Sep 132017
 
 September 13, 2017  Posted by at 7:09 pm Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Eugene Delacroix Greece expiring on the Ruins of Missolonghi 1826

 

European Commission president Jean-Claude Juncker, famous for his imbibition capacity and uttering -not necessarily in that order- the legendary words “when it becomes serious, you have to lie”, presented his State of the Union today. Which is of pretty much limited interest because, as Yanis Varoufakis’ book ‘Adults in the Room’ once again confirmed, Juncker is nothing but ventriloquist Angela Merkel’s sock puppet.

But of course he had lofty words galore, about how great Europe is doing, and how that provides a window for more Europe, in multiple dimensions. Juncker envisions a European Minister of Finance (Dutch PM Rutte immediately scorned the idea), and he wants to enlarge the EU by inviting more countries in, like Albania, Montenegro and Serbia (but not Turkey!).

Juncker had negative things to say about Britain and Brexit, about Poland, Prague and Hungary who don’t want to obey the decree about letting in migrants and refugees, and obviously about Donald Trump: Brussels apparently wants ‘to make our planet great again’.

What the likes of Jean-Claude don’t seem to be willing to contemplate, let alone understand or acknowledge, is that the EU is a union of sovereign countries. The meaning of ‘sovereignty’ fully escapes much of the pro-EU crowd. And if they keep that up, it will break the union into pieces.

The European Court of Justice has ruled that Poland, the Czech Republic and Hungary must accept their migrant ‘quota’, as decided in Brussels, and that, too, constitutes an infringement on these countries’ sovereignty. And don’t forget, sovereignty is not something that can be divided into separate parts, some of which can be upheld while others are discarded. A country is either sovereign or it is not.

The single euro currency is already shirking awfully close to violating sovereignty, if not passing over an invisible line, and a European Finance Minister would certainly constitute such a violation. At some point, the politicians in all these countries will have to tell their voters that they’re about to surrender -more of- their sovereignty and become citizens of Merkel Land. But they don’t want to do that, because as soon as people would realize this, the pitchforks would come out and the union would be history.

The EU will be able to muddle on for a while longer, but Europe is not at all doing great economically (however, to maintain the illusion ECB head Draghi buys €60 billion a month in ‘assets’), and when the next crisis comes people will demand their sovereignty back. It really is that simple. And what will the negotiations look like to make that happen? 27 times Brexit?

 

The real Europe is not the one Juncker paints a portrait of. The real Europe is Greece. That’s where you can see the economic reality as well as the political one. Greece has no sovereignty left to speak of, despite the fact that it is guaranteed it in EU law. Europe’s political reality is about raw power. About the rich waterboarding the poor, to the point that they are turned from sovereign citizens of their countries into lost souls in debt prisons.

This week, another chapter has been added to the dismal annals of the Greek adventures in the European Union. It’s like the Odyssee, I kid you not. Like the previous chapters, this one will not solve the Greek crisis, or even alleviate it, but instead it will deepen it further, and not a little bit. This chapter concerns the forced auctioning of -real estate- properties.

Not to Greeks, 90% of whom can’t afford to buy anything at all, let alone property, but to foreigners, often institutional investors. At the same time, bad loans, including mortgage loans, will be offloaded for pennies on the dollar to that same class of ‘investors’. Once the Troika is done with this chapter, Greece will have seen capital destruction the likes of which the world has seldom if ever witnessed.

People in the country have a hard time understanding the impact:

Greece Property Auctions Certain To Drive Market Prices Even Lower

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.”

[..]Giorgos Litsas, head of the GLP Values chartered surveyor company, which cooperates with PQH [..] 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.”

A 10% drop? Excuse me? Even in the center of Athens, rental prices for apartments that are not yet absorbed by Airbnb have plummeted. With so many people making just a few hundred euro a month that is inevitable. You can rent a decent place for €200 a month, and if you keep looking I’m sure you can find one for €100. An 80% drop?! But property prices would only go down by 10% in a market that has 20 times more unsold properties than it sells in a year?

The Troika creditors found they had to deal with attempts to prevent the wholesale fire sale of Greek properties. They now think they’ve found the solution. First, they will force the government to lower official valuations concerning the so-called “primary residence protection”, which protected homes valued at below €300,000 from foreclosure. Second, they will bypass the associations of notaries who refused to cooperate in ‘physical’ auctions, as well as protesters, by doing the fire sale electronically:

E-Auctions Of Foreclosed Property For First Time This Month In Greece

Environment and Energy Minister Giorgos Stathakis confirmed the development in statements to a local television station, announcing the relevant justice ministry is ready to begin electronic auctions in the middle of next week.At the same time, Stathakis noted that a law protecting a debtor’s primary residence from creditors will be expanded until the end of 2018. According to reports, the e-auctions will take place every Wednesday, Thursday and Friday over a four-hour period, i.e. from 10 a.m. to 2 p.m. or 2 p.m. to 6 p.m. Some 5,000 foreclosed commercial properties will be up for sale by the end of the year, which translates into 1,250 properties per month, on average.

Currently, the primary residence protection against foreclosure extends to properties valued (by the State tax bureau) at under €300,000, a very high threshold that shields the “lion’s share” of mortgaged residential real estate in the country, if judged by current commercial property values in Greece. Creditors and local lenders have called for a decrease in the protection threshold, a prospect that is very likely.

The development is also expected to generate another round of acrimonious political skirmishing, given that both leftist SYRIZA, and its junior coalition partner, the rightist-populist Independent Greeks party, rode to power in January 2015 on a election campaign platform that included an almost universal protection of residential property from bank foreclosures and auctions.

Associations representing notaries – professionals who in Greece are law school graduates specializing in drawing up contracts and maintaining registries of deeds, property transactions, wills etc. – had also blocked old-style auctions from taking place in district courts by ordering their members not to take part. The e-auction process aims to bypass this opposition, as well as disruptions and occupations of courtrooms by anti-austerity protesters.

The claim is that Greek banks must be made healthy again by removing bad loans from their books. The question is if selling both properties and bad loans to foreign institutional investors for pennies on the buck is a healthy way to achieve that. But yeah, if 50% of your outstanding loans are bad, you have a problem. Still, at the same time, the problem with that is that many if not most of those loans have turned sour because of the neverending carrousel of austerity measures unleashed upon the country. It’s a proverbial chicken and egg issue.

If Brussels were serious about Greek sovereignty, it would make sure that Greek homes were to remain in Greek hands. You can’t be sovereign if foreigners own most of your real estate. By bleeding the country dry, and forcing the sale of Greek property to Germans, Americans, Russians and Arabs, the Troika infringes upon Greek sovereignty in ways that will scare the heebees out of other EU nations.

It’s not for nothing that the entire Italian opposition is talking about a parallel currency next to the euro. That is about sovereignty.

5,000 Greek Properties Under the Electronic Auction System by End of 2017

Auctions of foreclosed properties to settle bad debts are seen as key to returning Greek banks to health by helping reduce the burden of non-performing loans. These currently stand at roughly €110 billion, or 50% of the banks’ total loans. Under pressure from its lenders, in the summer of 2016 the Greek government passed measures allowing the sale of delinquent mortgages and small business loans to international funds, a move seen by many as yet another betrayal by the SYRIZA-led government.

Greek banks won’t return to health, they’ll simply shrink the same way the people do who can’t afford to rent a home or eat decent food. Austerity kills entire societies, including banks. If Mario Draghi would decide tomorrow morning to include Greece in his €60 billion a month QE bond-buying program, and Greece could use that money to stop squeezing pensions and wages, and no longer raise taxes and unemployment, both the people AND the banks could return to health. It would take a number of years, but still.

 


Attica! Attica!

 

Whatever you call what happens to Greece, and what’s been happening for nearly 10 years now, whether you call it fiscal waterboarding or Shock Doctrine, it is definitely not something that has a place in a union of sovereign nations bound together in mutual respect and dignity. And that will ensure the demise of that union.

 

Another aspect of the fire sale is the valuation of the properties austerity has caused to crumble (so many buildings in Athens are empty and falling apart, it’s deeply tragic, at times it feels like the entire city is dying). The press calls it a hard task, but that doesn’t quite cover it.

It’s not just about mortgages, many Greeks simply give up their properties because they can’t afford the taxes on them. People that inherit property refuse to accept their inheritance, even if it’s been in their families for generations, and it’s where they grew up. In that sense, it may be good to lower valuations to more realistic levels. But tax revenues will plunge along with the valuations, and the government is already stretched silly. Add a new tax, then?

Greece Property Value Review A Hard Task

The government is facing a daunting task in adjusting the so-called objective values (the property rates used for tax purposes) to market levels by the end of the year, as its bailout agreement dictates. The huge slump in transactions and the forced sales of properties due to their owners’ debts do not lead to any safe conclusions for the values per area. One in four sales are conducted with prices that lag the objective value by 60-70%, and the prices of 2008 by 70-80%. The Finance Ministry must overcome all the obstacles to bring to Parliament all the necessary adjustments and regulations.

Moreover, once the objective values are brought in line with market rates, the government will have to maintain the same amount of revenues from the Single Property Tax (ENFIA) either by raising the tax’s rates or by introducing a new tax in the form of the old Large Property Tax.

Furthermore, once the objective values are reduced by 40-50% to match the going prices, banks may see problems with their capital adequacy, as lenders will incur losses by having to revise the collateral they get. Mortgage loans in Greece amount to €59.44 billion, of which 42%, or €25.4 billion are nonperforming.

Yeah, there’s the health of the banks again. And the government. And the people. A wholesale fire sale is the worst possible thing that could happen at this point in time. Greece needs help, stimulus, hope, not more austerity and fire sales. Juncker and his Berlin ventriloquist have this all upside down and backwards, squared. The one thing the EU cannot afford itself to do, is the one thing it engages in.

They may as well pack in the whole thing today, and go home. Actually, that would be by far the best option, because more of this will inevitably lead to the very thing Europe prides itself in preventing for the past 70 years: battle, struggle, war, fighting in the streets, and worse. If the EU cannot show it exists for the good and benefit of its people, it no longer has a reason to exist.

Saving the banks in the richer countries by waterboarding an entire other country is not just the worst thing they could have thought of, it’s entirely unnecessary too. The EU and ECB could easily have saved Greece from 90% of what it has gone through, and will go through going forward, at virtually no cost at all. But yes, German, French, Dutch banks would likely have had to cut the bonuses of their bankers, and their vulture funds couldn’t have snapped up the real estate quite that cheaply.

Summarized: the EU is a disgrace, morally, politically, economically. I know that French President Macron on the one side, and Yanis Varoufakis’ DiEM25 movement on the other, talk about reforming the EU. But the EU is the mob, and you don’t reform the mob. You dismantle their organization and then you lock them up.

 

 

Sep 062017
 
 September 6, 2017  Posted by at 9:10 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Edward Hopper Summer evening 1947

 

Irma Becomes Most Powerful Hurricane Ever Recorded In Atlantic (G.)
Australia: Classic Mortgage Ponzi Finance Model (News)
The World Is Becoming Desperate About Deflation (Katsenelson)
Mario Draghi Is Running Out Of Bonds To Buy (BBG)
Banks Moving Jobs From London Post-Brexit Need To Act Fast – Bundesbank (CNBC)
UK PM May in Double Brexit Trouble (BBG)
Trump: I Will ‘Revisit’ DACA If Congress Can’t Legalize It (CNBC)
Putin Warns of Planetary Catastrophe over North Korea (G.)
Diplomacy With North Korea Has Worked Before, and Can Work Again (N.)
The Bad Guys Are The Ones Invading Sovereign Nations (M.)
Neoliberalism is a Form of Fascism (Cadelli)
European Top Court Dismisses Eastern States’ Challenge To Refugee Quota (DW)
Plastic Film Covering 12% of China’s Farmland Contaminates Soil (BBG)

 

 

Tropical storm José is close behind, and the next one, Katia, is forming in the Gulf. Prayers. The Saffir-Simpson scale doesn’t go to 6, or Irma would be that. 5++ for now.

Irma Becomes Most Powerful Hurricane Ever Recorded In Atlantic (G.)

The most powerful Atlantic Ocean hurricane in recorded history bore down on the islands of the north-east Caribbean on Tuesday night local time, following a path predicted to then rake Puerto Rico, the Dominican Republic, Haiti and Cuba before possibly heading for Florida over the weekend. At the far north-eastern edge of the Caribbean, authorities on the Leeward Islands of Antigua and Barbuda cut power and urged residents to shelter indoors as they braced for Hurricane Irma’s first contact with land early on Wednesday. Officials warned people to seek protection from Irma’s “onslaught” in a statement that closed with: “May God protect us all.” The category 5 storm had maximum sustained winds of 185mph (295kph) by early Tuesday evening, according to the US National Hurricane Center (NHC) in Miami.

Category 5 hurricanes are rare and are capable of inflicting life-threatening winds, storm surges and rainfall. Hurricane Harvey, which last week devastated Houston, was category 4. Other islands in the path of the storm included the US and British Virgin Islands and Anguilla, a small, low-lying British island territory of about 15,000 people. US president Donald Trump declared emergencies in Florida, Puerto Rico and the US Virgin Islands. Warm water is fuel for hurricanes and Irma is over water that is one degree celsius (1.8F) warmer than normal. The 26C (79F) water that hurricanes need goes about 250 feet deep (80m), said Jeff Masters, meteorology director of the private forecasting service Weather Underground.

Four other storms have had winds as strong in the overall Atlantic region but they were in the Caribbean Sea or the Gulf of Mexico, which are usually home to warmer waters that fuel cyclones. Hurricane Allen hit 190mph in 1980, while 2005’s Wilma, 1988’s Gilbert and a 1935 great Florida Key storm all had 185mph winds.

Read more …

‘piss in a fancy bottle scam’

Australia: Classic Mortgage Ponzi Finance Model (News)

The Australian mortgage market has “ballooned” due to banks issuing new loans against unrealised capital gains of existing investment properties, creating a $1.7 trillion “house of cards”, a new report warns. The report, “The Big Rort”, by LF Economics founder Lindsay David, argues Australian banks’ use of “combined loan to value ratio” — less common in other countries — makes it easy for investors to accumulate “multiple properties in a relatively short period of time despite high house prices relative to income”. “The use of unrealised capital gain (equity) of one property to secure financing to purchase another property in Australia is extreme,” the report says. “This approach allows lenders to report the cross-collateral security of one property which is then used as collateral against the total loan size to purchase another property. This approach substitutes as a cash deposit.

“This has exacerbated risks in the housing market as little to no cash deposits are used.” The report describes the system as a “classic mortgage Ponzi finance model”, with newly purchased properties often generating net rental income losses, adversely impacting upon cash flows. “Profitability is therefore predicated upon ever-rising housing prices,” the report says. “When house prices have fallen in a local market, many borrowers were unable to service the principal on their mortgages when the interest only period expires or are unable to roll over the interest-only period.” LF Economics argues that while international money markets have until now provided “remarkably affordable funding” enabling Australian banks to issue “large and risky loans”, there is a growing risk the wholesale lending community will walk away from the Australian banking system.

“[Many] international wholesale lenders … may find out the hard way that they have invested into nothing more than a $1.7 trillion ‘piss in a fancy bottle scam’,” the report says. The report largely sheets the blame home to Australia’s financial regulators, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission. “ASIC and APRA have failed to protect borrowers from predatory and illegal lending practices,” it says. “Although ASIC has no official ‘duty of care’, APRA does, and will have some serious questions to answer in relation to systemic criminality within the mortgage market committed by the financial institutions they regulate. The evidence strongly suggests the regulators have done nothing to combat white-collar criminality in the mortgage market.”

Read more …

Because the world doesn’t know what it is.

The World Is Becoming Desperate About Deflation (Katsenelson)

The Great Recession may be over, but eight years later we can still see the deep scars and unhealed wounds it left on the global economy. In an attempt to prevent an unpleasant revisit to the Stone Age, global governments have bailed out banks and the private sector. These bailouts and subsequent stimuli swelled global government debt, which jumped 75%, to $58 trillion in 2014 from $33 trillion in 2007. (These numbers, from McKinsey, are the latest, but it’s fair to say they have not shrunk since.) There’s a lot about today’s environment that doesn’t fit neatly into economic theory. Ballooning government debt should have brought higher – much higher – interest rates. But central banks bought the bonds of their respective governments and corporations, driving interest rates down to the point at which a quarter of global government debt now “pays” negative interest.

The concept of positive interest rates is straightforward. You take your savings, which you amass by forgoing current consumption — not buying a newer car or making fewer trips to fancy restaurants — and lend it to someone. In exchange for your sacrifice, you receive interest payments. With negative interest rates, something quite different happens: You lend $100 to your neighbor. A year later the neighbor knocks on your door and, with a smile on his face, repays that $100 loan by writing you a check for $95. You had to pay $5 for forgoing your consumption of $100 for a year. The key takeaway: negative and near-zero interest rates show central banks’ desperation to avoid deflation. More important, they highlight the bleak state of the global economy. In theory, low- and negative interest rates were supposed to reduce savings and stimulate spending.

In practice, the opposite has happened: The savings rate has gone up. As interest rates on their deposits declined, consumers felt that now they had to save more to earn the same income. Go figure. Some countries resort to negative interest rates because they want to devalue their currencies. This strategy suffers from what economists call the fallacy of composition: the mistaken assumption that what is true of one member of a group is true for the group as a whole. As a country adopts negative interest rates, its currency will decline against others — arguably stimulating its export sector (at the expense of other countries). But there is absolutely nothing proprietary about this strategy: Other governments will do the same, and in the end all will experience lowered consumption and a higher savings rate.

Read more …

Draghi seeks to protect Europe’s biggest banks, but he can’t. Not anymore.

Mario Draghi Is Running Out Of Bonds To Buy (BBG)

The European Central Bank may not have as much flexibility left in its bond-buying program as Mario Draghi insists. As the Governing Council kicks off discussion about the future of its asset purchases, the question that will loom large is how much wiggle room policy makers have to extend their 2.3 trillion-euro program ($2.7 trillion). Not much, according to two economists. They believe the ECB’s decision to wind down bond buying next year will be a matter of necessity rather a choice. “Bond scarcity is increasing in more and more countries,” says Louis Harreau, an ECB strategist at Credit Agricole CIB in Paris. “The ECB will be forced to reduce its QE regardless of economic conditions, simply because it has no more bonds to purchase.”

But working out how much space the central bank still has is fiendishly hard. That’s because the asset-purchase program is like a three-dimensional game of chess spread over bonds from 18 euro-area states. The 19th member, Greece, is excluded from the program. The first rule the ECB could trip over is the one that prohibits the accumulation of more than 33% of debt from a single country. Germany could hit this mark as early as spring if the current pace of purchases is maintained, says Commerzbank Chief Economist Joerg Kraemer. It’s long been a red line for Draghi and revisiting it now when the program is awaiting a review at the European Union’s highest court could be particularly tricky.

Yet some rules of the program are more malleable, giving the ECB potential leeway. The euro-area central banks have quotas to meet in buying each nation’s debt based on the size of their economies. But they can deviate from those capital-key guidelines and have done so for months now. A good example is Germany, where debt-buying last month hit the lowest level since the program started more than two years ago. According to Harreau, the ECB could deviate from the capital key by a total of €5 billion a month, twice the amount they do now. That could ease the strain for some countries, but would still require the program to be wound down by the end of next year, he says.

Read more …

By the time Brexit is reality, they’ll need to lay them off anyway.

Banks Moving Jobs From London Post-Brexit Need To Act Fast – Bundesbank (CNBC)

Frankfurt and Dublin are emerging as the clear favorites for post-Brexit relocation among U.K.-based banks, according to a top official at Germany’s central bank. “From the discussions I have, it is my clear impression that Dublin and Frankfurt are the two cities where there is most interest (from City lenders). We have received quite a number of applications,” Andreas Dombret, an executive board member at the German Bundesbank, told CNBC on Tuesday. “We encourage the banks to finalize their thinking, especially the ones that have not done so, and to really think where they want to move and how they want to move … Let’s all not try to walk through the same narrow door in the 11th hour,” he added. Britain’s financial services industry has been quietly preparing for Brexit given that it’s likely to lose its EU passporting rights – these are special licenses that allow U.K.-based banks to sell their services across the whole of the EU.

The negotiations between London and Brussels are still ongoing and it remains unclear how many employees will have to be moved from London to other European cities. At the moment, the disruption appears to be minimal compared to the overall size of the industry. But there are clear winners from the exit of some jobs from London with Frankfurt and Dublin perceived to be the top destinations for institutions that wish to continue working with clients across the EU. When asked whether vulnerable European banks could trigger a systemic crisis across the continent, Dombret said that such a prospect “doesn’t keep me up at night.” “I’m not that worried about a systemic crisis at all. There are regions, there are sectors and there are certain banks in certain countries which are more exposed than others but it is not a system wide or country wide issue,” he said.

Read more …

An event that shapes an entire nation is negotiated by just one segment of its population. Not even a majority at that.

UK PM May in Double Brexit Trouble (BBG)

U.K. Prime Minister Theresa May’s Brexit planning suffered a double blow as a top European Union official doubted that trade talks will start next month and the opposition Labour Party prepared to challenge key legislation. The EU’s deputy Brexit negotiator, Sabine Weyand, told German lawmakers that she’s skeptical officials will be able to begin discussing a trade deal in October, as they had hoped, according to two people present at the briefing. Her warning emerged as Labour announced it will seek to block May’s plan for a post-Brexit legal regime in London. May also has to contend with a leak of a draft plan for new immigration rules, which would end the free movement of workers on the day Britain leaves the EU, and impose restrictions on all but highly skilled workers from the region.

The 82-page document, obtained by The Guardian, said immigration should not just benefit the migrants, but “make existing residents better off.” The fresh trouble at home and abroad exposes how hard May is finding it to extricate the U.K. from the EU just days after the latest round of negotiations ended in acrimony with the two sides at odds over how much Britain should pay when it quits the bloc. [..] The EU has said it will not shift to discussing the sweeping new free-trade agreement that the U.K. wants until “sufficient progress” has been made on divorce issues – including the financial settlement, the rights of citizens and the border between Northern Ireland and the Irish Republic.

Labour is challenging the government’s argument that with a shrinking amount of time available, ministers should be handed the power to revise aspects of EU law without full parliamentary scrutiny. As May has no majority in Parliament, she’d be vulnerable to rebels from her own Conservative side, and some Tories, including former Attorney General Dominic Grieve, have already expressed reservations about this aspect of the bill. If amendments to the bill mean ministers have to get parliamentary approval for each regulation, they risk being held up by constant roadblocks.

Read more …

In the hands of Congress now.

Trump: I Will ‘Revisit’ DACA If Congress Can’t Legalize It (CNBC)

President Donald Trump on Tuesday night said he would “revisit” the Obama-era policy shielding hundreds of thousands of young people from deportation in six months if Congress cannot legalize it. It is unclear what action Trump would take if he decided to again address Deferred Action for Childhood Arrivals, the program that he said he would end Tuesday with a six-month delay. However, his tweeted comment appears to cloud his view on the issue after a day in which he and his administration vehemently criticized President Barack Obama’s authority to implement the policy. Trump’s decision set up a potential rush for lawmakers to pass a bill protecting so-called dreamers before the Trump administration’s deadline. It is unclear if the GOP-led Congress, members of which voted to sink similar legislation in the past, can do so in the near future as it faces multiple crucial deadlines to approve legislation.

In a statement earlier Tuesday, Trump said he looks forward “to working with Republicans and Democrats in Congress to finally address all of these issues in a manner that puts the hardworking citizens of our country first.” “As I’ve said before, we will resolve the DACA issue with heart and compassion — but through the lawful democratic process — while at the same time ensuring that any immigration reform we adopt provides enduring benefits for the American citizens we were elected to serve. We must also have heart and compassion for unemployed, struggling, and forgotten Americans,” Trump said. Trump allies like Attorney General Jeff Sessions urged him to end DACA, arguing it will be difficult to defend in court. “Simply put, if we are to further our goal of strengthening the constitutional order and rule of law in America, the Department of Justice cannot defend this overreach,” Sessions said Tuesday in announcing the move.

Read more …

“They will eat grass but will not stop their [nuclear] programme as long as they do not feel safe.”

Putin Warns of Planetary Catastrophe over North Korea (G.)

The Russian president, Vladimir Putin, has warned that the escalating North Korean crisis could cause a “planetary catastrophe” and huge loss of life, and described US proposals for further sanctions on Pyongyang as “useless”. “Ramping up military hysteria in such conditions is senseless; it’s a dead end,” he told reporters in China. “It could lead to a global, planetary catastrophe and a huge loss of human life. There is no other way to solve the North Korean nuclear issue, save that of peaceful dialogue.” On Sunday, North Korea carried out its sixth and by far its most powerful nuclear test to date. The underground blast triggered a magnitude-6.3 earthquake and was more powerful than the bombs dropped by the US on Hiroshima and Nagasaki during the second world war. Putin was attending the Brics summit, bringing together the leaders of Brazil, Russia, India, China and South Africa.

Speaking on Tuesday, the final day of the summit in Xiamen, China, he said Russia condemned North Korea’s provocations but said further sanctions would be useless and ineffective, describing the measures as a “road to nowhere”. Foreign interventions in Iraq and Libya had convinced the North Korean leader, Kim Jong-un, that he needed nuclear weapons to survive, Putin said. “We all remember what happened with Iraq and Saddam Hussein. His children were killed, I think his grandson was shot, the whole country was destroyed and Saddam Hussein was hanged … We all know how this happened and people in North Korea remember well what happened in Iraq. “They will eat grass but will not stop their [nuclear] programme as long as they do not feel safe.”

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History does talk. Jimmy Carter was replaced with “We came, we saw, he died.”

Diplomacy With North Korea Has Worked Before, and Can Work Again (N.)

The 1994 agreement was the United States’ response to a regional political crisis that began that year when North Korea announced its intention to withdraw from the Nuclear Non-Proliferation Treaty (NPT), which requires non-nuclear states to agree never to develop or acquire nuclear weapons. Although it had no nuclear weapon, North Korea was producing plutonium, an action that almost led the United States to launch a pre-emptive strike against its plutonium facility. That war was averted when Jimmy Carter made a surprise trip to Pyongyang and met with North Korea’s founder and leader at the time, Kim Il-sung (he died a few months later, and his power was inherited by his son, Kim Jong-il). The framework was signed in October 1994, ending “three years of on and off vilification, stalemates, brinkmanship, saber-rattling, threats of force, and intense negotiations,” Park Kun-young, a professor of international relations at Korea Catholic University, wrote in a 2009 history of the negotiations.

In addition to shutting its one operating reactor, Yongbyon, the North also stopped construction of two large reactors “that together were capable of generating 30 bombs’ worth of plutonium a year,” according to Leon V. Sigal, a former State Department official who helped negotiate the 1994 framework and directs a Northeast Asia security project at the Social Science Research Council in New York. Most important for the United States, it remained in the NPT. In exchange for North Korea’s concessions, the United States agreed to provide 500,000 tons a year of heavy fuel oil to North Korea as well two commercial light-water reactors considered more “proliferation resistant” than the Soviet-era heavy-water facility the North was using. The new reactors were to be built in 2003 by a US/Japanese/South Korean consortium called the Korean Peninsula Energy Development Organization, or KEDO. (The reactors, however, were never completed).

[..] First, the Agreed Framework led North Korea to halt its plutonium-based nuclear-weapons program for over a decade, forgoing enough enrichment to make over 100 nuclear bombs. “What people don’t know is that North Korea made no fissible material whatsoever from 1991 to 2003,” says Sigal. (The International Atomic Energy Agency confirmed in 1994 that the North had ceased production of plutonium three years earlier.) “A lot of this history” about North Korea, Sigal adds with a sigh, “is in the land of make-believe.” Second, the framework remained in effect well into the Bush administration. In 1998, the State Department’s Rust Deming testified to Congress that “there is no fundamental violation of any aspect of the framework agreement”; four years later, a similar pledge was made by Bush’s then–Secretary of State Colin Powell.

Read more …

“Americans are saturated in lies about their country from birth..”

The Bad Guys Are The Ones Invading Sovereign Nations (M.)

These are not the bad guys. The bad guys are the ones refusing to respect the sovereignty of North Korea or any other nation under the sun. The bad guys are the ones invading sovereign nations at will and slaughtering civilians with explosives dropped from flying killing machines. The fact that something so simple and so obvious is not universally known in America speaks to the phenomenal efficacy of its corporate media propaganda machine. Because of that propaganda machine, Americans sincerely think that the bad guys are the tiny little nations that America bullies in proxy conflicts to maintain global hegemony. They’re watching Star Wars and cheering for the stormtroopers.

Because of the neoconservative American supremacist doctrine that the US power establishment has espoused, America has given itself the authority to intervene in any government’s affairs at any time and for any reason. This doctrine of American supremacy is founded on the belief that the United States was selected by destiny to lead the world when it won the Cold War, a divine right of sorts to dominion over the entire planet. This is the real evil. The North Koreans aren’t the bad guys, and the South Koreans want to get along with them. They’re sick of being in a constant state of war, they want dialogue and diplomacy with North Korea by a nearly four to one margin, and they staged large protests against America’s missile defense system which at one point mobilized 8,000 riot police to remove protesters from a South Korean THAAD site.

These are the people who are actually putting their lives on the line with Seoul’s close proximity to the DMZ, and they want peace and de-escalation. They should be allowed to have that, but their US-backed government is talking about bringing American tactical nukes back to the Korean Peninsula. [..] Americans are saturated in lies about their country from birth, throughout their schooling and by every screen they interact with throughout their day; it’s a testament to their good will that the elites are forced to put on this Scooby Doo haunted house song and dance every time.

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The Mussolini kind.

Neoliberalism is a Form of Fascism (Cadelli)

The time for rhetorical reservations is over. Things have to be called by their name to make it possible for a co-ordinated democratic reaction to be initiated, above all in the public services. Liberalism was a doctrine derived from the philosophy of Enlightenment, at once political and economic, which aimed at imposing on the state the necessary distance for ensuring respect for liberties and the coming of democratic emancipation. It was the motor for the arrival, and the continuing progress, of Western democracies. Neoliberalism is a form of economism in our day that strikes at every moment and every sector of our community. It is a form of extremism. Fascism may be defined as the subordination of every part of the State to a totalitarian and nihilistic ideology.

I argue that neoliberalism is a species of fascism because the economy has brought under subjection not only the government of democratic countries but also every aspect of our thought. The state is now at the disposal of the economy and of finance, which treat it as a subordinate and lord over it to an extent that puts the common good in jeopardy. The austerity that is demanded by the financial milieu has become a supreme value, replacing politics. Saving money precludes pursuing any other public objective. It is reaching the point where claims are being made that the principle of budgetary orthodoxy should be included in state constitutions. A mockery is being made of the notion of public service. The nihilism that results from this makes possible the dismissal of universalism and the most evident humanistic values: solidarity, fraternity, integration and respect for all and for differences.

There is no place any more even for classical economic theory: work was formerly an element in demand, and to that extent there was respect for workers; international finance has made of it a mere adjustment variable. Every totalitarianism starts as distortion of language, as depicted accurately in George Orwell’s 1984. Neoliberalism has its Newspeak and strategies of communication that enable it to deform reality. In this spirit, every budgetary cut is represented as an instance of modernisation of the sectors concerned. If some of the most deprived are no longer reimbursed for medical expenses and so stop visiting the dentist, this is modernisation of social security in action.

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The EU seeks to forcefully redefine ‘sovereignty’, like it did in Greece. That will not end well. Even if these countries gave in and admitted refugees, how would they be treated?

European Top Court Dismisses Eastern States’ Challenge To Refugee Quota (DW)

The EU’s top court on Wednesday dismissed a challenge by eastern European members over the bloc’s mandatory refugee quota program. The ruling means that Hungary and Slovakia could face fines if they refuse to abide by the quota system. The ruling is a victory for EU immigration policy, which has divided the bloc as nearly 1.7 million people arrived from the Middle East and Africa since 2014. Poland, Slovakia, the Czech Republic and Hungary argue the mandatory quota system violates their sovereignty and threatens their societies. The legal challenge was also backed by Poland, which alongside Hungary has not taken in any asylum seekers. Slovakia and the Czech Republic have only taken in a few dozen asylum seekers. Only 24,000 of 160,000 refugees from frontline Mediterranean states like Greece and Italy have been transferred to other states under the EU’s refugee burden sharing policy agreed to in 2015.

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Because they have farmland to spare?

Plastic Film Covering 12% of China’s Farmland Contaminates Soil (BBG)

China will expand its agricultural use of environment-damaging plastic film to boost crop production even as authorities try to curb soil pollution, a government scientist said. Some 1.45 million metric tons of polyethylene are spread in razor-thin sheets across 20 million hectares (49 million acres) — an area about half the size of California — of farmland in China. Use of the translucent material may exceed 2 million tons by 2024 and cover 22 million hectares, according to Yan Changrong, a researcher with the Chinese Academy of Agricultural Sciences in Beijing. The plastic sheets, used as mulch over 12% of China’s farmland, are growing in popularity because they trap moisture and heat, and prevent weeds and pests. Those features can bolster cotton, maize and wheat yields, while enabling crops to be grown across a wider area.

“The technology can boost yields by 30%, so you can image how much extra production we can get — it can solve the problems of producing sufficient food and fiber,” Yan said in an interview at his office at the academy’s Institute of Environment and Sustainable Development in Agriculture. The downside is that polypropylene film isn’t biodegradable and often not recycled. Potentially cancer-causing toxins can be released into the soil from the plastic residue, known locally as “white pollution,” which is present at levels of 60-to-300 kilograms (132-to-661 pounds) per hectare in some provinces. [..] Regrettably, there are no viable alternatives to polyethylene that possess the same agronomic advantages. That means farmers are compelled to keep using it to boost production and income, said Yan, as he flicked through slides showing pollution in the northwest region of Xinjiang.

The material enables crops to be grown in both drier and colder environments. In Xinjiang, which accounts for almost 70% of the country’s cotton output, plastic mulch is used on all cotton farms; and across 93% of the country’s tobacco fields, he said. The film reduces water demand by 20-to-30%.

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OXI

Jun 272015
 
 June 27, 2015  Posted by at 10:45 am Finance Tagged with: , , , , , , , ,  5 Responses »
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Harris&Ewing Woodward & Lothrop dept. store trucks, Washington DC 1912

While many voices will be seeking to define the precise terms of the referendum announced last night by Alexis Tsipras for July 5, I think perhaps the general gist is more important. It’ll be a vote between being governed by Tsipras, and Greeks in general, on the one hand, and being governed by Germany, the ECB and IMF on the other. “Who do you want to decide your future?”

And the Greek population will have to understand that voting to go with the latter, voting yes to the troika proposals, will mean there will be no getting out of the stranglehold of the institutions, there will be no more sovereignty, and there will be far more severe austerity, all for years to come. All that must be caught in the exact wording of the referendum question, but what lies underneath is what really counts.

In a similar vein, I don’t think it’s all that interesting to go through the precise text and numbers of the latest troika proposal, the one Tsipras labeled ‘blackmail’ and which led to the referendum announcement. This is not about those numbers. It never was.

It’s about two things: the battle for power in Europe, all of Europe, and the refusal by the troika members to admit to their past failures. I see the word ‘failures’ as fundamentally different from ‘mistakes’, because the latter indicates a lack of intent, and I am very hesitant to suggest there was no intent involved in the handling of the crisis over the past 5 years.

I would also suggest that unless one or more troika members admit to past failures, and honestly and openly work to correct them retroactively, there will never be a solution to the Greek issue that does not involve huge defaults and political fall-out. They should not want that, but their notion of the battle for power seems to have them too entrenched to get out.

Still, for the neutral observer, there is no way not to realize that the troika has to a large extent been responsible for creating the Greek problem. Which is a whole other problem all by itself, since the troika consists of three entirely different institutions, who often don’t agree. If just one of the three would admit to past failures, and look at and propose ways to correct these failures, the entire Greek issue could be resolved in no time.

I said a while ago that the IMF could be the one to break the chains, (How The IMF Can Save Greece And Itself), by insisting on ‘retroactive debt restructuring’, an applying the losses and write-offs for French, Dutch and German banks that should have been applied in 2010. But the IMF sits a lot closer to those banks than it does to the people of Greece.

The problem with that is that it makes the Fund’s position a political one, and it should stay away from politics at all costs. It ostensibly is part of the troika only because it has more experience in restructurings than the ECB and EU. But the so-called restructuring that has taken place in 2010 and 2012 could just as well have been done by the other two members. It’s what Varoufakis called the difference between a meat cleaver and surgery.

Still, the IMF did sign off on what happened, and that means a large risk to its credibility and the trust it can expect to encounter in subsequent cases. There are elections in Spain and Portugal later this year, and people there have duly noted how Greece has been handled even just so far.

Lagarde and her staff may still think they’re above everyone else on the planet, that they’re even more omnipotent than central banks, but the cracks are showing. The Fund’s own researchers have recently issued quite a few reports critical of the course set in recent events, and the Asian Infrastructure Investment Bank looms on the horizon as an IMF alternative. The IMF’s position, and future, may be much better served by opening up on its failures than by digging in. But hubris is a powerful incentive.

As for the ECB and EU and their ability and willingness to eat their hats and their crows, there is little hope. The ECB, like the IMF, has veered far too deep into political territory, blindly following the example set by the Fed and other central banks. And as long as Goldmanites like Mario Draghi lead the dance, there’ll be no moving away from power politics. It’s what these people feed on.

This has put the ECB into a place where the more political power it seeks, the less independent it becomes. Draghi wouldn’t dream of doing anything that might upset Berlin and Paris, for example. But that’s exactly what he should do, and should have done. Granted, Draghi didn’t get his seat until late 2011, but he could and should have turned things around, and insisted on a -much- better deal for Greece, and a worse one for French and German banks. He did nothing of the kind.

Karl Whelan came with an interesting scenario yesterday that describes what could have happened, had the troika made the right choices in dealing with the Greek crisis. That is hasn’t speaks volumes about the political agendas of the three-headed beast:

An Alternative Version Of How The Greek Crisis Could Have Played Out

The Grexit scenario relies crucially on the Eurozone not having a proper lender of last resort or a functioning banking union. It is easy to imagine an alternative scenario to the current one. Consider the following alternative version of how the Greek crisis could have played out.

  1. As tension builds up in Greece prior to the Greek election in early 2015, Mario Draghi assures depositors in Greece that the ECB has fully tested the Greek banks and they do not have capital shortfalls. For this reason, their money is safe.
  2. Draghi announces that the ECB will thus provide full support to the Greek banks even if the government defaults on its debts, subject to those banks remaining solvent.
  3. Eurozone governments agree that, should Greek banks require recapitalisation to maintain solvency, the European Stabilisation Mechanism (ESM) will provide the capital in return for an ownership stake in the banks.
  4. Provided with assurances of liquidity and solvency support, there is no bank run as Greek citizens believe there banking system is safe even if the government’s negotiations with creditors go badly. The ECB stays out of the negotiations for a new creditor deal for Greece (because they are not a political organisation and are not involved in directly loaning money to the government) and its officials assure everyone that the integrity of the common currency is in no way at stake.

There are no legal impediments to this scenario. Despite the constant blather from ECB officials about how it is constantly constrained by its own persnikety rules, it is well known that the ECB can stretch these rules pretty much as far as it likes. Supporting banks that you have deemed solvent is pretty standard central banking practice. So Draghi’s ECB could have provided full and unequivocal support to the Greek banks if they wished. They just chose not to.

Similarly, procedures are in place for the ESM to invest directly in banks so a credible assurance of solvency could have been offered. Why did this not happen? Politics. European governments did not feel like providing assurances to Greek citizens about their banking system at the same time as their government was openly discussing the possibility of not paying back existing loans from European governments. Indeed, the ability to unleash the bank-driven Grexit mechanism has been the ace in the creditors’ pack all along.

Faced with massive political opposition in Germany and other Northern European countries to their existing monetary policy programmes, Mario Draghi and the ECB Governing Council have decided it is better for them to play along with the creditor country squeeze on Greece than to stabilise the Greek banking system. Imagine the hue and cry in Germany now if the ECB were refusing to threaten cutting off credit to Greek banks, thus undermining Angela Merkel’s leverage in negotiations.

This is what could have been done. That it hasn’t tells you all you need to know about the motives behind the troika’s stance.

The more I look at it, the more it seems that the Greeks on July 5 will vote not only on their own position and their own sovereignty, dignity and independence, they will also cast a vote on the future of the troika members. And that makes this a dangerous ‘experiment’, because the three will not give up without a fight.

The propaganda showered over Greece in the next week will be an exercise in absurdism. Attemps at instigating bank runs are a certainty. If the ECB wants to get even more political, it could cause one with the flick of a switch. But what credibility and trust it has left would fly out the window with that same flick.

There are already comments I see that miss the boat by a mile. :

Greeks will be voting under “extremely difficult conditions of national division and extreme economic conditions,” said Nicholas Economides, an economics professor at New York University’s Stern School of Business. “Tsipras is gambling with the future of Greece.”

I’m sorry, but that’s just dumb. It’s the ‘partners’ in the negotiations that gamble with that future. The only thing Tsipras has done is to refuse to get on his knees with his pants down his ankles. In what setting do we call that a gamble?

Something Tyler Durden (with whom I agree in 99% of cases) said on the Zero Hedge page today also struck me as worthy of a comment:

Greek PM Tsipras just delivered the biggest Friday night bomb in recent European history: he stunned the Troika and his peers in Europe with the biggest shocker of all – a referendum announcement, aka the Greek “nuclear option”, something which cost his predecessor George Papandreou his job. At this point there is no turning back, and the Greeks – of which 80% want to stay in the Euro even as 80% want an end to austerity – will get to choose their own fate. Whatever choice they make, they will now only have only themselves to blame.

You know, that makes me think of a schoolyard bully giving his victim the choice between a punch in the stomach or a blow to the head. However that would play out, can the victim be saddled with the blame for it?

It’s not as if the Greeks volunteered for their current misery. It was imposed upon them. And it’s not as if Syriza didn’t offer substantial concessions in the troika talks, they only said ‘there are limits to what we’ll do, imposed upon us by our mandate’.

I don’t think we can get away from a broader, pretty unforbidding, perspective such as that offered by Paul Craig Roberts in an article I read earlier this week, and which I think must be a part of the entire discussion.

Greek Democracy Is Failing

The Greek debt is unpayable. It is simply too large to be repaid. The austerity that the EU and IMF have imposed on Greece has worsened the problem by driving down the Greek economy, thus making the burden of the debt even heavier. Despite the obvious fact that the EU’s austerity policy is a failure and cannot succeed, the Greek “debt crisis” drama continues.

A solution was possible at the beginning of the “crisis” prior to the economy being driven down by austerity. The debt should have been written down to the amount that the Greek economy could service or pay. This traditional solution was unacceptable to creditors, to the EU, and to the ECB.

[..] the EU and the ECB have agendas unrelated to Greece’s ability to pay. The creditors are determined to establish the principle that they can over-lend to a country and force the country to pay by selling public assets and cutting pensions and social services of citizens. The creditor banks then profit by financing the privatization of public assets to favored customers.

The agenda of the EU and the central bank is to terminate the fiscal independence of EU member states by turning tax and budget policy over to the EU itself.

In other words, the Greek “sovereign debt crisis” is being used to create a precedent that will apply to every EU member government. The member states will cease to exist as sovereign states. Sovereignty will rest in the EU. The measures that Germany and France are supporting will in the end terminate their own sovereignty, very little of which actually remains as they do not have their own currency and their foreign policy is subservient to Washington.

Default and a turn to Russia is the only possible way out for Greece. The entire world would benefit from this course of action as Greece’s departure from the EU and NATO would begin the unraveling of NATO, Washington’s principal mechanism for creating conflict with Russia. In the end, all of Europe and the rest of the world would thank Greece for derailing the violence that will result from Washington’s effort to assert hegemony over Russia.

As a Greek default and a turn to the East is the only workable solution for Greece, the EU’s agents inside Greece have launched a huge campaign against a Greek turn to the East.

I fear that the Greek people are too brainwashed to be able to avail themselves of the opportunity to rescue themselves from the clutches of the One Percent, who will drive the Greek population into the ground. The Greek voters did not have sufficient judgment to give their current government a large enough percentage of the vote for the government to have any credibility with the EU and Greece’s creditors. What we are witnessing in Greece is the failure of democracy due to the people themselves.

I don’t agree with Roberts’ conclusion, or let me put it this way: we’re not there yet. I would tend to be more worried about what awaits the Greeks if they support Tsipras and Syriza on July 5, through a big fat OXI (no!). But they haven’t given in yet.

And perhaps unfortunately from them, their decision will have a much wider impact than only in Greece, politically, economically, and even morally. The way Europe is presently structured is certain, over time, to take ever more powers away from people, and the people they elect to represent them, and centralize them in the hands of far-away, only semi-elected, career politicians in Brussels and bankers in Frankfurt and Washington.

Nobody should choose that last option. It can only lead to disaster.