Jul 032018
 


Edward Hopper Summer interior 1909

 

Buybacks Are The Only Thing Keeping The Stock Market Afloat (CNBC)
Stock Markets Look Ever More Like Ponzi Schemes (Murphy)
A Japanese Tsunami Out Of US CLOs Is Coming (HC)
The Eurozone’s Coming Debt Crisis (Lacalle)
The ‘Dirty Dozen’ Sectors Of Global Debt (Rochford)
UK’s Latest Brexit Proposal Is Unrealistic, Say EU Officials (G.)
Nassim Taleb Slams “These Virtue-Signaling Open-Borders Imbeciles” (ZH)
Merkel Dodges Political Bullet With Controversial Migrant Deal (AFP)
Austria Says To ‘Protect’ Its Borders After German Migrant Deal (AFP)
Is Facebook A Publisher? In Public It Says No, But In Court It Says Yes (G.)
Tesla’s All-Nighter To Hit Production Goal Fails To Convince Wall Street (R.)
The New York Times Squares off with the Truth, Again (AHT)
Anthony Kennedy and Our Delayed Constitutional Crisis (GP)
‘Snowden is the Master of His Own Destiny’ – Russia (TeleSur)

 

 

And then QE ends.

Buybacks Are The Only Thing Keeping The Stock Market Afloat (CNBC)

Stocks right now are hanging by a thread, boosted by a bonanza of corporate buying unrivaled in market history and held back by a burst in investor selling that also has set a new record. Both sides are motivated by fear, as corporations find little else to do with their $2.1 trillion in cash than buy back their own shares or make deals, while individual investors head to the sidelines amid fears that a global trade war could thwart the substantial momentum the U.S. economy has seen this year. “Corporate cash is going to find a home, and it’s either going to be in buybacks, dividends or M&A activity. What it’s not going to be is in capex,” said Art Hogan, chief market strategist at B. Riley FBR.

“Individuals are looking at the turbulence we’ve seen this year that we had not seen last year. That creates its own sort of exit sign for investors who don’t want to deal with that.” The numbers showing where each side put their cash in the second quarter are striking. Companies announced $433.6 billion in share repurchases during the period, nearly doubling the previous record of $242.1 billion in the first quarter, according to market research firm TrimTabs. Dow components Nike and Walgreens Boots Alliance led the most recent surge in buybacks, with $15 billion and $10 billion, respectively, last week. In all, 31 companies announced buybacks in excess of $1 billion during June.

At the same time, investors dumped $23.7 billion in stock market-focused funds in June, also a new record. For the full quarter, the brutal June brought global net equity outflows to $20.2 billion, the worst performance since the third quarter of 2016, just before the presidential election. The selling is particularly acute in mutual funds, which saw $52.9 billion in outflows during the quarter and are typically more the purview of the retail side.

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“People think their savings and pensions are safe because of rising share prices. They do not realise it is all a con-trick.”

Stock Markets Look Ever More Like Ponzi Schemes (Murphy)

The FT has reported this morning that: “Debt at UK listed companies has soared to hit a record high of £390bn as companies have scrambled to maintain dividend payouts in response to shareholder demand despite weak profitability.” They added: “UK plc’s net debt has surpassed pre-crisis levels to reach £390.7bn in the 2017-18 financial year, according to analysis from Link Asset Services, which assessed balance sheet data from 440 UK listed companies.” So what, you might ask? Does it matter that companies are making sense of low-interest rates to raise money when I am saying that government could and should be doing the same thing?

Actually, yes it does. And that’s because of what the cash is being used for. Borrowing for investment makes sense. Borrowing to fund revenue investment (that is training, for example, which cannot go on the balance sheet but still adds value to the business) makes sense. But borrowing to pay a dividend when current profits and cash flow would not support it? No, that makes no sense at all. Unless, of course, you are CEO on a large share price linked bonus package and your aim is to manipulate the market price of the company. It is that manipulation that is going on here, I suggest. These loans are being used to artificially inflate share prices.

The problem is systemic. In the US the problem is share buybacks, which I read recently have exceeded $5 trillion in the last decade, meaning that US companies are now by far the biggest buyers of their own shares. That is, once again, market manipulation. And this manipulation does matter. People think their savings and pensions are safe because of rising share prices. They do not realise it is all a con-trick. And companies claim that their pension funds are better funded as a result of these share prices, and so they are meeting their obligations to their employees when that too is a con-trick. They may be insolvent when the truth is known, so serious is the fraud.

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Japan plays a strange role in the global economy. It won’t be able to keep that up much longer. The Bank of Japan has many options; none are good.

A Japanese Tsunami Out Of US CLOs Is Coming (HC)

Japan is at the very centre of the global financial system. It has run current account surpluses for decades, building the world’s largest net foreign investment surplus, or its accumulated national savings. Meanwhile, other nations, such as the US, have borrowed from nations like Japan to live beyond their own means, building net foreign investment deficits. We now have unprecedented levels of cross-national financing.

Much of Japan’s private sector saving is placed in Yen with financial institutions who then invest overseas. These institutions currency hedged most of their foreign assets to reduce risk weighted asset charges and currency write down risks. The cost of hedging USD assets has however risen due to a flattening USD yield curve and dislocations in FX forwards. As shown below, their effective yield on a 10 year US Treasury (UST) hedged with a 3 month USDJPY FX forward has fallen to 0.17%. As this is below the roughly 1% yield many financial institutions require to generate profits they have been selling USTs, even as unhedged 10 year UST yields rise. The effective yield will fall dramatically for here if 3 month USD Libor rises in line with the Fed’s “Dot Plot” forecast for short term rates, assuming other variables like 10 year UST yields remain constant.

As Japanese financial institutions sell US Treasuries, which are considered the safest foreign asset, they are shifting more into higher yielding and higher risk assets; foreign bonds excluding US treasuries as well as foreign equity and investment funds. This is a similar pattern to what we saw prior to the last global financial crisis. In essence, Japan’s financial institutions are forced to take on more risk in search of yield to cover rising hedge costs as the USD yield curve flattens late in the cycle. Critically as the world’s largest net creditor they facilitate significant added liquidity for higher risk overseas borrowers late into the cycle.

I follow these flows closely. One area I think is rather interesting is US Collateralised Loan Obligations (CLOs) which Bloomberg reports “ballooned to a record last quarter thanks in large part to unusually high demand from Japanese investors”. CLOs are essentially a basket of leveraged loans provided to generally lower rated companies with very little covenant protection. Alarmingly, some US borrowers have used this debt to purchase back so much of their own stock that their balance sheets now have negative net equity. A recent Fed discussion paper shows in the following chart that CLOs were the largest mechanism for the transfer of corporate credit risk out of undercapitalised banks in the US and into the shadow banking sector. Japanese financial institutions have been the underwriter of much of that risk in their search for yield.

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“This reduction in costs is financed by pensioners and savers who are forced to invest in these debt instruments, often by institutional mandate.”

The Eurozone’s Coming Debt Crisis (Lacalle)

The European Central Bank (ECB) has signaled the end of its asset purchase program and even a possible rate hike before 2019. After more than 2 trillion euros of asset purchases and a zero interest rate policy, it is long overdue. The massive quantitative easing (QE) program has generated very significant imbalances and the risks far outweigh the questionable benefits. The balance sheet of the ECB is now more than 40 percent of the eurozone GDP. The governments of the eurozone, however, have not prepared themselves at all for the end of stimuli. They often claim that deficits have been reduced and risks contained. However, closer scrutiny shows that the bulk of deficit reductions came from lower cost of government debt.

Eurozone government spending has barely fallen, despite lower unemployment and rising tax revenues. Structural deficits remain stubborn, and in some cases, unchanged from 2013 levels. In other words, the problems are still there, they were just hidden for a while, swept under the rug of an ever-expanding global economy. The 19 eurozone countries have collectively saved 1.15 trillion euros in interest payments since 2008 due to ECB rate cuts and monetary policy interventions, according to German media outlet Handelsblatt. This reduction in costs is financed by pensioners and savers who are forced to invest in these debt instruments, often by institutional mandate.

However, that illusion of savings and budget stability will rapidly disappear as most Eurozone countries face massive amounts of debt coming due in the 2018–2020 period and wasted precious years of quantitative easing without implementing strong structural reforms. The recent troubles of Italian banks are just one precursor of things to come. Taxes rose for families and small and medium-sized enterprises, while current spending by governments barely fell, competitiveness remained poor, and a massive 1 trillion euro in nonperforming loans raises doubts about the health of the European financial system.

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Good overview. Crises wherever you look.

The ‘Dirty Dozen’ Sectors Of Global Debt (Rochford)

When considering where the global credit cycle is at, it’s often easy to form a view based on a handful of recent articles, statistics and anecdotes. The most memorable of these tend to be either very positive or negative otherwise they wouldn’t be published or would be quickly forgotten. A better way to assess where the global credit cycle is at is to look for pockets of dodgy debt. If these pockets are few, credit is early in the cycle with good returns likely to lie ahead. If these pockets are numerous, that’s a clear indication that credit is late cycle.

In reviewing global debt, twelve sectors standout for their lax credit standards and increasing risk levels. There’s excessive risk taking in developed and emerging debt, as well as in government, corporate, consumer and financial sector debt. This points to global credit being late cycle. Central banks have failed to learn the lessons from the last crisis. By seeking to avoid or lessen the necessary cleansing of malinvestment and excessive debt, this cycle’s economic recovery has been unusually slow. Ultra-low interest rates and quantitative easing have increased the risk of another financial crisis, the opposite of the financial stability target many central bankers have.

For global debt investors, the current conditions offer limited potential for gains beyond carry. With credit spreads in many sectors at close to their lowest in the last decade, there is greater potential for spreads to widen dramatically than there is for spreads to tighten substantially. Keeping credit duration low, staying senior in the capital structure and shifting up the rating spectrum will cost some carry. However, the cost of de-risking now is as low as it has been for a long time. If the risks in the dirty dozen sectors materialise in the medium term, the losses avoided by de-risking will be a multiple of the carry foregone.

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I’d say it’s about time for the British to wake up to the damage May et al are inflicting on the nation.

UK’s Latest Brexit Proposal Is Unrealistic, Say EU Officials (G.)

A draft of Theresa May’s Brexit plan has already been dismissed as unrealistic by senior EU officials, who say the UK has no chance of changing the European Union’s founding principles. The prime minister is gathering her squabbling ministers at Chequers on Friday for a one-day discussion to thrash out the UK’s future relationship with the EU. But EU sources who have seen drafts of the long-awaited British white paper said the proposals would never be accepted. “We read the white paper and we read ‘cake’,” an EU official told the Guardian, a reference to Boris Johnson’s one-liner of being “pro having [cake] and pro-eating it”. Since the British EU referendum, “cake” has entered the Brussels lexicon to describe anything seen as an unrealistic or far-fetched demand.

May’s white paper is expected to propose the UK remaining indefinitely in a single market for goods after Brexit, to avoid the need for checks at the Irish border. While the UK is offering concessions on financial services, it wants restrictions on free movement of people – a long-standing no-go for the EU. Jean-Claude Piris, a former head of the EU council’s legal service, said it would be impossible for the EU to split the “four freedoms” underpinning the bloc’s internal market, which are written into the 1957 treaty that founded the European project: free movement of goods, services, capital and people. “The EU is in difficulties at the moment; the one and only success which glues all these countries together is a little bit the money and the internal market,” Piris said. “If you fudge the internal market by allowing a third state to choose what they want … it is the beginning of the end.”

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Not easy to find the right position on the topic. But Europe seems to show that uncontrolled immigration leads to the rise of right wing movements. Merkal gave birth to Salvini.

Nassim Taleb Slams “These Virtue-Signaling Open-Borders Imbeciles” (ZH)

As liberals across America continue to attempt to one-up one another with the volume of virtue they can signal, specifically on the question of ‘open borders’ – especially since ‘jenny from the bronx’ victory over the weekend, none other than Nassim Nicholas Taleb unleashed a trite 3-tweet summary of how farcical this argument is…

What intellectuals don’t get about MIGRATION is the ethical notion of SYMMETRY:

1) OPEN BORDERS work if and only if the number of pple who want to go from EU/US to Africa/LatinAmer equals Africans/Latin Amer who want to move to EU/US

2) Controlled immigration is based on the symmetry that someone brings in at least as much as he/she gets out. And the ethics of the immigrant is to defend the system as payback, not mess it up. Uncontrolled immigration has all the attributes of invasions.

3) As a Christian Lebanese, saw the nightmare of uncontrolled immigration of Palestinians which caused the the civil war & as a part-time resident of N. Lebanon, I am seeing the effect of Syrian migration on the place.

So I despise these virtue-signaling open-borders imbeciles.

Silver Rule in #SkinInTheGame

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Mutti’s holding centers.

Merkel Dodges Political Bullet With Controversial Migrant Deal (AFP)

German Chancellor Angela Merkel survived a bruising challenge to her authority with a compromise deal on immigration but faced charges Tuesday that it spelt a final farewell to her welcoming stance toward refugees. In high-stakes crisis talks overnight, Merkel had put to rest for now a dangerous row with her hardline Interior Minister Horst Seehofer that had threatened the survival of her fragile coalition government. In separate statements, Merkel praised the “very good compromise” that she said spelt a European solution, while Seehofer withdrew a resignation threat and gloated that “it’s worth fighting for your convictions”.

In a pact both sides hailed as a victory, Merkel and Seehofer agreed to tighten border controls and set up closed holding centres to allow the speedy processing of asylum seekers and the repatriations of those who are rejected. They would either be sent back to EU countries that previously registered them or, in case arrival countries reject this – likely including frontline state Italy – be sent back to Austria, pending an agreement with Vienna. CSU general secretary called the hardening policy proposal the last building block “in a turn-around on asylum policy” after a mass influx brought over one million migrants and refugees.

But criticism and doubts were voiced quickly by other parties and groups, suggesting Merkel may only have won a temporary respite. Refugee support group Pro Asyl slammed what it labelled “detention centres in no-man’s land” and charged that German power politics were being played out “on the backs of those in need of protection”. Bernd Riexinger of the opposition far-left Die Linke party spoke of “mass internment camps” as proof that “humanity got lost along the way” and urged Merkel’s other coalition ally, the Social Democrats (SPD), to reject the plan.

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And Merkel made Kurz possible, too.

Austria Says To ‘Protect’ Its Borders After German Migrant Deal (AFP)

Austria’s government warned Tuesday it could “take measures to protect” its borders after Germany planned restrictions on the entry of migrants as part of a deal to avert a political crisis in Berlin. If the agreement reached Monday evening is approved by the German government as a whole, “we will be obliged to take measures to avoid disadvantages for Austria and its people,” the Austrian government said in a statement. It added it would be “ready to take measures to protect our southern borders in particular,” those with Italy and Slovenia. German Chancellor Angela Merkel reached a deal Monday on migration with her rebellious interior minister, Horst Seehofer, to defuse a bitter row that had threatened her government.

Among the proposals is a plan to send back to Austria asylum seekers arriving in Germany who cannot be returned to their countries of entry into the European Union. Austria said it would be prepared to take similar measures to block asylum seekers at its southern borders, with the risk of a domino effect in Europe. “We are now waiting for a rapid clarification of the German position at a federal level,” said the statement, signed by Austria’s conservative Chancellor Sebastian Kurz and his allies of the far-right Freedom party, Vice Chancellor Heinz-Christian Strache and Interior Minister Herbert Kickl. “German considerations prove once again the importance of a common European protection of the external borders,” the statement said.

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Wonder what the strategy meetings were like.

Is Facebook A Publisher? In Public It Says No, But In Court It Says Yes (G.)

Facebook has long had the same public response when questioned about its disruption of the news industry: it is a tech platform, not a publisher or a media company. But in a small courtroom in California’s Redwood City on Monday, attorneys for the social media company presented a different message from the one executives have made to Congress, in interviews and in speeches: Facebook, they repeatedly argued, is a publisher, and a company that makes editorial decisions, which are protected by the first amendment. The contradictory claim is Facebook’s latest tactic against a high-profile lawsuit, exposing a growing tension for the Silicon Valley corporation, which has long presented itself as neutral platform that does not have traditional journalistic responsibilities.

The suit, filed by an app startup, alleges that Mark Zuckerberg developed a “malicious and fraudulent scheme” to exploit users’ personal data and force rival companies out of business. Facebook, meanwhile, is arguing that its decisions about “what not to publish” should be protected because it is a “publisher”. In court, Sonal Mehta, a lawyer for Facebook, even drew comparison with traditional media: “The publisher discretion is a free speech right irrespective of what technological means is used. A newspaper has a publisher function whether they are doing it on their website, in a printed copy or through the news alerts.” [..] Mehta argued in court Monday that Facebook’s decisions about data access were a “quintessential publisher function” and constituted “protected” activity, adding that this “includes both the decision of what to publish and the decision of what not to publish”.

David Godkin, an attorney for Six4Three, later responded: “For years, Facebook has been saying publicly … that it’s not a media company. This is a complete 180.” Questions about Facebook’s moral and legal responsibilities as a publisher have escalated surrounding its role in spreading false news and propaganda, along with questionable censorship decisions. Eric Goldman, a Santa Clara University law professor, said it was frustrating to see Facebook publicly deny that it was a publisher in some contexts but then claim it as a defense in court. “It’s politically expedient to deflect responsibility for making editorial judgements by claiming to be a platform,” he said, adding, “But it makes editorial decisions all the time, and it’s making them more frequently.”

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He did pull it off. But it may be too little too late. Biggest no-no: Model 3 was supposed to be $35,000. ended up at $78,000.

Tesla’s All-Nighter To Hit Production Goal Fails To Convince Wall Street (R.)

Tesla’s burning the midnight oil to hit a long-elusive target of making 5,000 Model 3 vehicles per week failed to convince Wall Street that the electric carmaker could sustain that production pace, sending shares down 2.3% on Monday. Tesla met the target by running around the clock and pulling workers from other projects, workers said. The company also took the unprecedented step of setting up a new production line inside a tent on the campus of its Fremont factory, details of which Chief Executive Elon Musk tweeted last month. Tesla’s heavily-shorted shares rose as much as 6.4% to $364.78 in early trading, but sank after several analysts questioned whether Tesla would be able to sustain the Model 3 production momentum, which is crucial for the long-term financial health of the company.

“In the interim, we do not see this production rate as operationally or financially sustainable,” said CFRA analyst Efraim Levy. “However, over time, we expect the manufacturing rate to become sustainable and even rise.” Levy cut CFRA’s rating on Tesla stock to “sell” from “hold.” Tesla, which Chief Executive Elon Musk hailed on Sunday as having become a “real car company,” said it now expects to boost production to 6,000 Model 3s per week by late August, signaling confidence about resolving technical and assembly issues that have plagued the company for months. Tesla also reaffirmed a positive cash flow and profit forecast for the year. Tesla has been burning through cash to produce the Model 3. Problems with an over-reliance on automation, battery issues and other bottlenecks have potentially compromised Tesla’s position in the electric car market as a host of competitors prepare to launch rival vehicles.

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NATO is “justified by the need to manage the security threats provoked by its enlargement.”.

The New York Times Squares off with the Truth, Again (AHT)

Whenever I’m having a rough day and need a pick-me-up, I turn to The New York Times’ editorial page. It’s always a gas to see how far the empire’s leading propaganda outfit is prepared to go in its mission to pull the wool over we the people’s gullible little eyes. The good editors have come through for me again with their latest entry, “Trump and Putin’s Too-Friendly Summit.” (Original title: “Trump and Putin: Best Frenemies for Life”). No doubt the original headline was deemed rather too impish for such a serious newspaper—it might, for instance, have alerted readers to the fact that the editorial’s content is not to be taken very seriously—and so was understandably jettisoned.

“One would think,” the editors write, “that the president of the United States would let Mr. Putin know that he faces a united front of Mr. Trump and his fellow NATO leaders, with whom he would have met days before the [Putin] summit in Helsinki.” Alas, during said meeting Trump reportedly remarked that “NATO is as bad as NAFTA”—the “free trade” agreement that has succeeded in decimating most of the manufacturing jobs spared by the automation wrecking ball. In other words, Trump does not necessarily think it’s a good idea to encircle Russia with a hostile military alliance whose existence, according to geopolitical expert Richard Sakwa, is “justified by the need to manage the security threats provoked by its enlargement.” (If you haven’t read Professor Sakwa’s comprehensive study of the Ukrainian crisis, Frontline Ukraine, put it at the top of your summer reading list.)

One notes the Turgidsonian delight with which the Times reminds us that, should push come to shove, we’ve got those Russki bastards outgunned. Of course, gullibles like you and I are to pay no mind to the fact that such a confrontation (a military one, for the Times brought up NATO) would almost certainly involve a nuclear exchange, rendering the disparity in manpower that so excites the Times totally meaningless. No, what’s important is that NATO has twenty-nine member states and counting, while the Warsaw Pact was dissolved twenty-seven years ago: ergo, unless he wants the old mailed fist, Putin had better ask “how high?” when we tell him to jump. One would be hard-pressed to come up with a more delusional assessment of where things stand.

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“We are in that constitutional crisis now, but just at the start of it.”

Anthony Kennedy and Our Delayed Constitutional Crisis (GP)

Like “swing vote” Justice Sandra Day O’Connor before him, “swing vote” justice Anthony Kennedy has been one of the worst Supreme Court jurists of the modern era. With swing-vote status comes great responsibility, and in the most consequential — and wrongly decided — cases of this generation, O’Connor and Kennedy were the Court’s key enablers. They • Cast the deciding vote that made each decision possible • Kept alive the illusion of the Court’s non-partisan legitimacy. Each of these points is critical in evaluating the modern Supreme Court. For two generations, it has made decisions that changed the constitution for the worse. (Small “c” on constitution to indicate the original written document, plus its amendments, plus the sum of all unwritten agreements and court decisions that determine how those documents are to be interpreted).

These horrible decisions are easy to list. They expanded the earlier decision on corporate personhood by enshrining money as political speech in a group of decisions that led to the infamous Citizens United case (whose majority opinion, by the way, was written by the so-called “moderate” Anthony Kennedy); repeatedly undermined the rights of citizens and workers relative to the corporations that rule and employ them; set back voting rights equality for at least a generation; and many more. After this next appointment, many fear Roe v. Wade may be reversed. Yet the Court has managed to keep (one is tempted to say curate) its reputation as a “divided body” and not a “captured body” thanks to its so-called swing vote justices and the press’s consistent and complicit portrayal of the Court as merely “divided.”

The second point above, about the illusion of the Court’s legitimacy, is just as important as the first. If the Court were ever widely seen as acting outside the bounds of its mandate, or worse, seen as a partisan, captured organ of a powerful and dangerous political minority (which it certainly is), all of its decisions would be rejected by the people at large, and more importantly, the nation would plunged into a constitutional crisis of monumental proportions. We are in that constitutional crisis now, but just at the start of it. We should have been done with it long ago. Both O’Connor and Kennedy are responsible for that delay.


Image credit: Mike Thompson / Detroit Free Press

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A tale of two refugees
Putin: Snowden is free to do whatever he wants
Lenin: I ordered Assange to be gagged and isolated and am coordinating “next steps” with US

‘Snowden is the Master of His Own Destiny’ – Russia (TeleSur)

United States President Donald Trump is expected to pressure Russia to hand over NSA whistleblower Edward Snowden in exchange for sanctions relief at the upcoming Trump-Putin summit; however, Russia has emphasized that they “are not in a position” to expel Snowden and will “respect his rights” if any such attempt is made. “I have never discussed Edward Snowden with (Donald Trump’s) administration,” Russian Foreign Minister Sergey Lavrov said to Channel 4 reporters. “When he (Putin) was asked the question, he said this is for Edward Snowden to decide. We respect his rights, as an individual. That is why we were not in a position to expel him against his will because he found himself in Russia even without a U.S. passport, which was discontinued as he was flying from Hong Kong.”

Snowden, who is being prosecuted in the United States for leaking classified documents that showed surveillance abuse by U.S. intelligence agencies, was given political asylum in Russia after his passport was revoked. “Edward Snowden is the master of his own destiny,” Lavrov said. Trump is meeting with Russian President Vladimir Putin on July 16 in Helsinki, where Putin is expected to push for an end to U.S. sanctions. Trump has said he would like better relations with Russia, perhaps as a way of pulling them away from China, but Trump’s opponents in the United States are already applying political pressure on him for holding the summit, in the midst of the tensest U.S.-Russian relations since the height of the Cold War.

The fate of Wikileaks founder Julian Assange also lay in the balance when U.S. Vice President Mike Pence met with Ecuador’s President Lenin Moreno this week. “The vice president raised the issue of Mr. Assange. It was a constructive conversation. They agreed to remain in close coordination on potential next steps going forward,” a White House official said in a statement.

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Jun 302018
 


Paul Gauguin We hail thee Mary 1891

 

If The US Middle Class Disappears So Will The US Economy (Hutch)
Nervous Investors Exiting US Stocks At Near-Record Pace (CNBC)
Emerging Markets Are In A Death Cross (CNBC)
Are Central Banks Embracing Too Much Risk? (R.)
Stress Test Results Signal More Flexible New-Look Fed (R.)
EU Warns Deep Disputes With UK Threaten No-Deal Brexit (Ind.)
EU Leaders Say Post-Brexit Single-Market Access For Goods A Nonstarter (G.)
Hidden Figures (Jim Kunstler)
Canada Hits US With Retaliatory Tariffs: ‘We Will Not Back Down’ (G.)
Merkel Confirms Bilateral Migrant Agreements With Spain And Greece (DW)
Not Up To US To Decide On Assange Asylum, Ecuador Says (AFP)
Edward Snowden Calls Russian Government ‘Corrupt’ (Ind.)
The Great Firewall Of China (G.)

 

 

“..the “Walmartization” of America.”

If The US Middle Class Disappears So Will The US Economy (Hutch)

Economies have ebbs and flows. In spite of what they teach you in economics 101 nothing is ever in equilibrium. There are just too many parts as well as internal and external influences although there are times when activity is stronger than others. The US built one of the greatest economic powerhouses on earth after World War II, however it was already well on its way from the 1800s as it built out its infrastructure and put many to work. There was a time when the US consumed the majority of what it produced as a nation and then exported the remainder. Who was responsible for the consumption? It was the middle class. The middle class made up the majority of the population. They had jobs and respectable salaries. So what happened?

According to a research report by the Pew Research Center in 2012, “The Lost Decade of the Middle Class” they state: “For the half century following World War II, American families enjoyed rising prosperity in every decade—a streak that ended in the decade from 2000 to 2010, when inflation-adjusted family income fell for the middle income as well as for all other income groups, according to U.S. Census Bureau data.” The above graph shows that the 50s and 60s had the strongest middle class. In 1950 and 1951 the US had successive years of 8% GDP growth. The report also highlights how the net worth of middle income families—that is, the sum of assets minus debts— took a hit from 2001 to 2010 from the Federal Reserve’s Survey of Consumer Finances. Median net worth fell 28%, to $93,150, erasing two decades of gains.

So we have a situation where consumer debt has increased over the years and incomes have fallen. There are a large number of reasons for this. The manufacturing base has shrunk as companies chose to produce goods in other countries in order to take advantage of cheap labour so they could give themselves pricing advantages. There is, what has become to be known as the “Walmartization” of America. Author John Atcheson writes, “If you want to know why the middle class disappeared and where they went, look no further than your local Walmart. People walked in for the low prices, and walked out with a pile of cheap stuff, but in a figurative sense, they left their wages, jobs, and dignity on the cutting room floor of the House of Cheap.” Driving prices lower and lower is just a race to the bottom that erodes everyone’s quality of life.

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Safety.

Nervous Investors Exiting US Stocks At Near-Record Pace (CNBC)

Investors bailed out of U.S. stocks at a near-record pace in the last week, as money flowing into Treasury bills surged to a 10-year high. Outflows from U.S. stock funds and ETFs totaled $24.2 billion, the third-highest ever, and the $30 billion that came out of global stock funds in total in the past week was the second-highest ever and largest since the financial crisis, according to Bank of America Merrill Lynch strategists. The outflows from U.S. stocks were the highest since the stock market correction in February. Bonds, at the same time, saw small inflows of $700 million. “That nervousness, the losses people were experiencing in non-U.S. markets with the trade wars has probably led to what you’re seeing in the markets in the last week or so — a big unwind of positioning, a flight to quality,” said Michael Hartnett, BofAML chief investment strategist.

Hartnett said there was a “pervasive euphoria” about the U.S. at the beginning of the year and that has faded. Now, investors are adjusting positions, not panicking, though T-bills, considered the safest of safe haven bets, continued to pull in funds at a rapid pace. “It’s not like it’s February 2016. It’s not like we’re staring recession in the face, and everyone is cashed up to the eyeballs and policymakers are panicking. That’s not what’s happening. It’s just that people were pricing in Goldilocks forever earlier on in the year, and that was wrong. They’re probably unwinding that positioning,” he said. “It helps explain why the markets have firmed up in the last couple of days. You want to buy fear and sell greed.” Hartnett said July could be a month where investors sell volatility, but then the market could get rockier in August and September, ahead of the midterm elections.

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Prone to get a whole lot worse.

Emerging Markets Are In A Death Cross (CNBC)

Emerging markets are feeling the heat. China is in a bear market, Brazil is closing in on one, and the EEM emerging markets ETF could close out its worst quarter in nearly three years on Friday. Brace for more pain, says one technical analyst. “There’s really a time to own EEM and it’s time not to own EEM,” Piper Jaffray’s chief market technician Craig Johnson told CNBC’s “Trading Nation” on Thursday. “Our rising dollar is going to be an issue for EEM in here and it looks like to me you got probably another 12 percent downside before you get down to a material support area.”

A 12 percent decline from Thursday’s close would put the EEM ETF at around $37.50, its lowest level since March 2017. On Friday afternoon it had risen 1.5 percent to $43.35. The EEM ETF has also entered a death cross, a technical red flag for Johnson. A death cross marks the point on a chart where a longer-term moving average, such as the 200-day, breaks above a shorter-term moving average, such as the 50-day. The technical indicator demonstrates a sharp breakdown in a security’s price and often prefaces further downside.

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How is that a question?

Are Central Banks Embracing Too Much Risk? (R.)

Central banks are usually thought of as very conservative institutions; if they were cars they would be safe, family sedans. Lately, though, some central banks have been doing the market equivalent of zipping around in a sporty convertible. In recent years, at least two large central banks have been snapping up large quantities of equities, typically considered a risky investment. The Swiss National Bank now has about 20% of its reserves in equities, up from about 7 percent a decade ago. More than half of that is in U.S. equities. And to say that the Bank of Japan has become a player in that country’s equity market is an understatement; BOJ currently owns nearly 75% of the Japanese exchange-traded fund (ETF) market, again up sharply from just a few years ago.

Other central banks, including the European Central Bank and South African Reserve Bank, also make similar purchases, although Japan and Switzerland are the most aggressive buyers of equities. If the idea of a central bank owning a significant amount of stock in a company sounds strange to you, that’s hardly surprising. In the United States, for example, the Federal Reserve Bank is legally prohibited from owning equities, and instead invests its reserves in bonds and other government-backed securities. Some other countries, obviously, have different rules in their bank charters, and modest equity holdings have been a central bank strategy for years. Even so, the practice of central banks owning significant shares of equities is a very recent phenomenon. So why is it happening now, and what kind of risks does this unprecedented trend carry?

In the case of Japan, the motive is clear: for decades the country has had difficulty sustaining economic growth, and the Bank of Japan has already exhausted more traditional forms of stimulus, such as interest rate cuts and bond purchases. Both Prime Minister Shinzo Abe and BOJ Governor Haruhiko Kuroda have been at pain to stimulate growth and defy expectations of deflation. Switzerland’s bank, by contrast, seems to be acting more like an aggressive individual investor: it has been buying stocks because that is where money is to be made. Unbeknownst to many American investors, the Swiss National Bank is a significant shareholder in well-known American firms like Amazon, Apple, Facebook and Microsoft.

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All in for Wall Street.

Stress Test Results Signal More Flexible New-Look Fed (R.)

This year’s Federal Reserve stress test results suggested a more flexible approach, a further sign the regulator’s new leadership is responding positively to a Wall Street push for pragmatic bank supervision, analysts and lawyers said. Banks that took a one-off capital hit due to the 2017 U.S. tax overhaul got a conditional pass, a departure from the Fed’s traditional strict pass-fail approach to quantitative capital issues, while scandal-plagued Wells Fargo was able to double share buyback plans. Goldman Sachs and Morgan Stanley were dinged since their capital fell below the Fed’s minimum, but the regulator’s response this year sounded a more industry-friendly tone under Chairman Jerome Powell and Vice Chairman Randal Quarles, President Donald Trump appointees, analysts and lawyers said.

“They have allowed firms to pass on the basis there were special circumstances and applied a level of pragmatism in the way they haven’t in the past. This is the new Fed and it signals to me an early retirement of this super-strict quantitative test,” said Mike Alix, financial services risk leader at PwC. The Fed on Thursday approved the capital plans of 34 lenders following the second leg of its annual tests, a process introduced after the 2007-2009 financial crisis to assess banks’ capacity to withstand a severe recession. The U.S. central bank has ramped up its worst-case scenarios each year.

The U.S. tax code rewrite signed into law in December meant Goldman and Morgan Stanley’s Thursday results were weighed, in part, by changes to the treatment of past losses on hypothetical tax bills under the Fed’s scenarios. But since the tax issue was a one-off and capital levels in the system are high, the Fed felt it was unnecessary to fail the two banks, senior Fed officials said.

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“Asked about Ms May’s dinner speech on Friday morning, Leo Varadkar, the Irish prime minister, looked confused, and said: “There was a speech? Haha.”

EU Warns Deep Disputes With UK Threaten No-Deal Brexit (Ind.)

The European Union has warned that “serious divergence” between itself and Britain in Brexit talks risks the possibility of a no deal, following a meeting by the 27 national leaders in Brussels on Friday. After roughly an hour of discussion, leaders signed off a joint statement pledging to prepare for the possibility of a no-deal situation and highlighting their “concern” at the lack of progress on the Irish border issue. Speaking ahead of the meeting, Michel Barnier, the European Commission’s chief negotiator, warned: “On Brexit, we have made progress, but huge and serious divergence remains, in particular on Ireland and Northern Ireland.”

Mr Barnier called for “workable and realistic proposals” to be included in a UK government white paper scheduled for release next month. He added that “time is very short” and said UK negotiators should return to Brussels on Monday to intensify talks. The EU says a deal must be struck before October to stop Britain crashing out of the bloc in March without a transition period – a scenario that would be expected to cause economic chaos. Theresa May on Thursday night addressed leaders over dinner about Brexit for 10 minutes but her speech was apparently overshadowed by hours of discussions about the EU migration crisis, the main focus of the summit. Asked about Ms May’s dinner speech on Friday morning, Leo Varadkar, the Irish prime minister, looked confused, and said: “There was a speech? Haha.”

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One long litany of nonstarters.

EU Leaders Say Post-Brexit Single-Market Access For Goods A Nonstarter (G.)

Theresa May has been told by European leaders that an attempt to protect the UK’s industrial base by gaining single market access for goods alone after Brexit is a nonstarter, as the Irish prime minister warned: “We are not going to let them destroy the European Union.” After being given a “broad brush approach” presentation at a Brussels summit of May’s long-awaited paper, yet to be signed off by her warring British cabinet, the taoiseach, Leo Varadkar, told her that unless the final document presented a departure from the UK government’s thinking over the last two years, it would be dead on arrival. The British government is continuing to push the idea of keeping frictionless trade on goods, claiming that it would be a good deal for Europe, given the large trade surplus it enjoys.

May has promised to publish her vision for the future trading relationship after a cabinet meeting at Chequers on Friday. Speaking at the end of a summit dominated by a row over migration, Donald Tusk, the European council president, said that “quick progress” in the Brexit negotiations was needed for there to be any hope of an agreement in October, at what is increasingly being billed as a make-or-break summit. “This is the last call to lay the cards on the table,” Tusk said, of the EU’s call for a workable plan. The French president, Emmanuel Macron, said: “There is a clear message in this respect – we can no longer wait”.

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Anyone seen Jeff Sessions lately?

Hidden Figures (Jim Kunstler)

Now, Mr. Trey Gowdy (R – SC) is a different breed of porpoise among congressmen, kind of legal man-eating orca. In look and demeanor, he comes off as a cross between Atticus Finch and the young feller who played the banjo so well in the opening scenes of Deliverance. Mr. Rosenstein didn’t dare lay any mirthful smirky trips on Mr. Gowdy, who radiated the consolidated wrath of the legislative branch at this flock of executive branch popinjays. Mr. Gowdy, who is declining to run for his seat this year, may be bound for bigger things. Some say he may be the next Attorney General. In case you’ve forgotten, Rod Rosenstein is not the Attorney General, he’s the Deputy AG.

His boss is Mr. Jeff Sessions, an elusive figure for months now in the malarial DC backwaters, like that Louisiana Swamp Thang that turns up in the fake Bigfoot documentaries, looming hairily through the night-vision goggles in a cypress slough. Maybe three or four people have laid eyes on him since sometime back in April. Better check his office, make sure he isn’t hunched over face-down in a take-out order of tonkatsu ramen. It’s rumored that our president, the Golden Golem of Greatness, can, shall we say, put the Department of Justice and its subsidiary, the FBI, out of their current misery by finally firing a few of these conniving top dawgs. Order Rosenstein to release un-redacted files he’s been sitting on for a year, and fire his ass for cause when he refuses. In the case of Mr. Sessions, for Godsake, call the undertaker.

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Yogurt and whiskey.

Canada Hits US With Retaliatory Tariffs: ‘We Will Not Back Down’ (G.)

Canada has announced billions of dollars in retaliatory tariffs against the US in a tit-for-tat response to the Trump administration’s duties on Canadian steel and aluminum. Justin Trudeau’s government released the final list of items that will be targeted beginning 1 July. Some items will be subject to taxes of 10 or 25%. “We will not escalate and we will not back down,” the Canadian foreign minister, Chrystia Freeland, said. The taxes on items including ketchup, lawnmowers and motorboats amount to $12.6bn. “This is a perfectly reciprocal action,” Freeland said. “It is a dollar-for-dollar response.” Freeland said they had no other choice and called the tariffs regrettable.

Many of the US products were chosen for their political rather than economic impact. For example, imports just $3m worth of yoghurt from the US annually and most of it comes from one plant in Wisconsin, the home state of the House speaker, Paul Ryan. The product will now be hit with a 10% duty. Another product on the list is whiskey, which comes from Tennessee and Kentucky, the latter of which is the home state of the Republican Senate leader, Mitch McConnell. Freeland also said they are prepared if Donald Trump, the US president, escalates the trade war. “It is absolutely imperative that common sense should prevail,” she said. “Having said that, our approach from day one of the Nafta negotiations has been to hope for the best but prepare for the worst.”

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How much money is on the line, Angela?

Merkel Confirms Bilateral Migrant Agreements With Spain And Greece (DW)

Spain and Greece have agreed to take back asylum seekers already registered in those countries who are intercepted at the Austria-German border, Chancellor Angela Merkel confirmed on Friday. However she said no bilateral agreement had been made with Italy. The agreements are temporary measures to stem secondary migration until EU-wide policies take effect. “What we achieved here together is perhaps more than I had expected,” Merkel told reporters at the end of the summit. Merkel is to inform her coalition allies about the agreement on Friday evening.

Merkel was asked if the agreements with Athens and Madrid met demands from her German conservative CSU coalition partners. Merkel told reporters she believed they even surpassed them: “They are more than equivalent in their effect,” she said. “We are not at the end of the road. I always said that we would never be able to agree a common European asylum system here. But the more we agree among ourselves, the closer we get to a possible European solution. I’m convinced of that.” The tentative agreement with Greece and Spain came on the sidelines of an EU leaders’ summit that reached a breakthrough on migration. It will go into effect once operational details are worked out in the next four weeks, the Chancellery said.

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Does Ecuador have a spine?

Not Up To US To Decide On Assange Asylum, Ecuador Says (AFP)

It’s not up to Washington to decide the fate of WikiLeaks founder Julian Assange, Ecuador’s top diplomat said Friday, following the visit of US Vice President Mike Pence. Pence “raised the issue” of the Australian anti-secrecy activist – holed up at Ecuador’s embassy in London since 2012 – when he met with Lenin Moreno on Thursday, an official with the US vice president’s office confirmed. “Ecuador and the United Kingdom, and of course Mr Assange as a person who is currently staying, on asylum, at our embassy” will decide the next steps, Foreign Minister Jose Valencia told reporters. “It does not enter, therefore, on an agenda with the United States.” Pence and Moreno “agreed to remain in close coordination on potential next steps going forward,” the US official told reporters traveling with Pence.

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Snowden sure has a spine.

Edward Snowden Calls Russian Government ‘Corrupt’ (Ind.)

Edward Snowden, who fled to Russia after releasing thousands of documents from the US National Security Agency, has suggested his current homeland’s government is “corrupt in many ways”. The ex-IT contractor and Central Intelligence Agency (CIA) worker, said the country’s citizen’s were warm and clever but he “strongly” disagreed with the policies of Russian president Vladimir Putin. “I think the public feels disempowered. Russians are not naive, they know that state TV is unreliable. The Russian government is corrupt in many ways, that’s something the Russian people realise,” the 35-year-old told German newspaper Suddeutsche Zeitung. “Russian people are warm, they are clever. It’s a beautiful country. Their government is the problem not the people.”

Mr Snowden was granted asylum in Russia after his flight from the US when he made public the NSA’s widespread undeclared surveillance in 2013. He faces three charges under the Espionage Act in his homeland, each of which carry a minimum of 10 years in jail. He has been granted permission to stay in Russia until 2020. Asked by the Suddeutsche Zeitung whether his comments could put him in danger by angering Mr Putin, Mr Snowden said: “There’s no question, it’s a risk. Maybe they don’t care, right? Because I don’t speak Russian. “And I am literally a former CIA agent, so it’s very easy for them to discredit my political opinions as those of an American CIA agent in Russia.”

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Thought control.

The Great Firewall Of China (G.)

In December 2015, thousands of tech entrepreneurs and analysts, along with a few international heads of state, gathered in Wuzhen, in southern China, for the country’s second World Internet Conference. At the opening ceremony the Chinese president, Xi Jinping, set out his vision for the future of China’s internet. “We should respect the right of individual countries to independently choose their own path of cyber-development,” said Xi, warning against foreign interference “in other countries’ internal affairs”. No one was surprised by what they heard. Xi had already established that the Chinese internet would be a world unto itself, with its content closely monitored and managed by the Communist party.

In recent years, the Chinese leadership has devoted more and more resources to controlling content online. Government policies have contributed to a dramatic fall in the number of postings on the Chinese blogging platform Sina Weibo (similar to Twitter), and have silenced many of China’s most important voices advocating reform and opening up the internet. It wasn’t always like this. In the years before Xi became president in 2012, the internet had begun to afford the Chinese people an unprecedented level of transparency and power to communicate. Popular bloggers, some of whom advocated bold social and political reforms, commanded tens of millions of followers.

Chinese citizens used virtual private networks (VPNs) to access blocked websites. Citizens banded together online to hold authorities accountable for their actions, through virtual petitions and organising physical protests. In 2010, a survey of 300 Chinese officials revealed that 70% were anxious about whether mistakes or details about their private life might be leaked online. Of the almost 6,000 Chinese citizens also surveyed, 88% believed it was good for officials to feel this anxiety.

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Jun 052018
 
 June 5, 2018  Posted by at 8:40 am Finance Tagged with: , , , , , , , , , , , , ,  


John French Sloan East Entrance, City Hall, Philadelphia 1901

 

Carbon Bubble To Destroy Trillions Of Dollars Of Global Wealth (Ind.)
The Effects Of Trump’s Steel Tariffs On Red State Energy (F.)
US Firms To Pour $2.5 Trillion Into Buybacks, Dividends, M&A This Year (CNBC)
India Central Banker Sees Sudden “Evaporation” Of Dollar Funding (ZH)
China’s Debt Crackdown To Hurt Emerging Markets, Oil, Metals – Fitch (R.)
Italy’s Long, Hot Summer (Carmen Reinhart)
Why The Euro Was Created (ZH)
Toronto’s House Price Bubble Not Fun Anymore (WS)
Why Australia’s Great Banking Boom Has Ended (SMH)
Apple Jams Facebook’s Web-Tracking Tools (BBC)
A West Coast State of Mind (Jim Kunstler)
Edward Snowden: ‘The People Are Still Powerless, But Now They’re Aware’ (G.)
Who Should Feed The World: Real People Or Faceless Multinationals? (Vidal)

 

 

Don’t think it will happen without an overall economic collapse.

Carbon Bubble To Destroy Trillions Of Dollars Of Global Wealth (Ind.)

Trillions of dollars of fossil fuel wealth will be wiped out at some point over the next 17 years even if governments fail to impose binding carbon emissions limits on industry to curb global warming, according to a major new study. Environmentalists and policymakers have long warned of the threat of a “carbon bubble” and “stranded assets” for listed energy companies, based on the possibility they will never be able to realise the value of their vast stores of oil, gas and coal if politicians actually deliver on their decarbonisation promises.

But today a group of scientists and analysts from Cambridge, Nijmegen, Macao and the Open University take that warning a step further by arguing that these assets are destined to be stranded regardless of official policies to discourage the use of fossil fuels because clean energy technologies are now developing so rapidly that those polluting assets will be worthless in any case. “Our analysis suggests that, contrary to investor expectations, the stranding of fossil fuels assets may happen even without new climate policies. This suggests a carbon bubble is forming and it is likely to burst,” said Professor Jorge Viñuales from Cambridge University. If policymakers did deliver on the decarbonisation programmes, the loss for investors would be even more rapid.

The research is at odds with work from the International Energy Agency, which projects steady price rises for fossil fuels until 2040. And Donald Trump’s decision last year to pull the United States out of the Paris Agreement on climate change has also done nothing to persuade most investors to take the stranded assets warning seriously. But the researchers’ new “simulation-based, energy-economy-carbon-cycle climate” model suggests investing in fossil fuel firms today is likely to prove a disastrous bet, suggesting that between $1 trillion and $4 trillion could be wiped off the value of global fossil fuel assets by 2035.

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Steel and concrete prices better not rise.

The Effects Of Trump’s Steel Tariffs On Red State Energy (F.)

Electricity production is heavily dependent on materials like steel, concrete, copper and aluminum, for both producing electricity and moving it around to where it’s needed (see figure). Solar and Wind energy take more steel than any other energy source. Natural gas and nuclear take the least. Solar needs 1,600 tons of steel per MW, wind energy needs over 400 tons of steel, while gas and nuclear need only 4 and 40 tons, respectively. Wind and solar also require ten times more transmission, also heavily steel-intensive, since they are usually sited far away from where the energy is used.

The average high-voltage transmission tower includes about 30 tons of steel and transmission wire contains about a ton of steel per mile. Going from our biggest solar array, located in the Mohave Desert, to Los Angeles is almost 300 miles, requiring on the order of 10,000 tons of steel depending on specific design. While we tend to think of renewables as associated with Blue States, they are actually growing faster in Red States. Four of the five states with the most installed wind energy are Texas (20,321 MW), Iowa (6,917 MW), Oklahoma (6,645 MW) and Kansas (4,451 MW). The only Blue State in the top five is California (5,662 MW).

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Prop up your stock some more.

US Firms To Pour $2.5 Trillion Into Buybacks, Dividends, M&A This Year (CNBC)

Money is pouring into the U.S. economy and in turn helping provide support for the otherwise struggling stock market. If current conditions persist, corporations are likely this year to inject more than $2.5 trillion into what UBS strategists term “flow” — the combination of share buybacks, dividends, and mergers and acquisitions activity. The development comes as companies find themselves awash in cash, thanks primarily to years of stashing away profits plus the benefits of a $1.5 trillion tax break this year that slashed corporate rates and encouraged firms to bring back money idling overseas. Companies have nearly $2.5 trillion in cash parked domestically, according to the Federal Reserve, and as much as $3.5 trillion overseas, various estimates have shown.

When all is said and done for 2018, UBS expects dividend issuance to top $500 billion, buybacks to range from $700 billion to $800 billion, and M&A to constitute about $1.3 trillion. If the numbers pan out, they would equate to about 10% of the S&P 500’s market cap and 12.5% of GDP. “Assuming improving growth and stable rates, we expect the positive positioning/flow backdrop to support US equities, which is important as the daily corporate flow slows from mid-June to mid-July,” UBS strategist Keith Parker said in a note. Parker pointed out that the firm has overweight positions in both tech and health care as the two sectors are leading the buyback boom.

Buybacks specifically have been on a torrid pace and are helping provide a floor to a market that for much of 2018 had looked tired and volatile after a 20% S&P 500 gain the year before. Repurchases are up 83% year to date, far ahead of the 9% gain in dividends, while M&A activity involving U.S. companies has surged 130%, according to UBS. [..] UBS estimates that the combination of buybacks, dividends and demand flows account for some 40% in performance this year. The S&P 500 has nudged 2.6% higher and the Dow industrials are just ahead of breakeven.

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The Fed retreats and the Treasury issues new debt.

India Central Banker Sees Sudden “Evaporation” Of Dollar Funding (ZH)

In an op-ed published overnight in the FT, a central banker writes that when it comes to the turmoil gripping the world’s Emerging Markets, whether it is the acute, idiosyncratic version observed in Argentina and Turkey, which according to JPM may be doomed, or the more gradual selloffs observed in places like Indonesia, Malaysia, Brazil, Mexico and India, don’t blame the Fed’s rate hike cycle. Instead blame the “double whammy” of the Fed’s shrinking balance sheet coupled with the dollar draining surge in debt issuance by the US Treasury.

That’s the message from the current Reserve Bank of India, Urjit Patel, who writes that “unlike previous turbulence, this episode cannot be attributed to the US Federal Reserve’s moves on interest rates, which have been rising steadily since December 2016 in a calibrated manner.” But does that mean that the Fed is not to blame for what increasingly looks like another budding EM crisis? Not at all: according to Patel, the dollar funding shortage “upheaval” stems from what he sees as the confluence of two significant events of which the Fed’s balance sheet reduction is one, while the second is the dramatic increase in US Treasury issuance to pay for Trump’s tax cuts; what is notable is that both events are drastically soaking up dollar liquidity.

As a result, Patel blames a lack a coordination between the Fed and Treasury on the adverse flow through across global funding markets as a result of this decline in dollar liquidity, and writes that “given the rapid rise in the size of the US deficit, the Fed must respond by slowing plans to shrink its balance sheet. If it does not, Treasuries will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.” Putting these two parallel processes – which threaten to materially impair dollar funding markets – in context, on one hand there is QT, or the gradual decline in the Fed’s balance sheet which is set to peak at a rate of $50BN/month by October, while at the same time US net Treasury issuance is set to jump to $1.2 trillion in 2018 and 2019 to cover the forecasted budget deficit of $804BN and $981BN in 2018 and 2019, respectively.

And in a curious coincidence, the withdrawal of dollar funding by the Fed in monthly terms, as it reduces its reinvestment of income received, is proceeding at roughly the same pace as that of net issuance of debt by the US government. Furthermore, both processes are open ended which means that over the next few years, the government’s net issuance will stabilize, albeit at a high level, whereas the Fed’s balance-sheet reduction will keep rising. Both are terrible news for Emerging Markets, which are in desperate need of reversing the ongoing dollar outflows; however as long as Trump continues to make America great, and funds said stimulus with excess debt issuance, emerging market turmoil is virtually guaranteed.

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China retreats, too.

China’s Debt Crackdown To Hurt Emerging Markets, Oil, Metals – Fitch (R.)

China’s debt crackdown is a key risk to the country’s economic growth and will have significant knock-on effects for the global economy, particularly emerging markets with high commodity dependence or close Chinese trade links, Fitch Ratings said. Beijing’s campaign to put a lid on debt could also lead to a sharp slowdown in business investment, Fitch said late on Sunday, forecasting that growth in the world’s second-biggest economy would slow to around 4.5% over the medium term. Fitch said the implications of this scenario for the global economy would be significant but not dramatic, unlike a full-scale hard landing.

One of the most significant effects would be on commodity prices, with Fitch expecting oil and metal prices to fall 5 to 10% from its baseline scenario, reflecting China’s large role as a commodity consumer. In April, a Reuters poll of 72 institutions showed economists expected China’s economic growth to slow to 6.5% this year and 6.3% next year as Beijing extends its crackdown on riskier lending practices. GDP in 2017 expanded 6.9% in real terms and 11.2% in nominal terms. Beijing’s financial crackdown, now in its third year, has slowly pushed up borrowing costs and is choking off alternative, murkier funding sources for companies such as shadow banking.

The ratio of Chinese corporate debt to GDP is already very high by international standards – at 168% in 2017 – and is expected to start rising again as nominal GDP growth declines towards 8% from the unusually high rate of more than 11% in 2017, Fitch said. If the government aims to stabilize its corporate debt ratio by 2022, Fitch said China’s nominal economic growth rate could fall by 1 percentage point a year over the medium term while business investment growth would drop 5percentage points per year.

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Restructuring Target2. That should be fun.

Italy’s Long, Hot Summer (Carmen Reinhart)

The political upheaval and social unrest fueling the current crisis in Italy should surprise no one. On the contrary, the only uncertainty was when exactly matters would come to a head. Now they have. Italy’s per capita GDP in 2018 is about 8% below its level in 2007, the year before the global financial crisis triggered the Great Recession. And the International Monetary Fund’s projections for 2023 suggest that Italy will still not have fully recovered from the cumulative output losses of the past decade. Among the 11 advanced economies that were hit by severe financial crises in 2007-2009, only Greece has suffered a deeper and more protracted economic depression.

Greece and Italy were the two economies carrying the highest debt burdens at the outset of the crisis (109% and 102% of GDP, respectively), leaving them poorly positioned to cope with major adverse shocks. Since the crisis erupted a decade ago, economic stagnation and costly banking weaknesses have propelled debt burdens higher still, despite a decade of exceptionally low interest rates. Greece has already faced more than one “credit event” and, while Italy has also had a couple of close calls, the spring of 2018 is turning out to be its most tumultuous episode yet. The summer will probably be worse, bringing Italy closer to a sovereign debt crisis. On the surface, general government debt appears to have stabilized since 2013, at around 130% of GDP. However, as I have stressed here and elsewhere, this “stability” is misleading.

General government debt is not the whole story for Italy, even setting aside the private debt loads and the recent renewed upturn in nonperforming bank loans (a daunting legacy of the financial crisis). When evaluating Italy’s sovereign risk, the central bank’s debts (Target2 balances) must be added to those of the general government. As the most recent available data (through March) show, these balances increase the ratio of public-sector debt to GDP by 26%. With many investors pulling out of Italian assets, capital flight in the more recent data is bound to show up as an even bigger Target2 hole. This debt, unlike pre-1999, pre-euro Italian debt, cannot be inflated away. In this regard, it is much like emerging markets’ dollar-denominated debts: it is either repaid or restructured.

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What the euro has meant for Greece and Italy: lower wages, higher unemployment and higher current account deficit.

Why The Euro Was Created (ZH)

[..] we thought it would be a good idea to remind readers why the euro exists in the first place. The briefest possible answer: to make sure the Deutsche Mark does not. As presented in the chart below – which shows the performance for each of the EU12 countries against the German DEM in every decade from the 1950s to the start of the Euro in 1999 – apart from a small revaluation of core countries in the 1990s, every country devalued to Germany in every decade between the 1950s and the start of the Euro. Said otherwise, the Deutsche Mark appreciated in value against all of its European peers for 5 consecutive decades, a condition which if left unchanged, would have led to an economic and trade crisis.

And as a bonus chart, here is same data (with the US and UK added) from the end of the Bretton Woods system in 1971 to the start of the Euro (Lira -82% devaluation to German DM) and during the 1990s (-24% devaluation) – the decade immediately leading up to the Euro start. As can be seen Italy is amongs the weakest performers relative to the German DM over these periods and showed the momentum that existed in the period leading up to the start of the Euro.

And while the fixed exchange of the Euro for European nations allowed the German export industry to go into overdrive, the lack of the possibility for an external, i.e. currency, devaluation, meant that Italy has been forced to do it all by engaging in internal devaluation, i.e., lower wages, higher unemployment and boosting its current account deficit, which however is made virtually impossible given Italy’s deteriorating demographics. This is what DB’s Jim Reid said of Italy’s potential future: Looking forward, Italy will not find it easy to grow out of its problems as its facing one of the worst set of demographics of the G20 countries. Its population size has peaked (according to the UN) and is expected to decline out to 2050. Its working age population (15-64 year olds as a proxy) is set to fall -24% over the same period and is again one of the worst placed in the G20.

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“Home sales plunged 22% in May compared to a year ago..”

Toronto’s House Price Bubble Not Fun Anymore (WS)

Housing in the Greater Toronto Area is, let’s say, retrenching. Canada’s largest housing market has seen an enormous two-decade surge in prices that culminated in utter craziness in April 2017, when the Home Price Index had skyrocketed 32% from a year earlier. But now the hangover has set in and the bubble isn’t fun anymore. Home sales plunged 22% in May compared to a year ago, to 7,834 homes, according to the Toronto Real Estate Board (TREB). It affected all types of homes, even the once red-hot condos: • Detached houses -28.5% • Semi-detached houses -29.4% • Townhouses -13.4% • Condos -15.5%.

It was particularly unpleasant at the higher end: Sales of homes costing C$1.5 million or more plummeted by 46% year-over-year to 508 homes in May 2018, according to TREB data. Compared to the April 2017 peak of 1,362 sales in that price range, sales in May collapsed by 63%. But it’s not just at the high end. At the low end too. In May, sales of homes below C$500,000 – about 68% of them were condos – fell by 36% year-over-year to 5,253 homes. The TREB publishes two types of prices – the average price and its proprietary MLS Home Price Index based on a “composite benchmark home.” Both fell in May compared to a year ago.

The average price in May for the Greater Toronto Area (GTA) fell 6.6% year-over-year to C$805,320, and is now down 12.3%, or an ear-ringing C$113,000, from the crazy peak in April 2017. There are no perfect measures of home prices in a market. Each has its own drawbacks. Average home prices can be impacted by the mix and by a few large outliers – but over the longer term, it gives a good impression of the direction. The chart below shows thepercentage change in average home prices in the GTA compared to a year earlier:

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Because the boom was a bubble.

Why Australia’s Great Banking Boom Has Ended (SMH)

It doesn’t feel all that long ago that Australian banks were the envy of the world. In March 2009, when stress-testing of US financial institutions drove the final spasm of the previous year’s credit crisis, you could have bought all the shares in Citigroup, Royal Bank of Scotland Group and Barclays with their $US8.4 trillion ($11 trillion) of gross assets for less than you’d pay for the equity of Westpac, with $US347 billion of assets. Commonwealth Bank of Australia’s share price peaked six years later just a sliver south of three times the value of its net assets, an extraordinary level in a business where price-book ratios have struggled to break above one times over the past decade.

With the current Royal Commission inquiring into practices in the country’s financial services industry and a slew of court cases, those high-flyers have come to earth with a bump. CBA on Monday agreed to pay $700 million to settle a money laundering case in which it admitted that a software update allowed about 54,000 reportable transactions to go unreported over a period of almost three years. On Friday, ANZ and local units of Deutsche Bank and Citigroup announced they were facing possible criminal cartel charges over their handling of a $2.5 billion placement of ANZ shares in 2015. Having executives hauled up before government inquiries and paying out hundreds of millions in court settlements isn’t great for headlines, but it would be a mistake to see the declines in Australia’s banking sector as purely a result of this.

When your annual net income is in the region of $10 billion, as CBA’s is, a $700 million charge is more than just a rounding error. But the 1.2 per cent jump in the company’s stock after the settlement was announced Monday is an indication that the cost is worth less to shareholders than the benefit of putting the issue firmly in the past. The greater risk to Australia’s banks lurks not in the papers of regulators and inquisitors, but on the streets of the country’s sprawling suburbs. As we’ve argued before, the most ominous indicator to watch is also a favourite one of the Reserve Bank of Australia. Rents, as measured by the Australian Bureau of Statistics, have been increasing at less than 1 per cent for nine consecutive quarters , the worst performance for the measure since the housing crash of the early 1990s.

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The spirit of Steve Jobs?!

Apple Jams Facebook’s Web-Tracking Tools (BBC)

Apple will attempt to frustrate tools used by Facebook to automatically track web users, within the next version of its iOS and Mac operating systems. “We’re shutting that down,” declared Apple’s software chief Craig Federighi, at the firm’s developers conference. He added that the web browser Safari would ask owners’ permission before allowing the social network to monitor their activity. The move is likely to add to tensions between the two companies. Apple’s chief executive Tim Cook had previously described Facebook’s practices as being an “invasion of privacy” – an opinion Facebook’s founder Mark Zuckerberg subsequently denounced as being “glib”.

At the WWDC conference – held in San Jose, California – Mr Federighi said that Facebook keeps watch over people in ways they might not be aware of. “We’ve all seen these – these like buttons, and share buttons and these comment fields. “Well it turns out these can be used to track you, whether you click on them or not.” He then pointed to an onscreen alert that asked: “Do you want to allow Facebook.com to use cookies and available data while browsing?” “You can decide to keep your information private.”

One cyber-security expert applauded the move. “Apple is making changes to the core of how the browser works – surprisingly strong changes that should enable greater privacy,” said Kevin Beaumont. “Quite often the changes companies make around privacy are small, incremental, they don’t shake the market up much. “Here Apple is allowing users to see when tracking is enabled on a website – actually being able to visually see that with a prompt is breaking new ground.”

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Building on the Ring of Fire.

A West Coast State of Mind (Jim Kunstler)

It’s only been in the last thirty years that Seattle hoisted up its tombstone cluster of several dozen office and condo towers. That’s what cities do these days to demonstrate their self-regard, and Seattle is perhaps America’s boomingest city, what with Microsoft’s and Amazon’s headquarters there — avatars of the digital economy. A megathrust earthquake there today would produce a scene that even the computer graphics artistes of Hollywood could not match for picturesque chaos. What were the city planners thinking when they signed off on those building plans?

I survived the journey through the Seattle tunnel, dogged by neurotic fantasies, and headed south to California’s Bay Area, another seismic doomer zone. For sure I am not the only casual observer who gets the doomish vibe out there on the Left Coast. Even if you are oblivious to the geology of the place, there’s plenty to suggest a sense of impossibility for business-as-usual continuing much longer. I got that end-of-an-era feeling in California traffic, specifically driving toward San Francisco on the I-80 freeway out in the suburban asteroid belt of Contra Costa County, past the sinister oil refineries of Mococo and the dormitory sprawl of Walnut Creek, Orinda, and Lafayette.

Things go on until they can’t, economist Herb Stein observed, back in the quaint old 20th century, as the USA revved up toward the final blowoff we’ve now entered. The shale oil “miracle” (so-called) has given even thoughtful adults the false impression that the California template for modern living will continue indefinitely. I’d give it less than five years now.

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Snowden deserves as much support as Assange does.

Edward Snowden: ‘The People Are Still Powerless, But Now They’re Aware’ (G.)

Edward Snowden has no regrets five years on from leaking the biggest cache of top-secret documents in history. He is wanted by the US. He is in exile in Russia. But he is satisfied with the way his revelations of mass surveillance have rocked governments, intelligence agencies and major internet companies. In a phone interview to mark the anniversary of the day the Guardian broke the story, he recalled the day his world – and that of many others around the globe – changed for good. He went to sleep in his Hong Kong hotel room and when he woke, the news that the National Security Agency had been vacuuming up the phone data of millions of Americans had been live for several hours.

Snowden knew at that moment his old life was over. “It was scary but it was liberating,” he said. “There was a sense of finality. There was no going back.” What has happened in the five years since? He is one of the most famous fugitives in the world, the subject of an Oscar-winning documentary, a Hollywood movie, and at least a dozen books. The US and UK governments, on the basis of his revelations, have faced court challenges to surveillance laws. New legislation has been passed in both countries. The internet companies, responding to a public backlash over privacy, have made encryption commonplace.

Snowden, weighing up the changes, said some privacy campaigners had expressed disappointment with how things have developed, but he did not share it. “People say nothing has changed: that there is still mass surveillance. That is not how you measure change. Look back before 2013 and look at what has happened since. Everything changed.” The most important change, he said, was public awareness. “The government and corporate sector preyed on our ignorance. But now we know. People are aware now. People are still powerless to stop it but we are trying. The revelations made the fight more even.”

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Bayer-Monsanto: “It will effectively control nearly 60% of the world’s supply of proprietary seeds, 70% of the chemicals and pesticides used to grow food, and most of the world’s GM crop genetic traits..”

Who Should Feed The World: Real People Or Faceless Multinationals? (Vidal)

Unless there is a major hiccup in the next few days, an incredibly powerful company will shortly be given a licence to dominate world farming. Following a nod from Donald Trump, powerful lobbying in Europe and a lot of political arm-twisting on several continents, the path has been cleared for Monsanto, the world’s largest seed company, to be taken over by Bayer, the second-largest pesticide group, for an estimated $66bn (£50bn). The merger has been called both a “marriage made in hell” and “an important development for food security”.

Through its many subsidiary companies and research arms, Bayer-Monsanto will have an indirect impact on every consumer and a direct one on most farmers in Britain, the EU and the US. It will effectively control nearly 60% of the world’s supply of proprietary seeds, 70% of the chemicals and pesticides used to grow food, and most of the world’s GM crop genetic traits, as well as much of the data about what farmers grow where, and the yields they get. It will be able to influence what and how most of the world’s food is grown, affecting the price and the method it is grown by. But the takeover is just the last of a trio of huge seed and pesticide company mergers.

Backed by governments, and enabled by world trade rules and intellectual property laws, Bayer-Monsanto, Dow-DuPont and ChemChina-Syngenta have been allowed to control much of the world’s supply of seeds. You might think that these mergers would alert the government, but because political parties in Britain are so inward-looking, and because most farmers in rich countries already buy their seeds from the multinationals, opposition has barely been heard.

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Mar 212018
 
 March 21, 2018  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , , , ,  


Dirk de Herder Amstel Bridge, Amsterdam1946

 

Sign of Pending Recession? Total American Net Worth Ratio At New High (CNBC)
EU To Unveil Digital Tax Targeting Facebook, Google (AFP)
UK Tells Facebook’s Auditors Visiting Cambridge Analytica To Stand Down (CNBC)
Whatsapp Co-Founder Who Made Billions From Facebook Now Says To Delete It (MW)
The NSA Worked To “Track Down” Bitcoin Users – Snowden Documents (IC)
Bitcoin Bust Is Like Nasdaq Crash, But Faster (BBG)
German Prosecutors Launch New Enquiry Into VW Over Market Manipulation (R.)
Capitalism And The Veil Of Ignorance (Claire Connelly)
Libya: The True Face Of ‘Humanitarian Intervention’ (RT)
France’s Bird Population Collapses As Pesticides Kill Off Insects (AFP)

 

 

Net worth my ass.

Sign of Pending Recession? Total American Net Worth Ratio At New High (CNBC)

Nine years into the second-longest bull market run in history, the level of total net worth compared with income has reached a record, according to Joe LaVorgna, chief economist for the Americas at Natixis, citing Federal Reserve data. Since the Great Recession ended in June 2009, the disparity between net worth and income has soared, attributable in large part to the growth in financial assets, which have increased by $33.9 trillion, compared with $10.4 trillion in nonfinancial assets. Essentially, that means that American wallets have grown fatter from the accumulation of financial assets like stocks and mutual fund holdings than they have from gains in their homes and other physical assets like autos.

In all, total net worth of $98.75 trillion is now 6.79 times the $14.55 trillion in disposable income for households as of the fourth quarter, according to Fed financial accounts figures. That’s up from 6.71 times in the third quarter. The previous tops came in the first quarter of 2006, with 6.51, and the first quarter of 2000, at 6.12. Those two levels cast ominous signals over the U.S. economy. “A recession started four quarters from the peak of the former and eight quarters from the zenith in the latter,” LaVorgna said Tuesday in a note to clients. As a practical matter, the level should serve as a yellow flag for Fed officials, who are on a course of hiking rates gradually but steadily.

[..] The Fed is an important part of the equation in that it helped boost financial assets through historically low interest rates and an aggressive policy of monthly bond buying called quantitative easing. This is the first meeting for new Chairman Jerome Powell, who must navigate the Fed through rate increases aimed at controlling but not stopping growth. After years of mostly steady gains since the bull market run began in 2009, volatility has crept in 2018 and raised the specter that forward gains will be tougher to achieve. “Powell needs to be mindful of the current backdrop and not signal aggressive rate hikes to come,” LaVorgna said. “Otherwise, stock prices and the economy are in trouble.”

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Brussels and Facebook: they’re going to come for part of the loot of selling your data.

EU To Unveil Digital Tax Targeting Facebook, Google (AFP)

The EU will unveil proposals for a digital tax on US tech giants on Wednesday, bringing yet more turmoil to Facebook after revelations over misused data of 50 million users shocked the world. The special tax is the latest measure by the 28-nation European Union to rein in Silicon Valley giants and could further embitter the bad-tempered trade row pitting the EU against US President Donald Trump. EU Economics Affairs Commissioner Pierre Moscovici will present proposals aimed at recovering billions of euros from mainly US multinationals that shift earnings around Europe to pay lower tax rates.

The transatlantic blow has been championed by French President Emmanuel Macron and will be discussed over dinner at an EU leaders summit on Thursday. “This will be given top priority as tax file. There is a lot of political momentum on this issue,” an EU official said ahead of the announcement. The unprecedented tech tax follows major anti-trust decisions by the EU that have cost Apple and Google billions and also caught out Amazon. The commission’s tax, expected to be about 3% of sales, would affect revenue from digital advertising, paid subscriptions and the selling of personal data.

The EU tax plan will target mainly US companies with worldwide annual turnover above 750 million euros ($924 million), such as Facebook, Google, Twitter, Airbnb and Uber. Spared are smaller European start-ups that struggle to compete with them. Companies like Netflix, which depend on subscriptions, will also avoid the chop. Brussels is seeking to choke tax-avoidance strategies used by the tech giants that, although legal, deprive EU governments of billions of euros in revenue.

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Got to admit, hard to say who I’d trust least with this, Facebook or the UK deep state.

UK Tells Facebook’s Auditors Visiting Cambridge Analytica To Stand Down (CNBC)

The U.K.’s data protection watchdog ordered Facebook’s auditors to back down from a probe into a political analytics company accused of wrongly harvesting the data of millions of its users. The tech giant was planning to investigate Cambridge Analytica’s servers and systems, but the Information Commissioner’s Office told Facebook on Monday that it should withdraw from the research firm’s London premises. The ICO said it would seek to gain its own warrant to access the company’s computers and servers.

Facebook had said Monday that it was pursuing a forensic audit of Cambridge Analytica and had hired digital forensics firm Stroz Friedberg to determine whether the data analytics company still possessed Facebook user data. But in an updated statement later that day, Facebook said: “Independent forensic auditors from Stroz Friedberg were on site at Cambridge Analytica’s London office this evening. At the request of the U.K. Information Commissioner’s Office, which has announced it is pursuing a warrant to conduct its own on-site investigation, the Stroz Friedberg auditors stood down.”

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Sold his shares first?!

Whatsapp Co-Founder Who Made Billions From Facebook Now Says To Delete It (MW)

WhatsApp co-founder Brian Acton left Facebook last year. Now he’s saying others should do the same. In a tweet Tuesday, Action said: “It is time. #deletefacebook,” referencing the online movement that is gaining steam in the wake of revelations that the personal data of 50 million Facebook users was used without their permission by political data company Cambridge Analytica during the 2016 presidential campaign. He did not immediately expand on his comment. While his Facebook profile was still active for hours after his tweet, it appeared deactivated later Tuesday night.

Acton and fellow co-founder Jan Koum sold the messaging service WhatsApp to Facebook in 2014 for $22 billion. Acton received about $3 billion in the deal, and has a net worth of about $5.5 billion, according to Forbes. After staying on for three years, Acton quit Facebook in September, and is now a major backer of rival messaging service Signal, which boasts encryption to make its messages resistent to government surveillance. In February, he joined the newly launched nonprofit Signal Foundation as executive chairman, and invested $50 million into the app.

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Now connect this to the Facebook stories.

The NSA Worked To “Track Down” Bitcoin Users – Snowden Documents (IC)

Classified documents provided by whistleblower Edward Snowden show that the National Security Agency indeed worked urgently to target bitcoin users around the world — and wielded at least one mysterious source of information to “help track down senders and receivers of Bitcoins,” according to a top-secret passage in an internal NSA report dating to March 2013. The data source appears to have leveraged the NSA’s ability to harvest and analyze raw, global internet traffic while also exploiting an unnamed software program that purported to offer anonymity to users, according to other documents. Although the agency was interested in surveilling some competing cryptocurrencies, “Bitcoin is #1 priority,” a March 15, 2013 internal NSA report stated.

The documents indicate that “tracking down” bitcoin users went well beyond closely examining bitcoin’s public transaction ledger, known as the Blockchain, where users are typically referred to through anonymous identifiers; the tracking may also have involved gathering intimate details of these users’ computers. The NSA collected some bitcoin users’ password information, internet activity, and a type of unique device identification number known as a MAC address, a March 29, 2013 NSA memo suggested. In the same document, analysts also discussed tracking internet users’ internet addresses, network ports, and timestamps to identify “BITCOIN Targets.”

The agency appears to have wanted even more data: The March 29 memo raised the question of whether the data source validated its users, and suggested that the agency retained bitcoin information in a file named “Provider user full.csv.” It also suggested powerful search capabilities against bitcoin targets, hinting that the NSA may have been using its XKeyScore searching system, where the bitcoin information and wide range of other NSA data was cataloged, to enhance its information on bitcoin users. An NSA reference document indicated that the data source provided “user data such as billing information and Internet Protocol addresses.” With this sort of information in hand, putting a name to a given bitcoin user would be easy.

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One took 519 days, the other 35 days. That’s an actual compariosn?

Bitcoin Bust Is Like Nasdaq Crash, But Faster (BBG)

Bitcoin has long been compared to the dot-com bubble. Morgan Stanley says its recent moves are similar to the tech boom and bust, but on steroids. Bitcoin’s recent moves almost mirror that of the Nasdaq Composite Index in the lead-up to and aftermath of 2000, but at 15 times the speed, Morgan Stanley said. The Nasdaq climbed 278% in 519 days in the rally leading up to its high in March 2000, while Bitcoin soared 248% in 35 days in the last leg of the rally to its $19,511 high in December, according to the report. There have been three waves of weakness since Bitcoin peaked in December, with prices falling between 45% and 50% each time, before rebounding.

The Nasdaq’s bear market from 2000 had five price declines, averaging a similar 44%. The bear market also looks similar on the way up. There have been two Bitcoin bear market rallies of 43% on average, while the Nasdaq bear market rallies averaged 40%. Bear markets are nothing new for the first decentralized digital currency. Since the coin’s creation in 2009 there have been four bear markets with price declines ranging from 28% to 92%. From the December peak to the most recent low on February, Bitcoin’s price fell by 70%, “nothing out of the ordinary,” Morgan Stanley said.

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C’mon, close them down already. This movie’s getting boring.

German Prosecutors Launch New Enquiry Into VW Over Market Manipulation (R.)

German prosecutors said on Tuesday they had searched Volkswagen’s headquarters as part of a new investigation into whether the carmaker had overstated the fuel efficiency of more vehicles than previously disclosed. The news is the latest setback in the German company’s efforts to move on from a 2015 scandal in which it admitted to cheating U.S. emissions tests on diesel engines. Prosecutors from the city of Braunschweig searched 13 offices at Volkswagen’s (VW) headquarters in nearby Wolfsburg at the start of March, seizing documents and computer files that will now be reviewed, a spokesman for the prosecutor’s office said, confirming a report by German magazine WirtschaftsWoche.

They were checking a statement issued by VW on Dec. 9, 2015—about three months after its “dieselgate” scandal broke in the United States—over suspicions its contents were incorrect In that statement, VW said its own investigations found it had understated fuel consumption, and hence carbon dioxide (CO2) emissions, on no more than 36,000 vehicles. That was much lower than its preliminary estimate of around 800,000 diesel and gasoline vehicles produced five weeks earlier, which caused VW to warn it could face a 2 billion euro ($2.5 billion) hit to profits from the disclosure. VW also said in its December 2015 statement that it had found no evidence of unlawful alterations to CO2 emissions data.

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We might as well keep thinking as long as we still can.

Capitalism And The Veil Of Ignorance (Claire Connelly)

So our taxes don’t pay for spending, so what? So the government can’t run out of money. Big deal. Does that change anything? ‘We can’t afford it’ has been the proverbial comforter of opponents of the welfare state harking back to the Clinton / Blair days. Perhaps even earlier. And while it might make you feel good to believe that, it is simply untrue. This argument has been used as an emotional crutch for people who don’t want to admit that they’re comfortable with homelessness and unemployment if it keeps export prices low. Or the currency competitive. Or their bottom line stable. Ultimately, this comes down to what government is for, and what role markets should play in our lives. People are divided on this. And that is ok. Civil disagreements are a hallmark of a civilised society.

Economies and markets are complex beasts, that perform differently in different environments, under different conditions. Arguably across the duration of time, a range of potential solutions could apply at any given scenario. And the best solution is to pick and choose from a range of different economic schools of thought, and use them in combination. Unfortunately, across the world, the economists and historians that are seeking to gain greater clarity of how to do just that, by understanding the true function of economies and markets are being pushed out of universities and barred from institutions and organisations that would allow their research to come to fruition. This is not a mark of a civilised society, but corporate fascism that is actively suppressing research that threatens the dominance of late-stage capitalism.

If you feel comfortable convincing yourself that unemployment and homelessness is acceptable, if you think the fact that wages have not only stagnated but are in many countries actually going backwards somehow doesn’t affect you, that what most people earn in a lifetime will be insufficient to cover a modestly comfortable retirement should not concern you, that addressing any one of these things would be a detriment not only to your bottom line but to the economy itself, if you can justify that position without relying on arguments over deficits and balanced budgets, well, more power to you, I guess. But we should be honest about our disagreements. And our opinions should be informed by an as accurate understanding of how wealth is created as possible.

For many people, whether or not government can afford to address unemployment and social spending isn’t the issue, the question is whether it should. The argument over budgets, debt ceilings and deficits have been used as a national pacifier that would have us believe that the health of the economy and our ability to earn a living relies on a degree of human suffering. We have been convinced that the balancing of federal budgets somehow relates to our ability to put food on the table, when in fact the opposite is true. These lies have made us paranoid and competitive, where the well-being of everyone else is a direct threat to our own. It’s a pretty genius strategy, really.

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On the 15th anniversary of the invasion of Iraq.

“Libya had the highest GDP per capita and life expectancy on the continent. Less people lived below the poverty line than in the Netherlands.”

Libya: The True Face Of ‘Humanitarian Intervention’ (RT)

Seven years ago today, NATO began its “humanitarian bombing” of Libya. While “humanitarian bombing” is an oxymoron, many believe that a country is not truly advancing human rights if it’s not bombing another back to the Stone Age. As an initial matter, it must be said that while the UN had authorized a NATO fly-zone over Libya to protect civilians – all civilians, by the way – there was never authorization for the full-scale invasion which was carried out and which quickly became aimed at regime change. Therefore, the NATO operation which actually took place was illegal.

[..] the intervention was spearheaded by Hillary Clinton, Samantha Power and Susan Rice – three self-described warriors for human and women’s rights. Instead, they became three ushers of the Apocalypse. In addition, Italy and France, which also helped lead the charge for invasion, had their own reasons for intervening in Libya. For his part, French President Nicolas Sarkozy appeared to be singularly focused on killing Libyan leader Muammar Gaddafi, who allegedly gave him €50 million for his presidential campaign – a claim which was just coming to light and to which Gaddafi was the chief witness.

[..] Gaddafi had taken Libya from being the least prosperous country in Africa to the being the most prosperous by the time of the NATO operation. Thus, as one commentator explains, before the intervention, “Libya had the highest GDP per capita and life expectancy on the continent. Less people lived below the poverty line than in the Netherlands.” Moreover, one of the main reasons, we were told, that NATO needed to intervene in 2011 was to save Benghazi from imminent harm from the government forces of Gaddafi.

However, Hillary Clinton’s own internal emails show that her team recognized that any humanitarian problems confronting Benghazi had passed by the time of the NATO bombing. For example, Clinton’s assistant, Huma Abedin, in an email dated February 21, 2011 – that is, just a mere four days after the initial anti-government protests broke out in Libya – explains that the Gaddafi forces no longer controlled Benghazi and that the mood in the city was indeed “celebratory” by that time. Then, on March 2, just over two weeks before the bombing began, Harriet Spanos of USAID sent an email describing “[s]ecurity reports” which “confirm that Benghazi has been calm over the past couple of days.”

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Rhinos, insects, birds. You are next.

Bird populations in France have fallen by 33% in just 15 years.

France’s Bird Population Collapses As Pesticides Kill Off Insects (AFP)

Bird populations across the French countryside have fallen by a third over the last decade and a half, researchers have said. Dozens of species have seen their numbers decline, in some cases by two-thirds, the scientists said in a pair of studies – one national in scope and the other covering a large agricultural region in central France. “The situation is catastrophic,” said Benoit Fontaine, a conservation biologist at France’s National Museum of Natural History and co-author of one of the studies. “Our countryside is in the process of becoming a veritable desert,” he said in a communique released by the National Centre for Scientific Research (CNRS), which also contributed to the findings.

The common white throat, the ortolan bunting, the Eurasian skylark and other once-ubiquitous species have all fallen off by at least a third, according a detailed, annual census initiated at the start of the century. A migratory song bird, the meadow pipit, has declined by nearly 70%. The museum described the pace and extent of the wipe-out as “a level approaching an ecological catastrophe”. The primary culprit, researchers speculate, is the intensive use of pesticides on vast tracts of monoculture crops, especially wheat and corn. The problem is not that birds are being poisoned, but that the insects on which they depend for food have disappeared.

“There are hardly any insects left, that’s the number one problem,” said Vincent Bretagnolle, a CNRS ecologist at the Centre for Biological Studies in Chize. Recent research, he noted, has uncovered similar trends across Europe, estimating that flying insects have declined by 80%, and bird populations has dropped by more than 400m in 30 years. Despite a government plan to cut pesticide use in half by 2020, sales in France have climbed steadily, reaching more than 75,000 tonnes of active ingredient in 2014, according to EU figures. “What is really alarming, is that all the birds in an agricultural setting are declining at the same speed, even ’generalist’ birds,” which also thrive in other settings such as wooded areas, said Bretagnolle.

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Jul 012017
 
 July 1, 2017  Posted by at 9:50 am Finance Tagged with: , , , , , , , , , , ,  


Fred Lyon Terrific Street, Barbary Coast, San Francisco 1947

 

Bill To Remove Trump From Office Picks Up Democratic Support (DM)
Bank of America: The Fed Is Preparing To Make The Rich Poorer (ZH)
Debt Is the Third Benjamin Franklin Certainty (Stockman)
UK Household Incomes Fall Most In 40 Years, Savings Rates Crash (Ind.)
China’s Opening Of Bond Market May Spark ‘Massive Demand’ From Foreigners (CNBC)
Judge Orders Illinois To Pay Billions More Toward Medicaid (CT)
Maine Governor Won’t Sign Latest Budget Proposal, Will Allow A Shutdown (BDN)
Connecticut Social Service Agencies Brace for Deep Cuts With No Budget (AP)
America’s Pension Bomb: Illinois Is Just the Start (BBG)
An Awful Lot Of Americans Are A Walking Illinois Now (Jim Kunstler)
US Says Its Warning Appears To Have Averted Syrian Chemical Attack (R.)
Make No Mistake, We Are Already at War in Syria (Giraldi)
Qatar Crisis: Armed Conflict And Protracted Dispute Grow More Likely (CNBC)
Oliver Stone: Edward Snowden Is The “Most American Of Patriots” (ZH)
Billionaires And Aristocrats Biggest Beneficiaries Of EU Farm Subsidies (TLE)
Juncker: EU To Discuss More Migrant Help For Greece And Italy (R.)

 

 

I thought they were kidding, Daily Mail after all. But there are more reports on this. In a nutshell: the people who support this are much less capable of doing THEIR jobs than Trump is of doing his. They’re 100% delusional. And they lack a very essential respect for the American system and the Office of the President.

But it’ll all just keep coming. This is on the same day that both the NYT and AP feel forced finally to state that their Russiagate/hacking reporting has been based on nothing at all.

Bill To Remove Trump From Office Picks Up Democratic Support (DM)

A Democratic congressman has proposed convening a special committee of psychiatrists and other doctors whose job would be to determine if President Donald Trump is fit to serve in the Oval Office. Maryland Rep. Jamie Raskin, who also teaches constitutional law at American University, has predictably failed to attract any Republicans to his banner. But the U.S. Constitution’s 25th Amendment does allow for a majority of the president’s cabinet, or ‘such other body as Congress may by law provide,’ to decide if an Oval Office occupant is unable to carry out his duties – and then to put it to a full congressional vote. Vice President Mike Pence would also have to agree, which could slow down the process – or speed it up if he wanted the levers of power for himself.

The 25th Amendment has been around since shortly after the John F. Kennedy assassination, but Congress has never formed its own committee in case it’s needed to judge a president’s mental health. Raskin’s bill would allow the four Republican and Democratic leaders of the House and Senate to each choose a psychiatrist and another doctor. Then each party would add a former statesman – like a retired president or vice president. The final group of 10 would meet and choose an 11th member, who would become the committee’s chairman. Once the group is officially seated, the House and Senate could direct it through a joint resolution to conduct an actual examination of the president ‘to determine whether the president is incapacitated, either mentally or physically,’ according to the Raskin bill.

And if the president refuses to participate, the bill dictates, that ‘shall be taken into consideration by the commission in reaching a conclusion.’ Under the 25th Amendment, such a committee – or the president’s cabinet – can notify Congress in writing that a sitting president is unfit. In either case the vice president must concur, and he would immediately become ‘acting president.’ Presidents have voluntarily transferred their powers to vice presidents in the past, including when they are put under anesthesia for medical procedures. In the case of Raskin’s plan, the Constitution holds that both houses of Congress would hold a vote within three weeks. If two-thirds majorities in the House and Senate agreed that the president couldn’t discharge his duties, he would be dismissed.

Raskin’s plan could have a fatal flaw, however: Legal scholars tend to agree that when the Constitution’s framers first provided for the replacement of a president with an ‘inability to discharge the Powers and Duties of the Office,’ they weren’t talking about mere eccentricities. And when the 25th Amendment was sent to the states for ratification in 1965, the Senate agreed that ‘inability’ meant that a president was ‘unable to make or communicate his decisions’ and suffered from a ‘mental debility’ rendering him ‘unable or unwilling to make any rational decision.’ So far two dozen members of the House, all Democrats, have signed on to cosponsor the bill. Texas Rep. Sheila Jackson Lee, a far-left liberal Democrat, claimed Friday in a Fox Business Channel interview that Congress can remove ‘incompetent’ presidents. ‘The 25th Amendment is utilized when a president is perceived to be incompetent or unable to do his or her job,’ she said.

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Interesting idea, but how valid?:“Fed/ECB are now tightening to make Wall St poorer” because it is “no longer politically acceptable to stoke Wall St bubble.”

Bank of America: The Fed Is Preparing To Make The Rich Poorer (ZH)

Remember when – for years and years after the grand, global QE experiment started – any suggestion that central bankers are the primary cause behind global wealth inequality, and thus directly responsible for such political outcomes as Brexit and Trump – was branded as a conspiracy theory by bloggers living in their parents’ basement? We do, because we were accused over and over of just that (our position on the Fed and other central banks should be familiar to all by now). Well, as of this morning, none other than the chief investment strategist at BofA, Michael Hartnett, is a basement dwelling, tinfoil hatter because in his latest Flow Show report, writes that “central banks have exacerbated inequality via Wall St inflation & Main St deflation.”

Of course we knew that, you knew that, and pretty much everyone else knew that, but those whose jobs depended on not admitting it, kept their mouths shut terrified of pointing out that the central banking emperor is not only naked, but an idiot. Well, the seal has been broken, and even the biggest cowards from within the financial establishment, most of whom can be found on financial twitter for some inexplicable reason, can speak up now. However, it’s what Hartnett said next that was more notable, namely that the “massive outperformance of deflation assets versus inflation assets shows central bank failure in War on Deflation…they have failed to boost wage expectations, inflation expectation, “animal spirits” on Main St.”

And, according to the Bank of American, now that central banks are in full reverse mode, there are “two ways to cure inequality…you can make the poor richer…or you can make the rich poorer…” So for anyone still confused, about what is taking place right now, the “Fed/ECB are now tightening to make Wall St poorer” because it is “no longer politically acceptable to stoke Wall St bubble.” Sooner or later the market will get it, and when it does, those who sell first will be happy. Everyone else will be stuck with a market that is locked limited down, with no position sales possible indefinitely, maybe in perpetuity.

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“..the nation effectively performed a leveraged buyout (LBO) on itself during the last forty years. And that did temporarily add to the appearance of prosperity.”

Debt Is the Third Benjamin Franklin Certainty (Stockman)

Once upon a time people used to have mortgage burning ceremonies when later in their working years the balance on the one-time loan they took out in their 30s to buy their castle was finally reduced to zero. And there was no such thing as student loans, and not only because students are inherently not credit worthy. College was paid for with family savings, summer jobs, work study and an austere life of four to a dorm room. No more. The essence of debt in the present era is that it is perpetually increased and rolled-over. It’s never reduced and paid-off. To be sure, much of mainstream opinion considers that reality unremarkable — even evidence of economic progress and enlightenment. Keynesians, Washington politicians and Wall Street gamblers would have it no other way because their entire modus operandi is based not just on ever more debt, but more importantly, on ever higher leverage.

The chart below not only proves the latter point, but documents that over the last four decades rising leverage has been insinuated into every nook and cranny of the U.S. economy. Nominal GDP (dark blue) grew by 6X from $3 trillion to $18 trillion, whereas total credit outstanding (light blue) soared by 13X from $5 trillion to $64 trillion. Consequently, the national leverage ratio rose from 1.5X in 1980 to 3.5X today. My point today is not to moralize, but to discuss the practical implications of the nation’s debt-topia for Ben Franklin’s other two certainties — death and (especially) taxes. There’s no doubt that the modus operandi of the American economy has been transformed by the trends displayed in the below chart. It so happened that the 1.5X ratio of total debt-to-income (GDP) at the beginning of the chart was not an aberration.

It had actually been a constant for 100 years — except for a couple of unusual years during the Great Depression. It was also linked with the greatest period of capitalist prosperity, economic growth and rising living standards in recorded history. By contrast, today’s 3.5X debt-to-income ratio has two clear implications. First, the nation effectively performed a leveraged buyout (LBO) on itself during the last forty years. And that did temporarily add to the appearance of prosperity. But it also means that the U.S. economy is now lugging two turns of extra debt compared to the historic norm. Mainstream opinion, of course, says “so what?” The U.S. economy is lugging $35 trillion of extra debt, that’s what. That’s right. In the absence of the 40-year leverage aberration since the late 1970s, the chart below would show about $29 trillion of credit market debt (public and private) outstanding, not $64 trillion.

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Just don’t blame this on Brexit. It’s a much longer trajectory. Britain has been living above its weight for a long time, and austerity has made that much worse.

UK Household Incomes Fall Most In 40 Years, Savings Rates Crash (Ind.)

The aggregate real disposable income of UK households has fallen for three quarters in a row for the first time since the 1970s, according to the Office for National Statistics. The ONS said that the inflation-adjusted compensation of the household sector fell 1.4% in the first three months of 2017, reflecting spiking inflation and weak pay growth. It was the biggest decline since the first quarter of 2013 and followed a 0.4% fall in Q4 2016 and a 0.3% slip in Q3 2016. Three consecutive quarters of contraction is the worst run for the series since 1976-77. The ONS also said that the aggregate household savings rate collapsed to just 1.7%, down from 3.3% in the final quarter of 2016, and the lowest on record, although it said one-off tax payment factors might have distorted the latest reading.

Nevertheless, weak pay growth means that households have had to resort to running down their savings and borrowing to support consumption, which has almost single-handedly powered the overall economy since last June’s Brexit vote. “This is not sustainable and fuels the belief that weakened consumer spending is likely to hold back the economy over the coming months,” said Howard Archer of the EY Item Club. “With consumer confidence declining and banks reporting that they intend to restrict the supply of secured credit, the saving rate is more likely to rise than fall ahead,” said Samuel Tombs of Pantheon.

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Those foreigners would have to sell somthing first, we presume. There goes the S&P?!

China’s Opening Of Bond Market May Spark ‘Massive Demand’ From Foreigners (CNBC)

China’s move to open up its fixed income market to foreign investors will eventually unleash “massive” demand for the mainland’s bonds, the chief executive of the company that operates Hong Kong’s stock exchange, told CNBC on Friday. In May, regulators in Hong Kong and on the mainland approved a “bond connect” program to allow investors operating in Hong Kong to trade Chinese bonds, called a “northbound” flow, with a “southbound” flow of Chinese investment into Hong Kong to be considered later. Authorities also won’t cap the amount that foreigners can invest in China. “I think this is a huge breakthrough,” HKEx CEO Charles Li told CNBC’s “Squawk Box” on the anniversary of Hong Kong’s handover to China.

Li said that while large investors are already able to access the mainland fixed income market though existing programs, the bond connect would be fundamentally different. “People are now finally able to do it and able to do it in a way that is familiar, that is similar to the way we trade U.S. dollar Treasurys or other international treasury fixed income instruments,” he said. “That is something so new. That the demand, underlying demand, the potent demand are massive.” He noted that with China’s yuan being included in the IMF’s Special Drawing Rights (SDR) basket in November 2015, some investors must include at least some renminbi assets on their balance sheets. Inclusion in the SDR means the renminbi is now officially recognized as a reserve currency. “That will require massive reallocation of capital but over quite a long period of time,” Li said, saying foreign investment into Chinese bonds was “at the beginning of the beginning.”

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Not all of this will come out as bad as it may look tomorrow morning, but down the line it’s all a toxic swamp. In the short term, deep cuts to social programs.

Judge Orders Illinois To Pay Billions More Toward Medicaid (CT)

A federal judge on Friday ordered Illinois to start paying $293 million in state money toward Medicaid bills every month and an additional $1 billion over the course of the next year, worsening a cash-flow problem caused by two years of budget-free spending by state government. U.S. District Judge Joan Lefkow’s ruling came after lawyers representing Medicaid patients and attorneys for the state were unable to agree on a plan to deal with bills and pay down a $3 billion backlog owed to health care providers. The ruling requires the state to start promptly paying all new Medicaid bills, which is estimated at about $586 million per month, and to pay down $2 billion of its bill backlog in payments spread out over the course of the coming fiscal year. The federal government pays half of those costs, so the bottom line for the state will be $293 million per month and $1 billion in backlogged bill payments over the next year.

Comptroller Susana Mendoza’s office earlier in the week had offered to pay an additional $150 million per month, but the plaintiffs rejected it, saying it wasn’t enough. The $150 million would have only cost the state $75 million because of the federal match, and Mendoza’s office said that was all the state could spare while meeting other demands. Now, Mendoza said Friday’s ruling would cause her to likely have to cut payments to the state’s pension funds, state payroll or payments to local governments. Payments to bond holders won’t be interrupted, she said. “As if the governor and legislators needed any more reason to compromise and settle on a comprehensive budget plan immediately, Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Mendoza said in a statement. “A comprehensive budget plan must be passed immediately.”

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Maine beat Illinois to it! Partial shutdown started today.

Maine Governor Won’t Sign Latest Budget Proposal, Will Allow A Shutdown (BDN)

Gov. Paul LePage said Friday that he won’t sign a state budget package endorsed Thursday night by a special panel, ensuring a partial shutdown of state government at midnight. The Republican governor’s opposition to the budget deal would force Maine’s first state government shutdown since 1991, which could stretch 10 days if LePage holds a budget bill for the full time the Constitution allows before he must act. A budget would go to him tonight if the Legislature can muster two-thirds votes in both chambers, but even that was a big “if” on Friday. LePage hosted House Republicans for a Friday morning meeting where he reportedly implored them to oppose the budget deal negotiated by Senate President Mike Thibodeau, R-Winterport, and House Speaker Sara Gideon, D-Freeport.

LePage told reporters his major objections were the overall cost of the budget package – around $7.1 billion – and that it proposes raising the state’s lodging tax from 9% to 10.5% without income tax cuts. However, the budget package currently under consideration contains an income tax cut of 3% because it eliminates the surtax on income above $200,000 per year for education which was approved by voters last year. LePage said “on June 30” – the deadline for Maine’s next fiscal year – “they’re trying to put a gun to the governor’s head,” but it won’t work. “This budget they have has no prayer, and if they’re hell-bent on bringing this budget down, we will shut down at midnight tonight and we will talk to them in 10 days,” LePage said.

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Whack-a-state.

Connecticut Social Service Agencies Brace for Deep Cuts With No Budget (AP)

Nonprofit social service agencies prepared Friday to cut programs, close facilities and lay off staff after Gov. Dannel P. Malloy signed an order that slashes funding to maintain essential state services after lawmakers couldn’t come to terms on a budget before the end of the fiscal year. Barry Simon, president and CEO of Oak Hill, said his Hartford-based agency which serves people with developmental disabilities has decided to close four group homes and consolidate two others. Oak Hill was already losing money on those programs and anticipated the problem would be acerbated by the additional state reimbursement cuts in Malloy’s executive order. “Because of this situation, we’re pulling the trigger because it’s only going to get worse,” he said. Simon said 26 individuals live at the six affected group homes, some as long as 20 years. Most are being moved into other facilities.

Meanwhile, Oak Hill is scaling back day programs and employment services for people currently receiving services. And Simon said his agency cut off new admissions two months ago, in anticipation of the state budget impasse. Malloy called it “regrettable” he had to sign the executive order. When it became clear an agreement wasn’t possible on a new, two-year state budget before the fiscal year ended, the Democrat urged the General Assembly to pass a three-month “mini budget” he created. Malloy said it would be less draconian than the executive order and give lawmakers more time to reach a budget deal. While Democratic and Republican state Senate leaders supported Malloy’s mini budget, House leaders did not. Democratic House officials instead offered an eleventh-hour, two-year budget they said can be ready for a vote July 18. Malloy, however, was unenthusiastic about the proposal.

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A healthy pension fund today should really be over 100% funded- because of future demographic expectations. Only South Dakota’s complies.

America’s Pension Bomb: Illinois Is Just the Start (BBG)

We’ve been hearing it for years: America’s public pensions are a ticking time bomb. Well, at long last, the state of Illinois is about to expose just how big this blowup could be. As of the 2015 fiscal year, Illinois had promised its employees $199 billion in retirement benefits. Right now, it’s $119.1 billion short. That gap lies at the center of a years-in-the-making fiscal mess that’s threatening to drop the state’s credit rating to junk-bond status. But Illinois is hardly alone. Connecticut and New Jersey—states that, to most of the world, seem like oases of prosperity—are under growing financial strain, too. We’ve ranked the states by the size of their funding gap. The lower the funding ratio, the more money the state has to come up with to meet its pension obligations.

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“The American people, by and large, have no more idea how false and fragile the financial arrangements of the nation are than the average eight-year-old has about why the re-po squad is towing away Daddy’s Ford-F150.”

An Awful Lot Of Americans Are A Walking Illinois Now (Jim Kunstler)

The preview of coming attractions is currently playing out in Illinois — soon to be joined by Connecticut, California, Kentucky, and many other bankrupt states. Illinois is dead broke. It can’t pay the contractors who fix things like roads and storm drains, and supply food to its prisons. It’s over $200-billion deep in pension obligations that will never be honored. Its Medicaid system is a shambles. It doesn’t even have the cash-on-hand to pay lottery winners (what happened to all the cash paid into the lottery by the suckers who didn’t win, which is supposed to pay off the winners?). The state legislature hasn’t passed a budget in three years. The governor and the mayor of Chicago and everybody else nominally in charge have no idea what they’re going to do about it. Think the federal government is going to just step in and save the day there?

They’d have to bail out every other foundering state and that’s just not going to happen, especially with that same federal government about to run out of cash money itself, with no resolution of the debt ceiling controversy that might allow it to even pretend to borrow more money by issuing treasury bonds that are instantly bought by the Federal Reserve — which, of course, is not an official government agency but a private banking consortium contracted to manage the nation’s money. Do you begin to see the outlines of the clusterfuck rising like a bad moon over the harvest season of 2017? The American people, by and large, have no more idea how false and fragile the financial arrangements of the nation are than the average eight-year-old has about why the re-po squad is towing away Daddy’s Ford-F150.

We’re just doing what we always do: gittin’ our summer on. Breaking out the potato salad and the Bud Lites – at least those who have enough mojo left in their MasterCards to charge the party supplies. An awful lot of Americans must be maxed out, though, people who actually used to work at things and get paid for it. Each one of them is a walking Illinois now, facing each dawning day with a bigger load of problems, more things they can’t pay for, and moving closer to the dreadful day when everything is gone, every chattel, every knickknack, the very roof over their head, and most particularly the belief that they live in a fair and decent society.

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Absurd theater 2017. Because: “The intelligence that prompted the administration’s warning to Syria this week was “far from conclusive,” said a U.S. official familiar with it. “It did not come close to saying that a chemical weapons attack was coming,” the official said.”

But Nikki Haley says: “I would like to think that the president saved many innocent men, women and children.”

US Says Its Warning Appears To Have Averted Syrian Chemical Attack (R.)

U.S. Defense Secretary Jim Mattis said on Wednesday that the Syrian government of President Bashar al-Assad appeared so far to have heeded a warning this week from Washington not to carry out a chemical weapons attack. Russia, the Syrian government’s main backer in the country’s civil war, warned that it would respond proportionately if the United States took pre-emptive measures against Syrian forces to stop what the White House says could be a planned chemical attack. The White House said on Monday it appeared the Syrian military was preparing to conduct a chemical weapons attack and said that Assad and his forces would “pay a heavy price” if it did so. The warning was based on intelligence that indicated preparations for such a strike were under way at Syria’s Shayrat airfield, U.S. officials said.

“It appears that they took the warning seriously,” Mattis said. “They didn’t do it,” he told reporters flying with him to Brussels for a meeting of NATO defense ministers. He offered no evidence other than the fact that an attack had not taken place. Asked whether he believed Assad’s forces had called off any such strike completely, Mattis said: “I think you better ask Assad about that.” Washington accused Syrian forces of using the Shayrat airfield for a chemical weapons attack in April. Syria denies this. The intelligence that prompted the administration’s warning to Syria this week was “far from conclusive,” said a U.S. official familiar with it. “It did not come close to saying that a chemical weapons attack was coming,” the official said.

[..] Russian Foreign Minister Sergei Lavrov said on Wednesday that Moscow will respond if the United States takes measures against Syrian government forces. “We will react with dignity, in proportion to the real situation that may take place,” he said at a news conference in the city of Krasnodar. Lavrov said he hoped the United States was not preparing to use its intelligence assessments about the Syrian government’s intentions as a pretext to mount a “provocation” in Syria. [..] In Washington, the U.S. ambassador to the United Nations, Nikki Haley, credited Trump with saving Syrian lives. “Due to the president’s actions, we did not see an incident,” Haley told U.S. lawmakers. “I would like to think that the president saved many innocent men, women and children.”

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Suggestion: look at this through Russian eyes. They don’t think Trump is crazy, they think all of America is.

Make No Mistake, We Are Already at War in Syria (Giraldi)

Donald Trump has been in office for five months and it would appear that at least some of the outlines of his foreign policy are beginning to take shape, though that may be exaggeration as no one seems to be in charge. The “America First” slogan seemingly does not apply to what is developing, as actual U.S. interests do not appear to be driving what takes place, and there does not seem to be any overriding principle that shapes the responses to the many challenges confronting Washington worldwide. The two most important observations that one might make are both quite negative. First, lamentably, the promised détente with Russia has actually gone into reverse, with the relationship between the two countries at the lowest point since the time of the late, lamented Hillary Rodham Clinton as Secretary of State.

Second, we are already at war with Syria even though the media and Congress seem blissfully unaware of that fact. We are also making aggressive moves intended to create a casus belli for going to war with Iran, and are doubling down in Afghanistan with more troops on the way, so Donald Trump’s pledge to avoid pointless wars and nation-building were apparently little more than glib talking points intended to make Barack Obama look bad. The situation with Russia can be repaired as Vladimir Putin is a realist head of state of a country that is vulnerable and willing to work with Washington, but it will require an end to the constant vituperation being directed against Moscow by the media and the Democratic Party. That process could easily spin out for another year with all parties now agreeing that Russia intervened in our election even though no one has yet presented any evidence that Russia did anything at all.

Syria is more complicated. Senators Tim Kaine and Rand Paul have raised the alarm over American involvement in that country, declaring the U.S. military intervention to be illegal. Indeed it is, as it is a violation of the United Nations Charter and the American Constitution. No one has argued that Syria in any way threatens the United States, and the current policy is also an affront to common sense: like it or not Syria is a sovereign country in which we Americans have set up military bases and are supporting “rebels” (including jihadis and terrorists) who are seeking to overthrow the legitimate government. We have also established a so-called “de-confliction” zone in the southeast of the country to protect our proxies without the consent of the government in Damascus. All of that adds up to what is unambiguously unprovoked aggression, an act of war.

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Expect Russia to react to this too, and soon.

Qatar Crisis: Armed Conflict And Protracted Dispute Grow More Likely (CNBC)

A diplomatic crisis on the Arabian Peninsula is turning into a protracted standoff, and some analysts now say the risk of armed conflict is emerging. The dispute between Qatar, a major natural gas exporter, and its neighbors is now entering its fifth week. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut diplomatic ties with Qatar and implemented a partial blockade on June 5 in a bid to bring the tiny Persian Gulf monarchy in line with Saudi-dominated foreign policy. Some analysts initially thought the parties would seek a resolution by the end of the Muslim holy month of Ramadan, but last week, the anti-Qatar alliance issued a series of harsh demands. “It’s escalated to a stage where it’s very difficult for both sides to back down,” Firas Modad, analyst at IHS Markit, told CNBC this week.

The demands include non-starters such as shutting down Al Jazeera news and closing a Turkish military base. The coalition also calls on Qatar to end its alleged ties to terrorist groups and political opposition figures in Gulf nations and Egypt. It demanded Qatar pay reparations and submit to compliance reviews going forward. Qatar has rejected the demands. That is likely to trigger a series of additional economic and political sanctions against the government in Doha, causing the impasse to stretch out for months, risk consultancy Eurasia Group concluded in a briefing this week. “The crisis will continue to escalate before the Qatari leadership ultimately adjusts its policy positions, or in a slightly less likely scenario, opts to cement an alliance with Turkey and closer ties with Iran,” Eurasia Group said.

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Or the Most Patriotic of Americans?

Oliver Stone: Edward Snowden Is The “Most American Of Patriots” (ZH)

Director Oliver Stone, who’s recently released series “The Putin Interviews” stirred up controversy among liberals who accused him of being a Russian propagandist, appeared on the Liberty Report with former Texas Congressman Ron Paul to discuss the documentary, his views about former NSA contractor Edward Snowden, and why the US’s aggressive approach to containing the purported threat posed by Russia has led to a breakdown in relations between the two powers. Stone said he’s been “interested” in Russia since being raised as a conservative in New York City, claiming that his father instilled a “fear” of Communism and Russians in him at a young age. In the early 1980s, Stone visited the country for the first time as a screenwriter with the idea of interviewing several dissidents. He has returned several times since.

In particular, Stone has become interested in the case of Snowden, whom he praised as “the most American of patriots.” “I was interested in Russia – I went back into the 2000s. The Snowden story occupied me. And of course, it’s so ironic that he the most American of patriots is living in Moscow because he has to. It’s the only country in the world that would give him asylum – in other words it’s the only country in the word that can deny the US what it wants which is Snowden.” “[Putin] explained to me that Russians wanted an extradition treaty with the US for years, but nothing doing, because there are a lot of Russian criminals in America who stole money from Russia. He did nothing wrong in Russian terms so they gave him asylum – now its 3 years 5 years whatever its going to be. I wish Ed well I really do.”

Stone also shared a story about watching the movie “Dr. Strangelove” with Putin, who he said was greatly moved. “I showed him the movie Dr. Strangelove…and he watched it very serious about it. He said this movie was very accurate of that time and it’s still accurate today.” Circling back to the issue of nuclear deterrents, Stone said he’s worried that rising tensions around the world could trigger a “nuclear confrontation.” “I’m saying I have reached that age when I am not really concerned about what happens to me but… it’s not just about the US, but about the whole planet and I feel a nuclear confrontation, an accident, could happen tomorrow. But you put ABMs in Poland and Romania – that’s a gigantic mistake.”

“An ABM can be converted overnight from a defensive missile to an offensive missile. They’re surrounded from the North the East and the West by US missiles and we don’t seem to realize it.” Stone says he’s “scared for America,” explaining that many US citizens prefer to blindly accept media spin that’s favorable to the US establishment, without questioning it, or trying to understand Russia’s point of view. “It’s a good thing I went through JFK when I was younger…there’s been a lot of controversy around my movies. I’m scared not for myself because I’m at that age, they can’t destroy me anymore, but I’m scared for America, I’m afraid they’ve lost their sense. I’m afraid there’s a lack of foresight and leadership.”

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EU farm budget is about €1 trillion. While Greece’s health care system and social programs are being murdered underpressure from the same EU.

Billionaires And Aristocrats Biggest Beneficiaries Of EU Farm Subsidies (TLE)

20% of the 100 largest payments under the European Union’s “direct” subsidy system now go to people or families on the Sunday Times Rich List. According to a new investigation by Energydesk billionaires and aristocrats last year scooped up an even greater proportion of the UK’s biggest farm subsidy payouts, with “basic payments” to the Top 100’s Rich List recipients totalling £11.2 million in 2016 – up from £10.6 million the previous year. Direct EU subsidies – now known as “basic payments” – have attracted criticism for largely rewarding landowners simply for owning land, rather than paying farmers to invest in environmental or other “public goods”. The National Trust – which itself received £1.6m in basic payments last year – said the system needed fundamental reform, even if it meant the trust getting less income for its land.

Richard Hebditch, the trust’s external affairs director, said: “Rather than being paid for how much land you happen to farm, a new model which delivers clear public benefit from the money being spent is within reach after Brexit. “Farmers should receive a fair market price for safe and sustainable supplies of food, with public funding paying for the crucial role of protecting vulnerable natural resources, caring for our heritage and landscape and helping address issues like flooding and climate change.” Ironically, the farm business owned by prominent Brexit-backing billionaire inventor Sir James Dyson is now the biggest for-profit recipient of direct EU farm subsidies in the UK. Beeswax Dyson Farming netted £1.6 million under the basic payment scheme last year – up from £1.4 million in 2015. According to the Rich List, Sir James and family are worth £7.8 billion, and he is a bigger landowner than the Queen, with holdings of around 25,000 acres.

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Nobody takes Juncker serious anymore.

Juncker: EU To Discuss More Migrant Help For Greece And Italy (R.)

The EU executive will discuss further measures with Italy and Greece in the coming week to help the Mediterranean states deal with irregular migrants, European Commission President Jean-Claude Juncker said on Friday. Asked at a news conference what, in particular, the Commission might do to help Italy, where arrivals from Libya are up a third on a year ago, Juncker said: “I will see with the Italian prime minister, with the Greek prime minister, during the coming week what further efforts the Commission can line up to relieve Italy and Greece in their difficult struggles.” He recalled that he had described both countries as “heroic” and said he had discussed the issue on Thursday at a meeting in Berlin with Italian Prime Minister Paolo Gentiloni and leaders of other big EU states which are members of the global G20.

“I said Italy and Greece … cannot be left alone in this refugee crises,’ Juncker told reporters in Tallinn, where he was meeting the Estonian government as it takes on the six-month presidency of European Union ministerial councils. He rejected any suggestion the Union had failed to help the countries where most refugees and migrants are arriving, noting EU funds allocated to Italy and Greece and border guard and other personnel sent to help process those arriving. The Commission on Thursday threw its weight behind a plea by Italy for fellow EU states to allow rescue boats carrying migrants to dock in their ports.

EU diplomats said they were looking at Italian concerns over how private charities are picking up people just off the Libyan coast. Some see that as encouraging more to take to the sea. The rescue organisations complain of unfair criticism. About 10,000 people have been rescued over the past three days. Italy has taken in 82,000 people so far this year. Voters dealt a blow to the ruling party in local elections last week, opting for groups promising a tougher line on immigration. The Commission has signalled readiness to give Italy more cash to help with increased arrivals, though officials and diplomats in Brussels are sceptical there would be any swift agreement for other EU states to take in the private boats.

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Jun 212017
 
 June 21, 2017  Posted by at 9:51 am Finance Tagged with: , , , , , , , , , , , ,  


Fred Lyon Post&Powell Union Square San Francisco 1947

 

100% Chance of Recession Within 7 Months? (DR)
The Secret Source of Eternal Australian Growth (Steve Keen)
We Need A Public Inquiry Into The Economics Profession (Pettifor)
Where Are The Empty Homes In Kensington? (Whoownsengland)
Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)
Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)
House Republicans Block Russia Sanctions Bill (ZH)
We Are Inches From A New World War (Medium)
Iran Slams Tillerson Call For Regime Change (RT)
The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)
EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)
Europe’s Unserious Plan for Greece (BBG)
Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)
At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

 

 

The numbers say it.

100% Chance of Recession Within 7 Months? (DR)

We asked this question one week after Trump was elected: “What does history predict for the Trump presidency?” The answer we furnished — based on over a century of data — was this: “A 100% chance of recession within his first year.” Not a 90% chance, that is. Not even a 99% chance. But a 100% chance of recession. That answer came by way of a certain Raoul Pal. He used to captain one of the largest hedge funds in the world. And to prove his case he called the unimpeachable witness of history to the stand… Crunching 107 years worth of data, he showed the U.S. economy enters or is in a recession every time a two-term president vacates the throne: “Since 1910, the U.S. economy is either in recession or enters a recession within 12 months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new president.”

Obama was a two-term president – if memory serves. Only two incoming presidents were not treated to a recession within the first year of office. And both followed one-term reigns: “Not every single election sees a recession, only every two-term incumbent change… Only two presidents in history did not see a recession, and they were inaugurated after single-term presidents.” Mr. Pal couldn’t fully explain the phenomenon. Maybe it takes two terms for presidential mischief to work its way into the economic machinery. One-term presidents just can’t heave enough sand in the gears. Regardless of the reason, this fellow’s research pointed him to one conclusion: “It is not a coincidence.” Trump’s now five months into his first 12. Where does the prediction stand? By grace of God or Janet Yellen or neither or both, no recession yet.

But our pessimistic side reminds us that seven months remain. And anxiety riles the deeps of our being… For we’ve spotted ill omens… disturbing portents of recession among the recent economic data… Old Daily Reckoning hand Wolf Richter: Over the past five decades, each time commercial and industrial loan balances at U.S. banks shrank or stalled… a recession was either already in progress or would start soon. There has been no exception since the 1960s. Last time this happened was during the financial crisis. “Now,” Wolf says, “it’s happening again.” Last month commercial and industrial loans (C&I) outstanding fell to $2.095 trillion, according to the St. Louis Fed. That’s down 4.5% from their November 2016 peak, says Wolf. And it marked the 30th consecutive week of no growth in C&I loans. Wolf argues C&I loans matter because they directly reflect the real economy – unlike today’s stock market, which is crooked as a Brit’s teeth.

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Tons of graphs from Steve. I find his use of ‘debt and ‘credit’ as seemingly separate terms a bit confusing.

The Secret Source of Eternal Australian Growth (Steve Keen)

Much was made of the fact that Australia recently replaced The Netherlands as the world record holder for the longest period without a recession (using the colloquial definition of two consecutive quarters of negative growth). The Netherlands went just under 26 years (103 quarters between 1982 and 2008) without a recession, and Australia surpassed this when it recorded 0.3% growth in the March 2017 quarter (for an annual growth rate of 1.7%).

Rather less attention was given to another Australian record: household debt. Before its recession-free record was set, Australia had already overtaken The Netherlands for the record of the highest level of household debt ever recorded for a large country (one with more than 10 million people).

Australia’s household debt level of 123% of GDP has been exceeded only by Switzerland (population 8.3 million, household debt of 128% of GDP in 2016 Q3) and Denmark (population 5.6 million, 139% of GDP in 2009).2 Australia also stands apart from its household leverage competitors in another important respect: Denmark, Switzerland and The Netherlands also run significant current account surpluses—Switzerland’s average surplus since 2000 has been the highest on the planet at over 10% of GDP; Denmark’s has averaged 5.75% since 2005; The Netherlands’ average current account surplus is around 8% of GDP.

Australia, in contrast, has averaged a current account deficit of 3.2% of GDP since 1960, and 4.3% since 2000. Australia therefore holds the record of the highest level of household debt for a country running a trade deficit, and has done so since 2010, when it overtook the previous record-holder: Ireland. Ireland’s household debt level has also plunged since then, from a peak of 118% of GDP in 2010 to 54%. Australia’s closest competitor now is Canada, which has a household debt level 22% lower than Australia’s, and an average trade deficit of 1.4% of GDP, versus Australia’s long-run average of 3.2%.

 

Why does this matter? Because Australia’s two records are related: Australia avoided a recession in 2008 only by adding additional leverage to its already over-indebted household sector, and the only ways that Australia can keep its winning streak on GDP growth going (given that its government is obsessed with trying to run a surplus) is to either to achieve a huge trade surplus, or for the household sector to continue piling on debt faster than GDP itself grows. A trade surplus is one of three ways to increase both aggregate demand and the amount of money in an economy:3 goods you sell to foreigners are paid for in US dollars, which the exporter then effectively sells to its country’s Central Bank in return for domestic currency (on that front, The Netherlands is, like Germany, a huge beneficiary of the Euro).

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A valiant effort, and economics should be redefined for sure, but Ann shirks far too close to assuming Brexit was about economics only and purely. Tempting when you’re an economist, but…

We Need A Public Inquiry Into The Economics Profession (Pettifor)

If the British economy crashes as a result of Brexit, it will not vindicate economists. It will simply illustrate once again, their failure. I and my colleagues at Policy Research in Macroeconomics (PRIME) believe there is urgent need for an independent, public inquiry into the economics profession, and its role in precipitating both the financial crisis of 2007-9, the subsequent very slow ‘recovery’; and in the British European referendum campaign. Financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. How can we trust economists at the Treasury not to impose more disastrous policies? Economists have once again proved themselves not only irrelevant, but a dangerous irrelevance. For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control.

The profession should be brought to account through a public inquiry into the this failure. In voting to leave the EU, England overwhelmingly has rejected economics – and in particular the dominant economic narrative. Unfortunately, the economics profession as a whole cannot resign, though perhaps the President of the RES, Andrew Chesher, should consider his position. Because this hardship is indirectly a consequence of the economics profession. Economists led the way to financial liberalisation of the past 40 years, which led to soaring levels of debt, crises and financial ruin. Economists dictated the terms for austerity that has so harmed the economy and society over the past years. As the policies have failed, the vast majority of economists have refused to concede wrongdoing, nor have societies been offered alternative economics policies.

While it is risky to second guess public opinion, it may just be that the prospect of hardship to come might not have been very compelling for those already suffering the hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’. With this historic vote, the British people have not just rejected the EU. They have done something that should worry the British establishment, and their friends in the City of London, and internationally, far more. Perhaps most symbolically, even the Queen suggested they did not know what they were doing. It is hardly surprising, therefore, that the British public did not find the opinion of Remain ‘experts compelling’.

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If you allow for homes to be speculative ‘assets’, you will end up with homeless people.

Where Are The Empty Homes In Kensington? (Whoownsengland)

As the nightmare of the Grenfell Tower disaster continues to unfold, one of the many painful questions being asked by survivors is: ‘Where are we going to live now?’ Kensington & Chelsea Council have still been unable to give firm assurances that residents will be rehoused in the area, issuing a statement on Friday afternoon (later contradicted) that “Given the number of households involved, it is possible the council will have to explore housing options that may become available in other parts of the capital”. On Friday, the Times reported that Jeremy Corbyn had an alternative solution. “Corbyn: seize properties of the rich for Grenfell homeless” ran its above-the-fold headline (£). This was not, of course, what Corbyn had actually proposed, as the article itself revealed.

In a parliamentary debate, the Labour leader had suggested that “Properties must be found, requisitioned if necessary, to make sure those residents do get rehoused locally… It cannot be acceptable that in London you have luxury buildings and flats kept as land banking for the future while the homeless and the poor look for somewhere to live.” Not quite the State appropriation of private property conveyed by the sub-editor’s fevered headline, then – but a proposal for making better use of empty housing which happens to be supported by 59% of the British public, according to YouGov. So how many empty homes are there in Kensington? A lot, it turns out. The Department for Communities and Local Government regularly publishes statistics on vacant dwellings, broken down by local authority area.

The latest figures for Kensington & Chelsea reveal there are 1,399 vacant dwellings in the borough, as of April 2017 – and the number hasn’t dropped below a thousand for over a decade. 600 people lived in Grenfell Tower – so there are more than enough empty homes in the borough to house them all, if the properties could be accessed. But where are these empty homes? And who owns them? It turns out that Kensington Council themselves know precisely where they are. In a report published in July 2015, the council’s Housing and Property Scrutiny Committee examined in detail the problem of ‘buy to leave’ in the borough. ‘Buy to leave’ is the phenomenon of purchasing a property where the buyer has no intention to live in it; where the home is regarded purely as an investment – one that, in London’s super-heated property market, will rapidly accrue in value.

The council’s report used a variety of methods to locate empty housing, from council tax registers and payment data, to energy use and Land Registry records. Their findings broadly corroborate central government stats – that there are around a thousand long-term empty homes in Kensington & Chelsea. And on page 13 of the report, they display an extraordinary map of the 941 homes classified as unoccupied dwellings for the purposes of council tax:

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Science and technology will not enforce human rights. Moral values will.

Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)

Saying that you don’t care about privacy because you have nothing to hide is no different than saying you don’t care about freedom of speech because you have nothing to say.” That comment was made by famed whistleblower Edward Snowden during a recent interview on the Ron Paul Liberty Report. In his conversation with Dr. Paul and Daniel McAdams, published Tuesday, an articulate Snowden discusses the true meaning of freedom, the nature of the deep state, and even his upbringing as a child of a government family. “I’d like to know a little bit, what do you do all day long?” a genuinely curious Dr. Paul asks as his opening question. After talking about the insanity that erupted — both in the political spectrum and his personal life — following the revelations he made back in 2013, Snowden says he’s now become a hot commodity for groups championing causes.

“They want me to sort of front for these issues of privacy and civil liberties and protection of people’s rights,” Snowden replies. “And I want to do what I can, but I’m not a politician. I’m an engineer.” The whistleblower goes on to talk about how he’s now, at long last, finally able to devote time to more practical applications. For him, this means focusing on the area that holds the key to finding a balance between rights and laws in the digital age — technology. “How technically is this even happening?” Snowden poses, digging straight to the heart of the issue of mass surveillance. “How is it that so many governments are spying on so many people? Because even if we pass the best legal reforms in the world in the United States, that doesn’t do anything against China, or Russia, or Germany, or France or Brazil or any other country in the world.”

Continuing, Snowden says that future generations’ rights and protections will be dependent on the current generation’s ability to adapt to a constantly shifting environment: “We need to find new means, new mechanisms, for enforcing these rights in the new times. And I think that’s going to be primarily through science and technology.”

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Wherever you live in the world, if you think things are a mess where you are, spare a thought for Brazil.

Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)

Brazil’s federal police has said that investigators have found evidence the president, Michel Temer, received bribes to help businesses, raising a new threat that the embattled leader could be suspended from office pending a corruption trial. Temer has been under investigation due to plea bargain testimony by the wealthy businessman Joesley Batista of the giant meatpacking company JBS that linked the president and an aide to bribes and the president to an alleged endorsement of hush money for jailed ex-House Speaker Eduardo Cunha. Temer has denied any wrongdoing and insists he will not resign. If Brazil’s top prosecutor agrees with the federal police recommendation, Congress will decide whether Temer should be investigated by the supreme court, which is the only body that can formally investigate the president.

If two-thirds of Congress voted to allow the investigation, Temer would be suspended from office pending trial. In a report published on Tuesday by Brazil’s top court, federal police investigators said they had enough evidence of bribes being paid to warrant a formal investigation of Temer for “passive corruption” – Brazil’s charge for the act of taking bribes. It said former Temer aide Rodrigo Rocha Loures directly received bribes from JBS on the president’s behalf. A previously released video made by investigators shows Loures carrying a suitcase filled with about $150,000 in cash allegedly being sent from JBS to the president. Loures later gave the bag and most of the money to Brazil’s federal police, authorities have said.

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They’ll pass at some point.

House Republicans Block Russia Sanctions Bill (ZH)

After recruiting Trump, the KGB and Moscow have clearly also managed to make all House Republicans their puppets, because the Senate bill that passed last week and slapped new sanctions on Russia (but really was meant to block the production on the Nord Stream 2 gas pipeline from Russia and which Germany, Austria and France all said is a provocation by the US and would prompt retaliation) just hit a major stumbling block in the House. At least that’s our interpretation of tomorrow’s CNN “hot take.” Shortly after House Ways and Means Chairman Kevin Brady of Texas said that House leaders concluded that the legislation, S. 722, violated the origination clause of the Constitution, which requires legislation that raises revenue to originate in the House, and would require amendments, Democrats immediately accused the GOP of delaying tactics and “covering” for the Russian agent in the White House.

“House Republicans are considering using a procedural excuse to hide what they’re really doing: covering for a president who has been far too soft on Russia,” Senate Minority Leader Chuck Schumer of New York said in a statement. “The Senate passed this bill on a strong bipartisan vote of 98-2, sending a powerful message to President Trump that he should not lift sanctions on Russia.” And, if the House does pass it, a huge diplomatic scandal would erupt only not between the US and Russia, but Washington and its European allies who have slammed this latest intervention by the US in European affairs… a scandal which the Democrats would also promptly blame on Trump. That said, the bill may still pass: Brady pushed back against Democrat suggestions that House GOP leadership is trying to delay the bill, stressing that he thought the Senate legislation was sound policy.

“I strongly support sanctions against Iran and Russia to hold them accountable. We were willing to work with the Senate throughout the process, but the final bill and final language violated the origination clause in the Constitution,” Brady told reporters on Tuesday. “I am confident working with the Senate and Chairman [Ed] Royce that we can move this legislation forward. So at the end of the day, this isn’t a policy issue, it’s not a partisan issue, it is a Constitutional issue that we will address.”

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We’re still not clued in to how dangerous ‘our own’ are.

We Are Inches From A New World War (Medium)

This is your fault, Clinton Democrats. You created this, and if our species is plunged into a new world war or extinction via nuclear holocaust, it will be your fault. You knuckle-dragging, vagina hat-wearing McCarthyite morons made this happen. American military provocations against the pro-Assad coalition in Syria are fast becoming a daily occurrence. In response to the US air force’s gunning down of a Syrian military plane on Sunday, Russia has cut off its hotline with which it was coordinating operations with America to avoid aerial collisions, and has warned that all US aircraft west of the Euphrates river will now be tracked and treated as potential targets. Today, 25 miles northwest of the Russian enclave of Kaliningrad, a US reconnaissance plane was intercepted by an armed Russian aircraft which came within five feet of the plane’s wingtip.

This on the same day that the US shot down yet another Iranian military drone in Syria. Clintonists have been working tirelessly since the election to manufacture these new Cold War tensions. Stephen Cohen, easily America’s foremost authority on US-Russia relations, has warned again and again that the political pressures being placed on the Trump administration to maintain escalations with Russia without conceding an inch has placed our species in a situation that is in some ways even more dangerous than those we faced at the height of the Cuban Missile Crisis. If Kennedy had had to negotiate that crisis while being pressured by his entire country to keep escalating tensions with the USSR without yielding an inch, there is no way any terrestrial life would have existed beyond 1962. The Clintonists (along with their neocon buddies on the other side of the aisle) are responsible for creating those pressures.

“You know it’s easy to joke about this, except that we’re at maybe the most dangerous moment in US-Russian relations in my lifetime, and maybe ever. And the reason is that we’re in a new cold war, by whatever name.

We have three cold war fronts that are fraught with the possibility of hot war, in the Baltic region where NATO is carrying out an unprecedented military buildup on Russia’s border, in Ukraine where there is a civil and proxy war between Russia and the west, and of course in Syria, where Russian aircraft and American warplanes are flying in the same territory. Anything could happen.”
~ Stephen Cohen

It wasn’t enough for these Democratic neocons to try and elect a woman who had been pushing for dangerous escalations with Russia since long before any hacking allegations and who campaigned on a promise to invade Syria and seize control of an airspace wherein Russian military planes were conducting operations. No, once their initial bid to start World War 3 failed, these deranged death cultists began attacking Trump for any movement away from escalations with Russia or regime change in Syria and showering him with praise when he launched a missile strike against a Syrian airbase. The current administration is culpable for its own actions and should be unequivocally condemned for bowing to these pressures instead of honoring Trump’s campaign promises of pursuing detente with Russia and avoiding regime change in Syria, but if Clintonists had been pushing for peace instead of war this entire time the situation would doubtless look very, very different.

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The opposite of what America needs.

Iran Slams Tillerson Call For Regime Change (RT)

Iran has accused the United States of interfering in its domestic affairs after calls by the US Secretary of State to support “elements” that would ensure a “peaceful transition” in the Islamic Republic. Tehran also officially delivered a note of protest to the UN. Speaking last Wednesday before the House Foreign Affairs Committee, Rex Tillerson said Washington will support efforts of a regime change in Iran. “Our policy towards Iran is to push back on this hegemony, contain their ability to develop obviously nuclear weapons, and to work toward support of those elements inside of Iran that would lead to a peaceful transition of that government. Those elements are there, certainly as we know,” Tillerson said on June 14. In addition to voicing Washington’s apparent support of a regime change, Tillerson also said the US could pursue sanctions on Iran’s entire Islamic Revolutionary Guard Corps.

Tillerson’s remarks sparked an avalanche of criticism and condemnation from Iran. In the latest development, the Iranian Foreign Ministry summoned the Swiss charge d’affaires to Tehran to protest Washington’s policy. The Embassy of Switzerland represents American interests in the Islamic Republic after the US cut diplomatic relations with Iran in April 1980 in the wake of the 400-day US Embassy hostage crisis of 1979-1981. “Following the interfering and meddling statements made by the US Secretary of State Rex Tillerson… the charge d’affaires of the European country was summoned to express Iran’s complaint about Tillerson’s anti-Iran remarks in the country’s House of Representatives,” Iran’s Foreign Ministry spokesperson said in a statement, Mehr News reported.

[..] Tillerson’s remarks “is a brazen interventionist plan that runs counter to every norm and principle of international law, as well as the letter and spirit of UN Charter, and constitutes an unacceptable behavior in international relations,” Iran’s UN Ambassador Gholamali Khoshroo said in the letter. Tehran further accused the US of violating the 1981 Algiers Accords, a set of agreements signed by Washington and Tehran to end the Iran hostage crisis. “The United States pledges that it is and from now on will be the policy of the United States not to intervene, directly or indirectly, politically or militarily, in Iran’s internal affairs,” Point I of the Accord reads.

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No surprise here.

The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)

On the ground, the Syrian army is now undertaking one of its most ambitious operations since the start of the war, advancing around Sueda in the south, in the countryside of Damascus and east of Palmyra. They are heading parallel with the Euphrates in what is clearly an attempt by the government to “liberate” the surrounded government city of Deir ez-Zour, whose 10,000 Syrian soldiers have been besieged there for more than four years. If they can lift the siege, the Syrians will have another 10,000 soldiers free to join in the recapture of more territory. More importantly, however, the Syrian military suspects that Isis – on the verge of losing Raqqa to US-supported Kurds and Mosul to US-backed Iraqis – may try to break into the garrison of Deir ez-Zour and declare an alternative “capital” for itself in Syria.

In this context, the American strike on Monday was more a warning to the Syrians to stay away from the so-called Syrian Democratic Forces – the facade-name for large numbers of Kurds and a few Arab fighters – since they are now very close to each other in the desert. The Kurds will take Raqqa – there may well have been an agreement between Moscow and Washington on this – since the Syrian military is far more interested in relieving Deir ez-Zour. The map is quite literally changing by the day. But the Syrian military are still winning against Isis and its fellow militias – with Russian and Hezbollah help, of course – although comparatively few Iranians are involved. The US has been grossly exaggerating the size of the Iranian forces in Syria, perhaps because this fits in with Saudi and American nightmares of Iranian expansion. But the success of the Assad regime is certainly troubling the Americans – and the Kurds.

So who is fighting Isis? And who is not fighting Isis? Russia claims it has killed the terrible and self-appointed “caliph of the Islamic State”, al-Baghdadi. Russia says it is firing Cruise missiles at Isis. The Syrian army, supported by the Russians, is fighting Isis. I have witnessed this with my own eyes. But what is America doing attacking first Assad’s air base near Homs, then the regime’s allies near Al-Tanf and now one of Assad’s fighter jets? It seems that Washington is now keener to strike at Assad – and his Iranian supporters inside Syria – than it is to destroy Isis. That would be following Saudi Arabia’s policy, and maybe that’s what the Trump regime wants to do. Certainly, the Israelis have bombed both the Syrian regime forces and Hezbollah and the Iranians – but never Isis.

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Complete nonsense: “..The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060

EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)

Greece will need additional debt relief to regain the trust of investors, even though it’s likely to exit its bailout with a €9 billion ($10 billion) cash buffer, the European Commission said in a draft report obtained by Bloomberg. The country’s €86 billion third bailout program from the European Stability Mechanism, agreed by Prime Minister Alexis Tsipras and European creditors in 2015, will expire in August 2018 with €27.4 billion left unused, the commission estimates in the so-called “compliance report” dated June 16. Disbursements up to then should also “cater for the build-up of seizable cash buffer” of around €9 billion, according to the document. The report contains an analysis of the country’s public debt that points to potential wrangling with the IMF following an agreement last week to disburse bailout funds, in which the fund only agreed to a new program “in principle.”

Even as the commission’s analysis points “to serious concerns regarding the sustainability of Greek public debt,” its assumptions about the country’s future growth prospects are still more optimistic than those of the IMF. The IMF hasn’t disbursed funds to Greece in almost three years on fears that the country’s debt is unsustainable. Last week’s compromise deal averts a Greek financing crisis this summer by allowing release of €8.5 billion of ESM funds, while the IMF holds out for more Greek debt relief from European creditors at a later stage before it gives out new loans. The June 15 deal by euro-area finance ministers commits to capping gross financing needs at 15% of GDP for the medium term, and 20% thereafter. The country’s gross financing needs will drop to 9.3% of GDP in 2020 from 17.5% this year, before rising again and surpassing 20% after 2045, according to the baseline scenario of the commission’s debt sustainability report.

[..] The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060, considerably higher than past IMF baseline estimates. The fund’s own assessment will be released before its executive board meets to approve the in-principle stand-by arrangement next month. The debt dynamics “become explosive” from the mid-2030s in the the most adverse scenario. In this scenario, which is still more optimistic than IMF assumptions, Greece’s gross financing needs exceed 20% in 2033, reaching 56% by 2060, while debt skyrockets to 241.4% of Greek GDP by 2060.

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Bloomberg, too, will first have to understand that Greece does not have €326 billion in debt, and why it is people state that regardless.

Europe’s Unserious Plan for Greece (BBG)

The deal struck last week between Greece and its euro-zone creditors is business as usual – and that’s not a good thing. This protracted game of “extend and pretend” serves nobody’s long-term interests: not those of the Greek government, the IMF or, most of all, the people of Greece. Euro-zone finance ministers have unlocked a payment of €8.5 billion ($9.5 billion), the newest installment of a rescue plan worth €86 billion. This will let Athens make debt repayments of €7 billion that fall due next month. But there’s still no agreement on how to get Greece’s debt burden under control. The IMF had previously insisted that this question should be settled now. It was right, and it should have stuck to that position. The new agreement fails to recognize what everybody knows: that Greece’s debt is unsustainable on the current terms.

In an effort to pretend otherwise, Athens has promised primary budget surpluses (meaning net of interest payments) of 3.5% of GDP until 2022, and then of “above but close to 2%” until 2060. True, the Greek economy achieved a better-than-expected primary surplus last year. As the European recovery gathers pace, there could be more good fiscal news. But the idea that Greece can maintain this degree of fiscal control for the next 40 years is ridiculous. For instance, at some point during the next four decades, there might be another recession. Stranger things have happened. The blow to the credibility of the IMF could prove to be lasting damage. The fund points to its refusal to disburse money at this point as proof it’s serious about debt relief. Yet it remains a partner in a project that, by its own analysis, is bound to fail.

It should have said, enough. Europe doesn’t need the fund’s money or expertise. Governments only sought the fund’s seal of approval – and should have been denied it. Granted, the euro zone has done a lot to support Greece since its fiscal crisis began. Athens has been granted no fewer three rescue packages, worth €326 billion€ in total. The euro zone has allowed generous grace periods for official loans, extended their maturities and lowered the interest rate. As a result, Greece’s debt repayments are actually quite manageable for now.

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While taxes have risen. An endless hole.

Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)

The value of the local property market has plummeted some €2 trillion since the outbreak of the financial crisis eight years ago, according to the calculations of a Greek real estate consultancy. CBRE-Atria calculated that the Greek market has lost 65% of its value in the years from 2009 to 2017, dropping from about €3 trillion to €1 trillion today. The head of the consultancy, Yiannis Perrotis, says the problem is that the majority of properties are not quality assets, which means that the economic crisis has affected them more by increasing their value loss. “Properties such as old apartments in less popular areas, fields in non-touristic areas, stores or offices of low standards in secondary spots,” Perrotis explains, have been hardest hit.

The drop in values has been aggravated by the imposition of high taxation. It’s easy to find examples of properties whose value has dropped 60-65% in the last few years: Data from estate agents show that a new fifth-floor apartment of 60 square meters in Kypseli, central Athens, which sold for €150,000 in 2008, was resold at end-2016 for just €60,000, a decline of 60%; a newly built apartment in Ambelokipi, also in Athens, was sold for €270,000 before the crisis, and today is for sale for just €120,000, down 55%.

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So fitting. Though, World Refugee Day is the most cynical expression possible of the disaster we’ve created.

At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

More than 120 refugees are feared to have drowned in the Mediterranean after a boat sank off the Libyan cost on Friday, the International Organization for Migration (IOM) has said. Four survivors who were rescued by Libyan fishermen said the boat sank after its motor was stolen by human traffickers, according to IOM spokesman Flavio Di Giacomo. After drifting for a while, the boat, believed to have been carrying 130 refugees — most of them of Sudanese and Nigerian nationality — capsized. News of the deaths comes on World Refugee Day, during which NGOs encourage the world to commemorate and show support for those forced to flee persecution. But there is little sign of the plight of refugees in the Mediterranean abating.

The death toll passed 1,000 in April — marking a record high with that figure not reached until the end of May last year — and the latest count by the IOM shows at least 1,850 have lost their lives on the dangerous crossing. Up to 146 people drowned when a refugee boat sunk in March, and up to 250 refugees, including a baby, were reported to have drowned in May after two refugee boats sunk in the Mediterranean Sea. It comes after a report earlier this month accused the EU of disregarding human rights and international law in its desperation to slow refugee boat crossings across the Mediterranean Sea. The bloc has pledged tens of millions of euros in funding for authorities in Libya, despite the country’s ongoing civil war and allegations of torture, rape and killings earning it the moniker “hell on Earth” among migrants, according to the report, published by the US-based Refugees International (RI) group.

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Jun 022017
 
 June 2, 2017  Posted by at 4:31 pm Finance Tagged with: , , , , , , , , , ,  


Bernard Pascucci Dancers on the Roof of the Opéra Garnier, Paris 1965

 

President Trump Announces US Withdrawal From The Paris Climate Accord (ZH)
Conservatives’ Donors Gave 10 Times As Much As Labour’s Last Week (G.)
The Myths About Money That British Voters Should Reject (Chang)
‘Ghost Collateral’ Haunts China’s Debt-Laden Banking System (R.)
BOJ’s Balance Sheet Almost As Big As Japanese Economy (Nikkei)
25-30% Of US Shopping Malls To Close In The Next Five Years (LATimes)
Westworld (Ben Hunt)
Cities, States And School Systems Lose Millions To Credit Downgrades (IBT)
S&P, Moody’s Downgrade Illinois to Near Junk, Lowest Ever for a US State (BBG)
Uber Burned Through Almost As Much Money As NASA Last Quarter (Simon Black)
The Next Recession May Be A Complete Reset Of All Asset Valuations (Mauldin)
China’s Ivory Ban Sparks Dramatic Drop In Prices Across Asia (G.)
Audi Emissions Scandal Erupts After Germany Says It Detects New Cheating (R.)
Oliver Stone Quizzes Vladimir Putin On Snowden (G.)
Schaeuble Launches A Broadside Against Tsipras (K.)
A New Antibiotic Multitool Could Beat The Toughest Bacteria (F.)

 

 

Yeah, we had a bit of a DDOS thing today. Sorry.

Haven’t seen one voice that makes sense in this Paris CON21 thing. I do remember what they said about everyone being on the same side of the boat.

President Trump Announces US Withdrawal From The Paris Climate Accord (ZH)

It’s done. Bannon 1 – 0 Kushner. President Donald Trump announced the U.S. would withdraw from the Paris climate pact and that he will seek to renegotiate the international agreement in a way that treats American workers better. “So we are getting out, but we will start to negotiate and we will see if we can make a deal, and if we can, that’s great. And if we can’t, that’s fine,” Trump said Thursday, citing terms that he says benefit China’s economy at the expense of the U.S. “In order to fulfill my solemn duty to protect America and its citizens, the United States will withdraw from the Paris climate accord, but begin negotiations to re-enter either the Paris accord or really an entirely new transaction on terms that are fair to the United States, its businesses” and its taxpayers, Trump said.

As Bloomberg reports, Trump’s announcement, delivered to cabinet members, supporters and conservative activists in the White House Rose Garden, spurns pleas from corporate executives, world leaders and even Pope Francis who warned the move imperils a global fight against climate change. As we noted earlier, we should prepare for the establishment to begin its mourning and fearmongering of the disaster about to befall the world. Pulling out means the U.S. joins Russia, Iran, North Korea and a string of Third World countries in not putting the agreement into action. Just two countries are not in the deal at all – one of them war-torn Syria, the other Nicaragua. The Hill notes that many Republicans on Capitol Hill are likely to support pulling out of the Paris deal – 20 leading Senate Republicans, including Majority Leader Mitch McConnell (R-Ky.) asked Trump to do just that last week.

Withdrawing from Paris would greatly please conservative groups, which have orchestrated an all-out push in opposition to the pact. “Without any impact on global temperatures, Paris is the open door for egregious regulation, cronyism, and government spending that would be disastrous for the American economy as it is proving to be for those in Europe,” said Nick Loris, a fellow at the Heritage Foundation. “It is time for the U.S. to say ‘au revoir’ to the Paris agreement,” he said.

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And use to NOT have their leader appear on TV. I’m thinking a decision by the new (American?!) campaign team installed after the Snap announcement. “Stay away from the camera, it can only do you harm!” Boris PM by July 1?

Conservatives’ Donors Gave 10 Times As Much As Labour’s Last Week (G.)

The Conservatives raised more than 10 times as much as Labour last week, partly thanks to a donation of over £1m from the theatre producer behind The Book of Mormon and The Phantom of the Opera. John Gore, whose company has produced a string of hit musicals, gave £1.05m as part of the £3.77m received by the Conservatives in the third week of the election campaign. In the same time, Labour received only £331,499. The Electoral Commission only publishes details of donations over £7,500, so the smaller donors who make up most of Labour’s fundraising are not identified. Almost all Labour’s larger donations came from unions, including £159,500 from Unite. The new figures show the Conservatives have received £15.2m since the start of 2017, while Labour has received £8.1m.

The large donations came as the poll lead held by the Conservatives and Theresa May appeared to fall following controversies around her social care policy. In the week starting 17 May, the Liberal Democrats received £310,500, of which £230,000 came from the Joseph Rowntree Reform Trust and £25,000 came from the former BBC director general Greg Dyke. The Women’s Equality party received £71,552, with Edwina Snow, the Duke of Westminster’s sister who is married to the historian Dan Snow, giving £50,000. Ukip’s donations fell dramatically to £16,300 from £35,000 the previous week. Political parties can spend £30,000 for every seat they contest during the regulated period. There are 650 seats around the country, meaning that parties can spend up to £19.5m during the regulated period in the run-up to the election.

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Money spent at the lower rungs of society tends to stay inside it.

The Myths About Money That British Voters Should Reject (Chang)

Befitting a surprise election, the manifestos from the main parties contained surprises. Labour is shaking off decades of shyness about nationalisation and tax increases for the rich and for the first time in decades has a policy agenda that is not Tory-lite. The Conservatives, meanwhile, say they are rejecting “the cult of selfish individualism” and “belief in untrammelled free markets”, while adopting the quasi-Marxist idea of an energy price cap. Despite these significant shifts, myths about the economy refuse to go away and hamper a more productive debate. They concern how the government manages public finances – “tax and spend”, if you will.

The first is that there is an inherent virtue in balancing the books. Conservatives still cling to the idea of eliminating the budget deficit, even if it is with a 10-year delay (2025, as opposed to George Osborne’s original goal of 2015). The budget-balancing myth is so powerful that Labour feels it has to cost its new spending pledges down to the last penny, lest it be accused of fiscal irresponsibility. However, as Keynes and his followers told us, whether a balanced budget is a good or a bad thing depends on the circumstances. In an overheating economy, deficit spending would be a serious folly. However, in today’s UK economy, whose underlying stagnation has been masked only by the release of excess liquidity on an oceanic scale, some deficit spending may be good – necessary, even.

The second myth is that the UK welfare state is especially large. Conservatives believe that it is bloated out of all proportion and needs to be drastically cut. Even the Labour party partly buys into this idea. Its extra spending pledge on this front is presented as an attempt to reverse the worst of the Tory cuts, rather than as an attempt to expand provision to rebuild the foundation for a decent society. The reality is the UK welfare state is not large at all. As of 2016, the British welfare state (measured by public social spending) was, at 21.5% of GDP, barely three-quarters of welfare spending in comparably rich countries in Europe – France’s is 31.5% and Denmark’s is 28.7%, for example. The UK welfare state is barely larger than the OECD average (21%), which includes a dozen or so countries such as Mexico, Chile, Turkey and Estonia, which are much poorer and/or have less need for public welfare provision. They have younger populations and stronger extended family networks.

The third myth is that welfare spending is consumption – that it is a drain on the nation’s productive resources and thus has to be minimised. This myth is what Conservative supporters subscribe to when they say that, despite their negative impact, we have to accept cuts in such things as disability benefit, unemployment benefit, child care and free school meals, because we “can’t afford them”. This myth even tints, although doesn’t define, Labour’s view on the welfare state. For example, Labour argues for an expansion of welfare spending, but promises to finance it with current revenue, thereby implicitly admitting that the money that goes into it is consumption that does not add to future output.

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We saw this in 2015, I think it was Qingdao port(?!). Now it turns out this is widespread. China is very corrupt.

‘Ghost Collateral’ Haunts China’s Debt-Laden Banking System (R.)

The banker at the other end of the phone line was furious, recalled Shanghai lawyer Wang Chaoyu. A pile of steel pledged as collateral for a loan of almost $3 million from his bank, China CITIC, had vanished from a warehouse on the outskirts of the city. Just several months earlier, in mid-2013, Wang and the banker had visited the warehouse and verified that the steel was there. “The first time I went, I saw the steel,” recalled Wang, an attorney at Beijing DHH Law Firm, which represents the Shanghai branch of CITIC. “Afterwards, the banker got in contact with me and said, ‘The pledged assets are no longer there.’” The trouble had begun in 2012, after CITIC loaned the money to Shanghai Hanning Iron and Steel, a privately held steel trader. Hanning failed to meet payments, according to a mediation agreement reviewed by Reuters, and CITIC took ownership of the steel.

It was when CITIC moved to retrieve the collateral that the banker visited the warehouse and discovered that the 291-tonne pile of steel was no longer there, Wang said. The bank is still in court trying to recoup its losses. The missing collateral is a setback for CITIC. But it is indicative of a much wider problem that could endanger the health of China’s financial system – fraudulent or “ghost” collateral. When bank auditors in China go looking, they too often find that collateral recorded on the books simply isn’t there. In some cases, collateral that has been pledged simply doesn’t exist. In others, it disappears as borrowers in financial distress sell the assets. There are also instances in which the same collateral has been pledged to multiple lenders. One lawyer said he discovered that the same pile of steel was used to secure loans from 10 different lenders.

With the mainland facing its slowest growth in over a quarter of a century, defaults are mounting as borrowers struggle to repay their loans. The danger of fraudulent collateral in this situation, say economists, is that it exacerbates the problem of bad debt for China’s banks, increasing the risk of financial turmoil. As growth slows, lenders can expect more nasty surprises, said Xin Qingquan at Chongqing University. More instances of fake collateral will arise, he said. [..] There are no official statistics or estimates of the problem. But fraudulent collateral is “a huge issue,” said Violet Ho, co-head of Greater China Investigations and Disputes Practice at Kroll, which conducts corporate investigations on the mainland. “Often you also see that the paperwork around collateral may be dodgy, and the bank loan officer knows, the intermediary knows, and the goods owner knows – so it’s essentially a Ponzi scheme.”

[..]Bad loans are mounting fast. Officially, just 1.74% of commercial bank loans were classified as non-performing at the end of March. But some analysts say lenders often mask the true level of bad debt and so the figure is likely much higher. Fitch Ratings said in a report last September that it had estimated non-performing loans in China’s financial system could be as high as 15% to 21%. This in a banking sector that has undergone a massive credit expansion. The value of outstanding bank loans ballooned to $17.2 trillion at the end of April from $5.8 trillion at the end of 2009, according to data from China’s central bank. In September last year, the Bank for International Settlements warned that excessive credit growth in China meant there was a growing risk of a banking crisis in the next three years.

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ECB at 28% of Eurozone GDP. Fed at 23% of US.

BOJ’s Balance Sheet Almost As Big As Japanese Economy (Nikkei)

The Bank of Japan’s assets apparently exceeded 500 trillion yen ($4.49 trillion) as of the end of May, growing to rival the country’s economy as the central bank continues its debt purchases under an ultraeasy monetary policy. The bank’s total assets stood at 498.15 trillion yen as of May 20. By the time the month ended Wednesday, its holdings of Japanese government bonds had increased by another 2.24 trillion yen. Assuming that the BOJ had not significantly reduced its non-JGB assets, its balance sheet almost certainly crossed over the 500 trillion yen mark into uncharted territory. The BOJ’s balance sheet began expanding at a rapid clip after Governor Haruhiko Kuroda launched unprecedented quantitative and qualitative easing in April 2013. At around 93%, the scale of the Japanese central bank’s assets in proportion to GDP has no close match. Latest data shows that the U.S. Fed held roughly $4.5 trillion in assets, which is equivalent to 23% of the country’s GDP.

The ECB’s balance sheet, at about €4.2 trillion ($4.71 trillion) is larger than the BOJ’s, but it still sits at around 28% of the eurozone GDP. The BOJ in September shifted its policy focus from QE to controlling the yield curve, but the bank is still snapping up JGBs to keep long-term rates at around zero. The central bank has stood firm on its pledge to continue expanding its balance sheet to boost currency supply until Japan’s consumer price inflation is steadily above 2%. This suggests that the BOJ’s balance sheet will continue expanding past the 500 trillion yen mark. This prospect makes some financial experts uneasy. Once the inflation target is finally met, and the BOJ starts raising interest rates, the bank will have to pay more in interest to financial institutions’ reserve deposits than it will earn from its low-yielding JGB holdings.

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All hail Amazon.

25-30% Of US Shopping Malls To Close In The Next Five Years (LATimes)

Between 20% and 25% of the nation’s shopping malls will close in the next five years, according to a new report from Credit Suisse that predicts e-commerce will continue to pull shoppers away from bricks-and-mortar retailers. For many, the Wall Street firm’s finding may come as no surprise. Long-standing retailers are dying off as shoppers’ habits shift online. Credit Suisse expects apparel sales to represent 35% of all e-commerce by 2030, up from 17% today. Traditional mall anchors, such as Macy’s, J.C. Penney and Sears, have announced numerous store closings in recent months. Clothiers including American Apparel and BCBG Max Azria have filed for bankruptcy. Bebe has closed all of its stores.

The report estimates that around 8,640 stores will close by the end of the year. Retail industry experts say Credit Suisse may have underestimated the scope of the upheaval. “It’s more in the 30% range,” Ron Friedman, a retail expert at accounting and advisory firm Marcum said of the share of malls that he predicts will close in the next five years. “There are a lot of malls that know they’re in big trouble.” By ignoring new shopping centers being built, the research note took an overly simplistic view of the changing landscape of shopping centers, said analyst David Marcotte, senior vice president with Kantar Retail. “There are still malls being built,” Marcotte said. “Predominantly outlet malls and lifestyle malls.”

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From May 11. h/t Tyler.

Westworld (Ben Hunt)

Now don’t get me wrong. Do I think Emmanuel Macron, a former Rothschild investment banker whose “ambition was always two steps ahead of his experience”, is the second coming of Charles de Gaulle? Do I think Donald freakin’ Trump is a modern day Andrew Jackson? Bwa-ha-ha-ha-ha-ha … good one! But here’s what I do think: • Something old and powerful is happening in the real world to crush the status quo political systems of every Western democracy. • Something predictably sad is happening in the political world to replace the old guard candidates with self-absorbed plutocrats like Trump and pretty boy bankers like Macron. • Something new and powerful is happening in the investment world to divorce political risk and volatility from market risk and volatility. The old force repeating itself in the real world is nicely summed up by these two charts, the most important charts I know. They’re specific to the U.S., but applicable everywhere in the West.

First, the Central Banker’s Bubble since March 2009 and the launch of QE1 has inflated U.S. household wealth far beyond what the nominal growth rate of the U.S. economy would otherwise support. This is a classic bubble in every sense of the word, with the primary difference from prior vast bubbles being its concentration and focus in financial assets — stocks and bonds — which are held primarily by the rich. Who wins the Academy Award for creation of wealth inequality in a supporting role? Ladies and gentlemen, I give you the U.S. Federal Reserve.

And as the second chart shows, this central bank largesse has sharply accelerated the massive shift in wealth to the Rich from the Rest, a shift which began in the 1980s with the Reagan Revolution. We are now back to where we were in the 1930s, where the household wealth of the bottom 90% of U.S. wage earners is equal to the household wealth of the top one-tenth of 1% of U.S. wage earners.

So look … I’m not saying that the current level or dynamics of wealth inequality is a good thing or a bad thing. I’m just saying that it IS. And I understand that there are insurance programs today, like social security and pension funds, which are not reflected in this chart and didn’t exist in the 1930s, the last time you saw this sort of wealth inequality. I understand that there are a lot more people in the United States today than in the 1930s. I understand that there are all sorts of important differences in the nature of wealth distribution between today and the 1930s. I get all that. What I’m saying, though, is that just like in the 1930s, there is a political price to be paid for this level of wealth inequality. That price is political polarization and electoral rejection of status quo parties.

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At the local level, the US is in for something historic.

Cities, States And School Systems Lose Millions To Credit Downgrades (IBT)

[..] downgrades of bonds issued by local governments raise the interest rates those governments must pay on holders of its debt, thereby costing those communities up to hundreds of millions of dollars annually, according to the report, which was released Wednesday by the non-profit Roosevelt Institute’s ReFund America Project and focused on recent downgrades by Moody’s in relatively impoverished, predominantly-black localities. The more recent report [..] took a granular look at a few communities whose budgets were impacted by downgrades, which drive the prices of bonds down while raising the interest rate at which the government has to pay its bondholders. New Jersey was set to lose $258 million annually as a result of a Moody’s ratings drop, the report calculated, using the spread between interest rates on bonds with different Moody’s credit ratings and the amount of debt affected by the downgrade.

Moody’s announced a downgrade of the New Jersey’s $37 billion in publicly-issued debt to A3, six levels below the agency’s top rating of Aaa, in late March. The agency attributed the downgrade to “significant pension underfunding, including growth in the state’s large long-term liabilities, a persistent structural imbalance and weak fund balances,” as well as a tax cut that would decrease revenues by $1.1 billion over the next four years. New Jersey’s city of Newark — which is 52.4% African American and 33.8% Hispanic, compared to 12.6% and 16.3%, respectively, on the national level, according to U.S. Census data — was slated to lose an estimated $10 million annually as a result of a Moody’s downgrade, the report calculated. Newark’s median household income was just over $33,000, compared to nearly $54,000 nationwide, as of 2015.

That year, Moody’s downgraded Newark’s $374 million in general obligation unlimited tax bonds to Baa3, one level above junk bond status. The rating change, Moody’s said in the press release, reflected “the city’s further weakened financial position since last year,” along with its “reliance on market access for cash flow, history of aggressively structured budgets typically adopted late in the year and uncertainty around continued financial support from the state of New Jersey.” Further west, Chicago Public Schools (CPS) also stood to suffer tremendously from a Moody’s rating drop. The report authors calculated that the school system would lose out on $290 million annually from a September 2016 Moody’s downgrade to B3, five ranks below the highest junk bond rating. Nearly 40% of students are African American, 46.5% are Hispanic and 80.2% are considered “economically disadvantaged,” according to October 2016 CPS data.

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States falling one by one.

S&P, Moody’s Downgrade Illinois to Near Junk, Lowest Ever for a US State (BBG)

Illinois had its bond rating downgraded to one step above junk by Moody’s Investors Service and S&P Global Ratings, the lowest ranking on record for a U.S. state, as the long-running political stalemate over the budget shows no signs of ending. S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40% of its operating budget. “Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance,” Ted Hampton, Moody’s analyst, said in a statement.

“During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached.” Illinois hasn’t had a full year budget in place for the past two years amid a clash between the Democrat-run legislature and Republican Governor Bruce Rauner. That’s left the fifth most-populous state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois’s standing in the bond market, where investors have demanded higher premiums for the risk of owning its debt. Moody’s called Illinois “an outlier among states” after suffering eight downgrades in as many years.

“The rating actions largely reflect the severe deterioration of Illinois’ fiscal condition, a byproduct of its stalemated budget negotiations,” S&P analyst Gabriel Petek said in a statement. “The unrelenting political brinkmanship now poses a threat to the timely payment of the state’s core priority payments.” Illinois’s 10-year bonds yield 4.4%, 2.5 percentage points more than those on top-rated debt. That spread – a measure of the perceived risk – is the highest since at least January 2013 and more than any of the other 19 states tracked by Bloomberg.

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The new economy.

Uber Burned Through Almost As Much Money As NASA Last Quarter (Simon Black)

Uber reported yesterday that its NET LOSS totaled more than $700 million last quarter, despite pulling in a whopping $3.4 billion in revenue. (This means they spent at least $4.1 billion!) That’s the latest in a string of massive, 9-figure quarterly losses for the company. The only question I have is– how much cocaine are these people buying? Seriously, it’s REALLY HARD to spend so many billions of dollars. You could have over 100,000 employees (‘real’ employees, not Uber drivers) and pay them $150,000 EACH and still not blow through that much money in a single quarter. Even if you think about Research & Development, Uber still managed to burn through almost as much cash as NASA’s $4.8 billion budget last quarter. The real irony is that this company is worth $70 BILLION. And Uber is far from alone. Netflix is also worth $70 billion; and like Uber, they can’t make money.

Over the last twelve months Netflix burned through over $1.7 billion in cash, and they made up for it by going deeper into debt. The list goes on and on– Snapchat debuted with a $30 billion valuation after its IPO, only to subsequently report that they had lost $2.2 billion in the previous quarter. Telecom company Sprint is still somehow worth more than $30 billion despite having over $40 billion in debt and burning through more than $6 billion over the last three years. And then there’s Twitter, a rudderless, profitless company that is still worth over $13 billion. This is pure insanity. If companies that burn through obscene piles of cash and have no clear path to profitability are worth tens of billions of dollars, it seems like any business that’s cashflow positive should be worth TRILLIONS. None of this makes any sense, and investing in this environment is nothing more than gambling. Sure, it’s always possible these companies’ stock prices increase even more. Maybe Netflix and Twitter quadruple despite continuing losses and debt accumulation. Maybe Bitcoin surges to $50,000 next month. And maybe the Dallas Cowboys finally offer me the starting quarterback position next season.

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“One of those bubbles is global debt, especially government debt. The other is the even larger bubble of government promises.”

Hmm. Private debt is the biggie.

The Next Recession May Be A Complete Reset Of All Asset Valuations (Mauldin)

Sometime this year, world public and private plus unfunded pensions will surpass $300 trillion. That is not even counting the $100 trillion in US government unfunded liabilities. Oops. These obligations cannot be paid. A time is coming when the market and voters will realize this. Will voters decide to tax “the rich” more? Will they increase their VAT rates and further slow growth? Will they reduce benefits? No matter what they decide, hard choices will bring political turmoil. And that, of course, will mean market turmoil. We are coming to a period I call “the Great Reset.” As it hits, we will have to deal, one way or another, with the largest twin bubbles in the history of the world. One of those bubbles is global debt, especially government debt. The other is the even larger bubble of government promises.

The other is the even larger bubble of government promises. History shows it is more than likely that the US will have a recession in the next few years. When it does come, it will likely blow the US government deficit up to $2 trillion a year. Obama took eight years to run up a $10 trillion debt after the 2008 recession. It might take just five years after the next recession to run up the next $10 trillion. Here is a chart my staff at Mauldin Economics created in late 2016 using Congressional Budget Office data. It shows what will happen in the next recession if revenues drop by the same percentage as they did in the last recession (without even counting likely higher expenditures this time).

And you can add the $1.3 trillion deficit in this chart to the more than $500 billion in off-budget debt—and add a higher interest rate expense as interest rates rise. The catalyst could be a European recession that spills over into the US. Or it might be one triggered by US monetary and fiscal mistakes. Or a funding crisis in China, or an emerging-market meltdown. Whatever the cause, the next recession will be just as global as the last one. And there will be more buildup of debt and more political and economic chaos.

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The trade will move elsewehere until it’s simply entirely banned.

China’s Ivory Ban Sparks Dramatic Drop In Prices Across Asia (G.)

The price of raw ivory in Asia has fallen dramatically since the Chinese government announced plans to ban its domestic legal ivory trade, according to new research seen by the Guardian. Poaching, however, is not dropping in parallel. Undercover investigators from the Wildlife Justice Commission (WJC) have been visiting traders in Hanoi over the last three years. In 2015 they were being offered raw ivory for an average of US$1322/kg in 2015, but by October 2016 that price had dropped to $750/kg, and by February this year prices were as much as 50% lower overall, at $660/kg. Traders complain that the ivory business has become very “difficult and unprofitable”, and are saying they want to get rid of their stock, according to the unpublished report seen by the Guardian. Worryingly, however, others are stockpiling waiting for prices to go up again.

Of all the ivory industries across Asia, it is Vietnam that has increased its production of illegal ivory items the fastest in the last decade, according to Save the Elephants. Vietnam now has one of the largest illegal ivory markets in the world, with the majority of tusks being brought in from Africa. Although historically ivory carving is not considered a prestigious art form in Vietnam, as it is in China, the number of carvers has increased greatly. The demand for the worked pieces comes mostly from mainland China. Until recently, the chances of being arrested at the border slim due to inefficient law enforcement. But the prices for raw ivory are now declining as the Chinese market slows; this is partly due to China’s economic slowdown, and also to the announcement that the country will close down its domestic ivory trade.

China’s ivory factories were officially shut down by 31 March 2017, and all the retail outlets will be closed by the end of the year. Other countries have been taking similarly positive action on ivory, although the UK lags behind. Theresa May quietly dropped the conservative commitment to ban ivory from her manifesto, but voters have picked it up and there has been fury across social media. “All the traders we are speaking to are talking about what’s going on in China. It’s definitely having a significant impact on the trade,” said Sarah Stoner, senior intel analyst at the WJC. “A trader in one of the neighbouring countries who talked to our undercover investigators said he didn’t want to go to China anymore – it was so difficult in China now, and friends of his were arrested and sitting in jail. He seemed quite concerned about the situation,” said Pauline Verheji, WJC’S senior legal investigator.

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Lip service.

Audi Emissions Scandal Erupts After Germany Says It Detects New Cheating (R.)

Audi’s emissions scandal flared up again on Thursday after the German government accused the carmaker of cheating emissions tests with its top-end models, the first time Audi has been accused of such wrongdoing in its home country. The German Transport Ministry said it has asked Volkswagen’s luxury division to recall around 24,000 A7 and A8 models built between 2009 and 2013, about half of which were sold in Germany. VW Chief Executive Matthias Mueller was summoned to the Berlin-based ministry on Thursday, a ministry spokesman said, without elaborating. The affected Audi models with so-called Euro-5 emission standards emit about twice the legal limit of nitrogen oxides when the steering wheel is turned more than 15 degrees, the ministry said.

It is also the first time that Audi’s top-of-the-line A8 saloon has been implicated in emissions cheating. VW has said to date that the emissions-control software found in its rigged EA 189 diesel engine does not violate European law. The 80,000 3.0-liter vehicles affected by VW’s emissions cheating scandal in the United States included Audi A6, A7 and Q7 models as well as Porsche and VW brand cars. The ministry said it has issued a June 12 deadline for Audi to come up with a comprehensive plan to refit the cars. Ingolstadt-based Audi issued a recall for the 24,000 affected models late on Thursday, some 14,000 of which are registered in Germany, and said software updates will start in July. It will continue to cooperate with Germany’s KBA motor vehicle authority, Audi said.

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This is supposed to be our biggest enemy? He makes far too much sense for that.

Oliver Stone Quizzes Vladimir Putin On Snowden (G.)

Just a few hours after Megyn Kelly announced on NBC’s Today show that she would be interviewing Vladimir Putin in St Petersburg tomorrow at the International Economic Forum, Showtime released the first trailer and extended clip for The Putin Interviews, a sit-down with the Russian president conducted by the film-maker Oliver Stone for a four-part special that premieres on 12 June. Promoted as “the most detailed portrait of Putin ever granted to a Western interviewer”, The Putin Interviews spawned from several encounters over two years between Stone, director of politically oriented films including JFK and Nixon, and Putin. The interviews are to air as four one-hour installments, landing just a week after Kelly’s discussion with Putin, the centerpiece of her news magazine show on NBC, which premieres on Sunday night.

In the extended clip released on Thursday, Stone and Putin can be seen driving in a car with an English translator in the backseat, discussing topics such as Edward Snowden’s whistleblowing and Russian intelligence. “As an ex-KGB agent, you must have hated what Snowden did with every fiber of your being,” Stone asks in the clip. “Snowden is not a traitor,” Putin replies. “He did not betray the interests of his country. Nor did he transfer any information to any other country which would have been pernicious to his own country or to his own people. The only thing Snowden does, he does publicly.”

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Oh well.

Schaeuble Launches A Broadside Against Tsipras (K.)

Two weeks before a critical Eurogroup summit, German Finance Minister Wolfgang Schaeuble launched a broadside at Prime Minister Alexis Tsipras, claiming that the leftist premier has not shifted the burden of austerity away from poorer Greeks as he had pledged. In his comments, Schaeuble also maintained that party influence on the Greek public administration has increased rather than decreased during Tsipras’s time in power, noting that ruling party officials have been appointed to the country’s privatization fund. Greek government sources responded tersely to Schaeuble’s criticism. “The responsibility of Schaeuble in managing the Greek crisis has been recorded historically,” one source said. “There is no point in his ascribing it to others.”

Meanwhike Germany’s Die Welt reported that the ECB had similar views on the need for Greek debt relief to the IMF, and indicated that Schaeuble might be facing pressure to make unpopular decisions ahead of elections scheduled to take place in Germany in September. Tsipras, for his part, apparently sought to lower expectations in comments on Thursday. During a visit to the Interior Ministry, he said the government’s goal was “fulfilling the country’s commitments” linked to Greece’s third international bailout. He dodged reporters’ questions about whether he expected to leave a European Union leaders’ summit on June 22 wearing a tie – something he has pledged to do only when Greece secures debt relief. “The important thing is that I don’t leave with further burdens,” Tsipras said.

Aides close to Tsipras will be closely following a Euro Working Group meeting scheduled for June 8 for indications about what kind of deal creditors are likely to put on the table at the Eurogroup summit planned for June 15. If the solution that is in the works is deemed to be too politically toxic, it is likely that Tsipras will undertake another round of telephone diplomacy with key EU leaders such as German Chancellor Angela Merkel and French President Emmanuel Macron. He spoke to several prominent EU leaders earlier this week to underline the Greek government’s conviction that it has honored its promises to creditors and it is their turn to reciprocate with debt relief.

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Promising. But.

A New Antibiotic Multitool Could Beat The Toughest Bacteria (F.)

Doctors may soon have a new weapon in the long-running war between antibiotics and bacteria. It’s a Swiss Army knife of a drug that’s tens of thousands of times more effective in lab tests against dangerous antibiotic-resistant bacteria. Starting with the discovery of penicillin in 1928, scientists and doctors have been finding and making molecules that weaken or kill bacteria in a range of different ways to help humans survive infections. And as soon as humans started employing these antibiotics, bacteria began evolving to beat those attacks. That has started to become a huge problem. So-called superbugs like methicillin-resistant Staphylococcus aureus (MRSA) can ward off some of our most potent antibiotics, making infections by these bacteria extremely hard to treat.

Not only that, but their existence poses a strategic challenge as well, forcing doctors to think hard about when and where they use certain antibiotics, lest bacteria develop resistance to them and render them less effective. Vancomycin is one antibiotic that has stayed effective even as others have been been brought down by resistant bacteria. That’s because of the way vancomycin works: by latching onto one of the building blocks bacteria use to build their cell walls, like the microscopic equivalent of a bully stealing your shovel in the sandbox and not giving it back. (In this analogy, we’re on the bully’s side.) By interfering with such a critical cellular process in such a fundamental way, vancomycin makes it hard for bacteria to develop a simple mutation to defeat the antibiotic. That makes vancomycin one of our last lines of defense for treating infections like MRSA that others can’t.

It’s why the World Health Organization (WHO) added the drug to its list of essential medicines. Naturally, some bacteria have found ways to fight vancomycin, the most common being to substitute a different cell wall building block that the antibiotic can’t latch onto. Taking vancomycin out of doctors’ quivers would be a big blow. Which is why the WHO also lists vancomycin-resistant bacteria at number four and five on its list of the most threatening antibiotic-resistant microbes. So. To try to make sure vancomycin can beat those resistant bacteria, and stay effective for the next few decades—a reasonable lifetime for an antibiotic—chemists Dale Boger, Nicholas Isley and Akinori Okano at the Scripps Research Institute in California opened up the hood to make a few adjustments to the molecule.

After swapping out one part and bolting on a couple others, the group’s souped-up vancomycin was about 25,000 times more potent against resistant bacteria, and it had better endurance. They describe their work in the Proceedings of the National Academy of Sciences. The major change was to the region of the molecule that grabs those cell wall building blocks, which are called D-alanyl-D-alanine. Resistant bacteria have learned to substitute the very similar D-alanyl-D-lactate, which your standard vancomycin can’t bind to very well, limiting its effectiveness. The researchers changed an oxygen atom for two atoms of hydrogen, making a new version of vancomycin that could hang onto either building block.

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May 172017
 
 May 17, 2017  Posted by at 8:54 am Finance Tagged with: , , , , , , , , ,  


Arrest of Gavrilo Princip, the man who shoot Franz Ferdinand June 28 1914

 

Britain’s Labour Party Unveils ‘Radical’ Election Manifesto (AFP)
UK Media Trying Incredibly Hard To Keep Corbyn Out Of Number 10 (Can.)
The American Dystopia Didn’t Begin With Trump (MW)
Democratic Party Image Dips, GOP Ratings Stable (Gallup)
Chelsea Manning Set For Release After 7 Years In Prison (AP)
Hong Kong Rejects Asylum for Snowden Helpers (HRW)
The Everything Bubble: Stocks, Real Estate & Bond Implosion (Mike Maloney)
New Theory Behind Stalled Economy: Retirees Are Hoarding Too Much Cash (ZH)
Australia Needs Housing Slowdown for Stability on AAA – S&P (BBG)
Can China Afford Its Belt and Road? (Balding)
Erdogan’s Bodyguards Beat Up US Protestors in DC After He Met With Trump (Qz)
EU Warns Turkey After It Violates Greek Airspace 141 Times In One Day (EuAct)
Abe Divides Japan With Plan to Change Pacifist Constitution (BBG)
NATO Builds Infrastructure for Permanent Presence Near Russia’s Borders (SCF)
Eastern Europe Turns Its Back On Single Market (Pol.)
Germany and Italy Want EU To Halt Migrants In Libya (EuO)

 

 

Looking at the incredible mess built up by the likes of Trump and Hillary, Farge and Theresa May, Angela Merkel and Marine Le Pen, Jeremy Corbyn looks better all the time. He’s an actual person, and he sticks to his guns.

Maybe what goes against him most is that people in this day and age don’t recognize him as a politician anymore; politicians are supposed to stab backs, tell lies and conspire against anyone threatening their shot at power.

Is there anyone who would argue that the world would have been a worse place with Bernie Sanders in the White House and Jeremy Corbyn at no. 10?

As the left has moved, and become, right, we need a left just for balance in our societies. Nothing to do with if you are a socialist or not, just balance.

Britain’s Labour Party Unveils ‘Radical’ Election Manifesto (AFP)

Britain’s opposition Labour Party pledged to raise taxes on the well-off, renationalise key industries and end austerity in its manifesto on Tuesday, presenting voters with their starkest choice in decades in next month’s election. Labour leader Jeremy Corbyn called the programme “radical and responsible”, saying the country had been run “for the rich, the elite and the vested interests” in seven years of Conservative government. “It will change our country,” he will say in his speech at the presentation of the manifesto in Bradford in northwest England, according to extracts released by the party’s press office. “It will lead us through Brexit while putting the preservation of jobs first,” he said. The manifesto is expected to include a tax increase from 40% to 45% for salaries of between ££80,000 (€94,000, $103,000) and ££150,0000 a year, according to The Times and The Daily Telegraph.

The current 40% tax rate applies to people earning between ££31,500 and ££150,000. There would also be a new top rate of income tax of 50%, the reports said. Labour has said the rise would fund increased investment in the state-run National Health Service (NHS) and would only affect 5% of earners. The Guardian reported that the party was also planning a levy on businesses with staff earning large salaries, set at 2.5% on those earning over ££330,000 and 5.0% on those earning more than ££500,000. Labour will also promise to renationalise the railways, the Royal Mail postal service and water companies, according to various reports. Labour has also promised it will increase corporation tax to 26% by 2022 and impose a “Robin Hood tax” on financial transactions. “It’s a programme that will reverse our national priorities to put the interests of the many first,” Corbyn is expected to say. “This is a programme of hope. The Tory campaign, by contrast, is built on one word: fear.”

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Three weeks before the elections, Corbyn is still reported to lose in a landslide. Will Britain wake up in time? Theresa May is a sure bet for deterioration.

UK Media Trying Incredibly Hard To Keep Corbyn Out Of Number 10 (Can.)

An academic investigation has caught the UK media trying incredibly hard to keep Jeremy Corbyn out of Number 10. The mainstream TV and newspaper media are pushing the agenda of the Conservative Party within their coverage, according to an investigation from Loughborough University. The Conservatives are the “most frequently reported” and “most extensively quoted” party, while issues pushed by Labour are “marginalised”, say the report’s authors. In newspapers, for example, the Conservatives received by far the most direct quotation, exceeding Labour by 45%. One of the most striking findings is how much non-political personality pervades the entire media’s election coverage. Last week, Theresa May made a policy-free appearance on The One Show with her husband Philip May. The BBC hosted the personality-driven chat, despite the sitting Prime Minister refusing to debate her record on TV.

Then, according to the content analysis, the broader media amplified the appearance and sidelined the real issues. And this is precisely the aim of a Conservative Party opting for cosy sofa chats over serious policy debate. The sheer weight of reporting on the sanitised family affair propelled the Conservative leader’s husband into the fifth most covered political figure during the study’s time frame. He received nearly double the coverage of the SNP’s Nicola Sturgeon, who leads a party controlling 56 out of the 59 Scottish seats. The Conservative leader’s husband, a family figure irrelevant to the election, also received nearly as much coverage as Labour’s Shadow Chancellor. John McDonnell was the fourth most covered political figure, reported on in 6.1% of all the election news items analysed. Theresa May was easily the most prominent, featuring in 32.4% – over a third of all news items analysed. Corbyn received much less coverage across TV and newspaper media, appearing in 21.4%.

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And it won’t end there. Someone should be able to write it up better than this though.

The American Dystopia Didn’t Begin With Trump (MW)

Dystopia is here. It’s not just the “imagined place” of the dictionary definition or a future state of dystopian novels. It is very real and right now, at least for those of us trying to follow national politics. And it’s not just Donald Trump. It’s Barack Obama, it’s Ted Cruz, it’s the New York Times, it’s Breitbart News. It is an alternate universe detached from the world we live in but intruding into it in painful and dangerous ways. It is a media narrative of political conspirators colluding with a dictatorial archenemy, of an intemperate and delusional leader overturning the institutions of democracy, of a “deep-state” resistance to constitutional authority. It is a dystopia of rampant hypocrisy, where obstructing legislation, supporting a law-enforcement official who strays beyond the limits of his authority, or boycotting a president’s appointments is evil and undemocratic until it’s your party that wants to do it.

Two dystopian classics have shot back to the top of best-seller lists because the media suggest the authoritarian surveillance societies they portray have arrived. The 1948 novel “1984” and the 1985 novel “The Handmaid’s Tale” are touted as descriptions of where we are headed under Trump. While the author of “Handmaid,” Margaret Atwood, and the cast of the Hulu miniseries based on it see a Trump administration as the realization of the misogyny depicted in the novel, it’s obvious the U.S. is not about to become a Puritanical theocracy like that in the book. Critics on both the left and the right dispute the media meme that “Handmaid” is a depiction of the Trump era. Irish feminist Angela Nagle writes in the left-wing Jacobin magazine that it is neoliberal market forces that are oppressing women, not an imaginary theocratic state.

“The real-world dystopia for the majority of women in the age of Trump is not that they are being forced to have children by a repressive traditionalist state,” she wrote last week, “but that they’re being compelled not to by far more insidious forces, and those that do are financially and socially punished at every turn.” We are ruled by myths, she continues, but not those in the miniseries. “The mythologies of our age in the West are not enforced by repressive theocratic regimes,” Nagle says, “but by the market command to be free, to be creative, to be flexible, to love what you do for even the most uninspiring of jobs.”

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They’re all still well ahead of François Hollande. But imagine what a viable third party could do. Better let that be Bernie.

Democratic Party Image Dips, GOP Ratings Stable (Gallup)

Americans’ opinions of the two major political parties are now similar after the Democratic Party’s ratings slipped to 40% – from 45% last November – while the Republican Party’s image is essentially unchanged at 39%. The latest update on the party’s images is based on a May 3-7 Gallup poll, which asked Americans whether they have a favorable or an unfavorable opinion of each party. Throughout last year’s contentious presidential election campaign, U.S. adults rated neither party highly. In fact, more rated each party unfavorably than favorably. But Democrats maintained a slight edge in favorable ratings, including 45% to 40% in Gallup’s prior measurement, conducted last November after Donald Trump’s victory in the 2016 presidential election.

So far, Trump’s unpopularity as president has done little to erode Americans’ views of the GOP, perhaps because they were already quite negative. However, Americans are now less positive toward the Democratic Party than they were last fall. The decline in Democratic Party favorability is mostly a result of lower ratings from self-identified Democrats. In November, 83% of Democrats had a positive opinion of the Democratic Party; now, 77% do. Independents are also slightly less positive toward the Democratic Party, while Republicans’ negative views of the opposing party are steady.

[..]Americans are quite negative toward both of the major political parties at this time. Trump’s unpopularity and the GOP’s challenges in governing a divided nation have done little to weaken the party’s poor image further. But those same factors have also done little to cast the opposing party, the Democrats, in a more favorable light. If anything, the Democratic Party’s positioning appears weakened, largely because its own supporters now hold a less positive view of the party. That could indicate Democrats are frustrated with the party’s minority status in Washington. Not since 2003 through 2006 have Democrats failed to control the presidency, House of Representatives or Senate. Prior to that, Democrats had control of either Congress or the presidency for more than 50 years.

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Bless you.

Chelsea Manning Set For Release After 7 Years In Prison (AP)

Pvt. Chelsea Manning, the transgender soldier convicted of giving classified government materials to WikiLeaks, is due to be released from a Kansas military prison on Wednesday after serving seven years of her 35-year sentence. President Barack Obama granted Manning clemency in his final days in office in January. Though she’s set to be released from Fort Leavenworth, Manning’s lawyers and the Army have refused to say when and how she’ll be freed due to potential security concerns. Manning, who was known as Bradley Manning before transitioning in prison, was convicted in 2013 of 20 counts, including six Espionage Act violations, theft and computer fraud. She was acquitted of the most serious charge of aiding the enemy.

The Crescent, Oklahoma, native tweeted after being granted clemency that she plans to move to Maryland. Neither she nor her attorneys explained why, but she has an aunt who lives there. Manning, a former intelligence analyst in Iraq, has acknowledged leaking the materials, which included battlefield video. She said she wanted to expose what she considered to be the U.S. military’s disregard of the effects of war on civilians and that she released information that she didn’t believe would harm the U.S. Critics said the leaks laid bare some of the nation’s most-sensitive secrets and endangered information sources, prompting the State Department to help some of those people move to protect their safety. Several ambassadors were recalled, expelled or reassigned because of embarrassing disclosures.

Manning, who was arrested in 2010, filed a transgender rights lawsuit in prison and attempted suicide twice last year, according to her lawyers. Obama’s decision to commute Manning’s sentence to about seven years, including the time she spent locked up before being convicted, drew strong criticism from members of Congress and others, with Republican House Speaker Paul Ryan calling the move “just outrageous.” In a statement last week — her first public comments since Obama intervened — Manning thanked that former president and said that letters of support from veterans and fellow transgender people inspired her “to work toward making life better for others.” “For the first time, I can see a future for myself as Chelsea,” she said.

“I can imagine surviving and living as the person who I am and can finally be in the outside world. Freedom used to be something that I dreamed of but never allowed myself to fully imagine.” Her attorneys have said Manning was subjected to violence in prison and argued the military mistreated her by requiring her to serve her sentence in an all-male prison, restricting her physical and mental health care and not allowing her to keep a feminine haircut. The Army said Tuesday that Manning would remain on active duty in a special, unpaid status that will legally entitle her to military medical care, along with commissary privileges. An Army spokeswoman, Lt. Col. Jennifer Johnson, said Manning will be on “excess leave” while her court-martial conviction is under appellate review.

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Seems like every country punishes its best and bravest.

Hong Kong Rejects Asylum for Snowden Helpers (HRW)

Seven people who sheltered the whistleblower Edward Snowden in June 2013 are at risk of return to torture and persecution at home, Human Rights Watch said today. On May 11, 2017, the Hong Kong Immigration Department rejected their asylum claim; their lawyers are in the process of appealing the decision and pursuing a separate case for entry and asylum in Canada, where sponsors are ready to assist them. “Those who helped Edward Snowden in Hong Kong when he was seeking asylum now find themselves at dire risk if sent back to their countries,” said Dinah PoKempner, general counsel at Human Rights Watch. “Canada has the opportunity to a prevent a terrible outcome and should act immediately.”

The asylum-seekers include two men and a woman from Sri Lanka, and a woman from the Philippines, along with their three children who were born in Hong Kong and are stateless. The adults allege that they suffered torture and persecution in their home countries, and have been pursued by powerful people or officials who have tracked or threatened them. Their asylum lawyer, Robert Tibbo, brought Snowden, another client, to their homes in 2013 after he revealed he had disclosed classified information to the press. The families each freely allowed Snowden to stay with them for a short time after his disclosures became public but before his arrest was sought.

Neither the asylum-seekers nor their lawyer revealed their role in Snowden’s journey. However, journalists independently discovered their identities shortly before the release of an Oliver Stone movie about Snowden that shows him being hidden among asylum-seekers in Hong Kong. At that point, the asylum-seekers went public in an effort to have some control over how they were portrayed in the media.

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The Automatic Earth doesn’t promote any specific kind of investments, but Mike is a good friend of ours, and he’s right here.

The Everything Bubble: Stocks, Real Estate & Bond Implosion (Mike Maloney)

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No, they’re not.

New Theory Behind Stalled Economy: Retirees Are Hoarding Too Much Cash (ZH)

[..] we were somewhat shocked to come across a report from money manager United Income which effectively argues that American retirees are saving too much money rather than too little. To summarize the thesis, United Income argues that retirees become more conservative as they grow older which causes them to save more and allocate less to equities…which is, of course, a somewhat self-serving conclusion but never mind that.

“Innovations in medicine and technology have extended human life by over 30 years since 1900. This has helped to double the amount of time the average adult now spends in retirement compared to several decades ago. But, the benefits of longer lives and retirement may be limited if older households curb their consumption or investment in preventive health measures because they are overly pessimistic about their future financial health. Overly negative viewpoints toward the future may also create self-fulfilling economic problems if it leads to an overly aggressive fixed-income portfolio.”

Unfortunately, when combined with the fact that “Median Net Wealth” is actually shrinking, it’s easy to deduce that while the majority of American retirees are actually spending their retirement income (and then some), there is a group of super wealthy old folks who simply can’t spend enough money to offset annual investment income growth….which speaks more to the growing wealth gap than to some economic fear that is causing retirees to hoard cash. In this context, it’s not too difficult to understand why aggregate YoY spending trends collapse as old folks get older. The most wealthy retirees can only find so many ways to burn their massive nest eggs which means that, at least for these folks, YoY spending doesn’t grow but retirement balances do…while the overwhelming majority of people simply run out of cash and have to cut every corner possible to survive….

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Perfect irony.

Australia Needs Housing Slowdown for Stability on AAA – S&P (BBG)

Australia’s prized AAA rating will only rest on a firm footing once there’s a “meaningful moderation” in housing and credit, S&P Global Ratings said as it maintained a negative outlook on the country’s sovereign score. The country’s rating was affirmed by the credit assessor after the latest federal government budget projected a return to surplus by 2021, although S&P noted that revenue could disappoint and lawmakers may struggle to implement fiscal repair policies. It also highlighted risks stemming from Australia’s high level of external indebtedness. S&P has maintained a negative outlook on the country since last July when it issued a warning in the wake of a knife-edge federal election.

“The ratings could stabilize if we were to see a significant and sustained improvement in the medium-term budget outlook, leading to a return to a general government surplus,” S&P said in a statement Wednesday. “A stabilization of the ratings would also require a meaningful moderation of the credit and house price boom.” Home prices in Sydney and Melbourne have surged in the wake of unprecedented interest-rate cuts by the Reserve Bank of Australia as the country navigates its way through the aftermath of a mining boom. Regulators have progressively tightened lending restrictions amid concerns about financial stability.

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Debt and Road.

Can China Afford Its Belt and Road? (Balding)

China’s just-completed conference touting its Belt and Road initiative certainly looked like a triumph, with Russian President Vladimir Putin playing the piano and Chinese leaders announcing a string of potential deals and massive financial pledges. Underneath all the heady talk about China positioning itself at the heart of a new global order, though, lies in uncomfortable question: Can it afford to do so? Such doubts might seem spurious, given the numbers being tossed around. China claims nearly $900 billion worth of deals are already underway, with estimates of future spending ranging from $4 trillion to $8 trillion, depending on which Chinese government agency is doing the talking. At the conference itself, Chinese President Xi Jinping pledged another $78 billion for the effort, which envisions building infrastructure to link China to Europe through Asia, the Middle East and Africa.

From no other country in the world would such pledges be remotely plausible. Yet even for China, they’ll be difficult to fulfill without clashing with the country’s other objectives. The first question is what currency to use for all this lending. Denominating loans in renminbi would accelerate China’s stated goal of internationalizing its currency. But it would also force officials to tolerate higher levels of offshore renminbi trading and international price-setting. So far, they’ve shown little appetite for either. Additionally, countries along the Belt-and-Road route would need to run trade surpluses with China in order to generate the currency needed to repay such loans. In fact, as Bloomberg Intelligence economist Tom Orlik has noted, China ran a $250 billion surplus with Belt-and-Road countries in 2016.

It will be mathematically impossible for Sri Lanka and Pakistan to repay big yuan-denominated loans when they’re running trade deficits with China close to $2 billion and $9 billion, respectively. Financing projects in dollars is no panacea either. Unless China conducts U.S. dollar bond offerings to fund these investments, it’ll have to tap its official foreign-exchange reserves. Those now hover around $3 trillion. That sounds like a lot. But outside estimates suggest anywhere from a few hundred billion to nearly $1 trillion of that money is illiquid. China needs nearly $900 billion to cover short-term external debt and another $400 to $800 billion to cover imports for three to six months. Pouring additional billions into Central Asian infrastructure projects would only tie up money China needs to defend the yuan.

And, borrowers would need to run significant dollar surpluses in order to repay dollar-denominated loans. Obviously, not every country can do so, or undervalue its currency to try and build up a surplus. Beyond the specific mechanisms, it’s unclear whether China has the financial capacity to lend at these levels to borrowers of dubious creditworthiness. As French bank Natixis S.A. has noted, in order to finance $5 trillion in projects, China “would need to see growth rates of around 50% in cross-border lending.” This would wreak havoc on Chinese creditworthiness and raise external debt from a “very comfortable” level (around 12% of GDP) to “more than 50%” if China can’t bring in other lenders.

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Violence in a myriad forms is being normalized one step at a time.

Erdogan’s Bodyguards Beat Up US Protestors in DC After He Met With Trump (Qz)

“The relations between Turkey and the United States have been erected upon common democratic values and common interests.” That’s what Turkey’s president Recep Tayyip Erdogan said at a White House press conference with US president Donald Trump on Tuesday (May 16). But shortly after the event, Erdogan’s bodyguards proceeded to beat and kick people outside the Turkish ambassador’s residence in Washington DC. The altercation was captured on camera, and resulted in nine people being hurt, Voice of America said.

A photojournalist at the site said it seemed to be a pro-Turkey gathering at first, while some witnesses said the group outside the residence included a person carrying a flag of a Kurdish party in Syria allied with a militia the US plans to aid, over Turkey’s objections. [..] It’s not the first time Erdogan’s security has roughed up protesters on American soil. In 2016, the Washington Post reported clashes between protesters and the Turkish leader’s security detail. And in 2014, in New York, Turkish security threatened and pushed around journalists working for a newspaper perceived to be critical of Erdogan.

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This has been going on for years. And only know Brussels peeps.

EU Warns Turkey After It Violates Greek Airspace 141 Times In One Day (EuAct)

Turkish aeroplanes and helicopters illegally entered Greece’s airspace 141 times yesterday (15 May), the Hellenic National Defence General Staff reported. According to Greek press reports, 20 Turkish F-16, 5 CN-235 maritime surveillance aircraft and 19 helicopters entered the Athens flight information region (FIR) without submitting a flight plan. In all cases, Turkish aircraft were identified and intercepted by Greek fighters, while in nine cases the interception process resulted in near combat situations. In addition, two Turkish missile boats entered Greek territorial waters off the southeast Aegean island of Agathonisi. The vessels, which were taking part in a maritime exercise code-named Denizkurdu (Seawolf), stayed in Greek territorial waters for about 20 minutes.

As Kathimerini journal reported, last month Agathonisi was described as a “Turkish island” by Turkey’s Minister of European Union Affairs Omer Celik. While the EU and the international community recognise the sovereignty of Greece over the Greek Aegean islands, Turkey has a list of issues regarding the delimitation of territorial waters, national airspace, exclusive zones, etc. Ankara also claims “grey zones” of undetermined sovereignty over a number of small islets, most notably the islets of Imia/Kardak. The serious incidents occurred just a few hours after the meeting of Greek premier Alexis Tsipras with Turkish President Tayyip Erdogan in Beijing. The Greek Ministry of Foreign Affairs issued a strong communique saying that the incident “constitutes a flagrant violation of international law”.

“It is clear that there are forces in Turkey that do not want understanding and good neighbourly relations between the two countries,” the Greek ministry added. In the meantime, tensions between Ankara and Berlin also escalated. The German government is exploring the possibility of moving its troops out of Turkey’s Incirlik air base, which is crucial for the fight against ISIS, after a second German parliamentary delegation was prevented from visiting the Incirlik facility. German news agency dpa quoted Wolfgang Hellmich, the chairman of the Bundestag Defense Committee, as saying “we’re not going to be blackmailed” by the Ankara government.

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Another form of violence normalized. Abe is the proverbial nationalist.

Abe Divides Japan With Plan to Change Pacifist Constitution (BBG)

Prime Minister Shinzo Abe’s sudden rush to change the pacifist constitution that has defined Japan’s security policy since World War II risks eroding his popularity before an election due by the end of next year. This month, Abe proposed an amendment to recognize the existence of Japan’s Self-Defense Forces while maintaining Article 9, which renounces the right to war and prohibits land, sea and air forces. He wants the change to take effect by 2020, when Tokyo hosts the Olympics. Rewriting the constitution has been a longstanding goal of the ruling Liberal Democratic Party, whose original members – including Abe’s grandfather, who was a prime minister – saw the document as a U.S. imposition that humiliated Japan after World War II.

For Abe, the timing appears opportune: not only are tensions high over North Korea, but his opponents are weak. Yet it also carries risks. The public is divided on changing the constitution, and even some members of his own party don’t support it. The issue could galvanize the opposition and potentially hurt Abe’s chances of becoming Japan’s longest-serving prime minister. “It’s going to be very difficult for him to pull this off,” said Gerald Curtis, an emeritus professor of political science at Columbia University who is currently in Tokyo. “It will eat away at his support. Whether it eats away enough to threaten his third term – that’s unlikely.”

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Insanity rules.

NATO Builds Infrastructure for Permanent Presence Near Russia’s Borders (SCF)

A group of about 50 combat engineers based at Canadian Forces Base Gagetown were deployed to Latvia on April 29 as part of Operation Reassurance. The mission is to build a town for 500 soldiers. According to commanding officer Lt.-Col. Chris Cotton, the installation will have «everything you would expect in a small town, from its kitchen to its quarters, its electrical distribution system, water distribution system, internet, gym facilities that would allow people to survive over the long term in Latvia». Obviously, this is an element of vast infrastructure to provide for a long-term commitment. In early April, a US-led battle group of 1,350 soldiers for NATO’s Enhanced Forward Presence in Eastern Europe arrived at its base near Orzysz in northeastern Poland.

It took place just a few days after a NATO-Russia Council meeting took place on March 30. Secretary-General Jens Stoltenberg called the talks with Moscow «frank» and «constructive». Then the usual song and dance followed under the slogan of Russian threat. British RAF fighters are scheduled to be stationed to Romania this May. In March the first of 800 UK troops arrived in Estonia supported by around 300 armed vehicles. Along with French and Danish forces they’ll be stationed there on what NATO leadership calls «rotational basis». In January, German and Belgian forces arrived in Lithuania near the Russian enclave of Kaliningrad. The UK leads the Estonia Battlegroup while other NATO members are deploying forces to Latvia, Lithuania and Poland as part of the bloc’s Enhanced Forward Presence battalion.

All in all, 4,000 NATO troops with tanks, armored vehicles, air support, and high-tech intelligence centers deployed to Poland, Latvia, Lithuania, and Estonia. In accordance with the fiscal year 2017 European Reassurance Initiative budget proposal, the US Army is reopening or creating five equipment-storage sites in the Netherlands, Poland, Belgium and two locations in Germany. Last September, the service began to assemble more Army Prepositioned Stocks (APS) for permanent storage in Europe. Those stocks will be sufficient for another armored brigade to fall in on. The rotating brigade will bring its own equipment. The move will add hundreds of the Army’s most advanced weapons systems to beef up the US European Command’s combat capability. It will also free up an entire brigade’s worth of weapons currently being used by US forces training on the continent to enable more American troops to be rushed in on short notice.

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The EU is an instrument for German, Dutch, French power and profits.

Eastern Europe Turns Its Back On Single Market (Pol.)

The EU’s newest members are the fiercest opponents of its single market. As with so many of the toughest fights in Brussels, it all boils down to farmers and food. Central Europeans say big Western European landowners and multinational supermarkets are wiping out their farmers and shopkeepers. Protecting smallholders from powerful investors like banks has leapt to the top of the political agenda. Eastern European governments have rolled out a complex web of new laws to stop foreigners buying out swaths of ultra-cheap farmland. The European Commission regards this new legislation in the former communist countries as an existential threat to the EU’s free flow of goods, people and capital — the single market, in short — and struck back with infringement cases intended to preserve its sanctity.

In Bulgaria, for example, the European Commission launched an infringement proceeding last year over a law that investors should be resident for more than five years before they can buy farmland. In Romania, Brussels objected this year to rules that supermarkets should source 51 percent of fresh produce from local suppliers. There has been no decision on either case. It is in Poland, the regional heavyweight, that the battle over respect for the single market is fought the hardest. Brussels has already ordered the authorities to halt a tax on the retail sector on the grounds it grants a selective advantage to small, local shops with a low turnover over big foreign-owned supermarkets. All eyes are now focusing on how the European Commission will react to a growing chorus of complaints in Poland over the rights of foreigners to buy farmland.

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The ‘safe zones’ notion in northern Libya blew up in their faces. So now they’re moving the empty idea to the south. Meanwhile, people keep drowning, and that serves Europe’s purposes.

Germany and Italy Want EU To Halt Migrants In Libya (EuO)

Italy and Germany are reportedly seeking an EU mission to stabilise Libya’s 5,000km southern border with neighbouring countries and curb migration. German newspaper Welt am Sonntag reported on Sunday (14 May) that the German interior minister, Thomas de Maiziere, and his Italian counterpart, Marco Minniti, want the mission set up between Libya and Niger. The ministers sent a joint-letter last week to the European Commission, saying that an EU mission at the border between the two nations was needed “as soon as possible.” “The first months of this year have shown that our efforts up to this point have been insufficient. We must prevent hundreds of thousands of people who are in the hands of smugglers from risking their lives in Libya and the Mediterranean,” the letter states.

The letter, also seen by the French news agency AFP, says greater development and local support is needed for people living along the border. It also calls for “technical and financial support” to Libyan authorities. Abdulsalam Kajman, the vice president of the UN and EU-backed government seated in Tripoli, had also told Italy’s Corriere della Sera newspaper on Sunday that Libya was willing to launch patrols with the help of other countries. “If we don’t resolve southern Libya’s problems, we will not resolve the migrant issue,” he said. Kajman added that Italy was prepared to help train a new patrol guard for the task. The plans are part of a broader effort to prevent people from leaving Libya on boats towards the EU and crack down on migrant smugglers. The exodus from the coast has increased by over 44% – when compared to the same period last year – with some 45,000 people having disembarked between January and mid-May so far.

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May 142017
 
 May 14, 2017  Posted by at 9:39 am Finance Tagged with: , , , , , , , , , , ,  


Henri Matisse Sorrow of the King 1952

 

US Says Trump ‘Can’t Imagine Russia Pleased’ With North Korea Missile (R.)
Macron Takes Office As French President (AFP)
Tech Companies Have Become Monopolies, Drag On Economic Growth (AT)
‘We Can’t Do Brexit With Half The Brexiteers Outside The Tent’ (G.)
Schaeuble Says Financial Transfers In Euro Zone Are Necessary (R.)
Ireland Is World’s Fourth-Largest Shadow Banking Hub (ITimes)
London Home Raffled For £3.75m Bought With Right-to-Buy in 2014 For £360k (G.)
Media Blackout On The DNC Lawsuit Proves That It Is Nuclear (Med.)
Patriotism And Conscience: The Edward Snowden Affair (LibR)
Worried About ‘Wannacry’? You Should Have Listened To Julian Assange (Duran)
Steve Keen Defines A Production Function Based On Energy (Res.)
The Rise Of Rentiers And The Destruction Of The Middle Class (Ev)
The Economic School You’ve Never Heard Of (EpT)
The Future of Work, Robotization, and Capitalism’s Useless Jobs (Bregman)
US Much Women More Likely To Die In Childbirth Than 25 Years Ago (ProP)
Africa’s New Slave Trade (G.)

 

 

A more or less subtle way of trying to drag Putin into the situation.

US Says Trump ‘Can’t Imagine Russia Pleased’ With North Korea Missile (R.)

U.S. President Donald Trump “cannot imagine Russia is pleased” with North Korea’s latest missile test on Sunday, as it landed closer to Russia than to Japan, the White House said in a statement. “With the missile impacting so close to Russian soil – in fact, closer to Russia than to Japan – the President cannot imagine that Russia is pleased,” the White House said in its statement. The launch served as a call for all nations to implement stronger sanctions against reclusive North Korea, the White House added.

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Macron takes office in a strange kind of void. On Monday he will appoint a prime minister, and on Tuesday a cabinet. But his party has zero seats in parliament, so what can they do? Whether they can win a majority in the June elections is very much up for grabs. They may wind up needing -and using- support from the Socialist party that was burned down in the presidential elections.

Macron Takes Office As French President (AFP)

Emmanuel Macron becomes France’s youngest ever president on Sunday, taking over from Socialist Francois Hollande in a solemn ceremony. [..] The new president faces a host of daunting challenges including tackling stubbornly high unemployment, fighting Islamist-inspired violence and uniting a deeply divided country. Socialist Hollande’s five years in power were plagued by a sluggish economy and bloody terror attacks that killed more than 230 people and he leaves office after a single term. The 64-year-old launched Macron’s political career, plucking him from the world of investment banking to be an advisor and then his economy minister. “I am not handing over power to a political opponent, it’s far simpler,” Hollande said on Thursday.

Macron’s first week will be busy. On Monday, he is expected to reveal the closely-guarded name of his prime minister, before flying to Berlin to meet German Chancellor Angela Merkel. It is virtually a rite of passage for French leaders to make their first European trip to meet the leader of the other half of the so-called “motor” of the EU. Pro-EU Macron wants to push for closer cooperation to help the bloc overcome the imminent departure of Britain, another of its most powerful members. He intends to press for the creation of a parliament and budget for the eurozone. Merkel welcomed Macron’s decisive 32-point victory over Le Pen, saying he carried “the hopes of millions of French people and also many in Germany and across Europe”. In June, Macron faces what the French media are calling a “third round of the presidential election” when the country elects a new parliament in a two-round vote. The new president needs an outright majority to be able to enact his ambitious reform agenda.

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A huge global problem.

Tech Companies Have Become Monopolies, Drag On Economic Growth (AT)

Once upon a time the US stock market had disruptive challengers changing the economic landscape – Apple, Google, Cisco, Intel and a half dozen other upstarts. The same companies are there, but they have morphed from the equivalent of Luke Skywalker to Jabba the Hut. Tech companies used to be aggressive growth stocks, the kind that young people bought for long-range gain, while retirees stuck to less-volatile instruments like utility stocks. The world officially went topsy-turvy this year, when the volatility of tech stocks fell below the volatility of utility stocks. The graph shows the implied volatility of options on the S&P tech sector ETF (ticker XLK) vs. the implied volatility of options on the S&P utilities sector (XLU). Options on volatile stocks cost more than options on stable stocks, because volatility increases the likelihood of a payout.

Implied volatility is backed out of the prices of traded options, and reflects investor expectations about future stability. Why would investors expect less volatility from tech stocks than from utilities? Because they are utilities, that is, utilities with neither debt nor regulation. Power, water and sewer companies charge a stable fee to a predictable base of customers. They borrow heavily to build facilities, and are subject to public regulation, such that changes in interest rates and public policy can affect their value. Historically, though, they were widow-and-orphan stocks, the least risky sector of the equity market. In the disruptive days of the 1990s tech boom, the volatility of the S&P technology subsector was two to three times the VIX index. Today the implied volatility of XLK, the tech sector ETF, is actually lower than the VIX. The tech companies have brought down the overall level of market volatility.

Tech companies now sit atop a virtual toll booth and impose a charge on a myriad of transactions. Like water and power companies, they have monopolies, although these monopolies are driven by the price of infrastructure and the network effect. Google has the Internet-advertising monopoly. Microsoft has the personal computer software monopoly. Amazon has the Internet sales monopoly. Facebook has the targeted advertising monopoly. And Apple has the oddest monopoly of all: it is the vehicle by which customers assert their individuality by overpaying the largest-capitalization company in the world. [..] They’re all tech companies, and each dominates its corner of the industry: Google has an 88% market share in search advertising, Facebook (and its subsidiaries Instagram, WhatsApp and Messenger) owns 77% of mobile social traffic and Amazon has a 74% share in the e-book market. In classic economic terms, all three are monopolies.”

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“One Brexiter said: “There is no way to unpick Brexit that doesn’t involve civil war. “

Problem 1: Rich people trying to buy seats.

Problem 2: Both left and right across Europe want to “Love Europe Not the EU”. But the EU rules.

‘We Can’t Do Brexit With Half The Brexiteers Outside The Tent’ (G.)

As an investor in a Premier League football club and a collector of steam locomotives, Jeremy Hosking is used to expensive pursuits. The multimillionaire asset manager is under no illusions that his offer to fund well in excess of 100 local campaigns to unseat pro-Remain MPs could prove to be another. “This is going to stretch the bank’s ability to send out cheque books in a timely manner,” he says. “There is going to be a lot of ink involved.” Hosking has already spent in pursuit of securing Britain’s departure from the European Union shows his dedication to the cause. He gave about £1.7m to Vote Leave and even set up his own poster campaign, Brexit Express, as the referendum approached. Now the Crystal Palace co-owner wants to safeguard the result by funding Tory candidates trying to gain seats where most voters backed Brexit. He will do so through his Brexit Express campaign.

“For me, it is a long-running issue about sovereignty and the transfer of power,” he says. “It wouldn’t matter so much if the EU was constitutionalised properly, but one of the great things about being a democracy is we can boot the government out every five years, but we couldn’t boot out the EU. “A lot of the Remainers I know were really reformers – they held their nose and voted Remain in much the same way we are suggesting that traditional Labour voters should on this occasion hold their nose and vote Tory.” Hosking’s project is testing perhaps the most pertinent question posed by this election. Will the political fissure created by the EU referendum convince voters to abandon their traditional affiliations and back a party that more closely represents their views on Brexit?

The candidates eligible for his money must meet two simple tests. They must be a Conservative candidate trying to unseat an opposition MP that backed Remain. They must also be contesting a seat where most voters are believed to have voted in favour of Brexit. His team has come up with a list of 138 constituencies that they think fit the bill. All will be eligible for donations of up to £5,000 each. While there are some Lib Dems, SNP and Plaid Cymru-held seats on the list, the campaign is aimed overwhelmingly at Tories trying to win Labour-held seats in the north and the Midlands. There is a string of such seats that the Tories have a chance of winning. They include Coventry South, Bury South, Dewsbury, Gedling, Halifax and Bishop Auckland – a seat that has returned a Labour MP since 1935.

Hosking says that while Theresa May was not his “number one choice” as leader, he believes she is handling the Brexit issue well so far. He also believes that a cohort of Tory MPs from Brexit-supporting Labour seats could be key in safeguarding the referendum result and prevent any “backsliding”. “We need all the Brexiteers on the same side,” he says. “We can’t do this Brexit thing with half the Brexiteers outside the tent. “The thinking is, it would be strange if the Conservative party was dusting off inveterate Remainers to fight these seats… the Conservative party is more Brexit-orientated than it was a year ago.” Unlike some Brexiteers, Hosking knows there could be some bumpy times ahead. “We need the best team and you need the army fully equipped and as big as possible,” he says.

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He contradicts mis own words with impunity and of course doesn’t get called on it.

Schaeuble Says Financial Transfers In Euro Zone Are Necessary (R.)

German Finance Minister Wolfgang Schaeuble told a magazine he shared French president-elect Emmanuel Macron’s view that financial transfers from richer to poorer states are necessary within the euro zone. Macron, who is due to meet with German Chancellor Angela Merkel in Berlin on Monday, has promised to press ahead with closer European integration. Asked whether Macron was right in believing Europe and the euro zone need a “transfer union”, Schaeuble told Germany’s Der Spiegel magazine: “You can’t build a community of states of varying strengths without a certain balance.” “That’s reflected in the European budget and bailout programmes, for example, and that’s why there are net contributors and net recipients in Europe. A union can’t exist if the stronger members don’t vouch for the weaker ones,” he added in an interview to be published Saturday.

Some conservatives around Merkel worry the euro zone could develop into a “transfer union” in which Germany is asked to pay for struggling states that resist reforms. Schaeuble, a veteran member of Merkel’s party, said if countries wanted to make Europe stronger, it was necessary for each individual country to become stronger first – including France and Italy but also Germany. Schaeuble also signaled he would not object if the European Commission gave its blessing to possible French budget deficits: “It’s up to the European Commission to design the budget rules.” He added: “The German government and I have never objected to a ruling of the Commission on how the deficits of countries like France should be judged.” The European Commission estimates France’s deficit will be 3% of GDP this year, from 2.9% previously forecast, and 3.2% in 2018 from the previous forecast of 3.1%. EU rules say countries should keep their deficits below 3% of GDP.

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Not very useful without solid China data.

Ireland Is World’s Fourth-Largest Shadow Banking Hub (ITimes)

Ireland is home to the world’s fourth-largest “shadow banking” industry, with $2.2 trillion of nonbanking financial assets based in funds, special-purpose vehicles and other little-understood entities in Dublin’s IFSC, according to a report published on Tuesday. The figure equates to almost eight times the size of the Irish economy, as measured by GDP. The US has the world’s largest shadow-banking sector, with $13.8 trillion of assets as of 2015, according to the latest annual review of the sector by the Basel-based Financial Stability Board (FSB) as it searches for potential risks in the increasingly complex world of international finance. The Cayman Islands, which has taken part in the FSB study for first time, is the second-largest, at $4.3 trillion, followed by Japan, at $3.2 trillion.

The G20 major industrialised and emerging economies gave the FSB the job in 2010 of keeping track of the expanding world of financial activities that take place outside of mainstream banks, given the role that the sector played in the 2008 global financial crisis. The key concern is that, as central banks have clamped down on excessive risk-taking in the banking sector in the wake of the 2008 financial crisis, lenders might extend their use of shadow banking to escape the claws of regulators. “Market-based finance provides important diversification of the founding resources which support the real economy,” said Mark Carney, governor of the Bank of England and chairman of the FSB on the release of the latest report.

[..] The FSB said China, which ranked third with Ireland in the last report, published in late 2015, didn’t file data on time to be included in its narrow definition of shadow-banking activities that pose potential risks to global finance. Luxembourg, Ireland’s main rival in nonbanking financial activities in Europe, has not yet taken part in the annual survey. Nonbank financing provides a valuable alternative to bank funding and helps support economic activity, according to the FSB, adding that it can provide a “welcome” alternative supply of credit and provides “healthy competition for banks”.

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Where would we be without bubbles?

London Home Raffled For £3.75m Bought With Right-to-Buy in 2014 For £360k (G.)

A homeowner who tried to raise £3.75m by raffling her home online bought the property three years ago using the controversial right-to-buy scheme, and paid just £360,000. Renu Qadri, who lives in the house in Hardy Road, in south east London’s Blackheath, launched an online raffle on May 7. The dedicated website offered tickets for £5 each, with payments via Paypal. The stated aim was to sell 750,000 tickets, netting her £3.75m. A ticket picked at random would then win the property, including some of the furniture and £12,000 of “lead crystal chandeliers”. The raffle was halted on Thursday after advice from the homeowner’s local council, Greenwich, over “potential” breaches of Gambling Commission rules.

The website was taken down and replaced with a statement that said: “Ticket holders, please be advised that unfortunately we have been contacted by the local council informing us we will no longer be able to continue with this draw. Therefore we will be closing the site and all tickets holders will receive a full refund within 28 days. The five-bedroom flat is still on the market, however, and listed on property portal Rightmove for £1.25m. The owner, who is believed to have lived there since 2002, bought the property under the Government’s right-to-buy scheme three years ago, according to documents lodged with the Land Registry. It is understood that at the time it was valued at £460,000. Land Registry records confirm, however, that the price paid was £360,000, indicating the buyers benefited from a £100,000 right-to-buy discount. This is just under the maximum discount available through the scheme, which in London is currently £104,900.

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The media are too busy attacking Trump.

Media Blackout On The DNC Lawsuit Proves That It Is Nuclear (Med.)

I had the privilege of interviewing my newest personal hero yesterday, attorney Elizabeth Lee Beck, about her legal team’s fraud case against the Democratic National Committee. One of the many useful insights that this straight-shooting mom on fire brought to light during our conversation was her story about a time she reached out to New York Times reporter Michael Barbaro to get some help cracking through the deep, dark media blackout on this extremely important case. Barbaro had previously interviewed Beck and featured her in a front-page story not long ago, so she had every reason to try and contact him. What happened next? “The little piss head blocks me,” Beck said. Why is a journalist for the New York Times blocking a potential source from contacting him? Why is the mainstream media refusing to go anywhere near a legal case that has heavy implications for the future of American democracy?

You already know the answer to this deep down, whether you’re the kind of person who turns and faces reality or the kind of person who dissociates from reality at all costs while watching Samantha Bee and chugging cough syrup on the sofa. The function of the mass media is not to inform the American public of important things that are happening in their country, it is to turn attention away from the important things that are happening in their country and to keep them sleepy and compliant. The DNC lawsuit is one of the greatest threats to America’s power establishment right now, but only if people know about it. If the corporate media were to advance this story with even a fraction of the intensity that they’re advancing their xenophobic anti-Russia nonsense, they’d start waking up the sleeping masses to the fact that there is nothing resembling democracy happening in America at all.

And the DNC’s own lawyers have indeed made it abundantly clear to anyone who’s been listening that there is no democracy in America. You cannot make the case that you are not required to provide real primary elections in a rigidly-enforced two-party system and still say that democracy is happening to any extent within your nation. Being forced to choose between two establishment-selected corporatists is not democracy, and this revolutionary lawsuit has been showing in no uncertain terms that this is exactly what is happening both in practice and in theory. In order to say that there is any sort of democratic process in America at all, there would have to either be a way to run viable independent and third-party candidates, or the people would have to be able to determine who the candidates will be for the two parties that they are permitted to choose from. Currently neither of those things is happening.

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I’ve said it before: in Assange, Snowden, Manning etc., America -and the west- “persecutes, prosecutes, vilifies, condemns, exiles, or murders” its finest.

Patriotism And Conscience: The Edward Snowden Affair (LibR)

Here’s the point: If the NSA were to be abolished today and if Congress were to order all of its documents and records to be released immediately to the public, nothing would happen to the United States. Nothing! The same holds true for the CIA and the military-industrial complex. If all their files and records were to be suddenly disclosed to the people of the world, America would continue to exist as a country. It would not fall into the ocean, and the federal government would continue to operate. In fact, full disclosure of all of the illegal and immoral actions that the U.S. national-security establishment has engaged in during the past 70 years of its existence would be the greatest and healthiest thing that could ever happen to the United States.

Full disclosure of such secrets would be an antiseptic that would help cleanse the federal government and the country of many of the long-lasting stains that the national-security establishment has inflicted on it — an antiseptic that might finally begin to restore trust and confidence in the federal government among the American people. To be sure, the secrecy is always alleged to be justified by “national security,” the two most important words in any nation whose government is a national-security state. But what does that term mean? It has no objective meaning at all. It’s just a bogus term designed to keep nefarious and illegal actions secret. But heaven help those who reveal those secrets to others. They will be persecuted, prosecuted, vilified, condemned, exiled, or murdered. Nothing matters more to a national-security state than the protection of its secrets.

Those who reveal them must be made examples to anyone else who contemplates doing the same thing. In the process, conscience is suspended and stultified. It has no role in a national-security state. Individual citizens are expected to place their deep and abiding trust in the national-security establishment and to unconditionally defer to its judgment and expertise. Its job is to protect “national security” and that’s all that people need to know. Sometimes that entails illegal activity, such as murder, torture, and kidnapping, but that’s just the way it is. What’s important, they say, is that the national-security establishment is on the job, a perpetual sentinel for freedom, protecting “national security.”

Imagine that Edward Snowden voluntarily returned to the United States for trial. Do you think he would be given the opportunity at trial to show why he disclosed the NSA’s illegal and nefarious surveillance schemes? Do you think he would be entitled to argue that he was simply following the dictates of his conscience when he chose to reveal that information to the American people and the world?

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“Perhaps in order to save money, governments should also use prop-planes from the 1940s to conduct recon missions? ”

Worried About ‘Wannacry’? You Should Have Listened To Julian Assange (Duran)

A widespread computer virus attack known as ‘WannaCry’ has been compromising computers with obsolete operating systems across the world. This should be the opening sentence of just about every article on this subject, but unfortunately it is not. The virus does not attack modern computer operating systems, it is designed to attack the Windows XP operating system that is so old, it was likely used in offices in the World Trade Center prior to September 11 2001, when the buildings collapsed. Windows XP was first released on 25 August, 2001. A child born on the release date of Windows XP is now on the verge of his or her 17th birthday. Feeling old yet? The fact of the matter is that governments and businesses around the world should not only feel old, they should feel humiliated and disgraced.

With the amount of money governments tax individuals and private entities, it is beyond belief that government organisations ranging from some computers in the Russian Interior Ministry to virtually all computers in Britain’s National Health Service, should be using an operating system so obsolete that its manufacturer, Microsoft, no longer supports it and hasn’t done for some time. Perhaps in order to save money, governments should also use prop-planes from the 1940s to conduct recon missions? The scathing reality of this attack is that Julian Assange warned both private and public sectors to be on guard against known vulnerabilities in such systems, vulnerabilities Wikileaks helped to expose. Assange even offered to help companies to get their digital security up to date. The fact that Assange’s plea fell on deaf ears must bring further shame to all those impacted by the ‘WannaCry’ attacks who refused to listen to Assange and get with the times.

[..] if only governments and mega-corporations took precautions to ensure actual safety measures were in place, rather than engaging in bogus fear-mongering in order to conceal their own incompetence and lack of modern technology, the people that such bodies are supposed to protect would be safe rather than misled and exposed to threats. The blame for today’s attack can and should be equally shared by the hackers themselves and by those who patently ignored the warnings of Julian Assange, who advised the wider world to get clever, get secure and get modern upon the release of Vault 7 by Wikileaks. When there is a wolf at your door, it is unwise to blame the person pointing out the presence of the hungry wolf. Those who attack Julian Assange for pointing out the wolf of un-secured computer systems are doing just that.

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How many people know and understand that the economic models on which all current policies are based entirely ignore both credit and energy in our economies? How crazy is that?

Steve Keen Defines A Production Function Based On Energy (Res.)

Professor Steve Keen may be the first mainstream economist to address a fatal flaw in economic theory: omitting or minimizing the role of energy. Keen has developed a production formula incorporating energy, not as one factor of production along with capital and labor, but as the indispensable flow activating both. “Labor without energy is a corpse” says Keen; “Capital without energy is a sculpture.” Keen was one of twenty or so economists who made a credible prediction of the 2008-9 crisis, which government economists in the US and abroad declared “unpredictable” – after it blindsided them.

His work draws on contemporary economic theory and generates real-world predictions. He’s the sort of economist who financial commentators, investors and even government economists listen to; folks who haven’t heard of Daly’s steady state economy, Odum’s energy flow analysis of the ecosystem-economy, or Hall’s EROI “cheese slicer” model. Keen’s model implies that economic production is measurable in energy units, as Odum and others argued. Wealth is “nothing but the food, conveniences and pleasures of life,” as the earliest economists recognized. But it results from useful work, which can be measured in kilocalories. (To us weight watchers, just “calories.”) Here is his fundamental equation (the only one here, I promise):

To test his model against real data, Keen correlated its results with historical statistics of US GDP, and then compared correlations of GDP with the key terms individually. Over 40-odd years of data, his function correlated 0.79 with US GDP. The correlations with employment (Labor) alone and energy consumption (E) alone were much lower, at 0.60 and 0.59 respectively. His model might have correlated better if applied to a closed economic system, such as the entire world, or the US prior to 1970, if good data were available. Most of the useful work that supports Americans today is performed in the Far East or in the engines of container ships, and the energy inputs are considerable. Introducing his test data, Keen remarked that government statistics showing minimal unemployment were “just nonsense”. He presented a measure of employment instead. “They ask what Trump is complaining about- here’s what he’s complaining about..” (This was back in November.)

Presenting a chart of industrial energy consumption 1960-present, Keen remarked on the on the long decline since the 1979 peak, his latest values showing consumption comparable to 1967-8. Partly the result of increased efficiency, he said, but also “..becoming intractable because we are moving from highly efficient oil and coal to much less efficient wind and solar.” (Efficiency as energy output per unit of energy input.) I don’t think I’m overstating to say that Keen’s model marks a breakthrough in mainstream economics, though Keen describes it as merely “..the beginnings of a decent equation to explain the role of energy in production.”..demonstrating that wealth is “..fundamentally created by the exploitation of free energy, as the Physiocrats argued two centuries ago.” For those who discount any economic reasoning not expressed in calculus, Keen’s work opens an access to the wisdom of the Physiocrats. Maybe that of Daly, Odum and Hall as well.

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Time to organize. Or keep losing.

The Rise Of Rentiers And The Destruction Of The Middle Class (Ev)

The facts about the decline of the American middle class are increasingly familiar, though startling nonetheless. After growing almost continuously since World War II, U.S. median income stagnated at the end of the 1980s and then, beginning in 2000, declined 11%. Middle-class incomes today are no higher in real terms than they were in 1987. Much of the debt that caused the crisis was accumulated by the middle class as people tried to compensate for stagnant incomes by mortgaging up their homes and running up their credit cards. Then the debt bubble burst and the median family lost nearly $50,000, or 40% of its net wealth, from 2007 to 2010. For the typical middle-class family, the crisis wiped out 18 years of savings and investment. With too much debt before the crisis and their modest savings hammered by the downturn, many middle-class baby boomers are facing a major decline in living standards as they age.

On the other side of the generational divide, this will be the first cohort in modern American history whose children will quite possibly be poorer than their parents. So what do the rise of rentier capitalism and the hollowing out of America’s middle class have to do with each other? It is too simple to say that one directly caused the other. But they are more tightly linked than might be expected. The usual explanations for the woes of the American middle class point to big tectonic forces—namely globalization and technological change. At a superficial level this argument is correct—competition from low-wage countries has depressed wage growth in certain sectors, and technology has eliminated some manufacturing and middle-management jobs. But what this analysis leaves out is what we didn’t do—we didn’t make the long-term investments that would have helped us better adapt to these tectonic shifts.

One of the great historical strengths of both American capitalism and the American political system has been their adaptability. When the Industrial Revolution threatened America’s largely agricultural economy, America adapted and went one better, leapfrogging European industrial production by the early twentieth century. When industrialization then unbalanced America’s political system and strained its social fabric, Teddy Roosevelt unleashed a wave of political and social innovation, busting up trusts and introducing protections for consumers and workers. In the depths of the Depression, another Roosevelt responded with rural electrification, the creation of Social Security, and financial regulation that kept the system stable for 70 years. When the Soviet Union challenged America in the Cold War, we made massive investments in technology, education, and the National Highway System. The benefits of these innovations and investments flowed broadly in American society, not least to the middle class.

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Austrian school.

The Economic School You’ve Never Heard Of (EpT)

Economics was once tasked with describing how man manages the world’s scarce resources, a process far older than economics as a science. But it has morphed into a field that blames the individual and reality for not measuring up to its theories, and then uses the coercive power of the state in an attempt to shape individuals and reality according to its ends. The Austrian school of economics, the once dominant school of economic thought at the turn of the 19th century, focuses on the individual—and his or her actions and motivations—to explain economic life. It derives its name from the many scholars from Austria who developed 19th-century classic liberalism into a coherent explanation of economic life.

“Economics is in reality very simple. It functions in the same way that it did thousands of years ago. People come together to voluntarily engage in commerce with one another for their mutual benefit. People specialize and divide work among themselves to advance their condition,” writes modern Austrian economist Philipp Bagus in his book “Blind Robbery!” A bedrock principle of this understanding is that exchange should occur voluntarily and not under the coercion of the state or any other party. If exchange is voluntary, the individual or company must offer something of value if it wants to obtain something of value. This premise encourages innovative, creative, and productive behavior. It also forces individuals to think about what their fellow humans may appreciate or need. Every decision to allocate capital and labor needs to stand the test of reason, argument, and negotiation.

On aggregate, this decision-making process is much more elaborate and prudent than any central planning decision, which must use force to compel its subjects. “Production is directed either by profit-seeking businessmen or by the decisions of a director to whom supreme and exclusive power is entrusted. . . . The question is: Who should be master, the consumers or the director?” Austrian school economist Ludwig von Mises (1881-1973) writes in his book “Human Action.” This approach to economics can do without the complex mathematical models of the current schools because it admits that perfection doesn’t exist. There is no equilibrium. Things aren’t perfect, but the best possible solution to economic problems will be found by private individuals acting voluntarily, each assessing new situations for themselves.

“This is precisely what the price system does under competition, and which no other system even promises to accomplish. It enables entrepreneurs, by watching the movement of comparatively few prices, as an engineer watches the hands of a few dials, to adjust their activities to those of their fellows,” Nobel laureate Friedrich von Hayek wrote in his 1944 classic “The Road to Serfdom.”

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How any people are still happy in their work? Why do they volunteer to work for others?

The Future of Work, Robotization, and Capitalism’s Useless Jobs (Bregman)

I admit, we’ve heard it all before. Employees have been worrying about the rising tide of automation for 200 years now, and for 200 years employers have been assuring them that new jobs will naturally materialize to take their place. After all, if you look at the year 1800, some 74% of all Americans were farmers, whereas by 1900 this figure was down to 31%, and by 2000 to a mere 3%. Yet this hasn’t led to mass unemployment. In 1930, the famous economist John Maynard Keynes was predicting that we’d all be working just 15-hour weeks by the year 2030. Yet, since the 1980s, work has only been taking up more of our time, bringing waves of burnouts and stress in its wake. Meanwhile, the crux of the issue isn’t even being discussed. The real question we should be asking ourselves is: what actually constitutes “work” in this day and age?

In a 2013 survey of 12,000 professionals by the Harvard Business Review, half said they felt their job had no “meaning and significance,” and an equal number were unable to relate to their company’s mission, while another poll among 230,000 employees in 142 countries showed that only 13% of workers actually like their job. A recent poll among Brits revealed that as many as 37% think they have a job that is utterly useless. They have, what anthropologist David Graeber refers to as, “bullshit jobs”. On paper, these jobs sound fantastic. And yet there are scores of successful professionals with imposing LinkedIn profiles and impressive salaries who nevertheless go home every evening grumbling that their work serves no purpose.

Let’s get one thing clear though: I’m not talking about the sanitation workers, the teachers, and the nurses of the world. If these people were to go on strike, we’d have an instant state of emergency on our hands. No, I’m talking about the growing armies of consultants, bankers, tax advisors, managers, and others who earn their money in strategic trans-sector peer-to-peer meetings to brainstorm the value-add on co-creation in the network society. Or something to that effect. So, will there still be enough jobs for everyone a few decades from now? Anybody who fears mass unemployment underestimates capitalism’s extraordinary ability to generate new bullshit jobs. If we want to really reap the rewards of the huge technological advances made in recent decades (and of the advancing robots), then we need to radically rethink our definition of “work.”

It starts with an age-old question: what is the meaning of life? Most people would say the meaning of life is to make the world a little more beautiful, or nicer, or more interesting. But how? These days, our main answer to that is: through work. Our definition of work, however, is incredibly narrow. Only the work that generates money is allowed to count toward GDP. Little wonder, then, that we have organized education around feeding as many people as possible in bite-size flexible parcels into the employment establishment. Yet what happens when a growing proportion of people deemed successful by the measure of our knowledge economy say their work is pointless? That’s one of the biggest taboos of our times. Our whole system of finding meaning could dissolve like a puff of smoke.

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Painful. 3rd world.

US Much Women More Likely To Die In Childbirth Than 25 Years Ago (ProP)

The ability to protect the health of mothers and babies in childbirth is a basic measure of a society’s development. Yet every year in the U.S., 700 to 900 women die from pregnancy or childbirth-related causes, and some 65,000 nearly die — by many measures, the worst record in the developed world. American women are more than three times as likely as Canadian women to die in the maternal period (defined by the Centers for Disease Control as the start of pregnancy to one year after delivery or termination), six times as likely to die as Scandinavians. In every other wealthy country, and many less affluent ones, maternal mortality rates have been falling; in Great Britain, the journal Lancet recently noted, the rate has declined so dramatically that “a man is more likely to die while his partner is pregnant than she is.”

But in the U.S., maternal deaths increased from 2000 to 2014. In a recent analysis by the CDC Foundation, nearly 60% of such deaths were preventable. While maternal mortality is significantly more common among African Americans, low-income women and in rural areas, pregnancy and childbirth complications kill women of every race and ethnicity, education and income level, in every part of the U.S. [..] The reasons for higher maternal mortality in the U.S. are manifold. New mothers are older than they used to be, with more complex medical histories. Half of pregnancies in the U.S. are unplanned, so many women don’t address chronic health issues beforehand. Greater prevalence of C-sections leads to more life-threatening complications. The fragmented health system makes it harder for new mothers, especially those without good insurance, to get the care they need. Confusion about how to recognize worrisome symptoms and treat obstetric emergencies makes caregivers more prone to error.

Yet the worsening U.S. maternal mortality numbers contrast sharply with the impressive progress in saving babies’ lives. Infant mortality has fallen to its lowest point in history, the CDC reports, reflecting 50 years of efforts by the public health community to prevent birth defects, reduce preterm birth and improve outcomes for very premature infants. The number of babies who die annually in the U.S. — about 23,000 in 2014 — still greatly exceeds the number of expectant and new mothers who die, but the ratio is narrowing. The divergent trends for mothers and babies highlight a theme that has emerged repeatedly in ProPublica’s and NPR’s reporting. In recent decades, under the assumption that it had conquered maternal mortality, the American medical system has focused more on fetal and infant safety and survival than on the mother’s health and well-being.

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Everybody in the west is responsible for this. Our governments willfully create the chaos that generates it.

Africa’s New Slave Trade (G.)

The dangers of attempting to cross the Mediterranean to Europe, in overcrowded, unseaworthy vessels, have been highlighted by a series of desperate rescue missions and thousands of deaths at sea in recent years. Last week, at least 245 people were killed by shipwrecks, bringing the toll for this year alone to 1,300. Less well-known are the dangers of Libya itself for migrants fleeing poverty across West Africa. The country’s slide into chaos following the 2011 death of dictator Muammar Gaddafi and the collapse of the government have made it a breeding ground for crime and exploitation. Two rival governments, an Isis franchise and countless local militias competing for control of a vast, sparsely populated territory awash in weapons, have allowed traffickers to flourish, checked only by the activities of their criminal rivals.

Last year, more than 180,000 refugees arrived in Italy, the vast majority of them through Libya, according to UN agency the International Organisation for Migration (IOM). That number is forecast to top 200,000 this year – and these people form a lucrative source of income for militias and mafias who control Libya’s roads and trafficking networks. Migrants who managed to reach Europe from Libya have long told of being kidnapped by smugglers, who would then torture them to extort cash as they waited for boats. But in recent years this abuse has developed into a modern-day slave trade – plied along routes once used by slaving caravans – that has engulfed tens of thousands of lives.

The new slave traders operate with such impunity that, survivors say, some victims are being sold in public markets. Most, however, see their lives and liberty auctioned off in private. “They took people and put them in the street, under a sign that said ‘for sale’,” said Shamsuddin Jibril, 27, from Cameroon, who twice saw men traded publicly in the streets of the central Libyan town of Sabha, once famous as the home of a young Gaddafi, but now known for violence and brutality. “They tied their hands just like in the former slave trade, and they drove them here in the back of a Toyota Hilux. There were maybe five or seven of them.”

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Mar 082017
 
 March 8, 2017  Posted by at 7:04 pm Finance Tagged with: , , , , , , , , , ,  


Pablo Picasso Girl Before A Mirror 1932

 

Obviously, like hopefully many people, I’ve been following the WikiLeaks CIA revelations, and closely. It’s too early for too many conclusions, if only because WikiLeaks has announced much more will flow from that same pipeline. But one thing is already clear: the CIA is -still- a club that sees enemies behind every tree, and behind every TV set too. Which is not as obvious a world view as it may seem; it’s just something we’ve become used to.

Moreover, as we see time and again, organizations like the CIA and NATO have no qualms about ‘creating’ enemies if they are in short supply. The flavor du jour has now been, for years, Russia, but don’t be surprised if another one is cultivated alongside it. ISIS, China, North Korea, plenty of options, and plenty of media more than willing to aid the cultivation process. It’s a well-oiled machine geared towards making something out of nothing, a machine very adept at making you believe anything it wants you to.

In this way, our friends can become our enemies, and our enemies our friends. What gets lost in translation is that this way in reality we become our own worst enemies. While the upper and most secretive layers of society, filled with folk of questionable psychological constitution -sociopaths and psychopaths-, get to chase their dreams of wealth and power, those who try to live normal decent lives are, for that very purpose, increasingly subjected to poverty, misery and fear. As our economies decline further, this will only get worse.

 

Who needs your -conscious- vote or voice if these can be easily manipulated? Or do you not think you’re being manipulated? How many of you, American or European, think Russia is an actual threat to you? I’m afraid by now there’s a majority on each continent who perceive Putin as an evil force. The president of a country that spends one-tenth on its military of what the US does. Trump’s announced military spending increase alone is almost as much as Russia spends in a whole year.

If Putin is really the threat he’s made out to be, to both Europe and the US, he must be extremely smart; merely devious wouldn’t do it. A man who can be an active threat to two entire continents and almost a billion people while spending a fraction on building that threat of what those he threatens do, must be a genius. Or the victim of media-politico manipulation.

But we don’t stop there. As the CIA spying and hacking files once again make abundantly clear, America increasingly seeks its enemies at home. This may be presented in the shape of Donald Trump, or terrorists on US soil, imported or not, but claiming that we can still tell a real threat from an invented one is no longer credible. We are led along on a propaganda leash 24/7, and the best thing about it is we believe we are not. That’s why it’s a good idea to pay close attention to what WikiLeaks is telling us.

The most extreme example of the political machinery turning our friends into enemies is probably right there, in the WikiLeaks and whistleblower corner of society. Earlier today I wrote:

The CIA spent a huge wad of taxpayer money on this, and then lost it all. It’s early days to say what this will mean for the agency’s abilities, and the nation’s safety, as well as that of American citizens, but it’s not good. Question is: who’s going to investigate how this could have happened? (Snowden and Kim Dotcom could)… And who’s going to repair the damage done? Anyone could be spying on your phone and your TV by now, not just the CIA -as if that wouldn’t be bad enough.

Then later I saw I wasn’t the only one who had thought of this:

 

 

Edward Snowden and Kim Dotcom and Julian Assange and Chelsea Manning are ‘the enemy’, so say our ‘leaders’. They have received this honorable label for exposing secrets these same leaders were trying to hide from us. Secrets most of us, if we think it over, would say should not be kept from us. The NSA spying on the American people, or the CIA turning your phones and TVs and cars into objects that can be used against you, these are things that don’t belong in our societies.

Still, as I’ve always said, if they can do it -from a technical point of view-, they will, damn the law. So we will have to make very sure the laws keep up with these developments, or we’re defenseless. The Obama administration hasn’t been much help with this, and the rest of Washington won’t be either, they’re not just part of the machine, they are the engine that drives the machine. Obama allegedly gave in to the CIA for fear of ending up like JFK and the rest, along with the press, is under control too.

So perhaps Trump is our best chance at putting a stop to this coup, this deep state, from taking over. If we still can. And for that we might well need Snowden and Dotcom and Assange, who are not the enemies they are made out to be, they are the smartest among us, or at least they belong right up there. And they are not only the smartest, they are the bravest too. Locking them up would be a huge disservice to our societies, it would be much better to ask them to help us figure out what game the hell is being played.

 

One thing the WikiLeaks files accomplished is they made and and all accusations of Russian hacking, and of links between Trump and Russia, utterly meaningless in one fell swoop. Because the CIA has acquired the capability, both through hacking Russian files and through coding, to leave ‘footprints’ that make it look like the Russians left them. And the only ‘proof’ there ever was for all these accusations was based on these footprints. That’s one narrative that must now be restarted from scratch -just one of many.

All we need now is for Trump to figure out who his enemies are, and who his friends. He already knows the CIA is not his friend, but has he figured out yet that the whistleblowers are not his enemy? And has his crew? Kim Dotcom is right, Trump is in real danger, he’s been watched, and being watched, 24/7. Whether Obama ordered that or not is not very relevant. There are more urgent matters at hand.

And somewhere along the way he’s going to have to figure out that chasing women and children around the country and out of it is not just ugly, it’ll cost him too much sympathy too. But so far all protests come from the Democrats and their supporters, who have all been left voiceless and shapeless by the election and now see their Russian conspiracy narratives blown to smithereens too, so why wouldn’t he please his own voters for a bit longer?

Well, for one thing, because he has to start to realize he’s going to need very broad support, and soon, be a president for all Americans so to speak, to fend off the CIA et al, and in what may be the hardest thing to do, he needs to invoke transparency, explain to people exactly what he does, and why, to drain the deep swamp.

If he fails in all this, and for now the odds point in that direction, those who protest him today will feel validated, right, and winners. They will be tragically wrong. Because if Trump loses this, the CIA wins. And then we will all live in 1984 for as far into the future as we can see.

I know there’s a lot that’s not to like about Trump and Bannon and all those guys. However, look at it this way: they are the only ones who can keep the doors of the vault from slamming shut for the rest of our lives, leaving time for y’all to wake up and find a president who doesn’t seek to turn your friends into your enemies. At least you’ll still have that choice.

With present-day Washington, Democrat or Republican, there’s no such choice. They’re CIA, as are the media. Kim Dotcom tweeted this too today: