Feb 082019
 
 February 8, 2019  Posted by at 10:36 am Finance Tagged with: , , , , , , , , , , , , ,  


Salvador Dali They were there 1931

 

AOC, The Little Socialist That Could (Strassel)
Green New Deal Takes Its First Congressional Baby Step (IC)
Are Billionaires The American Dream? (NYMag)
China Is Unlikely To Become The World’s Largest Economy Anytime Soon (Colombo)
European Economy Raises Fresh Global Growth Fears (MW)
US Consumer Credit Hits $4 Trillion; Student, Auto Loans Hit All Time High (ZH)
Corbyn Sparks Labour Civil War Over Referendum (Ind.)
Brexit Deal May Not Be Put To MPs Until Late March (G.)
France Recalls Rome Envoy Over Worst Verbal Onslaught ‘Since The War’ (G.)
Rome’s War Of Words With Macron May Prove Self-Defeating (G.)
Fiat Chrysler Shares Plummet 12% On Weak Outlook (CNBC)
‘Globish’: Why France Has A Love-Hate Relationship With Global English (G.)
Trump’s Absurd Claim that Americans Are Free from Government Coercion (Bovard)
Albert Edwards: Negative Rates, 15% Budget Deficits And Helicopter Money (ZH)
Fed’s Powell On The Biggest Challenge Over The Next Decade (CNBC)

 

 

AOC is a step too far for Kimberley Strassel- and many others. She tweets: “The Republican Party has a secret weapon for 2020. It’s especially effective because it’s stealthy: The Democrats seem oblivious to its power. And the GOP needn’t lift a finger for it to work. All Republicans have to do is sit back and watch 29-year-old Rep. Alexandria Ocasio-Cortez . . . exist.”

That reminds me a lot of what many people said about Trump a few years ago, and that is no coincidence. AOC shakes up things like the Donald did, things in desperate need of shaking up.

She unveiled her Green New Deal, and got tons of ridicule. But 9 senators and 64 congressmen already sponsor her resolution. Perhaps her biggest danger is that they, the old guard, line up with her, and she becomes one of them. Or no, her biggest risk is in criticizing Trump and falling into the old guard that way. While her biggest danger is calling herself a socialist, which is a death sentence in the US.

And there’s her limited knowledge of energy issues, which apparently leads her to think present systems can be replaced 1-on-1 by renewable ones, while the no. 1 energy plan should be to use much less.

But she got something to say, this piece is pretty solid, and it will appeal to many disgruntelds:

AOC, The Little Socialist That Could (Strassel)

AOC, as she’s better known, today exists largely in front of the cameras. In a few months she’s gone from an unknown New York bartender to the democratic socialist darling of the left and its media hordes. Her megaphone is so loud that she rivals Speaker Nancy Pelosi as the face of the Democratic Party. Republicans don’t know whether to applaud or laugh. Most do both. For them, what’s not to love? She’s set off a fratricidal war on the left, with her chief of staff, Saikat Chakrabarti, this week slamming the “radical conservatives” among the Democrats holding the party “hostage.” She’s made friends with Jeremy Corbyn, leader of Britain’s Labour Party, who has been accused of anti-Semitism.

She’s called the American system of wealth creation “immoral” and believes government has a duty to provide “economic security” to people who are “unwilling to work.” As a representative of New York, she’s making California look sensible. On Thursday Ms. Ocasio-Cortez unveiled her vaunted Green New Deal, complete with the details of how Democrats plan to reach climate nirvana in a mere 10 years. It came in the form of a resolution, sponsored in the Senate by Massachusetts’ Edward Markey, on which AOC is determined to force a full House vote. That means every Democrat in Washington will get to go on the record in favor of abolishing air travel, outlawing steaks, forcing all American homeowners to retrofit their houses, putting every miner, oil rigger, livestock rancher and gas-station attendant out of a job, and spending trillions and trillions more tax money.

Oh, also for government-run health care, which is somehow a prerequisite for a clean economy. It’s a GOP dream, especially because the media presented her plan with a straight face – as a legitimate proposal from a legitimate leader in the Democratic Party. Republicans are thrilled to treat it that way in the march to 2020, as their set-piece example of what Democrats would do to the economy and average Americans if given control. The Green New Deal encapsulates everything Americans fear from government, all in one bonkers resolution.

Read more …

AOC already has 9 senators and 64 congressmen sponsoring her resolution. Look for them distancing themselves as soon as it hurts them in the polls.

Green New Deal Takes Its First Congressional Baby Step (IC)

Over the last few months, support for the Green New Deal has become a litmus test for 2020 Democratic hopefuls, and the resolution serves dual purposes: to unite lawmakers around the idea of a Green New Deal, and to offer a basic definition of what that means. For 2020 contenders who have conceptually supported the Green New Deal, the resolution makes clear that the phrase isn’t just a talking point, but connected to a specific set of policy priorities. Confirmed and rumored presidential hopefuls Elizabeth Warren, Kamala Harris, Kirsten Gillibrand, Cory Booker, and Bernie Sanders will be among the nine senators co-sponsoring the resolution. Sixty-four House Democrats will also be co-sponsoring the legislation, including Reps. Ro Khanna, D-Calif., Pramila Jayapal, D-Wash., and Joe Neguse, D-Colo.

“We’re going to be pressuring all of the 2020 contenders to back this resolution,” said Stephen O’Hanlon, a spokesperson for the Sunrise Movement, which helped launched the Green New Deal into the national spotlight with its sit-in at Pelosi’s office last November. “That’ll make it clear who’s using the Green New Deal as a buzzword and who’s actually serious about what it entails. For our generation, the difference between the Green New Deal as a buzzword and substantive policy is life and death.” [..] On Tuesday, the Sunrise Movement hosted some 500 watch parties around the country for a livestream laying out its next steps to support the resolution. As of Wednesday, the group was in the process of organizing visits to 600 congressional offices nationwide, for constituents to demand that their representatives co-sponsor Ocasio-Cortez and Markey’s measure. Supported by Justice Democrats — the group that backed Ocasio-Cortez’s primary run — Sunrise will also be launching a 15-city campaign tour through early primary states.

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2 weeks old but relevant.

Are Billionaires The American Dream? (NYMag)

In 1835, Alexis de Tocqueville produced one of the earliest accounts of the American dream. In his famous study of the Jacksonian U.S., the Frenchman wrote that Americans possessed “the charm of anticipated success” — a ubiquitous optimism that he attributed to our country’s democratic character, and to the “general equality of condition” that prevailed among its “people.” On Wednesday night, Sean Hannity took de Tocqueville to task. In the Fox News’ host’s telling, general economic equality is not a precondition for the American dream, but rather, an insurmountable obstacle to it — because the American dream is (apparently) to earn more than $10 million year without having to pay a top marginal tax rate higher than 37 percent.

Of course, Hannity did not actually frame his argument as a rebuke of de Tocqueville. His true target was Alexandria Ocasio-Cortez. After popularizing the idea of a 70 percent top marginal tax rate earlier this month, the freshman congresswoman recently suggested that the mere existence of billionaires was both immoral, and a threat to American democracy. “I do think that a system that allows billionaires to exist when there are parts of Alabama where people are still getting ringworm because they don’t have access to public health is wrong,” Ocasio-Cortez told the writer Ta-Nehisi Coates, during an interview on Martin Luther King Day.

One day later, the congresswoman approvingly quoted an op-ed by the economists Gabriel Zucman and Emmanuel Saez, which argued that the purpose of high taxes on the wealthy wasn’t merely to generate revenue, but rather, to safeguard “democracy against oligarchy.” Hannity’s not buying it. The Fox News host informed his audience Wednesday that Ocasio-Cortez had “called the American dream immoral,” and that she wants to “empower the government to confiscate” said dream. “Better hide your nice things,” Hannity advised his audience (whom he ostensibly believes to be composed primarily of billionaires), “because here come the excess police.”

[..] “Power and property may be seperated for a time, by force or fraud — but divorced never, ” Benjamin Leigh, a conservative legislator in Virginia’s House of Delegates, argued at that state’s Constitutional Convention in 1830. “For, so soon as the pang of separation is felt … property will purchase power, or power will take property.”

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Good to see my longtime friend Jesse Colombo slowly moves to my position on markets, now spelling them “markets”. And we see China largely the same too.

China Is Unlikely To Become The World’s Largest Economy Anytime Soon (Colombo)

As I have been warning for several years, China is experiencing a credit and asset bubble like Japan was in the 1980s. China’s powerful credit expansion in the past decade (as the chart below shows) is one of the main reasons why the global economy recovered from the Great Recession. China’s credit bubble of the past decade will prove to be a one-shot deal – in the next global economic downturn, there won’t be another large economy like China to binge on debt and create a temporary growth party that bails everyone else out.

An economic stagnation or slowdown in China is the least of our worries, I’m afraid. I am worried about a full-blown popping of their credit and asset bubble (like Japan in the early-1990s), which would reverberate around the world. In that scenario, Western exports to China would plunge, commodity-exporting economies from Australia to emerging markets would suffer, and the global economy would experience another severe recession if not an outright depression. The world has played with fire over the past decade and it’s just a matter of time before we all pay the price.

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Caught on Twitter: “Asked at a presser if he wakes up each morning regretting that he’s the @bankofengland governor in the age of Brexit, @markcarney1 replies: “I don’t wake up in the morning any more … I wake up in the middle of the night.”

European Economy Raises Fresh Global Growth Fears (MW)

The Bank of England and the European Commission both offered downbeat outlooks on Thursday, reaffirming growing fears about the health of Europe’s economy. Although, the BOE left interest rates unchanged, as expected, it cut its forecast for 2019 GDP to 1.2% versus its previous estimate of 1.7%, with its current level representing the weakest growth since 2009 when a crisis sparked by complex mortgage bonds cast a pall over the global financial system. “Naturally, the uncertainty over Brexit means considerable uncertainty over the U.K. macro outlook, and therefore monetary policy,” said Bill Diviney, senior economist at ABN Amro.

Both the BOE and Diviney still see a soft Brexit — where Britain leaves the European Union with a trade agreement in place — as the most likely scenario, but the U.K. economy seems destined to slow, notwithstanding any expectations of a trade resolution. [..] And it doesn’t look rosy on either side of the English Channel. On Thursday, the European Commission cut its forecast for 2019 eurozone growth to 1.3% in 2019, compared with the 1.9% expected in November. Underlining its forecast was weaker-than-expected industrial and manufacturing data for the eurozone’s biggest economy Germany. “We think there are a number of important take-aways,” said Diviney. “First of all, despite the large downgrade in economic growth forecasts, they probably do not go far enough, and further revisions are likely.”

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From revolving into non-revolving credit. Progess in America 2019.

US Consumer Credit Hits $4 Trillion; Student, Auto Loans Hit All Time High (ZH)

After a few months of wild swings, in December US consumer credit normalized rising by $16.6 billion, just below the $17 billion expected, after November’s whopping $22.5 billion. The surge in borrowing in November brought the total to just above $4 trillion for the first time ever on the back of a America’s ongoing love affair with auto and student loans. Revolving credit increased by $1.7 billion to $1.045 trillion, a modest slowdown since November’s $4.8 billion.

[..] while the slowdown in December credit card use may prompt fresh questions about the strength of the US consumer during the all-important holiday spending season, the recent dramatic upward revision to personal savings notwithstanding, one place where there were no surprises, was in the total amount of student and auto loans: here as expected, both numbers hit fresh all time highs, with a record $1.593 trillion in student loans outstanding, an impressive increase of $10.3 billion in the quarter, while auto debt also hit a new all time high of $1.155 trillion, an increase of $9.5 billion in the quarter. In short, whether they want to or not, Americans continue to drown even deeper in debt, and enjoying every minute of it.

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Is it too late for Corbyn to take control of the conversation? is he even capable?

Corbyn Sparks Labour Civil War Over Referendum (Ind.)

Jeremy Corbyn is battling to calm a growing Labour civil war over his refusal to support a fresh Brexit referendum, as some of his MPs threatened to quit the party in protest. The Labour leader was forced to justify his intentions after his new offer to help Theresa May deliver Brexit triggered accusations that he had torpedoed his party’s policy of keeping a public vote on the table. Amid growing tensions, Mr Corbyn wrote to party members to insist that party backing for a Final Say referendum remained an option – hours after furious Labour MPs accused their leader of helping enable Brexit.

The backlash was triggered when Mr Corbyn wrote to Ms May on Wednesday evening offering continued discussions in “constructive manner” with the aim of “securing a sensible agreement that can win the support of parliament and bring the country together”. Labour would support an exit deal if five conditions were met, he said, including a customs union with the EU and guarantees on workers’ rights. The move infuriated anti-Brexit MPs pushing for Labour to back giving the public the final say on Brexit, with two suggesting they were considering quitting the party over the issue. Owen Smith, who stood against Mr Corbyn for the party leadership in 2016, said Labour should be opposing the “disaster” that is Brexit.

Asked if Mr Corbyn’s letter paved the way for Labour MPs to support a Brexit deal put forward by Ms May, he told BBC 5Live: “I think that’s probably right. My fear is that this is the leadership rolling the pitch for accepting a version of Theresa May’s deal, and I think that will be at odds with our values and damaging to our country and damaging to the politics that we’ve traditionally believed it. “Brexit is a right-wing ideological project and we should be opposing it on those terms.”

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And by then, why bother?

Brexit Deal May Not Be Put To MPs Until Late March (G.)

The Brexit negotiations are being pushed to the brink by Theresa May and the EU, with any last-minute offer by Brussels on the Irish backstop expected to be put to MPs just days before the UK is due to leave. In strained talks on Thursday, during which Donald Tusk suggested that Jeremy Corbyn’s plan could help resolve the Brexit crisis, Theresa May and the European commission president, Jean-Claude Juncker, agreed to hold the next face-to-face talks by the end of February. That move cuts deep into the remaining time, piling pressure on the British parliament to then accept what emerges or face a no-deal scenario.

It is understood that EU officials are looking at offering May a detailed plan of what a potential technological solution to the Irish border might look like, which could be included in the legally non-binding political declaration on the future trade deal. The blueprint would pinpoint the problem areas and commit to breaching the technical gaps where possible to offer an alternative to the customs union envisaged in the withdrawal agreement’s Irish backstop. But officials believe it is increasingly likely that any renegotiated deal will only be put to the Commons at the end of March, necessitating even then an extension of the article 50 negotiating period to get legislation through parliament.

On Thursday the German finance commissioner, Günther Hermann Oettinger, suggested the chance of a no-deal Brexit was now as high as 60%. “If the British side asks for an extension of two or three months and there are reasons for that, I think there’s a good chance that the member states would accept that unanimously,” he said. “But in the eight or 12 weeks there needs to be the possibility of achieving progress and that there must be a withdrawal agreement at the end of that.”

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Old paradigms are dying everywhere. Given the state we find ourselves in, how bad can that be?

France Recalls Rome Envoy Over Worst Verbal Onslaught ‘Since The War’ (G.)

Paris has taken the extraordinary step of recalling its ambassador from Rome, in the worst crisis between the two neighbouring countries since the second world war. France blamed what it called baseless verbal attacks from Italy’s political leaders, which it said were “without precedent since world war two”. Italy’s two deputy prime ministers, the far-right Matteo Salvini and Luigi Di Maio of the populist, anti-establishment Five Star Movement, have in recent months criticised the French president, Emmanuel Macron, on a host of inflammatory issues, from immigration to the gilets jaunes (yellow vest) anti-government demonstrations.

Di Maio this week met leaders of the gilets jaunes seeking to run in May’s European parliament elections as he declared the “wind of change has crossed the Alps” and a “new Europe is being born of the yellow vests”. France said the comments were an unacceptable “provocation”. Announcing the immediate return to Paris of its ambassador for talks, the French foreign office said in a statement: “For several months, France has been the target of repeated, baseless attacks and outrageous statements. Having disagreements is one thing but manipulating the relationship for electoral aims is another. “All of these actions are creating a serious situation which is raising questions about the Italian government’s intentions towards France.”

Salvini responded by saying the Italian government did not want to fall out with France and suggested a meeting with Macron to fix the relationship. “I don’t want to row with anyone, I’m prepared to go to Paris, even by foot, to discuss the many issues we have,” he said. But, in a further dig at Macron, he said France must first address three issues: French police must stop pushing migrants back into Italy, end lengthy border checks blocking traffic and hand over around 15 Italian leftist militants who have taken refuge in France in recent decades.

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Macron with his sub-30% approval rating is not a threat.

Rome’s War Of Words With Macron May Prove Self-Defeating (G.)

Diplomatic etiquette would normally classify the recall of an ambassador for “consultations” as a middle-order symbol of displeasure. During the cold war, the summoning, or withdrawal, of an ambassador was mundane. More recently, Hungary pulled its ambassador from the Netherlands in 2017, in response to criticism by the outgoing Dutch ambassador in Hungary. But for France to withdraw its ambassador to Rome for the first time since the second world war represents a genuine diplomatic shock. For two European powers to fall out to this extent shows how far European populists are prepared to break the rules. Only a fortnight ago, faced by persistent insults from Rome, the Elysée chose to take the high road, saying it would not enter a stupidity contest.

President Emmanuel Macron had also promised not answer back, saying that is what the Italian populists wanted. But faced by Italian deputy prime minister Luigi Di Maio’s repeated courting of leaders of the gilet jaunes (yellow vests) protests that have repeatedly sparked violence in Paris, French patience snapped. It marks an extraordinary collapse in Franco-Italian relations since the recent high water mark of January 2018 when Macron signed a bilateral treaty of friendship alongside Italy’s previous prime minister, Paolo Gentiloni. That was only two months before the Italian elections in May. Macron had signed the treaty partly to reassure the Italians that Paris would not only face toward Berlin after Brexit.

But perhaps the seeds of the collapse were sown the day the treaty was signed. In Rome, Macron could not resist saying he hoped the Italians in their elections would make a pro-European choice – advice that Italians, fixated by migration from Libya, totally ignored by bringing a populist coalition government to power. [..] Italy, in recession and heading for only 0.2% growth this year, will need some allies in Europe and in Brussels. Its banking system remains undercapitalised. The Five Star Movement is determined to show it is on the side of the people, and not the bankers, but translating that emotion into practical budgetary policy is proving difficult. Insults by contrast come easier, and cheaper.

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Oh, well, it’s just cars.

Fiat Chrysler Shares Plummet 12% On Weak Outlook (CNBC)

Fiat Chrysler shares crashed by nearly 12 percent Thursday after the Italian-American automaker forecast a weak outlook for 2019. The automaker said it expects results in the first half of the year to be down over last year, in part because the company will not be selling two generations of the Jeep Wrangler side-by-side, as it did in 2018. It is also planning some Wrangler production downtime to retool factories for launch of the plug-in hybrid version of the iconic off-road machine in early 2020. The company also said continued actions to manage dealer inventories will hit its finances in the first half of the year. It is also facing higher-than-expected capital expenditures, shelling out roughly €500 million in connection with U.S. diesel emissions cases. It’s also paying an effective tax rate that’s about 25% higher than it was in 2018, mostly due to changes in the US.

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Best English must be Jamaican. Shows that languages are alive.

‘Globish’: Why France Has A Love-Hate Relationship With Global English (G.)

French writers were up in arms this week after the Salon du Livre book fair in Paris announced a celebration of young adult books that would feature a “Bookroom”, a “Photobooth”, and even a “Bookquizz”, a prospect so exciting it needs two zs. Such anglicisms, critics wrote, were an “unconscionable act of cultural vandalism”, employing the “sub-English known as Globish”. It is a lamentable irony, then, that Globish has been so energetically popularised by a Frenchman. In 2004, the former IBM executive Jean-Paul Nerrière began selling his system of simplified English (only 1,500 words) to students around the world. (Globish is a portmanteau of “globe” and “English”.)

The earliest attested use of the term, however, described in 1997 a more natural linguistic hybridisation of various “non-western forms of English” that had become just as “creative and lively” as the standard tongue. “Globish” is therefore both a trademark for one man’s singular vision of international communication, and a way of describing the branching of English into multiple exotic planetary species. But the literary Parisians see it simply as yet more Anglo-Saxon cultural imperialism. Well, as the French do sometimes say, c’est la life.

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A widespread idea, singling out Trump is not very useful.

Trump’s Absurd Claim that Americans Are Free from Government Coercion (Bovard)

In his State of the Union address Tuesday night, President Trump received rapturous applause from Republicans for his declaration: “America was founded on liberty and independence — not government coercion, domination, and control. We are born free, and we will stay free.” But this uplifting sentiment cannot survive even a brief glance at the federal statute book or the heavy-handed enforcement tactics by federal, state, and local bureaucracies across the nation. In reality, the threat of government punishment permeates Americans’ daily lives more than ever before: The number of federal crimes has increased from 3 in 1789 to more than 4000 today.

Congress has criminalized “transporting alligator grass across a state line; unauthorized use of the slogan ‘Give a hoot, don’t pollute’; and pretending to be a 4-H club member with intent to defraud,” as the Buffalo Criminal Law Review noted. Law enforcement agencies arrested over 10 million people in 2017— roughly three percent of the population. Trump momentarily noticed the existence of government coercion last month when he complained about the FBI using “29 people” and “armored vehicles” for the arrest of Roger Stone. But SWAT teams conduct up to 80,000 raids a year, according to the ACLU, mostly for drug arrests or search warrants. Many innocent people have been killed in such raids.

Trump on Tuesday highlighted the case of Alice Johnson, unjustly sentenced to life in prison for a nonviolent drug offense. Trump’s commutation of her sentence is no consolation to the targets of 1.6 million drug arrests in 2017 – and it is not like those individuals showed up voluntarily at police stations asking to be “cuffed-and-stuffed.” More people are arrested for marijuana offenses than for all violent crimes combined, according to FBI statistics. No coercion? Tell that to the scores of thousands of victims of asset forfeiture laws, which entitle law enforcement to confiscate people’s cash, cars, and other property based on the flimsiest accusation.

Federal law-enforcement agencies seized more property via asset forfeiture provisions in 2014 year than all the burglars stole from homeowners and businesses nationwide. Since 1970, the number of people confined in American prisons has increased by over 500 percent. Almost 10 percent of all American males will end up in prison at some point in their lives, according to an a 1997 Justice Department report. More than 10 percent of black males aged 20 to 34 were behind bars as of 2006, according to the Journal of American History.

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Jay Powell flew over the cuckoo’s nest.

Albert Edwards: Negative Rates, 15% Budget Deficits And Helicopter Money (ZH)

Earlier this week, when the San Fran Fed published a paper that suggested that the recovery would have been stronger if only the Fed had cut rates to negative, we proposed that this is nothing more than a trial balloon for the next recession/depression, one in which the Federal Reserve will seek affirmative “empirical evidence” that greenlights this unprecedented NIRPy step (in addition to QE of course). Today, in his latest note to clients after returning from a 2 week vacation in Jamaica, SocGen’s Albert Edwards picks up on this point and cranks it up to 11 writing that “as central banks thrash around for new tools, I have long thought the next recession would trigger the adoption of helicopter money and deeply negative Fed Funds. Clients have been sceptical of the latter because of the negative impact on bank margins, but now I am more convinced than ever that we will see negative Fed Funds.”

Predictably, Edwards takes aim at the SF Fed “analysis”, writing that “just because the San Fran Fed has published this paper doesn’t mean the Washington Fed will adopt the policy in the next recession, but with this economic cycle clearly now in its final act, one can sense that a number of trial balloons are being floated on what the Fed might do in the next recession. This is just one of them.” More to the point, Edwards also focuses on the recent resurgence of interest in Modern-Money Theory, i.e., MMT, or government-mandated helicopter money, which is predictably a “theory” espoused by socialists everywhere most notably Bernie Sanders and his economic advisors…

… and writes that “many of the more radical Democrats in the US seem to be adopting the idea and since I expect the US budget deficit to soar to 15% of GDP in the next recession, the ideas of MMT will surely become even more popular.” Edwards is convinced that “the Fed and other central banks will be desperate enough to adopt outright monetisation (aka helicopter money, that is to say the direct central bank financing of public sector deficits) in the next recession. And as that will coincide with public sector deficits in the mid teens, we will be conducting a live MMT experiment. Welcome to a brave new world!”

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If there’s anything that typifies how today’s institutions view the world, it must be that they see themselves in the frontline fighting against the problems they first caused.

Fed’s Powell On The Biggest Challenge Over The Next Decade (CNBC)

Sluggish productivity and widening wealth gap are the biggest challenges facing the U.S. over the next decade, Federal Reserve Chairman Jerome Powell said Wednesday. Speaking at a town hall in Washington D.C. to a group of educators, the central bank leader said his greatest economic fears lie outside the Fed’s purview. Specifically, he called for more aggressive policies to address income inequality. Wages at the middle and lower levels have “grown much more slowly” than those at the higher end, he said. “We want prosperity to be widely shared. We need policies to make that happen,” Powell added.

For the chairman, the forum was a chance to take some lighter questions — he revealed that to relax he plays guitar and rides his bicycle — but he also turned serious when addressing the issues of the future. Powell stressed the importance of increasing labor force participation and improving mobility between income classes, which is an area where he said the U.S. has lagged in recent years. “That’s not our self-image as a country, nor is it where we want to be,” he said. “There are policies that we need to do that everyone should be able to agree on that will change mobility, improve people’s chances and enable people to better take part in the workforce of the future,” Powell added.

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Jan 242019
 
 January 24, 2019  Posted by at 9:08 pm Primers Tagged with: , , , , , , , , , , , , , , ,  


René Magritte The black flag 1937

 

One thing I am not is an expert on Venezuela. What I know is the country has the world’s largest oil reserves, mainly in the Orinoco Belt, but they come in a form of tar sands that while they are not as hard to exploit as Canada’s (viscosity), they’re far from easy, and buried deep. And I know Venezuela had Hugo Chávez as its president, who, for a socialist, was quite successful at what he did (depending who you ask).

And I know of course that the US yesterday recognized an opposition leader, Juan Guaido, as the ‘real’ president of Venezuela, instead of the elected Nicolas Maduro, whom Chávez picked as his successor. Soon as I read that, I thought: CIA. If Chávez, and Maduro, are hated in one place in the world, look no further than Langley, Virginia.

So I looked up a few articles I though would be interesting to read. The first comes from a site called Venezuela Analysis, an entity recommended for Venezuela news. They had the article below, but also this enlightening picture:

Note: in 2002, coincident with the attempted coup against Chávez, half the employees at state oil company PDVSA went on strike. They must have felt like clowns, too, 48 hours later.

The article explains what happened in terms you can find everywhere (but are perhaps good to note), except for the last bit:

 

Venezuelan Opposition Leader Guaido Declares Himself President, Recognized by US and Allies

Opposition leader Juan Guaido swore himself in as “interim president” of Venezuela on Wednesday, a move which was immediately recognized by the United States and regional allies. “As president of the National Assembly, before God and Venezuela, I swear to formally assume the competencies of the national executive as interim president of Venezuela,” he declared before an opposition rally in eastern Caracas.

Guaido had already proclaimed on several occasions that he was “ready” to assume the responsibilities of the executive branch, as the US was reportedly considering recognizing him as “interim president.” US authorities reacted swiftly, with President Donald Trump, Secretary of State Mike Pompeo and Senator Marco Rubio immediately voicing their recognition of Guaido as Venezuela’s interim president.

“I will continue to use the full weight of United States economic and diplomatic power to press for the restoration of Venezuelan democracy,” Trump said in a statement. Washington’s regional allies, including Canada, Brazil, Argentina, Colombia and other members of the so-called Lima Group, were quick to follow suit, giving their backing to the 35-year-old opposition politician.

The Lima Group had set the tone in early January with a statement refusing to recognize Maduro’s second term. Meanwhile, Cuba and Bolivia expressed their support for Maduro, while Uruguay and the new Lopez Obrador government in Mexico refused to recognize Guaido as president and called for dialogue to “avoid an escalation of violence.” Russia and Turkey likewise indicated that their relations with Maduro administration were unchanged.

This last paragraph may be the most important and revealing bit of news we see today:

[..] Torino Capital Chief Economist Francisco Rodriguez, who advised defeated opposition presidential candidate Henri Falcon last year, wrote on Twitter that the recognition from the Trump administration makes it possible for Guaido, or a presumed transition government, to take charge of Venezuelan assets on US soil, such as state oil company PDVSA’s largest subsidiary, CITGO. It could also prevent the Venezuelan government from invoicing payments for oil shipments.

Without CITGO life becomes hard for Maduro, very hard. The company has extensive refining and chemicals capacity in the Houston area, but the US hasn’t been able to touch it until now. If they get enough allies to recognize their CIA puppet as president, they can close it down, sell it off to Exxon, anything they want. But we’re not there yet.

Russia has been very outspoken in its opinions about what’s going on. Its Rosneft oil company has large assets in Venezuela. Just like China has huge loans outstanding in the country. And though it’s hard to gauge how strong the people’s support is for Maduro (don’t believe everything you read), there’s no doubt where the army stands. The whole top brass was on TV today pledging loyalty to the government.

Turkey also came out strong in favor of Maduro. A Turkish site named Yeni Safak talks about social media as an intelligence tool:

 

CIA Launches Media Campaign To Ignite Protests Against Venezuela’s Maduro

The CIA is backing Washington’s decision to recognize Venezuela’s opposition leader Juan Guaido as president by manipulating the public opinion against democratically-elected President Nicolas Maduro and the legitimate government over social media platforms. [..] Millions of posts designed to instigate Venezuelans against the country’s legitimate president, Nicolas Maduro, were shared in a very short time to kindle a social unrest against Maduro.

Assoc. Prof. Dr Levent Eraslan unveiled the striking details of the U.S’s perception and deception strategies [..] Stressing the U.S. national intelligence’s strategy report in 2019 that consists Pentagon’s intervention in Venezuelan politics, Eraslan said, “The role of ‘machine learning’ and providing data to decision makers by determining political instabilities through social media were emphasized in the report.”

Noting that thousands of tweets that have been shared from different accounts in the last two days, “People are being called to take streets to overthrow the elected president. The efforts to trigger rebellion and push this process into a bloody situation through social media networks such as Twitter, YouTube, and Facebook can be observed,” he concluded.

This is from Volkan at DutchTurks; nothing is new (except Facebook as a regime change instrument):

 

 

Hugo Chávez was president of Venezuela from 1999 to his death of cancer in 2013. Whatever you may think of the man, and you don’t have to think hard to know what the CIA thought of him, have you ever wondered why the rampant runaway inflation the country has suffered lately, and which has been blamed by many on ‘socialism’, was not happening while socialist Chávez was alive? This from a site named War Is Boring provides at least some ideas as to why.

 

To Understand Venezuela’s Crisis, Look to the Past … and the CIA

Chavez died of cancer in 2013, and now five years later it seems that his socialist dream, like Allende’s, has failed. Under his successor Pres. Nicolas Maduro, Venezuela has descended into economic and political chaos. Hyperinflation has beset the country, with prices rising at an annualized rate of 1,000,000 percent.

Shortages of basic necessities such as toilet paper and bread have caused mass unrest, culminating in violent protests. Now there is open talk about the need to overthrow Maduro or remove him from power, perhaps through U.S. military intervention.

[..] In Venezuela the figure of Chavez precluded an overthrow of the government there. We know this for a fact because a coup against him in 2002 lasted a matter of hours before mass uprisings and a lack of support from the military forced the plotters to surrender. Chavez was a controversial figure, hated by significant elements of Venezuelan society, but beloved by a majority of the largely poor country and respected by the military.

Chavez announced the return of his cancer in the fall of 2012 and died in March 2013. The current economic crisis kicked into high gear in the late summer of 2012, with inflation — typically high, but manageable — suddenly growing at an exponential rate. The cause typically cited by Western media — a precipitous fall in oil prices — occurred a full two years after the crisis began.

 

[..] Since 2012 Venezuela has faced a twin plague of shortages and rampant inflation. Venezuelan economist Pasqualina Curcio makes the case in her 2016 book The Visible Hand of the Market: Economic Warfare in Venezuela that both phenomena cannot be explained through normal economics, but rather by political causes.

Shortages have been a feature of Venezuelan life since Chavez came to power in 1999, with their magnitude growing over time. Yet over the course of years when Venezuela saw steadily and then sharply increasing shortages both imports and domestic production were also rising. If more products are being brought into the country, and more are being produced, but consumers are experiencing shortages, it begs the question of where the stuff went.

[..] As for inflation, the factors typically involved with currency devaluation–a shortage of foreign reserves or increased liquidity–have not coincided with inflation spikes. Nor has the state hoarded foreign currency as many claim. Curcio shows that 94 percent of foreign reserves were distributed to the private sector, and these distributions have grown over time.

It appears that manipulation of currency black markets — a phenomenon that happened in Chile under Allende as well — and then adoption of this inflated exchange rate by importers to spike the costs of necessary goods, services, and industrial inputs neatly produces the sort of induced inflation plaguing Venezuela today.

Russian foreign minister Lavrov put it nice and succinctly:

The US, which is paranoid about somebody interfering in their elections, even though they have no proof of that, themselves are trying to rule the fates of other peoples. What they actually do is interfere in their internal affairs. There is no need for [US special counsel Robert] Mueller to determine that.

American regime change in other countries is something that perhaps the rest of the world is getting tired of. America instigating chaos in its own southern backyard, like it has for years in the Middle East and North Africa, is getting old in the eyes of many. And the CIA can get Trump to support their puppet, but Trump knows nothing about Venezuela, other than that there’s lots of oil there, and that makes him a CIA puppet too.

Not a good idea.

A lot of what has led up to the present coup has been the US flexing its financial muscle. But the American economy isn’t doing all that great, so it’s not just flexing that muscle, it’s also stretching it. And yeah, there’s an old set of Venezuelan domestic interests that has been faithful, just like there was one in Cuba, but that’s all in the past. That was way back when the US could get away with bullying the whole neighborhood.

And it shouldn’t want to do that anymore. Neither the bullying nor the living in the past.

Not good ideas either.

 

 

Nov 112018
 
 November 11, 2018  Posted by at 10:39 am Finance Tagged with: , , , , , , , , , , ,  


Paul Gauguin Christ in the garden of olives 1889

 

China Can Never Allow Its Housing Bubble To Burst (ZH)
One Thing Unites Britain (O.)
Four UK Ministers On Verge Of Quitting, EU Rejects Latest Plan (R.)
Top Tory Says Theresa May Is ‘Handing Power To EU’ In Brexit Deal (G.)
Khashoggi Murder Fails To Stop Britain Selling Arms To The Saudis (O.)
Saudi Arabia Wants To Cut OPEC Allies Oil Output By Up To 1 Million Bpd (R.)
Court Clears Rome’s Mayor Of Cronyism And Abuse Of Power (G.)
2 Koreas Complete The Disarming Of 22 Guard Posts (AP)
Moorside’s Atomic Dream Was An Illusion. Renewables Are The Future (G.)
Next Generation ‘May Never See The Glory Of Coral Reefs’ (G.)
Why Women Have Better Sex Under Socialism (G.)

 

 

50 million empty apartments. ‘Real’ estate holds 75% of Chinese private ‘assets’. There can hardly be a more dangerous concept for the global economy.

China Can Never Allow Its Housing Bubble To Burst (ZH)

Back in 2017, we explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth would keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing as three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US, with the remainder invested financial assets. Beijing knows this, of course, which is why China periodically and consistently reflates its housing bubble, hoping that the popping of the bubble, which happened in late 2011 and again in 2014, will be a controlled, “smooth landing” process.

For now, Beijing has been successful in maintaining price stability at least according to official data, allowing the air out of the “Tier 1” home price bubble which peaked in early 2016, while preserving modest home price appreciation in secondary markets. How long China will be able to avoid a sharp price decline remains to be seen, but in the meantime another problem faces China’s housing market: in addition to being the primary source of household net worth – and therefore stable and growing consumption – it has also been a key driver behind China’s economic growth, with infrastructure spending and capital investment long among the biggest components of the country’s goalseeked GDP.

One result has been China’s infamous ghost cities, built only for the sake of Keynesian spending to hit a predetermined GDP number that would make Beijing happy. Meanwhile, in the process of reflating the latest housing bubble, another dire byproduct of this artificial housing “market” has emerged: tens of millions of apartments and houses standing empty across the country. According to Bloomberg, soon-to-be-published research will show that roughly 22% of China’s urban housing stock is unoccupied, according to Professor Gan Li, who runs the main nationwide study. That amounts to more than 50 million empty homes.

Read more …

Britain is shrinking away from not just Europe, but the world, unable to focus on anything other than its domestic squabbles.

One Thing Unites Britain (O.)

[..] Theresa May has always hung on in the belief that, when it came to the crunch moment, when a deal was on offer that would take the UK out of the EU on 29 March next year, her party and the country would unite sufficiently behind her to allow a withdrawal agreement to pass through parliament. The country would rally behind her vision of Brexit. But instead, as people become more aware of what leaving the EU entails, many MPs believe the reverse may be happening. [..] With more Tory Remainers and Leavers now opposing her, May’s task is daunting. Downing Street’s immediate task is to get her deeply split cabinet to unite around the final unresolved element of a potential deal with the EU: the legally complex issue of how to avoid a hard border between Northern Ireland and the Republic after Brexit.

Downing Street knows it is in a race against time. May is desperate to put a motion before the House of Commons before Christmas, in the hope that, somehow, it will pass. No 10 has pencilled in a cabinet meeting for early this week, probably on Tuesday. But disagreements remain among her most senior ministers over how the UK would exit from the so-called “backstop” agreement, under which the whole of the UK would remain in the EU customs union until a final UK-EU trade deal is struck. Several cabinet ministers are unhappy with what they fear will be fudged wording in the withdrawal agreement that fails to chart a clear path to exit the backstop. They want to see the full legal advice and want guarantees that the EU will not be able to prevent the UK breaking free from its system once and for all, so that it can strike its own trade deals.

Read more …

It’s still the Irish hard border. And they’re still no closer to a solution.

Four UK Ministers On Verge Of Quitting, EU Rejects Latest Plan (R.)

Four British ministers who back remaining in the European Union are on the verge of quitting Theresa May’s government over Brexit, the Sunday Times reported, as pressures built on the prime minister from all sides. The newspaper also said that the European Union had rejected May’s plan for an independent mechanism to oversee Britain’s departure from any temporary customs arrangement it agrees. The newspaper sourced the development to British sources, and not sources in the EU team. May is trying to hammer out the final details of the British divorce deal but the talks have become stuck over how the two sides can prevent a hard border from being required in Ireland.

Britain has proposed a UK-wide temporary customs arrangement with the EU to resolve the issue but Brexiteers in her party want London to have the final say on when that arrangement would end, to prevent it from being tied indefinitely to the bloc. A senior cabinet minister was quoted in the paper as saying: “This is the moment she has to face down Brussels and make it clear to them that they need to compromise, or we will leave without a deal.” An EU diplomat told Reuters earlier on Saturday that they were cautiously hopeful that an EU summit could happen in November to endorse the deal but that the volatile situation in Britain made it very difficult to predict.

Read more …

Well, May herself doesn’t appear to know what to do with that power.

Top Tory Says Theresa May Is ‘Handing Power To EU’ In Brexit Deal (G.)

Theresa May was accused last night by a former cabinet colleague of planning the “biggest giveaway of sovereignty in modern times”, as she faced a potentially devastating pincer movement from Tory remainers and leavers condemning her Brexit plans. The day after Jo Johnson, the pro-remain brother of former foreign secretary Boris Johnson, resigned from the government and called for a second referendum on Brexit, former education secretary Justine Greening launched an attack on the prime minister, saying her plans would leave the country in the “worst of all worlds”. Piling yet more pressure on May, Greening – who resigned from the cabinet in January – backed the former transport minister’s call for another public vote and said MPs should reject the prime minister’s deal.

Greening told the Observer: “The parliamentary deadlock has been clear for some time. It’s crucial now for parliament to vote down this plan, because it is the biggest giveaway of sovereignty in modern times. “Instead, the government and parliament must recognise we should give people a final say on Brexit. Only they can break the deadlock and choose from the practical options for Britain’s future now on the table.” Greening added: “Like many of us, Jo Johnson is a pragmatist on Britain’s relationship with the EU. But Conservative MPs can increasingly see that this sovereignty giveaway from No 10 leaves our country with less say over rules that govern our lives … That is not in the national interest, it’s the worst of all worlds and it resolves nothing.”

Read more …

Even as the UK has also received the audio from Turkey.

Khashoggi Murder Fails To Stop Britain Selling Arms To The Saudis (O.)

Britain has pursued its assiduous courtship of Saudi Arabia despite the murder of the journalist Jamal Khashoggi, with diplomats and Ministry of Defence officials meeting their counterparts in the kingdom to discuss closer economic, military and political ties. The discussions have taken place as Britain enters the final phase of negotiations to sell more Typhoon jets to Riyadh. They are similar to those used in the Saudi-led bombing of Yemen in a war that has caused a humanitarian disaster.

Britain sells billions of pounds of weapons to the countries bombing Yemen and is keen to strengthen its ties after Brexit. In July last year, the government confirmed it had created a dedicated Gulf region working group to promote “high-level dialogue with key trading partners to progress our trade and investment relationships”. Since then, civil servants have regularly visited the region for confidential talks to prepare for future deals once Britain leaves the European Union. A delegation from the Department for International Trade visited the Eastern Province chamber of commerce in Dammam in Saudi Arabia on 2 October – the day Khashoggi was murdered.

Alastair Long, the UK’s deputy trade commissioner for the Middle East and director of trade for Saudi Arabia, stressed that Britain was keen to create alternative markets and that Saudi Arabia “is at the head of these markets”. On 31 October, another UK government delegation visited Riyadh for a meeting with the Gulf Cooperation Council secretariat. A press release from the council said the meeting discussed expanding “the horizons of political, security, military and commercial cooperation”

Read more …

Much discussed before: smaller producers have only one reaction to falling prices: produce more (if they can).

Saudi Arabia Wants To Cut OPEC Allies Oil Output By Up To 1 Million Bpd (R.)

Saudi Arabia is discussing a proposal to cut oil output by up to 1 million barrels per day by OPEC and its allies, two sources close to the discussions told Reuters on Sunday. The sources said the discussions were not finalized as much depended on the reduction in Iranian exports. “There is a general discussion about this. But the question is how much is needed to reduce by the market,” one of the sources said, speaking in Abu Dhabi where a market monitoring committee is due to be held on Sunday, attended by top exporters Saudi Arabia and Russia.

Asked by reporters in Abu Dhabi if the market is in balance, Saudi Energy Minister Khalid Al-Falih said: “We will find out. We have our meeting later.” Al-Falih last month said there could be a need for intervention to reduce oil stockpiles after increases in recent months. The United States this month imposed sanctions curtailing Iran’s oil exports as part of efforts to curb Tehran’s nuclear and missile programs as well as its support for proxy forces in Yemen, Syria, Lebanon and other parts of the Middle East.

Read more …

Smearing M5S has become less easy.

Court Clears Rome’s Mayor Of Cronyism And Abuse Of Power (G.)

The Rome mayor, Virginia Raggi, has been cleared of cronyism and abuse of power after a judge ruled that the alleged offence did not constitute a crime. Prosecutors had called for a 10-month jail term over allegations that Raggi, from the anti-establishment Five Star Movement, lied to investigators over the appointment of Renato Marra, the brother of one of her close aides, as Rome’s tourism chief. His brother Raffaele, the former head of staff at Rome city hall, faces separate corruption allegations. The accusations emerged not long after Raggi was elected as Rome’s first female mayor in June 2016. Had she been convicted she would have been forced to resign as mayor, in line with the Five Star Movement’s code of ethics.

She wept upon hearing the ruling, saying afterwards: “This sentence wipes out two years of mud-slinging. We’ll go forward with our heads held high for Rome, my beloved city, and for all citizens.” Luigi Di Maio, the Five Star Movement leader and Italy’s deputy prime minister, celebrated the court ruling while using the opportunity to criticise journalists whom he accused of “attacking Italy’s most massacred mayor” for two years and generating “fake news” to bring her down. “Go Virginia! I am happy for always having defended you and believed in you,” he wrote on Facebook.

Read more …

There are people who genuinely want peace. Get out of their way.

2 Koreas Complete The Disarming Of 22 Guard Posts (AP)

The North and South Korean militaries completed withdrawing troops and firearms from 22 front-line guard posts on Saturday as they continue to implement a wide-ranging agreement reached in September to reduce tensions across the world’s most fortified border, a South Korean Defense Ministry official said. South Korea says the military agreement is an important trust-building step that would help stabilize peace and advance reconciliation between the rivals. But critics say the South risks conceding some of its conventional military strength before North Korea takes any meaningful steps on denuclearization — an anxiety that’s growing as the larger nuclear negotiations between Washington and Pyongyang seemingly drift into a stalemate.

South Korea reportedly has about 60 guard posts — bunker-like concrete structures surrounded with layers of barbed-wire fences and manned by soldiers equipped with machine guns — stretched across the ironically named Demilitarized Zone. The 248-kilometer (155-mile) border buffer peppered with millions of land mines has been the site of occasional skirmishes between the two forces since the 1950-53 Korean War. The North is believed to have about 160 guard posts within the DMZ.


In this Nov. 4, 2018, photo provided by South Korea Defense Ministry, a yellow flag is raised at a guard post of South Korea in the demilitarized zone, South Korea. A South Korean Defense Ministry official said on Saturday, Nov. 10, 2018, the North and South Korean militaries have completed withdrawing troops and firearms from 22 front-line guard posts as they continue to implement a wide-ranging agreement reached in September to reduce tensions. The flag marks the post that is to be dismantled so that each side can observe the work in progress.

Read more …

Sorry, but no. Using much less energy of any kind is the future. Voluntarily or forced. That’s what we should prepare our societies for.

Moorside’s Atomic Dream Was An Illusion. Renewables Are The Future (G.)

Toshiba’s decision to pull out of building a nuclear power station in Cumbria last week will cause shockwaves far beyond the north-west of England. The outcome is a disaster for the surrounding area, which is heavily reliant on the nuclear industry for jobs and prosperity. Local politicians admit it is a blow and a disappointment for Cumbrians hoping for roles at the proposed Moorside plant. They say they genuinely believe a new buyer for the site will come forward. But that looks like wishful thinking. To an extent, the demise of Moorside can be attributed to problems with it as a specific project. It has looked doomed since Toshiba’s US nuclear unit, Westinghouse, declared bankruptcy in 2017 and the company ruled out new nuclear investments outside of Japan.

Efforts to woo the South Korean energy company Kepco as a buyer then floundered. The executive leading the sale for Toshiba blamed the failure to find a buyer on being “caught between a series of unplanned and uncontrollable events”. But the end of Moorside is also emblematic of the wider challenges that new nuclear faces. It took a decade from Tony Blair signalling the UK’s renewed interest in nuclear power in 2006 for France’s EDF Energy and the British government to sign a generous subsidy deal and green-light Hinkley Point C, the UK’s first new nuclear plant in a generation. In all likelihood, it will not be generating electricity until 2027. Ministers insist new nuclear power stations are still an essential way of hitting the country’s greenhouse gas emission targets and providing energy security as old plants are switched off in the 2020s.

Losing Moorside means there are just five other new nuclear projects planned, including Hinkley Point C. Eyes will now turn to Hitachi’s proposed Wylfa Newydd plant on Anglesey. The project is the furthest along the line after Hinkley, but it’s far from a done deal. The new nuclear drive was meant to be solely funded by the private sector, but the government has already made a striking exception in the case of Wylfa. Ministers have promised Hitachi they will use public money to take a £5bn stake in the scheme. Such a dramatic U-turn on policy is explained by the fact that Wylfa is about more than the UK’s desire for new nuclear: it is also about cooperation with Tokyo and bringing forth other investment from Japanese firms, such as carmakers, after Brexit.

Read more …

We get the drift, but we also know only a small part of 1 or 2 generations of mankind have ever ‘seen’ coral reefs. And most people only do ‘see’ them in pics and movies. You might want to think about that. it’s definitely not about you ‘seeing’ coral reefs or rhino’s or orangutans. It’s about something else.

Next Generation ‘May Never See The Glory Of Coral Reefs’ (G.)

Children born today may be the last generation to see coral reefs in all their glory, according to a marine biologist who is coordinating efforts to monitor the decline of the world’s most colourful ecosystem. Global heating and ocean acidification have already severely bleached 16 to 33% of all warm-water reefs, but the remainder are vulnerable to even a fraction of a degree more warming, said David Obura, chair of the Coral Specialist Group in the International Union for the Conservation of Nature. “It will be like lots of lights blinking off,” he told the Observer. “It won’t happen immediately but it will be death by 1,000 blows. Between now and 2 degrees Celsius, we will see more reefs dropping off the map.”

Obura added: “Children born today may be the last generation to see coral reefs in all their glory. Today’s reefs have a history going back 25 million to 50 million years and have survived tectonic collisions, such as that of Africa into Europe, and India into Asia. Yet in five decades we have undermined the global climate so fundamentally that in the next generation we will lose the globally connected reef system that has survived tens of millions of years.”

Read more …

Headline obviously for effect. But interesting theme. Still, is it capitalism that is to blame for suppressing women, or patriarchy?

Why Women Have Better Sex Under Socialism (G.)

This book has a simple premise: “Unregulated capitalism is bad for women,” Kristen Ghodsee argues, “and if we adopt some ideas from socialism, women will have better lives.” Ghodsee is an ethnographer who has researched the transition from communism to capitalism in eastern Europe, with a particular focus on gender-specific consequences. “The collapse of state socialism in 1989 created a perfect laboratory to investigate the effects of capitalism on women’s lives,” she writes. Less regulated economies, she finds, place a disproportionate burden on women. Women subsidise lower taxes through their unpaid labour at home. Cuts to the social safety net mean more women have to care for children, the elderly and the sick, forcing them into economic dependence.

Ghodsee contends that without state intervention, the private sector job market punishes those who bear and raise children and discriminates against those who might one day do so. The government is better at ensuring wage parity across different groups than the private sector, and economies with more public sector jobs tend to have more gender equality, too. Women bear the brunt of capitalism’s cyclical instability, and are often the last to be hired and the first to be fired in economic downturns. They are paid less, they have less representation in government and, she writes, all of this affects their sexuality. The less economic independence women have, the more sexuality and sexual relationships conform to the marketplace, with those who are disadvantaged in the free market pursuing sex not for love or pleasure but for a roof over their heads, health insurance, or access to the wealth or status that capitalism denies them.

Read more …

Sep 042017
 
 September 4, 2017  Posted by at 7:38 am Finance Tagged with: , , , , , , , , , , ,  


Edouard Manet Jeanne Duval, Baudelaire’s Mistress, Reclining (Lady with a Fan) 1862

 

How To Make The Financial System Radically Safer (AM)
Funding Battle Looms As Texas Sees Harvey Damage At Up To $180 Billion (R.)
Canadians Are Borrowing Against Real Estate At The Fastest Pace Ever (BD)
China Battles “Impossible Trinity” (Rickards)
Socialism For The Best Of Us, Capitalism For The Rest Of Us (CC)
Britain’s Addicted To Debt And Headed For A Crash (G.)
Global Negative Yielding Debt Hits One Year High Of $7.4 Trillion (ZH)
Greece Property Auctions Certain To Drive Market Prices Even Lower (K.)
Italy FinMin Says The Euro Zone Still Faces Problems – Even In Germany (CNBC)
Italy’s 5-Star Says Euro Referendum Is ‘Last Resort’ (R.)
Turkey Will Never Become EU Member, Says Angela Merkel (Ind.)
How Our Immune Systems Could Stop Humans Reaching Mars (Tel.)

 

 

Take away the political power of central banks.

How To Make The Financial System Radically Safer (AM)

At the same time, the new financial reforms haven’t minimized risk. Moreover, they’ve set taxpayers – that’s you – up for a future fleecing. Congressman Robert Pittenger elaborated this fact in a Forbes article last year: “Even Dodd-Frank’s biggest selling point, that it would end “too big to fail,” has proven false. Dodd-Frank actually created a new bailout fund for big banks–the Orderly Liquidation Authority–and the Systemically Important Financial Institution designation enshrines “too big to fail” by giving certain major financial institutions priority for future taxpayer-funded bailouts.” What gives? Regulations, in short, attempt to control something by edict. However, just because a law has been enacted doesn’t mean the world automatically bends to its will. In practice, regulations generally do a poor job at attaining their objectives. Yet, they often do a great job at making a mess of everything else.

Dictating how banks should allocate their loans, as Dodd-Frank does, results in preferential treatment of favored institutions and corporations. This, in itself, equates to stratified price controls on borrowers. And as elucidated by Senator Wallace Bennett over a half century ago, price controls are the equivalent of using adhesive tape to control diarrhea. The dangerous conceit of the clueless… the house of cards they have built is anything but “safe” and they most certainly can not “fix anything”. Listening to their speeches that seems to be what they genuinely believe. A rude awakening is an apodictic certainty, but we wonder what or who will be blamed this time. Not enough regulations? The largely absent free market? As they say, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” (this quote is often erroneously attributed to Mark Twain: we think it doesn’t matter whether he created it, it is often quite apposite and this is a situation that certainly qualifies).

The point is that planning for future taxpayer-funded bailouts as part of compliance with destructive regulations is asinine. In this respect, we offer an approach that goes counter to Fed Chair Janet Yellen and the modus operandi of all central planner control freaks. It’s really simple, and really effective. The best way to regulate banks, lending institutions, corporate finance and the like, is to turn over regulatory control to the very exacting, and unsympathetic, order of the market. That is to have little to no regulations and one very specific and uncompromising provision: There will be absolutely, unconditionally, categorically, no government funded bailouts. Without question, the financial system will be radically safer.

Read more …

Want to bet it’ll be a lot more?

Funding Battle Looms As Texas Sees Harvey Damage At Up To $180 Billion (R.)

U.S. Treasury Secretary Steven Mnuchin on Sunday challenged Congress to raise the government’s debt limit in order to free up relief spending for Hurricane Harvey, a disaster that the governor of Texas said had caused up to $180 billion in damage. Harvey, which came ashore on Aug. 25 as the most powerful hurricane to hit Texas in more than 50 years, has killed an estimated 50 people, displaced more than 1 million and damaged some 200,000 homes in a path of destruction stretching for more than 300 miles (480 km). As the city of Houston and the region’s critical energy infrastructure began to recover nine days after the storm hit, the debate over how to pay for the disaster played out in Washington. Texas Governor Greg Abbott estimated damage at $150 billion to $180 billion, calling it more costly than Hurricanes Katrina or Sandy, which devastated New Orleans in 2005 and New York in 2012.

The administration of President Donald Trump has asked Congress for an initial $7.85 billion for recovery efforts, a fraction of what will eventually be needed. Even that amount could be delayed unless Congress quickly increases the government’s debt ceiling, Mnuchin said, as the United States is on track to hit its mandated borrowing limit by the end of the month unless Congress increases it. “Without raising the debt limit, I am not comfortable that we will get money to Texas this month to rebuild,” Mnuchin told Fox News. Republican lawmakers, who control both houses of Congress, have traditionally resisted raising the debt ceiling, but linking the issue to Harvey aid could force their hand with people suffering and large areas of the fourth-largest U.S. city under water. Beyond the immediate funding, any massive aid package faces budget pressures at a time when Trump is advocating for tax reform or tax cuts, leading some on Capitol Hill to suggest aid may be released in a series of appropriations.

Katrina set the record by costing U.S. taxpayers more than $110 billion. In advocating for funds to help rebuild his state, Abbott said damage from Harvey would exceed that. Houston Mayor Sylvester Turner said the city expected most public services and businesses to be restored by Tuesday, the first day after Monday’s Labor Day holiday. “Over 95% of the city is now dry. And I‘m encouraging people to get up and let’s get going,” Turner told NBC News. Even so, Houston mandated the evacuation of thousands of people on the western side of town on Sunday to accommodate the release of water from two reservoirs that otherwise might sustain damage. The storm stalled over Houston, dumping more than 50 inches (1.3 m) on the region. Houston cut off power to homes on Sunday to encourage evacuations. The area was closed off on Sunday and military vehicles were stationed on the periphery to take people out.

Read more …

What Canada learned from history.

Canadians Are Borrowing Against Real Estate At The Fastest Pace Ever (BD)

Canadian real estate prices have soared, and so did borrowing against that value. Our analysis of domestic bank filings from the Office of the Superintendent of Financial Institutions (OSFI) shows that loans secured against property has reached an all-time high. More surprising is the unprecedented rate of growth experienced this year.

Loans secured against residential real estate shattered a few records in June. Over $313.66 billion in real estate was used to secure loans, up 3.43% from the month before. The rise puts annual gains 11.16% higher than the same month last year, an increase of $31.51 billion. The monthly increase is the largest increase since March 2012. The annual gain is unprecedented according to an aggregate of domestic bank filings. Not all borrowing against residential property is all bad, sometimes it’s a calculated risk. For example, someone may need to secure a business loan, and use the loan for operating risks. It doesn’t mean the property is safe, but it’s a risk that could potentially boost the economy.

This is opposed to non-business loans, which is used as short-term financing. This type of financing is often used for things like renovations, and putting a fancy car in the driveway. Experts have observed that more homeowners are using these to prevent bankruptcy. Bottom line, it’s not typically healthy looking debt. So let’s remove loans obtained for business reasons, and take a peek at higher risk debt. The majority of these loans are non-business related according to bank filings. The current total is over $266 billion as of June 2017, a 1.01% increase from the month before. This is a 4.9% increase from the same month last year, which works out to $12.49 billion more. Fun fact, that’s around $23,763 per minute. The number is astronomical.

Read more …

“..no country can have an open capital account, a fixed exchange rate and an independent monetary policy at the same time..”

China Battles “Impossible Trinity” (Rickards)

The Impossible Trinity theory was advanced in the early 1960s by Nobel Prize-winning economist Robert Mundell. It says that no country can have an open capital account, a fixed exchange rate and an independent monetary policy at the same time. You can have one or two out of three, but not all three. If you try, you will fail — markets will make sure of that. Those failures (which do happen) represent some of the best profit-making opportunities of all. Understanding the Impossible Trinity is how George Soros broke the Bank of England on Sept. 16, 1992 (still referred to as “Black Wednesday” in British banking circles. Soros also made over $1 billion that day). The reason is that if more attractive total returns are available abroad, money will flee a home country at a fixed exchange rate to seek the higher return.

This will cause a foreign exchange crisis and a policy response that abandons one of the three policies. But just because the trinity is impossible in the long run does not mean it cannot be pursued in the short run. China is trying to peg the yuan to the U.S. dollar while maintaining a partially open capital account and semi-independent monetary policy. It’s a nice finesse, but isn’t sustainable. China cannot keep the capital account even partly closed for long without drying up direct foreign investment. Similarly, China cannot raise interest rates much higher without bankrupting state-owned enterprises. China is buying time until the Communist Party Congress in October. It’s important to realize that for Beijing, the Chinese economy is more than about jobs, goods and services. It’s a means of ensuring its legitimacy.

The Chinese regime is deeply concerned that a faltering economy and mass unemployment could threaten its hold on power. Chinese markets are wildly distorted by the actions of its central bank. Given the problems inherent in trying to manage an economy without proper price signals, the challenge facing Beijing gets harder by the day. China has a long history of violent political fracturing, and the government is deeply worried about regime survival if it stumbles. Many in the West fail to appreciate Beijing’s fears and overestimate the support it has among the disparate Chinese people. What does China do next? Under the unforgiving logic of the Impossible Trinity, China will have to either devalue the yuan or see its reserves evaporate. In the end, China will have to break the yuan’s peg to the dollar in order to stop capital outflows without killing the economy with high rates. The Impossible Trinity really is impossible in the long run. China will find this out the hard way.

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How do we make government independent?

Socialism For The Best Of Us, Capitalism For The Rest Of Us (CC)

To the elected darlings of the free market: I hate to burst your bubble but – you have been living a lie. Your lifetime government pensions: socialism. Overly generous retirement packages, Superannuation and 401ks: socialism. Travel budgets, expense accounts, access to private drivers and town cars, government reimbursement for travel and living arrangements: socialism, socialism, socialism, socialism, socialism. Central banking: socialism. Not to mention fossil-fuel & mining subsidies and tax concessions: socialism, socialism, socialism. The bank bail-outs of 2008: One of the greatest acts of socialism of all time. Where were our free-market representatives then? When the financial system went into melt-down, the banks were not told to suck it up and stand on their own two feet. More than a trillion dollars were poured into the banks, most of which went towards profit margins and CEO bonuses.

These so-called champions of capitalism have the nerve to claim that it is social welfare recipients that are a drain on the system while government representatives take home all kinds of state-provided benefits the rest of us could only dream of: the best health insurance the country has to offer, lifetime pensions and generous retirement packages which drain many more billions from the economy than social welfare ever will. Moreover, corporate welfare pales in comparison to either. The private sector has its own dole system paid for by Federal Governments. Yet many Congressmen, Representatives and MPs still have the nerve to stand before the people who elected them and rail against social spending, claiming people ought to pull themselves up by their bootstraps when no such obligation has ever existed for the corporate sector. Most of the world’s most successful corporations don’t get out of bed without a subsidy.

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If it makes you feel better: Britain’s not alone.

Britain’s Addicted To Debt And Headed For A Crash (G.)

[..] if the debtors at the bottom aren’t at crisis point yet, the signs of a surfeit of debt are everywhere. Alex Brazier, executive director of financial stability at the Bank of England, warned last month that consumer loans had gone up by 10% in the past year, with average household debt having already eclipsed 2008 levels. He warned against the economy having to sit through “endless repeats of the ‘Debt Strikes Back’ movie”. There is something obscurely insulting about being warned about household debt by the Bank of England. It never warns employers about stagnant wages, or the government about the benefit freeze. It only ever mentions these in terms of the impact of inflation, as if any consideration of the human decisions behind them are too political for comment. But personal debt, miraculously, isn’t political at all.

But that doesn’t make Brazier wrong. Edward Smythe of the campaign group Positive Money, breaks it down: “If you look at total outstanding consumer loans, in July, they’re at £200bn, an £18.5bn net increase every year.” Households spent more than their income by £17.5bn in the first quarter of this year. Economists are interested in where that money comes from – whether it’s access to credit, selling assets or spending savings. The government is presumably, in some dusty corner, interested in why that money is needed, whether it is a result of pauperised wages– real wage growth is negative and looks set to decrease – benefit changes, or some rush of blood to the head where we all suddenly need Sky Sports and cigarettes but aren’t prepared to work for them.

The sources of all this debt are changing: about half the net increase was in personal contract purchase car loans. Four in five new cars are now bought by PCP – an inherently unstable system that leaves both consumers and car manufacturers exposed. It’s a bit like a mortgage system for cars, except you don’t own it at the end, ideally you wouldn’t be living in it, and while a housing crash has been seen before, nobody yet knows what a car crash would look like. Student loan debt is counted separately from consumer loans, and stands at £13bn a year. However much you think you’ve accommodated student fees into your picture of Britons’ finances, it is always astounding to consider how life-changing that decision has been for the younger generation.

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“What global recovery?!”

Global Negative Yielding Debt Hits One Year High Of $7.4 Trillion (ZH)

Two weeks ago, we were surprised to find that despite the recent “growth promise” of what has been called a coordinated global recovery, the market value of bonds yielding less than 0% had quietly jumped by a quarter in just one month to the highest since October 2016. Since then, the paradoxical divergence between the reported “strong” state of the “reflating” global economy and the amount of negative yielding debt, has only grown, and as JPM reports as of Friday, Sept. 1, the global market value of government bonds trading with negative yield within the JPM GBI Broad index rose to $7.4 trillion, up 60% from its low of $4.6 trillion at the beginning of the year. Some more details from JPM:

We calculate the market value by multiplying the dirty price with the amount outstanding for each bond within JPM GBI Broad Index and then convert it to US dollars at today’s exchange rate. The market value of bonds trading with negative yield,including central banks’ purchases, stands at 30% of the total JPM GBI Broad index. What makes the latest rise in negative yielding debt especially bizarre is that it was mainly driven by Japan, where 10-year government bond yields have fallen significantly over the past month and have turned negative this week for first time since the US presidential election, even as the Bank of Japan has twice in the past month reduced the amount of JGB debt it purchases in the open market in the 5-to-10 year bucket, following on Friday, by a 30BN yen reduction of buying in the 3-to-5 year debt range.

As a result, the total universe of Japanese bonds trading with negative yield within the JPM global government bond index (GBI Broad) now stands at $4.6tr, or 62% of the outstanding amount. The remaining government bonds trading with negative yields worth $2.8 trillion are from Europe, of which more than half are from France and Germany.

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Capital destruction 101 (thanks, Schaeuble!):

“..the stock of unsold properties of all types comes to 270,000-280,000, in a market with no more than 15,000 transactions per year..”

BTW, the only buyers left are those who want to profit from Airbnb. Mostly foreigners.

Greece Property Auctions Certain To Drive Market Prices Even Lower (K.)

Professionals in the property sector are warning that the auctioning of tens of thousands of buildings in the next few years could evolve into an unknown – probably negative – factor regarding the course of prices in the market. It is estimated that a wave of auctions expected to begin soon will see market rates drop at least 10%. Clearing firms are currently involved in an extensive program of property valuations to establish starting prices for the auctions. Ilias Ziogas, head of property consultancy company NAI Hellas and one of the founding members of the Chartered Surveyors Association, said that the property market is certain to suffer further as a result of the auctions: “The impact on prices will be clearly negative, not because the price of a property will be far lower at the auction than a nearby property, but because it will diminish demand for the neighboring property.”

He added that a market with already reduced demand that receives more supply at more attractive rates through auctions will definitely see buyers turn to the latter. He also said that they will only look at other buildings if they are not satisfied with what the auctions have to offer. This view is also shared by Giorgos Litsas, head of the GLP Values chartered surveyor company, which cooperates with PQH. He told Kathimerini that the only way is down for market rates. “I believe that unless there is an unlikely coordination among the parties involved – i.e. the state (tax authorities, social security funds etc.), the banks and the clearing firms – in order to prevent too many properties coming onto the market at the same time, rates will go down by at least 10%.”

He noted that “we estimate the stock of unsold properties of all types comes to 270,000-280,000, in a market with no more than 15,000 transactions per year. Therefore the rise in supply will send prices tumbling.” Yiannis Xylas, founder of Geoaxis surveyors, added, “I fear the auctions will create an oversupply of properties without the corresponding demand, which translates into an immediate drop in rates that may be rapid if one adds the portfolios of bad loans secured on properties that will be sold to foreign funds at a fraction of their price.”

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He sounds confused.

Italy FinMin Says The Euro Zone Still Faces Problems – Even In Germany (CNBC)

Italy’s finance minister delivered an upbeat tone on his country’s banking sector but highlighted that major hurdles still remain in the euro zone, including in Germany. Germany might be known as the powerhouse of the euro zone economy but it has its own banking problems to deal with, Pier Carlo Padoan told CNBC on the sidelines of the Ambrosetti Forum on Sunday. “I think that there are some German banking problems and I’m confident the German authorities will deal with them,” Padoan said when asked about remarks made by former Prime Minister Matteo Renzi last year. “Germany has been the country that has by far poured much more public money into the banking sector in terms of the hundreds of billions of euros in the past when the rules where different of course.

This is a sign that maybe we all have to recognize that we have problems and we all have to recognize that we need to cooperate much more effectively to provide European solutions to those problems,” he said. Though Italy keeps making headlines due to its financial sector, analysts have also warned on banking problems in Germany. These include the reliance on the shipping industry, which used to be a stable investment before the euro zone debt crisis. Other issues include the sheer number of banks in Germany with very little consolidation. There are approximately 2,400 separate banks with more than 45,000 branches throughout the country and over 700,000 employees, according to Commercial Banks Guide, an industry website.

As such, Padoan told CNBC that it is crucial to conclude the banking union – a project created in 2012 in response to the sovereign debt crisis that aims to have one single set of rules for all banks across the European Union. He told CNBC that so far the banking union hasn’t been fully implemented, not because of resistance from certain countries, but because of different national perspectives. “We are however making progress in one thing: That we are building trust among ourselves and we are also recognizing that we have to reconcile historically-driven different traditions in banking sectors and they have to merge into a new European banking culture,” Padoan said.

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He sounds like Varoufakis.

Italy’s 5-Star Says Euro Referendum Is ‘Last Resort’ (R.)

A referendum on Italy’s membership of the euro currency would be held only as a “last resort” if Rome does not win any fiscal concessions from the European Union, a senior lawmaker from the anti-establishment Five-Star Movement said on Sunday. Luigi Di Maio’s comments reflect a striking change of tone by some senior officials in the party in recent months as they have retreated from 5-Star’s original pledge. Seeking to reassure an audience of bankers and business leaders, Di Maio – widely tipped to be 5-Star’s candidate for prime minister at a general election due by next year – played down the referendum proposal, calling it a negotiating tool with the EU. “Austerity policies have not worked, on monetary policy we deserve the credit for triggering a debate… this is why we raised the issue of a referendum on the euro, as a bargaining tool, as a last resort and a way out in case Mediterranean countries are not listened to,” he said.

Two years ago the party gathered the signatures from the public needed to pave the way for a referendum that it said was vital to restore Italy’s fiscal and monetary sovereignty. But now, running neck-and-neck with the ruling Democratic Party (PD) in opinion polls and with the election in sight – scheduled to be held by May 2018 – it is hitting the brakes on the idea. This underlines the crucial challenge facing the party as it seeks to please some core supporters, while trying to shed its populist image and convince foreign capitals and financial markets that it can be trusted in office. [..] The party wants several changes to the euro zone’s economic rules to help its more sluggish economies, like Italy. These include stripping public investment from budget deficits under the EU’s Stability Pact and creating a European “bad bank” to deal with euro zone lenders’ bad loans.

“We are not against the European Union, we want to remain in the EU and discuss some of the rules that are suffocating and damaging our economy,” said Di Maio, who serves as deputy speaker of the Chamber of Deputies. An opinion poll in La Stampa daily on Sunday had 24% of respondents saying Di Maio most deserved to run the country in the next five years, against 17% for former PD Prime Minister Matteo Renzi and 12% for center-right leader Silvio Berlusconi.

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Schulz and Merkel are the same person.

Turkey Will Never Become EU Member, Says Angela Merkel (Ind.)

Germany’s Chancellor, Angela Merkel, has said Turkey should categorically not become a member of the European Union in comments that are expected to further inflame tensions between the Nato allies. Speaking at a televised election debate with her rival, Martin Schulz, she said she would seek a joint EU position with other leaders to ensure Turkey never became a member. “The fact is clear that Turkey should not become a member of the EU,” she said after Mr Schulz said he would stop Turkey’s bid to join the EU if he was elected chancellor. “Apart from this, I’ll speak to my colleagues to see if we can reach a joint position on this so that we can end these accession talks,” she added.

[..] Her comments are likely to worsen already strained ties between the countries after Ms Merkel said Berlin should react decisively to Turkey’s detention of two more German citizens on political charges. It comes just weeks after German Foreign Minister Sigmar Gabriel told Turkey it will never become a member of the EU as long as it is governed by the current president, Recep Tayyip Erdogan. “It is clear that in this state, Turkey will never become a member of the EU,” Mr Gabriel said. Mr Erdogan has urged German Turks to boycott Germany’s main parties in next month’s general election.

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Good to know. Still, if people really want to go, maybe we should just let them.

How Our Immune Systems Could Stop Humans Reaching Mars (Tel.)

The astrophysicist Neil DeGrasse Tyson commented that ‘dinosaurs are extinct today because they lacked the opposable thumbs and brainpower to build a space programme’ Yet although we now have the technological ability to leave Earth, scientists have found another stumbling block to colonising new worlds – our own immune system. Although it is said we are all made of ‘star stuff’ when it comes to travelling away from our home planet humans are far more vulnerable to the rigours of space than our interstellar origins might suggest. Billions of years of evolution has effectively backed mankind into a corner of the Solar System that it may be now be tricky to leave. A team of scientists from Russia and Canada analysed the effect of microgravity on the protein make-up in blood samples of 18 Russian cosmonauts who lived on the International Space Station for six months.

They found alarming changes to the immune system, suggesting that they would struggle to shake off even a minor virus, like the common cold. “The results showed that in weightlessness, the immune system acts like it does when the body is infected because the human body doesn’t know what to do and tries to turn on all possible defense systems,” said Professor Evgeny Nikolaev, of Moscow Institute of Physics and Technology and theSkolkovo Institute of Science and Technology. The effects of spaceflight on the human body have been studied actively since the mid-20th century and it is widely known that microgravity influences metabolism, heat regulation, heart rhythm, muscle tone, bone density, the respiration system. Last year research from the US also found that astronauts who travelled into deep space on lunar missions were five times more likely to have died from cardiovascular disease than those who went into low orbit, or never left Earth.

Astronauts are fitter than the general population and have access to the best medical care, meaning that their health is usually better than the general population. Those of comparable age but who never flew, or only achieved low Earth orbit, had less than a one in 10 chance of death from cardiovascular disease. [..] To gain a deeper understanding of the changes in human physiology during space travel, the research team quantified concentrations of 125 proteins in the blood plasma of cosmonauts. Proteins change as the immune system alters and so can be used as a measure of how it is functioning. Blood was taken from the cosmonauts 30 days before they travelled to the ISS and then on their immediate return to Earth. They were also tested seven days after touchdown. Individual proteins were then counted using a mass spectrometer.

”When we examined the cosmonauts after their being in space for half a year, their immune system was weakened,” said Dr Irina Larina, the first author of the paper, a member of Laboratory of Ion and Molecular Physics of Moscow Institute of Physics and Technology. “They were not protected from the simplest viruses. We need new measures of disorder prevention during a long flight.

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May 142015
 
 May 14, 2015  Posted by at 10:32 am Finance Tagged with: , , , , , , , , ,  


Walker Evans Street Scene, Vicksburg, Mississippi 1936

The US Economy Is Signalling An Iceberg And We’re Out Of Lifeboats (Guardian)
Central Banks Are Running Low on Ammunition (Bloomberg)
America’s Future Got $7 Trillion Worse Since the Financial Crisis (Bloomberg)
The US Economy Has Left Behind 20 Million Americans (MarketWatch)
Epic Global Bond Rout Is A QE Success Story – But It Won’t Last (AEP)
Foreign Money Pours Into US Real Estate, and It’s Not Just Houses (Bloomberg)
Greece Will Stay In Euro Even If It Defaults, Renzi Adviser Says (Bloomberg)
Greek Minister Sees ‘Only 10%’ Chance Of Failure In Creditor Talks (Bloomberg)
Greek Government Mulls Reforms With Eye On Deal As Some Resist (Kathimerini)
The Greek Bailout Crisis Didn’t Have to Happen (Slate)
The World’s Top Currency Dealers Are ‘Untouchable’ (MarketWatch)
Five Reasons Chicago Is in Worse Shape Than Detroit (Bloomberg)
Many Americans Agree With Bernie Sanders’ Brand Of Socialism (MarketWatch)
“We The People” Need To Circle The Wagons: The Government Is On The Warpath (ZH)
The Secret Corporate Takeover Of Trade Agreements (Stiglitz)
2600 People Arrested Since 2012 Too Injured To Enter Baltimore Jail (CopBlock)
Is The Only Purpose of a Corporation to Maximize Profit? (Bruce Bartlett)
McCain, Saakashvili Appointed To Ukraine Reform Advisory Team (RT)
Pope Francis to Congress: Capitalism Must Change (Bloomberg)
Over 40% Of US Honeybee Colonies Died In The Past Year (WSJ)

“This could be the start of a worrying trend.” Huh? The start?

The US Economy Is Signalling An Iceberg And We’re Out Of Lifeboats (Guardian)

As the economic news from the eurozone improves by a notch (although not in Greece, inevitably), US consumers are sending the opposite signal. Sluggish retail sales in the first quarter of the year were, we were told, caused by a cold snap. There would be a spring bounce, investors assumed, as supposedly confident Americans spent their windfalls from the lower oil price. Well, it didn’t happen in April: yesterday’s figures were flat, and the weather-related explanation is wearing thin. This could be the start of a worrying trend. Indeed, if Americans are preferring to use excess cash to pay down debt, it’s hard to see why they would change their minds now. The oil price has started to rise again and long-term bond yields are also on the up, reducing opportunities to remortgage at a cheaper rate.

Economists assume that this “soft patch” for the US economy is now so soggy that the US Federal Reserve will, again, postpone its attempt to raise interest rates. A hike next month is seen as a non-starter; it will come in September, at the earliest. But what if the run of weak numbers points to something more severe? On cue, HSBC economist Stephen King yesterday published a weighty analysis titled “the world economy’s titanic problem” that pointed out that it has been six years since the trough of the last US recession. “If history is any guide, we are probably now closer to the next one,” he said. Business cycles always turn, and after six years of growth, even at a pedestrian rate, the current recovery is old.

One could make the same point about the UK, where the economic weather tends to follow that of the US, with a lag. King’s point – which explains the Titanic reference – is that policymakers are out of lifeboats if a recession were to arrive. The US Fed has dealt with past recessions by cutting interest rates by at least five percentage points. That is obviously impossible today because rates are still on the floor. To change the metaphor, the arsenal is bare: “Whereas previous recoveries have enabled monetary and fiscal policymakers to replenish their ammunition, this recovery – both in the US and elsewhere – has been distinguished by a persistent ammunitions shortage,” says King. “This is a major problem.”

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Central banks should have stayed on the sidelines, but it’s too late now.

Central Banks Are Running Low on Ammunition (Bloomberg)

“The world economy is like an ocean liner without lifeboats.” That’s the headline in HSBC Chief Economist Stephen King’s latest note. What he’s getting at is that with interest rates sitting at or near record lows in economies across the globe, central banks could be set for major struggles if the economy starts to sour.

If another recession hits, it could be a truly titanic struggle for policymakers. … Remarkably enough, it’s six years since the last recession, suggesting the next one may not be too far away, yet there is a total absence of traditional policy ammunition.

In past recoveries, policymakers on both the fiscal and monetary side have been able to raise rates and “replenish their ammunition,” as King puts it. This recovery has proved otherwise. King says this is a huge problem.

In all recessions since the 1970s, the US Fed funds rate has fallen by a minimum of 5 percentage points. That kind of traditional stimulus is now completely ruled out. Meanwhile, budget deficits are still uncomfortably large and debt levels uncomfortably high: while the US fiscal position has improved, it remains structurally weak.

Although the Federal Reserve is the most discussed, it’s not just the U.S. central bank that has embarked on this historical move. King notes that several other regions have similar narratives. The European Central Bank appears to be committed to quantitative easing until September 2016. The Bank of Japan is basically in the same boat. The Bank of England may not be increasing its balance, but it has yet to raise rates. Fiscal positions, meanwhile, are mostly poor, at least when compared with those pre-crisis. So what options do central banks actually have at this point?

Here’s what King’s report looks at:
• Reducing the risk of recession
• Reverting to quantitative easing
• Moving away from inflation targeting
• Using fiscal policy to replace monetary policy
• Using fiscal and monetary policy together in a bid to introduce so-called “helicopter money”
• Pushing interest rates higher through structural reforms designed to lower excess savings, most obviously via increases in retirement age.

Regarding his first point, how exactly can fiscal and monetary policy reduce the risk of the next recession? Well, it’s not easy. According to King, new safeguard regulations such as increasing bank capital might work in a narrow sense, but not every crisis is the same.

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And here’s the inevitable result of the Fed actions:

America’s Future Got $7 Trillion Worse Since the Financial Crisis (Bloomberg)

Still feeling uncomfortable about that tax bill you owed last month? Think about it this way: If you didn’t pay it, America’s fiscal future would look even worse than it does now, six years out from the financial crisis. Driven by higher interest costs, Social Security and Medicare for baby boomers, as well as tax cuts made permanent in 2012, the federal debt held by the public is expected to hit $40 trillion in 2035, according to calculations by the Committee for a Responsible Federal Budget based on Congressional Budget Office estimates. Back in 2009, soon after President Barack Obama took office, the forecast for the 2035 burden was at least $7 trillion lower.

In 2035, the debt will almost equal the size of the U.S. economy; four years later it will match the previous record, set in 1946, at 106% of gross domestic product, the CBO estimated last year. Compare that to the 2014 debt burden of $12.8 trillion, or 74% of GDP.
The economy just isn’t growing fast enough to keep pace with the costs of caring for the soaring ranks of the elderly, and the discrepancy between spending and revenue is estimated to widen in the next few decades. Republicans say their proposal passed by Congress last week will save $5 trillion and balance the budget within a decade. The Obama administration likes to tout how it’s reduced the budget deficit by three-fourths and is on track to narrow further.

Either way, the number of people paying Social Security taxes is expected to grow more slowly than the number of those receiving the entitlements. The number of taxed workers will increase 20% between now and 2045, while beneficiaries of Social Security’s Old-Age, Survivors and Disability Insurance (OASDI) funds will increase 57% over the same period, according to the Social Security Board of Trustees. As a result, there will be about two taxpayers per beneficiary in three decades, down from almost three now. For comparison, the same ratio was 3.4 to 1 in 2000.

Higher spending on debt servicing and entitlements means less money for other purposes, such as education or research. It also means some hard decisions at some point. In order to prevent debt from becoming an even bigger portion of GDP, the U.S. needs to increase taxes by 7.5% or cut spending by 7%, said Marc Goldwein, vice president and policy director of the Committee for a Responsible Federal Budget, a Washington advocacy group. To bring the ratio more in line with the historical level of 40%, taxes would have to go up 13.5%, according to Goldwein. The later any action is taken, the deeper the spending cuts or the higher the tax increases would have to be.

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Classic lowballing.

The US Economy Has Left Behind 20 Million Americans (MarketWatch)

Last month, when Baltimore was burning after a young African-American man died in police custody (six officers were subsequently charged), I did a Google search to find what David Simon thought about it. Simon, a former reporter for the Baltimore Sun, was the creator and show runner of “The Wire,” which ran for five seasons on HBO and which Entertainment Weekly called the greatest television show ever. It was a brilliant narrative of the struggle for survival in a violent, drug-riddled Baltimore neighborhood much like the one that went up in flames. In my search, I came across an interview Simon did with Bill Moyers a few years ago in which he declared: “ ‘The Wire’ was not a story about America; it’s about the America that got left behind. … These really are the excess people in America. Our economy doesn’t need them — we don’t need 10% or 15% of our population.”

Have 10% to 15% of the U.S. population really been left behind? I contacted Simon at his website to ask where he got the number, but he didn’t get back to me. So I did my own calculations, and he’s actually not too far off. With a little help from the Labor Department’s Bureau of Labor Statistics, which produces the famous monthly jobs reports, I added up several categories of the unemployed, the underemployed and people on some form of public assistance. My conclusion: About 20 million Americans, roughly 10% of adults of working age, have at best marginal ties with the U.S. economy. I excluded the elderly, because most of them are retired and getting Social Security, and children, whose lives and futures are often collateral damage in the economic struggles of their parents.

Here’s how it adds up:
• 2.5 million are among the long-term unemployed, which the Labor Department defines as being out of work and actively seeking work for 27 weeks or more. That’s less than half what it was in 2009, but it’s still high.
• 6.6 million Americans are working part-time for economic reasons but would prefer to work full time.
• Another 2.1 million are marginally attached to the labor force, according to the Labor Department. That means they are “not in the labor force [but] want and are available for work, and … have looked for a job sometime in the prior 12 months.”
• Nearly 5 million adults from age 18-64 are collecting Supplemental Security Income (SSI) disability benefits, which go to people who can’t work because of various disabilities.
• Almost 1 million adults receive public assistance from Temporary Assistance to Needy Families (TANF) and General Assistance (GA), according to the U.S. Census Bureau. Those are temporary cash payments with some work requirements that replaced the old welfare system under welfare reform. • In 2013, 3.3 million Americans earned the federal minimum wage or less, according to the Pew Research Center. If you think they haven’t been left behind, try living on $7.25 an hour. Grand total: 20.4 million adults. Now, there is some overlap, and Labor Department figures are for people from 16 to 64, while the other stats cover those from 18 up. But those caveats aside, 20 million is a reasonable ballpark number — and a disturbing one.

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No, Ambrose, this is the sound of failure.

Epic Global Bond Rout Is A QE Success Story – But It Won’t Last (AEP)

Occam’s Razor is the sharpest way to cut through tangled explanations for the epic rout in global bond markets. The simplest explanation is the best. “Frustra fit per plura quod potest fieri per pauciora.” Bond yields are soaring because the world’s central banks have demonstrably done enough for now to stop deflation taking hold. The short-term monetary cycle is turning. The reflation trade is on. The broad M3 money supply has been growing at a 7pc rate in the US over the past six months (annualized), and nearly 8pc in the eurozone. Fiscal austerity has run its course as well. Budget policy is no longer contractionary in either of the world’s two biggest economic blocs. Unless the normal mechanisms of monetary policy have broken down altogether – which is possible, but would you bet your pension on it? – the burgeoning M3 data point to a reflationary revival of some sort later this year.

John Williams, the once dovish head of the San Francisco Fed, told Yahoo! Finance on Tuesday that the US economy is “running a little bit hot”. Rightly or wrongly, he chose to dismiss the economic relapse in the first quarter as a weather-blip. The world’s monetary superpower is chomping at the bit. Hedge funds were asking for trouble by driving yields on 10-year German Bunds to a historic low of 0.07pc in mid-April. Trouble is what they got. Three weeks later, Bunds are trading at 0.65pc. The paper losses across the spectrum of global bond markets is roughly half a trillion dollars. Put another way, Bank of America says the €2.8 trillion of eurozone debt trading at negative yields has just shrunk to €2 trillion. It calls this a “positioning purge”.

The mistake was to bet on an acute shortage of sovereign bonds once the European Central Bank launched its €60bn monthly blitz of quantitative easing. Bunds were thought to have a special “scarcity premium” since they are dying out. The German government is running a fiscal surplus of 0.5pc of GDP this year. Markets ignored known evidence that bond yields rose by 80-120 basis points during the various bouts of QE in America, which is what one would expect as recovery builds and the risk of deflation abates. Contrary to mythology, QE does not work by lowering bond rates. It works through a different mechanism: by causing banks to “create” money.

ECB president Mario Draghi has accomplished his first goal, even if he might silently be cursing the newfound strength of the euro. The eurozone is clawing its way out of depression. The growth rate of nominal GDP growth has risen from 1.1pc at the start of the year to 1.5pc, subtly altering long-term debt dynamics for the crisis states of southern Europe. They are no longer quite so close to a debt-deflation trap. The one-year “inflation swap rate” – measuring expectations – has jumped by almost 100 basis points since October in the eurozone. The five-year contracts are starting to catch up. This is a short-term cyclical upswing. It does not in itself narrow Europe’s North-South rift in competitiveness, and does not magically turn EMU into an optimal currency area. It does buy time.

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We accept monopoly money.

Foreign Money Pours Into US Real Estate, and It’s Not Just Houses (Bloomberg)

Blockbuster real estate deals are back and breaking records as cash from around the globe pours into U.S. office buildings, apartment complexes and other investment properties. Commercial real estate transactions jumped 45% by dollar volume in the first quarter, an increase driven by sales of multiple buildings or entire companies, according to research firm Real Capital. Since then, GE. agreed to sell real estate assets to Blackstone and Wells Fargo in a deal valued at about $23 billion, the largest property purchase since the financial crisis. As the pot of money set aside for U.S. commercial real estate grows, competition for the best properties is pushing investors to buy in bulk.

Based on the pipeline, which includes the GE deal, the second quarter may be one of the biggest on record for property transactions, according to Real Capital. “It’s so hard to get things on a single-asset basis,” said Janice Stanton, an executive managing director at commercial brokerage Cushman & Wakefield. “You’re starting to see larger and larger transactions.” Real estate deals surged to $129 billion during the three months through March, marking the most active start to a year since 2007, according to Real Capital. The largest was Blackstone’s $8.1 billion sale of IndCor Properties, an owner of industrial buildings, to GIC Pte, Singapore’s sovereign-wealth fund. Demand for property from warehouses to skyscrapers is booming, helped by more than six years of Federal Reserve efforts to stimulate economic growth by keeping interest rates low, and stockpiles of cash from overseas investors seeking a haven.

About $24 billion in foreign capital flowed to U.S. properties in the first quarter, more than half the total for all of 2014, according to Cushman. That number is poised to grow further because the majority of sovereign wealth funds – investors such as GIC – have yet to hit their target allocations for real estate, according to Preqin Ltd., an alternative-assets research firm. Total property allocations for such funds now top $6.3 trillion, more than double the amount in 2008, London-based Preqin said in a report this month. Surging prices for the best buildings in big cities such as New York and San Francisco are driving the real estate recovery. Centrally located office towers are fetching prices 33% above records set in 2008, according to an index from Real Capital and Moody’s.

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“In the face of an extraordinary event, you would also witness some extraordinary support” for Greece..”

Greece Will Stay In Euro Even If It Defaults, Renzi Adviser Says (Bloomberg)

Greece will remain in the euro even if it fails to meet a debt payment, according to Italian Prime Minister Matteo Renzi’s economic adviser. Filippo Taddei, a key aide to Renzi during his overhaul of the euro region’s third biggest economy, said that “nobody knows” whether Greece can meet its debt obligations from one day to the next. As a result, “plans are being set” at European level to mitigate the effect of a Greek default, he said in an interview in Rome on Tuesday. “It’s an intellectual and analytical mistake to think that a default on Greek debt would automatically bring Greece out of the euro,” Taddei said. “The euro is not just an economic project but has a strong political project, and it is very hard to envisage a united currency without Greece.”

Taddei’s comments are the strongest public indication yet that Greece’s euro-area creditors are preparing a plan in case Prime Minister Alexis Tsipras’s government is unable to meet a payment on its outstanding debt. The Greek economy returned to recession in the first quarter, European Union statistics showed on Wednesday, two days after Finance Minister Yanis Varoufakis said that Greece will run out of cash within a couple of weeks unless it gets help. Italy, which saw 10-year bond yields soar to more than 7% in November 2011 at the height of the debt crisis, would again suffer “additional volatility,” if Greece got into more difficulty, Taddei said. Similar Italian debt yielded about 1.82% [today]. “In the face of an extraordinary event, you would also witness some extraordinary support” for Greece, Taddei said.

Plans are being drawn up in “the proper European” forums to prepare for a possible default. While Taddei declined to be drawn on specifics, he said that European institutions were now “a lot more attentive, a lot more ready to respond” to such volatility than during previous financial crises. “We all learned that European institutions in general were not very active and were not very quick at addressing the crisis, or the shock, or the consequences of the crisis. But I think that lesson has been learned and now there is increased awareness that you have to react quickly,” Taddei said. “We will be ready to act.” That includes taking part in any third rescue package for Greece. Italy, he said, “will always take part in any effort to safeguard the euro.”

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“I’m sorry to say that this huge cost for the economy is the basic negotiating weapon of the other side..”

Greek Minister Sees ‘Only 10%’ Chance Of Failure In Creditor Talks (Bloomberg)

The chances of a breakdown between Greece and its creditors are small, as neither of the two sides is willing to risk the breakup of the euro area, Greece’s administrative reform minister said. “I estimate that the chances of rift are only 10%, as I have faith that reason will prevail,” George Katrougalos, 52, said in a telephone interview from Athens on Tuesday. “We are in a trajectory heading towards agreement for the simple reason that neither of the two sides wants a rift.” Europe’s most indebted state is locked in talks with its creditors over the terms attached to its €240 billion bailout. Uncertainty over the country’s future in the euro area has triggered a liquidity squeeze, which pulled the economy back into a double-dip recession.

“We have moved from Grexit to Grimbo, as Greece is in limbo,” said Katrougalos, who is also a professor of public law. “This liquidity crunch, which is caused by the European Central Bank not adhering to its responsibilities, doesn’t allow the Greek economy to grow.”Without access to capital markets, Greek lenders are bleeding deposits and relying on €80 billion of Emergency Liquidity Assistance, extended by the country’s central bank, to stay afloat. The European Central Bank, which can block the ELA provision, has so far resisted the Greek government’s demands to allow Greek lenders to buy more treasury bills, as the use of central bank funds to finance the state would go against EU treaties.

Sorbonne-educated Katrougalos said the ECB’s stance and the refusal of euro-area member states to disburse bailout funds are tactics creditors are using to force the Greek government to capitulate to their demands.“I’m sorry to say that this huge cost for the economy is the basic negotiating weapon of the other side,” the minister said. “They bring time limits to reach a deal to the brink, as a negotiating tactic. This is not proper behavior among partners.”Despite the lengthy negotiations, the minister believes a compromise will be reached. “Only if the logic in the back of the minds of some of our peers – which says that a government of the left shouldn’t be allowed to succeed – only then we will not reach an agreement,” he said.

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‘Emergency’ meetings are a daily event.

Greek Government Mulls Reforms With Eye On Deal As Some Resist (Kathimerini)

The government’s strategy in negotiations with creditors and a raft of possible measures, including tax reforms, that could form the basis of an agreement, dominated a marathon cabinet meeting on Wednesday chaired by Prime Minister Alexis Tsipras. The meeting, which ran late into the night, was aimed at examining a wide range of changes to the tax system as well as possible privatizations ahead of technical-level talks that are due to resume in Brussels on Thursday. Officials also discussed the possible timing for drafting some of these changes into legislation in a bid to show good will and convince the European Central Bank to relax liquidity restrictions on Greece.

Comments by cabinet members earlier in the day gave a mixed picture of the government’s intentions with some insisting that it remained focused on reaching a deal while others suggested there should be no compromise with the demands of Greece’s creditors, despite the increasingly tight liquidity situation. Speaking in Parliament, Energy Minister Panayiotis Lafazanis, who heads SYRIZA’s radical Left Platform, said, “This government will not surrender,” noting that “those who believe we will step back from our red lines are deluding themselves.” He was referring to SYRIZA’s pre-election pledges to protect pensions and the rights of workers.

Another senior member of the Left Platform was widely quoted in the media as saying that Greece will be unable to reach a deal with creditors this month as the latter “keep yanking our chain” and that Greece might be forced to “go it alone.” Interior Minister Nikos Voutsis appeared more conciliatory. “We are working toward an honorable compromise,” he told Mega TV. “Immediate recourse to a referendum or elections is not in our plans right now.” Finance Minister Yanis Varoufakis caused a stir earlier in the day when he said he could not guarantee that the government would be in power next January. He said his comments, which were in response to a question from one of hundreds of ministry cleaning staff who were rehired by the new administration, had been blown out of proportion.

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Without a restructuring blueprint, smaller parties will always get creamed.

The Greek Bailout Crisis Didn’t Have to Happen (Slate)

Everyone knows that bailouts have become overly politicized. The U.S. bailout during the financial crisis, which cemented “too big to fail” in the public consciousness, triggered hostility that helped spur a Republican landslide in the 2010 midterms. Now imagine if every one of the 900,000 or so commercial and consumer bankruptcy filings in the U.S. last year triggered bailouts. Creditors would eventually elbow each other for repayments; mayhem would ensue. In Greece the bailout has been marked by malfeasance, infighting, and decision-fumbling. A 2013 IMF report claimed that the fund underestimated the problems austerity might cause to the Greek economy and that Greece did not qualify on three of its four criteria before receiving the initial three-year, €30 billion loan.

The report also noted that the stimulus prioritized the health of Europe’s banking system over the Greek economy. For example, an early debt write-off was delayed for political reasons because of countries whose banks held Greek bonds. Debt restructuring, or an effort to renegotiate the terms and provisions of a debt, could be a valuable alternative to bailouts, or transfers of finances by a governmental body to rescue an entity that is not meeting its financial obligations. That’s because creditors aren’t impartial. Take the European Central Bank. It’s an invested stakeholder in the current standoff, with a €104 billion exposure that roughly equals 65% of Greek’s GDP.

In a way, it’s understandable that in early February, the ECB’s Governing Council removed a waiver that allowed Greece’s banks to post government debt as collateral for cash. But that led Greece to become reliant on emergency funds to stay afloat. Greek stocks then fell by as much as nearly 30% the following day, and depositors triggered a bank run. There have been many increases to the emergency ceiling, which is now €80 billion. The ECB has similarly strong-armed Ireland and Cyprus. It’s not that the ECB is wrong to pursue rules that benefit the eurozone; the terms of Greece’s bailout could still be changed midstream, but doing so would create legal headaches and other complications for the eurozone.

It’s that while bailouts may evoke a rescue operation of sorts for sovereign debtors, they can play out far differently. When countries like Greece risk going bankrupt, it can be an opportunity for bottom-feeding purchasers of distressed sovereign debt. Such private creditors, especially short-termers, might then either hock to another entity such as the ECB or IMF or hold on to assets and litigate until they recover those assets’ value. There ends up being not much of a rescue, but financial power plays that favor certain interests and assets over others. That has been one of the big criticisms of the Greek bailout. In March an IMF director reportedly told Greek’s Alpha TV that rescue funds were used for banks in France and Germany rather than to keep Greece afloat.

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Too big to touch. Break them down.

The World’s Top Currency Dealers Are ‘Untouchable’ (MarketWatch)

The world’s five largest foreign-exchange brokers ceded a significant chunk of their market share over the past year as regulators pressured them to shrink their operations while investigations into exchange-rate manipulation heated up. But though these dealers have retreated slightly, regulators will find it difficult to break their hold on the market, which they’ve dominated for decades, said analysts at Greenwich Associates, a research firm that, among other things, tracks changes in the foreign-exchange market’s structure. Three of the top five banks (Citigroup, Barclays and J.P. Morgan) are expected to plead guilty to charges of foreign-exchange manipulation, according to The Wall Street Journal. A fourth, UBS, which was the first to cooperate with investigators, will likely reach a settlement.

Maybe one or two more banks will join the ranks of the Deutsche Banks and Citigroups of the world, said Kevin McPartland, head of research for market structure and technology at Greenwich Associates. But a more extreme redistribution of market share is unlikely because of the sheer scale of investment needed to be a player in the massive foreign-exchange market, where turnover is measured in the trillions. “There will probably be more competition than there was in the past, but it’s hard to compete with the scale,” said McPartland said.

Many of the top dealers have a huge advantage when it comes to infrastructure. The top banks developed their own proprietary electronic-trading platforms years ago. They also have branches all over the world, which large clients find reassuring. Many of their smaller rivals depend on multi-dealer e-trading platforms, which pool liquidity from a consortium of banks. The market share of the top five banks shrank to 51%, from 53% in the past year, compared with 45% in 2011. The next five banks’ market share increased from 22% to 24%, while the banks that round out the bottom 10 of the 20 largest dealers saw their share rise from 14% to 15%. The rest of the market is controlled by smaller players.

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There goes your pension plan.

Five Reasons Chicago Is in Worse Shape Than Detroit (Bloomberg)

Forget all the nicknames attached to Chicago for generations – Windy City, City of Big Shoulders, the City that Works. This gleaming metropolis of 2.7 million people is now, along with Detroit, junk city. When Moody’s Investors Service downgraded Chicago’s debt on Tuesday to junk status, it deepened the city’s financial crisis and elevated comparisons to the industrial ruin 280 miles to the east. Chicago partisans, starting with Mayor Rahm Emanuel, argue vehemently that their city isn’t Detroit. They cite population growth, a diverse economy bolstered by an abundance of Fortune 500 companies, vibrant neighborhoods and a booming tourist trade. Yet here are five reasons, now more than ever, that suggest Chicago is akin to Detroit – or, by some measures, even worse. Or, as Illinois Republican Governor Bruce Rauner put it last month: “Chicago is in deep, deep yogurt.”

BIG, SCARY NUMBERS: Chicago’s unfunded liability from four pension funds is $20 billion and growing, hitting every city resident with an obligation of about $7,400. Detroit’s, whose population of about 689,000 is roughly a quarter of Chicago’s, had a retirement funding gap of $3.5 billion, meaning each resident was liable for $5,100. A January 2014 report from Morningstar Municipal Credit Research showed that among the 25 largest cities and Puerto Rico, Chicago had the highest per-capita pension liability.

HOSTILE COURT: When Detroit filed for Chapter 9 in July 2013, a federal bankruptcy judge exerted his considerable powers and decreed that everyone – taxpayers, employees, bondholders and creditors alike – would get a haircut to settle the crisis. When the Illinois Supreme Court ruled on May 8, it said the state couldn’t cut pension benefits as part of a solution to restructure the state retirement system. That decision sent a clear signal to Chicago, which was trying to follow the state’s benefit-cutting lead. Where the Detroit judge acted, the Illinois justices told elected officials to clean up the mess of their own making.

POLITICAL PARALYSIS: Just as Detroit slid into bankruptcy after decades of economic and actuarial warnings, Chicago politicians have watched the train wreck rumble toward them for more than a decade. During that time, they skipped pension payments and paid scant attention to the financial damage being done. In 10 years starting in 2002, the city increased its bonded debt by 84%, according to the Civic Federation, which tracks city finances. That added more than $1,300 to the tab of every Chicago resident. In Michigan, Governor Rick Snyder acted when the crisis in Detroit couldn’t be avoided. He invoked a state law giving an emergency manager what amounts to fiscal martial-law power. In Chicago’s case, there’s no political pressure to invoke a similar law.

NO BAILOUT: Detroit’s bankruptcy filing allowed it to restructure its debt, officially snuffing out $7 billion of it by cutting pensions and payments to creditors. In Illinois, the nation’s lowest-rated state with unfunded pension obligations of $111 billion, Rauner had a blunt message last week in an unprecedented address to Chicago’s City Council: The city will get no state bailout.

DENIAL: After years of denial, Detroit officials finally, if grudgingly, agreed to major surgery. At least for now, Chicago’s Emanuel is sticking to his view that the Illinois Supreme Court’s rejection of a state pension reform law doesn’t apply to the city. “That reform is not affected by today’s ruling, as we believe our plan fully complies with the State constitution because it fundamentally preserves and protects worker pensions,” he said in a statement on Friday. Four days later, Moody’s begged to differ. “In our opinion,” it wrote, “the Illinois Supreme Court’s May 8 ruling raises the risk that the statute governing Chicago’s Municipal and Laborer pension plans will eventually be overturned.”

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“..the American public — crushed by stagnant wages, robbed of middle-class jobs by competition with low-wage countries, deprived of health care, burdened by student debt..”

Many Americans Agree With Bernie Sanders’ Brand Of Socialism (MarketWatch)

John Nichols, a writer for The Nation, titled his 2011 book, “The ‘S’ Word: A Short History of an American Tradition…Socialism,” precisely because, he said, “it is the subject of daily derision, a derision that is at once more intense and more ignorant than at any point in the long history of the United States.” That is due in no small part to the sharp right turn taken by the Republican Party and the steady stream of right-wing blather on radio and television, where “socialist” is used as shorthand for big government, welfare, high taxes, and any other nefarious policy Rush Limbaugh and his cohorts care to attach to it. But it is also due to the residue of the long Cold War demonization of communism and the failure of centrally planned economies in the Soviet Union, Eastern Europe, Cuba, and China.

Of course, the Marxism-Leninism of those countries is only one strand of a progressive socialist tradition that also includes social democracy in its various forms, which is still a vital political force in most European countries — most prominently in Scandinavia. Comfortable in the conviction that the U.S. is the biggest, strongest economy in the world with the highest standard of living, Americans have for decades tended to sneer at these European countries as inferior, bogged down economically by anti-business policies. But it is slowly dawning on wide portions of the American public — crushed by stagnant wages, robbed of middle-class jobs by competition with low-wage countries, deprived of health care, burdened by student debt and the astronomical costs of a college education — that this supposed superiority of ours is no longer true, if it ever was.

And that’s just the middle class. The rapidly growing pool of families below the poverty line, forced to work two or three jobs at subsistence wages just to scrape by, is also waking up to the fact that the famous “American dream” is no longer theirs. George Stephanopoulos, the ABC anchor whose career began as an aide to Democratic presidential candidate Bill Clinton in the 1990s, did a little sneering of his own recently when he interviewed Sanders on “This Week.” “I can hear the Republican attack ad right now,” Stephanopoulos said after Sanders expounded on the benefits of universal health care, a living wage, free higher education, access to child care, guaranteed pensions and other benefits enjoyed in “socialist” countries. “He wants America to look more like Scandinavia.”

Sanders blinked away his astonishment and replied, “That’s right. That’s right. And what’s wrong with that? What’s wrong when you have more income and wealth equality? What’s wrong when they have a stronger middle class in many ways than we do, a higher minimum wage than we do, and they’re stronger on the environment?”

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“This vital truth, that the government exists for our benefit and operates at our behest, seems to have been lost in translation..”

“We The People” Need To Circle The Wagons: The Government Is On The Warpath (ZH)

Despite what some special interest groups have suggested to the contrary, the problems we’re experiencing today did not arise because the Constitution has outlived its usefulness or become irrelevant, nor will they be solved by a convention of states or a ratification of the Constitution. No, as I document in my new book Battlefield America: The War on the American People, the problem goes far deeper. It can be traced back to the point at which “we the people” were overthrown as the center of the government. As a result, our supremacy has been undone, our authority undermined, and our experiment in democratic self-governance left in ruins. No longer are we the rulers of this land.

We have long since been deposed and dethroned, replaced by corporate figureheads with no regard for our sovereignty, no thought for our happiness, and no respect for our rights. In other words, without our say-so and lacking any mandate, the point of view of the Constitution has been shifted from “we the people” to “we the government.” Our taxpayer-funded employees—our appointed servants—have stopped looking upon us as their superiors and started viewing as their inferiors. Unfortunately, we’ve gotten so used to being dictated to by government agents, bureaucrats and militarized police alike that we’ve forgotten that WE are supposed to be the ones calling the shots and determining what is just, reasonable and necessary.

Then again, we’re not the only ones guilty of forgetting that the government was established to serve us as well as obey us. Every branch of government, from the Executive to the Judicial and Legislative, seems to be suffering this same form of amnesia. Certainly, when government programs are interpreted from the government’s point of view (i.e., the courts and legislatures), there is little the government CANNOT do in its quest for power and control. We’ve been so brainwashed and indoctrinated into believing that the government is actually looking out for our best interests, when in fact the only compelling interesting driving government programs is maintain power and control by taking away our money and control.

This vital truth, that the government exists for our benefit and operates at our behest, seems to have been lost in translation over two centuries dominated by government expansion, endless wars and centralized federal power. Have you ever wondered why the Constitution begins with those three words “we the people”? It was intended to be a powerful reminder that everything flows from the citizenry. We the people are the center of the government and the source of its power. That “we” is crucial because it reminds us that there is power and safety in numbers, provided we stand united. We can accomplish nothing alone.

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Joe’s late to the game, and has little to add. And if your claim to fame is your link to Bill Clinton, you may want to take a deep breath.

The Secret Corporate Takeover Of Trade Agreements (Stiglitz)

When I chaired Bill Clinton’s council of economic advisers, when he was president, anti-environmentalists tried to enact a similar provision, called “regulatory takings”. They knew that once enacted, regulations would be brought to a halt, simply because government could not afford to pay the compensation. Fortunately, we succeeded in beating back the initiative, both in the courts and in the US Congress. But now the same groups are attempting an end run around democratic processes by inserting such provisions in trade bills, the contents of which are being kept largely secret from the public (but not from the corporations that are pushing for them). It is only from leaks, and from talking to government officials who seem more committed to democratic processes, that we know what is happening.

Fundamental to America’s system of government is an impartial public judiciary, with legal standards built up over the decades, based on principles of transparency, precedent, and the opportunity to appeal unfavourable decisions. All of this is being set aside, as the new agreements call for private, non-transparent, and very expensive arbitration. Moreover, this arrangement is often rife with conflicts of interest; for example, arbitrators may be a judge in one case and an advocate in a related case. The proceedings are so expensive that Uruguay has had to turn to Michael Bloomberg and other wealthy Americans committed to health to defend itself against Philip Morris. And, though corporations can bring suit, others cannot. If there is a violation of other commitments – on labour and environmental standards, for example – citizens, unions, and civil society groups have no recourse.

If there ever was a one-sided dispute-resolution mechanism that violates basic principles, this is it. That is why I joined leading US legal experts, including from Harvard, Yale, and Berkeley, in writing a letter to Barack Obama explaining how damaging to our system of justice these agreements are. American supporters of such agreements point out that the US has been sued only a few times so far, and has not lost a case. Corporations, however, are just learning how to use these agreements to their advantage. And high-priced corporate lawyers in the US, Europe, and Japan will likely outmatch the underpaid government lawyers attempting to defend the public interest. Worse still, corporations in advanced countries can create subsidiaries in member countries through which to invest back home, and then sue, giving them a new channel to bloc regulations.

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Damning.

2600 People Arrested Since 2012 Too Injured To Enter Baltimore Jail (CopBlock)

Over 2600 people arrested by Baltimore police since 2012 were too injured to enter the city’s detention center, jail records show. The Baltimore Sun reports that according to records, 123 of the detainees who weren’t admitted had visible head injuries, the third-most common ailment cited by officials while others had broken bones, facial trauma and lacerations. While the records do not indicate how the people were injured or whether they suffered their injuries at the hands of police, they do suggest that officers either ignored or did not notice the injuries. The report comes in the wake of the death of Freddie Gray last month, who died of a broken neck prosecutors say he suffered while riding in the back of a Baltimore police van. Six of the officers involved are facing criminal charges, including one charged with second-degree murder.

The incident sparked protests and rioting in the city, before Friday, when the U.S. Justice Department launched a civil-rights investigation into the department. Critics say the figures show that Baltimore police officers take little interest in detainees after they are arrested. This may result, law enforcement experts say, from officers not receiving adequate training to detect injuries or whether or not a detainee is faking being hurt in order to avoid jail. The United States Constitution guarantees health care to suspects before they are booked into jail. In the Gray case, prosecutors say the man requested medical care five times before his death. The Sun previously reported that dozens of Baltimore residents have accused the city’s police of inflicting injuries on them and disregarding their requests for medical help. The city has paid out almost $6 million in court judgments and settlements in response to over 100 lawsuits filed since 2011.

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Corporations have accumulated too much political power to allow for justice or common sense.

Is The Only Purpose of a Corporation to Maximize Profit? (Bruce Bartlett)

Historically, corporations were expected to serve some public purpose as justification for the benefits and privileges they receive from the state. But since the 1970s, the view has become widespread that corporations exist solely to maximize profits and for no other purpose. While the shareholder-first doctrine was supposed to solve the agency problem, in fact it has gotten worse as corporate executives enrich themselves at the expense of shareholders. Moreover, the obsession with current share prices as the only measure of corporate success may be destroying long-term value as companies cut back on investment to raise short-term profits. Tax policies designed to raise after-tax profits have done nothing to reverse these trends.

To conservatives, the corporation is often treated as the pinnacle of capitalist development. This justifies their deferential treatment of corporations in terms of taxation and government regulation, which, they claim threaten to kill the goose that lays golden eggs. In reality, the corporation wouldn’t exist in a pure free market. It is and always has been a creature of the state. For many years, corporate status was only granted to businesses deemed to be in the public interest, such as companies that built turnpikes and canals. But as time has gone by, the idea that corporations exist at the pleasure of the state and in the public interest has been forgotten.

Today, it is widely believed that corporations exist for the sole purpose of making a profit. Corporate executives who believe corporations have a social responsibility are considered old fashioned. But the costs of this new view of the corporation have been very high in terms of lost jobs and investment, and minuscule wage growth for more than a generation. Shareholders, the owners of the corporation, haven’t even benefitted that much from the laser-like focus on profit above all else because much of it has been siphoned off by corporate executives, who have enriched themselves at the expense of shareholders, and financial institutions that have encouraged companies to become highly leveraged.

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Put the crazies in charge!

McCain, Saakashvili Appointed To Ukraine Reform Advisory Team (RT)

Georgia’s fugitive ex-president Mikhail Saakashvili and hawkish US Senator John McCain have been approved as members of the newly-formed International Advisory Group that will help Ukraine’s president in “conducting reforms.” Saakashvili has been appointed as head of the new advisory group, says the statement on Ukraine’s presidential website. The list of members included in the advisory group mostly includes current and former European politicians. Among them are the German member of the European Parliament and the current Chairman of the European Parliament Committee on Foreign Affairs Elmar Brok, Sweden’s former Prime and Foreign Minister Carl Bildt, former Prime Minister of Slovakia Mikulas Dzurinda, and Lithuania’s former Prime Minister Andrius Kubilius.

Back in February Saakashvili was appointed as a non-staff adviser to Poroshenko. The ex-Georgian president, who was in power from 2004 to 2013, faces numerous charges at home, including embezzlement of over $5 million, corruption and brutality against protesters during demonstrations in 2007. Georgia’s Chief Prosecutor’s Office launched proceedings to indict Saakashvili and place him on the international most wanted list, but Kiev refused to hand over the fugitive president, despite an existing extradition agreement between Ukraine and Georgia. Saakashvili is known for his strong anti-Russian stance, which garnered heavy US support. In August 2008 during his term in office Georgia launched an offensive against South Ossetia, killing dozens of civilians and Russian peacekeepers stationed in the republic.

Georgia’s shelling of Tskhinval prompted Russia to conduct a military operation to fend off the offensive. Despite Saakashvili’s claims that the conflict was “Russian aggression,” the 2010 EU Independent Fact Finding Mission Report ruled that Tbilisi was responsible for the attack. Meanwhile Senator John McCain, for years spearheading the anti-Russian and particularly anti-Putin crusade, said that while he “would love to do anything” to help Ukraine, he has not yet cleared his new appointment under the US Senate rules. “I was asked to do it both by Ukraine and Saakashvili and I said I would be inclined to do it but I said I needed to look at all the nuances of it, whether it’s legal under our ethics and all that kind of stuff,” McCain told BuzzFeed.

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Too late.

Pope Francis to Congress: Capitalism Must Change (Bloomberg)

Pope Francis will denounce the inequalities of capitalism when he becomes the first pontiff to address Congress on his visit to the U.S. in September, according to his closest adviser. Cardinal Oscar Andres Rodriguez Maradiaga, a fellow Latin American whom the Argentine pope has appointed to advise him on governing the church, said in an interview in Rome that Francis will speak “not as an enemy of the system or of the culture” but “as a shepherd who wants to make the world better, especially for those who do not have a voice.” On his election as leader of 1.2 billion Catholics, Francis called for “a poor church for the poor,” setting a humbler tone for his papacy that began with his decision to live in a modest residence.

At the same time, he’s set out an ambitious political agenda, from lobbying for a global climate accord to decrying the widening gap between rich and poor. Francis will present the lawmakers with “the same way of thinking that he expressed” in Evangelii gaudium, his first 2013 encyclical, or major papal writing, according to Maradiaga. In that document, Francis attacked the “idolatry of money” and a financial system “of exclusion and inequality,” adding: “Such an economy kills.” Free-market laws aim to “to produce the biggest revenue possible and the lowest costs possible,” Maradiaga, 72, said on Wednesday. “Change is needed, making capitalism more human, otherwise inequalities will continue growing and inequalities produce violence, frustration, pain and especially insecurity in every sense.”

Maradiaga, the archbishop of Tegucigalpa, Honduras, expressed the hope that the Republican-dominated Congress will hear the pope “with open hearts.” Francis, 78, will travel to Cuba Sept. 19-22, and then to Washington, where he will meet with President Barack Obama at the White House, to New York, where he will address the United Nations General Assembly, and finally to Philadelphia. The White House said in a March statement that the discussion between Francis and Obama will include “caring for the marginalized and the poor” and “advancing economic opportunity for all.” As the Vatican’s spokesman on developing countries’ debt at the IMF and the World Bank, Maradiaga helped negotiate a writedown for his native Honduras in the 1990s.

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“For the first time since the survey began five years ago, the summer loss rates exceeded the winter loss rates..”

Over 40% Of US Honeybee Colonies Died In The Past Year (WSJ)

More than 40% of U.S. honeybee colonies died in a 12-month period ending in April, extending a troubling trend that has scientists scrambling for a solution and professional beekeepers struggling to stay in business. The Agriculture Department said in its annual honeybee survey released Wednesday that beekeepers are starting to lose large numbers of bees during both the summer and winter—presenting scientists with a new wrinkle since die-offs had generally occurred during the cold winter months. “I think the situation is changing,” said Dennis vanEngelsdorp, an expert on honeybees at the University of Maryland. “It remains bad but I don’t know if we can assume the same thing is happening year to year.”

For the first time since the survey began five years ago, the summer loss rates exceeded the winter loss rates, suggesting bees are becoming vulnerable during a time of the year they were thought to be healthy and robust. The most recent summer loss rate reached 27%, up from 20%. While the precise cause of the honeybee crisis is unknown, scientists generally blame a combination of factors, including poor diets and stress. Some bees die from infestations of the Varroa mite, a bloodsucking parasite that weakens bees and introduces diseases to the hive. Environmental groups also point to a class of pesticides known as neonicotinoids.

In April, the Environmental Protection Agency said it would stop approving new outdoor uses for those types of chemicals until more studies on bee health are conducted. During the one-year period ending in April, beekeepers lost 42% of their colonies, according to the survey, marking the second-highest rate of loss since the Agriculture Department began tracking annual statistics in 2010. The loss rate was up from 34% during the previous 12-month period. Bee deaths present a considerable challenge to professional beekeepers, who spend substantial amounts of time and money to replenish their colonies. Many beekeepers, already in their 50s and 60s, are considering early retirement or are being forced out of the business due to the expense.

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 February 3, 2015  Posted by at 12:06 am Finance Tagged with: , , , , , ,  


Harris&Ewing House-Capitol tunnel, Washington, DC Feb 3 1939

It’s all still about Greece, and that makes sense, if nothing else Syriza is a breath if not a tornado of fresh air. But those too pass. The question at the end remains: did anything really change? It’s quite possible, don’t get me wrong, but Tsipras and Vanoufakis are busy looking out for the people who voted for them, not the rest of the Europe, or the world for that matter. And neither should they.

They’ve already gotten good response from Obama, from France and Britain, and if only for that reason they will get more. But you have to understand what they are trying to do: getting a better life for their own people, and that’s hard enough all by itself. The best they can do for now, hopefully, is that. But Greece is merely a symptom of something bigger and deeper that is going wrong.

There’s an ideological battle happening between money and wellbeing, between people and banks. Western leaders have so far chosen to protect money and banks, instead of people and their wellbeing, and that’s why we find ourselves where we do. Choosing money before people can only end in the demise of the system that makes such a choice. That, however, is apparently terribly hard to comprehend.

And that got Greece where it is. That’s why Europe set up a ‘union’ that shares a currency but that has no provisions to transfer funds from – even temporarily – weak regions from stronger ones. Even the US has that, or it would have imploded long ago. It’s the kind of thing that makes you wonder if maybe the EU wasn’t set up from the start so Germany could exploit the Mediterranean.

But even that is not the core issue. It’s money over people that is. And Brussels should not just be ashamed for what they’ve done to Greece, they should be driven out of town with tar and feathers. That’s not how they see it, though. Brussels, in the voice of Eurogroup head Dijsselbloem, when he met with new Greek FinMin Varoufakis, had the audacity – and stupidity, his job is up for grabs – to point out that much progress had been made. As the troika demands have turned Greece into a third world nation. That’s known as progress.

If you think about it, it’s not much different from how US policies have turned Detroit, and many other places, into semi-hellholes. It’s fine if there’s a difference between West Virginia and the Hamptons, it’s just about how big that difference gets.

It all comes down to a system that is failing spectacularly. Failing, that is, even if it’s intentional: there are plenty Darwinists and neo-liberals who would swear the poor only get what they deserve. Just as Brussels apparently saw the Greeks: let ’em bleed, let ’em suffer, let ’em die, it’s only because they borrowed too much.

I can’t seem to figure out the logic there: if they borrowed so much, why are they unemployed and miserable and without health care? The answer to that of course is that they didn’t, it’s 90%+ money that flowed into western banks to make up for their gambling losses. It should by now be a non-issue, because it’s so glaringly obvious, but the narrative is strong.

This is not about Greece, this is about ideology, about economics as a belief system, a system so blind it sacrifices real people and proclaims that is a good thing: ‘much progress had been made’. Some people are saying: you need to help these people who end up on the wrong side of the economic tracks, while others invoke Darwin.

But you need to ask how they got where they are, or you’ll never solve the issue, you’ll just need up murdering people. And whether they deserve it or not, murder is not legal, Mr. Dijsselbloem. And neither is using your job to put people into misery, not even if your economic beliefs say that’s alright.

In the US, a lot of people complain about how the country has turned into a socialist bastion. And even taking into account that the word has a very different connotation stateside than it does in Europe and other parts of the world, it’s simply not correct, it doesn’t fit.

The US, like western Europe, is in the midst of a massive failure of its brand of capitalism. There are no free markets, no price discovery, there are asset bubbles being blown with money that belongs to our grandchildren as people are thrown into despair, while others attain unparalleled riches, and the whole grossly distorted movie is fed to everyone by a well-oiled spin machine.

Yes, 40 million Americans are on food stamps, 100 million are not even officially in the labor force, and perhaps as much as most Americans are receiving some sort of government assistance, but that doesn’t make it socialism. It makes it a failed capitalist system. Socialism is supposed to be about a society that cares, and that’s not what those US government handouts are about. They’re about keeping people quiet in a failed system.

Europe understands the ‘caring society’ definition of socialism much better. Or it used to. Now it has to face the ‘New Greeks’, elected to stand up against a Europe that does not care one bit. That only wants Greece to obey its budget and bailout rules, over the bodies of its own people. The Greeks have democratically voted not to take that anymore.

Can you imagine what would happen in the US if the government pay-outs were halted? If there were no more foodstamps? The epic failure of the economic system would come to light in too many ways to mention. But one thing’s for sure, it would create one big mess of chaos and unrest that would sweep across the streets of the country like a tidal wave.

Nothing to do with socialism, that’s a political ideology, like capitalism is. There’s not much between them, once you put people first in either.

Still, for now, we all live in a failed economic system, and we refuse to admit it, edged on by our self-serving leaders and media. But how is it not obvious? It is in Greece, after all.