shutdown Archives - Page 2 of 2 - The Automatic Earth

The US Senate is due back in session to try to end a budget impasse before the start of the working week when the shutdown of many federal services will be felt around the country. Hundreds of thousands of federal staff face the prospect of unpaid leave. On Saturday, recriminations flew around over the Senate’s failure to pass a new budget and prevent the shutdown. A bill to fund the federal government for the coming weeks did not receive the required 60 votes by Friday. The Republican leader of the US Senate, Mitch McConnell, has said there will be a vote at 01:00 in the early hours of Monday (06:00 GMT) on a bill to fund the government until 8 February. The last government shutdown was in 2013, and lasted for 16 days.

This is the first time a government shutdown has happened while one party, the Republicans, controls both Congress and the White House. The vote on Friday was 50-49, falling far short of the 60 needed to advance the bill. With a 51-seat majority in the Senate, the Republicans do not have enough votes to pass the bill without some support from the Democrats. They want funding for border security – including the border wall – and immigration reforms, as well as increased military spending. The Democrats have demanded protection from deportation of more than 700,000 undocumented immigrants who entered the US as children.

No gloating.

• Trump’s Trip To Davos Is Up In The Air Because Of The Shutdown (CNBC)

Donald Trump was set to be the first U.S. president to attend the World Economic Forum in Davos, Switzerland, in nearly two decades, but the government shutdown might have scrambled those plans. White House budget chief Mick Mulvaney said Saturday that Trump’s plans to travel to Davos next week are up in the air while Congress scrambles to strike a deal to fund the federal government. “We’re taking Davos, from the president’s perspective and the Cabinet’s perspective, on a day-by-day basis,” Mulvaney told reporters during an impromptu briefing. The government shut down at midnight Friday, after congressional negotiators failed to pass a budget.

Earlier in the day, Trump cancelled a planned trip to Florida, where he was scheduled to host a party at his private Mar-a-Lago club to mark the one year anniversary of his inauguration. Tickets for the Mar-a-Lago party begin at $100,000 per couple, and proceeds will benefit the Trump reelection campaign and the Republican National Committee. On Saturday, RNC staffers were busy setting up TV screens in the private club, so Trump could address the guests via satellite, according to CNN. The budget impasse showed no signs of letting up on Saturday, as both Democrats and Republicans dug their heels in, and each party blamed the other. The president is scheduled to depart for Switzerland on Wednesday, along with a delegation of more than a dozen Cabinet members, including Treasury Secretary Steven Mnuchin, and top White House aides.

They have to release it, no choice.

• Republicans Have Four Easy Ways to #ReleaseTheMemo – and the Evidence (GG)

One of the gravest and most damaging abuses of state power is to misuse surveillance authorities for political purposes. For that reason, The Intercept, from its inception, has focused extensively on these issues. We therefore regard as inherently serious strident warnings from public officials alleging that the FBI and Department of Justice have abused their spying power for political purposes. Social media last night and today have been flooded with inflammatory and quite dramatic claims now being made by congressional Republicans about a four-page memo alleging abuses of Foreign Intelligence Surveillance Act spying processes during the 2016 election.

This memo, which remains secret, was reportedly written under the direction of the chair of the House Permanent Select Committee on Intelligence, GOP Rep. Devin Nunes, and has been read by dozens of members of Congress after the committee voted to make the memo available to all members of the House of Representatives to examine in a room specially designated for reviewing classified material. The rhetoric issuing from GOP members who read the memo is notably extreme. North Carolina Republican Rep. Mark Meadows, chair of the House Freedom Caucus, called the memo “troubling” and “shocking” and said, “Part of me wishes that I didn’t read it because I don’t want to believe that those kinds of things could be happening in this country that I call home and love so much.”

GOP Rep. Scott Perry of Pennsylvania stated: “You think about, ‘Is this happening in America or is this the KGB?’ That’s how alarming it is.” This has led to a ferocious outcry on the right to “release the memo” – and presumably thereby prove that the Obama administration conducted unlawful surveillance on the Trump campaign and transition. On Thursday night, Fox News host and stalwart Trump ally Sean Hannity claimed that the memo described “the systematic abuse of power, the weaponizing of those powerful tools of intelligence and the shredding of our Fourth Amendment constitutional rights.” Given the significance of this issue, it is absolutely true that the memo should be declassified and released to the public — and not just the memo itself.

The House Intelligence Committee generally and Nunes specifically have a history of making unreliable and untrue claims (its report about Edward Snowden was full of falsehoods, and prior claims from Nunes about “unmasking” have been discredited). Thus, mere assertions from Nunes — or anyone else — are largely worthless; Republicans should provide American citizens not merely with the memo they claim reveals pervasive criminality and abuse of power, but also with all of the evidence underlying its conclusions.

Don’t worry, the shadow banks will.

• China Orders Banks To Stop Financing Cryptocurrencies (SCMP)

The People’s Bank of China has ordered financial institutions to stop providing banking or funding to any activity related to cryptocurrencies, further tightening the noose since its shutdown of crypto exchanges last September sent digital currency enthusiasts fleeing overseas. “Every bank and branch must carry out self-inspection and rectification, starting from today,” according to a document issued by the central bank on Wednesday. “Service for cryptocurrency trading is strictly prohibited. Effective measures should be adopted to prevent payment channels from being used for cryptocurrency settlement.” The Chinese-language document, as seen by the South China Morning Post, was distributed as an internal document among banks, and not published on the central bank’s official website.

“Banks should enhance their daily transaction monitoring, and the timely shut down of the payment channel once they discover any suspected trading of cryptocurrencies,” the document said, adding that the deadline for disclosing the measures is on January 20. The emphasis was on handling any capital settlement to avoid any financial losses by cryptocurrency investors from escalating into public protests – known as “group events” in China – and preserve social stability, the central bank said. [..] Chinese cryptocurrency traders, who once dominated 90 per cent of the world’s trading volume of bitcoin, the most popular and oldest form of cryptocurrency, have moved to the underground market, or overseas to Japan. Bitcoin is considered legal tender in Japan.

“Most of the trading is taking place via US dollar now, as some big accounts active in digital currency trading are already on China’s official watch list and payment channel already blocked,” said Zhao Dong, an individual bitcoin investor who spends most of his time in Japan now. “This move by the PBOC is further pushing capital and innovation out of China.” Still, a person no less than Zhou Xiaochuan, the longest-serving governor in the Chinese central bank, has himself announced that the People’s Bank of China itself is studying the feasibility of developing its own digital currency.

As does Russia.

• China Urges U.S. to Abandon ‘Cold War’ Mindset (BBG)

China’s National Defense Ministry said the U.S. should abandon a “Cold War” mindset and view Chinese national security and military efforts “rationally and objectively.” The instigators of militarization of the South China Sea are “other countries” that don’t seem to want to see peace in the region and are using the banner of “navigational freedom” to undertake military activities in a tyrannical manner, ministry spokesman Ren Guoqiang said in a statement released late Saturday. The statement was in response to a U.S. Defense Department strategy report, released last week, that singled out China’s military modernization and expansion in the South China Sea as key threats to U.S. power.

China has undertaken massive land reclamation in the contested waterway that hosts $5 trillion in trade a year, to strengthen its claim to more than 80 percent of the area. That has strained ties with other claimant states, such as Vietnam and the Philippines, as well as the U.S. The National Defence ministry’s statement on Saturday came shortly after China’s Foreign Ministry vowed to take “necessary measures” to safeguard its sovereignty after a U.S. warship entered waters surrounding the Huangyan Island in the South China Sea. China’s activities in the South China Sea is “a matter within China’s sovereign rights,” Ren said, adding that the country is committed to a path of peaceful development and a harmonious world order.

A good point not particularly well made.

• Britain’s Tired Old Economy Isn’t Strong Enough For Brexit (G.)

Brexit, at its heart, is a recognition that Britain has become steadily weaker since it spent much of its empire wealth fighting two world wars – too feeble in the years before the 2016 referendum to sustain an exchange rate of $1.60 and €1.40, just as it was too poor to cope with $4 to the pound in the 1950s and $2 to the pound in 1992. Manufacturers were unable to make things cheaply, reliably or efficiently enough against the headwind of a high-value currency, forcing many to give up. An economy that boasted 20% of its income coming from manufacturing in the 1980s found it was the source of barely 10% at the beginning of this decade.

Surges in GDP growth in the 70 years since the war can be attributed (and this short list makes the point crudely) to periods when there were cheap raw materials and energy costs; or a growing population; or foreign ownership and management of key industries; or the offloading of vast amounts of state and mutually owned assets; or cheap borrowing. Without these in operation to improve the UK’s performance, a lower exchange rate became inevitable. Some Brexit campaigners made a cheaper currency their explicit aim, arguing that while Britain’s wealth and standing in the world would be diminished in the short term, the breathing space given to manufacturers would allow them to sell abroad at cheaper prices, then use the funds to invest and gain the efficiencies needed to cope with a return to a higher exchange rate sometime in the next decade.

There is a good deal of logic to the argument, but it rests, like so many revolutionary aims, on the many and competing forces in the economy doing exactly what its proponents want them to. For instance, manufacturers, with a few honourable exceptions, have refused to invest more than the bare minimum for decades, even when the exchange rate has helped them. There are windfall profits to be made when currencies fall: but these windfalls have been trousered by shareholders, not invested.

Little emperor.

• Macron: Bespoke Brexit Deal Possible If UK Accepts ‘Preconditions’ (G.)

Emmanuel Macron has said it would be possible for Britain to secure a bespoke trade deal but only if the UK accepts certain “preconditions”. The French president said that while a special solution could be secured, full access to the single market without accepting its rules was “not feasible”. The comments were made during an interview recorded for BBC One’s The Andrew Marr Show on Sunday. Macron has been in the UK for his first visit since taking office. On Thursday, at the end of a joint press conference with Theresa May at Sandhurst military training college, he rejected the idea of a tailored Brexit deal for Britain’s financial services sector. Macron said full access to EU markets would not be possible unless the UK paid into the EU budget and accepted all its rules.

In the interview with Marr, he said there was “a competition between different countries” to attract financial services companies in the future and that France wanted “to attract the maximum activity”. The Brexit secretary, David Davis, has said he is seeking a “Canada plus plus plus” arrangement, based on the EU-Canada trade treaty, but with additional access for services. However, EU negotiators have stressed that Britain would not be allowed to “cherry-pick” sectors. Pressed on whether there would be a bespoke special solution for the UK, Macron said: “Sure, but … this special way should be consistent with the preservation of the single market and our collective interests. “And you should understand that you cannot, by definition, have the full access to the single market if you don’t tick the box.” He added: “So it’s something perhaps between this full access and a trade agreement.”

It’s starting to feel like Stockholm Syndrome.

• Athens Hopeful For Eurogroup Decisions Despite Problems (K.)

Eurozone finance ministers are to meet in Brussels on Monday to assess Greece’s progress in enforcing economic reforms, decide whether to disburse 6.7 billion euros in bailout loans and, Athens hopes, signal talks on debt relief. It was unclear if the loan tranche would be disbursed in its entirety, as some prior actions are pending. However, Greek officials sounded upbeat following a decision late on Friday by Standard & Poor’s to raise Greece’s sovereign credit rating from B- to B with a positive outlook. “Greece’s growth and fiscal outlooks have improved alongside a labor market recovery and amid a period of relative policy certainty,” S&P said.

“These positive developments boost the sense that the trust of the markets and investors in the Greek economy is being restored with steady steps,” the Finance Ministry said on Saturday. “With the conclusion of the program in August 2018 and the securing of steady access to the markets, the Greek economy is definitely moving away from a long period of crisis.” Despite the upbeat rhetoric, there are divisions within SYRIZA over government policies, particularly in the radical Group of 53 faction. In comments to SYRIZA’s central committee on Saturday, Finance Minister Euclid Tsakalotos conceded that there are “many short-term problems” and underlined two major risks. “One is the banks and the other is the IMF,” he said.

Nice. Kiwis believe in fairy tales.

• In New Zealand, 100% Pure Is 100% Propaganda (Stuff)

Ask Tourism New Zealand what 100% Pure means and they’ll tell you: it’s not a ‘clean, green’ campaign, but a campaign that delivers a “100% Pure New Zealand experience”. What it is is 100% pure advertising, and a slogan fit to replace the fertiliser used in the country’s intensive farming. But while Kiwis do seem to be realising there’s something murky about our clean-green image, there is one area we are still fooling ourselves about – the state of our native creatures. Stuff has just wrapped up its Forgotten Species series, a five-part series looking at a handful of the estimated 3700 native species which are either approaching extinction or at risk. Despite having one of the highest proportions of threatened or endangered species of anywhere on the planet, 70% of the public feel the state of our country’s natives is adequate or doing well, according to a recent Lincoln University study.

Ask study co-author Ross Cullen and he will tell you – 70% of the public is “totally wrong”. All countries advertise, and everyone accepts it with a pinch of salt. If we didn’t we would all be jetting off to England expecting a village in the Cotswolds and end up at a sleazy pub in Plumstead, east London. Advertising is advertising, and good advertising brings in tourism money. However, when the public believes its own advertising, it’s no longer advertising, it’s propaganda –and that’s a problem. It’s a problem because if the populace think something’s going well, they ignore it, the political hot-potato cools, and the decline continues. Case in point – the National Government’s Minister for Conservation, Maggie Barry, paraded the new Threatened Species Strategy in front of voters just as the 2017 general election was heating up.

It promised to increase the number of at-risk species directly managed by 40%. On the face of it, this seems great, but when the Budget was released a couple of weeks later, almost all of DOC’s extra funding was ring-fenced for upgrading tourism infrastructure and developing new Great Walks. It was a great ad delivered by a great ex-garden show host. Kiwis might have kicked up a fuss – if the majority didn’t think we were doing a bang up job on protecting native species already. I remember a telling moment after ex-Parliamentary Commissioner for the Environment Jan Wright’s launched her report finding 80% of native birds were threatened. I was present to hear why Tourism Industry Aotearoa chief executive Chris Roberts didn’t fancy this was a problem. “The people come here for our scenery, not our wildlife,” he said. Roberts didn’t disagree with any of the report’s findings, he just thought a visitor levy would do more harm to the country than the rapid die-off of our native birds.

Depression zone. I went from Athens to Amsterdam 5 weeks ago, lost 2 hours of daylight to begin with, and been dead tired ever since. Vitamin D doesn’t do it either.

• Ain’t No Sunshine: Winter Is One Of Darkest Ever For Parts Of Europe (G.)

Sunshine is in short supply across a swathe of north-west Europe, shrouded in heavy cloud from a seemingly never-ending series of low pressure systems since late November and suffering one of its darkest winters since records began. If you live in Brussels, 10 hours and 31 minutes was your lot for the entire month of December. The all but benighted inhabitants of Lille in France got just two hours, 42 minutes through the first half of January. “Sound the alarm and announce the disappearance,” read a despairing headline in photon-deprived northern France’s regional paper, La Voix du Nord. “A star has been kidnapped. We still have no sign of life from the sun.”

Belgium’s Royal Meteorological Institute has declared December 2017 “the second darkest month since 1887”, when it began measuring, after the 10.5 hours of sun recorded at its Uccle weather station last month were beaten only by a bare 9.3 hours in 1934. France’s northern Hauts-de-France region did better with 26 hours of sunshine in December, but that was against a norm of 48. But Météo France described the paltry 2.7 hours of sun recorded from 1 to 13 January in Lille, the region’s biggest city, as “exceptional”. The January average stands at 61.4 hours, according to the agency – meaning Lille and its unfortunate residents were deprived of perhaps 30 hours’ worth of rays in the first part of the month.

[..] Even southern French sun-traps such as Bordeaux and Marseille fell a very long way short of their usual ray quota in the first half of the month, basking in just 10.3 and 26.9 hours respectively against monthly averages of 96 and 92.5. Health experts say a shortage of sunshine can lead to seasonal depression, whose symptoms include a lack of energy, a desire to sleep and a perceived need to consume greater quantities of sugar and fat. “Exposure to morning light inhibits the secretion of melatonin that promotes sleep and favours the production of hormones that will stimulate the body,” Matthieu Hein, a psychiatrist at the Erasmus Hospital in Brussels, said. In the absence of light, we are “rather slow, tired, which is characteristic of SAD, or seasonal affective disorder”. Florent Durand, who runs a massage studio in Lille, told France 3 TV that his €39 light therapy sessions were booked out.

As Turkey bombs US supported Kurds, Erdogan feels like a god.

• Turkey Threatens Refugee Deal With EU (K.)

Turkey’s agreement with the European Union to curb human trafficking across the Aegean appears to be in jeopardy again after a top Turkish official warned that a current impasse with the EU gives Ankara no reason to honor the deal. A collapse of the deal would put more pressure on Greek islands where thousands of migrants are cooped up in overcrowded reception centers. The comments on Friday by Turkey’s minister for EU affairs, Omer Celik, essentially rejected a proposal by French President Emmanuel Macron for a partnership rather than full EU membership for Turkey. “A privileged partnership or similar approaches, we don’t take any of these seriously. Turkey cannot be offered such a thing,” Celik told Reuters.

Celik said the EU was not fully honoring its part of the migration deal, noting that financial aid was “not working well” and that no new chapters have been opened in Turkey’s EU accession bid. “Technically there’s no reason for Turkey to maintain this deal,” he said. The minister’s words echoed those of Turkish President Recep Tayyip Erdogan, who, during a landmark visit to Greece in December, hit out at the EU for giving Turkey just a portion of the aid it had pledged as part of the 2016 migrant deal. During Erdogan’s visit, Prime Minister Alexis Tsipras proposed that Turkey take back migrants from facilities on the Greek mainland to free up space for migrants from overcrowded camps on the islands. Erdogan did not publicly respond to the suggestion.

After Celik’s comments on Friday, a spokesman for the Greek Migration Ministry said the government’s position, that all sides must honor the Turkey-EU deal, remained “fixed and firm.” Migration Minister Yiannis Mouzalas visited Lesvos on Friday, together with Valentin Radev, the interior minister of Bulgaria, which holds the EU’s rotating presidency. Mouzalas reassured local residents, who had gathered at the Moria facility, that measures would be taken to ensure that migrants alleged to have been involved in thefts or other offenses will no longer be allowed to leave the premises. Lesvos Mayor Spyros Galinos said the minister was not doing enough to adequately inform residents and was shifting the blame for the situation on the islands on to local authorities.

New year, same old lack of humanity.

• 15 Syrian Refugees Found Frozen To Death On Lebanon Border (BBC)

Fifteen Syrian refugees – some of them children – have been found frozen to death while trying to cross the mountainous border into Lebanon. Thirteen bodies were found on Friday and two more were discovered on Saturday after the area was hit by a fierce snowstorm. Lebanese civil defence officials found the bodies after being told a group of refugees were in trouble near Masnaa. Local reports say the group had been abandoned by smugglers. Two smugglers have reportedly been arrested.

Several refugees were rescued, including a young boy who was found wandering by himself. The group were taking the same route hundreds of thousands of Syrians have taken before them trying to flee the conflict at home. Lebanon, with a population of four million, has taken in nearly one million Syrians since the war began in 2011. The Lebanese authorities brought in new restrictions in 2015 to try to restrict the number of refugees arriving in the country.

Debt Rattle January 20 2018

Jan 202018

January 20, 2018 Posted by Raúl Ilargi Meijer at 10:58 am Finance Tagged with: Brexit, Davos, housing bubble, mortgage rates, NSA, plastic, shutdown, Spanish Flu, Syria, Trump, whitewash 18 Responses »

Vincent van Gogh Lane near Arles 1888

• US Government Shutdown Begins As Spending Bill Fails In Senate (R.)

• Trump To Tout US Economy, Urge Fair Trade At Elite Davos Forum (R.)

• What Will Rising Mortgage Rates Do to Housing Bubble 2? (WS)

• Fever Pitch (Jim Kunstler)

• NSA Deleted Surveillance Data Court Had Ordered It To Preserve (Pol.)

• Russia Accuses US Of “Carving Out Alternative Government” In Syria (ZH)

• Europe Must Wake Up To Drastic Consequences Of A Hard Brexit (Joris Luyendijk)

• UK Banks Turn Off Lending Taps To Households (G.)

• The Carillion Whitewash (Coppola)

• Hundreds Of UK MPs Call On Supermarkets To Scrap Plastic Packaging (G.)

• The Untreatable: The Centenary of Spanish Flu (LRB)

Maybe it’s better this way: expose the failing systems. Bring out your dead.

• US Government Shutdown Begins As Spending Bill Fails In Senate (R.)

The U.S. government shut down at midnight on Friday after Democrats and Republicans failed to reach a last-minute deal to fund its operations, divided in a bitter dispute over immigration and border security. In a dramatic late-night session, senators blocked a bill to extend government funding through Feb. 16. The bill needed 60 votes in the 100-member Senate but fell short, with only 50 supporting it. Most Democrats opposed the bill because their efforts to include protections for hundreds of thousands of mostly young immigrants known as Dreamers failed. Huddled negotiations by Senate Majority Leader Mitch McConnell and Senate Democratic leader Chuck Schumer in the last minutes before midnight were unsuccessful, and the U.S. government technically ran out of money at midnight.

The shutdown formally began on Saturday, the first anniversary of President Donald Trump’s inauguration. Trump immediately sought to blame Democrats. “Tonight, they put politics above our national security, military families, vulnerable children, and our country’s ability to serve all Americans,” the White House said in a statement. It also said it would not discuss immigration until the government is up and running again. “We will not negotiate the status of unlawful immigrants while Democrats hold our lawful citizens hostage over their reckless demands. This is the behavior of obstructionist losers, not legislators.” In return, Schumer pointed the finger directly at Trump. “It’s almost as if you were rooting for a shutdown and now we’ll have one and the blame should crash entirely on President Trump’s shoulders,” he said.

Until a funding deal is worked out, scores of federal agencies across the country will be unable to operate, and hundreds of thousands of “non-essential” federal workers will be put on temporary unpaid leave. The Republican-controlled House of Representatives passed a stopgap funding measure on Thursday. But Republicans then needed the support of at least 10 Democrats to pass the bill in the Senate. While five Democrats ended up voting for the measure, five Republicans voted against it. Democratic leaders demanded that the measure include protections from deportation for about 700,000 undocumented immigrants known as Dreamers who arrived in the United States as children.

Despite bipartisan negotiations, Republican leaders refused to include those protections, and neither side was willing to back down. McConnell and Schumer insisted they were still committed to finding an agreement that restores government funding as soon as possible. Trump, who had made strict measures on immigration a cornerstone of his presidential campaign, last week rejected a bipartisan proposal, saying he wanted to include any deal for Dreamers in a bigger legislative package that also boosts funding for a border wall and tighter security at the U.S. border with Mexico.

A lion’s den indeed.

• Trump To Tout US Economy, Urge Fair Trade At Elite Davos Forum (R.)

U.S. President Donald Trump will be entering something of a lion’s den when he visits the elitist enclave of Davos next week, rubbing shoulders with the same “globalists” that he campaigned against in winning the 2016 election. Aides said some of Trump’s advisers had argued against him attending the World Economic Forum in order to steer clear of the event, which brings together political leaders, CEOs and top bankers. But in the end, they said, Trump, the first sitting U.S. president to attend the forum since Bill Clinton in 2000, wanted to go to call attention to growth in the U.S. economy and the soaring stock market. A senior administration official said Trump is expected to take a double-edged message to the forum in Switzerland, where he is to deliver a speech and meet some world leaders.

In his speech, Trump is expected to urge the world to invest in the United States to take advantage of his deregulatory and tax cut policies, stress his “America First” agenda and call for fairer, more reciprocal trade, the official said. During his 2016 election campaign, Trump blamed globalization for ravaging American manufacturing jobs as companies sought to reduce labor costs by relocating to Mexico and elsewhere. “Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache,” he said on June 28, 2016, in Pennsylvania. Trump retains the same anti-globalist beliefs but has struggled to rewrite trade deals that he sees as benefiting other countries.

This is going to hurt.

• What Will Rising Mortgage Rates Do to Housing Bubble 2? (WS)

The US government bond market has further soured this week, with Treasuries selling off across the spectrum. When bond prices fall, yields rise. For example, the two-year Treasury yield rose to 2.06% on Friday, the highest since September 2008. In the chart, note the determined spike of 79 basis points since September 8, 2017. That was the month when the Fed announced the highly telegraphed details of its QE Unwind. September as month of the QE-Unwind announcement keeps cropping up. All kinds of things began to happen, at first quietly, without drawing much attention. But then the trajectory just kept going.

The three-year yield, which had gone nowhere for the first eight months of 2017, rose to 2.20% on Friday, the highest since October 1, 2008. It has spiked 82 basis points since September 8:

The ten-year yield – the benchmark for financial markets that most influences US mortgage rates – jumped to 2.66% late Friday. This is particularly interesting because the 10-year yield had declined from March 2017 into August despite the Fed’s three rate hikes last year, and rising short-term yields. At 2.66%, the 10-year yield has reached its highest level since April 2014, when the “Taper Tantrum” was winding down. That Taper Tantrum was the bond market’s way of saying “we’re shocked and appalled,” when Chairman Bernanke dropped hints the Fed might eventually begin tapering what the market had called “QE Infinity.” The 10-year yield has now doubled since the historic intraday low on July 7, 2016 of 1.32% (it closed that day at 1.37%, a historic closing low):

Friday capped four weeks of pain in the Treasury market. But it has not impacted yet the corporate bond market, and the spread in yields between Treasuries and corporate bonds, and particularly junk bonds, has further narrowed. And it has not yet impacted the stock market, and there has been no adjustment in the market’s risk pricing yet. But it has impacted the mortgage market. On Friday, the average 30-year fixed-rate mortgage with conforming loan balances ($417,000 or less) for top-tier borrowers, according to Mortgage News Daily, ended at 4.23%, the highest in nine months. But historically, 4.25% is still very low. And likely just the beginning of a long, uneven climb higher. And the impact on mortgage payments can be sizable. When rates rise for example from 3.5% to 4.5%, the payment for a $250,000 mortgage jumps by $144 to $1,267 a month. This can move the payment out of reach for households that have trouble making ends meet.

Rising markets and fever as flu symptoms.

• Fever Pitch (Jim Kunstler)

In case you’re worked up about the looming federal government shut-down, this is exactly how we’re supposed to roll in the long emergency: everything organized at the gigantic scale is going to wobble and fail. It’s nature’s way of saying, “get smaller, get realer, scale down, and get local.” The catch is, we probably won’t listen to nature. Instead, we’ll just behave like bystanders and do nothing until the full force of failure is upon us, just as we’re doing with climate change — the tragedy of the commons at planetary scale. The failure of national party politics is deep and systemic, as you would expect from activities nurtured in a shit-hole called Washington, corruption being the manifestation of sepsis. The lethal vector of this illness is money.

There’s the money flowing into the “campaign funds” (so-called) of congressmen and senators, of course, but there’s also the “money” that is flowing in and out of the leviathan government — a whole lot of it is not really there. It’s a figment of promises to pay back loans on top of a monumental heap of past promises that will never be kept. The threatened government shutdown is just a symptom of the illness: a society doing things out of scale, trying to run its excessive activities by check-kiting and accounting fraud. What could go wrong? Not the stock and bond markets, I’m sure. Though… wait a minute… that hockey-stick surge in equities looks a little bit like the action of a thermometer measuring the rising body temperature of a very sick patient.

From 25,000 to 26,000 on the Dow — in what? seven days? — is kind of like the flu victim going from 98.6 to 105 after onset. And we know what happens to humans up around the 105 Fahrenheit body temperature level: the brain starts to sputter and smoke. Soon, it’s lights out and don’t let your karma smack you on the butt going through the exit.

State within the state. F*ck the courts.

• NSA Deleted Surveillance Data Court Had Ordered It To Preserve (Pol.)

The National Security Agency destroyed surveillance data it pledged to preserve in connection with pending lawsuits and apparently never took some of the steps it told a federal court it had taken to make sure the information wasn’t destroyed, according to recent court filings. Word of the NSA’s foul-up is emerging just as Congress has extended for six years the legal authority the agency uses for much of its surveillance work conducted through U.S. internet providers and tech firms. President Donald Trump signed that measure into law Friday. Since 2007, the NSA has been under court orders to preserve data about certain of its surveillance efforts that came under legal attack following disclosures that President George W. Bush ordered warrantless wiretapping of international communications after the 2001 terrorist attacks on the U.S.

In addition, the agency has made a series of representations in court over the years about how it is complying with its duties. However, the NSA told U.S. District Court Judge Jeffrey White in a filing on Thursday night and another little-noticed submission last year that the agency did not preserve the content of internet communications intercepted between 2001 and 2007 under the program Bush ordered. To make matters worse, backup tapes that might have mitigated the failure were erased in 2009, 2011 and 2016, the NSA said. “The NSA sincerely regrets its failure to prevent the deletion of this data,” NSA’s deputy director of capabilities, identified publicly as “Elizabeth B.,” wrote in a declaration filed in October. “NSA senior management is fully aware of this failure, and the Agency is committed to taking swift action to respond to the loss of this data.”

In the update Thursday, another NSA official said the data were deleted during a broad, housecleaning effort aimed at making space for incoming information. “The NSA’s review to date reveals that this [Presidential Surveillance Program] Internet content data was not specifically targeted for deletion,” wrote the official, identified as “Dr. Mark O,” “but rather the PSP Internet content data matched criteria that were broadly used to delete data of a certain type … in response to mission requirements to free-up space and improve performance of the [redacted] back-up system. The NSA is still investigating how these deletions came about given the preservation obligations extant at the time. The NSA, however, has no reason to believe at this time that PSP Internet content data was specifically targeted for deletion.”

With Turkey starting an extensive bombing campaign, Syria could explode once again.

• Russia Accuses US Of “Carving Out Alternative Government” In Syria (ZH)

Russia’s Foreign Minister Sergey Lavrov has accused the United States of working to carve out “an alternative government” on Syrian soil in statements made at a UN press briefing related to the recent Turkish military build-up poised to assault Syrian Kurdish areas of Northern Syria. Lavrov’s words come after Secretary of State Rex Tillerson pledged in a speech on Wednesday that US military forces would remain in Syria indefinitely until various objectives are met, which include Syrian government transition and the curtailing of Iran’s influence. Lavrov said “It’s a fact that US forces are seriously involved in creating alternative government bodies on vast part of the Syrian territory. And this, of course, absolutely contradicts their own obligations, which they committed to on numerous occasions, including at the UN Security Council, on maintaining the sovereignty and the territorial integrity on Syria.”

The Russian FM further accused the US of contradicting its previous claim that US troops – which number at least 2,000 according to recent Pentagon statements – were only in Syria to fight the Islamic State and not wage a proxy war against the Syrian government and its allies. The prior US policy of regime change in Syria, which began under the Obama administration and intensified under a CIA program, was something many analysts perceived that President Trump had abandoned – consistent with earlier campaign promises. In the summer of last year Trump shut down the CIA program – widely reported to be the agency’s largest covert program – even while boosting support for the Pentagon program to arm and train the predominately Kurdish Syrian Democratic Forces (SDF).

“Rex Tillerson told me many times that the only reason for their presence there [in Syria] is defeating Islamic State (IS, formerly ISIS/ISL). Now they have some much more long-standing plans,” Lavrov said further of the inconsistency in US policy. “We will have to take this into account and look for solutions that won’t allow the destruction of Syrian sovereignty.”

Bit late, perhaps?

• Europe Must Wake Up To Drastic Consequences Of A Hard Brexit (Joris Luyendijk)

Because it is such a riveting clown show with new crazy episodes almost every day, Europeans can be forgiven for ignoring the fact that Brexit is going to hurt them too. But as the date of Britain’s departure comes closer and Theresa May’s government continues its kamikaze policy of demanding the politically unthinkable from the EU, it is time for Europeans to wake and begin preparing for the worst. On Thursday the Dutch government published a report drawn up by the consultancy firm KPMG analysing the consequences of a “no-deal” Brexit in which the UK leaves the EU without an agreement on 29 March 2019.

Here are the practical implications and cold numbers behind the hot-headed rhetoric about no deal with the EU being “better than a bad deal” for Britain: should the UK “crash” out of the EU by late March 2019 the Dutch companies trading with the UK will have to secure a total of no less than 4.2m exporting and 750,000 importing licences. If by this time both states have a functioning customs system in place – a big if for this consistently incompetent UK government – costs for companies are between €80 and €130. That is per licence. The price tag for all this new red tape is €600m for the Dutch side alone. This excludes the costs of new export and import tariffs, VAT and other new “sector-specific” barriers for trading with the UK.

The 35,000 small and medium-sized businesses unused to trading with non-EU countries also face an estimated cost of €20,000-€50,000 to adapt their IT systems. Added to this, warns the report, must be the likely effects of the inevitable economic slowdown, or worse, in Britain. When the country leaves without a deal it must “fall back” on the minimal WTO rules for trade. But financial services and aviation fall outside the WTO regime, meaning that after a British no-deal departure both sectors must stop trading with the EU overnight. Between Amsterdam Schiphol airport and London alone there are currently 60 flights a day – one every 15 minutes.

“The richest 10% spent more on wine per week (£9.40) than the poorest 10% spent on water..”

• UK Banks Turn Off Lending Taps To Households (G.)

There is little for the average household to cheer these days as inflation crushes paltry earnings increases. Inflation is running at 3% while wage rises can manage no more than 2.5%. Worse for the average household, the banks are beginning to turn off the lending taps that have allowed them to boost their incomes with cheap debt. Things were better in the year to April 2017, according to the number crunchers at the Office for National Statistics, who have lifted the lid on Britain’s spending habits in their annual family spending report. It shows that average weekly household spending clawed its way back from the depths of the 2009 recession to exceed the pre-crisis level for the first time.

This slice of good news, albeit five or six years later than many economists thought it would happen, disguises how the better off have thrived compared to those on the bottom rung of the income ladder. For instance the richest 10% spent more on wine per week (£9.40) than the poorest 10% spent on water (£7.30). In the same vein, the richest 10% spent £59.40 on “furniture and furnishings, carpets and other floor coverings” to almost match how much the poorest 10% spent on rent (£62.70). Challenging the idea that the poorest waste their money on booze and cigarettes, the survey found that the richest 10% devote twice as much of the weekly shop (£17.50) to “alcoholic drinks, tobacco and narcotics” as the poorest. But it is the new rich, the 65- to 74-year-olds that really catch the eye.

Their spending might not match that of the top 10%, yet it significantly powers ahead of anything the average 20-something can muster on areas like entertainment and recreation. The figures show that people in the 10 years from their 65th birthday go on a spending binge that means devoting nearly a fifth of their total expenditure on recreation and culture, double the 10% spent by the under-30s. This is the final salary pension bonanza that can only be described as a once in a generation spending boost. The same applies to those of all ages on below average incomes. They increased their spending by a startling 7% on the previous year, far more than the 1% increase across the richest half of households. Unfortunately they managed this largely by running down savings and taking on extra debt.

As banks, under instruction from the financial regulator, rein in their lending, debt-fuelled spending should be considered a one-off boon, just like the final salary payout. However, that seems unlikely. Banks remain dependent for profit on lending.

Another bunch of lies that will go unpunished.

• The Carillion Whitewash (Coppola)

The Carillion whitewash has begun. Carillion’s interim CEO, Keith Cochrane, is spinning the line that had banks not pulled funding, its collapse could have been averted. And the Financial Times has released details of a letter Carillion sent to the Government at the beginning of January, in which it asked for short-term advances to tide it over while it underwent restructuring. Labour MP Pat McFadden has written to the Treasury Secretary asking whether it would have been more cost-effective for the U.K. Government to support Carillion, rather than allowing it to collapse. This looks to me like a campaign to deflect blame from Carillion’s management to its lenders and customers. We are being led to believe that it wasn’t insolvent, it was just illiquid, and depriving it of short-term funds caused a completely unnecessary collapse.

Deliciously, the bank Cochrane principally accuses of precipitating Carillion’s collapse by depriving it of funds is RBS, which was rescued at taxpayer expense in the 2008 financial crisis. Something tells me Cochrane’s fingering of RBS is no accident. For a bailed-out bank to refuse to provide a major Government contractor with short-term funds looks at best ungrateful and at worst insulting. Of course, RBS is itself a past master at playing the “we’re not insolvent, we are just illiquid” game. On the day that RBS failed, in September 2008, RBS’s CEO, Fred Goodwin, insisted that the bank was solvent. “We don’t have a capital problem,” he said. “We have a liquidity problem. All we need is short-term cash”.* But in fact, RBS was deeply insolvent. Rescuing it cost the U.K. Government £45bn, and RBS has lost a further £58bn since. Nearly ten years after the crisis, it is still in majority public ownership.

The similarity to RBS’s collapse is striking. Less than a week after Carillion’s failure, we now know that it is deeply insolvent. A couple of days after it filed for compulsory liquidation, Carillion’s unsecured bonds were trading at only 2.4% of par: This is an extraordinary writedown. It implies that bondholders expect to get back almost none of their investment. And this is senior unsecured debt, not subordinated debt or equity. The holders of anything more junior have already been wiped.

All of a sudden everyone wakes up at the same time. But why have supermarkets and Coca Cola never done anything about it? And what are the odds they will once the atttention dies down?

• Hundreds Of UK MPs Call On Supermarkets To Scrap Plastic Packaging (G.)

Two hundred cross-party MPs are calling on heads of the major supermarkets to eliminate plastic packaging from their products by 2023. The MPs, who are from seven political parties, have written to Tesco, Sainsbury’s, Morrisons, Asda, Waitrose, Aldi, Lidl, Budgens and Marks & Spencer urging them to scrap plastic packaging. They wrote after the Guardian revealed this week the major supermarkets in the UK create more than 800,000 tonnes of plastic packaging waste – well over half the household plastic waste – each year. Six of the major supermarkets refused to reveal the amount of plastic packaging they put on to the market, saying the information was commercially sensitive. Analysis by Eunomia environmental consultants used figures provided by Aldi and the Co-op – the only chains to release public figures on their plastic tonnage – and the market share of each supermarket to estimate how much plastic packaging the chains produce each year.

This week, Iceland announced it would stop plastic packaging on its own brand products by 2023. Catherine West, Labour MP for Hornsey and Wood Green, who is behind the letter, said: “Vast amounts of plastic are ‘used’ for merely a few seconds before being discarded. “We have a moral duty to tackle this disposable culture. As such, I welcome the recent announcement from Iceland supermarkets … and I’m delighted that MPs from all parties are supporting my call for other retailers to follow suit.” Waitrose announced on Friday it would no longer use black plastic for its meat, fish, fruit and vegetables by the end of this year, and that all Waitrose products would be free of black plastic by the end of 2019. Black plastic cannot be recycled under current UK systems.

Each year it is estimated that more than 300m tonnes of plastic are produced globally. The Guardian revealed recently that plastic production is set to soar over the next 10 years. On Friday Coca-Cola announced a new goal to collect and recycle the equivalent of 100% of the packaging it sells globally by 2030. Coca-Cola said: “Given the size and scope of this challenge, we expect to invest in new packaging innovations and local collection and recycling systems, as well as consumer education and awareness programs.”

Good to know your history. Society would be at least as helpless now as 100 years ago, Better medicine, but also 100 times more mobility. And that’s what kills.

• The Untreatable: The Centenary of Spanish Flu (LRB)

This year marks the centenary of Spanish flu, the most deadly pandemic in human history. It is estimated that five hundred million people contracted it – a third of the global population in 1918 – and that between fifty and a hundred million of them died. Asians were thirty times more likely to die than Europeans. The pandemic had some influence on the lives of everyone alive today. Donald Trump’s grandfather Friedrich died from it in New York City. He was 49. His early death meant that his fortune passed to his son Fred, who used it to start a New York property empire. My wife’s great-grandmother died from it in Verona; her grandfather, aged eight, had to leave school and find work to support the family. Emilio died in 2011 aged 101.

When I told a friend, the writer Andrew Greig, that I was writing this piece, he told me that his father, born in 1899, came down with Spanish flu while on leave from the war in France. ‘His convalescence delayed his return to the front, where his battalion was all but wiped out,’ Andrew said. ‘He always insisted Spanish flu saved his life, and without it, I suppose I wouldn’t be alive either.’ Laura Spinney’s book attempts to collate what is known about the pandemic, and takes a stab at examining its legacy: ‘The flu resculpted human populations more radically than anything since the Black Death,’ she writes. ‘It influenced the course of the First World War and, arguably, contributed to the second. It pushed India closer to independence, South Africa closer to apartheid, and Switzerland to the brink of civil war. It ushered in universal healthcare and alternative medicine, our love of fresh air and our passion for sport.’

The majority of deaths came in the three months between September and December 1918. The war probably didn’t spawn it, but certainly helped it spread: the US lost more soldiers to flu than to the war in part because so many of them spent weeks coughing together in barracks and transports on their way to Europe. Britain and Italy suffered between two and three times more deaths from the war than from the flu, while Germany’s war deaths outnumbered flu deaths six to one. Spinney quotes historians who claim that flu struck Germany harder than Britain or France; Erich Ludendorff was convinced it had robbed Germany of victory. The spread of Spanish flu was quickened by the railway and steamer lines that girdled the planet, starkly illuminating global inequalities in security, nutrition and access to medical care.

In India 6% of the population died; in Fiji 5%; in Tonga 10%. In Western Samoa, for reasons that aren’t entirely clear, more than 20% of the population died. Even harder hit were the Alaskan Inuit, with a death rate between 25 and 50%: in some small Alaskan communities everybody died. Koreans and Japanese were infected at the same rate, but the Koreans, subject to chronic malnutrition, were twice as likely to die. In the US, Italian immigrants died at twice the background rate (the Italian neighbourhoods of New York had a density of five hundred per acre, ten to a room), while black populations were the least affected. ‘As far as the “Flu” is concerned the whites have the whole big show to themselves,’ J. Franklin Johnson wrote to the Baltimore Afro-American.

Debt Rattle January 19 2018

Jan 192018

January 19, 2018 Posted by Raúl Ilargi Meijer at 10:37 am Finance Tagged with: adolescence, bitcoin, Calais, cancer, DNA, FISA, Greece, hackers, hotspots, Mueller, refugees, SEC, shutdown, stopgap, Tsipras, Ukraine 9 Responses »

Vincent van Gogh Red Vineyards at Arles 1888

• The Most Sustainable Stock Market Bubble Ever (MW)

• Global Debt Growing Three Times Faster than Global Wealth (Schiff)

• US House Passes Stopgap Funding Bill and Sends It to Senate (BBG)

• Conservatives Bring Russia Probe Demand to Shutdown Talks (BBG)

• FISA Memo Set To Rock DC, “End Mueller Investigation” (ZH)

• Hackers Have Walked Off With About 14% of Big Digital Currencies (BBG)

• Blockchain Eyed for Mortgage Bundling That Caused 2008 Crisis (BBG)

• SEC Says Bitcoin Funds Raise ‘Investor Protection Issues’ (R.)

• Oliver Stone’s “Ukraine On Fire” Documentary Released In The West (Quinn)

• Blood Test Could Use DNA To Spot Early-Stage Cancers (G.)

• Adolescence Now Lasts From 10 to 24 (BBC)

• Varoufakis Reveals Outburst Against ‘Stupid’ Tsipras (GR)

• Greece Compliance Report Due Friday Ahead of Monday’s Eurogroup (R.)

• UK and France Must Stop ‘Systematic Violation’ Of Calais Refugees (Ind.)

• HRW Blames Greek Authorities For Abysmal Conditions At Hotspots (K.)

We’re having to find new semantics. Once sustainable bubbles become acceptable, anything goes…

• The Most Sustainable Stock Market Bubble Ever (MW)

Is this the most sustainable stock market bubble ever? It’s rare to find the words “sustainable” and “bubble” in the same sentence, but the stock market rally from November 2016 until now has been relentless enough to at least discuss the notion of a “sustainable bubble.” In February 2016, the S&P 500 recorded three consecutive daily gains of more than 1.5%. The Profit Radar Report highlighted that this happened only eight other times. A year later, the S&P 500 was up 19.16%. The February 2016 kickoff rally continued to build momentum. One way to quantify momentum was shown in the Nov. 19, 2017, Profit Radar Report: “The S&P 500 was higher 8 of the first 9 months of 2017. This has only happened 8 other times (1936, 1950, 1954, 1958, 1964, 1995, 1996, 2006). 2, 3, 6, and 12 months later, the S&P was higher every time but one (0.7% loss 2 month later in 1964).

Such strong momentum readings (and they are seen across all time frames) are extremely rare. As mentioned in December 2016 and March 2017, stocks rarely top out at peak momentum. We have to go back to 1995/1996 to find similarly strong and persistent upside momentum. The stock market infrequently finds the delicate and potent balance between being hot, but not too hot. Tempered relentlessness best describes this market. How relentless? The S&P 500 has not closed more than 1.5% below its all-time high since Aug. 21, 2017. The only other time the S&P 500 has been similarly glued to its all-time high was in 1965. The S&P 500 has not dropped more than 5% below its all-time high since June 27, 2016, and has been above its 200-day simple moving average (SMA) since June 28, 2016.

How tempered? The S&P 500 has traded above its 200-day SMA for 391 days, but, until Jan. 5, also never traded more than 10% above its 200-day SMA. This “sweet spot” range is illustrated by the chart below. For the first time ever, the S&P 500 broke such a “controlled range-bound rally” streak (there’ve been two similar rallies in the 1960s and 1990s) by surging higher instead of falling lower.

Once debt is subtracted, there’s very little wealth growth left. It’s a mirage.

• Global Debt Growing Three Times Faster than Global Wealth (Schiff)

Global wealth increased to a new record of $280 trillion in 2017, according to Credit Suisse Global Wealth Report 2017. That seems like pretty good news until you consider global debt is increasing nearly three times as fast. According to the Wealth Report, total global wealth rose at a rate of 6.4%, the fastest pace since 2012 and reached $280 trillion, a gain of $16.7 trillion. This reflected widespread gains in equity markets matched by similar rises in non-financial assets, which moved above the pre-crisis year 2007’s level for the first time this year. Wealth growth also outpaced population growth, so that global mean wealth per adult grew by 4.9% and reached a new record high of $56,540 per adult.”

Increasing global wealth is one of the trends the World Gold Council identifies as a positive for the gold market in the next year. That’s all well and good. But we have to also look at the other side of the equation. The Institute of International Finance recently released its latest global debt analysis. It reported that global debt rose to a record $233 trillion at the end of Q3 2017. That is split up between $63 trillion in government debt, $58 trillion in financial sector corporate debt, $68 trillion in non-financial sector corporate debt, and $44 trillion in household indebtedness. In just nine months, there was an increase of $16 trillion in worldwide debt.

You really can’t talk about wealth without talking about debt. SRSrocco took a look at both factors in the equation. Even if global wealth surged in 2017, so did world debt. According to the data, global wealth increased by $16.7 trillion in 2017 while global debt expanded $16 trillion… nearly one to one. However, this is only part of the story. If we look at the increase in total world debt and total global wealth over the past 20 years, we can see a troubling sign, indeed: Since 1997, total global debt increased from $50 trillion to $233 trillion compared to the rise in global wealth from $120 trillion to $280 trillion. When you do the math, you find global debt has increased 366% vs. 133% increase in global wealth since 1997. That means net wealth was $70 trillion in 1997 versus $47 trillion in 2017.

Shaky. A government shutdown could well be imminent.

• US House Passes Stopgap Funding Bill and Sends It to Senate (BBG)

The House passed a spending bill Thursday to avoid a U.S. government shutdown, but Senate Democrats say they have the votes to block the measure in a bid to force Republicans and President Donald Trump to include protection for young immigrants. The 230-197 vote came just over a day before current funding is set to run out at midnight Friday. The bill would keep the government open through Feb. 16 while all sides negotiate on longer-term funding for defense and domestic programs. The Senate took an initial vote to advance the bill late Thursday, but was headed toward an additional procedural step requiring 60 votes, which Democrats say they will be able to block. The Senate adjourned until Friday morning without taking further action.

Shortly before the House vote, Trump wrote on Twitter: “House of Representatives needs to pass Government Funding Bill tonight. So important for our country – our Military needs it!” In a show of strength, House Republicans had enough support within their own ranks to pass the measure without help from Democrats. Some members of the conservative House Freedom Caucus withheld their support through much of the day Thursday, but reached a last-minute agreement with Speaker Paul Ryan to hold votes later on a conservative immigration bill and a measure to boost defense spending without increasing non-defense spending.

Still, Senate Democrats said they have the votes to block the measure in their chamber. At least 10 of the 18 Democrats who voted for a temporary funding measure in December have publicly announced their opposition, and a Democratic aide said there won’t be enough party members who support the House bill. Republicans would need at least a dozen Democratic votes to get the bill, H.R. 195, through the Senate after at least three of the 51 Republicans in the chamber said they would vote against it.

The gloves are coming off.

• Conservatives Bring Russia Probe Demand to Shutdown Talks (BBG)

House conservatives negotiating with GOP leaders over how to avert a government shutdown brought a fresh demand to the last-minute talks: release classified information they say raises questions about the origins of the FBI’s probe into President Donald Trump’s possible connections to Russia. A Republican lawmaker said they tried to pressure Speaker Paul Ryan to allow a vote on making public a document they say shows Justice Department and FBI misconduct and political bias in the investigation into Russian meddling in the 2016 presidential campaign and whether anyone close to Trump colluded in it. The facts contained in the memo from Republicans on the House Intelligence Committee are “jaw-dropping and demand full transparency,” said Matt Gaetz, a Florida Republican.

The top Democrat on the Intelligence Committee, Adam Schiff of California, criticized the move. He dismissed the committee document as “talking points” drafted by Republican staffers that he said were “profoundly misleading” and “rife” with inaccuracies. The odd juxtaposition of issues – tying the Russia inquiry to the debate over a stopgap spending bill – came as much of the government faced a threatened shutdown on Friday at midnight. Gaetz said the effort was led by Freedom Caucus Chairman Mark Meadows of North Carolina and caucus co-founder Jim Jordan of Ohio. Jordan confirmed that some conservatives had “highlighted” in continuing resolution talks that it was “extremely important” that the memo go public. He said it was not something they were requiring of the Republican leadership in return for votes.

“But it was something we definitely talked about – that needs to happen,” Jordan added. Meadows earlier referred to “subplots” of promises the Freedom Caucus was able to extract from the leadership before he agreed to support the continuing resolution. “Mr Meadows and Mr. Jordan and many conservatives want to include in this negotiation a requirement that the House make public intelligence documents that highlight the unfair treatment of the president” by the FBI and the Justice Department, Gaetz said. Gaetz said he couldn’t describe the contents of the entire memo put together by the House Intelligence Committee “because to do so would reveal classified information, in the absence of a vote to do so,” he said. “Just 218 votes and the American people can read this intelligence information that goes to the fundamentals of our democracy.”

So let’s see it.

• FISA Memo Set To Rock DC, “End Mueller Investigation” (ZH)

All hell is breaking loose in Washington D.C. tonight after a four-page memo detailing extensive FISA court abuse was made available to the entire House of Representatives Thursday. The contents of the memo are so explosive, says Journalist Sara Carter, that it could lead to the removal of senior officials in the FBI and the Department of Justice and the end of Robert Mueller’s special counsel investigation. “These sources say the report is “explosive,” stating they would not be surprised if it leads to the end of Robert Mueller’s Special Counsel investigation into President Trump and his associates.” -Sara Carter. A source close to the matter tells Fox News that “the memo details the Intelligence Committee’s oversight work for the FBI and Justice, including the controversy over unmasking and FISA surveillance.”

An educated guess by anyone who’s been paying attention for the last year leads to the obvious conclusion that the report reveals extensive abuse of power and highly illegal collusion between the Obama administration, the FBI, the DOJ and the Clinton Campaign against Donald Trump and his team during and after the 2016 presidential election. Lawmakers who have seen the memo are calling for its immediate release, while the phrases “explosive,” “shocking,” “troubling,” and “alarming” have all been used in all sincerity. One congressman even likened the report’s details to KGB activity in Russia. “It is so alarming the American people have to see this,” Ohio Rep. Jim Jordan told Fox News. “It’s troubling. It is shocking,” North Carolina Rep. Mark Meadows said. “Part of me wishes that I didn’t read it because I don’t want to believe that those kinds of things could be happening in this country that I call home and love so much.”

“Rep. Peter King, R-N.Y., offered the motion on Thursday to make the Republican majority-authored report available to the members. “The document shows a troubling course of conduct and we need to make the document available, so the public can see it,” said a senior government official, who spoke on condition of anonymity due to the sensitivity of the document. “Once the public sees it, we can hold the people involved accountable in a number of ways.” The government official said that after reading the document “some of these people should no longer be in the government.” -Sara Carter

And there’s no guarantee this won’t continue.

• Hackers Have Walked Off With About 14% of Big Digital Currencies (BBG)

Digital currencies and the software developed to track them have become attractive targets for cybercriminals while also creating a lucrative new market for computer-security firms. In less than a decade, hackers have stolen $1.2 billion worth of Bitcoin and rival currency Ether, according to Lex Sokolin at Autonomous Research. Given the currencies’ explosive surge at the end of 2017, the cost in today’s money is much higher. “It looks like crypto hacking is a $200 million annual revenue industry,” Sokolin said. Hackers have compromised more than 14% of the Bitcoin and Ether supply, he said. All told, hacks involving cryptocurrencies like Bitcoin have cost companies and governments $11.3 billion through lost potential tax revenue from coin sales and illegitimate transactions, according to Susan Eustis, CEO of WinterGreen Research.

The blockchain ecosystem – the decentralized “distributed ledgers” that track crypto transactions – is also vulnerable. Those losses could snowball as more companies and investors rush into the white-hot cryptocurrency market without weighing the dangers or taking steps to protect themselves. Blockchain records are shared, making them hard to alter, so some users see them as super-secure. But in many ways they are no safer than any other software, Matt Suiche, who runs the blockchain security company Comae Technologies, said. And since the market is immature, blockchains may even be more vulnerable than other software. There are thousands of them, each with its own bugs. Until the field is winnowed to a few favorites, as happened with web browsers, securing them all will be a challenge. “Each implementation is going to have its own problems,” Suiche said. “The more implementations, the harder it is to cover all of them.”

[..] In a Dec. 25 paper, researchers at the Institute of Electrical and Electronics Engineers outlined ways hackers can spend the same Bitcoins twice, the very thing blockchains are meant to prevent. In a Balance Attack, for instance, hackers delay network communications between subgroups of miners, whose computers verify blockchain transactions, to allow for double spending. “We have no evidence that such attacks have already been performed on Bitcoin,” the IEEE researchers said. “However, we believe that some of the important characteristics of Bitcoin make these attacks practical and potentially highly disruptive.”

Predictable. Securitizing hasn’t exactly benefitted Jill and John, has it?

• Blockchain Eyed for Mortgage Bundling That Caused 2008 Crisis (BBG)

A group of big financial institutions wants to use the blockchain to help resurrect the packaging of home mortgages into securities, a business that almost destroyed the global banking system in 2008. Credit Suisse, U.S. Bancorp, Wells and Western Asset Management. said Thursday that they successfully tested the distributed ledger technology as a way to make it easier to track securitized home loans. Before the 2008 crisis, bundling home loans together and then selling those baskets to investors was a huge profit center for banks. But this was the primary cause of the meltdown after many borrowers couldn’t repay their debt and the value of the securitized loans crashed, causing trillions of dollars in losses.

The business then shrank dramatically. There were about $823 billion of securitized private-label residential mortgage bonds outstanding in early 2017, according to the Securities Industry and Financial Markets Association, down from a peak of $2.7 trillion in 2007. “Structuring securities is complex, involving many different parties, manual processes, duplicated documents and data in different formats,” David Rutter, chief executive officer of blockchain startup R3, which is organizing the consortium, said in a statement Thursday. While the group is starting with residential mortgages that aren’t backed by the U.S. government, it plans to expand to other types of asset-backed securities. The next step is delivering a commercially viable product, R3 said.

Any regulation will need to concern all crypto, not just bitcoin. Does the SEC have the knowledge to do that?

• SEC Says Bitcoin Funds Raise ‘Investor Protection Issues’ (R.)

The U.S. securities regulator on Thursday raised alarm about the safety of bitcoin-themed investments, telling the fund industry they want answers to their concerns before endorsing more than a dozen proposed products based on cryptocurrencies. A top division chief at the U.S. Securities and Exchange Commission detailed the agency’s concerns about the wild-trading investment in a letter to two trade groups representing fund managers who unleashed a range of proposals for funds holding bitcoin or related assets. The SEC’s division of investment management demanded answers to at least 31 detailed questions about how mutual funds or exchange-traded funds based on bitcoin would store, safeguard, and price that asset. They also asked whether investors can understand the risks and how to address concerns that bitcoin markets could be manipulated.

“There are a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to investors,” said the letter signed by Dalia Blass, the SEC’s director of investment management. Bitcoin’s 1,500% surge last year stoked investor demand for any product with exposure to the red-hot asset. A host of companies are jostling to launch exchange-traded funds which would open up the cryptocurrency to a broad retail market. The SEC in March denied a request to list an ETF from investors Cameron and Tyler Winklevoss, owners of the Gemini bitcoin exchange. The Winklevoss fund is seeking to invest in bitcoin directly. Other fund firms staked their hopes on recently launched U.S.-listed bitcoin futures contracts, which promised a more stable base for ETFs than the largely unregulated virtual currency spot market. Many of those proposals were withdrawn last week at the request of the SEC.

Haven’t watched it yet.

• Oliver Stone’s “Ukraine On Fire” Documentary Released In The West (Quinn)

Oliver Stone’s seminal documentary Ukraine on Fire has finally been made available to watch in the West. Investigative journalist Robert Parry reveals how US-funded political NGOs and media companies have emerged since the 1980s, replacing the CIA in promoting America’s geopolitical agenda abroad. As Russia-Insider details, Ukraine on Fire provides a historical perspective for the deep divisions in the region which led to the 2004 Orange Revolution, the 2014 uprisings, and the violent overthrow of democratically-elected Yanukovych. Covered by Western media as a ‘popular revolution’, it was in fact a coup d’état scripted and staged by ultra-nationalist groups and the US State Department.

Executive producer Oliver Stone gained unprecedented access to the inside story through his on-camera interviews with former President Viktor Yanukovych and Minister of Internal Affairs Vitaliy Zakharchenko, who explain how the US Ambassador and factions in Washington actively plotted for regime change. And, in his first meeting with Russian President Vladimir Putin, Stone solicits Putin’s take on the significance of Crimea, NATO and the US’s history of interference in elections and regime change in the region. The film was originally released in 2016, but unsurprisingly, Stone came up against problems distributing the film in the US and western countries. A Russian-dubbed version was available almost immediately and was aired on TV in Russia, but people in the ‘free world’ were left without access to the full film.

Seems quite obvious. If you can train dogs to discover cancer early on, why not DNA?

• Blood Test Could Use DNA To Spot Early-Stage Cancers (G.)

Scientists have made a major advance towards developing a blood test for cancer that could identify tumours long before a person becomes aware of symptoms. The new test, which is sensitive to both mutated DNA that floats freely in the blood and cancer-related proteins, gave a positive result approximately 70% of the time across eight of the most common cancers when tested in more than 1,000 patients. In the future, such a test could be used in routine screening programmes to significantly increase the proportion of patients who get treatment early, at a time before cancer would typically show up on conventional scans. “The use of a combination of selected biomarkers for early detection has the potential to change the way we screen for cancer, and it is based on the same rationale for using combinations of drugs to treat cancers,” said Nickolas Papadopoulos, professor of oncology at Johns Hopkins University and senior author on the paper.

The test could also identify the form of cancer that a patient had, a goal that previous cancer blood tests have failed to achieve. It works by detecting free-floating mutated DNA, released into the bloodstream by dying cancer cells. The test screened for the presence of errors in 16 genes that are frequently mutated in different kinds of cancer. The blood of patients was also tested for eight known protein biomarkers which are seen to differing degrees depending on where in the body a tumour is located. In blood samples from 1,005 patients, the test detected between 33% and 98% of cases of disease. Ovarian cancer was the easiest to detect, followed by liver, stomach, pancreas, oesophageal, colorectal, lung and breast cancers. For the five cancers that currently have no screening tests – ovarian, liver, stomach, pancreatic and oesophageal cancers – sensitivity ranged from 69% to 98%.

They’re all still living with mom and dad anyway.

• Adolescence Now Lasts From 10 to 24 (BBC)

Adolescence now lasts from the ages of 10 to 24, although it used to be thought to end at 19, scientists say. Young people continuing their education for longer, as well as delayed marriage and parenthood, has pushed back popular perceptions of when adulthood begins. And changing the definition is vital to ensure laws and government policy stay appropriate, they say in the Lancet Child & Adolescent Health journal. But another expert warns doing so risks “further infantilising young people”. Puberty is considered to start when the part of the brain known as the hypothalamus starts releasing a hormone that activates the body’s pituitary and gonadal glands. This used to happen around the age of 14 but has dropped with improved health and nutrition in much of the developed world to around the age of 10.

As a consequence, in industrialised countries such as the UK the average age for a girl’s first menstruation has dropped by four years in the past 150 years. Half of all females now have their period by 12 or 13 years of age. There are also biological arguments for why the definition of adolescence should be extended, including that the body continues to develop. For example, the brain continues to mature beyond the age of 20, working faster and more efficiently. And many people’s wisdom teeth don’t come through until the age of 25. Young people are also getting married and having children later. According to the Office of National Statistics, the average age for a man to enter their first marriage in 2013 was 32.5 years and 30.6 years for women across England and Wales. This represented an increase of almost eight years since 1973.

Lead author Prof Susan Sawyer, director of the centre for adolescent health at the Royal Children’s Hospital in Melbourne, writes: “Although many adult legal privileges start at age 18 years, the adoption of adult roles and responsibilities generally occurs later.” She says delayed partnering, parenting and economic independence means the “semi-dependency” that characterises adolescence has expanded.

The 3.5% surplus is the opposite of what’s good for Greece; there should be a 3.5% deficit, with all 7% of it invested in the economy.

• Varoufakis Reveals Outburst Against ‘Stupid’ Tsipras (GR)

Former Greek Finance Minister Yanis Varoufakis has revealed he accused Prime Minister Alexis Tsipras of being “totally stupid” in accepting a demand by Greece’s creditors for big primary surpluses. During an interview with Greece’s Parapolitika radio, Varoufakis said when he learned that Tsipras in 2015 accepted, without consulting him, a primary surplus target of 3.5% he confronted the premier: “I told him: ‘Are you totally stupid? What have they given you in return?’ And he replied: ‘Oh, maybe I was stupid. I will retract from the promise’.” Varoufakis said he actually used a stronger word than “stupid”.

In the same interview, the former finance minister repeated claims that Tsipras did not really want to win in the infamous July 2015 referendum on the bailout. Varoufakis said he remembered that everyone at the prime minister’s office that evening was sad. “I do not know when exactly Tsipras decided to capitulate,” he added. Referring to his successor, Euclid Tsakalotos, he said: “I can no longer recognize him.” “Euclid became a yes man on July 6 [2015] .. The case of Euclid hurts, because I was an eyewitness of his total transformation,” he added. Varoufakis also confirmed that he still has in his possession recordings of the Eurogroup meetings of the turbulent first half of 2015.

And also, the 3.5% surplus is a perfect way to make Greece a debt slave forever.

• Greece Compliance Report Due Friday Ahead of Monday’s Eurogroup (R.)

Eurozone finance ministers could decide on Monday, or soon afterward, to release the next tranche of bailout loans to Greece after the country pushed through a batch of laws to meet reform agreements with its creditors, a senior European Union official has said. Finance ministers from the 19 countries sharing the euro meet for monthly talks on Monday and a review of Greek reforms is one of the top items on the agenda. Last Monday, the Greek Parliament approved a bill for fiscal, energy and labor reforms requested by international lenders. This is likely to complete the third and penultimate review of Greek reforms, unlocking new loans. “We are extremely well on our way towards the completion of the third review,” the senior EU official said.

“There are a number of administrative measures to be taken still. As of yet we cannot say that all the preconditions [for disbursements] have been successfully completed simply because the time lines are as they are,” the official said. Lenders’ experts, who are now translating and checking the Greek laws, are to issue a report on their compliance with the bailout’s requirements on Friday. The new loans would be between 6 and 7 billion euros, disbursed to Greece in more than one tranche, the official said. Greece would use the money to redeem maturing debt, pay arrears and create a cash buffer for when it leaves its third bailout in August. “We can be confident that the disbursements will… start in February, probably in the second half,” the official said.

It’s not about people, it’s about money and politics. Welcome to the real Europe.

• UK and France Must Stop ‘Systematic Violation’ Of Calais Refugees (Ind.)

The UK and France must urgently put an end to the “systematic violation” of refugees in Calais, a group of charities has warned. In a letter shared exclusively with The Independent, eight aid organisations urged leaders Theresa May and Emmanuel Macron to uphold their commitment to human rights law, as conditions for the thousands living on the border become increasingly perilous. The group, which includes l’Auberge des Migrants, Help Refugees, Safe Passage and Utopia56, wrote to the leaders on the same day Ms May welcomed the French President to the UK-France Summit at the Royal Military Academy in Sandhurst. “We are writing to ask that any new agreement relating to the French-British border bear in mind the human rights of displaced people currently residing in Calais,” the letter states.

“We are deeply concerned that the human rights of refugees and displaced people in northern France are being systematically violated on French territory. We moreover lament the heightened risk of sexual violence, exploitation and trafficking to which children and youth in Calais are exposed, as well as the many avoidable deaths occurring at the border.” Ahead of the visit, the Prime Minister announced the UK will take more child refugees from Calais and spend £44.5m on additional security at the French port. Ms May and Mr Macron subsequently signed a deal on migrants called the Sandhurst Treaty, designed to ease the suffering of some of the thousands of people camped near the French port who currently wait six months to have their cases settled. However, No 10 was keen to play down suggestions that Ms May had agreed to accept more refugees, insisting it would simply speed up the process of settling claims.

And Germany now blames the island mayors.

• HRW Blames Greek Authorities For Abysmal Conditions At Hotspots (K.)

In its annual review for 2018, Human Rights Watch (HRW) said the failure of Greek authorities to properly identify vulnerable asylum seekers for transfer to the mainland has “impeded their access to proper care and services.” The watchdog group also said that policy formed under the deal between the European Union and Turkey to stem the flow of migrants to the continent has led to thousands being “trapped in Greece in overcrowded and abysmal conditions, while denying most access to adequate asylum procedures or refugee protection.” “The policies, conditions, uncertainty and the slow pace of decision-making contributed to deteriorating mental health for some asylum seekers and other migrants on the islands, while creating tensions that sometimes erupted into violence,” it said.

More than 50,000 refugees and migrants are stranded in Greece. Meanwhile, five eastern Aegean island mayors are calling for a meeting with the German ambassador in Athens after coming under fire from German Interior Minister Thomas de Maiziere, who said on Wednesday that they were to blame for the appalling living conditions of refugees and migrants trapped in the hotspots. De Maiziere accused the island mayors of not making use of the aid that is being offered in order to force the government to transfer them to the Greek mainland.

Debt Rattle December 7 2017

Dec 072017

December 7, 2017 Posted by Raúl Ilargi Meijer at 9:10 am Finance Tagged with: bitcoin, corporatism, Greece, immigration, Jerusalem, NiceHash, population, Saudi, shutdown, Trump, Yemen 5 Responses »

MC Escher Convex and concave 1955

Note: no Debt Rattle tomorrow due to travel

• The Great Credit Party Is Almost Over, Societe Generale Says (BBG)

• Mother of All Bubbles Too Big to Pop – Peter Schiff (USAW)

• One Day Soon, The Sun Will Not Rise (Econimica)

• China’s Financial System Has Three Important ‘Tensions’ – IMF (CNBC)

• Bitcoin Mining Service NiceHash Says Hackers Emptied Its Wallet (BBG)

• Trump: Government Shutdown ‘Could Happen’ Saturday (CNBC)

• Trump Calls On Saudi Arabia To End Yemen Blockade Immediately (Ind.)

• Why the Deep State Is at War With Trump (Stockman)

• How Corporate Power Killed Democracy (CP)

• EU Regulators Threaten Court Challenge To EU-US Data Transfer Pact (R.)

• Greek Stability Attracts US Investors Amid Turkey, Middle East Tumult (CNBC)

• Greek Islands Boiling Over As Winter Arrives (K.)

• Scientists Warn Of 93% Chance Global Warming Will Exceed 4°C (Ind.)

“Emerging market and high-yield markets are the most alarming.”

• The Great Credit Party Is Almost Over, Societe Generale Says (BBG)

The great credit party that’s taken yield premiums in major markets down around lowest in a decade is probably months away from an end, as central banks normalize monetary policy and the economic outlook softens, Societe Generale predicts. “We expect next year to be a transition year, when the ultra-low yield environment finally starts to lose its grip,” Societe Generale credit strategists Juan Esteban Valencia and Guy Stear wrote in a note. “The U.S. and the eurozone are heading for an economic slowdown in 2019, and given the rising levels of corporate leverage, this should have an impact on credit.” U.S. investment-grade bond premiums will widen by mid-2018, with European counterparts following suit, as credit markets price in the economic slowdown, they wrote.

“The sword falls in 2H,” they predicted in a report that recognized last year’s annual outlook proved too bearish. Societe Generale had anticipated political risk to hurt credit in 2017, but changed tack by March as that didn’t pan out. Now, with global premiums having fallen further, “credit looks very pricey indeed,” they wrote. “Emerging market and high-yield markets are the most alarming.”

Schiff is right, except he keeps being focused on the dollar alone. It’s an American thing.

• Mother of All Bubbles Too Big to Pop – Peter Schiff (USAW)

Money manager Peter Schiff correctly predicted the financial meltdown in 2008. Now, 10 years later, what does Schiff see today? Schiff says, “I predicted a lot more than just the stock market going down back then. I predicted the financial crisis, but more importantly, I predicted what the government would do as a result of the financial crisis and what the consequences of that would be because that’s where we’re headed. The real crash I wrote about in my most recent book is still coming. . . . This is the third gigantic bubble that the Fed has inflated, and when this one pops, it’s not going to be ‘the third time is a charm.’ It’s going to be ‘three strikes and you’re out.’ I think this bubble is too big to pop. I think it’s the mother of all bubbles, and when it bursts, there is not a bigger one that the Fed is going to be able to inflate to mask these problems, meaning we can’t kick the can down the road anymore.”

This time, the crisis is going to hit everyone in the wallet. Schiff goes on to say, “I think the problem we are going to be confronted with is going to be much worse than a financial crisis. It is going to be a dollar crisis, and it is going to be a sovereign debt crisis where the bonds people are worried about are not some sub-prime mortgages. . . . It’s going to be the U.S. government that people are worried about and the solvency of the U.S. government and the Treasury bonds. If it’s a dollar crisis and people are worried about the dollar, the only thing worse than owning a dollar today is owning the promise of being paid in dollars in the future. I don’t think we have the courage to default and admit to our creditors that we don’t have the money and we can’t repay. I think we will create all the money that we need so we can pretend to repay, but what we end up doing is wiping out the debt with inflation.”

Many more graphs in this from Chris Hamilton. US population growth? It was all immigration: “.. the US fertility rate has been negative for 45 years..”

• One Day Soon, The Sun Will Not Rise (Econimica)

When the Q4 US resident population data is released, something that has not happened in the post WWII era will take place. The population of adults aged 15-64 years old will decline. This was not supposed to happen and will put an end to seven plus decades of continuous population growth which has meant a growing workforce, a growing consumer base, and growing tax base. A growing core US population, something considered as sacrosanct as the sun rising, will not happen. On a year over year basis, where there once were up to 3 million more homebuyers than the previous year, 3 million more car buyers than the year before, 3 million more potential customers…there will be likely be thousands fewer.

Many will assume this is a demographic issue of boomers exiting the working age population… but actually demographics is simply the early onset of a disease that will only progressively worsen. This is truly a population growth issue, not simply a demographic distribution problem. The economic system the US and world have adopted are dependent on perpetual growth on a quarter over quarter and year over year basis. Two negative quarters (or even zero growth) and a recession is called and all the Federal Reserve’s and federal governments tools are employed. Given the importance of growth, the most important factor in growing the economy is the rising demand represented by a growing population. But the US fertility rate has been negative for 45 years (chart below) meaning the native population (plus immigrants) have continually failed to replace themselves.

This means US population growth has simply been a story of immigration. And until 2000, N. America was the primary destination for the majority of the world’s immigrants. However, since ’00 and particularly since ’05, the migration patterns have significantly changed.

The soft approach.

• China’s Financial System Has Three Important ‘Tensions’ – IMF (CNBC)

An almost two-year long study of the Chinese financial system by the International Monetary Fund found three major tensions that could derail the world’s second-largest economy. Those tensions emerged as China moves away from its role as the world’s factory to a more modern, consumer-driven economy, the IMF said. The financial sector is critical in facilitating that transition, but in the process it evolved into a more complicated and debt-laden system. “The system’s increasing complexity has sown financial stability risks,” the fund said in the 2017 China Financial Sector Stability Assessment report released on Thursday morning Asia hours. The report was a culmination of the fund’s several visits to China between October 2015 and September 2017.

The assessment is intended to identify key sources of systemic risk in the financial sector so that policies can be implemented to enhance resilience to shocks and problems that could spread across the globe. The first tension in China’s financial system, according to the IMF, is the rapid build-up in risky credit that was partly due to the strong political pressures banks face to keep non-viable companies open, rather than letting them fail. Such struggling firms have, in recent years, taken on more debt to achieve growth targets set by the authorities. The overall debt-to-GDP ratio in the Asian economic giant grew from around 180% in 2011 to 255.9% by the second quarter of 2017, data by the Bank for International Settlements showed. The rise coincided with a slowdown in productivity growth and pressures on asset quality in the banking system – increasing the risks faced by the Chinese economy.

The second tension identified by the IMF is that risky lending has moved away from banks to the less-regulated parts of the financial system, commonly known as the “shadow banking” sector. That adds to the complexity of the financial sector and makes it more difficult for authorities to supervise activities in the system, the IMF said. And the third issue identified by the international organization is that there’s been a rash of “moral hazard and excessive risk-taking” because of the mindset that the government will bail out troubled state-owned enterprises and local government financing vehicles. An example is the “implicit guarantees” that financial institutions offer when selling products to retail investors. That is a situation where the financial product sold are not guaranteed, but banks almost always compensate investors for principal losses by dipping into their own capital.

The People’s Bank of China, in response to the IMF assessment, said in a statement on its website that it disagrees with some points in the report but the fund’s recommendations are “highly relevant in the context of deepening financial reforms” in the country. One of the points the Chinese central bank said it disagrees with is the conclusion that many banks lack the ability to withstand shocks. The IMF’s stress tests found that 27 out of 33 banks studied were under-capitalized. But the PBOC said the Chinese financial system is resilient.

NiceHash is the largest bitcoin-mining exchange. Well, its coins have been found. But what now?

“a highly professional attack with sophisticated social engineering”

• Bitcoin Mining Service NiceHash Says Hackers Emptied Its Wallet (BBG)

NiceHash, the marketplace for cloud-based mining of cryptocurrencies, said hackers breached its systems and stole an unknown amount of bitcoin from its virtual wallet. “We are working to verify the precise number of BTC taken,” the company said Wednesday in a statement on its Facebook page. It’s halting operations for 24 hours, it said. The venture’s main webpage showed a “maintenance” error message, linking to its social media accounts. NiceHash helps match people who can spare computing capacity with miners looking to solve complex math problems to obtain a variety of new coins. It later facilitates periodic payments to the service providers with bitcoin. A wallet address circulated by NiceHash users shows that more than $60 million of bitcoins might be affected, according to CoinDesk, the cryptocurrency research and news website.

Seems a bit early, but echo chambers are deafening.

• Trump: Government Shutdown ‘Could Happen’ Saturday (CNBC)

President Donald Trump on Wednesday said that a government shutdown “could happen” as soon as Saturday. “It could happen,” Trump said during a Cabinet meeting at the White House, in response to a reporter’s question about the Friday deadline for a spending bill to fund the government. “The Democrats are really looking at something that could be very dangerous for our country,” Trump said. “They are looking at shutting down. They want to have illegal immigrants, in many cases people that we don’t want in our country, they want to have illegal immigrants pouring into our country, bringing with them crime, tremendous amounts of crime.” Congress has until midnight on Friday to approve a short-term spending package to keep the government open. Despite majorities in both chambers, Republicans will need Democratic votes to pass the bill.

House Minority Leader Nancy Pelosi, D-Calif., responded on Twitter to Trump’s comments saying: “President Trump is the only person talking about a government shutdown. Democrats are hopeful the President will be open to an agreement to address the urgent needs of the American people and keep government open.” What congressional Democrats want in exchange for supporting the spending bill are permanent protections for the nearly 800,000 young, undocumented immigrants currently living in the United States who were brought here as children, the so-called Dreamers. Earlier this year, Trump canceled an Obama-era protection policy for Dreamers, the Deferred Action for Childhood Arrivals program, or DACA. The president’s order gave Congress until March 2018 to pass a bill with DACA-like protections.

To balance out the Jerusalem decision? Jerusalem should be a religious city, not a political one.

• Trump Calls On Saudi Arabia To End Yemen Blockade Immediately (Ind.)

US President Donald Trump has called on Saudi Arabia to end its Yemen blockade immediately, citing humanitarian concerns. Mr Trump said in a statement that he has directed US officials to call Saudi Arabian leaders and request they “completely allow food, fuel, water and medicine to reach the Yemeni people.” He said Yemenis “desperately need it.” A Saudi-led coalition has been fighting to defeat the Iran-backed Houthis and Yemeni President Ali Abdullah Saleh’s forces in Yemen since March 2015 with the aim of reinstating the internationally recognized government of Mr Saleh’s successor, Abed Rabbo Mansour Hadi. The US has been supporting the coalition through weapons sales, some intelligence sharing, and refuelling capabilities for air operations.

Since the conflict began, at least 10,000 people have died as a result and 40,000 have been wounded, Al Jazeera reported. Mr Saleh was killed earlier this week after moving to switch allegiances in the bloody conflict, making the situation in the country unpredictable according to experts. [..] The Saudi-led coalition had imposed a blockade on the country last month after Houthi rebels fired a missile on the Saudi capital of Riyadh. It responded by sending a slew of missiles into Yemen’s capital Sanaa. The blockade was partially lifted at the Hudaya port of the international airport in Sanaa and the first aid shipments were allowed to enter the country just last week. In the meantime, aid groups were forced to buy their own fuel in order to assist with relief work.

Stockma’s not the lonly one pointing out that the NSA already knows everything. They don’t have to interview Flynn for that.

• Why the Deep State Is at War With Trump (Stockman)

If you were a Martian visitor just disembarked from of one of Elon Musk’s rocket ships and were therefore uninfected by earth-based fake news, the culprits in Washington’s witch-hunt de jure would be damn obvious. They include John Brennan, Jim Comey, Sally Yates, Peter Strzok and a passel of deep state operatives – all of whom baldly abused their offices. After Brennan had concocted the whole Russian election meddling meme to sully the Donald’s shocking election win, the latter three holdovers – functioning as a political fifth column in the new Administration – set a perjury trap designed to snare Mike Flynn as a first step in relitigating and reversing the voters’ verdict. The smoking gun on their guilt is so flamingly obvious that the ability of the Trump-hating media to ignore it is itself a wonder to behold.

After all, anyone fresh off Elon’s rocket ship would learn upon even cursory investigation of the matter that the National Security Agency (NSA) intercepts electronically every single communication of the Russian Ambassador with any person on US soil – whether by email, text or phone call. So the clear-minded visitor’s simple question would be: What do the transcripts say? In fact, a Martian visitor would also quickly understand that the entire world – friend, rival, foe and enemy, alike – already knows of NSA’s giant digital spying operation owing to Snowden’s leaks, and that therefore there are no “sources and methods” on the SIGINT (signals intelligence) front to protect. Accordingly, the disinterested Martian would undoubtedly insist: Declassify the NSA intercepts and publish them on Facebook (and, for old timers, on the front page of the New York Times) so that the truth would be known to all.

Of course, that would punch a deep hole in the entire RussiaGate witchhunt because NSA, in fact, did record Flynn’s late December conversations with Russian Ambassador Kislyak. And there was not a single word in them that related to alleged campaign collusion or otherwise inappropriate communications by the in-coming national security adviser to a newly-elected President who was three-weeks from inauguration. Indeed, as explained below, Mueller has effectively told us that Flynn’s communications with Kislyak were clean as a whistle.

Corporatism. Another name for Mussolini’s version of fascism.

• How Corporate Power Killed Democracy (CP)

The rise of Corporate Power was the fall of democracy. Over the long haul, US politics has revolved around a deep tension between democracy and an unrelenting drive for plunder, power and empire. Granted that our democracy has been seriously flawed and only rarely revolutionary, yet the democratic movements are the source of every good thing America has ever stood for. Since the mid-1970s, when the corporations fused with the state, a new imperial order emerged that killed what remained of representative democracy. Not only would corporations exercise public authority as only government once had, but government would coordinate and serve corporate activity. Power and profits became one and the same. Corporate power has replaced democracy with oligarchy and justice with a vast militarized penal system.

Instead of innovative production, they plunder people and planet. To achieve this new order, elections and the economy had to be drained of any remaining democratic content. Both Democrats and Republicans were eager to have at it. By the 1990s “Third Way” Democrats like Bill Clinton abandoned what was left of the New Deal to try to outdo the Republicans as the party of Wall Street. The Republicans pioneered election fraud on a national scale in 2000, 2004, and 2016; a lesson the Democrats learned all too well by the 2016 Primary. Neither major party wants election reform since free and fair elections would threaten the system itself. So-called private corporations like Facebook, Google and Twitter control information and manage the 1st Amendment.

The corporate media now broadcast propaganda and play the role of censor once monopolized by the FBI and CIA. The migration of propaganda work to civilian organizations began under Ronald Reagan. While both major parties offer the people nothing beyond austerity and the worst kind of identity politics, the big banks like Goldman Sachs gained positions of real influence with both Republican and Democratic administrations and always with the Department of the Treasury and the Federal Reserve. Without pubic money and political protection the banking system — the headquarters of the mythical free market — could not function.

Yes, this has everything to do with Google, Facebook et al (not just government spies). It involves some $260 billion in digital trade.

• EU Regulators Threaten Court Challenge To EU-US Data Transfer Pact (R.)

European Union privacy regulators have threatened to bring a legal challenge to a year-old EU-U.S. pact on the cross-border transfer of personal data if their concerns about its functioning and U.S. surveillance practices are not resolved by the autumn of 2018, they said in a report. The EU-U.S. Privacy Shield pact was agreed last year after the European Union’s highest court had struck down the previous Safe Harbour Principles agreement which allowed companies to transfer European citizens’ personal data to the United States, due to concerns about intrusive U.S. surveillance of online data. The Privacy Shield pact enables companies to easily conduct everyday cross-border data transfers in compliance with EU data protection rules.

“The WP29 (Article 29 Working Party) has identified a number of significant concerns that need to be addressed by both the (European) Commission and the U.S. authorities,” the regulators – known as the Article 29 Working Party – said in their report. The European Commission, which negotiated the Privacy Shield deal, conducted its first annual review in September and said it was satisfied with the way it was working. It did however ask Washington to improve it, including by strengthening the privacy protections contained in a controversial portion of the U.S. Foreign Intelligence Surveillance Act (FISA), known as Section 702. Section 702 allows the U.S. National Security Agency to collect digital communications from foreign suspects living outside the United States. It is due to expire on Dec. 31 in the absence of congressional action.

It won’t remain stable. Or rather, it never was: poevry is making more victims every day.

• Greek Stability Attracts US Investors Amid Turkey, Middle East Tumult (CNBC)

A series of positive factors for the Greek economy are attracting U.S. investors back to the embattled euro zone nation, a government minister told CNBC. “There are many American investors who are interested in participating in projects in Greece, because every clever investor would be interested in an economy that now starts to have positive growth rates,” Dimitris Tzanakopoulo, Greek minister of state and the government spokesperson, told CNBC Monday. Following a meeting between President Donald Trump and Greek Prime Minister Alexis Tsipras in October, there’s a renewed interest from the U.S. in shoring up its investments in Greece, especially in the energy sector.

Aside from a bounce back in economic growth, Tzanakopoulo said that Greece was “a pillar of stability in a region” and is winning back investors. “(The region) has many, many problems, wherever you look there’s destabilization, there is turbulence,” Tzanakopoulo said in his office in Athens. “We think we are one of the factors which will secure and guarantee stability in the region and this is something everybody knows, from the U.S. to our European partners,” he said. At the crossroads of Europe, Asia, and Africa, Greece is a key ally for many Western countries in the face of escalating tumult in Turkey and the rest of the Middle East.

Apparently Berlin has not given permission to move refugees to the mainland. Shame on you, mutti Merkel.

• Greek Islands Boiling Over As Winter Arrives (K.)

The decision by the Migration Policy Ministry to expand and upgrade hot spots on Chios and Lesvos have cultivated a tense atmosphere, as critics say it will do nothing to ease pressure on the eastern Aegean islands and or to alleviate the situation of thousands of stranded refugees and migrants crammed in camps designed to hold far less people. Moreover, the onset of winter has made a bad situation even worse and the calls for authorities to accelerate asylum applications so as to transfer people to the mainland have become even louder. In the bid to deal with the deteriorating conditions, a team from Medecins Sans Frontiers (MSF) has, since last week, set up operations outside the Moria camp in Lesvos, offering assistance to those in need in cooperation with the Hellenic Center for Disease Control and Prevention (KEELPNO).

In a Facebook post, MSF said the harsh conditions and the cold are posing a serious threat to the health of the some 7,000 people that remain at the Moria hot spot. The group, which has called for the immediate transfer of those living at Moria to the mainland, has set up a mobile unit outside the camp to help children under the age of 16 and pregnant women. MSF is also distributing blankets, mattresses and other basic necessities as the situation, it said, is on the brink of a humanitarian crisis. At the same time, the Migration Policy Ministry is planning to transfer another 65 prefabricated huts to Moria in a bid to increase the camp’s capacity and to improve the living conditions of those that are still staying in summer tents. But the move is set to trigger more acrimony, as islanders and local authorities have said they do not agree with the expansion of the hot spot’s capacity.

That would mean much higher sea levels.

• Scientists Warn Of 93% Chance Global Warming Will Exceed 4°C (Ind.)

Current predictions of climate change may significantly underestimate the speed and severity of global warming, according to a new study. Reappraisal of the models climate scientists use to determine future warming has revealed that less optimistic estimates are more realistic. The results suggest that the Paris Climate Agreement, which aims to keep global average temperatures from rising by 2C, may be overly ambitious. “Our study indicates that if emissions follow a commonly used business-as-usual scenario, there is a 93% chance that global warming will exceed 4C by the end of this century,” said Dr Ken Caldeira, an atmospheric scientist at the Carnegie Institution for Science, who co-authored the new study. This likelihood is an increase on past estimates, which placed it at 62%.

Climate models are vital tools for scientists attempting to understand the impacts of greenhouse-gas emissions. They are constructed using fundamental knowledge of physics and the world’s climate. But the climate system is incredibly complex, and as a result there is disagreement about how best to model key aspects of it. This means scientists have produced dozens of climate models predicting a range of different global warming outcomes resulting from greenhouse-gas emissions. Based on a “business-as-usual” scenario in which emissions continue at the same rate, climate models range in their predictions from a 3.2C increase in global temperatures to a 5.9C increase The new study, published in the journal Nature, sought to resolve this situation and establish whether the upper or lower estimates are more accurate.

To do this, Dr Caldeira and his collaborator Dr Patrick Brown reasoned that the most accurate models would be the ones that were best at simulating climate patterns in the recent past. “It makes sense that the models that do the best job at simulating today’s observations might be the models with the most reliable predictions,” said Dr Caldeira. Their conclusion was that models with higher estimates were more likely to be accurate, with the most likely degree of warming 0.5C higher than previous best estimates.

If I knew for a certainty that a man was coming to my house with the conscious design of doing me good, I should run for my life.
—Thoreau

Debt Rattle July 3 2017

Jul 032017

July 3, 2017 Posted by Raúl Ilargi Meijer at 9:32 am Finance Tagged with: Abenomics, austerity, Congo, dollar, Illinois, Kuroda, May, Merkel, migrants, shutdown, Trump 6 Responses »

Paul Klee Girl in Mourning 1939

• Merkel Promises Full Employment In Party Platform (R.)

• Theresa May Steps Back From Public Sector Pay Cap Amid Austerity Backlash (Ind.)

• Donald Trump May Make ‘Sneak’ Visit To UK Within Fortnight (G.)

• Maine, New Jersey Lawmakers Scramble To End Partial Government Shutdowns (R.)

• Illinois House Approves Major Income Tax Hike (CTrib)

• China Inc’s $7.8 Billion of Dividend Payments Will Stress the Yuan (BBG)

• Japan PM Abe’s Party Suffers Historic Defeat In Tokyo Election (R.)

• Abe’s Mentor Says BOJ Needs Fresh Face as Kuroda Is Out of Ideas (BBG)

• Saudi Arabia, Allies Give Qatar Two More Days To Accept Demands (R.)

• The Crash of 1929 (Jesse’s Café/PBS)

• Italy Urges EU Ports To Take Migrants As Pressure Builds (AFP)

• ‘Our Future Is Slavery, The West Gets Everything’ – Congo (RT)

Note: tomorrow’s a travel day for me. Not sure about a Debt Rattle.

Plus tax relief. Plus support for young families to build new housing. Now compare that to Greece, where over half of young people are unemployed, and where taxes are being raised all the time and pensions cut. That, too, is a German decision. But Greeks don’t get to vote for or against Merkel.

• Merkel Promises Full Employment In Party Platform (R.)

Chancellor Angela Merkel’s conservatives will promise to all but eliminate unemployment in Germany by the year 2025 when they announce their 2017 election campaign platform on Monday. Merkel’s Christian Democrats (CDU) and their Bavarian sister party, the Christian Social Union (CSU), will present their platform for the Sept. 24 election on Monday with other already known policies such as income tax cuts worth 15 billion euros per year and promises to build flats. “A major point is that we’d like to achieve full employment,” Horst Seehofer, CSU chairman and state premier in Bavaria, said on Sunday on his way into a meeting of the conservative leadership. The CDU/CSU consider full employment to be a jobless rate of less than 3% – compared to 5.5% now.

Those “Economic Miracle” levels of unemployment have not been seen in the country since the mid-1970s. The two parties also want to add 15,000 police officers in the 16 federal states. The sister parties, however, will not agree on a joint position on refugees. The CSU wants an upper limit of 200,000 per year, which Merkel and the CDU rejects. “We agree to disagree on that,” Interior Minister Thomas de Maiziere (CDU) said in a Bild am Sonntag newspaper interview, referring to the issue that split the two parties badly since some 1 million refugees arrived in late 2015. The CDU/CSU hold a 16%age point lead over the center-left Social Democrats in opinion polls with a 40-24 lead, but would still need a coalition partner. They rule with the SPD and in the past they have ruled with the Free Democrats (FDP).

[..] Earlier on Sunday, CDU Finance Minister Wolfgang Schaeuble said in a radio interview there could be room to cut taxes by more than the €15 billion already announced. Germany has had balanced budgets since 2014 and the government plans to have no new borrowing in its planning through 2021. Schaeuble told Deutschlandfunk radio he hoped there could be tax relief beyond that already promised €15 billion income tax cut. “We’re planning, all in all, to do more than just correcting the income taxes by €15 billion,” he said, referring to plans to reduce the country’s “cold progression” tax increases – or clandestine tax increases. [..] Schaeuble said aside from fighting “cold progression”, the Christian Democrats want to support young families to build new housing while also supporting research and development for small- to medium-sized companies.

Messing it up as they go along.

• Theresa May Steps Back From Public Sector Pay Cap Amid Austerity Backlash (Ind.)

Tory austerity appeared to be crumbling at the edges today, as Theresa May further distanced herself from a hated public sector pay freeze. Downing Street said the Government would consider potential wage increases for nurses, police officers and firefighters on a “case by case” basis after a string of top cabinet ministers signalled backing for an end to the blanket 1 per cent cap on all public servants. Environment Secretary Michael Gove said the Government should now listen to the recommendations of salary review bodies ignored by ministers for almost ten years. Education Secretary Justine Greening and Health Secretary Jeremy Hunt are also both reported to be pushing for new deals for teachers and nurses. The Independent reported last week how the Government faced a first ever strike from the Royal College of Nursing over a crisis in the profession.

There has also been mounting pressure from Jeremy Corbyn’s Labour – whose party fought a successful election campaign on an anti-austerity message. A Downing Street spokesman defended the Government’s record, but pointed to potential changes ahead. He said: “Dealing with the economic mess we inherited from Labour has meant hard work and sacrifice, including for public sector workers. That hard work and those tough decisions have helped get our deficit down by three quarters, and public sector pay restraint has helped us protect jobs. “Independent public sector pay review bodies are currently reporting to Government and we are responding to them on a case-by-case basis. While we understand the sacrifice that has been made, we must also ensure we continue to protect jobs and deal with our debts.”

What is the Queen would be received like this?:

“MPs and trade unions vowed to hold the largest demonstrations in UK history if Donald Trump made a state visit to the UK..”

• Donald Trump May Make ‘Sneak’ Visit To UK Within Fortnight (G.)

Anti-Donald Trump protesters are preparing to spring into action at short notice, after it emerged that Downing Street is braced for a snap visit from the US president in the next two weeks. A formal state visit, which was expected to take place over the summer, was postponed last month, amid fears that it could be disrupted by mass protests, despite Theresa May extending the invitation personally when she visited the White House late last year. But Whitehall sources confirmed the government has now been warned that the president could visit Turnberry, his golf resort in Scotland, during his trip to Europe, between attending the G20 summit in Hamburg next weekend and joining celebrations for Bastille Day in France on 14 July.

Trump would be expected to come to Downing Street to meet the prime minister for informal talks as part of any such visit – though final confirmation would be likely to be given with just 24 hours’ notice, to minimise the risk of disruption. May invited Trump to Britain seven days after his inauguration when she became the first foreign leader to visit him in the White House. In February activists, MPs and trade unions vowed to hold the largest demonstrations in UK history if Donald Trump made a state visit to the UK, forming The Stop Trump coalition, even hiring a permanent staff member. In early June, just after the UK general election, it emerged that the US president had told May that he did not want to go ahead with the state visit to Britain until the British public supports his coming, fearing large-scale demonstrations.

How about you borrow some more, guys? Or, you know, come clean and tell people their pensions are shot.

• Maine, New Jersey Lawmakers Scramble To End Partial Government Shutdowns (R.)

Partial government shutdowns in Maine and New Jersey entered a second day on Sunday as lawmakers returned to their respective state capitals in a bid to break budget impasses that have led to the suspension of many nonessential services. In Maine, a bipartisan legislative committee met in Augusta in hopes of breaking a stalemate between Republican Governor Paul LePage and Democratic lawmakers. The shutdown came after LePage threatened to veto a compromise reached by lawmakers in the state’s $7.055 billion, two-year budget. In New Jersey, the legislature was due to reconvene to resolve a political fight over a controversial bill that Governor Chris Christie said must be passed alongside the state’s budget.

After House Republicans in Maine voted to reject a compromise deal on Saturday, the Bangor Daily News reported that Republican Minority Leader Ken Fredette presented a $7.1 billion plan he said could get the governor’s approval, but some Democrats noted that was costlier than the rejected compromise. “The Speaker thinks it is unconscionable that Maine doesn’t have a budget, especially leading into the holiday weekend,” Mary-Erin Casale, a spokeswoman for Democratic House Speaker Sara Gideon, said Sunday morning. If the budget committee meeting on Sunday in Augusta agrees on a deal, the measure would go to the full legislature. LePage has insisted on a budget with deeper spending cuts than those contemplated by lawmakers and has promised to veto any spending plan that raises taxes.

Sign of things to come.

• Illinois House Approves Major Income Tax Hike (CTrib)

The Illinois House on Sunday approved a major income tax increase as more than a dozen Republicans broke ranks with Gov. Bruce Rauner amid the intense pressure of a budget impasse that’s entered its third year. The Republican governor immediately vowed to veto the measure, saying Democratic House Speaker Michael Madigan was “protecting the special interests and refusing to reform the status quo.” The measure, which needed 71 votes to pass and got 72, is designed to start digging the state out of a morass left by the lengthy stalemate. Madigan, in a statement, praised the action as “a crucial step toward reaching a compromise that ends the budget crisis by passing a fully funded state budget in a bipartisan way.”

The tax hike now heads to the Senate, but whether there will be enough votes to send it to Rauner’s desk is in question. When the Senate approved its own tax hike in late May, no Republicans voted for it and several Democrats voted against it. Senators return to the Capitol on Monday. The crucial vote in the House was the big story Sunday, though. Ultimately, pressure that had built up in districts across the state moved enough Republicans to defy the governor. With state government operating without a budget for two full years, public universities risk losing their accreditation, social service providers are closing their doors and layoffs of road construction workers are imminent.

Adding to lawmakers’ anxiety was a promised downgrade of the state’s credit rating to junk status, which could spike the cost of borrowing at a time when the state has $15 billion in unpaid bills. Left out of the House budget package was a plan for dealing with the unpaid bills, though both sides generally agree that some amount of borrowing will be needed. Rauner, a former private equity specialist from Winnetka, had spent tens of millions of dollars on legislative campaigns and TV ads to prop up the Illinois Republican Party as a counterweight to Madigan and his labor union allies. And Republican lawmakers largely had stuck by their governor — until Sunday. [..] The proposal mirrors a plan the Senate passed earlier this year and calls for raising the personal income tax rate from the current 3.75% to 4.95%, which would generate roughly $4.3 billion. An increase in the corporate income tax rate from 5.25% to 7% would bring in another $460 million.

Bearish on the dollar? You sure?

• China Inc’s $7.8 Billion of Dividend Payments Will Stress the Yuan (BBG)

The yuan’s rebound may be undermined by a seasonal hunt for dollars as Chinese companies prepare to pay dividends to shareholders overseas. Demand for the greenback and other currencies will peak at $7.8 billion in July, a substantial sum considering that local lenders settled an average of $11.8 billion in foreign-exchange for clients in the first five months of 2017. China’s currency reserves have shrunk every July in the last three years, with former regulator Guan Tao saying last week that demand for foreign-exchange surges in this period. China’s exchange rate has turned more volatile in the past two months, climbing the most in more than a year in May and then declining in June before suspected central bank intervention spurred a rally.

Goldman Sachs warned capital outflows have picked up, while recent data suggest the economy is showing signs of slowing as an official deleveraging drive crimps spending. “The need for dividend payouts will pressure the yuan and may pressure a recent increase in China’s foreign reserves,” said Xia Le at BBVA. “The yuan’s advance in the past few days is not sustainable – short-term factors such as dividend payments and long-term ones like capital outflows will work together to push the currency weaker in the coming months.” Offshore-listed Chinese firms need to pay a combined $16 billion of dividends in foreign exchange in the three months through August. That includes $2.4 billion in June and $5.9 billion for August.

Abe will shuffle his cabinet to deflect attention from himself. But he’s in trouble.

• Japan PM Abe’s Party Suffers Historic Defeat In Tokyo Election (R.)

Prime Minister Shinzo Abe’s Liberal Democratic Party suffered an historic defeat in an election in the Japanese capital on Sunday, signaling trouble ahead for the premier, who has suffered from slumping support because of a favoritism scandal. On the surface, the Tokyo Metropolitan assembly election was a referendum on Governor Yuriko Koike’s year in office, but the dismal showing for Abe’s party is also a stinging rebuke of his 4-1/2-year-old administration. Koike’s Tokyo Citizens First party and its allies took 79 seats in the 127-seat assembly. The LDP won a mere 23, its worst-ever results, compared with 57 before the election. “We must recognize this as an historic defeat,” former defense minister Shigeru Ishiba was quoted as saying by NHK.

“Rather than a victory for Tokyo Citizens First, this is a defeat for the LDP,” said Ishiba, who is widely seen as an Abe rival within the ruling party. Past Tokyo elections have been bellwethers for national trends. A 2009 Tokyo poll in which the LDP won just 38 seats was followed by its defeat in a general election that year, although this time no lower house poll need be held until late 2018. [..] “We must accept the results humbly,” said Hakubun Shimomura, a close Abe ally and head of the LDP’s Tokyo chapter. “The voters have handed down an extremely severe verdict.” Abe is expected to reshuffle his cabinet in coming months in an effort to repair his damaged ratings, a step often taken by beleaguered leaders but one that can backfire if novice ministers become embroiled in scandals or commit gaffes.

If Kuroda’s out of ideas, that means Abenomics has failed. And that in turn means Abe should go too.

• Abe’s Mentor Says BOJ Needs Fresh Face as Kuroda Is Out of Ideas (BBG)

Haruhiko Kuroda shouldn’t serve another term as governor of the Bank of Japan because the central bank will need fresh ideas as it moves toward exiting years of unprecedented monetary easing, according to an adviser to the prime minister. “An exit will surely come up within the next five years and we need someone who can prepare for it,” said Nobuyuki Nakahara, a former BOJ board member. “He will fall into inertia and struggle to come up with bold new ideas. It’s the same in the private sector when a corporate president stays too long,” he said. Nakahara’s comments come amid growing speculation among private economists that Prime Minister Shinzo Abe will reappoint Kuroda, 72, after his five-year term ends in April.

Nakahara, who was close to Abe’s father, Shintaro, has known the prime minister since he was young and has advised him for years. In an interview on June 29, Nakahara, one of the architects of Abenomics, said he didn’t have any replacements for Kuroda in mind. But he said change at the top of the BOJ would be good because the government and central bank should strike a new accord and form a new strategy for the next five years. The current accord, issued in January 2013, says the central bank should aim for price stability at an annual inflation rate of 2%, while the government is responsible for strengthening competitiveness and the nation’s growth potential. More than four years later, the inflation target remains far off.

[..] Kuroda’s propensity to surprise markets with innovative ideas has been waning, according to Nakahara. And the strains of his record easing are particularly evident in the bank’s purchases of exchange-traded funds, which are distorting the market, he said. “They can’t keep holding ETFs forever,” he said. Nakahara offered a possible solution. How about getting companies to buy back their own shares from the BOJ? Or the BOJ could tell companies it plans to sell the shares on the market. If the companies need funding for share buybacks, the central bank could help with a loan-support program. “That’s my secret strategy,” he said.

Really, close Al Jazeera? What an awful signal that would be. Why not close CNN then?!

• Saudi Arabia, Allies Give Qatar Two More Days To Accept Demands (R.)

Four Arab states that accuse Qatar of supporting terrorism agreed to extend until Tuesday a deadline for Doha to comply with a list of demands, as U.S. President Donald Trump voiced concerns about the dispute to both sides. Qatar has called the charges baseless and says the stiff demands – including closing Qatar-based al Jazeera TV and ejecting Turkish troops based there – are so draconian that they appear designed to be rejected. Saudi Arabia, Bahrain, Egypt and the United Arab Emirates (UAE) have raised the possibility of further sanctions against Qatar if it does not comply with the 13 demands presented to Doha through mediator Kuwait. They have not specified what further sanctions they could impose on Doha, but commercial bankers in the region believe that Saudi, Emirati and Bahraini banks might receive official guidance to pull deposits and interbank loans from Qatar.

According to a joint statement on Saudi state news agency SPA, the four countries agreed to a request by Kuwait to extend by 48 hours Sunday’s deadline for compliance. Foreign ministers from the four countries will meet in Cairo on Wednesday to discuss Qatar, Egypt said on Sunday. Kuwait state media said its Emir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah had received a response by Qatar to the demands. It did not elaborate. The four states cut diplomatic and commercial ties with Qatar on June 5, accusing it of supporting terrorism, meddling in their internal affairs and cosying up to regional adversary Iran, all of which Qatar denies. Mediation efforts, including by the United States, have been fruitless. Trump spoke separately to the leaders of Saudi Arabia, Qatar and the Crown Prince of Abu Dhabi in the UAE to discuss his “concerns about the ongoing dispute”, the White House said.

For history buffs.

• The Crash of 1929 (Jesse’s Café/PBS)

“…people believed that everything was going to be great always, always. There was a feeling of optimism in the air that you cannot even describe today.” “There was great hope. America came out of World War I with the economy intact. We were the only strong country in the world. The dollar was king. We had a very popular president in the middle of the decade, Calvin Coolidge, and an even more popular one elected in 1928, Herbert Hoover. So things looked pretty good.” “The economy was changing in this new America. It was the dawn of the consumer revolution. New inventions, mass marketing, factories turning out amazing products like radios, rayon, air conditioners, underarm deodorant…One of the most wondrous inventions of the age was consumer credit. Before 1920, the average worker couldn’t borrow money. By 1929, “buy now, pay later” had become a way of life.”

“Wall Street got the credit for this prosperity and Wall Street was dominated by just a small group of wealthy men. Rarely in the history of this nation had so much raw power been concentrated in the hands of a few businessmen…” “One of the most common tactics was to manipulate the price of a particular stock, a stock like Radio Corporation of America…Wealthy investors would pool their money in a secret agreement to buy a stock, inflate its price and then sell it to an unsuspecting public. Most stocks in the 1920s were regularly manipulated by insiders ” “I would say that practically all the financial journals were on the take. This includes reporters for The Wall Street Journal, The New York Times, The Herald-Tribune, you name it. So if you were a pool operator, you’d call your friend at The Times and say, “Look, Charlie, there’s an envelope waiting for you here and we think that perhaps you should write something nice about RCA.”

And Charlie would write something nice about RCA. A publicity man called A. Newton Plummer had canceled checks from practically every major journalist in New York City… Then, they would begin to — what was called “painting the tape” and they would make the stock look exciting. They would trade among themselves and you’d see these big prints on RCA and people will say, “Oh, it looks as though that stock is being accumulated. Now, if they are behind it, you want to join them, so you go out and you buy stock also. Now, what’s happening is the stock goes from 10 to 15 to 20 and now, it’s at 20 and you start buying, other people start buying at 30, 40. The original group, the pool, they’ve stopped buying. They’re selling you the stock. It’s now 50 and they’re out of it. And what happens, of course, is the stock collapses.”

Prediction: the EU will offer more money. They simply don’t understand that some things are not about money.

• Italy Urges EU Ports To Take Migrants As Pressure Builds (AFP)

The French and German interior ministers met with their Italian counterpart Marco Minniti in Paris on Sunday to discuss a “coordinated response” to Italy’s migrant crisis, hours after Minniti had called on other European countries to open their ports to rescue ships. The working dinner at the French interior ministry – also attended by EU Commissioner for Refugees Dimitris Avramopoulos – was aimed at finding “a coordinated and concerted response to the migrant flux in the central Mediterranean (route) and see how to better help the Italians,” a source close the talks said. The four-way talks between Minniti, Thomas de Maiziere of Germany, Gerard Collomb of France and Avramopoulos will also prepare them for EU talks in Tallinn this week. “The talks went off very well,” a member of the Italian delegation told AFP after the Paris meeting, with the “Italian proposals being discussed”.

“We are under enormous pressure,” Minniti had said earlier Sunday in an interview with Il Messaggero. With arrivals in Italy up nearly 19% over the same period last year, Rome has threatened to close its ports to privately-funded aid boats or insist that funding be cut to EU countries which fail to help. “There are NGO ships, Sophia and Frontex boats, Italian coast guard vessels” saving migrants i the Mediterranean, Minniti said, referring to the aid boats as well as vessels deployed under EU border security missions. “They are sailing under the flags of various European countries. If the only ports where refugees are taken to are Italian, something is not working. This is the heart of the question,” he said. “I am a europhile and I would be proud if even one vessel, instead of arriving in Italy, went to another European port. It would not resolve Italy’s problem, but it would be an extraordinary signal” of support, he said.

I’ve often said that the Congo is perhaps richer in resources than any other country. It should be prosperous, but instead it ranks 227th out of 230 countries for GDP per capita. That’s our doing.

From July 5, see documentary at https://rtd.rt.com/films/congo-my-precious/

• ‘Our Future Is Slavery, The West Gets Everything’ – Congo (RT)

RT Documentary travels to the vast, landlocked Democratic Republic of Congo, prized for its mineral resources, but plagued by centuries of colonial rule, dictatorship, civil wars and lawlessness, and meets people trying to make a living in one of the most desperate places on Earth. The documentary crew’s key to understanding the country, seven times the size of Germany, was Bernard Kalume Buleri, born in 1960, the same year DRC was granted its independence from Belgium. Buleri served as an interpreter, guide, and finally the hero and symbol of the country, having been a direct participant in some of its bloodiest chapters. “I can’t say that the Congolese, we are in control of our destiny. No, because the ones who benefit from our minerals are not the local population, but Western countries are the ones who are taking everything.

They make themselves rich, while we are getting poorer and poorer,” says Buleri. The country of almost 80 million is one of the world’s largest exporters of diamonds, coltan – essential for electronics – and has massive deposits of copper, tin and cobalt. “I’m afraid even for my children. Because they will continue in this system to be slaves forever. We’ll never be powerful enough to challenge the Western countries. So, the future will be the future of slaves,” Buleri continues. There is plenty of blame to go around for the predicament of what is also a fertile and scenic land. With almost no educated elite, DRC was poorly-prepared for its separation from Belgian rule, now best remembered for the atrocity-filled reign of King Leopold II, which may have killed as many as half of the country’s population.

The vacuum was filled by the archetype-setting African kleptocrat Mobutu Sese Seko, who ruled the country for more than three decades, until he was deposed in 1997, plunging Africa into a series of continent-wide conflicts that may have resulted in as many as 5 million deaths through violence, starvation and disease. The country’s below-ground wealth means that it was never left alone for long enough to reform and wean itself off its reliance on metals and gems – the widely-mentioned “mineral curse.” The mines the RT crew passes are now owned by local warlords, chiefs and officials, with exports mostly going to China. [..] Millions of locals – perhaps as many as one-fifth of the adult population – are employed in what is known as artisanal mining, inefficient small-scale prospecting with simple handheld tools, with no safety measures or guaranteed wages. But for a country that ranks 227th out of 230 for GDP per capita, according to World Bank data, any job at all is a matter of survival.

Debt Rattle May 3 2017

May 032017

May 3, 2017 Posted by Raúl Ilargi Meijer at 9:31 am Finance Tagged with: austerity, bubble, Canada, currency, Greece, Le Pen, Putin, sanctions, shutdown, Soros, Trump, upheaval 4 Responses »

Leonardo da Vinci A Copse of Trees 1508

• Trump: US “Needs A Good Shutdown In September To Fix This Mess” (ZH)

• Home Capital Fails to Draw Buyout Interest From Canada Banks (BBG)

• Hot Air Hisses Out of US Auto Bubble (WS)

• May’s Election Fighting Talk Fuels Brexit War of Words With EU (BBG)

• Le Pen Wants A French National Currency Within Two Years After Election (R.)

• Macron Victory Could Mark The Start Of Political Upheaval For France (CNBC)

• Italy Is Europe’s Next Big Problem (BBG)

• Soros At it Again – Trying to Overthrow Polish Government? (Martin Armstrong)

• In Tense Encounter, Merkel Tells Putin Sanctions Must Remain (BBG)

• ‘It’s Very Important We Hear What Putin Has To Say’ – Oliver Stone (RT)

• Adults in the Room – One Of The Greatest Political Memoirs Ever (Mason)

• Greece, Creditors To Discuss Options For Debt Restructuring (CNBC)

• Greece Will Avoid Default After Bailout Deal – But Faces More Austerity (G.)

• Greek Poverty Deepens During Seven Years Of Austerity (AP)

September’s a long way away.

• Trump: US “Needs A Good Shutdown In September To Fix This Mess” (ZH)

With Congress poised this week to approve a deal to fund the government through September, the first major bipartisan legislation of Trump’s presidency, after lengthy negotiations (which have appeared to signal numerous ‘folds’ by President Trump), apparently frustrated by the lack of tryannical powers that a simple majority grants him, President Trump has lashed out this morning at disagreeable Democrats, and in particular Senate Democrats. As a reminder, the proposed government funding deal does not include funding for Trump’s proposed wall along the U.S.-Mexico border or include language stripping federal money from so-called sanctuary cities, both of which the White House demanded at the outset of negotiations. In fact, as we reported yesterday, the bill has been seen widely as a victory for Democrats, something which has been panned by the conservative press.

While the White House also backed off a threat to withhold ObamaCare subsidy payments to insurance companies, Trump did secure increased military spending in the 2017 budget deal. According to the Hill, the comments are likely irk top Republican lawmakers, who have been frustrated by Trump’s repeated attempts to intervene in the legislative process. The businessman-turned-president, in turn, has vented frustration with the slow pace of work on Capitol Hill. “I’m disappointed that it doesn’t go quicker,” Trump told Fox News last week when asked about the Republican effort to repeal and replace ObamaCare. Commenting on Trump’s tweets, Citi asks rhetorically whether “this could be a case of cutting one’s nose to spit one’s face? – Potentially problematic when the nose in question is attached to the current administration… It seems counterintuitive that a sitting president would want a shutdown, unless he was to blame it on the opposition in order to force through reform/encourage a voter backlash.”

Bloomberg reports that “The message appeared to encourage the Republican-controlled Senate to change rules that now require 60 votes to end a filibuster of legislation. Republicans reduced the threshold to 51 votes for Supreme Court nominees this year and could do the same for legislation with a simple majority vote.” USD does not seem to have reacted to the President’s tweet (it can’t every time, after all), which may just be more political manoeuvring rather than a signal of intent. In any case, we’re not so sure there is such a thing as a “good” shutdown of the US government – and with what will be over $20 trillion in debt and a declining GDP by that time, one wonders which ratings agency will have the balls to downgrade the world’s reserve currency this time?

“Someone will buy it for a dollar because they want to get the loan book [..] it goes for a lot less than it’s trading at today.”

• Home Capital Fails to Draw Buyout Interest From Canada Banks (BBG)

Canadian banks and financial firms are so far showing little interest in buying Home Capital, vindicating short-sellers who say the embattled mortgage lender could be sold off piecemeal, driving the stock down further. “People in the industry would rather see these guys go out of business because the loans aren’t worth the risk, and they’re so leveraged,” said Marc Cohodes, a private investor and part-time chicken farmer in California who has been shorting the stock, or betting on declines, for more than two years. Home Capital’s rival Equitable joined a list of companies that have said they aren’t interested in taking over the struggling mortgage lender, which hired investment banks last week for a possible sale after the stock plunged by two-thirds amid a regulatory probe.

“The bottom line is no,” Equitable Chief Executive Officer Andrew Moor said on Monday. “We have some concerns based on what we’ve read about how they underwrote their loans and their internal controls.” Other banks have indicated that they aren’t interested. Canadian Western Bank CEO Chris Fowler said his Edmonton, Alberta-based lender, which has an alternative mortgage business, would not be a buyer for all of Home Capital. He added the bank will consider “selectively” acquiring loan portfolios. A Laurentian Bank of Canada spokeswoman said that for the lender to be interested in an acquisition it needs to be financially sound and a good strategic fit. Laurentian is active in the alternative lending space.

Canada’s biggest commercial banks, meanwhile, are unlikely to be interested because Home Capital’s mortgages are with customers who wouldn’t qualify for a loan with them, said Sumit Malhotra, an analyst at Bank of Nova Scotia, in a research note. They might be interested in the loan book, he added. [,,] Other short sellers agree with Cohodes. Jerome Hass at Lightwater in Toronto, said he wonders why anybody would buy Home Capital when they could just pick up the mortgages. “It’s got all this litigation against it, it’s going to have all these liabilities against it, so why not just take their loan book off their hands?” Hass said in an interview. “Someone will buy it for a dollar because they want to get the loan book, but I don’t see it going for much, and it goes for a lot less than it’s trading at today.”

No purchasing power.

• Hot Air Hisses out of US Auto Bubble (WS)

A 4.7% drop in sales, bad as it is, wouldn’t qualify for #carmageddon. These things happen. But here’s the thing: Automakers had shelled out $3,465 in incentives per new vehicle sold, on average, according to TrueCar estimates. A record for the month of April. It beat the prior record of $3,393, set in April 2009. It amounts to about 10% of suggested retail price, similar to March. The last period when incentive spending was at this level of MSRP was in 2009 as the industry and sales were collapsing. The #carmageddon point to watch: despite the 13.4% year-over-year surge in incentive spending to nearly $5 billion, total vehicle sales fell 4.7%! When these massive incentives fail to even slow the sales decline, serious problems lurk beneath the surface. This table shows the largest automakers, their year-over-year sales performance – the sea of red ink – along with average per-unit incentive spending and total incentive spending:

GM shelled out the most incentives on average per vehicle, in total $1.23 billion. In March, it had spent about $1.3 billion. At this rate, GM is spending just under $4 billion per quarter in incentives. By comparison, in its Q1 earnings, GM reported “North America” revenue of $29.3 billion. At this rate, it is spending about 13% of its North American revenues on US incentives. But it’s just not working out. Total sales dropped nearly 5.9%, to 244,200 units, with car sales plunging 12.5% and even truck sales falling 3.2%. A gruesome detail: Silverado-C/K pickup sales plunged 20% to 40,154 units. Total retail sales (not including fleet sales) fell 4% to 191,911 vehicles. GM ended the month with 100 days’ supply, up from the nail-biter level of 98 days at the end of March.

The UK is so divided along multiple fault lines that May has nothing, unless she’s prepared to walk away.

• May’s Election Fighting Talk Fuels Brexit War of Words With EU (BBG)

U.K. Prime Minister Theresa May vowed she won’t be pushed around in Brexit talks with the European Union as her war of words with Brussels escalates before negotiations even begin. The premier said European Commission President Jean-Claude Juncker is learning she can be “bloody difficult” after leaked details of a dinner meeting between the leaders alleged he was shocked by her approach to negotiating Brexit. May won a measure of support from several European government officials, who distanced themselves from Juncker’s apparent skepticism about the chances of a Brexit deal. The row blew up after details of the allegedly disastrous meal Juncker attended at May’s London residence last week were reported by a German newspaper.

“What we’ve seen recently is that at times these negotiations are going to be tough,” May told BBC television in an interview Tuesday. “During the Conservative Party leadership campaign, I was described by one of my colleagues as a bloody difficult woman. And I said at the time the next person to find that out will be Jean-Claude Juncker.” The clash between London and the European Commission comes as May seeks re-election on June 8 in a campaign defined by Brexit, and the argument won’t necessarily hurt her chances. While EU officials are concerned about such a public dispute ahead of negotiations, it could help May’s Tories convince voters the U.K. needs what she calls her “strong and stable leadership” for the Brexit talks.

May claims her main rival for power, opposition Labour party leader Jeremy Corbyn, would be too “weak” to succeed at the negotiating table. Germany’s Frankfurter Allgemeine Sonntagszeitung newspaper said on Sunday that Juncker left a dinner on April 26 “10 times more skeptical” of reaching a Brexit deal. In her interview on the campaign trail, May told the BBC she hopes to agree an accord that works for the U.K. and the EU, saying there’s “a lot of similarity” between her proposals and the bloc’s negotiating guidelines.

Can a national currency exist alongside a European one?

• Le Pen Wants A French National Currency Within Two Years After Election (R.)

Far-right presidential challenger Marine Le Pen said capital controls could be used if she won the election and there was a run on banks as she negotiated France’s exit from the European Union, but stressed they were unlikely to be needed. In an interview with Reuters ahead of Sunday’s decisive second round, Le Pen reaffirmed she wanted to take France out of the euro and said she hoped the French people would have a national currency in their pockets within two years. Le Pen said she wanted to replace the EU single currency with another, looser type of cooperation in the form of the ECU basket of currencies that preceded the euro. That would exist alongside a national currency.

“The objective is to transform the euro ‘single currency’ into a euro ‘common currency’, going back to the ancestor of the euro, the ECU, which was an accounting unit that did not stop each country from having each its own currency,” Le Pen said. Calling the euro a deadweight on the French economy, the National Front candidate said a new national currency would better protect French people’s savings. She accused the “establishment” of wanting to “frighten” voters into thinking otherwise. “I am convinced there won’t be any banking crisis,” Le Pen said when asked if French negotiations to quit the EU could trigger a run on French banks.

Asked if she would impose capital controls if savers nevertheless did rush to take their money out of banks, she said: “If there’s a run on banks, we could very well imagine such a solution for a few days, but I’m telling you it won’t happen.” Le Pen said she would launch negotiations over reforms of the EU immediately after winning, saying this would allow France to regain national sovereignty. The talks would include ditching the euro as well as regaining control of France’s borders and being able to decide French legislation alone, she said. Those negotiations could last six to eight months, she said, after which France would hold a referendum on its EU membership.

Whatever happens in Sunday’s 2nd round, a mess is certain.

• Macron Victory Could Mark The Start Of Political Upheaval For France (CNBC)

France’s political course is likely to remain far from certain even with a win for presumed victor Emmanuel Macron, as his inability to form a parliamentary majority threatens to undermine his authority both domestically and across Europe, political analysts have suggested. Sunday’s second round runoff will mark the start of a period of tension for the country as the successful candidate waits to see if they can garner a large enough parliamentary majority in June’s legislative election to enact change, Dominique Reynié, professor of political science at the Sciences Po institute in Paris, told CNBC Tuesday. “I’m not worried about Macron’s ability to win, but the question surrounds what kind of turnout he will achieve and what his ability to gain a majority in the June election will be,” explained Reynié.

Polls are currently pitching centrist Macron to gain anywhere from a 59% to a 64% lead on his far-right opponent Marine Le Pen. However, this lead will do little to boost Macron’s authority in government, Reynié suggests. The independent will have to gain significant support from other parties if he is to form a majority when France once again heads to the polls on June 11 and June 18 to elect the 577 members of its National Assembly. “It will all depend on his margin of victory. A 55 to 45% win for Macron would be a disaster. Even 60 to 40 is not at all a triumph; a 20% margin would be very difficult. “It would be a crisis. It is not normal and would be a problem both on the streets of France and for Europe,” said Reynié.

In the first round of voting, Macron’s En Marche!, or Onwards! party, achieved a majority in 240 constituencies versus Le Pen’s 216. However, Reynié says this is simply not enough. “The smaller Macron’s majority the harder it will be for him to win the general election in June. He needs support; it is not possible to have power as President without support. “This could cause parliament to be largely fragmented like in the first round, with discussions taking place in fractured groups. Macron will have to negotiate with MPs and will be fragile and unpopular.”

Has been for years.

• Italy Is Europe’s Next Big Problem (BBG)

Emmanuel Macron looks on course to become France’s new president, ending the threat of a euroskeptic at the Elysee. Even if Macron wins, though, it’ll be too soon to celebrate a new phase of stability in the euro zone. Across the Alps, an economic and political storm is brewing – and there’s no sign anyone can stop it. Italy’s economic problems are in many ways worse than France’s. Public debt stands at nearly 133% of gross domestic product; in France, it’s 96%. The last time Italy grew faster than France was in 1995. Both countries have struggled to stay competitive internationally – but French productivity has risen by roughly 15% since 2001, whereas Italy’s has stagnated.

Meanwhile Italian politics goes from bad to worse. The Five Star Movement, a populist force that wants to hold a referendum on Italy’s membership of the euro system, is riding high in the polls and currently neck and neck with the center-left Democratic Party. The general election, scheduled for next spring, is unlikely to produce a clear winner – and there’s even a small chance it may result in a Eurosceptic government, if the Five Stars were to win enough votes and form an alliance with the fiercely anti-euro Northern League. Europhiles in Italy are busily looking for an Italian Macron – someone who could offer a liberal remedy for Italy’s economic woes while fighting off the threat of “It-exit.” Investors would like that. In the autumn, the European Central Bank looks set to slow its purchases of government debt. The prospect of political instability in Rome could spook investors, raising doubts over the sustainability of Italy’s debt.

In many ways, Matteo Renzi, Italy’s former prime minister, who resigned after a heavy defeat in December’s constitutional referendum, would be the obvious choice. At 42, he is only three years older than Macron. He too has sought to modernize the left, even though he preferred to climb through the ranks of his party, rather than set up a new one as Macron did. The trouble is that Renzi looks increasingly like a spent force. He has just obtained a fresh mandate as party leader, but many Italians doubt his promises because he reneged on a pledge to quit politics if he lost the referendum. His message has also become muddled. He claims to be pro-EU, but never misses a chance to bash Brussels – for imposing fiscal austerity, especially. Why should voters opt for Renzi’s half-hearted euroskepticism when they can have the real thing?

“Money does not give you the right to fund revolutions to recast the world in your image.”

• Soros At it Again – Trying to Overthrow Polish Government? (Martin Armstrong)

QUESTION: Mr. Armstrong, I attended your March 1999 conference in Tokyo when I worked for ___ bank. I remember you called out Soros and crew and said they were trying to manipulate the yen for fiscal year end. You warned the Japanese how to defeat the Club. If I remember, he and his crew lost $1 billion when everyone in Tokyo followed your advice. Many assumed what they did to you 6 months later was retribution. Now he is at it in Poland funneling money he made from such trading in through Norway to create political unrest. What is it with this guy? Why does he play God?

ANSWER: Oh yes. I remember that event very clearly. That’s why they started calling me Mr. Yen because it was me and our clients against the Club and the Club lost. They were trying to push the yen down for the fiscal year-end roll of March 31st and then run it up into April 1st. They had our clients lock it in and that forced the manipulators out. That was a wild day – 3 big figures in a single day in an outside-reversal was a big move back then. I know the rumor was that Soros was in on that and the Club lost $1 billion. Not sure how much they lost on that one. It was the good-old fun days of confrontations. The Polish government wants to stop the distribution of Norwegian money flowing into Poland coming from Soros’ funded Batory Foundation, which manages over 800 million euros with a target of overthrowing the Polish government by 2020.

Since 2014, the Batory Foundation has distributed some 130 million zlotys (around 31.7 million euros) to various associations and organizations within Poland to change the government. According to Bloomberg, this includes organizations for the promotion of parliamentary democracy , but only if it agrees with Soros agenda. Effectively, Soros is trying to defeat ‘Catholic values’ in Poland which are supported by the population and government. [..] Soros has publicly stated he does not believe in God. Many who worked for him said they think he believes he is a god with the right to reshape the world in his image. So have many throughout history and they are responsible for the murder of countless millions. Money does not give you the right to fund revolutions to recast the world in your image.

Merkel knows Putin can’t give in on Ukraine. Useless rhetoric.

• In Tense Encounter, Merkel Tells Putin Sanctions Must Remain (BBG)

German Chancellor Angela Merkel told President Vladimir Putin that EU sanctions will have to remain on Russia as the two leaders clashed over Ukraine, human rights and election meddling at a chilly encounter in the Black Sea city of Sochi. Addressing a joint press conference with Putin after about two hours of talks on Tuesday, Merkel raised concerns about the rights of homosexuals in Chechnya and Russia’s role in the war in Syria. She devoted much of her time to the lack of progress in resolving the three-year-old conflict in Ukraine. While Putin sought to lay the blame on the Ukrainian government, the chancellor said that a cease-fire is required as part of the “arduous” so-called Minsk process for restoring peace in eastern Ukraine and appealed to him to make it happen.

“My goal remains to get to the point where we can lift EU sanctions, but there’s a link here,” Merkel told reporters on her first visit to Russia since May 2015. The peace process is “moving very slowly, we only make progress in small steps and constantly have setbacks.” Merkel, who met with President Donald Trump at the White House in March, is visiting Putin in her capacity as holder of the presidency of the Group of 20 nations. As well as Ukraine, Merkel and Putin discussed the civil war in Syria and the G-20 summit in Hamburg in July, when the Russian and U.S. presidents are scheduled to meet for the first time. Ukraine was the main flashpoint, with Putin reiterating his stance that the Russian-backed breakaway regions in southeastern Ukraine split off because of a “coup d’etat, an unconstitutional change of power in Kiev.”

Merkel noted the two leaders’ “different opinions” about the origins of the conflict in Ukraine, which spiraled after protests over a scrapped accord with the EU triggered the downfall of the Russian-backed government in 2014. “We don’t share this view,” Merkel said in the briefing, which dispensed with the usual pleasantries or leaders’ banter. “We think that the Ukrainian government came to power through democratic means.” Although she’s among Putin’s sternest critics, Merkel has sought to keep a channel open to the Russian leader even as she holds the line on EU sanctions, which are a response to Russia’s annexation of Crimea and backing for Ukrainian separatists. Hours before Putin was scheduled to speak by phone with Trump on Tuesday, he responded again to allegations of electoral interference, saying “we never interfere in the political life of other countries.”

There are people with less bias on Putin. Just not in US or EU politics.

• ‘It’s Very Important We Hear What Putin Has To Say’ – Oliver Stone (RT)

The man behind three films about American presidents, Oliver Stone, says his upcoming feature about Russian President Vladimir Putin “opens up a whole viewpoint that we as Americans haven’t heard,” and could help prevent “a dangerous situation – on the brink of war.” Academy Award-winning director and revered documentary filmmaker Stone said in interview with the Sydney Morning Herald that his new film about Putin will be released soon. “It’s not a documentary as much as a question and answer session,” he said. “Mr. Putin is one of the most important leaders in the world and in so far as the United States has declared him an enemy – a great enemy – I think it’s very important we hear what he has to say.” The film will present Putin’s viewpoint of political events since he was first elected president of Russia in March 2000.

“It opens up a whole viewpoint that we as Americans haven’t heard,” Stone told the newspaper, adding that his crew went to see the indefatigable Russian leader four times over the course of two years. “I talked to him originally about the Snowden affair, which is in the film. And out of that grew, I think, a trust that he knew that I would not edit it so much,” he said, adding that Putin “talks pretty straight.” “I think we did him the justice of putting [his comments] into a Western narrative that could explain their viewpoint in the hopes that it will prevent continued misunderstanding and a dangerous situation – on the brink of war.” The 70-year-old director also commented the accusations of Russian influence on the US presidential elections.

“That’s a path that leads nowhere to my mind. That’s an internal war of politics in the US in which the Democratic Party has taken a suicide pact or something to blow him up; in other words, to completely de-legitimize him and in so doing blow up the US essentially. “What they’re doing is destroying the trust that exists between people and government. It’s a very dangerous position to make accusations you cannot prove,” he added. Stone also said he does not believe claims circulating in the mainstream media that Moscow allegedly passed some classified documents to WikiLeaks in a bid to influence the November US elections. “I hold Assange [WikiLeaks editor Julian Assange] in high regard in many issues of state. I take very seriously his statement that he received no information from Russia or any state actors,” Stone said.

“.. it is French and German taxpayers who will pay the price when the Greek debt is inevitably written off.”

I should get the book later this week.

• Adults in the Room – One Of The Greatest Political Memoirs Ever (Mason)

Varoufakis began on the outside – both of elite politics and the Greek far left – swerved to the inside, and then abruptly abandoned it, after he was sacked by his former ally, Greek prime minister Alexis Tsipras, in July 2015. He dramatises his intent throughout the crisis with a telling anecdote. He’s in Washington for a meeting with Larry Summers, the former US treasury secretary and Obama confidant. Summers asks him point blank: do you want to be on the inside or the outside? “Outsiders prioritise their freedom to speak their version of the truth. The price is that they are ignored by the insiders, who make the important decisions,” Summers warns. Elected politicians have little power; Wall Street and a network of hedge funds, billionaires and media owners have the real power, and the art of being in politics is to recognise this as a fact of life and achieve what you can without disrupting the system.

That was the offer. Varoufakis not only rejected it – by describing it in frank detail now, he is arming us against the stupidity of the left’s occasional fantasies that the system built by neoliberalism can somehow bend or compromise to our desire for social justice. In this book, then, Varoufakis gives one of the most accurate and detailed descriptions of modern power ever written – an achievement that outweighs his desire for self-justification during the Greek crisis. He explains, with a weariness born of nights in soulless hotels and harsh-lit briefing rooms, how the modern power network is built. Aris gets a loan from Zorba’s bank; Zorba writes off the loan but Zorba’s construction company gets a contract from Aris’s ministry. Aris’s son gets a job at Zorba’s TV station, which for some reason is always bankrupt and so can never pay tax – and so on.

“The key to such power networks is exclusion and opacity,” Varoufakis writes. As sensitive information is bartered, “two-person alliances forge links with other such alliances … involving conspirators who conspire de facto without being conscious conspirators”. In the process of telling this story, Varoufakis not only spills the beans but beans of the kind the Greeks call gigantes – fat ones, full of juice. The first revelation is that not only was Greece bankrupt in 2010 when the EU bailed it out, and that the bailout was designed to save the French and German banks, but that Angela Merkel and Nicolas Sarkozy knew this; and they knew it would be a disaster.

This charge is not new – it was levelled at the financial elite at the time by leftwing activists and rightwing economists. But Varoufakis substantiates it with quotes – some gleaned from the tapes of conversations and phone calls he was, unbeknown to the participants, making at the time. Even now, two years after the last Greek election, this is of more than academic interest. Greece remains burdened by billions of euros of debt it cannot pay. Because of the actions taken in 2010-11 – saving private banks by saddling north European states with massive debts – it is French and German taxpayers who will pay the price when the Greek debt is inevitably written off.

Not going to happen until after the German fall election.

• Greece, Creditors To Discuss Options For Debt Restructuring (CNBC)

Greece and its creditors are expected to discuss ways to restructure the country’s debt ahead of a meeting of euro zone finance ministers on May 22, a European official told CNBC on Tuesday. Athens agreed on Tuesday to introduce new laws on labor, energy reforms, pension cuts, and tax rises. This paves the way for a fresh disbursement of money from creditors in mid-June, but above all it allows Greece, its European creditors, and the IMF to consider how they will restructure the country’s debt. A European official who follows the bailout talks told CNBC that there isn’t a specific date for a solution to Greece’s debt but the first discussions on this issue will start soon. “From now until the Eurogroup meeting of May 22 there will be discussions to consider options for debt relief,” the official said.

Greece has to legislate the new reforms within two weeks. However, these new laws won’t take effect until 2019 and 2020 and will be dependent on the country’s economic performance. For example, among the new measures is the promise to cut pensions in 2019 and cut the tax-free threshold in 2020 to produce savings worth 2% of GDP. But if Athens exceeds its targets, it is allowed to offset the austerity measures and reduce taxes. During the first stages of talks on debt restructuring, the European Stability Mechanism, which is the euro zone’s permanent bailout fund, will produce a new debt sustainability analysis. Current economic forecasts indicate that Greece’s public debt stood at about 180% of GDP in 2016. The IMF will also be doing its debt sustainability analysis to include the recently-agreed measures.

The Fund wants an agreement on measures to make Greece’s debt more sustainable before deciding whether it is participating with its own money in the Greek bailout program. Dimitris Tzanakopoulos, spokesperson to the Greek government told reporters last month, that the IMF will make a “small” funding contribution that will not last for more than one year, so it ends at the same time as the current European program, which runs out in August of 2018. The IMF’s participation in the third bailout program to Greece is key for many euro countries, which perceive the fund’s involvement as giving credibility to the reform process in Greece. One of these countries is Germany, but the upcoming federal election might reduce Berlin’s room to restructure Greece’s debt.

“We will get some IMF participation, but no significant number,” Johannes Mayr, head of economic research at Bayern LB ,told CNBC via email. On the debt issue, “we need a compromise between the IMF and the EU/ESM (European Stability Mechanism), he said, “and this is realistic only after the German elections.” Neil Dwane, global strategist at Allianz Global Investors, added: “National governments, like Germany, would lose popularity if they wrote off Greek debt.” “I would expect more extend and pretend from the EU and the IMF,” he said via email.

No Greek default, but nothing else either: again, until after the German fall election. And even then.

• Greece Will Avoid Default After Bailout Deal – But Faces More Austerity (G.)

The long road to Greece emerging from its worst financial crisis in modern times reached another milestone on Tuesday as the country concluded a crucial compliance review that will allow it to avert default in July. At the cost of yet more painful austerity – in the form of extra pension cuts and tax increases – international creditors agreed to disburse €7.5bn (£6.3bn) in emergency loans to enable Athens to honour maturing debt repayments. More importantly, lenders accepted to set talks in motion on making Greece’s debt mountain more manageable – vital if the country is to gain access to the capital markets from which it has been almost completely exiled since 2009. [..] The deal ends more than six months of intense wrangling over the fiscal and structural reforms that Athens must implement in exchange for loans from its third, €86bn bailout programme.

Although the programme was outlined in 2015 when Greece came closest to crashing out of the eurozone and reverting to the drachma, the conditions attached to the lifeline remained open to negotiation. Discord most recently had focused on labour reforms and pensions – two issues that Tsakalotos, a British-trained Marxist economics professor, had felt especially strongly about. Under the agreement, the leftist-led government undertook to further slash pensions by 18% as of 2019. Pension payments have now been reduced 12 times since the start of the crisis, and cut by 40% in the past six years. With poorer out-of-work families often depending on them, news of a further drop was met with fury by union leaders, who immediately announced industrial action.

The two-party coalition led by the prime minister, Alexis Tsipras, also agreed to broaden the tax-free threshold by effectively dispensing with tax breaks as of 2020. Both measures are expected to produce savings worth €3.6bn or 2% of GDP. “It will be a very hot spring,” Odysseus Trivalas, acting president of the union of public sector employees, told the Guardian. “We have yet to see the details of this agreement but what we know is that it will mean further cuts. There will be a lot of strikes and a general 24-hour lockdown when the measures are brought to parliament for vote.”

“On a corner of Monastiraki Square full of tourists and passers-by, a group of volunteers from the soup kitchen O Allos Anthropos (The Fellow Man) cook chicken with rice. In less than 20 minutes, 230 hot meals are delivered to people who waited more than an hour to get them.”

• Greek Poverty Deepens During Seven Years Of Austerity (AP)

Over the past seven years, austerity has left visible scars in Greece’s capital. A walk around Athens reveals more homeless people than ever despite some signs of a rosier economic outlook. Thousands of shops, mostly small businesses, are shuttered here and across the country. In what used to be a busy shopping arcade, closed stores are padlocked against a backdrop of hanging Greek flags. Whole families can be seen lining up for free meals at a growing number of soup kitchens. “Every day we feed 400 to 500 people, and this number has increased even more in the past two years,” says Evangelia Konsta, organizer and sponsor of the meals offered by the Church of Greece in a run-down neighborhood in central Athens.

Yesterday, IMF and European negotiators bailout negotiators reached an agreement with Greece’s government to continue rescue funding in return for a painful new round of cuts and higher taxes over the next three years. High unemployment and a steady decline of living standards for most Greeks for seven consecutive years have had lasting effects. Greece has survived on international rescue loans since 2010, granted by the IMF and other countries using the euro currency in exchange for drastic cuts in public spending and benefits. Greece is now in its third bailout. A few steps away from the Church-run soup kitchen is a homeless shelter also run by the Church. Guests in its tiny rooms include one family with their young children and a retired nurse suffering from cancer who is still waiting to get her pension application approved.

Another shelter, the “Shelter of Love and Solidarity,” has a great view of the ancient Acropolis that’s barely noticed by the hundreds of homeless and poor who come twice a week to wash their clothes and take a hot bath. “The shelter is the best option for us because the government doesn’t really do anything for us,” says Ilias Kosmidis, 38, who has been sleeping on the street for the past two years. While waiting to wash their clothes, people at the shelter have developed friendships, and catch up on the news, including the French presidential election. Sofia Vitalaki and her husband Costas, both retired civil servants, have run the shelter since 1991. “It’s not just the food,” she says. “Most people want their dignity back and here we try to support them.”

On a corner of Monastiraki Square full of tourists and passers-by, a group of volunteers from the soup kitchen O Allos Anthropos (The Fellow Man) cook chicken with rice. In less than 20 minutes, 230 hot meals are delivered to people who waited more than an hour to get them. At the end of every month, it’s become a familiar sight outside banks: pensioners waiting in huge lines to collect their monthly checks. Few know how to use ATMs. While in line, they fret over how to make ends meet after years of cuts to their earnings, worrying about more austerity being planned. They won’t have long to wait till the next round of cuts. The government on Tuesday finalized its agreement with bailout lenders to ax pensions further, starting on January 1, 2019.

Debt Rattle April 24 2017

Apr 242017

April 24, 2017 Posted by Raúl Ilargi Meijer at 8:58 am Finance Tagged with: billionaire bubble, border wall, colony, Greece, Macron, Obamacare, regression, shutdown, Trump 1 Response »

Pablo Picasso Self portrait 1896

• Euro and Shares Rally After Macron Wins First Round of French Election (Ind.)

• Fight Over Obamacare Could Shut Down The Government (CNN)

• Trump Push For Border Wall Threatens To Cause Government Shutdown (G.)

• America is Regressing into a Developing Nation for Most People (Parramore)

• London Mayor To Subsidise ‘Naked’ Homes Solution To Housing Crisis (G.)

• China Stocks Head For Worst Day Of 2017 As Regulators Tighten Grip (R.)

• Chinese Billionaires Amass In The Country’s Heartland (CNBC)

• Jack Ma Sees Decades of Pain as Internet Upends Old Economy (BBG)

• Fear City (Naomi Klein)

• IMF Warns Greece That Additional Economic Overhauls Are Needed (WSJ)

• Greek Banks Aspire To Begin Online Asset Auctions In June (K.)

Not sure there’s all that much to celebrate. Looks like a torn country.

• Euro and Shares Rally After Macron Wins First Round of French Election (Ind.)

The euro briefly surged to a five-month high against a basket of currencies after centrist candidate Emmanuel Macron won the first round of a hotly contested French election vote, an outcome broadly considered the most market-friendly. Immediately after the vote on Sunday, the euro surged to $1.0940, its highest level against the dollar since November last year, before retreating to around $1.0869. It rose against the pound and the Swiss franc too and stocks across Europe and Asia climbed as investors pulled out of assets considered safest to hold during times of economic uncertainty or political turmoil, like gold, Japan’s yen and core government bonds. The FTSE 100 was up 1.5% in early trading while Paris’ CAC 40 added almost 4%. Germany’s DAX rose more than 2%.

Analysts and strategists were quick to point out that the outcome lessens the risk of an anti-establishment shock, like the UK’s vote last year to quit the European Union and Donald Trump’s US presidential election victory in November. “Macron will be reassuring to markets, with his pledge to lower corporate taxes and to lighten the administrative burden on firms. He basically represents continuity,” said Octavio Marenzi, CEO of Opimas, a capital markets management consultancy. “While the markets would have preferred Trump-style deregulation, no candidate, including Macron, would dare touch such an agenda in France,” he added.

The media can’t make up their minds on what could cause a shutdown. Obamacare….

• Fight Over Obamacare Could Shut Down The Government (CNN)

The fight over Obamacare’s future is now threatening to shut down the federal government. Congress must pass a spending bill by the end of this week or the federal government will run out of money. And Democrats, whose votes are needed to approve a budget, plan to use their leverage to force Republicans to stabilize Obamacare. They want the budget deal to fund a set of Obamacare subsidies that are crucial to keeping insurers in the program. Here’s how Obamacare figures into the government spending battle. Subsidies make health care affordable for those with low-incomes: The House GOP bill to repeal and replace Obamacare may be shelved for now, but Republicans still hold tremendous power over Obamacare’s future.

The most pressing issue is the funding of subsidy payments to insurers known as cost-sharing reductions, or CSRs. These make health care more affordable for lower-income Obamacare enrollees by reducing their deductibles and co-pays. Those with incomes under $29,700 for a single person are eligible. The payments can cut deductibles to as low as $227, on average, instead of nearly $3,500 for the standard silver Obamacare plan. These subsidies are important to insurers, too. A little over 7 million people, or 58%, signed up for policies with cost-sharing subsidies on the Obamacare exchanges for 2017. The payments are made directly to insurers and will cost the federal government an estimated $7 billion this year.

Republicans sued Obama to block the subsidies: The subsides have been at the center of a court battle since 2014, when House Republicans sued the Obama administration to try to stop them. GOP lawmakers have argued that Congress never appropriated funds for the payments. A district court judge agreed last year, ruling the subsidies were illegal. The Obama administration filed an appeal, and the subsidies continue to be paid while GOP lawmakers and Trump officials agree on a settlement.

… or the border wall.

• Trump Push For Border Wall Threatens To Cause Government Shutdown (G.)

Looming above Washington as Congress and the White House attempt to avert a funding shutdown in only five days’ time, Donald Trump’s central campaign promise to build a wall on the Mexican border threatens to bring the US government to a halt this week in a national display of dysfunction. On Sunday, even White House officials expressed uncertainty about whether the president would sign a funding bill that did not include money for a wall, which Trump has promised since the first day of his presidential campaign. “We don’t know yet,” said the White House budget director, Mick Mulvaney, on Fox News Sunday. “We are asking for our priorities.” The president himself waded into the negotiations on Sunday, holding out two sticks and no carrot. “ObamaCare is in serious trouble,” he tweeted. “The Dems need big money to keep it going – otherwise it dies far sooner than anyone would have thought.”

“The Democrats don’t want money from budget going to border wall despite the fact that it will stop drugs and very bad MS 13 gang members,” he continued, suggesting he would accuse Democrats of being soft on international crime. But Trump also retreated from a related pledge to the American people: that he would “make Mexico pay” for the wall, which is estimated to cost billions. “Eventually, but at a later date so we can get started early, Mexico will be paying, in some form, for the badly needed border wall,” the president tweeted, without offering a plan or timeline. Without a deal, funding for the government will run out at midnight on 28 April, Trump’s 100th day in office. The secretary of homeland security, John Kelly, told CNN’s State of the Union on Sunday he suspected the president would push for the wall. “He’ll do the right thing, for sure, but I suspect he’ll be insistent about the funding,” Kelly said.

“..the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.”

• America is Regressing into a Developing Nation for Most People (Parramore)

You’ve probably heard the news that the celebrated post-WW II beating heart of America known as the middle class has gone from “burdened,” to “squeezed” to “dying.” But you might have heard less about what exactly is emerging in its place. In a new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Peter Temin, Professor Emeritus of Economics at MIT, draws a portrait of the new reality in a way that is frighteningly, indelibly clear: America is not one country anymore. It is becoming two, each with vastly different resources, expectations, and fates. In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth).

These are the 20% of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework, and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies, and count themselves as lucky to be Americans. The FTE citizens rarely visit the country where the other 80% of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to.

They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt. They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. While members of the first country act, these people are acted upon. The two sectors, notes Temin, have entirely distinct financial systems, residential situations, and educational opportunities. Quite different things happen when they get sick, or when they interact with the law. They move independently of each other. Only one path exists by which the citizens of the low-wage country can enter the affluent one, and that path is fraught with obstacles. Most have no way out.

The richest large economy in the world, says Temin, is coming to have an economic and political structure more like a developing nation. We have entered a phase of regression, and one of the easiest ways to see it is in our infrastructure: our roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan. But it goes far deeper than that, which is why Temin uses a famous economic model created to understand developing nations to describe how far inequality has progressed in the United States. The model is the work of West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. For the first time, this model is applied with systematic precision to the U.S.

The result is profoundly disturbing. In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.

Yeah, sure, when things get too expensive you just lower the quality. Could it be an idea to tackle the cause of the problem instead of mere symptoms?

• London Mayor To Subsidise ‘Naked’ Homes Solution To Housing Crisis (G.)

Who needs internal walls or a fitted kitchen anyway? As house prices soar ever further out of reach, London’s mayor, Sadiq Khan, is to subsidise a new generation of ultra-basic “naked” homes wthat will sell for up to 40% less than standard new builds. The apartments will have no partition walls, no flooring and wall finishes, only basic plumbing and absolutely no decoration. The only recognisable part of a kitchen will be a sink. The upside of this spartan approach is a price tag of between £150,000 and £340,000, in reach for buyers on average incomes in a city where the average home now costs £580,000.

The no-frills concept is to be be tested with 22 apartments on three sites in Enfield, north London, where the council will allow builders to take over derelict council estate garages and car parks. Khan has awarded a £500,000 grant to what he says will be the largest custom-build development in London. If successful, a further seven sites will be built. “The idea is to strip out all of the stuff that people don’t want in the first place,” said Simon Chouffot, one of the founders of the not-for-profit developer, Naked House. “People want to do some of the custom building. We can make it affordable by people doing some of the work themselves.” The developers are a group of thirtysomethings who found themselves priced out of buying homes in London’s fast-rising property market.

“We are all from generation rent and we have been growing up with this housing crisis,” said Chouffot, 37. “I put down roots in north-east London but it was impossible to buy there. My response has been to live on a boat on the Regent’s canal. The average income in our area is about £40,000 but the average income you need to buy a property is £170,000, so there is a huge affordability gap.” He said the Enfield homes would be about 15% cheaper to build than standard new homes because of their basic design.

A power struggle developing? Xi must tackle the debt, or risk losing.

• China Stocks Head For Worst Day Of 2017 As Regulators Tighten Grip (R.)

China stocks tumbled more than 1% on Monday and looked set for their biggest loss of the year amid signs that Beijing would tolerate more market volatility as regulators clamp down on shadow banking and speculative trading. Recent signs of stability in China’s economy “have provided a good external environment and a window of opportunity to reduce leverage in the financial system, strengthen supervision and ward off risks,” the official Xinhua News Agency reported on Sunday. “Over the past week, interbank rates trended higher, bond and capital markets suffered from sustained corrections and some institutions faced liquidity pressure. But these have little impact to the stability of the broader environment.”

The Shanghai Composite Index slumped 1.6% to 3,123.80 points by the lunch break, after posting its biggest weekly loss so far this year last week. The blue-chip CSI300 index fell 1.3% to 3,423.11. Barring a rebound, the indexes looked set for their biggest one-day percentage loss since mid-December. Daily declines of more than 1% in the indexes have been rare for notoriously volatile Chinese markets this year. “Even the better-than-expected Q1 data could not boost the market, as investors are concerned about regulatory risks,” wrote Larry Hu, analyst at Macquarie Capital Ltd, referring to stronger-than-expected 6.9% economic growth early in the year.

In the latest of a flurry of regulatory measures, China’s insurance regulator said on Sunday it will ramp up its supervision of insurance companies to make sure they comply with tighter risk controls and threatened to investigate executives who flout rules aimed at rooting out risk-taking. The banking regulator said late on Friday that growth in Chinese wealth management products (WMPs) and interbank liabilities eased in the first quarter, suggesting authorities are making some headway in containing financial risks built up by years of debt-fuelled stimulus.

The billionaire bubble. A communist party rules this country. In name.

• Chinese Billionaires Amass In The Country’s Heartland (CNBC)

ZHENGZHOU, China — Here in China’s heartland, in the capital of its Henan province, some of the country’s most powerful leaders are meeting. But these are not the political elite that have run the country for decades, this is a new crop of leaders — all from the private sector. This city, near corn and wheat fields, is hosting an annual meeting from the China Entrepreneur Club. That’s an invite-only group composed of 55 Chinese billionaires, at last count. In other words, they’re the richest — and among the most influential — people in a country that’s already minting millionaires monthly. Unlike many of the moneyed elite from other developing countries, who accrued wealth from a privatization land-grab, almost all of China’s entrepreneurs started from scratch. And these entrepreneurs aren’t just titans of industry, but also technology, energy, finance and retail.

In many ways, they are China’s new economy. How they’ve succeeded, mostly despite the Communist government, is a major and under-appreciated part of the story of China’s transformation over the past 35 years. In fact, even before the Chinese government officially acknowledged the benefits of private companies, hundreds of thousands of businesses had already begun. A handful of those have become international giants. Huawei is now one of the largest telecommunications equipment makers in the world, but it started by importing used gear from the telephone exchange in Hong Kong. The company now known as Lenovo, the world’s top PC-maker by market share, started by selling televisions imported into China. Geely, now one of China’s biggest carmakers, started by selling parts for refrigerators.

The people behind those names are China’s first generation of entrepreneurs. The second generation came about in the 1990s, and the country’s third crop of entrepreneurs includes people like Alibaba’s Jack Ma, and Tencent’s Pony Ma (no relation), who are now the focus of most of the Western world’s attention. And China is already churning out a new slew of tech titans in the making. By some measures, China’s private sector now accounts for two thirds of its economy. Entrepreneurs, not politicians, are now the ones driving the long-sought economic rebalancing away from a dependence on manufacturing and exports and more toward services and consumption.

But one of the major questions about China’s future is what the dynamic will be like between entrepreneurs and state-owned enterprises. So far, Beijing has largely treated private success benignly because the biggest stars, like Alibaba, are more valuable to the national cause without official direction or interference. Those companies are flying China’s flag, in an increasingly international capacity, more effectively than any state campaign or directive could ever hope to achieve. But the state and its companies still comprise a full third of China’s economy, and when state-owned enterprises begin to get crowded out, there will likely be tension.

Ma has wild fantasies.

• Jack Ma Sees Decades of Pain as Internet Upends Old Economy (BBG)

Alibaba Chairman Jack Ma said society should prepare for decades of pain as the internet disrupts the economy. The world must change education systems and establish how to work with robots to help soften the blow caused by automation and the internet economy, Ma said in a speech to an entrepreneurship conference in Zhengzhou, China. “In the next 30 years, the world will see much more pain than happiness,” Ma said of job disruptions caused by the internet. “Social conflicts in the next three decades will have an impact on all sorts of industries and walks of life.” It was an unusual speech for the Alibaba co-founder, who tends to embrace his role as visionary and extol the promise of the future. He explained at the event that he had tried to warn people in the early days of e-commerce it would disrupt traditional retailers and the like, but few listened.

This time, he wants to warn against the impact of new technologies so no one will be surprised. “Fifteen years ago I gave speeches 200 or 300 times reminding everyone the Internet will impact all industries, but people didn’t listen because I was a nobody,” he said. Ma made the comments as Alibaba, China’s largest e-commerce operator, spends billions of dollars to move into new businesses from film production and video streaming to finance and cloud computing. The Hangzhou-based company, considered a barometer of Chinese consumer sentiment, is looking to expand abroad since buying control of Lazada to establish a foothold in Southeast Asia, potentially setting up a clash with the likes of Amazon.com. Ma, 52, was also critical of the traditional banking industry, saying that lending must be available to more members of society. The lack of a robust credit system drives up the costs for everyone, he said.

[..] Ma was at times brutal in his criticism of companies that won’t adapt. At one point, he said cloud computing and artificial intelligence are essential for business – and if leaders don’t get that, they should find young people in their companies to explain it to them. Another time, he called for traditional industries to stop complaining about the internet’s effects on the economy. He said Alibaba critics ignore that Taobao, its main online marketplace, has created millions of jobs. [..] He also warned that longer lifespans and better artificial intelligence were likely to lead to both aging labor forces and fewer jobs. “Machines should only do what humans cannot,” he said. “Only in this way can we have the opportunities to keep machines as working partners with humans, rather than as replacements.”

Klein interviews Kim Philipps-Fein, author of Fear City, which describes New York in the 1970s, and Trump’s role in it.

• Fear City (Naomi Klein)

When i published “The Shock Doctrine” a decade ago, a few people told me that it was missing a key chapter in the evolution of the tactic I was reporting on. That tactic involved using periods of crisis to impose a radical pro-corporate agenda. They said that in the United States that story doesn’t start with Reagan in the 1980s, as I had told it, but rather in New York City in the mid-1970s. That’s when the city’s very near brush with all-out bankruptcy was used to dramatically remake the metropolis. Massive and brutal austerity, sweetheart deals for the rich, privatizations. In classic Shock Doctrine style, under cover of crisis, New York changed from being a place with some of the most generous public services in the country, engaged in some cutting-edge attempts at racial and economic integration, to the temple of nonstop commerce and gentrification that we all know and still love today.

New York’s debt crisis is an incredibly important and little understood chapter in the evolution of what Nobel Prize-winning economist Joseph Stiglitz calls market fundamentalism, a process the Trump administration is in the process of rapidly accelerating, which is why I was so happy to receive Kim Phillips-Fein’s remarkable new book, “Fear City.” In it, she meticulously documents how the remaking of New York City in the ’70s was a prelude to what would become a global ideological tidal wave, one that has left the world brutally divided between the 1% and the rest. She helps us to understand many of the forces that Trump exploited to win the White House, from economic insecurity to crumbling public infrastructure to fearmongering about black crime, all amid previously unimaginable private wealth.

Thomsen continues to play an ugly part.

• IMF Warns Greece That Additional Economic Overhauls Are Needed (WSJ)

The IMF had a sobering message for Greece this weekend: Even if the country secures debt relief from its European creditors—a question that is by no means assured with bailout talks still deadlocked—the nation still needs even more painful economic overhauls than currently planned. Seven years into an economic crisis and another near-term financial emergency looming, that is a message no Greek wants to hear and a key reason why the IMF is also urging Germany and Athens’ other European creditors to give the country hope in the form of real debt relief. The country’s “fiscal and structural reforms…pension reforms, tax reforms, are only a down payment,” said Poul Thomsen, IMF’s European department chief and Greece’s original bailout architect, on the sidelines of the fund’s semiannual meeting of finance ministers and central bankers.

To bring the country’s unemployment and income levels back to precrisis rates will take “deep structural reforms, many of which are not yet on the books,” he said. The jobless rate is currently at 22% and half of all the youth labor force are without work. “This is a long-term project,” he said. Mr. Thomsen, along with IMF Managing Director Christine Lagarde, met with Finance Minister Euclid Tsakalotos over the weekend ahead of a return of the fund to Athens next week. Although bailout talks continue, the fund hasn’t been involved in emergency financing for the country in three years, and future funding from the IMF is an open question. Fund officials worry the Greece’s existing efforts are stretching the nation’s political and social limits to their breaking point.

The country has already endured a series of political crises and government changeovers over the bailout years. Another could be coming, analysts say, as the government faces debt due in the coming months that it can’t cover without additional help from outside creditors. Earlier this year, the fund said the deadlock over new bailout terms, financing and debt relief risked pushing the country out of the eurozone. Analysts say Greece’s crisis could be the thread that unravels the currency union, especially amid Britain’s rejection of the European Union and rising anti-euro parties in key upcoming elections.

The blessings of foreclosures. The entire country is for sale. It’s a colony.

• Greek Banks Aspire To Begin Online Asset Auctions In June (K.)

The country’s four systemic banks have evolved into some of the biggest property owners in Greece, obtaining ownership of assets worth over €40 billion in the past few years. The majority are properties that came under the banks’ full ownership mainly from being the collateral used by borrowers – households and enterprises – who failed to repay their debts. There also are properties used to house bank branches that were shut down, assets belonging to banks’ subsidiaries of banks, etc. According to bank officials, the acquisition of these properties has met all the legal requirements and they do not include assets stemming from nonperforming loans created during the years of crisis, originating, instead, from previous years.

Banks are examining various ways to sell them off – including the use of an online platform for investors – so as to be rid of the heavy maintenance costs, to capitalize on the assets and to obtain liquidity that can then be channeled into the economy through loans. Certain lenders are at an advanced stage in the creation of such a platform, aiming to launch the first auctions some time in June. It is estimated that if banks manage to attract foreign investors this could revitalize the Greek property market, which has contracted dramatically in recent years due to the prolonged recession. From 250,000 transactions in 2007, the market dropped to just 20,000 in 2014. Banks have already engaged in certain transactions, selling some small or large properties (such as hotels) to foreign investors.

However, more extensive activity,requires other procedures, which would also be simple and transparent. Electronic auctions appear as the best way forward, as they are open, do not require the seller’s physical presence and have low costs, while also keeping out the “vultures” that take advantage of the lack of transparency in conventional auctions. The online platforms will include all the main details of each asset, while potential buyers will be allowed to visit the properties on offer and submit their offers online on certain dates. Bank officials tell Kathimerini that one such platform in the US has sold over 200,000 properties worth $34 million to investors from more than 100 countries in the last decade.

Debt Rattle April 22 2017

Apr 222017

April 22, 2017 Posted by Raúl Ilargi Meijer at 8:38 am Finance Tagged with: crisis, depression, Greece, IMF, India, neocons, refugees, shutdown, Troika, Trump Comments Off

Andrei Rublev Trinity 1411

• White House Orders Agencies to Prepare for Potential Government Shutdown (BBG)

• Beware: The Next Financial Crisis Is Coming (Planet Ponzi)

• Robert Prechter Is Awaiting A Depression-Like Shock In The US (MW)

• Fed’s Fisher Warns Trump About Plans To ‘Do A Number’ On Dodd-Frank (BI)

• Former FinMin Says China Should Let Local Governments Default on Debt (BBG)

• Everything Gets Worse – Pakistan vs. India (Bhandari)

• Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)

• Schaeuble Says Greece to Blame for Delays in Bailout Program

• Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)

• Greek Primary Surplus Chokes Market (K.)

• On Neocons and their Mental Defects (Taleb)

• 28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

It could happen.

• White House Orders Agencies to Prepare for Potential Government Shutdown (BBG)

The White House ordered federal agencies Friday to began preparations for a potential partial government shutdown after signaling President Donald Trump would demand money for key priorities in legislation to continue funding the government beyond April 29. But the president and his aides expressed confidence that Congress would work out a spending agreement and that there won’t be any halt in government operations. Administration officials portrayed the order as normal contingency planning, stressing that the previous administration had followed the same practice as funding deadlines approached. “I think we’re in good shape” on avoiding a deadlock on maintaining funding, Trump told reporters in the Oval Office on Friday. White House press secretary Sean Spicer said the administration is “confident” because negotiations are ongoing and “no one wants a shutdown.”

The push to reach an agreement on spending is complicated by White House efforts to try again for a House vote on replacing Obamacare next week, crowding the congressional schedule with two politically thorny measures the same week. House approval of an Obamacare repeal would give the president a legislative victory to boast about before his 100th day in office April 29. But failure to reach an agreement on spending legislation would risk marring the anniversary with a government shutdown. House Republicans plan a conference call Saturday with Ryan and other leaders to discuss the health-care bill as well as spending legislation. Republican Congressional leaders have pushed back against scheduling an Obamacare vote during the week, indicating there isn’t a clear strategy yet for achieving passage.

Mick Mulvaney, Trump’s director of Office of Management and Budget, said Thursday Democrats will need to agree to pay for some Trump’s top priorities, including a wall at the U.S.-Mexico border, in legislation to fund the government for the remainder of the fiscal year, which ends Oct. 1. Democrats responded harshly to Mulvaney’s remarks Thursday. “Everything had been moving smoothly until the administration moved in with a heavy hand,” said Matt House, spokesman for Senate Minority Leader Chuck Schumer of New York.

“Constantly printing more money will not end in prosperity, but in ruin.”

• Beware: The Next Financial Crisis Is Coming (Planet Ponzi)

There is more debt, credit, and leverage today than there was preceding the banking crisis of 2008. No lessons were learned from that catastrophe as trillions of taxpayer dollars were provided in the form of bank bailouts from the US Federal Reserve. Despite their name, US Federal Reserve Banks are not part of the federal government and they are not banks. For the past 11 years, the Federal Reserve has been run by non-elected officials, Ben Bernanke and Janet Yellen (career academics), alongside a host of X Goldman and JP Morgan bankers. Since 2007, these non-elected bankers have provided banks “temporary, emergency liquidity measures.” Since when is eight years temporary?

Banks have continued to lend trillions and trillions of dollars to fund the construction of grotesquely overpriced residential and commercial properties around the world. The trillions of dollars given in bank bailouts are a perfect example of government “pay-to-play.” When giving out this money, most bankers are making at least three flawed assumptions:
1. Real estate prices will always go up. Clearly, this is the denial phase of “a bubble mentality.”
2. Rents will always keep rising. Rents peaked a few years ago. There is a massive oversupply of high-end residential and commercial properties on the market while real wages have declined. This is a sign that a crash is imminent.
3. The Federal Reserve will always bail them out. With zero transparency or an audit the Federal Reserve’s balance sheet has ballooned from 500 billion to nearly 5 trillion in a short period. The Federal Reserve doesn’t have the money to keep bailing companies out.

The Federal Reserve has become nothing more than a rogue hedge fund taking leveraged, wildly speculative, gargantuan and high-risk positions in bonds and mortgages. Next up, the Fed will angle to dump these toxic real estate assets in your pension fund. There are several steps that need to be taken to address this situation and save your pensions:
1. The President and Congress need to order an immediate audit of the Fed.
2. The Fed’s positions need to be unwound.
3. No more taxpayer funded bailouts – save your pension!

Capitalism without bankruptcy is like Catholicism without hell. Constantly printing more money will not end in prosperity, but in ruin. The coming collapse will be much worse than in 2008-2009 because the debt is so much larger and the Federal Reserve has run out of bullets. Since the 1980s, we have seen real average wages decline, college tuition skyrocket nearly 2,000%, and housing prices hitting all-time new highs while high-paying jobs have disappeared. Rents have risen so much that many small businesses are no longer economically viable. The situation doesn’t look any better for graduates. Graduates entering the jobs market have nearly $250,000 in student debt. A graduate may get a job in Manhattan for $40,000 a year ($3,333 a month before tax) but rent on a studio apartment costs $3,000 a month. The numbers just don’t add up anymore.

Social mood: “declining stock and property prices, contracting debt, angry and somber music, more intense horror movies..”

• Robert Prechter Is Awaiting A Depression-Like Shock In The US (MW)

Avi Gilburt: You’ve said that, once the stock market tops, you expect a major bear market and economic contraction to take hold. What is your general timing for this to occur?

Robert Prechter: The true top for stocks in terms of real money (gold) occurred way back in 1999. Overall prosperity has waned subtly since then. Primary wave five in nominal terms started in March 2009, and wave B up in the Dow/gold ratio started in 2011. Their tops should be nearly coincident.

Gilburt: What do you foresee will set off this event?

Prechter: Triggers are a popular notion, borrowed from the physical sciences. But I don’t think there are any such things in financial markets. Waves of social mood create trends in the stock market, and economic and political events lag behind them. Because people do not perceive their moods, tops and bottoms in markets sneak right past them. At the top, people will love the market, and events and conditions will provide them with ample bases for rationalizing being heavily invested.

Gilburt: You’ve said we will be mired in a “depression-type” event. How long could that last?

Prechter: I don’t know. All I can say for sure is that the degree of the corrective wave will be larger than that which created the malaise of the 1930s and 1940s.

Gilburt: How are conditions going to change from what we have now?

Prechter: The increasingly positive trend in social mood over the past eight years has been manifesting in rising stock and property prices, expanding credit, buoyant pop music, lots of animated fairy tales and adventure movies, suppression of scandals, an improving economy and — despite much opinion — fairly moderate politics. This trend isn’t quite over yet. In the next wave of negative mood, we should see the opposite: declining stock and property prices, contracting debt, angry and somber music, more intense horror movies, eruption of scandals, a contracting economy and political upheaval. That’s been the pattern of history.

It’s all relative, though, and it’s never a permanent condition. Just as people give up on the future, its brightness will return. The financial contraction during the negative mood trend of 2006-2011 was the second worst in 150 years. Yet, thanks to the return of positive mood, many people have already forgotten about it. Investors again embrace stocks, ETFs, real estate, mortgage debt, auto-loan debt and all kinds of risky investments that they swore off just a few years ago.

Because the Fed is doing such a great job of keeping banks in check.

• Fed’s Fisher Warns Trump About Plans To ‘Do A Number’ On Dodd-Frank (BI)

Stanley Fischer, the vice chairman of the Federal Reserve, on Friday delivered an unusually sharp warning to President Donald Trump and his plan to “do a number” on post-crisis reforms aimed at reining in Wall Street. Fed officials usually go out of their way to not appear political, which makes the comments all the more startling. Fischer, a former Citigroup banker and respected policymaker who led the Bank of Israel for many years, appears truly concerned. “We seem to have forgotten that we had a financial crisis, which was caused by behavior in the banking and other parts of the financial system, and it did enormous damage to this economy,” Fischer told CNBC’s Sara Eisen in the lobby of the IMF, responding to a question about the potential rolling back of Dodd-Frank rules.

This happened just as the president was signing an executive order aimed at what he said was “reviewing” Dodd-Frank. “Millions of people lost their jobs. Millions of people lost their houses,” Fischer said. “This was not a small-time, regular recession. This was huge, and it affected the rest of the world, and it affected, to some extent, our standing in the world as well. We should not forget that. “The strength of the financial system is absolutely essential to the ability of the economy to continue to grow at a reasonable rate, and taking actions which remove the changes that were made to strengthen the structure of the financial system is very dangerous.”

Asked specifically about Trump’s vow to “do a number” on Dodd-Frank, Fischer shot back: “I’m not sure precisely what the president said and what a ‘number’ is, but there are aspects of Dodd-Frank, which if they were taken away would have very serious potential consequences for the economy — not immediately but when times get tough.” What provisions is he most worried about? The ability of the Fed and other regulators to wind down large banks, many of which are still seen as too big to fail. “I think it is very important that big banks be subject to the discipline of the possibility of going bankrupt. It is also very important that that discipline extends to not making those changes, the bankruptcy of a big bank, a huge shock and the source of crisis or damage to the overall economy,” Fischer said. “So we need the resolution mechanisms that have been put in place which will allow the authorities and the markets to wind up a big bank.”

Beware the cascade.

• Former FinMin Says China Should Let Local Governments Default on Debt (BBG)

Former Finance Minister Lou Jiwei said China should allow smaller local governments to default on debt because it would signal that central government bailouts aren’t assured. Such defaults would educate investors that their investments will be allowed to go bad, Lou said Friday at a public finance forum in Beijing. “They need to shoulder responsibility,” said Lou, who’s now chairman of the country’s social security fund. “Nobody will save them.” Lou’s comments reiterate those by Premier Li Keqiang and other central government officials such as current Finance Minister Xiao Jie that local government debt shouldn’t be bailed out, or benefit from assumptions it will be.

With economic growth accelerating for a second-straight quarter to 6.9% through March, policy makers have more room to cut leverage and rein in risks. A credit surge since 2014 that underpinned growth has also fueled a further buildup in borrowing. Total debt rose to 258% of economic output last year from 161% in 2008, Bloomberg Intelligence estimates show. Lou said government debt remains broadly safe, but borrowing levels are poised to keep climbing given increased investment in substandard public-private partnership projects.

Great long read on India and its region.

• Everything Gets Worse – Pakistan vs. India (Bhandari)

When Narendra Modi announced on 8th November 2016 that he was demonetizing 86% of the monetary value of all currency in circulation, he gave three major reasons for doing so: to end corruption, to end terrorism and to eliminate counterfeit currency. Ironically, all three are now in far worse condition than they were previously, and even worse than the predictions I made. Many ATMs in India still dispense no cash. The economy is in shatters. This had to happen, as any new cash is rapidly moving under the carpets of the financial powerful that hoard currency. Small businesses are traumatized by the lack of access to cash – many are closing for good. People continue to avoid making non-essential purchases. Even food demand has failed to recover. Poor people very likely are still forced to go to bed half-hungry.

No-one knows whether there are famines in parts of India, as none of the mainstream media are covering the issue. Not unlike North Koreans or the Chinese during the times of Mao, Indians today, particularly members of the so-called educated class, simply cannot see what Modi or their nationalistic paradigm does not want them to see. Indian banks and other financial institutions are extremely unethical. Since privatization was implemented in the 1990s, they have charged fees and commissions for accounts that were never agreed upon. Indians never fight, so this continues. After the demonetization exercise, these mysterious charges have started to appear more often. Then they deduct certain services and financial taxes, and most people don’t make the effort to try to understand them. Indians are getting very tired of the banks – not for moral, but simply for financial reasons.

Bank websites are extremely unwieldy. They require a sequence of passwords and OTPs (one time pad codes), which have an automatic expiry date. Getting the whole sequence right to make an online payment without having these websites freeze during the procedure leaves one with a sense of accomplishment. Most people prefer to walk down to their banks to get bank officials to perform such online transactions. India is simply not ready for the digital age. This experiment in going cashless will end in a disaster. Similar to every tyrant, Modi likes to think that tax collection should be at the heart of society. He imagines a society in which subjects dance around the state. The problem is, one can perfect the tax system or minimize corruption, but with a per capita GDP of $1,718, India simply does not have the required productivity.

Anything you do can and will be used against you: The more such surplus it has, the less debt relief will be needed.

• Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)

Discussions between Greece’s European creditors and the IMF on additional debt relief for the Mediterranean euro region member will be difficult because of political hurdles within the 19-nation bloc, though a solution is on the horizon, Eurogroup Chairman Jeroen Dijsselbloem said. “Greece: We’re very close, it’s really the last stretch,” he said in a Bloomberg Television interview on Friday in Washington with Francine Lacqua and Tom Keene. “We have a full agreement on the major reforms. How they are to be designed, when they are to be implemented, the size of them.”

IMF Managing Director Christine Lagarde said Friday she had “constructive discussions” with Greek Finance Minister Euclid Tsakalotos in preparation for the return of bailout auditors to Athens after euro-area finance ministers reached a tentative agreement on the measures Greece needs to implement to qualify for the next tranche of emergency loans. Dijsselbloem met Tsakalotos earlier on Friday in Washington. “That will be a tough discussion with the IMF,” said Dijsselbloem, who is also the Dutch Finance Minister in a caretaker cabinet, “There are some political constraints where we can go and where we can’t go.” The level of Greece’s primary budget surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed.

The Hellenic Statistical Authority on Friday unveiled data on last year’s primary surplus, which Eurostat is expected to validate on Monday. The surplus was 3.9% according to the European Union’s statistics office methodology, or 4.2% according to what has been agreed in the bailout program. The bailout target was for a primary surplus of 0.5% of GDP. In spite of its better-than-expected primary surplus last year, the IMF is not convinced Greece will be able to maintain that level of performance for 2018 and beyond. The fund estimates that at least half of the primarily surplus for 2016 came from one-off measures rather than structural changes that will continue delivering results in the years to come, according to a person familiar with its analysis. That has prompted the fund to demand more austerity measures.

Groundhog man.

• Schaeuble Says Greece to Blame for Delays in Bailout Program

German Finance Minister Wolfgang Schaeuble said the Greek government bore responsibility for current delays in the country’s bailout program. Greece is to blame that its creditors didn’t return to Athens during the Greek Easter break to finish negotiations on steps the nation must take to qualify for the next tranche of emergency loans, Schaeuble told reporters Friday on the sidelines of the IMF spring meetings. IMF European Department head Poul Thomsen said at a media briefing there’s been enough progress recently to send back a mission to Greece. Greece and its international creditors struck a tentative agreement at a meeting of euro-area finance ministers in Malta earlier this month, breaking the latest deadlock over the country’s rescue and paving the way for about €7 billion in aid for Athens.

Although the decision represents progress, the euro area won’t unlock the payout until their audit in Athens is concluded. “It would have been possible to continue the mission in Athens immediately in the week after Malta,” said Schaeuble. “This was not possible during the Greek Easter break.” In a statement on Friday, IMF Managing Director Christine Lagarde said she had a “constructive dialogue” with Greek Finance Minister Euclid Tsakalotos “in preparation for the return of the mission to discuss the two legs of the Greece program: policies and debt relief.” The IMF isn’t holding back progress, said Schaeuble. “The IMF isn’t delaying this process at all,” he said.

The worst thing Greece could do.

• Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)

Greece far exceeded its international lenders’ budget demands last year, official data showed on Friday, posting its first overall budget surplus in 21 years even when debt repayments are included. The primary surplus – the leftover before debt repayments that is the focus of IMF-EU creditors – was more than eight times what they had targeted. Data released by Greek statistics service ELSTAT – to be confirmed on Monday by the EU – showed the primary budget surplus at 3.9% of GDP last year versus a downwardly revised 2.3% deficit in 2015. This was calculated under European System of Accounts guidelines, which differ from the methodology used by Greece’s in bailout deliberations.

Under EU-IMF standards, the surplus was even larger. Government spokesman Dimitris Tzanakopoulos said the primary budget surplus under bailout terms reached 4.19% of GDP last year versus the 0.5% of GDP target. “It is more than eight times above target,” Tzanakopoulos said in a statement. “Therefore, the targets set under the bailout program for 2017 and 2018 will certainly be attained.” Debt-strapped Greece and its creditors have been at odds for months over the country’s fiscal performance, delaying the conclusion of a key bailout review which could unlock needed bailout funds. The IMF, which has reservations on whether Greece can meet high primary surplus targets, has yet to decide if it will fund Greece’s current bailout, which expires in 2018.

The surplus kills the economy even more.

• Greek Primary Surplus Chokes Market (K.)

The state’s fiscal performance last year has exceeded even the most ambitious targets, as the primary budget surplus as defined by the Greek bailout program, came to 4.19% of GDP, government spokesman Dimitris Tzanakopoulos announced on Friday. It came to €7.369 billion against a target for €879 million, or just 0.5% of GDP. A little earlier, the president of the Hellenic Statistical Authority (ELSTAT), Thanos Thanopoulos, announced the primary surplus according to Eurostat rules, saying that it came to 3.9% of GDP or €6.937 billion. The two calculations differ in methodology, but it is the surplus attained according to the bailout rules that matters for assessing the course of the program. This was also the first time since 1995 that Greece achieved a general government surplus – equal to 0.7% of GDP – which includes the cost of paying interest to the country’s creditors.

There is a downside to the news, however, as the figures point to overtaxation imposed last year combined with excessive containment of expenditure. The amount of €6-6.5 billion collected in excess of the budgeted surplus has put a chokehold on the economy, contributing to a great extent to the stagnation recorded on the GDP level in 2016. On the one hand, the impressive result could be a valuable weapon for the government in its negotiations with creditors to argue that it is on the right track to fiscal streamlining and can achieve or even exceed the agreed targets. On the other hand, however, the overperformance of the budget may weaken the argument in favor lightening the country’s debt load. It is no coincidence that German Finance Minister Wolfgang Schaeuble noted in Washington that over the last couple of years, Greek government deficit forecasts are more realistic than those of the IMF.

Skin in the game.

• On Neocons and their Mental Defects (Taleb)

So we tried that thing called regime change in Iraq, and failed miserably. We tried it in Libya, and now there are now active slave markets in the place. But we satisfied the objective of “removing a dictator”. By the exact same reasoning, a doctor would inject a patient with “moderate” cancer cells “to improve his cholesterol numbers”, and claim victory after the patient is dead, particularly if the post-mortem shows remarkable cholesterol readings. But we know that doctors don’t do that, or, don’t do it in such a crude format, and that there is a clear reason for it. Doctors usually have some skin in the game. And don’t give up on logic, intellect and education, because a tight but higher order logical reasoning would show that the logic of advocating regime changes implies also advocating slavery.

So these interventionistas not only lack practical sense, and never learn from history, but they even make mistakes at the pure reasoning level, which they drown in some form of semi-abstract discourse. The first flaw is that they are incapable in thinking in second steps and unaware of the need for it –and about every peasant in Mongolia, every waiter in Madrid, and every car service operator in San Francisco knows that real life happens to have second, third, fourth, nth steps. The second flaw is that they are also incapable of distinguishing between multidimensional problems and their single dimensional representations –like multidimensional health and its stripped, cholesterol-reading reduced representation. They can’t get the idea that, empirically, complex systems do not have obvious one dimensional cause and effects mechanisms, and that under opacity, you do not mess with such a system.

An extension of this defect: they compare the actions of the “dictator” to the prime minister of Norway or Sweden, not to those of the local alternative. And when a blow up happens, they invoke uncertainty, something called a Black Swan, not realizing that one should not mess with a system if the results are fraught with uncertainty, or, more generally, avoid engaging in an action if you have no idea of the outcomes. Imagine people with similar mental handicaps, who don’t understand asymmetry, piloting planes. Incompetent pilots, those who cannot learn from experience, or don’t mind taking risks they don’t understand, may kill many, but they will themselves end up at the bottom of, say, the Atlantic, and cease to represent a threat to others and mankind.

So we end up populating what we call the intelligentsia with people who are delusional, literally mentally deranged, simply because they never have to pay for the consequences of their actions, repeating modernist slogans stripped of all depth. In general, when you hear someone invoking abstract modernistic notions, you can assume that they got some education (but not enough, or in the wrong discipline) and too little accountability. Now some innocent people, Yazidis, Christian minorities, Syrians, Iraqis, and Libyans had to pay a price for the mistakes of these interventionistas currently sitting in their comfortable air-conditioned offices. This, we will see, violates the very notion of justice from its pre-biblical, Babylonian inception. As well as the ethical structure of humanity.

Just a week ago we commemorated a man on a cross whose image we remember but whose teachings we’ve forgotten.

• 28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

Almost 30 migrants have been found dead in a boat drifting off the coast of Libya as the number of refugees dying in attempts to reach Europe reach record highs. Fishermen found the bodies of 28 people, including four children, in waters near the smuggling hub of Sabratha after more than 8,300 asylum seekers were rescued over the Easter weekend. “Their boat stopped in the middle of the water because the engine was broken,” said Ahmaida Khalifa Amsalam, the interior ministry’s security commander. He said the victims appeared to have died of thirst and hunger after their vessel was left drifting in the Mediterranean.

They were buried in a cemetery dedicated to migrants whose bodies are regularly washed up on the coast of Libya, which remains embroiled in a bloody civil war six years after the UK helped overthrow Muammar Gaddafi. Smugglers have increasingly resorted to packing migrants into flimsy dinghies that are unable to survive the crossing to Europe, with some being intercepted and forced back by the Libyan coastguard, others being rescued by EU officials and aid agencies, and many sinking. Tuesday’s tragic discovery was the latest incident of refugees being found dead inside boats, with a worrying trend emerging suggesting engines are being removed or sabotaged at sea.

Debt Rattle December 16 2014

Dec 162014

December 16, 2014 Posted by Raúl Ilargi Meijer at 11:16 am Finance Tagged with: bubble, Greenland, melt, North Pole, oil, peat, rhino, Ron Paul, Russia, shutdown 2 Responses »

DPC Conover Building, Third and Main, Dayton, Ohio 1904

• Oil Has Become The New Housing Bubble (CNBC)

• Oil’s Crash Is the Canary In the Coal Mine for a $9 Trillion Crisis (Phoenix)

• Oil Slides Below $55 as U.S. Output Seen Steady Amid OPEC Fight (Bloomberg)

• Brent Seen Falling to $50 in 2015 as OPEC Fails to Act (Bloomberg)

• Crash-O-Matic Finance (James Howard Kunstler)

• Russia Central Bank Raises Interest Rate To 17% On Ruble Collapse (Guardian)

• How China’s Interest-Rate Cut Raised Borrowing Costs (Bloomberg)

• China Manufacturing In Contraction (BBC)

• Why Paul Krugman Is Wrong (AEP)

• You Are Hereby Baffled With Bullshit (Zero Hedge)

• Bill Gross: US Structural Growth Rate To Be About 2% Or Less (CNBC)

• Did Wall Street Need the Swaps Budget to Hedge Against Oil Plunge? (Yves)

• Greek Central Bank Boss Warns Of ‘Irreparable’ Economic Damage (BBC)

• German Economy at Risk of Downturn as Growth Seen Weak at Best

• Russia Says US, NATO Increased Spy Flights Seven-Fold (Bloomberg)

• All I Want for Christmas is a (Real) Government Shutdown (Ron Paul)

• Peat Is Amazon’s Carbon Superstore (BBC)

• Denmark Claims North Pole Via Greenland Ridge Link (AP)

• Welcome To Manus, Australia’s Asylum Seeker Dumping Ground Gulag (Guardian)

• Only Five Northern White Rhinos Now Exist On The Entire Planet (MarketWatch)

• Is The Lima Deal A Travesty Of Global Climate Justice? (Guardian)

• Bad News For Florida: Models Of Greenland Ice Melting Could Be Way Off (NBC)

And there’s another nice comparison.

• Oil Has Become The New Housing Bubble (CNBC)

The same thing that happened to the housing market in 2000 to 2006 has happened to the oil market from 2009 to 2014, contends well-known trader Rob Raymond of RCH Energy. And he believes that just as we witnessed the popping of the housing bubble, we are in the midst of the popping of the energy bubble. “It’s the outcome of a zero interest rate policy from the Federal Reserve. What’s happened from 2009 to 2014 is, the energy industry has outspent its cash flow by $350 billion to go drill all these wells, and create this supply ‘miracle,’ if you will, in the United States,” Raymond said Thursday on CNBC’s “Futures Now.” “The issue with this has become, what were houses in Florida and Arizona in 2000 to 2006 became oil wells in North Dakota and Texas in 2009 to 2014, and most of that was funded in the high-yield market and by private equity.”

And now that a barrel of West Texas Intermediate crude oil has fallen from $100 to $60 in five months, those energy producers are in trouble. “The popping of the credit bubble in the energy industry as a result of the downside volatility in oil is likely to result in a collapse of the U.S. rig count,” Raymond said. “From a longer-term standpoint, what it does is it really impairs the industry’s ability to invest capital.” That said, when it comes to the price of a barrel of oil itself, Raymond expects to see a rebound once U.S. production dries up. “We live in a $90 to $100 world,” he said. “We just don’t live in it today.”

Phoenix confirms what I’ve been saying all along; the problem is not oil.

• Oil’s Crash Is the Canary In the Coal Mine for a $9 Trillion Crisis (Phoenix)

The Oil story is being misinterpreted by many investors. When it comes to Oil, OPEC matters, as does Oil Shale, production cuts, geopolitical risk, etc. However, the reality is that all of these are minor issues against the MAIN STORY: the $9 TRILLION US Dollar carry trade. Drilling for Oil, producing Oil, transporting Oil… all of these are extremely expensive processes. Which means… unless you have hundreds of millions (if not billions) of Dollars in cash lying around… you’re going to have to borrow money. Borrowing US Dollars is the equivalent of shorting the US DOLLAR. If the US Dollar rallies, then your debt becomes more and more expensive to finance on a relative basis. There is a lot of talk of the “Death of the Petrodollar,” but for now, Oil is priced in US Dollars. In this scheme, a US Dollar rally is Oil negative. Oil’s collapse is predicated by one major event: the explosion of the US Dollar carry trade. Worldwide, there is over $9 TRILLION in borrowed US Dollars that has been ploughed into risk assets.

Energy projects, particularly Oil Shale in the US, are one of the prime spots for this. But it is not the only one. Emerging markets are another. Just about everything will be hit as well. Most of the “recovery” of the last five years been fueled by cheap borrowed Dollars. Now that the US Dollar has broken out of a multi-year range, you’re going to see more and more “risk assets” (read: projects or investments fueled by borrowed Dollars) blow up. Oil is just the beginning, not a standalone story. If things really pick up steam, there’s over $9 TRILLION worth of potential explosions waiting in the wings. Imagine if the entire economies of both Germany and Japan exploded and you’ve got a decent idea of the size of the potential impact on the financial system And that’s assuming NO increased leverage from derivative usage. The story here is not Oil; it’s about a massive bubble in risk assets fueled by borrowed Dollars blowing up. The last time around it was a housing bubble. This time it’s an EVERYTHING bubble. And Oil is just the canary in the coalmine.

No bottom in sight.

• Oil Slides Below $55 as U.S. Output Seen Steady Amid OPEC Fight (Bloomberg)

Oil in New York fell below $55 a barrel for the first time in more than five years amid speculation that U.S. producers may further increase output as they battle OPEC for market share. Crude in London traded below $60. West Texas Intermediate futures dropped as much as 2.1%, after closing yesterday at the lowest level since May 2009. U.S. crude drillers are benefiting as costs fall almost as quickly as prices, according to Goldman Sachs Group Inc. Brent, the benchmark for more than half the world’s oil, may decline to $50 a barrel in 2015, a Bloomberg survey of analysts showed. Oil has slumped almost 45% this year as OPEC sought to defend market share amid a U.S. shale boom that’s exacerbating a global glut.

The group, responsible for about 40% of the world’s supply, will refrain from curbing output even if crude drops to $40 a barrel, according to the United Arab Emirates. “It seems like the market is no longer able to respond to the issue of oversupply,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul, said by phone. “On the demand side, the global economy continues to slow while it takes time for U.S. shale production to pull back on the supply side.” West Texas Intermediate for January delivery fell as much as 66 cents to $55.25 a barrel in electronic trading on the New York Mercantile Exchange and was at $55.62 at 1:18 p.m. Singapore time. It decreased $1.90 to $55.91 yesterday. The volume of all futures traded was about 3% above the 100-day average. Prices are set for the biggest annual loss since a 54% collapse in 2008.

Almost there. What happens after is a more interesting question.

• Brent Seen Falling to $50 in 2015 as OPEC Fails to Act (Bloomberg)

Crude oil prices are poised to fall below half where they were six months ago, before producers begin dealing with a global glut. Brent, the global benchmark, will slide to as low as $50 a barrel in 2015, according to the median in a Bloomberg survey of 17 analysts, down from the $115.71 a barrel high for the year on June 19. The grade has already collapsed 47% since then and needs to fall further before producers clear the current glut, said five out of six respondents who gave a reason. Brent futures sank in the weeks after the Organization of Petroleum Exporting Countries decided to maintain output even as the highest U.S. production in three decades swells a global surplus. The organization will stand by its decision even if prices fall to $40, United Arab Emirates Energy Minister Suhail Al-Mazrouei said.

“This won’t stop until oil producers are on their backs,” Bjarne Schieldrop, chief commodities analyst at SEB AB, Sweden’s fourth-biggest bank, said by phone from Oslo. “There will be better demand in the second half, hopefully some demand effects from lower prices, and definitely softer growth in U.S. shale.” The group decided at the Nov. 27 meeting to keep output unchanged to protect OPEC’s market share, even if it has a negative effect on crude prices, the official Kuwait News Agency reported, citing Oil Minister Ali al-Omair. The U.S. pumped 9.12 million barrels a day in the period ended Dec. 5, the most in weekly Energy Information Administration started in 1983. The gain came as horizontal drilling and hydraulic fracturing unlocked supplies from shale formations including the Eagle Ford in Texas and the Bakken in North Dakota.

“In the good old days of the late 20th century, before Federal Reserve omnipotence, they could depend on a regular annual interest rate churn of between 5 and 10% and do what they had do – write pension checks, pay insurance claims, and pay clients, with a little left over for company salaries.”

• Crash-O-Matic Finance (James Howard Kunstler)

“Oil prices have dropped $50 a barrel. That may not sound like much. But when you take $107 and you take $57, that’s almost a 47% decline…!”
–James Puplava, The Financial Sense News Network

May not sound like much? I guess when you hunker down in the lab with the old slide rule and do the math, wow! Those numbers really pop! This, of course, is the representative thinking out there. But then, these are the very same people who have carried pompoms and megaphones for “the shale revolution” the past couple of years. Being finance professionals they apparently failed to notice the financial side of the business, for instance the fact that so much of the day-to-day shale operation was being run on junk bond financing. It all seemed to work so well in the eerie matrix of zero interest rate policy (ZIRP) where investors desperate for “yield” — i.e. some return more-than-zilch on their money — ended up in the bond market’s junkyard. These investors, by the way, were the big institutional ones, the pension funds, the insurance companies, the mixed bond smorgasbord funds.

They were getting killed on ZIRP. In the good old days of the late 20th century, before Federal Reserve omnipotence, they could depend on a regular annual interest rate churn of between 5 and 10% and do what they had do – write pension checks, pay insurance claims, and pay clients, with a little left over for company salaries. ZIRP ruined all that. In fact, ZIRP destroyed the most fundamental index in the financial universe: the true cost of borrowing money. In doing so, it twerked and torqued the concept of “risk” so badly that risk no longer had any meaning. In “risk-on” financial weather, there was no longer any risk. Imagine that? It also destroyed the entire relationship between borrowed money and the cost-structure of the endeavors it was borrowed for. Take shale oil, for instance.

The fundamental limiting factor for shale oil was that the wells were only good for about two years, and then they were pretty much shot. So, if you were in that business, and held a bunch of leases, you had to constantly drill and re-drill and then drill some more just to keep production up. The drilling cost between $6 and $12-million per well. What happened the past seven years is that the drillers and their playmates on Wall Street hyped the hoo-hah out of the business — it was a shale revolution! In a few short years they drilled to beat the band and the results seemed so impressive that investment money poured into the sector like honey, so they drilled some more. It was going to save the American way of life. We were going to be “energy independent,” the “new Saudi America.” We would be able to drive to Wal-Mart forever!

Let’s all open a bank account in Russia.

• Russia Central Bank Raises Interest Rate To 17% On Ruble Collapse (Guardian)

Russia’s central bank has taken drastic action to halt the rouble’s freefall on the foreign exchanges by raising interest rates by 6.5 percentage points to 17%. After a day of turmoil dominated by fears that a crashing global oil price would devastate Russia’s energy-dominated economy, an after-hours meeting of the central bank in Moscow decided emergency action was needed to prevent the rouble’s collapse. The bank said the increase in borrowing costs – which will deepen Russia’s recession if sustained for a prolonged period – was needed to end currency depreciation and to combat inflation. Higher interest rates tend to make currencies more attractive to foreign investors and the rouble rose against the dollar in the wake of the surprise announcement. Earlier, a 10% fall in the value of the rouble against the dollar had badly rattled global markets, with the FTSE 100 index in London closing at its lowest level of 2014.

Investors dumped shares as they weighed up the risk that a deepening economic crisis would destabilise Russia and make it more difficult for the west to deal with its president, Vladimir Putin, adding to geopolitical tensions in eastern Europe and the Middle East. The huge jump in interest rates was seen by analysts as an attempt by the central bank to show that it was determined to protect the rouble. A smaller one-point rise to 10.5% last week had failed to impress financial markets at a time when the price of oil was plunging to a five and a half year low. Earlier, Russia bought roubles for dollars on the foreign exchanges but failed to prevent the biggest one-day decline in the currency since Russia’s debt default in 1998. The fall meant it took 63 roubles to buy a dollar, a decline of 45% since the start of a year that has seen the price of oil drop from $115 a barrel (£73) to barely $60 a barrel.

“We don’t think the call for aggressive interest rate or reserve-requirement ratio cuts are well-grounded under current circumstances, as it could fuel bubbles in stocks.”

• How China’s Interest-Rate Cut Raised Borrowing Costs (Bloomberg)

What if a central bank cut interest rates and borrowing costs rose? Since the People’s Bank of China surprised markets with the first benchmark rate reduction in two years on Nov. 21, the five-year sovereign bond yield climbed 15 basis points, that for similar AAA corporate notes surged 37 and AA debt yields jumped 76. While finance companies did start charging less for mortgages, their funding costs rose as the one-week Shanghai interbank lending rate added 37 basis points. The PBOC move misfired as it triggered an 18% surge in the Shanghai Composite Index of shares, prompting investors to raise cash by selling bonds and seeking loans, driving interest rates higher. Costs for riskier issuers of notes rose as regulators banned the use of riskier debt as collateral for financing. Investors dialed back expectations for further monetary easing as policy makers seek to cool the stock rally. “Financing costs moved in the opposite way than the central bank wished,” said Deng Haiqing at Citic Securities, China’s biggest brokerage.

“We don’t think the call for aggressive interest rate or reserve-requirement ratio cuts are well-grounded under current circumstances, as it could fuel bubbles in stocks.” The central bank reduced the one-year benchmark lending rate by 40 basis points to 5.6% and the deposit rate by 25 basis points to 2.75% starting from Nov. 22. The one-week Shanghai Interbank Offered Rate climbed to 3.59% on Dec. 12, the highest since Aug. 29, while the yield on top-rated five-year company bonds rose to 5.17% on Dec. 10, the highest since Sept. 18. The outstanding value of shares bought with borrowed money climbed to a record 122 billion yuan ($19.7 billion yuan) on Dec. 9, helping lift the benchmark stock index 39% this year. “The fund flows into the stock market could nurture prosperity in the capital market, but the real economy may not necessarily benefit in the short term,” Haitong Securities analysts wrote in a note on Dec. 7. “On the contrary, it could lead to further scarcity of funds, leading to an increase in interest rates.”

More confirmation of what I’ve been saying for a long time.

• China Manufacturing In Contraction (BBC)

China’s factory activity is in contraction, based on a private survey, reinforcing calls for more stimulus. The HSBC/Markit manufacturing purchasing manager’s index’s initial reading fell to 49.5 in December from November’s final reading of 50. A reading above 50 indicates expansion, while one below 50 points to contraction on a monthly basis. China will release its official PMI reading for December in the new year. The state’s official PMI came in at 50.3 for November. This morning’s latest reading from HSBC marks a seven-month low. Qu Hongbin, Chief Economist for China at HSBC said “Domestic demand slowed considerably and fell below 50 for the first time since April 2014. Price indices also fell sharply. The manufacturing slowdown continues in December and points to a weak ending for 2014.”

Earlier this week, China’s central bank said growth could slow to 7.1% next year from about 7.4% this year, because of a property market slump. Growth in the world’s second largest economy fell to 7.3% in the third quarter, which was the slowest pace since the global financial crisis. The risk that China might miss its official growth target of 7.5% this year for the first time in 15 years is growing because economic data is weaker than expected, economists said. A struggling property market, uneven export growth and cooling domestic demand and investment are some of the major factors weighing on overall growth. Last month the People’s Bank of China cut its one year deposit rate to 2.75% from 3.0% to try to revive its economy.

I thought they were twins?! But Ambrose here just about does a Steve Keen as far as banks’ role in money supply is concerned.

• Why Paul Krugman Is Wrong (AEP)

Professor Paul Krugman is the world’s most influential commentator on economic issues by a wide margin. It is a well-deserved ascendancy. He is brilliant, wide-ranging, readable, and the point of his rapier is very sharp. He correctly predicted and described the Long Slump; though whether he did so entirely for the right reasons is an interesting question. He demolished claims by hard-money totemists that zero rates and quantitative easing would lead to spiralling inflation in a global liquidity trap, as he calls it – or in a China-led world of excess supply and deficient demand, as others would put it. He correctly scolded those who claimed that rich developed countries with their own sovereign currencies are at risk of a bond market crisis unless they retrench into the downturn, or might go the way of Greece. So it is disconcerting to find myself on the wrong side of his biting critique. On other occasions I might submit to his Nobel authority, bruised, but wiser. This time I stand my ground.

The dispute is over whether central banks can generate inflation even when interest rates are zero. He says they cannot do so, and that it is jejune to float such an outlandish idea. Monetary policies are to all intents and purposes impotent at that point. He goes on to suggest that the historical and global evidence has demonstrated this beyond any possible doubt, and here he ventures into flinty terrain. Let me counter – and I will return to this – that his own theoretical model of how the economy works has broken down in one key respect over the last six years. Things are happening that he strongly implied would not and could not happen. He has so far been frugal in acknowledging the limitations of his theory, let alone in exploring why it has gone wrong. He has fallen back to a default setting: the IS-LM model. Developed in 1936, it defines the relationship between interest rates and real output. He returns to the IS-LM invariably and reflexively, almost as if were a religious incantation.

He rebukes me for quoting Tim Congdon from International Monetary Research, specifically for invoking traditional monetary theory to suggest that QE can work even when bond yields are hyper-compressed. The precise quote: “The interest rate is totally irrelevant. What matters is the quantity of money. Large scale money creation is a very powerful weapon and can always create inflation.” Mr Congdon’s claim is a self-evident truism. Central banks can always create inflation if they try hard enough. As Milton Friedman said, they can print bundles of notes and drop from them helicopters. The modern variant might be a $100,000 electronic transfer into the bank account of every citizen. That would most assuredly create inflation. I don’t see how Prof Krugman can refute this, though I suspect that he will deftly change the goal posts by stating that this is not monetary policy. To anticipate this counter-attack, let me state in advance that the English language does not belong to him. It is monetary policy. It is certainly not interest rate policy.

Fun with US stats.

• You Are Hereby Baffled With Bullshit (Zero Hedge)

Just in case you were confidently reflecting on America’s decoupling recovery… we present – today’s baffle ’em with bullshit meme:

“Gross said it would be “very difficult” for oil prices to stabilize.”

• Bill Gross: US Structural Growth Rate To Be About 2% Or Less (CNBC)

Bill Gross said in an exclusive interview with CNBC on Monday that economic growth will likely fall to 2%. “Yes, we’re starting from a 3% growth economy that will probably persist for another quarter or so,” he said. “We get back to a relatively new structural growth rate, which is not 3 but probably 2 or even less. “He attributed the decline to falling oil prices, which in turn affects industries such as fracking. Oil’s slide also “determines currency movements,” setting off a chain reaction. “Then financial markets try and readjust,” he said. “Hedge funds reduce leverage and sell other positions.”

Gross said it would be “very difficult” for oil prices to stabilize. Financial conditions are also a problem, Gross said. “Why would the Federal Reserve raise interest rates in order to slow economic growth if in fact inflation was moving lower? They have a dual mandate from that standpoint,” he said. “I think the market basically doesn’t respect the second part of that mandate.” He also sees the 10-year yield holding near 2%.”I think high quality bonds are a safe bet, just not a high returning bet,” he said.

Interesting point from Yves Smith.

• Did Wall Street Need the Swaps Budget to Hedge Against Oil Plunge? (Yves)

Conventional wisdom among banking experts is that Wall Street’s successful fight last week to get a pet provision into the must-pass budget bill (or in political junkies’ shorthand, Cromnibus) as more a demonstration of power and a test for gutting Dodd Frank than a fight that mattered to them. But the provision they got in, which was to undo a portion of Dodd Frank that barred them from having taxpayer-backstopped deposits fund derivative positions, may prove to be more important than it seemed as the collateral damage from the 40% fall in oil prices hits investors and intermediaries. Mind you, all the howling by Big Finance over this measure can’t be seen as an indicator of its importance. Yes, they have been trying to get this passed for two years. In fact, as Akshat Tewary of Occupy the SEC points out:

The provision that just got passed by the House (Section 630 of the Cromnibus) is identical to another bill already passed by the House last year – HR 992 (Swaps Regulatory Improvement Act). So the House has basically passed the same bill twice. Last year the Senate wouldn’t approve it and the banks were not happy…so the Republicans thought they would hide it in the budget bill so the Senate was forced to approve it this time.

Industry participants view any incursion on their right to make profit (as in pay themselves big bonuses) as a casus belli. That leads to regular histrionics about minor restrictions, like the TARP’s pathetically weak limits on executive bonuses. Exerts on regulation said that the Dodd Frank provision at issue, known as derivatives push-out, was simply about the big US financial firms keeping their profit margins via continued access to cheap funding. Banks weren’t barred from engaging in this type of business but they’d have to do it in different legal entities.

Election propaganda wars.

• Greek Central Bank Boss Warns Of ‘Irreparable’ Economic Damage (BBC)

Greece’s economy faces “irreparable” damage from the ongoing political crisis, the boss of its central bank has warned. “The crisis in recent days is now taking serious dimensions…and the risk of irreparable damage for the Greek economy is now great,” said Yannis Stournaras. Greek politicians will start voting on Wednesday for a new Greek president. There will be a snap general election if the government nominee loses. The political uncertainty has rattled Greek markets over the past week. Greece’s economy emerged from a six-year long recession in the first quarter of the year.

However, the size of Greece’s economy is still about a quarter below the peak it reached before the severe recession and debt crisis triggered by the global financial crash. And conservative Prime Minister Antonis Samaras’s decision to call an early vote in parliament to elect a new president has caused fresh concerns. His conservative-led coalition needs the support of other parties if its candidate is to obtain the backing of MPs. On Thursday an official in the governing coalition said it was still short of the support needed to stop the government collapsing in the parliamentary vote. Greece’s government has warned of a catastrophe if snap elections are called and left-wing anti-bailout party Syriza wins, but Syriza has accused the government of fear mongering.

“The German “data are consistent with only marginal gross-domestic-product growth in the fourth quarter at best ..”

• German Economy at Risk of Downturn as Growth Seen Weak at Best

German private-sector growth slowed to the weakest in 18 months in December, increasing the risk that a soft phase will turn into a more pronounced economic downturn. Markit Economics said a Purchasing Managers Index for manufacturing and services fell to 51.4 this month from 51.7 in November. Economists forecast an increase to 52.3. A factory gauge rose to 51.2 from 49.5, crossing the 50 mark that divides expansion from contraction, while a measure for services fell to 51.4 from 52.1. While German data showed this month that the economy, Europe’s largest, had a modest start into the last quarter of the year, the Bundesbank has pointed to signs that growth could strengthen. As the rest of the euro area struggles to expand and inflation hovers close to zero, the European Central Bank has held out the prospect of expanding its range of asset-purchases next year.

The German “data are consistent with only marginal gross-domestic-product growth in the fourth quarter at best,” said Oliver Kolodseike, an economist at London-based Markit. “The possibility of a renewed downturn at the start of next year is clearly becoming more and more likely, especially if the survey data continue to disappoint.” The German economy narrowly escaped recession in the third quarter, recording growth of 0.1% after shrinking by the same extent in the April-June period. Economists predict growth of 0.2% in the final three months of the year. Companies signaled a second consecutive monthly decline in new business in December, citing a lack of investment and increased competition, according to today’s report.

“NATO jets escorted Russian planes 140 times in 2014, a 70% increase on the previous year, while they flew missions that were “in strict compliance with international rules ..”

• Russia Says US, NATO Increased Spy Flights Seven-Fold (Bloomberg)

Russia has reported a seven-fold increase in reconnaisance missions by U.S. and NATO aircraft near its border on the Baltic Sea since April as tensions flared over the crisis in Ukraine. Russian fighter jets also flew more than 300 missions in response to NATO and other foreign military aircraft approaching the country’s borders this year, compared with more than 200 in 2013, Lieutenant-General Mikhail Mizintsev, head of the Russian Defense Ministry’s joint military command center, said. The sharp increase in air activity by NATO and countries including Sweden and Finland is taking place without “any mutual exchange of information,” Mizintsev said today in his first interview with foreign media. “All achievements in the field of trust-building and voluntary transparency that NATO and Russia have formed over the years have ceased.” Russia’s disclosures about NATO activities around its borders come as it’s embroiled in the worst standoff since the Cold War with the U.S. and its allies over the conflict in Ukraine.

It mirrors NATO reports of a jump in Russian military flights close to the borders of member states. The number of flights by NATO’s tactical aircraft close to the borders of Russia and Belarus doubled to about 3,000 this year, Mizintsev said. He rejected NATO’s claim that it had intercepted Russian aircraft some 400 times this year, a 50% increase on 2013. NATO jets escorted Russian planes 140 times in 2014, a 70% increase on the previous year, while they flew missions that were “in strict compliance with international rules,” Mizintsev said. NATO will remain vigilant in tracking Russian flights, Secretary General Jens Stoltenberg told reporters today after a meeting at the military alliance’s Brussels headquarters with Ukrainian Prime Minister Arseniy Yatsenyuk. Mizintsev said Russia registered 55 cases of foreign jets flying in “dangerous proximity” to its long-range military aircraft, at a distance of less than 100 meters, in 2013-14. Russia’s missions were “as risky as NATO aircraft flights near the Russian border can be considered risky,” he said.

Amen.

• All I Want for Christmas is a (Real) Government Shutdown (Ron Paul)

The political class breathed a sigh of relief Saturday when the US Senate averted a government shutdown by passing the $1.1 trillion omnibus spending bill. This year’s omnibus resembles omnibuses of Christmas past in that it was drafted in secret, was full of special interest deals and disguised spending increases, and was voted on before most members could read it. The debate over the omnibus may have made for entertaining political theater, but the outcome was never in doubt. Most House and Senate members are so terrified of another government shutdown that they would rather vote for a 1,774-page bill they have not read than risk even a one or two-day government shutdown. Those who voted for the omnibus to avoid a shutdown fail to grasp that the consequences of blindly expanding government are far worse than the consequences of a temporary government shutdown.

A short or even long-term government shutdown is a small price to pay to avoid an economic calamity caused by Congress’ failure to reduce spending and debt. The political class’ shutdown phobia is particularly puzzling because a shutdown only closes 20% of the federal government. As the American people learned during the government shutdown of 2013, the country can survive with 20% less government. Instead of panicking over a limited shutdown, a true pro-liberty Congress would be eagerly drawing up plans to permanently close most of the federal government, staring with the Federal Reserve. The Federal Reserve’s inflationary policies not only degrade the average American’s standard of living, they also allow Congress to run up huge deficits.

Congress should take the first step toward restoring a sound monetary policy by passing the Audit the Fed bill, so the American people can finally learn the truth about the Fed’s operations. Second on the chopping block should be the Internal Revenue Service. The federal government is perfectly capable of performing its constitutional functions without imposing a tyrannical income tax system on the American people. America’s militaristic foreign policy should certainly be high on the shutdown list. The troops should be brought home, all foreign aid should be ended, and America should pursue a policy of peace and free trade with all nations. Ending the foreign policy of hyper-interventionism that causes so many to resent and even hate America will increase our national security.

And what do you think happens when the water evaporates as temperatures rise?

• Peat Is Amazon’s Carbon Superstore (BBC)

The most dense store of carbon in Amazonia is not above ground in trees but below ground in peatlands, a study has calculated. An international team of researchers said their work, which uses satellite data and field measurements, provides the “most accurate estimates to date”. Protecting these landscapes is vital if efforts to curb climate change are to be successful, they added. The findings appear in the journal Environmental Research Letters. Writing in the paper, the scientists observed: “This investigation provides the most accurate estimates to date of the carbon stock of an area that is the largest peatland complex in the Neotropics.” They said it also confirmed “the status of the [Pastaza-Marañón foreland basin in north-west Peru] as the most carbon-dense landscape in Amanozia”.

“We expected to find these peatlands but what was more of surprise was how extensive they were, and how much this relatively small area contributed to Peru’s carbon stock,” explained co-author Freddie Draper from the University of Leeds. The 120,000 sq km basin accounts for just about 3% of the Peruvian Amazon, yet it stores almost 50% of its carbon stock, which equates to about three billion tonnes. Mr Draper told BBC News that the team used a new approach to produce their figures: “We used quite a novel method, combining a lot of field data – for about 24 months, we measured how deep the peat was, how dense it was and how much of it was carbon. “That measured how much carbon was in the ground, and then we estimated how much carbon was in the trees.

“Probably the most novel part, because the study covered such a large area, we used different satellite products (radar and images) to identify where these peatlands were.” The team said that the basin remains “almost entirely intact”, but threats are increasing. “Maintaining intact peatlands is crucial for them to continue to act as a carbon sink by continuing to form peat and contribute fully to regional habitat and species diversity,” explained co-author Katy Roucoux from the University of St Andrews. Dr Roucoux told BBC News that scientists are still learning about the contribution these landscapes make to the global carbon cycle. “An important issue is the extent to which the peatland ecosystems are continuing to lock up and store carbon as peat today. It certainly looks as though they are as the environmental conditions are right, ie water-logged.”

It will take forever to solve this issue.

• Denmark Claims North Pole Via Greenland Ridge Link (AP)

Scientific data shows Greenland’s continental shelf is connected to a ridge beneath the Arctic Ocean, giving Danes a claim to the North Pole and any potential energy resources beneath it, Denmark’s foreign minister said. Foreign Minister Martin Lidegaard said Denmark will deliver a claim on Monday to a United Nations panel in New York that will eventually decide control of the area, which Russia and Canada are also coveting. The five Arctic countries – the United States, Russia, Norway, Canada and Denmark – all have areas surrounding the North Pole, but only Canada and Russia had indicated an interest in it before Denmark’s claim. Lidegaard told the AP that the Arctic nations so far “have stuck to the rules of the game” and he hoped they would continue to do so.

In 2008, the five pledged that control of the North Pole region would be decided in an orderly settlement in the framework of the United Nations, and possible overlapping claims would be dealt with bilaterally. Interest in the Arctic is intensifying as global warming shrinks the polar ice, opening up possible resource development and new shipping lanes. The area is believed to hold an estimated 13% of the world’s undiscovered oil and 30% of its untapped gas. Lidegaard said he expects no quick decisions, with other countries also sending in claims. “This is a historical milestone for Denmark and many others as the area has an impact on the lives of lot of people. After the U.N. panel had taken a decision based on scientific data, comes a political process,” Lidegaard told The Associated Press in an interview on Friday. “I expect this to take some time. An answer will come in a few decades.”

Oh boy …

• Welcome To Manus, Australia’s Asylum Seeker Dumping Ground Gulag (Guardian)

The 60,000 people of Manus province, a remote island outpost of Papua New Guinea, had no say in the decision by Australian and local leaders to detain, process and at least temporarily resettle foreign asylum seekers on their shores. “We heard about it on the radio,” says Nahau Rooney, a pioneering political leader, former PNG justice minister and Manus’ most famous daughter. In the 14 months since Australia’s “PNG solution” was brokered, sending asylum seekers trying to reach Australia by boat to Manus for processing and eventual resettlement in PNG, the operation has also sent a tsunami of change crashing through every dimension of island life. It has delivered a booming economy, jobs and desperately needed services.

It has also brought social and environmental damage, deaths, dislocation, disputes and deep anxiety about what will come next. What is certain is that life in Manus will never be the same. […] Two years ago there were only a couple of flights a week to faraway Manus province. Today aircraft sweep in every day over the Bismarck Sea, crossing 370km of open water from the Papua New Guinea mainland to bump down on a strip carved into the jungle by Japanese soldiers 72 years ago. It’s here, since November 2012, that more than 1,650 asylum seekers who once tried to sail to a new life in Australia have instead found themselves unloaded on to PNG soil. Most of the first wave, about 300, did fly back to Australia for processing when the regional resettlement arrangement with PNG was signed in August 2013.

But under its terms all who have arrived since have been assured that even if they are ultimately recognised as refugees, they will never live in Australia. PNG will be their home. None of these asylum seekers have yet been released, though this is said to be close. Two have died. More than 240 have flown away again, “voluntary returns” to their homelands. At last count 1,056 remain in detention, 20 minutes from where they landed. They are held in a compound at a place called Lombrum. Though it long predates them, the name in local language refers to the bottom of a canoe where captives are kept. Momote airport has also seen the coming and going of the legions of guards, tradespeople, medics, interpreters and officials required to wrangle, secure, house, assess and care for the asylum seekers.

Well, done, y’all!

• Only Five Northern White Rhinos Now Exist On The Entire Planet (MarketWatch)

One of six known remaining northern white rhinoceroses died at the San Diego Zoo Safari Park on Sunday. The rhino, Angalifu, was around 44 and died of old age, the Associated Press reported. “Angalifu’s death is a tremendous loss to all of us,” said the park’s curator, Randy Rieches, in a statement, according to the AP. “Not only because he was well-beloved here at the park but also because his death brings this wonderful species one step closer to extinction.” The zoo took to Twitter to memorialize Angalifu and draw attention to the plight of the northern white rhino via the #EndExtinction hashtag:

The white rhino is the second largest land mammal and has two subspecies: the northern and southern white rhino. The southern white is currently classified as “near threatened,” with a population of about 20,000, according to the World Wildlife Fund. With the death of Angalifu, only five northern white rhinos exist — all of them in captivity. There are no northern white rhinos known to be in the wild. Of the remaining rhinos, one is at the same San Diego zoo, another is at a zoo in the Czech Republic, and three are at a wildlife conservancy in Kenya.

Of course it is, there’s no other way. These kinds of conferences never solve a thing.

• Is The Lima Deal A Travesty Of Global Climate Justice? (Guardian)

At one point on Saturday night it looked quite likely that the Lima climate talks would collapse in disarray. Instead of the harmony expected between China and the US following their pre-talks pact, the world’s two largest economies were squaring off; workmen were dismantling the venue; old faultlines between rich and poor countries were opening up again and some countries’ delegations were rushing to catch their planes. In the end, after a marathon 32-hour session where everyone stared into the abyss of total failure, a modicum of compromise prevailed. Some deft changes of emphasis in the revised text and the inclusion of key words such as “loss” and “damage” proved just enough for diplomats to bodge a last-minute compromise. There were cheers and tears as the most modest of agreements was reached. The Peruvian president of the UN climate change convention, or Cop20, could say without irony: “With this text, we all win without exception.”

Not so. Countries may technically still be on track to negotiate a final agreement in Paris next year, but the gaps between them are growing rather than closing and the stakes are getting higher every month. We have now reached the point where everyone can see clearly that whatever ambition there once was to respect science and try to hold temperatures to an overall 2C rise has been ditched. We also know that developing countries will not get anything like the money they need to adapt their economies and infrastructure to climate change and that those countries that have been historically responsible for getting the world into its current climate mess will be able to do much what they like. As it stands, 21 years of tortuous negotiations may have actually taken developing countries backwards on tackling climate change.

From an imperfect but legally binding UN treaty struck in 1992, in which industrialised countries accepted responsibility and agreed to make modest but specific cuts over a defined period, we now have the prospect of a less than legally binding global deal where everyone is obliged to do something but where the poor may have to do the most and the rich will be free to do little. In 1992, rich countries were obliged to lead and to help the poor, but we now have a situation where those who had little or no historical responsibility for climate change are likely to cut emissions the most. This travesty of global climate justice, say many developing countries, is largely the fault of the US, which, backed by Britain and others industrialised countries like Canada and Australia, has helped build up distrust in developing countries by continually trying to deregulate the international climate change regime by weakening the rules, shifting responsibility to the south and making derisory offers of financial help.

“Existing computer models may be severely underestimating the risk to Greenland’s ice sheet..”

• Bad News For Florida: Models Of Greenland Ice Melting Could Be Way Off (NBC)

Existing computer models may be severely underestimating the risk to Greenland’s ice sheet — which would add 20 feet to sea levels if it all melted — from warming temperatures, according to two studies released Monday. Satellite data were instrumental for both studies — one which concludes that Greenland is likely to see many more lakes that speed up melt, and the other which better tracks large glaciers all around Earth’s largest island. The lakes study, published in the peer-reviewed Nature Climate Change, found that what are called “supraglacial lakes” have been migrating inland since the 1970s as temperatures warm, and could double on Greenland by 2060. The study upends models used by the Intergovernmental Panel on Climate Change because they “didn’t allow for lake spreading, so the work has to be done again,” study co-author Andrew Shepherd, director of Britain’s Centre for Polar Observation and Modelling, told NBCNews.com.

Those lakes can speed up ice loss since, being darker than the white ice, they can absorb more of the sun’s heat and cause melting. The melt itself creates channels through the ice sheet to weaken it further, sending ice off the sheet and into the ocean. “When you pour pancake batter into a pan, if it rushes quickly to the edges of the pan, you end up with a thin pancake,” study lead author Amber Leeson, a researcher at Britain’s University of Leeds, explained in a statement. “It’s similar to what happens with ice sheets: The faster it flows, the thinner it will be. “When the ice sheet is thinner,” she added, “it is at a slightly lower elevation and at the mercy of warmer air temperatures than it would have been if it were thicker, increasing the size of the melt zone around the edge of the ice sheet.”

The mix of IPCC models have Greenland contributing 8.7 inches to global sea level rise by 2100 without the doubling of supraglacial lakes, but the team fears that a doubling could add almost as much as that over the next century. Such a rise in sea level would have serious repercussions for heavily populated low-lying areas, like Florida or Bangladesh, which could see beach and barrier island erosion and salt water encroachment, scientists say. The glaciers study, published in the peer-reviewed Proceedings of the National Academy of Sciences, used NASA satellite data to reconstruct how the height of the ice sheet has changed at nearly 100,000 locations from 1993 to 2012.

The team found significant variations that aren’t factored in by existing computer models for future changes on Greenland because they focus on just four glaciers. “The problem is that these models have been applied to four glaciers only, one of which has not been changing much, to predict how these glaciers may change in the future,” Kees van der Veen, a study co-author and University of Kansas geographer, told NBCNews.com. “Results for these four glaciers have been extrapolated to the entire ice sheet to estimate the contribution of the entire ice sheet to sea level rise,” he adds. “Our results show that this is not appropriate because of how differently individual glaciers have changed over the last decade.”

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