Oct 312018
 
 October 31, 2018  Posted by at 9:59 am Finance Tagged with: , , , , , , , , , , ,  


Francisco Goya Witches’ Sabbath 1798

 

US Calls For Yemen Ceasefire, Peace Talks ‘In The Next 30 Days’ (AFP)
Erdogan Urges Saudi Prosecutor To Find Out Who Ordered Khashoggi Hit (AFP)
Housing Market Now ‘Reminds Me Of 2006′ – Robert Shiller (MW)
China Debt Bomb Ready to Explode (Rickards)
China Factory Growth Weakest In Over 2 Years, Export Orders Slump Deepens (R.)
Ray Dalio Hails Paul Volcker As ‘The Greatest Man’ He Knows (MW)
The Monster Mash (Kunstler)
No-Deal Brexit Would Trigger Lengthy UK Recession – S&P (G.)
Welcome to the Jungle (Escobar)
After Germany’s Merkel Comes Chaos (John Rubino)
Ocean Shock (Reuters)

 

 

Both Mattis and Pompeo, a coordinated effort. 30 days seems ambitious, but MbS doesn‘t have much leverage left.

US Calls For Yemen Ceasefire, Peace Talks ‘In The Next 30 Days’ (AFP)

The United States called Tuesday for a ceasefire and peace talks in Yemen, as the Saudi-led military coalition sent more than 10,000 new troops toward a vital rebel-held port city ahead of a new assault. Pentagon chief Jim Mattis said the US had been watching the conflict “for long enough,” adding that Saudi Arabia and the United Arab Emirates, which are in a US-backed coalition fighting Shiite Huthi rebels, are ready for talks. “We have got to move toward a peace effort here, and we can’t say we are going to do it some time in the future,” Mattis said at the US Institute of Peace in Washington. “We need to be doing this in the next 30 days.”

He said the US is calling for all warring parties to meet with United Nations special envoy Martin Griffiths in Sweden in November and “come to a solution.” US-Saudi ties have cooled in recent weeks after the murder of journalist Jamal Khashoggi, a prominent critic of the conservative kingdom, that has also tarnished the image of Crown Prince Mohammed bin Salman. Saudi Arabia and its allies intervened in the conflict between embattled Yemeni President Abedrabbo Mansour Hadi, whose government is recognized by the United Nations, and the Huthis in 2015. Nearly 10,000 people have since been killed and the country now stands at the brink of famine, with more than 22 million Yemenis — three quarters of the population — in need of humanitarian assistance.

[..] US Secretary of State Mike Pompeo called for an end to all coalition air strikes in Yemen’s populated areas. “The time is now for the cessation of hostilities, including missile and UAV (drone) strikes from Huthi-controlled areas into the Kingdom of Saudi Arabia and the United Arab Emirates,” Pompeo said in a statement. “Subsequently, coalition air strikes must cease in all populated areas in Yemen.”

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Body still not found.

Erdogan Urges Saudi Prosecutor To Find Out Who Ordered Khashoggi Hit (AFP)

Turkish President Recep Tayyip Erdogan on Tuesday called on Saudi Arabia’s chief prosecutor to find out who ordered the murder of journalist Jamal Khashoggi, and not spare “certain people” in his investigation. “Who sent these 15 people? As Saudi public prosecutor, you have to ask that question, so you can reveal it,” Erdogan said, referring to the 15-man team suspected of being behind the hit. “Now we have to solve this case. No need to prevaricate, it makes no sense to try to save certain people,” he told reporters in Ankara. Khashoggi was killed after entering the Saudi consulate in Istanbul on October 2 to obtain paperwork ahead of his upcoming wedding. His body has not yet been found.

[..] Erdogan said that during the talks Fidan requested the 18 suspects be sent to Turkey for trial, as the killing took place in Istanbul. The Istanbul prosecutor’s office last week prepared a written request for the extradition of the 18 suspects “involved in the premeditated murder”, the justice ministry said, but Riyadh rejected Ankara’s request. Erdogan also urged Saudi Foreign Minister Adel al-Jubeir to explain who the “local co-conspirators” were that were reportedly given Khashoggi’s body after his death. “Again either the Saudi foreign minister or the 18 suspects must explain who the local co-conspirators are. Let’s know who this co-conspirator is, we can shed further light. We cannot let this subject end mid-way.”

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Only this time it’s global.

Housing Market Now ‘Reminds Me Of 2006′ – Robert Shiller (MW)

Famed housing-watcher Robert Shiller said Tuesday that the weakening housing market reminded him of the last market top, just before the subprime housing bubble burst, slashing prices by nearly a third and costing millions of Americans their homes. Home price gains moderated again in the most recent version of the closely-watched housing index that bears his name, which was released Tuesday, and Shiller, a Nobel Prize-winning economist, told Yahoo Finance that such data shows “a sign of weakness.” Housing pivots take more time than those in the stock market, Shiller said. Still, “the housing market does have a momentum component and we’re seeing a clipping of momentum at this time.”

When a startled reporter reminded Shiller that 2006 predated the greatest financial crisis in a lifetime, the Yale economist acknowledged that any correction would likely be far less severe. “The drop in home prices in the financial crisis was the most severe drop in the U.S. market since my data begin in 1890,” Shiller said. “It could be that we’re primed to repeat it because it’s in our memory and we’re thinking about it but still I wouldn’t expect something as severe as the Great Financial Crisis coming on right now. There could be a significant correction or bear market, but I’m waiting and seeing now.”

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Foreign reserves runnning out.

China Debt Bomb Ready to Explode (Rickards)

The great Chinese growth slowdown has been proceeding in stages for the past two years. The reason is simple. Much of China’s “growth” (about 25% of the total) has consisted of wasted infrastructure investment in ghost cities and white elephant transportation infrastructure. That investment was financed with debt that now cannot be repaid. This was fine for creating short-term jobs and providing business to cement, glass and steel vendors, but it was not a sustainable model since the infrastructure either was not used at all or did not generate sufficient revenue. China’s future success depends on high-value-added technology and increased consumption. But shifting to intellectual property and the consumer means slowing down on infrastructure, which will slow the economy.

In turn, that means exposing the bad debt for what it is, which risks a financial and liquidity crisis. China started to do this last year but quickly turned tail when the economy slowed. Now the economy has slowed so much that markets are collapsing. But doesn’t China have over $1 trillion of reserves to prop up its financial system? On paper, that’s true. But in reality, China is “short” U.S. dollars. The Chinese may have $1.4 trillion of U.S. Treasury securities in its reserve position, but they need those assets possibly to bail out their banking system or defend the yuan. Meanwhile, the Chinese banking sector, which in many ways is an extension of the state, owes $318 billion in U.S. dollar-denominated deposits of commercial paper.

From a bank’s perspective, borrowing in dollars is going short dollars because you need dollar assets to back up those liabilities if the original lenders want their money back. For the most part, the banks don’t have those assets because they converted the dollar to yuan to prop up local real estate Ponzis and local corporations. There’s not much left over to bail out the corporate, individual and real estate sectors. This is all part of a global “dollar shortage” attributable to Fed tightening, both in the forms of higher rates but also a reduction in base money. A dollar shortage seems implausible in a world where the Fed printed $4.4 trillion. But while the Fed was printing, the world borrowed over $70 trillion (on top of prior loans), so the dollar shortage is real. The math is inescapable.

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Everyone’s going to call on Beijing to come to the rescue.

China Factory Growth Weakest In Over 2 Years, Export Orders Slump Deepens (R.)

China’s manufacturing sector in October expanded at its weakest pace in over two years, hurt by slowing domestic and external demand, in a sign of deepening cracks in the economy from an intensifying trade war with the United States. Anxiety about China’s cooling growth and its likely drag on the global economy have vexed financial markets recently, and Wednesday’s official Purchasing Managers’ Index (PMI) indicates more stress for investors through coming months. The official PMI – which gives global investors their first look at business conditions in China at the start of the last quarter of the year – fell to 50.2 in October, the lowest since July 2016 and down from 50.8 in September.

It was a touch above the 50-point mark that separates growth from contraction for a 27th straight month, but undershot the 50.6 forecast in a Reuters poll. The latest reading suggests a further loss of momentum in the world’s second-biggest economy, and the deteriorating environment for businesses could prompt more policy support from Beijing on top of a raft of recent initiatives. “All the numbers from China’s PMI release today confirm a broad-based decline in economic activity,” said Raymond Yeung, chief economist for China at ANZ in a client note, adding that conditions for the private sector is “much worse” than headline data suggested. “Besides an expected reserve requirement ratio (RRR) cut next January, we expect future supportive policy actions to be measured. The government’s priority is to avoid a financial blow-up.”

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Not hard to be better than The Oracle, Bernanke and Yellen. But where was Volcker when these three went off the rails?

Ray Dalio Hails Paul Volcker As ‘The Greatest Man’ He Knows (MW)

Those weighty words of praise were tweeted out Tuesday by Ray Dalio, founder of hedge-fund behemoth Bridgewater Associates. Dalio’s social-media nod to the former Fed chair coincides with the release of Volcker’s memoir, “Keeping at It: The Quest for Sound Money and Good Government.”

In his new book, Volcker says he’s worried about the impact of money in politics and argues that the U.S. is devolving into a plutocracy. “We face a huge challenge in this country to restore a sense of public purpose and of trust in government,” he wrote in the book. “It will require critically needed reforms in our political processes and leaders who can restore and preserve a consensus upon which our great democracy can depend.” Volcker, 91, served as Fed chair from 1979 until 1987, and he’s widely credited for stopping runaway inflation during that time. He was also chairman of the Economic Recovery Advisory Board under Obama from 2009 to 2011.

Dalio wasn’t the only one to give Volcker some love in light of his memoir. Martin Wolf of the Financial Times is also a big fan, saying that he’s “the greatest man I have known,” because “he is endowed to the highest degree with what the Romans called virtus (virtue): moral courage, integrity, sagacity, prudence and devotion to the service of country.” Wolf said “the pinnacle of Volcker’s career” was when he achieved something many thought impossible: he slew inflation. “Great credit is due to Jimmy Carter, who appointed him, and Ronald Reagan, who supported him. But Volcker did it, despite great criticism,” Wolf explained. “The costs were huge. But he was right: it had to be done.”

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“And if it happens that the Dems don’t prevail, and don’t manage to get their hands on the machinery of congress — then what?”

The Monster Mash (Kunstler)

The Democratic Party war on white people and their dastardly privilege has been the theme all year long, with its flanking movement against white men especially and super-especially the hetero-normative white male villains who rape and oppress everybody else. Anyway, that’s the strategy du jour. I’m not persuaded that it’s going to work so well in the coming election. The party could not have issued a clearer message than “white men not welcome here.” Very well, then, they’ll vote somewhere else for somebody else. And if it happens that the Dems don’t prevail, and don’t manage to get their hands on the machinery of congress — then what?

For one thing, a lot of people get indicted, especially former top officers from various glades of the Intel swamp. It shouldn’t be a surprise, given the numbers of them already called before grand juries and fingered by inspectors general. But it may be shocking how high up the indictments go, and how serious the charges may be: sedition… treason…? These midterm election may bring the moment when the Democratic Party finally blows up, at least enough to sweep away the current coterie of desperate idiots running it. It’s time to shove the crybabies offstage and allow a few clear-eyed adults to take the room, including men, yes even white men. And let all the shrieking, clamoring, marginal freaks return to the margins, where they belong.

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That recession is now certain, deal or not. Even in case of a deal, 1000s of documents must be signed. A deal will not mean a return to BAU.

No-Deal Brexit Would Trigger Lengthy UK Recession – S&P (G.)

Britain’s economy will suffer rising unemployment and falling household incomes that would trigger a recession should Theresa May fail to secure a deal to prevent the UK crashing out of the European Union next year, according to analysis by the global rating agency Standard & Poor’s. Property prices would slump and inflation would spike to more than 5% in a scenario that S&P said had become more likely in recent months following deadlock with Brussels over a post-Brexit deal. In a warning that included a possible downgrade to the UK’s credit rating, which would bring with it an increase in the Treasury’s borrowing costs, S&P said it still expected both sides in the Brexit talks to come to an agreement before next March, when the UK is scheduled to leave the European Union.

But it warned that the chance of a “no-deal” Brexit had risen in recent months to such an extent that it needed to warn international investors about the potential challenges ahead. [..] S&P Global Ratings credit analyst Paul Watters, said: “Our base-case scenario is that the UK and the EU will agree and ratify a Brexit deal, leading to a transition phase lasting through 2020, followed by a free trade agreement. “But we believe the risk of no deal has increased sufficiently to become a relevant rating consideration. This reflects the inability thus far of the UK and EU to reach agreement on the Northern Irish border issue, the critical outstanding component of the proposed withdrawal treaty.”

Coming only a day after the chancellor said the failure to secure a deal would force him to hold an emergency budget, S&P’s analysis joins a welter of independent reports that forecast that a split from the EU without a deal will deal a serious blow to the prospects of the UK economy. Last month rival agency Moody’s said the risks to the British economy had “risen materially” in recent months.

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If you think Trump’s scary, this guy’s in a league of his own.

Welcome to the Jungle (Escobar)

It’s darkness at the break of (tropical) high noon. Jean Baudrillard once defined Brazil as “the chlorophyll of our planet”. And yet a land vastly associated worldwide with the soft power of creative joie de vivre has elected a fascist for president. Brazil is a land torn apart. Former paratrooper Jair Bolsonaro was elected with 55.63 percent of votes. Yet a record 31 million votes were ruled absent or null and void. No less than 46 million Brazilians voted for the Workers’ Party’s candidate, Fernando Haddad; a professor and former mayor of Sao Paulo, one of the crucial megalopolises of the Global South. The key startling fact is that over 76 million Brazilians did not vote for Bolsonaro. His first speech as president exuded the feeling of a trashy jihad by a fundamentalist sect laced with omnipresent vulgarity and the exhortation of a God-given dictatorship as the path towards a new Brazilian Golden Age.

French-Brazilian sociologist Michael Lowy has described the Bolsonaro phenomenon as “pathological politics on a large scale”. His ascension was facilitated by an unprecedented conjunction of toxic factors such as the massive social impact of crime in Brazil, leading to a widespread belief in violent repression as the only solution; the concerted rejection of the Workers’ Party, catalyzed by financial capital, rentiers, agribusiness and oligarchic interests; an evangelical tsunami; a “justice” system historically favoring the upper classes and embedded in State Department-funded “training” of judges and prosecutors, including the notorious Sergio Moro, whose single-minded goal during the alleged anti-corruption Car Wash investigation was to send Lula to prison; and the absolute aversion to democracy by vast sectors of the Brazilian ruling classes.

That is about to coalesce into a radically anti-popular, God-given, rolling neoliberal shock; paraphrasing Lenin, a case of fascism as the highest stage of neoliberalism. After all, when a fascist sells a “free market” agenda, all his sins are forgiven.

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My old buddy John Rubino is right, but the story’s bigger than this. Merkel’s been given far too much power.

After Germany’s Merkel Comes Chaos (John Rubino)

After a long, initially-successful run promoting European integration and mass immigration, German Chancellor Angela Merkel saw the bottom fall out of her political fortunes this year. This week she stepped down as leader of the formerly-dominant Christian Democrat party and promised not run again when her term as Chancellor ends in 2021. What happens next is almost certain to be chaotic, as the following chart (courtesy of this morning’s Wall Street Journal) makes clear. Note that in August of 2017 the two least popular parties were the far right Alternative for Germany (blue line) and the far left Greens (green line). In the ensuing 14 or so months AfG’s support rose from single digits to around 17% while the Greens rocketed from the bottom of the pack to 20%.

If you didn’t know what these two parties stood for you might think, “Fine, they’re new and interesting, so let them form a coalition and govern for a while.” Unfortunately they’re more likely to kill each other in street fights than work together, since the former want closed borders and free markets while the latter want increased regulation and unlimited immigration. The alternative to an AfG/Green coalition then becomes some combination of the remaining, more centrist (by European standards at least) parties. But the biggest of those parties – Merkel’s Christian Democrats and their coalition partner Social Democrats – are in freefall, precisely because of what they’ve done while in power. So there appears to be no way to put these puzzle pieces together to produce a stable government.

And – here’s where things get truly scary – a stable Germany under Merkel’s bland but firm hand has been the only thing holding the European Union and eurozone together. If Germany descends into internal turmoil without a coherent government to push the Italys and Hungarys around, European populists/nationalists will fill the resulting vacuum. Borders will be re-imposed within and without the EU, national government budgets – already above EU deficit limits in many cases – will explode. Already-debilitating debts will keep rising, and the ECB will be forced to bail out Italy for sure and probably several other member states after that.

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Intro to an elaborate series of reports by Reuters, kudos for the effort. Fish have moved north and deeper, leaving entire communities without their proteins.

Ocean Shock (Reuters)

To stand at the edge of an ocean is to face an eternity of waves and water, a shroud covering seven-tenths of the Earth. Hidden below are mountain ranges and canyons that rival anything on land. There you will find the Earth’s largest habitat, home to billions of plants and animals – the vast majority of the living things on the planet. In this little-seen world, swirling super-highway currents move warm water thousands of miles north and south from the tropics to cooler latitudes, while cold water pumps from the poles to warmer climes. It is a system that we take for granted as much as we do the circulation of our own blood. It substantially regulates the Earth’s temperature, and it has been mitigating the recent spike in atmospheric temperatures, soaking up much of human-generated heat and carbon dioxide.

Without these ocean gyres to moderate temperatures, the Earth would be uninhabitable. In the last few decades, however, the oceans have undergone unprecedented warming. Currents have shifted. These changes are for the most part invisible from land, but this hidden climate change has had a disturbing impact on marine life – in effect, creating an epic underwater refugee crisis. Reuters has discovered that from the waters off the East Coast of the United States to the coasts of West Africa, marine creatures are fleeing for their lives, and the communities that depend on them are facing disruption as a result. As waters warm, fish and other sea life are migrating poleward, seeking to maintain the even temperatures they need to thrive and breed.

The number of creatures involved in this massive diaspora may well dwarf any climate impacts yet seen on land. In the U.S. North Atlantic, for example, fisheries data show that in recent years, at least 85 percent of the nearly 70 federally tracked species have shifted north or deeper, or both, when compared to the norm over the past half-century. And the most dramatic of species shifts have occurred in the last 10 or 15 years. Fish have always followed changing conditions, sometimes with devastating effects for people, as the starvation that beset Norwegian fishing villages in past centuries when the herring failed to appear one season will attest. But what is happening today is different: The accelerating rise in sea temperatures, which scientists primarily attribute to the burning of fossil fuels, is causing a lasting shift in fisheries.

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Sep 152018
 
 September 15, 2018  Posted by at 8:26 am Finance Tagged with: , , , , , , , , , ,  


Leonard Misonne Waterloo Place 1899

 

Central Banks Have Gone Rogue, Putting Us All at Risk (Ellen Brown)
Shiller Sees ‘Bad Times In The Stock Market’ Ahead (CNBC)
Yellen: Fed Should Commit To Future ‘Booms’ To Make Up For Major Busts (R.)
Russia Central Bank Raises Key Rate To 7.5%, Extends Pause In FX Buying (R.)
Turkey Raises Key Interest Rate To 24% In Bid To Curb Inflation (G.)
Lamentation (Jim Kunstler)
Days After 9/11 Tulsi Gabbard Slams Betrayal Of American People Over Syria (ZH)
Acrimony As EU Denies False Report On Greek Pension Cuts Relief (K.)
Dalai Lama Says ‘Europe Belongs To Europeans’ (AFP)
Florence Plows Inland, Leaving Five Dead, States Flooded (R.)

 

 

Tons of 10-year Lehman stories. haven’t seen that many truly impressive ones.

Central Banks Have Gone Rogue, Putting Us All at Risk (Ellen Brown)

The U.S. Federal Reserve, which bailed out General Motors in a rescue operation in 2009, was prohibited from lending to individual companies under the Dodd-Frank Act of 2010, and it is legally barred from owning equities. It parks its reserves instead in bonds and other government-backed securities. But other countries have different rules, and central banks are now buying individual stocks as investments, with a preference for big tech companies like Amazon, Apple, Facebook and Microsoft. Those are the stocks that dominate the market, and central banks are aggressively driving up their value. Markets, including the U.S. stock market, are thus literally being rigged by foreign central banks.

The result, as noted in a January 2017 article at Zero Hedge, is that central bankers, “who create fiat money out of thin air and for whom ‘acquisition cost’ is a meaningless term, are increasingly nationalizing the equity capital markets.” Or at least they would be nationalizing equities, if they were actually “national” central banks. But the Swiss National Bank, the biggest single player in this game, is 48 percent privately owned, and most central banks have declared their independence from their governments. They march to the drums not of government but of private industry.

Marking the 10th anniversary of the 2008 collapse, former Fed Chairman Ben Bernanke and former Treasury Secretaries Timothy Geithner and Henry Paulson wrote in a Sept. 7 New York Times op-ed that the Fed’s tools needed to be broadened to allow it to fight the next anticipated economic crisis, including allowing it to prop up the stock market by buying individual stocks. To investors, propping up the stock market may seem like a good thing, but what happens when the central banks decide to sell? The Fed’s massive $4 trillion economic support is now being taken away, and other central banks are expected to follow. Their U.S. and global holdings are so large that their withdrawal from the market could trigger another global recession. That means when and how the economy will collapse is now in the hands of central bankers.

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We all do.

Shiller Sees ‘Bad Times In The Stock Market’ Ahead (CNBC)

Nobel laureate Robert Shiller thinks investors ought to ignore the recent burst in corporate profits and focus on longer-term valuation, which he says carries foreboding news for the stock market. At a time when earnings are rising 25 percent a quarter, Shilller said that’s not indicative of what longer-term results in the market will be. History has shown that in previous times, particularly around World War I, the late 1920s approaching the time of the Depression, and in the high-inflation 1980s, profits could be strong but equity results not as much. In the present case, the recent surge in profits has been due to last year’s tax cuts, backed by President Donald Trump, that took the corporate rate from 35 percent to 21 percent.

“My own way of thinking is it looks like an overreaction,” Shiller said Friday at a conference in New York presented by the Wharton School. “We’re launching a trade war. Aren’t people thinking about that? Is that a good thing? I don’t know, but I’m thinking it’s likely to be bad times in the stock market.” Shiller cautioned that he is not predicting major calamity for the market but rather a much lower level of returns, in the 2.6 percent annual range, than investors have come to expect during the 9-year-old bull market. The longest rally in history has the S&P 500 up more than 335 percent since the March 2009 bottom. “It’s not like I’m predicting a crash,” he said. “This is a 10-year forward return. This is not going to be great, because we’re just too high at the present value.”

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Really, these people think they saved the economy. By creating fake booms.

Yellen: Fed Should Commit To Future ‘Booms’ To Make Up For Major Busts (R.)

The U.S. Federal Reserve should commit to letting economic booms run on enough to fully offset collapses like the 2007 to 2009 Great Recession, former Fed chair Janet Yellen said on Friday, urging the central bank to make “lower-for-longer” its official motto for interest rates following serious downturns. Yellen’s approach, which comes in the wake of complaints by the Trump administration about Fed interest rate hikes, could imply a looser monetary policy stance amid Fed officials’ concerns about tight labor markets and greater financial stability risks after a decade of low rates. Those concerns should not be shunted aside, Yellen said, in her most extensive remarks about monetary policy since leaving the Fed early in the year.

Elaborating on how the central bank should think about what to do if rates have to be cut to zero again in the future and can’t go any lower, she said the Fed should promise now that it will keep rates low enough to let a hot economy make up for lost time. “By keeping interest rates unusually low after the zero lower bound no longer binds, the lower-for-longer approach promises, in effect, to allow the economy to boom,” Yellen said in remarks delivered at a Brookings Institution conference. “The (Federal Open Market Committee) needs to make a credible statement endorsing such an approach, ideally before the next downturn.”

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The trade wars affect Russia only slightly.

Russia Central Bank Raises Key Rate To 7.5%, Extends Pause In FX Buying (R.)

The Russian central bank raised its key interest rate to 7.50 percent on Friday and said it would not make any foreign currency purchases until the end of the year, citing the risk of higher inflation and rouble volatility. It was the first time the central bank had raised the key rate since late 2014 when it had to step in to help stabilise the tanking rouble. The rouble firmed after the decision, trading at 67.88 versus the dollar compared with 68.41 shortly before. “The increase of the key rate will help maintain real interest rates on deposits in positive territory, which will support the attractiveness of savings and balanced growth in consumption,” the central bank said in a statement.

Analysts polled by Reuters had mostly expected the central bank to hold the rate at 7.25 percent, as it had done at three previous board meetings, but had not ruled out the possibility of a rate hike either. The bank’s decision to extend a pause in daily FX buying until the end of 2018 from the end of September will help curtail exchange rate volatility and its influence on inflation over the next few quarters, the central bank said. Explaining its thinking, the central bank said “changes in external conditions observed since the previous meeting of the Board of Directors have significantly increased pro-inflationary risks.”

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7.5% in Russia, 24% in Turkey. Why? Because Turks borrowed so much in dollars.

Turkey Raises Key Interest Rate To 24% In Bid To Curb Inflation (G.)

Turkey‘s central bank has raised its key interest rate to 24% in a dramatic bid to control rocketing inflation and prevent a currency crisis. Ignoring calls for restraint from President Erdogan, the bank raised its main short-term rate from 17.5% following weeks of pressure from international investors. Financial markets have grown increasingly concerned that Turkey is in danger of adding its name to the list of countries seeking a rescue loan from the IMF. Argentina agreed a loan earlier in the summer with the IMF and only last month called on the Washington-based lender to release the funds earlier to to ease concerns that the country would not be able to meet its debt obligations over the next year.

South Africa, Indonesia and Mexico are also among a group of emerging market economies that have seen their currencies tumble as investors desert countries that have grown quickly using large amounts of borrowed funds. The Turkish lira began to recover shortly after the rate hike, strengthening by 3% to 6.16 against the dollar. Inflation also soared this month to a 15-year high of almost 18%. The currency has plunged in recent months and even after Thursday’s rise was down almost 39% against the dollar this year.

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Third world America.

Lamentation (Jim Kunstler)

The lamentation for the northern part of “flyover” America is an old story now. Nobody is surprised anymore by the desolation of de-industrialized places like Youngstown, Ohio, or Gary, Indiana, where American wealth was once minted the hard way by men toiling around blast furnaces. But the southeast states enjoyed a strange interlude of artificial dynamism since the 1950s, which is about three generations, and there is little cultural memory for what the region was like before: an agricultural backwater with few cities of consequence and widespread Third Worldish poverty, barefoot children with hookworm, and scrawny field laborers in ragged straw hats leaning on their hoes in the stifling heat.

The demographic shifts of recent decades turned a lot of it into an endless theme park of All-You-Can-Eat buffets, drive-in beer emporia, hamburger palaces, gated retirement subdivisions, evangelical churches built like giant muffler shops, vast wastelands of free parking, and all the other trappings of the greatest misallocation of resources in the history of the world. Like many of history’s prankish proceedings, it seemed like a good idea at the time. As survivors slosh around in the plastic debris in the weeks ahead, and the news media spins out its heartwarming vignettes of rescue and heroism, will there be any awareness of what has actually happened: the very sudden end of a whole regional economy that was a tragic blunder from the get-go?

It is probably hard to imagine Dixieland struggling into whatever its next economy might be. In some places, it’s not even possible to return to a prior economy based on agriculture. A lot of the landscape was farmed so ruinously for two hundred years that the soil has turned into a kind of natural cement, called hardpan or caliche. The climate prospects for the region are not favorable either, not to mention the certain cessation of universal air-conditioning and “happy motoring” that made the unwise mega-developments of recent decades possible.

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I remember her meeting with Trump. She must feel deceived. Just not clear by whom.

Days After 9/11 Tulsi Gabbard Slams Betrayal Of American People (ZH)

In a rare and unprecedented speech delivered on the House floor just two days after the nation memorialized 9/11, Democratic Hawaiian Congresswoman Tulsi Gabbard on Thursday slammed Washington’s longtime support to anti-Assad jihadists in Syria, while also sounding the alarm over the current build-up of tensions between the US and Russia over the Syria crisis. She called on Congress to condemn what she called the Trump Administration’s protection of al-Qaeda in Idlib and slammed Washington’s policies in Syria as “a betrayal of the American people” — especially the victims and families that perished on 9/11.

Considering that Congresswoman Gabbard herself is an Iraq war veteran and current Army reserve officer who served in the aftermath of 9/11, it’s all the more power and rare that a sitting Congress member would make such forceful comments exposing the hypocrisy and contradictions of US policy. She called out President Trump and Vice President Mike Pence by name on the House floor in her speech: “Two days ago, President Trump and Vice President Pence delivered solemn speeches about the attacks on 9/11, talking about how much they care about the victims of al-Qaeda’s attack on our country. But, they are now standing up to protect the 20,000 to 40,000 al-Qaeda and other jihadist forces in Syria, and threatening Russia, Syria, and Iran, with military force if they dare attack these terrorists.”

[..] Trump and Gabbard had even once met to discuss Syria policy at a private meeting at Trump Tower in November of 2016 just ahead of then president-elect Trump being sworn into office. At the time the two appeared to be in complete agreement over Syria policy, after which Gabbard said of the meeting, “I felt it important to take the opportunity to meet with the President-elect now before the drumbeats of war that neocons have been beating drag us into an escalation of the war to overthrow the Syrian government—a war which has already cost hundreds of thousands of lives and forced millions of refugees to flee their homes in search of safety for themselves and their families.”

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Pacta sunt servanda.

Acrimony As EU Denies False Report On Greek Pension Cuts Relief (K.)

The European Commission on Friday denied a report in the state-run Athens-Macedonian News Agency (ANA-MPA) that claimed Greece’s lenders had agreed to the non-implementation of pension cuts slated for January as they believe the country’s social security system has become viable. The agency, whose report was initially backed by government spokesman Dimitris Tzanakopoulos, also claimed that the institutions had informed opposition parties about their decision. But a government source told Kathimerini that the report was not true.

The EC was quick to refute the report with a statement urging Greece to deliver on the promises it has made to its international lenders under the bailout program. “Our position is crystal-clear: Pacta sunt servanda. This is the only position you need to look at,” Commission spokesman Alexander Winterstein told a news briefing, using a Latin proverb which means “agreements must be kept.” For their part, the institutions said they made the visit to Athens – the first since Greece’s exit from the bailout program in August – not to engage in negotiations but to monitor whether the government is sticking to agreed reforms.

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Not a popular thing to say. But is it wrong? What he means is stop the wars and invasions first.

Dalai Lama Says ‘Europe Belongs To Europeans’ (AFP)

The Tibetan spiritual leader, the Dalai Lama, said Wednesday that “Europe belongs to the Europeans” and that refugees should return to their native countries to rebuild them. Speaking at a conference in Sweden’s third-largest city of Malmo, home to a large immigrant population, the Dalai Lama – who won the Nobel Peace Prize in 1989 – said Europe was “morally responsible” for helping “a refugee really facing danger against their life”. “Receive them, help them, educate them… but ultimately they should develop their own country,” said the 83-year-old Tibetan who fled the capital Lhasa in fear of his life after China poured troops into the region to crush an uprising. “I think Europe belongs to the Europeans,” he said, adding they should make clear to refugees that “they ultimately should rebuild their own country”. .

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Where’s all the water going to go?

Florence Plows Inland, Leaving Five Dead, States Flooded (R.)

Florence had been a Category 3 hurricane on the five-step Saffir-Simpson scale with 120-mph winds as of Thursday, but dropped to a Category 1 hurricane before coming ashore near Wrightsville Beach close to Wilmington. The National Hurricane Center downgraded it to a tropical storm on Friday afternoon, but warned it would dump as much as 30 to 40 inches of rain on the southeastern coast of North Carolina and into the northeastern coast of South Carolina in spots. “This rainfall will produce catastrophic flash flooding and prolonged significant river flooding,” the hurricane center said. Atlantic Beach on North Carolina’s Outer Banks islands had already received 30 inches (76 cm) of rain, the U.S. Geological Survey said.

By Friday night the center of the storm had moved to eastern South Carolina, about 15 miles northeast of Myrtle Beach, with maximum sustained winds of 70 mph. North Carolina utilities have estimated that as many as 2.5 million state residents could be left without power, the state’s Department of Public Safety said. More than 22,600 people were housed in 150 shelters statewide, including schools, churches and Wake Forest University’s basketball arena. Officials in New Bern, which dates to the early 18th century, said over 100 people were rescued from floods and the downtown was under water by Friday afternoon. Calls for help multiplied as the wind picked up and the tide rolled in.

“These are folks who decided to stay and ride out the storm for whatever reason, despite having a mandatory evacuation,” city public information officer Colleen Roberts said. “These are folks who are maybe in one-story buildings and they’re seeing the floodwaters rise.”

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Dec 112016
 
 December 11, 2016  Posted by at 9:54 am Finance Tagged with: , , , , , , , , , ,  


‘Daly’ Somewhere in the South, possibly Miami 1941

The ECB Is Creating A World Of Zombie Banks And Zombie Companies (HandBl.)
Stocks Have Only Been This Expensive During Times Of Crisis (BI)
UK Government Faces New Brexit Court Case (R.)
Senate Quietly Passes “Countering Disinformation And Propaganda Act” (ZH)
Does Krugman Really Support The Working Class? (Dean Baker)
Non-OPEC Oil States Agree To Cuts In ‘Historic’ Deal (AFP)
Quebec Paves Way For More Oil And Gas Exploration (BBG)
Goa Goes Cashless: ‘Who Buys Fish With A Credit Card?’ (G.)
Greece Passes Austerity 2017 Budget, Eyes 2.7% Growth (AP)
The Icelandic Minister Who Refused To Help The FBI Frame Assange (Katoikos)
WikiLeaks Emails ‘Link Turkey Oil Minister To Isis Oil Trade’ (Ind.)
Russian Bombardment ‘Forces ISIS Out Of Palmyra’ Hours After Re-Entry (AFP)

 

 

“A large part of the European banking sector would be on the brink of collapse and no stress test could anticipate the magnitude of that kind of credit risk..”

The ECB Is Creating A World Of Zombie Banks And Zombie Companies (HandBl.)

Next year could turn out to be a make-or-break year for Europe. But unlike in 2008, neither the governments nor the central banks have sufficient means to deal with another crisis. And it’s not entirely clear whether their intervention last time actually made things better or worse. Take Mr. Draghi, for instance. By lowering interest rates in the euro zone and buying up debt en masse, he has been trying to give the European economy a much needed shot in the arm. Yet despite all of his efforts, the specter of deflation still looms over the bloc, the future of the common currency is uncertain and lenders in southern Europe are still fighting for their existence. At the same time, the negative effects of Mr. Draghi’s policies are becoming more apparent. The STOXX Europe 600 index may have closed at its highest level in more than two months earlier this week, but it’s still 65% lower than where it was before the financial crisis.

The IMF has even said it feared a third of European banks wouldn’t be able to become profitable again even if the economy were to recover. The weird thing about the way the European economy has fared after the financial crisis is that even though businesses have been struggling, not a lot of them are going under. Insolvencies have been below the historical average. In Germany, for instance, the%age of companies declaring bankruptcy was the same right before the Lehman Brothers crash as it was in the 1990s – between 1.5 and 2%. Since the crisis began, that metric has fallen steadily. In 2015, the last full year for which data is available, it stood at 0.6%. Insolvency rates have even dropped in the euro zone’s weakest members along its southern periphery. Common sense would have one believe that the number of bankruptcies increases in times of crisis – especially during crises as protracted as financial ones.

“With its zero interest rate policy and the massive purchasing of bonds, the ECB is undermining the process of creative destruction, which is so important to a market economy,” said Markus Krall at Goetz Partners in Frankfurt. The ECB, for its part, was willing to do anything to prevent the economy from tanking. The central bank flooded the banks with money, and that deluge reduced companies’ capital costs to practically nothing. Even the most inefficient businesses can survive in that environment. Mr. Krall did the math on what it would mean for the balance sheets of European banks if insolvency rates had been at the historical average all along. He discovered that the €1 trillion in bad loans the ECB identified in its latest report would be closer to the tune of €2.5 trillion in that hypothetical scenario. “A large part of the European banking sector would be on the brink of collapse and no stress test could anticipate the magnitude of that kind of credit risk,” Mr. Krall said. “The ECB is creating a world of zombie banks and zombie companies,” he added.

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1929, 1999, 2007.

Stocks Have Only Been This Expensive During Times Of Crisis (BI)

Stocks are getting a bit pricey. All three major indexes break though their all-time highs on a seemingly daily basis, and this has pushed earnings multiples higher and higher. The current 12-month trailing price-to-earnings ratio of the S&P 500 sits at 25.95x, while the forward 12-month price-to-earnings is roughly 17.1x, according to FactSet data. Each of these is higher than its long-term average. In fact, based on one measure of valuation, the market hasn’t been this expensive anytime other than before a massive crash. The cyclical adjusted price-to-earnings ratio, better known as Shiller P/E, which adjusts the price-to-earnings ratio for cyclical factors such as inflation, stands at 27.86 as of Friday.

There have only been a few instances in history when stocks have been this expensive: just before the crash of 1929, the years leading up to the tech bubble and its bursting, and around the financial crisis of 2007-09. This does not necessarily mean that a crash is imminent — during the tech bubble, the Shiller P/E made it well into the 30s before coming back down. Additionally, there are some criticisms that Shiller P/E is generally more backward-looking since it adjusts for the cycle, so it may not be as accurate. Another caveat is that, during the three previous instances, investors have been incredibly bullish on stocks (there’s a reason Robert Shiller’s book is titled “Irrational Exuberance”) and most indicators of sentiment — from the American Association of Individual Investors to Bank of America Merrill Lynch’s sell-side sentiment indicator — are still depressed. Still, an elevated level for the Shiller P/E certainly isn’t going to make it any easier to sleep at night.

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As the EU descends into chaos, some of these people are going to remember something about a gift horse’s mouth.

UK Government Faces New Brexit Court Case (R.)

Opponents to Britain leaving the EU will launch a fresh legal action this week, which could further hamper Prime Minister Theresa May’s Brexit plans, The Sunday Times reported. The newspaper said campaigners will write to the UK government on Monday saying they are taking it to the High Court in an effort to keep Britain in the single market. It said the claimants will seek a judicial review in an attempt to give lawmakers a new power of veto over the terms on which Britain leaves the EU. They argue the government “has no mandate” to withdraw from the single market because it was not on the referendum ballot paper on June 23 and was not part of the ruling Conservative Party’s manifesto for the 2015 general election.

May has said she wants to invoke Article 50 of the EU’s Lisbon Treaty by the end of March, kicking off up to two years of exit negotiations. However the High Court ruled last month that Article 50 cannot be triggered without parliament’s assent. That ruling is being challenged by the government in Britain’s Supreme Court. The Sunday Times said the new court case hinges on whether the government would also have to trigger another legal measure — Article 127 of the European Economic Area agreement — in order to quit the single market. It said ministers argue Britain automatically exits the single market when it quits the EU. But, it said if the claimants win the new case, the government would have to gain the approval of lawmakers.

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Sanity evaporates in the US. And it’s not Trump.

Senate Quietly Passes “Countering Disinformation And Propaganda Act” (ZH)

While we wait to see if and when the Senate will pass (and president will sign) Bill “H.R. 6393, Intelligence Authorization Act for Fiscal Year 2017”, which was passed by the House at the end of November with an overwhelming majority and which seeks to crack down on websites suspected of conducting Russian propaganda and calling for the US government to “counter active measures by Russia to exert covert influence … carried out in coordination with, or at the behest of, political leaders or the security services of the Russian Federation and the role of the Russian Federation has been hidden or not acknowledged publicly,” another, perhaps even more dangerous and limiting to civil rights and freedom of speech bill passed on December 8.

Recall that as we reported in early June, “a bill to implement the U.S.’ very own de facto Ministry of Truth has been quietly introduced in Congress. As with any legislation attempting to dodge the public spotlight the Countering Foreign Propaganda and Disinformation Act of 2016 marks a further curtailment of press freedom and another avenue to stultify avenues of accurate information. Introduced by Congressmen Adam Kinzinger and Ted Lieu, H.R. 5181 seeks a “whole-government approach without the bureaucratic restrictions” to counter “foreign disinformation and manipulation,” which they believe threaten the world’s “security and stability.” Also called the Countering Information Warfare Act of 2016 (S. 2692), when introduced in March by Sen. Rob Portman, the legislation represents a dramatic return to Cold War-era government propaganda battles.

“These countries spend vast sums of money on advanced broadcast and digital media capabilities, targeted campaigns, funding of foreign political movements, and other efforts to influence key audiences and populations,” Portman explained, adding that while the U.S. spends a relatively small amount on its Voice of America, the Kremlin provides enormous funding for its news organization, RT.“Surprisingly,” Portman continued, “there is currently no single U.S. governmental agency or department charged with the national level development, integration and synchronization of whole-of-government strategies to counter foreign propaganda and disinformation.”

Long before the “fake news” meme became a daily topic of extensive conversation on wuch mainstream fake news portals as CNN and WaPo, H.R. 5181 would rask the Secretary of State with coordinating the Secretary of Defense, the Director of National Intelligence, and the Broadcasting Board of Governors to “establish a Center for Information Analysis and Response,” which will pinpoint sources of disinformation, analyze data, and — in true dystopic manner — ‘develop and disseminate’ “fact-based narratives” to counter effrontery propaganda.

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I don’t really want to mention Krugman ever again, but maybe just this once…

Does Krugman Really Support The Working Class? (Dean Baker)

Paul Krugman told readers that intellectual types like him tend to vote for progressive taxes and other measures that benefit white working class people. This is only partly true. People with college and advanced degrees tend to be strong supporters of recent trade deals [I’m including China’s entry to the WTO] that have been a major factor in the loss of manufacturing jobs in the last quarter century, putting downward pressure on the pay of workers without college degrees. They also tend to support stronger and longer patent and copyright protections (partly in trade deals), which also redistribute income upward. (We will pay $430 billion for prescription drugs this year, which would cost 10-20% of this amount in a free market. The difference is equal to roughly five times annual spending on food stamps.)

Educated people also tended to support the deregulation of the financial sector, which has led to some of the largest fortunes in the country. They also overwhelmingly supported the 2008 bailout which threw a lifeline to the Wall Street banks at a time when the market was going to condemn them to the dustbin of history. (Sorry, the second Great Depression story as the alternative is nonsense — that would have required a decade of stupid policy, nothing about the financial collapse itself would have entailed a second Great Depression.)

His crew has also been at best lukewarm on defending unions. However they don’t seem to like free trade in professional services that would, for example, allow more foreign doctors to practice in the United States, bringing their pay in line with doctors in Europe and Canada. The lower pay for doctors alone could save us close to $100 billion a year in health care expenses.

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OPEC members cheat. What do you think non-members will do? Still, prices can remain ‘high-ish’ until we find out.

Non-OPEC Oil States Agree To Cuts In ‘Historic’ Deal (AFP)

11 countries agreed on Saturday to cut their oil output, teaming up with the OPEC cartel in an exceptional bid to end the world’s glut of crude and reverse a dramatic fall in income. Russia and 10 other non-OPEC states will reduce their production by more than half a million barrels per day (bpd), OPEC announced. The deal will take effect from the start of 2017 and last for six months, though it may be extended depending on market conditions. “I am happy to announce that a historic agreement has been reached,” said Qatar’s Energy Minister Mohammed Bin Saleh Al-Sada, whose country holds the rotating presidency of the OPEC. The cut will contribute to OPEC’s own initiative to ease a saturated market and end a price slump that has brutally affected the economies of many oil producers.

On November 30 its members announced a slash in output by 1.2 million barrels per day (bpd) beginning in January, to 32.5 million bpd. Under that deal, OPEC called on non-member producer states to lower their output by 600,000 bpd. Saturday’s deal approves cuts totalling 558,000 bpd. Russia had already signalled it would provide half of that production cut in the first half of 2017. Among the other countries that will contribute cuts Kazakhstan agreed to reduce production by 20,000 bpd, Mexico 100,000 bpd, Oman 40,000 bpd and Azerbaijan 35,000 bpd, according to Bloomberg. The deal also includes Malaysia, Bahrain, Equatorial Guinea, Sudan, South Sudan and Brunei.

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Québec is powered by hydro. All this is just for export to the US. Turn ‘La Belle Province’ into a moonscape. It’s up to the First Nations again to stop the mess. You still like Justin?

Quebec Paves Way For More Oil And Gas Exploration (BBG)

Quebec’s legislature passed a bill that will pave the way for more oil and gas exploration, providing a boost to drillers such as Junex Inc. while drawing criticism from environmental, aboriginal and citizen groups. Bill 106 passed Quebec’s National Assembly in a 62-38 vote early Saturday after an overnight debate ahead of the holiday break. The legislation is meant to implement Quebec’s clean energy plan but also contains provisions allowing for energy exploration, potentially including fracking. “Quebec’s government just voted down an amendment to ban fracking in a triumph of science over ‘leave it in the ground’ lunacy,” Calgary-based Questerre Energy tweeted early Saturday morning. Shares of companies that hold exploration rights, including Questerre and Junex, based in Quebec City, surged last week as passage of the legislation looked likely.

Questerre holds about 1 million acres and has drilled test wells in the Utica shale formation along the St. Lawrence River, according to its website. Questerre’s shares rose the most in more than eight years on Thursday and inched up again on Friday. Junex’s stock increased 30%, the most in almost two years. Bill 106 creates a new agency to promote Quebec’s transition to cleaner energy yet also lays out a framework for oil and gas development in the Canadian province. Environmental, aboriginal and citizen groups argued that the bill’s mandate is contradictory, that debate was rushed and that it should have included a moratorium on fracking as well as greater protection for landowners. [..] Bill 106 strips power from landowners who will be powerless to stop exploration by companies with drilling claims, Carole Dupuis at Regroupement vigilance hydrocarbures Quebec, said by phone.

That, in turn, will hurt property values, especially if exploration leads to fracking. “If there was not the fracking issue, the landowner issue would not be a problem. It’s an access issue,” she said. “What’s the value of your land if someone has been drilling one kilometer from you and you don’t know if your drinking water is safe?” [..] Bill 106 goes against aboriginal rights to self-determination and to establish the best use of their lands, Mi’gmaq Chief Darcy Gray said in an e-mail Saturday. “The bill also opens up our lands to exploration that we feel could have long-lasting, detrimental and irreparable damage,” he wrote “especially with regards to hydraulic fracturing and or other types of well stimulation.” “Why this would even be considered, or how it could be construed as a favorable initiative, is beyond me,” he said.

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When will Modi’s support crash?

Goa Goes Cashless: ‘Who Buys Fish With A Credit Card?’ (G.)

It’s 11 o’clock, and Laxman Chauhan still hasn’t sold any fish. His stall in the central market in the west Indian city of Panjim has been open for three hours, but none of his usual clients have come today. He checks his watch, and then takes a walk to see if other vendors have had any customers. “Sold anything yet?” he asks Ramila Pujjar, who has set her stall up with a glistening display of the morning’s catch. She hasn’t either. “I’m losing 2,000-3,000 rupees (£23-£35) a day,” says Chauhan. “I’m throwing fish away every day.” The low footfall at Panjim’s fish market is unusual; fish is a staple in Goan cuisine but, for the past month, since the prime minister, Narendra Modi, abolished the 500 and 1,000 rupee notes, business has suffered. “I’m losing money because of the government,” says Pujjar.

“The government only takes care of the rich, the poor will always be poor.” Modi’s surprise announcement wiped out 86% of the nation’s currency overnight, leaving the vendors at Panjim’s fish market to suffer heavy losses. “Nobody has cash, so they’re not buying fish.” Panjim is no different to the rest of India. Long queues wind around banks and ATMs in every city as people scramble to exchange their high-value banknotes. The cash crisis has hit millions of traders, as people tighten purse strings and save up precious banknotes. But now, this sleepy tourist town is going to become the laboratory for a radical new experiment. From January, Goa’s government has announced that the city will go “cashless”, meaning every street vendor, rickshaw driver and shopkeeper must offer their customers the option to pay using a debit card or mobile phone. The cash-free drive will attempt to close down India’s thriving parallel economy of untaxed cash transactions.

A government circular at the beginning of the month instructed traders: “Goa is likely to become the state in India to go for cashless transactions from 31 December. Even though cash transactions are not being banned, it is in the interest of the government to encourage cashless transactions.” The policy, announced by India’s defence minister, Manohar Parrikar, is in line with Modi’s vision for a cash-free India. Last week, the finance minister, Arun Jaitley, announced a series of discounts on digital transactions for petrol, railway tickets and insurance policies. Modi has urged young people to support his “less cash” economy in a radio broadcast: “I need the help of young people in India … There are many people in your families or neighbourhoods who may not know how to use technologies such as e-wallets and payments through mobiles. I urge you to spend some time … to teach this technology to at least 10 families who may not know it,” he said.

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Sure. Just get your most creative accountants out. A “landmark year”?

Greece Passes Austerity 2017 Budget, Eyes 2.7% Growth (AP)

Greece’s Parliament has passed a budget of continued austerity as mandated by the country’s creditors, but which forecasts robust growth for 2017. Prime Minister Alexis Tsipras says it will mark Greece’s “final exit” from its nearly decade-long financial crisis. The budget adds more than €1 billion in new taxes, mostly indirect taxes on items from phone calls to alcohol. It also cuts spending by over €1 billion. The budget was backed by the left-dominated ruling coalition and opposed by all other parties. It passed by a vote of 152-146 on Saturday. Despite the continued austerity, Tsipras predicted that 2017 will be a “landmark year” with 2.7% economic growth. He said his government has achieved a higher-than-forecast 2016 primary surplus.

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Interesting long interview.

The Icelandic Minister Who Refused To Help The FBI Frame Assange (Katoikos)

You are “the minister” who refused to cooperate with the FBI because you suspected their agents on mission in Iceland were of trying to frame Julian Assange. Do you confirm this? Yes. What happened was that in June 2011, US authorities made some approaches to us indicating they had knowledge of hackers wanting to destroy software systems in Iceland. I was a minister at the time. They offered help. I was suspicious, well aware that a helping hand might easily become a manipulating hand! Later in the summer, in August, they sent a planeload of FBI agents to Iceland seeking our cooperation in what I understood as an operation set up to frame Julian Assange and WikiLeaks.

Since they had not been authorised by the Icelandic authorities to carry out police work in Iceland and since a crack-down on WikiLeaks was not on my agenda, to say the least, I ordered that all cooperation with them be promptly terminated and I also made it clear that they should cease all activities in Iceland immediately. It was also made clear to them that they were to leave the country. They were unable to get permission to operate in Iceland as police agents, but I believe they went to other countries, at least to Denmark. I also made it clear at the time that if I had to take sides with either WikiLeaks or the FBI or CIA, I would have no difficulty in choosing: I would be on the side of WikiLeaks.

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Erdogan’s son-in-law, “groomed to be Mr Erdogan’s successor”. Parliament certain to vote to hand Erdogan much increased powers. Seen any false flags lately?

WikiLeaks Emails ‘Link Turkey Oil Minister To Isis Oil Trade’ (Ind.)

WikiLeaks has released a cache of thousands of personal emails allegedly from the account of senior Turkish government minister Berat Albayrak, son-in-law of the country’s president, Recep Tayyip Erdogan, which it says shows the extent of links between Mr Albayrak and a company implicated in deals with Isis-controlled oil fields. The 60,000 strong searchable cache, released on Monday, spans the time period between April 2000 – September 23 2016, and shows Mr Albayrak had intimate knowledge of staffing and salary issues at Powertrans, a company which was controversially given a monopoly on the road and rail transportation of oil into the country from Iraqi Kurdistan.

Turkish media reported in 2014 and 2015 that Powertrans has been accused of mixing in oil produced by Isis in neighbouring Syria and adding it to local shipments which eventually reached Turkey, although the charges have not been substantiated by any solid evidence. The emails were apparently obtained by Redhack, a Turkish hactivist collective. WikiLeaks founder Julian Assange said that they were published in response to the Turkish government’s widening crackdown on dissent. Mr Albayrak, one of the most powerful individuals in Turkey, is widely seen as being groomed to be Mr Erdogan’s successor. The hardline president has been consolidating his grip on power by implementing emergency powers and arresting thousands of journalists, activists and academics in the wake of a failed military coup in July.

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Reported without any added anti-Putin innuendo?!

Russian Bombardment Forces ISIS Out Of Palmyra Hours After Re-Entry (AFP)

A Russian aerial onslaught forced Islamic State fighters to withdraw from Palmyra at dawn on Sunday, only hours after the jihadis had re-entered the ancient Syrian city, a monitor said.“Intense Russian raids since last night forced IS out of Palmyra, hours after the jihadists retook control of the city,” said Rami Abdel Rahman of the Syrian Observatory for Human Rights.The raids killed a large number of militants in the desert city in central Syria, Abdel Rahman told AFP. “The army brought reinforcements into Palmyra last night, and the raids are continuing on jihadist positions around the city.”Isis began an offensive last week near Palmyra, which is on Unesco’s world heritage list. In May last year, the Sunni Muslim extremist group seized several towns in Homs province including Palmyra, where they caused extensive damage to many of its ancient sites. They were ousted from Palmyra in March by Syrian regime forces backed by Russia.

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Dec 092016
 
 December 9, 2016  Posted by at 9:42 am Finance Tagged with: , , , , , , , ,  


Arthur Rothstein Migratory fruit pickers’ camp in Yakima, Washington Jul 1936

Trumponomics Will Collapse Under a Mountain of Debt (Stockman)
Shiller CAPE Ratio Signals ‘Overvaluation On A Very Grand Scale’ (CNBC)
The American Dream Is Fading And May Be Very Hard To Revive (WSJ)
Europe’s Comfort Blanket Is Being Pulled Away (AEP)
Albert Edwards’ ‘Most Frightening Chart’ (MW)
Australia Property Market Mirrors Tulip Bubble, Says Former Bank CEO (ND)
Top Official In Italy’s M5S Increases Call For Referendum On Euro (G.)
It Is Almost Certain There Will Be Another Euro Crisis In 2017 (McWilliams)
OPEC Deal Won’t Be Enough to Drain Oil Stockpiles (BBG)
UK Sells Majority Stock In Gas Infrastructure To China, Qatar (Ind.)
UK Village Unleashes Anger With Syrian Refugees: £600 Worth Of Jumpers (Ind.)
Relations With Ankara Sour As Turkey Disputes Greek Sovereignty (Kath.)
Electric Cars Are Only As Clean As Their Power Supply (G.)

 

 

Right back to the poisoned chalice I wrote about on the morning of election day.

Trumponomics Will Collapse Under a Mountain of Debt (Stockman)

Financial markets are heading straight into a perfect storm of central bank failure, bond market carnage, a worldwide recession and a spectacular fiscal bloodbath in Washington. Investors should be heading for the hills with all deliberate speed. What is going to stop Trumponomics cold is debt — roughly $64 trillion of it. That’s what is crushing the American economy, and until the mechanics of its relentless growth are stopped and reversed, the odds of achieving and sustaining the 3–4% real economic growth that Trump’s economics team is yapping about is somewhere between slim and none. Here’s the newsflash. The nation’s monumental debt problem wasn’t newly created by the Obama Administration or the fact that Nancy Pelosi never met a spending program she couldn’t embrace.

The last eight years have surely made the problem far worse and the Democrats are culpable without question. But quite frankly the debt problem is a thoroughly bipartisan creation that is completely immune to the fact that the White House and both sides of Capitol Hill are now under GOP control. In fact, the nation’s debt affliction actually goes back to August 1971 when Nixon closed the gold window and launched the world on the current destructive experiment with massive central bank driven credit expansion. However, it was after 1980 that the wraps really started coming off the debt monster that was spawned by the world’s unshackled central banks. In that context, Paul Volcker was the last honest central banker, and with Ronald Reagan’s acquiescence he did break the back of the virulent commodity and consumer goods inflation that had been unleashed by his immediate predecessors during the 1970s.

Yet Volcker’s great handiwork was for naught because of two other developments – the breakdown of fiscal rectitude and the final destruction of sound money by Alan Greenspan – that also occurred on the Gipper’s watch. In fact, the gigantic Reagan deficits — which nearly tripled the national debt from $930 billion to $2.7 trillion during his eight years in office — is exactly what led Greenspan to crank up the printing press at the Fed after the stock market crash in October 1987.

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What Stockman said, but now in a graph.

Shiller CAPE Ratio Signals ‘Overvaluation On A Very Grand Scale’ (CNBC)

While the S&P 500 is reaching all-time highs on optimism over Donald Trump’s economic agenda, some Wall Street strategists are increasingly worried about a widely followed valuation measure that’s reached levels that preceded most of the major market crashes of the last 100 years. “The cyclically adjusted P/E (CAPE), a valuation measure created by economist Robert Shiller now stands over 27 and has been exceeded only in the 1929 mania, the 2000 tech mania and the 2007 housing and stock bubble,” Alan Newman wrote in his Stock Market Crosscurrents letter at the end of November. Newman said even if the market’s earnings increase by 10% under Trump’s policies “we’re still dealing with the same picture,.”

The Shiller “cyclically adjusted price-to-earnings ratio” (CAPE) is calculated using price divided by the index’s average historical 10-year earnings, adjusted for inflation. Yale economics professor Robert Shiller’s research found future 10-year stock market returns were negatively correlated to high CAPE ratio readings on a relative basis. He won the Nobel Prize in economics in 2013 for his work on stock market inefficiency and valuations.

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Barely half of US 30-year-olds earn more than their parents did at that age..

The American Dream Is Fading And May Be Very Hard To Revive (WSJ)

Barely half of 30-year-olds earn more than their parents did at a similar age, a research team found, an enormous decline from the early 1970s when the incomes of nearly all offspring outpaced their parents. Even rapid economic growth won’t do much to reverse the trend. Economists and sociologists from Stanford, Harvard and the University of California set out to measure the strength of what they define as the American Dream, and found the dream was fading. They identified the income of 30-year-olds starting in 1970, using tax and census data, and compared it with the earnings of their parents when they were about the same age. In 1970, 92% of American 30-year-olds earned more than their parents did at a similar age, they found. In 2014, that number fell to 51%.

“My parents thought that one thing about America is that their kids could do better than they were able to do,” said Raj Chetty, a prominent Stanford University economist who emigrated from India at age 9 and is part of the research team. “That was important in my parents’ decision to come here.” Although there are many definitions of the American Dream—the freedom to speak your mind, for instance, or the ability to rise from poverty to wealth—the economists chose a measure that they said was possible to define precisely. The percentage of young adults earning more than their parents dropped precipitously from 1970 to about 1992, to 58%, found Mr. Chetty et al.

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Draghi says two or more completely contradictory things all in one breath. It’s what they pay him the big bucks for.

Europe’s Comfort Blanket Is Being Pulled Away (AEP)

The long-feared moment of bond tapering in the eurozone has arrived. The comfort blanket is being pulled away – gently – for the first time since the region first crashed into a debt crisis. The ECB has tried to cushion the blow with dovish rhetoric and a glacially slow exit but there is no denying that monetary policy has reached a critical turning point. “The ECB has delivered an unwelcome surprise,” said Luigi Speranza from BNP Paribas. Europe’s incipient tightening has begun just as the US Federal Reserve prepares to raise interest rate next week, probably the first of several rises over the next twelve months as the incoming Trump administration launches a fiscal boom. It comes as China takes action to choke off a property bubble and rein in shadow banking. The world’s three big monetary blocs will all be draining liquidity at the same time.

The ECB will wind down quantitative easing from €80bn to €60bn a month when the current programme expires in March. Societe Generale says that this is just the start, predicting more tapering of €10bn in June, and then further cuts of €10bn at each meeting – a truly drastic outlook. Doves at the ECB warned that it would be dangerous to start any tapering at this delicate juncture, given that there has been no flicker of life in core inflation – still stuck at 0.8pc – and given that imported monetary tightening from the US has already led to a doubling of Italian 10-year yields over the last three months. The doves were over-ruled. It is clear that a German-led bloc on the ECB’s governing council blocked efforts to roll over the existing QE structure for another six months.

Bond purchases will carry on for longer instead. The new €60bn regime will run for nine months until the end of 2017. The ultimate stock of ECB bonds will be higher. You could call it a compromise. But despite appearances – and logical inference – these are not an equivalent forms of stimulus. The stormy saga of bond tapering by the Fed shows that investors react more to the monthly “flow” of QE than they do to the “stock” of bonds held – the balance sheet syndrome that looms large in the theoretical models of central banks. [..] Mario Draghi, the ECB’s president, was at pains to insist that there is no tightening whatsoever coming next year. “The presence of the ECB on the markets will be there for a long time. The key message is that there is no tapering in sight,” he said. Nothing is on auto-pilot and the volume of QE could rise again if need be. “It can go back to €80bn,” he said.

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“..a ghoulish quest to harvest bad news with a forceful sweep of my scythe..”

Albert Edwards’ ‘Most Frightening Chart’ (MW)

Albert Edwards, a global strategist at Société Générale, has been steadily beating the doomsday drum for decades. But despite the perma-bear’s repeated warnings about an impending economic disaster, investors are still likely to take notice when he gleefully shares the “most frightening chart” he’s seen in a while — especially when the stupendous postelection rally in U.S. stocks has stoked fears that a correction might be just around the corner. “I sometimes feel like ‘The Grim Reaper,’ scouring the research savannah in a ghoulish quest to harvest bad news with a forceful sweep of my scythe. Imagine then my perverse delight when our credit team produced what is one of the scariest charts I have seen for a very long time,” writes Edwards in his report. The chart by Guy Stear, head of emerging markets and credit research at Société Générale, shows credit spreads holding steady even as political uncertainty spikes to an unprecedented level.

According to Edwards, that cognitive dissonance is all wrong. “Markets shrugged off the Brexit vote in a couple of days. They shrugged off Donald Trump’s election in a single day. They shrugged off the Italian referendum result in a couple of hours. Heck, in this mood they would shrug off an alien invasion of planet Earth,” he said. “But global political risk is now at such elevated levels that investors must surely be on another planet.” The graph is based on the economic policy uncertainty index developed by three U.S. professors — Scott Baker, Nick Bloom and Steven Davis. This is the original chart that shows the EPU index at 282, significantly above 201 in 2008 and 218 in 2011, two previous periods of panic:

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Really?: “If the economy tracks along okay, it might turn out that this thing sorts itself out.”

Australia Property Market Mirrors Tulip Bubble, Says Former Bank CEO (ND)

Australia’s property market now mirrors one of the worst speculative manias in human history, according to a former Commonwealth Bank CEO. In a televised interview that drew little media attention, David Murray warned that the entire economy is “vulnerable” because of overvalued house prices in Sydney and Melbourne. “All the signs of a bubble are there. Many of the signs are the same as the Dutch tulips,” Mr Murray told Sky News on December 1. Starting in 1634, the Dutch bid up the price of tulip bulbs to extraordinarily high levels. Then, in 1637, the price collapsed, turning the craze into a byword for speculative insanity. Since 2009, Sydney dwelling prices have risen by 95% and Melbourne by 85%, according to CoreLogic, a prominent property analysis firm.

Mr Murray, who chaired a recent inquiry into the health of Australia’s financial sector, said we may yet avoid a Dutch-style price plunge. It is a risk, not a certainty. “If the economy tracks along okay, it might turn out that this thing sorts itself out. But when those risks are there, something needs to be done about it in a regulatory sense, and the Reserve Bank and APRA need to stay on it.” In recent years, APRA has imposed tougher lending policies on the big banks, including forcing them to hold more capital as a buffer against mortgage defaults. This was a recommendation made by Mr Murray during his financial sector review. The former bank boss has been warning of a property bubble since at least last year.

The fact that prices in Melbourne and Sydney have not corrected already is a further cause for concern, he said in his latest interview. “When we get a momentum in a market like this, when you get these self-amplifying price spirals, the fact they keep going on and on longer than expected is another sign that it’s not very healthy.” The crash, if it eventuates, would be triggered by a large number of landlords being forced to sell their investment properties all at once, thereby driving down prices, Mr Murray said. “We have more investors in the market than we’ve had historically and those investors typically, even people on lower incomes, own multiple properties and those properties are often collateralised in the system. So they’re the people who become forced sellers, and that’s the risk to the system.”

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Now President Mattarella is rumored to have asked Renzi to form a new government?!

Top Official In Italy’s M5S Increases Call For Referendum On Euro (G.)

A top official in the Italian anti-establishment Five Star Movement (M5S) is ratcheting up his party’s call for a referendum on the euro, signalling that Italy’s possible exit from the single currency could become a central issue in the next election. Alessandro Di Battista, 38, who is a prime contender to represent M5S in the next poll, said in an interview with German newspaper Die Welt that he did not support an exit from the EU but did support a referendum on the euro. “The euro and Europe are not the same thing. We only want for Italians to decide on the currency,” he said. Asked whether the party had considered the repercussions of leaving the euro, which most economists believe would carry big risks for Italy and the global markets, Di Battista said he “understood well the consequences of the introduction of the euro”.

The single currency, he said, had shrunk Italians’ buying power and earnings and caused higher unemployment and “social deprivation”. “If Europe does not want to implode you must accept that you can not go on like this,” he said. M5S’s opposition to the euro is not new, but the remarks are important in the wake of the departure of the centre-left prime minister Matteo Renzi, who submitted his resignation to Sergio Mattarella, the Italian president, on Wednesday evening. Mattarella is meeting the leaders of all the major political parties over the next few days in the hope they can agree on an interim prime minister. Renzi resigned after he was trounced in a referendum on Sunday, with nearly 60% of Italians opposing constitutional reforms he backed. Even if the parties agree on the next prime minister an early election is expected to be called in 2017.

[..] The chances of M5S winning the next election are fairly strong, according to most analysts. But its ability to hold a referendum would depend on whether the party could win strong majorities in both chambers of parliament. That rests on the fate of a controversial electoral law that is under legal review and will dictate how parliamentary seats will be allocated in the next election. Italy’s constitutional court is due to rule on the electoral law on 24 January. Even if M5S wins the next election, Italy’s exit from the euro would be complicated. Italy’s constitution sets a high threshold for the country to abandon an international treaty via a popular vote. M5S would have to pass an amendment before calling a referendum, which would then require winning two-thirds majorities in both chambers of parliament. Even if a referendum passed, the issue could come up for review by the constitutional court.

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Oh, no, not almost.

It Is Almost Certain There Will Be Another Euro Crisis In 2017 (McWilliams)

It is almost certain that there will be another euro crisis in 2017. The last time we had a euro crisis, the focus of attention was Greece; today the vortex is Italy. Italy is not Greece. Italy is the third-largest economy in the Eurozone. Italy is the second-largest manufacturing nation in the EU after Germany. Italy is the largest debtor in Europe. The third-largest Italian bank is irredeemably bankrupt. Italy has no government and the people who are likely to win the next election want to take Italy out of the euro and replace the euro with their own currency, the lira. These are the facts. Our Finance Minister has said there is no problem in the Eurozone. I really don’t know what planet he is living on. Unfortunately for the EU, if Greece was a tricky issue to deal with, Italy is — in economic terms — a massive Greece.

Unlike Greece when it was going bust, Italy can’t be patronised, isolated and vilified by the likes of Slovakia, Finland and – shamefully – our own Government. Italy is a country of close to 60 million people and unlike the British, who were always semi-detached Europeans, the Italians are founding members of the EU and original signatories of the Treaty of Rome, which is 60 years old in March. By March, it is likely that Marine Le Pen will be the frontrunner in the French presidential election. Could she win? Of course she could. And if she wins, the euro is toast. There is already a massive capital flight from Italy. This flight of money will extend to France in the months ahead. The euro is the problem and if the EU wants to save itself, it may have to abandon the euro.

Quite what that looks like is anyone’s guess, but here are the political facts: the two main Italian opposition parties, the people who won on Sunday, want Italy to hold a referendum on leaving the euro. Furthermore, Le Pen has explicitly stated that the day she wins, if she does, she will pull France out of the euro and reinstate the French franc. Le Pen currently has 40pc of the electorate. All she needs is the same type of momentum that propelled Brexit, Donald Trump, and the vote in Italy, where the government lost — not by a few%, but by a whopping 60pc to 40pc.

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Not even close.

OPEC Deal Won’t Be Enough to Drain Oil Stockpiles (BBG)

OPEC is likely to bring the oil market into balance by the middle of next year, but its production cut looks set to fall short of its stated goal of draining the stockpiles that are depressing prices. The oil market will rebalance “toward the middle of next year,” according to Nigeria’s Minister of State for Petroleum Emmanuel Kachikwu, bringing an end to more than three years when supply exceeded demand. However, Bloomberg News calculations based on OPEC data show that across the whole of 2017 there will be little overall reduction in record oil inventories – even if the group convinces non-members to join supply curbs at a meeting on Saturday. “Even with 100% compliance from both OPEC and non-OPEC producers global stocks are unlikely to fall in the first half of 2017,” said Tamas Varga at PVM Oil Associates in London. “That should keep oil prices in check.”

Crude prices could rise to $60 to $70 a barrel if the OPEC succeeds in bring inventories back to a normal level, Venezuelan Oil Minister Eulogio del Pino said last week, echoing a widely held view within the group, from Saudi Arabia to Iran. The portents for achieving this are mixed. OPEC’s track record shows the group only delivers 80% of promised cuts. While Russia has pledged to come to the party and lower output by 300,000 barrels a day in the first half of 2017, other non-OPEC producers, such as Mexico, Azerbaijan and Colombia, are likely to dress up involuntary production declines, already factored in by traders, as cuts. That scenario would leave largely unchanged the 300 million-barrel global stockpile surplus Del Pino and his colleagues are targeting.

OPEC has said its agreement will accelerate the decline of global stockpiles and an optimistic Bloomberg scenario shows the call on the group’s supply exceeding its output by 1.2 million barrels a day in third quarter. That depends on full compliance by OPEC members and for Russia to make good on its pledge, even as other non-OPEC producers make little contribution. The analysis of the market re-balancing by Bloomberg News is based on OPEC’s own estimates and projections of crude supply and demand adjusted for potential scenarios of cooperation from Russia and other non-OPEC countries. Other consultancies and agencies have different views. The International Energy Agency expects the re-balancing will happen early next year, while consultants at Rystad Energy expect a 1.26 million barrels-a-day deficit in the first quarter of next year if Russia is the only non-OPEC country to join the effort.

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You should take your government to court for this, guys. Let them prove this is beneficial to the country.

UK Sells Majority Stock In Gas Infrastructure To China, Qatar (Ind.)

National Grid has agreed to sell a majority stake in the UK’s gas pipe network to a team of investors, including the Chinese and Qatari states. The UK’s power network operator confirmed it is offloading the 61% shareholding to a consortium led by Australian investment bank Macquarie in a deal that values the unit at around £13.8bn. The division controls an important part of the country’s infrastructure, which delivers gas to 11 million homes through 82,000 miles of pipeline, and its sale will reignite concerns about the ownership of critical national assets by foreign investors. In August Theresa May said such deals would face tighter regulation as she gave the green light to the French and Chinese-funded Hinkley Point nuclear reactor.

National Grid said it would distribute a £150m voluntary payment to benefit British energy customers, while some £4bn of the proceeds will be returned to the company’s shareholders. It will keep 31% of the business but said it could potentially sell another 14% stake to the consortium under the terms of the deal. The sale, which is set to complete before the end of March next year, comes as part of a move to rebalance National Grid’s business towards higher growth areas and create extra value for shareholders. Dave Prentis, Unison union general secretary, said: “The experience of Thames Water customers when Macquarie was running the show should have been a red flag to ministers and regulators as how unsuitable this company is to be in charge of the UK’s gas supply. ”Macquarie has poor form already – in building up huge company debt, repatriating massive dividends to the southern hemisphere and charging customers more for a much poorer service.

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Lovely. And funny.

UK Village Unleashes Anger With Syrian Refugees: £600 Worth Of Jumpers (Ind.)

Last week I was in Torrington, North Devon, the village that’s been in the news because local people organised a massive collection of clothes and toys, for Syrian refugees placed in the area. Hundreds took part in the collection, and the local theatre was filled with provisions. It’s a story that would make any reasonable person look at those children’s faces and say, “What a bunch of do-gooding whining liberals, this is typical of the metropolitan elites in their cosy London boroughs such as North Devon.” North Devon obviously isn’t in Devon, because a law of modern life is that in the real neglected England that no one ever talks about, real proper people think all immigrants are thieving dogs, and they understand these matters because they’ve never seen a mango.

So it’s lucky the Daily Mail was able to report, “Fury as refugees are settled in Devon”, and another paper told us the refugees “faced anger” from the community. Because when the mayor, local theatre and hundreds of residents organised the collections, and arranged meetings to welcome the refugees, you could at first sight see this as motivated slightly by kindness. But these newspapers weren’t fooled, and understand it’s tradition in North Devon to express your anger by buying a room full of clothes and arranging them in a hall. Whatever you do when you’re in South Molton, don’t shout at a tractor driver to move out of your way, or they’ll lose their temper and collect six hundred pounds worth of jumpers and line them up in their kitchen, insisting you take the lot. Because a lifetime of working on the land makes them vicious.

Five national newspapers told the story of this rage against the refugees, all quoting one man who said: “We’re receiving 50 to 70 refugees, and 50 to 70 is a huge number in an area with restricted public transport.” There’s no doubt 50 to 70 would create a problem for local public transport, if all 50 to 70 of them were housed on one bus. The 7.15am from St Mary’s Church to Barnstaple would be a dreadful crush, so it’s no wonder this man was annoyed, and you can see why the newspapers regard him as the spokesman for the entire region, rather than the hundreds of people who provided all the clothes, who represent no one but themselves.

But it gets worse, because every newspaper covering the story told how refugee children “annoyed locals” by “relaxing playing basketball on a basketball court”. That’s just taking the piss, isn’t it? How dare children play sports in an area specially designated for that specific sport? They should reward our hospitality by playing sports in the wrong areas, such as basketball on a chess board, or skiing on a snooker table.

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Here’s an issue the EU does need to speak up about. But doesn’t.

Relations With Ankara Sour As Turkey Disputes Greek Sovereignty (Kath.)

Greek Foreign Minister Nikos Kotzias and his Turkish counterpart Mevlut Cavusoglu met Thursday on the sidelines of the annual OECD Summit in Hamburg amid escalating tensions brought on by the nationalistic rhetoric coming out of Ankara and Defense Minister Panos Kammenos’s reference to President Recep Tayyip Erdogan as a “ruthless dictator” who “at this moment is threatening our country.” “If they [Turkey] threaten our country, they will meet with our response and they will know that we shall not make concessions in the name of diplomacy on issues of national sovereignty,” Kammenos said in a radio interview Thursday, referring to recent remarks by Erdogan questioning the 1923 Treaty of Lausanne that set the borders between Greece and Turkey, as well as by other Turkish politicians who have disputed Greek sovereignty over a string of islets in the eastern Aegean.

The remarks by Kammenos, the leader of junior coalition partner Independent Greeks, followed strong statements by Turkey’s Deputy Parliament Speaker Tugrul Turkes, who described his country as the guarantor power of the whole of Cyprus, rather than just the breakaway state in the north, while a lawmaker of the opposition CHP, Tanju Ozcan, upped the ante even further, saying he would raise the Turkish flag on 18 Greek islands. “I will go to the islands and if need be I myself will raise the Turkish flag. Then I will fold the Greek one and send it to the Greek government with a courier,” he told the Turkish Parliament. The latest acrimonious rhetoric comes as tensions also simmer over the outcome of Turkey’s extradition request for eight officers who landed in Greece in July in the aftermath of a botched coup attempt in the neighboring country.

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But ‘green’ sells, and delivers votes. Still: “Charging an electric car for 100 miles of travel could use about 30kwh – roughly the same amount of energy an average US home uses in three or four days.”

Electric Cars Are Only As Clean As Their Power Supply (G.)

Electric cars have never been closer to the mainstream, the market pushed ahead by California subsidies for electric car buyers, and a wide array of new models from established car firms such as Toyota and Chevy. Tesla’s focus on luxury, high-performance vehicles has also broadened their appeal; electric cars are no longer purely an environmental statement, but a tech status symbol too. Yet the “zero emissions” claim grates on some experts, who have continued to argue over whether electric cars are really more environmentally friendly than gas guzzlers, once the manufacturing process for the vehicles and their batteries are taken into account.

Electric cars rely on regular charging from the local electricity network. The power plants providing that energy aren’t emission-free; even in California, 60% of electricity came from burning fossil fuels in 2015, while solar and wind together made up less than 14%. “I couldn’t bear to hear them say the words ‘zero emissions vehicle’ one more time,” says Joshua Graff Zivin, who advised one of California’s three main utilities, San Diego Gas & Electric, on electric cars. Graff Zivin is a professor of economics and public policy at the University of California, San Diego. [..] “All of the action is in the hourly,” says Graff Zivin. It’s not only the region that an electric vehicle plugs into that matters. The hour of the day is equally critical. “The cheapest power is not the greenest power.”

In California, the cheapest power is produced at night, mostly from natural gas, hydroelectric dams and nuclear. Night is when many people will charge their electric cars. However, the greenest power gets generated during the day, when solar power can feed the grid; solar doesn’t work in the dark, windmills stop spinning if there’s no wind and, in today’s grid, there is almost the capacity to store solar and wind-generated electricity to use later. Grid storage is slowly expanding, but most electricity has to be used as it is produced. Units of electricity also can’t be tagged according to where and how they were generated, so nobody can verify whether the electricity they use is from a sustainable source – unless they plug directly into their own solar panel or windmill.

[..] Graff Zivin, along with economics researchers Matthew Kotchen and Erin Mansur, waded into this contentious territory in a 2014 paper. Zivin concluded that a plug-in electric vehicle, such as the Nissan Leaf, always produces less carbon dioxide emissions than a hybrid electric- and gas-powered car – but only in selected regions that rely on less coal, like the western United States and Texas. Charging from the coal-dependent grid in the upper midwest of the US at night could generate more emissions than an average gasoline car. And, in some US regions, plugging in at different times of day could even double an electric car’s emissions impact. Charging an electric car for 100 miles of travel could use about 30kwh – roughly the same amount of energy an average US home uses in three or four days.

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