a country, that they have ties that bring responsibilities, that they should feel loyalty to their people or, at the very least, a grounded respect.

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“Did they think they can separate me from my kids without a fight? I fight corrupt US empire clowns all day, every day. Not even tired.”

Megaupload’s Dotcom To Seek A Review Of US Court’s Forfeiture Ruling (R.)

German tech entrepreneur and alleged internet pirate Kim Dotcom will seek a review of a Federal Court decision which rejected his bid to keep hold of millions of dollars in assets held in Hong Kong and New Zealand, his lawyer said. A three-judge panel of the 4th Circuit U.S. Court of Appeals ruled two to one on Friday that Dotcom could not recover his assets because by remaining outside the U.S., he was a fugitive, which disentitled him from using the resources to fight his case. Dotcom’s lawyer Ira P. Rothken said his client would seek a review of the decision in front of the full bench and, if necessary, petition the Supreme Court.

“This opinion has the effect of eviscerating Kim Dotcom’s treaty rights by saying if you lawfully oppose extradition in New Zealand, the U.S. will still call you a fugitive and take all of your assets,” Rothken said in an email to Reuters received on Sunday. Dotcom has been fighting extradition from New Zealand over charges of copyright infringement, racketeering and money laundering in the United States related to the Megaupload file-sharing site he founded in 2005. A New Zealand court ruled in December he could be extradited, but an appeal hearing has been set for later this month. Dotcom responded to the Federal Court ruling on Twitter. “Did they think they can separate me from my kids without a fight? I fight corrupt US empire clowns all day, every day. Not even tired.”

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The writedowns total down the road keeps growing rapidly.

A Year After The Crisis Was Declared Over, Greece Is Still Spiralling Down (G.)

In a side street in the heart of Athens, two siblings are hard at work. For the past year they have run their hairdressing business – an enterprise that was once located on a busy boulevard – out of a two-bedroom flat. The move was purely financial: last summer, as it became clear that Greeks would be hit by yet more austerity to foot the bill for saving their country from economic collapse, they realised their business would go bust if it continued operating legally. “We did our sums and understood that staying put made no sense at all,” says one sibling. “If we didn’t [offer] receipts, if we avoided taxes and social security contributions, we could just about make ends meet.”

They are far from being alone. A year after debt-stricken Greece received its third financial rescue in the form of international funding worth €86bn, such survival techniques have become commonplace. For a middle class eviscerated by relentless rounds of cuts and tax rises – the price of the country’s ongoing struggle to avert bankruptcy – the draconian conditions attached to the latest bailout are invariably invoked in their defence. Measures ranging from the overhaul of the pension system to indirect duties – slapped on beer, fuel and almost everything in between – and a controversial increase in VAT are similarly cited by Greeks now reneging on loan repayments, property taxes and energy bills.

Against a backdrop of monumental debt – €320bn, or 180% of GDP, the accumulation of decades of profligacy – fatalism is fast replacing pessimism on the streets. “Our country is doomed,” sighs Savvas Tzironis, summing up the mood. “Everything goes from bad to worse.” Close to half a million Greeks are believed to have migrated since the crisis begun, thanks to the searing effect of persistent unemployment (at just under 24%, the highest in Europe) and an economy that has shed more than a third of its total output over the past six years. The nation has been assigned some €326bn in bailout loans since May 2010 – the biggest rescue programme in global financial history. Yet the fear that it is locked in an economic death spiral was given further credence last week when Eurobank analysts announced that consumption and exports had also fallen, by 6.4% and 7.2%, in the second quarter of the year.

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And why should Larry Elliott not call a spade a spade? What’s happening to Greece is not some ‘policy mistake’, all parties involved know exactly what they do.

The Greek Crisis Will Flare Up Again. And Why Should It Not? (G.)

Greece has ceased to make headlines. A year ago, the TV cameras were trained on the protesters thronging the streets of Athens because there were fears that a crisis that had been steadily becoming more acute in the first half of 2015 could result in the single currency splintering. That threat was removed by a deal that involved a humiliating climbdown by the Syriza-led government. Greece received a bailout, but with harsh conditions attached. There were three obvious problems with that 2015 deal, which secured Greece its third bailout in five years. The first was that the new dose of austerity would make it more difficult for Greece to emerge from a slump just as severe as that which gripped the US in the 1930s.

The second was that Greece’s creditors were making unrealistic assumptions for growth and deficit reduction. The third was that sooner or later the Greek crisis would flare up again. It was a case of when, not if. It has not all been bad news over the past 12 months. Fears that yields on Greek bonds would soar after the UK’s Brexit vote did not materialise. Some of the tough capital controls that were imposed in the summer of 2015 to protect the banking system have been eased. There has been talk that by next summer it will be possible for the government in Athens to raise money in the world’s financial markets by selling Greek government bonds. All that said, though, the first two predictions have come true.

By last summer, Greece had suffered a five-year slump that was on a par with the damage caused to the US economy in the Great Depression. Yet the country’s creditors thought it was a good idea to suck even more demand out of the economy through spending cuts and tax increases. The result has been depressingly predictable. Far from there being a resumption of growth, the economy has continued to contract. Greece’s national output was 1.4% lower in the first three months of 2016 than it was a year earlier. Consumer spending was down by 1.3%. Nor, with confidence at rock bottom, is there much prospect of better times. Greece remains deep in recession.

[..] The IMF says that without debt relief, Greece’s debt could hit 250% of GDP by the middle of the century. Germany would prefer those discussions to be delayed until after its election in autumn next year. But the chances are that Greece will be back in the headlines before then.

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Oh, irony. Just a few days after I wrote about Greece’s 15 minutes of fame in Meanwhile in Greece.., both the Guardian and the NY Times happen to notice the same thing. “..ceased to make headlines..” , “..Attention dwindling..”

Aid and Attention Dwindling, Migrant Crisis Intensifies in Greece (NYT)

Seven months after the EU shut the doors to large numbers of newcomers, Greece remains Europe’s de facto holding pen for 57,000 people trapped amid the chaos. Many are living in a distressing limbo in sordid refugee camps on the mainland and on Greek islands near Turkey. A year after the world was riveted by scenes of desperate men, women and children streaming through Europe, international attention to their plight has waned now that the borders have been closed and they are largely confined to camps. Anti-immigrant sentiment has surged since last year in many countries, especially as people who entered Europe with the migrant flow are linked to crimes and, in a few cases, attacks planned or inspired by the Islamic State or other radical groups.

Neither the prosperous nations of Western and Northern Europe, where the refugees want to settle, nor Turkey, their point of departure for the Continent, are living up to their promises of help. [..] The ranks of those in limbo are most likely to grow despite a deal to resolve the crisis that took effect March 20 between the EU and Turkey. While the number of migrants entering Greece has dwindled from nearly 5,000 a day last year, hundreds have started crossing the Aegean Sea again after the July 15 coup attempt in Turkey. Few of the resources pledged by the EU to assist the asylum seekers and process their applications have actually come through, leaving the Greek authorities struggling to cope with a daunting humanitarian and logistical challenge that has fallen from view in the rest of Europe.

European Union member states have sent just 27 of the 400 asylum specialists and 24 of the 400 interpreters they had agreed to provide to process claims for refugees like Mrs. Madran. So far, 21,000 migrants have been registered for asylum; 36,000 have not. A union plan to ease Greece’s burden by relocating tens of thousands of asylum seekers to the Continent has also fizzled, with European countries taking less than 2,300 people.

The bottlenecks have overwhelmed many of the camps, especially on the Greek islands, where migrants arriving after the March 20 deal are supposed to be held until being deported to Turkey. That program has stalled because of legal challenges and because Greece must process each asylum application first. So far, 468 of the more than 10,000 people who have arrived since the deal took effect have been returned. Turkish monitors assigned to assist were fired by President Recep Tayyip Erdogan of Turkey after the coup attempt against him.

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“The cost for Greece since the beginning of the Refugee Crisis “is more than €2 billion, the EU has allocated so far €330million – not to the Greek government but to NGOs, mostly NGOs from abroad..” Makes you wonder how much of that €330million has actually been used to help refugees, and how much on NGO operating costs.

Germany To Send 3,000 Refugees Back To Greece (KTG)

I thought, EU members states were supposed to take 6,000 refugees per month from Greece – according to some forgotten EU Deal signed the European Commission and the EU member states. Reality teaches us, the deal will work the other way around. Member states will send refugees back to …Greece. Blame the Dublin III Agreement. Germany decided to send to Greece and specifically to Crete more than 3,000 refugees in first phase. Berlin considers that this number is “redundant” in its territory. According to local media ekriti.gr, the Greek government has adopted this German decision, while Migration Minister Yiannis Mouzalas chaired a revelant meeting in Herakleion recently and announced the transfer.

The refugees will start coming by plane initially in Heraklion and Chania in December. Mouzalas had said that they will come after the tourist season. Independent MEP Notis Marias also confirmed the transfer in an interview with Radio Kriti. The cost for Greece since the beginning of the Refugee Crisis “is more than two billion euro, the EU has allocated so far €330million – not to the Greek government but to NGOs, mostly NGOs from abroad,” ekriti notes. Meanwhile the influx from Turkey started to increase again, more than 650 refugees and migrants arrived last week. Athens is worried that Ankara will draw back from the EU-Turkey deal in October.

Read more …

Jun 072016
 
 June 7, 2016  Posted by at 8:29 am Finance Tagged with: , , , , , , , , , , ,  9 Responses »
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Esther Bubley Soldiers with their girls at the Indianapolis bus station 1943


This Job Market Slump Started In January
Yellen Sees Rates Rising Gradually But .. (BBG)
The Shadow Looming Over China (Balding)
Nation of Debt: New Zealand Sitting on Half-Trillion-Dollar Debt Bomb (NZH)
Sterling Swings Wildly As Polls Suggest UK Heading For EU Exit (G.)
S&P Downgrades Royal Bank of Canada Outlook (WSJ)
Goldman Probed Over Malaysia Fund 1MDB (WSJ)
This Fannie-Freddie Resurrection Needs To Die (WaPo ed.)
State Department Blocks Release Of Hillary Clinton’s TPP Emails (IBT)
Debt Buyers (John Oliver)
Taxes And Recession Slash Income Of Greek Households (Kath.)
Nausea Rising (Jim Kunstler)
NATO Countries Begin Largest War Game In Eastern Europe Since Cold War (G.)
Finns To Bury Nuclear Waste In World’s Costliest Tomb (AFP)
Great Barrier Reef: The Stench Of Death (G.)

And this is Yellen’s favorite index?! Makes you wonder.

This Job Market Slump Started In January

The sharp May hiring slowdown revealed in Friday’s employment report took a lot of people – including me – by surprise. It shouldn’t have. Things have actually been on the downswing for the U.S. labor market for months, according to the Federal Reserve’s Labor Market Conditions Index. The LMCI is a new measure cooked up by Federal Reserve Board economists in 2014 that consolidates 19 different labor market indicators to reflect changes in the job market. They calculated it going all the way back to 1976; the chart above shows its movements since the end of the last recession in June 2009. The May index, released Monday morning, showed a 4.8-point decline from April. As you can see from the chart, the index has now declined for five straight months — its worst performance since the recession.

The index does get revised a lot. When the January number was first reported on Feb. 8, for example, it was still modestly positive. Still, since the February number was released on March 7 the news from the LMCI has been unremittingly negative. Which probably should have told us something. Not many people were paying attention, though. Fed Chair Janet Yellen is apparently a fan of the LMCI, but I have to admit that I first learned of its existence Monday when Erica Groshen, the Commissioner of the BLS, mentioned it at a conference for BLS data users in New York. It was a good reminder, as were a lot of the other presentations at the conference, that the headline jobs numbers that get the lion’s share of attention – the monthly change in payroll employment and the unemployment rate – aren’t always the best places to look for information on the state of the jobs market.

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They should really start having her do these speeches in a cave filled with smoke and vapors.

Yellen Sees Rates Rising Gradually But .. (BBG)

Federal Reserve Chair Janet Yellen said the U.S. economy was making progress but was silent on the timing of another interest-rate increase, an omission viewed as a signal that a June move was off the table. “I continue to think that the federal funds rate will probably need to rise gradually over time to ensure price stability and maximum sustainable employment in the longer run,” Yellen said Monday during a speech in Philadelphia. Her comments were less specific than in her previous remarks in describing when she thought the Fed should raise rates again.

On May 27 at Harvard University, she said an increase would likely be appropriate in “coming months,” a phrase she didn’t repeat on Monday. Since then, the Labor Department reported U.S. employers in May added the fewest number of new jobs in almost six years, causing expectations for a rate increase to plunge. “She did not address the timing of the Fed’s next gradual move, which suggests to us that she is in no hurry,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd, arguing that her comments on the payroll report “largely rules out a move in rates next week. July is not a strong bet either.”

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Beijing has not just allowed shadow banks to grow much too big, it has used this growth to hide its actions behind. Local governments got most of their credit to build highways to nowhere from shadow banks. It’s really weird that the western press only catches on now.

The Shadow Looming Over China (Balding)

Of all the topics sure to be come up in Sino-U.S. economic talks this week – from the problem of excess capacity to currency controls – the health of China’s financial sector will no doubt feature high on the list. Especially worrying are the multiplying links between the country’s commercial and “shadow” banks – the name given to a broad range of non-bank financial institutions from peer-to-peer lending platforms to trusts and wealth management companies. All told, the latter now hold assets that exceed 80 percent of China’s gross domestic product, according to Moody’s – much of them linked to the commercial banking sector in one way or another. That poses a systemic threat, and needs to be treated as such. There’s nothing inherently wrong with shadow banks, of course.

Largely owned by the government, China’s commercial banks focus primarily on directing capital from savers to state-owned enterprises, leaving Chinese households and smaller private enterprises starved for funds. Shadow banks have grown to meet the demand. At their best, they allocate capital more efficiently than state-owned lenders and keep afloat businesses that create jobs and growth. The line between good shadow banks and dodgy ones is increasingly fuzzy, however, as is the divide between shadow and commercial banking. Traditional banks often assign their sales teams to sell shadow products. This gives an unwarranted sheen of legitimacy to schemes that are inherently risky. Buyers trust that the established bank will make them whole if their investment goes south.

Shadow banks are also selling more and more products directly to commercial banks. Wealth management products held as receivables now account for approximately 3 trillion yuan of interbank holdings, or around $500 billion — a number that’s grown sixfold in three years. According to Autonomous Research, as much as 85 percent of those products may have been resold to other shadow banks, creating a web of cross-ownership with disturbing parallels to the U.S. mortgage securities market just before the 2008 crash. In total, the big four state-owned banks hold more than $2 trillion in what’s classified as “financial investment,” much of it in trusts and wealth-management products.

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A nation of lost souls.

Nation of Debt: New Zealand Sitting on Half-Trillion-Dollar Debt Bomb (NZH)

New Zealand is sitting on a half-a-trillion-dollar debt bomb and Kiwis are increasingly treating their houses like cash machines, piling on the debt as they watch the value of their properties soar. Reserve Bank figures show household debt, excluding investment property, has risen 23% in the past five years to $163.4 billion. Incomes have risen only 11.5%. Households are now carrying a debt level that is equivalent to 162% of their annual disposable income – higher than the level reached before the global financial crisis. Including property investment the total debt households owed as of April was $232.9 billion, according to the Reserve Bank. Satish Ranchhod, a senior economist at Westpac Bank, says the main driver has been low interest rates.

“Continued low interest rates have sparked a sharp increase in household borrowing at a time when income growth has been very modest.” And it’s housing loans where the growth has mainly come from. Housing loan debt has risen 23.4% to $132.83 billion. Student loans were up 22.9% to $14.84 billion and consumer loans are up 16.6% to $15.7 billion. Ranchhod said much of the rising debt on housing was down to investors, as more people jumped into the property market on the back of rising house prices. He also believed many people were using their home loans to make consumer purchases. “We think a lot of the increase in lending on housing loans will also be an increase in spending … people feel wealthy when the value of their home goes up.”

Hannah McQueen, an Auckland financial coach and managing director of EnableMe, said she had seen three clients in the past week alone who had paid for a new car by using the equity in their home to increase their mortgage debt. “It’s definitely on the increase … People think, ‘I’m worth so much more now …'”

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Volatility just getting started.

Sterling Swings Wildly As Polls Suggest UK Heading For EU Exit (G.)

The pound swung wildly on currency markets on Monday, reaching extremes of volatility not seen since the financial crisis, as City traders reacted to polls suggesting voters were increasingly likely to send Britain out of the EU this month. The poll boost to the Vote Leave campaign sent the pound tumbling by up to 1.5 cents to below $1.44, adding to a decline of 2 cents last week and indicating the degree of pressure on the UK currency since the remain camp’s lead in the polls began to evaporate. A dovish speech by the US central bank chief, Janet Yellen, hinting that poor jobs data meant the Federal Reserve was unlikely to raise rates this month, steadied the pound – despite her comments that a vote to leave the EU could hurt the US economy.

“One development that could shift investor sentiment is the upcoming referendum in the United Kingdom. A UK vote to exit the European Union could have significant economic repercussions,” she said. Sterling’s value has become increasingly volatile as fears of a Brexit have increased among investors. The index charting the daily swings in the pound’s value has risen to its highest level of volatility since the first quarter of 2009. It is double the level seen in April when the remain camp was ahead in the polls. Elsa Lignos, a foreign exchange expert at City firm RBC, one of many to warn that the pound would come under further pressure should the lead established by Vote Leave be consolidated, said: “Brexit is almost all that matters for the pound at the moment.”

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Hmm.. “..speculative-grade borrowers..”, “..highly indebted Canadian consumers ..”

S&P Downgrades Royal Bank of Canada Outlook (WSJ)

Standard & Poor’s is downgrading the outlook for Royal Bank of Canada, a change it says reflects the lender’s increased risk appetite and credit-risk exposure relative to other domestic banks. The credit-ratings firm said Monday it was revising its outlook on RBC, Canada’s largest bank by assets, to “negative” from “stable,” but would leave its credit ratings untouched. The move comes less than two weeks after the Toronto-based lender reported a stronger-than-expected fiscal second-quarter profit but set aside bigger provisions to cover soured loans. “The outlook revision reflects concerns over what we see as RBC’s higher risk appetite, relative to peers,” said S&P credit analyst Lidia Parfeniuk in a release.

“We see one example of this in its aggressive growth in loans and commitments in the capital markets wholesale loan book, particularly in the U.S., with an emphasis on speculative-grade borrowers, including exposure to leveraged loans,” she added. S&P also pointed to RBC’s “higher-than-peer average exposure” to highly indebted Canadian consumers and to the country’s oil- and gas-producing regions, which have been hard hit by the collapse in crude-oil prices. S&P, however, affirmed RBC’s ratings including its “AA-/A-1+” long- and short-term issuer credit ratings. “RBC is one of the strongest and highest rated banks in Canada, reflecting our strong financial profile and the success of our diversified business model,” said RBC in an emailed statement. “This outlook change will have no direct impact to RBC clients,” it later added.

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“..Goldman wired the $3 billion in proceeds to a Singapore branch of a small Swiss private bank instead of to a large global bank, as would be typical for a transfer of that size..”

Goldman Probed Over Malaysia Fund 1MDB (WSJ)

U.S. investigators are trying to determine whether Goldman Sachs broke the law when it didn’t sound an alarm about a suspicious transaction in Malaysia, people familiar with the investigation said. At issue is $3 billion Goldman raised via a bond issue for Malaysian state investment fund 1Malaysia Development Bhd., or 1MDB. Days after Goldman sent the proceeds into a Swiss bank account controlled by the fund, half of the money disappeared offshore, with some later ending up in the prime minister’s bank account, according to people familiar with the matter and bank-transfer information viewed by The Wall Street Journal. The cash was supposed to fund a major real-estate project in the nation’s capital that was intended to boost the country’s economy.

U.S. law-enforcement officials have sought to schedule interviews with Goldman executives, people familiar with the matter said. Goldman hasn’t been accused of wrongdoing. The bank says it had no way of knowing how 1MDB would use the money it raised. Investigators are focusing on whether the bank failed to comply with the U.S. Bank Secrecy Act, which requires financial institutions to report suspicious transactions to regulators. The law has been used against banks for failing to report money laundering in Mexico and ignoring red flags about the operations of Ponzi scheme operator Bernard Madoff. The investigators believe the bank may have had reason to suspect the money it raised wasn’t being used for its intended purpose, according to people familiar with the probe.

One red flag, they believe, is that Goldman wired the $3 billion in proceeds to a Singapore branch of a small Swiss private bank instead of to a large global bank, as would be typical for a transfer of that size, the people said. Another is the timing of the bond sale and why it was rushed. The deal took place in March 2013, two months after Malaysia’s prime minister, Najib Razak, approached Goldman Sachs bankers during the annual meeting of the World Economic Forum in Davos, Switzerland. And it occurred two months before voting in a tough election campaign for Mr. Najib, who used some of the cash from his personal bank account on election spending, the Journal has reported, citing bank-transfer information and people familiar with the matter.

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This being from the mouthpiece WaPo, g-d only knows what’s behind it.

This Fannie-Freddie Resurrection Needs To Die (WaPo ed.)

It’s been said that Washington is where good ideas go to die. We don’t know about that, but some bad ideas are certainly hard to get rid of. Consider the persistent non-solution to the zombie-like status of Fannie Mae and Freddie Mac known as “recap and release.” The plan is to return the two mortgage-finance giants to their pre-financial-crisis status as privately owned but “government-sponsored” enterprises. That is to say, to recreate the private-gain, public-risk conflict that helped sink them in the first place. Their income would recapitalize the entities, rather than be funneled to the treasury, as is currently the case. Then they could exit the regulatory control known as “conservatorship” that has constrained them since 2008 — and resume bundling home loans and selling them, as if it had never been necessary to bail them out to the tune of $187 billion in the first place.

Congress last year effectively barred recap and release, at least for the next two years. Coupled with the Obama administration’s firm opposition, you’d think that would put a stake through its heart. But “no” is not an acceptable answer for the handful of Wall Street hedge funds that scooped up Fannie and Freddie’s beaten-down common stock for pennies a share after the bailout — and would realize a massive windfall if the government suddenly decided to let shareholders have access to company profits again. With megabillions on the line, the hedge funds have been arguing high-mindedly that their true concerns are property rights and the rule of law; they have also made common cause with certain low-income-housing advocates who see a resurrected Fan-Fred as a potential source of funds for their programs.

Left unexplained, because it’s inexplicable, is how the hedge funds’ arguments square with the fact that there wouldn’t even be a pair of corporate carcasses to fight over but for the massive infusion of taxpayer dollars and the public risk that represented. The latest iteration of recap and release is a hedge-fund-backed bill sponsored by Rep. Mick Mulvaney (R-SC), which would set Fannie and Freddie, unreformed, loose on the marketplace again and do so under terms wildly favorable to the hedge funds. Specifically, shareholders would be charged nothing for the government backing the entities would retain, supposedly to save scarce resources for the capital cushion. But as the WSJ recently noted, capital could be “risk-weighted” so forgivingly that the actual cushion required might be considerably less than headline numbers suggest.

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Desperate move.

State Department Blocks Release Of Hillary Clinton’s TPP Emails (IBT)

Trade is a hot issue in the 2016 U.S. presidential campaign. But correspondence from Hillary Clinton and her top State Department aides about a controversial 12-nation trade deal will not be available for public review — at least not until after the election. The Obama administration abruptly blocked the release of Clinton’s State Department correspondence about the so-called Trans-Pacific Partnership (TPP), after first saying it expected to produce the emails this spring. The decision came in response to International Business Times’ open records request for correspondence between Clinton’s State Department office and the United States Trade Representative. The request, which was submitted in July 2015, specifically asked for all such correspondence that made reference to the TPP.

The State Department originally said it estimated the request would be completed by April 2016. Last week the agency said it had completed the search process for the correspondence but also said it was delaying the completion of the request until late November 2016 — weeks after the presidential election. The delay was issued in the same week the Obama administration filed a court motion to try to kill a lawsuit aimed at forcing the federal government to more quickly comply with open records requests for Clinton-era State Department documents.

Clinton’s shifting positions on the TPP have been a source of controversy during the campaign: She repeatedly promoted the deal as secretary of state but then in 2015 said, “I did not work on TPP,” even though some leaked State Department cables show that her agency was involved in diplomatic discussions about the pact. Under pressure from her Democratic primary opponent, Bernie Sanders, Clinton announced in October that she now opposes the deal — and has disputed that she ever fully backed it in the first place.

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John Oliver buys $15 million of unpaid debt for $60,000. And then forgives it. Now there’s an idea. Unless I’m very mistaken, that means $1 million could forgive $250 million in debt. $10 million, you free $2.5 billion in debt. Well, quite a bit more, actually, because now we’d be talking wholesale. People raise a millon bucks for all sorts of purposes all the time. Know what I mean?

Someone get this properly organized in a fund, and why wouldn’t they (?!), means: You donate $1 and $250 in debt goes away. Donate $100 and $25,000 goes up in air. 100 people donate $100 each, $2,500,000 in debt is gone. I’m not the person to do it, but certainly somebody can?! (Do call me on my math if I missed a digit..). It’s crazy people like Bill Gates or Mark Zuckerberg are not doing this. Or even Janet Yellen. Not all that smart after all, I guess. $1 billion can buy off $250 billion in debt. Want to fight deflation?

Debt Buyers (John Oliver)

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How to make sure an economy and society cannot recover.

Taxes And Recession Slash Income Of Greek Households (Kath.)

The avalanche of new taxes that began this month will deal a devastating blow to household incomes, consumption and the prospects of the Greek economy in general. As the dozens of new measures are implemented, the market will also be forced to deal with the higher charges that will strengthen the lure of tax evasion. All this is expected to extend the recession and deter investment, while leading to more business shutdowns. Crucially, the disposable income of households will shrink anew due to the increase in taxation and the hikes in almost all indirect taxes and social security contributions.

Hundreds of thousands of families are cutting down on their basic expenses while many have run into debt over various obligations: For example, unpaid Public Power Corporation bills now total €2.7 billion. All that has resulted in major drop in retail spending. A consumer confidence survey carried out by Nielsen for the first quarter of the year shows that eight out of 10 Greeks are constantly attempting to reduce their household expenditure. Their main targets for cuts are going out for entertainment and food delivery, while they are buying cheaper and fewer groceries.

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JHK: “As you may know, Kunstler.com is currently under an aggressive Denial of Service (DoS) attack. My web and server technicians are working to get the website and blog back up and live soon (though it’s going to cost a pretty penny). In the meantime, here is today’s blog. Please share this with any of your friends so they don’t miss out.”

Nausea Rising (Jim Kunstler)

The people of the United States have real grievances with the way this country is being run. Last Friday’s job’s report was a humdinger: only 38,000 new jobs created in a country of over 300 million, with a whole new crop of job-seeking college grads just churned out of the diploma mills. I guess the national shortage of waiters and bartenders has finally come to an end. What’s required, of course, is a pretty stout restructuring of the US economy. And that should be understood to be a matter of national survival. We need to step way back on every kind of giantism currently afflicting us: giant agri-biz, giant commerce (Wal Mart etc.), giant banking, giant war-making, and giant government — this last item being so larded with incompetence on top of institutional entropy that it is literally a menace to American society.

The trend on future resources and capital availability is manifestly downward, and the obvious conclusion is the need to make this economy smaller and finer. The finer part of the deal means many more distributed tasks among the population, especially in farming and commerce operations that must be done at a local level. This means more Americans working on smaller farms and more Americans working in reconstructed Main Street business, both wholesale and retail. This would also necessarily lead to a shift out of the suburban clusterfuck and the rebuilding of ten thousand forsaken American towns and smaller cities.

For the moment, many demoralized Americans may feel more comfortable playing video games, eating on SNAP cards, and watching Trump fulminate on TV, but the horizon on that is limited too. Sooner or later they will have to become un-demoralized and do something else with their lives. The main reason I am so against the Hillary and Trump, and so ambivalent on Bernie is their inability to comprehend the scope of action actually required to avoid sheer cultural collapse.

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Completely crazy. Is Trump really the only person who can stop this? For the first time since the Nazi invasion of Soviet-occupied Poland began on 22 June 1941, German tanks will cross the country from west to east.

NATO Countries Begin Largest War Game In Eastern Europe Since Cold War (G.)

The largest war game in eastern Europe since the end of the cold war has started in Poland, as Nato and partner countries seek to mount a display of strength as a response to concerns about Russia’s assertiveness and actions. The 10-day military exercise, involving 31,000 troops and thousands of vehicles from 24 countries, has been welcomed among Nato’s allies in the region, though defence experts warn that any mishap could prompt an offensive reaction from Moscow. A defence attache at a European embassy in Warsaw said the “nightmare scenario” of the exercise, named Anaconda-2016, would be “a mishap, a miscalculation which the Russians construe, or choose to construe, as an offensive action”. Russian jets routinely breach Nordic countries’ airspace and in April they spectacularly “buzzed” the USS Donald Cook in the Baltic Sea.

The exercise, which US and Polish officials formally launched near Warsaw, is billed as a test of cooperation between allied commands and troops in responding to military, chemical and cyber threats. It represents the biggest movement of foreign allied troops in Poland in peace time. For the first time since the Nazi invasion of Soviet-occupied Poland began on 22 June 1941, German tanks will cross the country from west to east. Managed by Poland’s Lt Gen Marek Tomaszycki, the exercise includes 14,000 US troops, 12,000 Polish troops, 800 from Britain and others from non-Nato countries. Anaconda-2016 is a prelude to Nato’s summit in Warsaw on 8-9 July, which is expected to agree to position significant numbers of troops and equipment in Poland and the Baltic states.

It comes within weeks of the US switching on a powerful ballistic missile shield at Deveselu in Romania, as part of a “defence umbrella” that Washington says will stretch from Greenland to the Azores. Last month, building work began on a similar missile interception base at Redzikowo, a village in northern Poland. The exercise comes at a sensitive time for Poland’s military, following the sacking or forced retirement of a quarter of the country’s generals since the nationalist Law and Justice government came to power in October last year. So harsh have the cuts to the top brass been that the Polish armed forces recently found themselves unable to provide a general for Nato’s multinational command centre at Szczecin.

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Tell me, do I feel safe now? 100,000 years is a long time. No fault lines? Volcanic activity?

Finns To Bury Nuclear Waste In World’s Costliest Tomb (AFP)

Deep underground on a lush green island, Finland is preparing to bury its highly-radioactive nuclear waste for 100,000 years — sealing it up and maybe even throwing away the key. Tiny Olkiluoto, off Finland’s west coast, will become home to the world’s costliest and longest-lasting burial ground, a network of tunnels called Onkalo – Finnish for “The Hollow”. Countries have been wrestling with what to do with nuclear power’s dangerous by-products since the first plants were built in the 1950s. Most nations keep the waste above ground in temporary storage facilities but Onkalo is the first attempt to bury it for good. Starting in 2020, Finland plans to stow around 5,500 tons of nuclear waste in the tunnels, more than 420 metres (1,380 feet) below the Earth’s surface.

Already home to one of Finland’s two nuclear power plants, Olkiluoto is now the site of a tunnelling project set to cost up to €3.5 billion until the 2120s, when the vaults will be sealed for good. “This has required all sorts of new know-how,” said Ismo Aaltonen, chief geologist at nuclear waste manager Posiva, which got the green light to develop the site last year. The project began in 2004 with the establishment of a research facility to study the suitability of the bedrock. At the end of last year, the government issued a construction license for the encapsulation plant, effectively giving its final approval for the burial project to go ahead. At present, Onkalo consists of a twisting five-kilometre (three-mile) tunnel with three shafts for staff and ventilation. Eventually the nuclear warren will stretch 42 kilometres (26 miles).

[..] The waste is expected to have lost most of its radioactivity after a few hundred years, but engineers are planning for 100,000, just to be on the safe side. Spent nuclear rods will be placed in iron casts, then sealed into thick copper canisters and lowered into the tunnels. Each capsule will be surrounded with a buffer made of bentonite, a type of clay that will protect them from any shuddering in the surrounding rock and help stop water from seeping in. Clay blocks and more bentonite will fill the tunnels before they are sealed up.

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Long piece on bleaching by the Guardian. Depressing.

Great Barrier Reef: The Stench Of Death (G.)

It was the smell that really got to diver Richard Vevers. The smell of death on the reef. “I can’t even tell you how bad I smelt after the dive – the smell of millions of rotting animals.” Vevers is a former advertising executive and is now the chief executive of the Ocean Agency, a not-for-profit company he founded to raise awareness of environmental problems. After diving for 30 years in his spare time, he was compelled to combine his work and hobby when he was struck by the calamities faced by oceans around the world. Chief among them was coral bleaching, caused by climate change. His job these days is rather morbid. He travels the world documenting dead and dying coral reefs, sometimes gathering photographs just ahead of their death, too.

With the world now in the midst of the longest and probably worst global coral bleaching event in history, it’s boom time for Vevers. Even with all that experience, he’d never seen anything like the devastation he saw last month around Lizard Island in the northern third of Australia’s spectacular Great Barrier Reef. As part of a project documenting the global bleaching event, he had surveyed Lizard Island, which sits about 90km north of Cooktown in far north Queensland, when it was in full glorious health; then just as it started bleaching this year; then finally a few weeks after the bleaching began. “It was one of the most disgusting sights I’ve ever seen,” he says. “The hard corals were dead and covered in algae, looking like they’ve been dead for years. The soft corals were still dying and the flesh of the animals was decomposing and dripping off the reef structure.”

[..] When the coral dies, the entire ecosystem around it transforms. Fish that feed on the coral, use it as shelter, or nibble on the algae that grows among it die or move away. The bigger fish that feed on those fish disappear too. But the cascading effects don’t stop there. Birds that eat fish lose their energy source, and island plants that thrive on bird droppings can be depleted. And, of course, people who rely on reefs for food, income or shelter from waves – some half a billion people worldwide – lose their vital resource.

[..] What’s at stake here is the largest living structure in the world, and by far the largest coral reef system. The oft-repeated cliche is that it can be seen from space, which is not surprising given it stretches more than 2,300km in length and, between its almost 3,000 individual reefs, covers an area about the size of Germany. It is an underwater world of unimaginable scale. But it is up close that the Great Barrier Reef truly astounds. Among its waters live a dizzying array of colourful plants and animals. With 1,600 species of fish, 130 types of sharks and rays, and more than 30 species of whales and dolphins, it is one of the most complex ecosystems on the planet.


Coral off Lizard Island, bleached in March, and then dead and covered in seaweed in May. Photo: the Ocean Agency

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