Jan 232019
 
 January 23, 2019  Posted by at 9:45 am Finance Tagged with: , , , , , , , , , , , , ,  


Pablo Picasso The classical head 1922

 

 

David Attenborough And Prince William Urge World Leaders On Environment (G.)
The Super Rich At Davos Are Scared Of Ocasio-Cortez’s Tax Proposal (CNBC)
EU Fossil Fuel Subsidies Still At The Same Level As 2008 (G.)
Shutdown Reveals Most Americans Are Unprepared For The Next Recession (MW)
Unusually Large Drop In US Home Sales Has Real Estate Agents Baffled (CNBC)
Moonwalking with Theresa May: Unboxing Brexit ‘Plan C’ (George Galloway)
Companies Press Brexit Panic Button In Further Blow To Theresa May (G.)
Britain ‘Could Triple State Aid For Industry Under EU Rules’ (G.)
France And Germany Take Major Step Toward EU Army (ZH)
Trump Won’t Soften Hardline On China To Make Trade Deal (R.)
Chinese App ‘Live-Shames’ Debtors Within 500-Meter Radius (ZH)
‘Never Good News Having Particles in Your Brain’ (Spiegel)

 

 

This curious spectacle of the rich and famous pretending to tackle a crisis. As I was filing this article, Bloomberg ran a headline for a live event that went: “Bono and Christine Lagarde Discuss How to Address Income Inequality”

David Attenborough And Prince William Warn World Leaders On Environment (G.)

Sir David Attenborough has warned that humankind has the power to exterminate whole ecosystems “without even noticing”, and urged world leaders to treat the natural world with respect, during an interview with Prince William in Davos. Prince William also took world leaders to task at the World Economic Forum in Switzerland, asking Attenborough why those in key positions have “taken so long” to address climate change. Attenborough said the connection between the natural world and urban societies had been “remote and widening” since the industrial revolution, meaning humans do not realise the effect their actions have on the global ecosystem. The 92-year-old broadcaster added that it was “difficult to overstate” the urgency of the environmental crisis.

“We’re now so numerous, so powerful, so all-pervasive, the mechanisms we have for destruction are so wholesale and so frightening, that we can actually exterminate whole ecosystems without even noticing it. We have to now be really aware of the dangers of what we’re doing, and we already know that of course the plastic problem in the seas is wreaking appalling damage upon marine life, the extent of which we don’t yet fully know.” He stressed that the natural world “is not just a matter of beauty, interest and wonder” but a coherent ecosystem on which we depend for “every breath we take, every mouthful of food we take.” A healthy planet, Attenborough added, is an essential part of human life. “If we don’t recognise the kind of connections I’ve been describing, then the whole planet comes in hazard, and we are destroying the natural world and with it ourselves.”

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Catchy headline, but… She’ll be whistled back any time now. Can’t steal Kamala’s, or Warren’s, or Bernie’s headlights.

“I do think 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..”

The Super Rich At Davos Are Scared Of Ocasio-Cortez’s Tax Proposal (CNBC)

The elite financiers attending the World Economic Forum are worried about the 70 percent tax rate on earnings above $10 million proposed by freshman Rep. Alexandria Ocasio-Cortez, D-N.Y. “It’s scary,” Scott Minerd, global chief investment officer for $265 billion Guggenheim Partners, said in an interview. “By the time we get to the presidential election, this is going to gain more momentum,” said Minerd, who added that he would probably be personally impacted by it. “And I think the likelihood that a 70 percent tax rate, or something like that, becomes policy is actually very real.”

The billionaires and millionaires attending Davos had misgivings about Ocasio-Cortez’s proposal, which she made during a recent interview on CBS’ “60 Minutes.” A poll found that 59 percent of voters were in favor of the idea, and even 45 percent of Republicans liked it. The lawmaker has turned heads in Washington and on Wall Street with her left-wing economic rhetoric, despite only being sworn into office earlier this month. Ocasio-Cortez, who represents parts of Queens and the Bronx, identifies as a Democratic-Socialist. In Davos, Stephen Schwarzman, the billionaire CEO of private equity giant Blackstone and Republican megadonor, said sarcastically that he is “wildly enthusiastic” about the lawmaker’s proposed tax hike. He added that “the U.S. is the second most progressive tax regime in the world,” meaning that tax rates climb along with higher incomes.

The remarks at Davos came a day after Ocasio-Cortez had even more harsh words about how the U.S. economy works. “I do think 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,” she said at a New York event on Martin Luther King Day. Ocasio-Cortez addressed this article in a tweet Tuesday. “It’s wild that some people are more scared of a marginal tax rate than the fact that 40% of Americans struggle to pay for at least one basic need, like food or rent,” she wrote.

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They all talk green in Davos. But this is what they actually do. Your politicians won’t save the planet.

EU Fossil Fuel Subsidies Still At The Same Level As 2008 (G.)

The UK leads the European Union in giving subsidies to fossil fuels, according to a report from the European commission. It found €12bn (£10.5bn) a year in support for fossil fuels in the UK, significantly more than the €8.3bn spent on renewable energy. The commission report warned that the total subsidies for coal, oil and gas across the EU remained at the same level as 2008. This is despite both the EU and G20 having long pledged to phase out the subsidies, which hamper the rapid transition to clean energy needed to fight climate change. Germany provided the biggest energy subsidies, with €27bn for renewable energy, almost three times the €9.5bn given to fossil fuels.

Spain and Italy also gave more subsidies to renewable energy than fossil fuels. But along with the UK, France, the Netherlands, Sweden and Ireland all gave more to fossil fuels. The report is based on 2016 Eurostat data, the latest available, and found that across the EU renewable energy received 45% of subsidies and fossil fuels 33%. The commission report said policies were being pursued to cut carbon emissions and meet the Paris climate agreement goals of limiting global warming to well below 2C above pre-industrial levels. “However, despite this and the international commitments made in the context of G20 and G7, fossil fuel subsidies in the EU have not decreased,” it said. “EU and national policies might need to be reinforced to phase out such subsidies.”

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We already knew that. It’s just one more sign.

Shutdown Reveals Most Americans Are Unprepared For The Next Recession (MW)

The government shutdown, the longest in history, comes with a hidden revelation: Millions of Americans are financially unprepared for the next economic downturn. Worse, they are highly vulnerable, with few protections available to them. Ten years after the financial crisis, the economic recovery has left millions behind with little to no savings, and the government shutdown serves as a preview for what will happen once unemployment rises from 50-year lows. Within just a few weeks into the government shutdown, people are struggling to cope. [..] Why do a few weeks without pay turn into a crisis for many families? Simple: Nearly 80% of Americans live paycheck to paycheck. That’s a problem when you have little to no savings. In fact, it’s akin to playing financial Russian roulette.

And the problem is terrifyingly pervasive. According to a recent GoBankingRates survey, only 21% of Americans have more than $10,000 in savings, with nearly 60% having less than $1,000 in savings. This savings-free game of complacency works as long as people have a steady paycheck coming in and as long as interest rates stay low. But they are not staying low, even though the Federal Reserve may be patient again this year, as it has proclaimed in recent days. As a matter of fact, the cost of carrying debt, especially the revolving credit-card type, have exploded higher since the Fed tempered rate increases. Think I’m exaggerating? How about this: Interest rates on credit cards by commercial banks are now as high as they were in 2000:

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Baffled by the obvious.

Unusually Large Drop In US Home Sales Has Real Estate Agents Baffled (CNBC)

Real estate brokers are trying to figure out why sales of existing homes plunged in December. The 6.4 percent monthly move was unusually large, regardless of direction. The tally from the National Association of Realtors generally moves in the very low single digits month to month. In fact, the shift was one of the largest that didn’t involve some sort of change in government policy, like the homebuyer tax credit. “The latest decline is harder to explain. Perhaps it is the decline in consumer confidence that’s been occurring in the latter half of 2018,” said Lawrence Yun, chief economist for the Realtors. “The latest numbers do not reflect the lower, current mortgage rates compared to the November figures, so it’s really harder to explain.”

The supply of homes for sale also rose just more than 3 percent compared with a year ago. Low supply had been holding sales back last spring, despite strong demand, so it would make sense that more supply would boost sales, unless this is a sign that demand is weakening. “This weakness is certainly due to the sharp home price gains along with the rise in mortgage rates,” said Peter Boockvar, CIO at Bleakley. Affordability has been blamed for slower sales over the past six months, but sales in December matched the same pace as in 2000, and Yun argues that affordability is better now. “Today it is actually more affordable compared to year 2000, yet we have about 20 million more jobs, so for home sales to be roughly equivalent means that in 2018 there is an underperformance of the overall housing sector.”

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A very useful set of numbers from Galloway. As I said yesterday: the first to jump party lines wins. 200 Tories and 100 Labours want no Hard Brexit and no general election. Throw in fringe parties and you have a solid majority. Call it a national government.

Moonwalking with Theresa May: Unboxing Brexit ‘Plan C’ (George Galloway)

There are 317 Conservative MPs. At least 100 of them are Brexiteers who would never go quietly into the good night of the current political dispensation. But 200 of them conceivably could if it meant: a) avoiding a “Hard-Brexit” and b) avoiding a General Election. There are 256 Labour MPs. Most of them hate the idea of Brexit and many of them equally hate the idea of a General Election, which would bring their own leader to power. Mindful though that MacDonald became a historic by-word for treachery in the labor movement and that “all over the country Labour people turned his portrait to face the wall” in the wake of his betrayal, let’s imagine 100 of the current crop of Labour MPs “doing a MacDonald” and betraying their banner. That gives us a hypothetical 300 MPs in a House of 650.

That makes them the “biggest party” in the house by far and with a claim to the Speaker and the Queen for recognition as the “Government” of the UK. When you factor in the support (assured) of the 11 Liberal Democrats the 35 Scottish Nationalists (if their deal was right) the 8 independents, (assured) the 4 Welsh Nationalists (assured) the one Green MP (assured) and the assured abstention from the House of the 7 Sinn Fein MPs (Irish Republicans who cannot swear allegiance to the Queen and thus cannot take their seats) this would give the “National Government” bloc 359 MPs in a House of effectively 640 (650 less 7 SF and 3 Speakers and Deputy Speakers) A much more “strong and stable” government than Theresa May could even dream off. Their purpose – canceling Brexit.

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What took them so long?

Companies Press Brexit Panic Button In Further Blow To Theresa May (G.)

The scale of no-deal panic gripping major companies has been thrown into sharp focus by a series of damage-limitation announcements, as corporate Britain signalled it is running out of patience with Westminster gridlock. Sir James Dyson, the Brexit-backing billionaire, dealt a further blow to the government by revealing he is shifting his company headquarters to Singapore in a move that drew sharp criticism. Dyson’s decision to move his HQ out of the UK came on a day in which a series of high-profile names revealed measures to mitigate the impact of a disorderly departure from the EU:

• P&O announced that its entire fleet of cross-Channel ferries will be re-registered under the Cypriot flag, as the 182-year-old British maritime operator activated its Brexit plans. • Sony confirmed it is moving its European headquarters from London to Amsterdam. • The chief executive of luxury carmaker Bentley said the company was stockpiling parts and described Brexit as a “killer” threatening his firm’s profitability. • Retailers Dixons Carphone and Pets at Home announced plans to shore up supplies in the event of chaos at British ports.

P&O, which began life as the Peninsular and Oriental Steam Navigation company in 1837, said all six of its cross-Channel ferries will be re-registered from the UK registry in Cyprus to keep EU tax benefits. The ferries include, the Spirit of Britain, the Pride of Kent and the Pride of Canterbury. Sony confirmed it was merging its London-based European unit with a new entity based in Amsterdam that would become the new continental HQ. Sony said: “In this way we can continue our business as usual without disruption once the UK leaves the EU.”

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Corbyn can nationalize the rialways and hospitals, and remain.

Britain ‘Could Triple State Aid For Industry Under EU Rules’ (G.)

Britain could triple state aid spending to industry without breaching EU rules, according to a study that compares government subsidies to promote economic growth across Europe. EU state aid rules “do not prevent an active industrial policy”, the report found, giving the green light to the UK government for an increase in its £7bn of state aid to nearer £21bn. The report by the left-leaning IPPR thinktank found that the EU’s state aid rules would apply to the UK once it had left the union because officials in Brussels would enforce the measures through a trade deal. The IPPR director, Tom Kibasi, said: “If the UK government decided to match Denmark, it could invest £250bn over a decade in a more active industrial policy.

“That would give it huge scope to support key areas of the economy, whether we remain in the EU or leave it.” The IPPR has not taken a view on Brexit, but its intervention in the debate over state aid will be keenly examined by Labour party supporters who voted to leave the EU. Like the Labour leader, Jeremy Corbyn, many of them believed that rules imposed by Brussels would constrain a leftwing government from nationalising parts of the economy and from supporting cooperatives or providing funds through state-backed local banks.

State aid can range from a government tax relief scheme for investors to a local authority giving a subsidy to a property developer. It is normally prohibited to prevent trade and competition between firms from being distorted, discouraging investment and increasing costs to consumers. However, the EU has allowed hundreds of public investment programmes to go ahead that support businesses under a regime that the IPPR said was more flexible than it might appear.

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Doubling down on the very things that turns their people -and others- against them.

France And Germany Take Major Step Toward EU Army (ZH)

French President Emmanuel Macron’s push for what he previously called “a real European army” got a big boost on Tuesday amid France and Germany signing an updated historic treaty reaffirming their close ties and commitment to support each other during a ceremony in the city of Aachen, a border town connected to Charlemagne and the Holy Roman Empire. But the timing for the renewal of the two countries’ 1963 post-war reconciliation accord is what’s most interesting, given both the rise of eurosceptic nationalism, the uncertainty of Brexit, and just as massive ‘Yellow Vests’ protests rage across France for a tenth week.

Macron addressed this trend specifically at the signing ceremony with the words, “At a time when Europe is threatened by nationalism, which is growing from within… Germany and France must assume their responsibility and show the way forward. Germany’s Angela Merkel agreed, adding in her own remarks: “We are doing this because we live in special times and because in these times we need resolute, distinct, clear, forward-looking answers.” The agreement, which is being described as sparse on specifics or detail, focuses on foreign policy and defense ties between Berlin and Paris. “Populism and nationalism are strengthening in all of our countries,” Merkel told EU officials at the ceremony. “74 years – a single human lifetime – after the end of the second world war, what seems self-evident is being called into question once more.”

Macron said those “who forget the value of Franco-German reconciliation are making themselves accomplices of the crimes of the past. Those who… spread lies are hurting the same people they are pretending to defend, by seeking to repeat history.” And in remarks that formed another affirmation that the two leaders are seeking to form an “EU army” Merkel said just before signing the treaty: “The fourth article of the treaty says we, Germany and France, are obliged to support and help each other, including through military force, in case of an attack on our sovereignty.” The text of the updated treaty includes the aim of a “German-French economic area with common rules” and a “common military culture” that Merkel asserted could “contribute to the creation of a European army”.

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US position gets stronger as China struggles.

Trump Won’t Soften Hardline On China To Make Trade Deal (R.)

As much as U.S. President Donald Trump wants to boost markets through a trade pact with China, he will not soften his position that Beijing must make real structural reforms, including how it handles intellectual property, to reach a deal, advisers say. Offering to buy more American goods is unlikely by itself to overcome an issue that has bedeviled talks between the two countries. Those talks are set to continue when Chinese Vice Premier Liu He visits Washington at the end of January. The United States accuses China of stealing intellectual property and forcing American companies to share technology when they do business in China. Beijing denies the accusations.

With a March 1 deadline approaching to reach an agreement or risk an escalation of tariffs on another $200 billion worth of Chinese goods, the two sides are still far apart on key, structural elements critical for a deal, according to sources familiar with the talks. “We’re not yet in a position where our concerns have been addressed sufficiently,” one U.S. official said, speaking on condition of anonymity. The official said the Trump team, led by hardline U.S. Trade Representative Robert Lighthizer, was focused on such structural issues as well as trade imbalances. White House economic adviser Larry Kudlow told Reuters that forced technology transfers, IP theft and ownership restrictions remained a top priority for Trump. “The president’s said many times how crucial that is, and he’s not going to back down,” Kudlow said.

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Is Orwell available in China? How much longer for? Then again, it’s about what tech can do. And what it can do in China, it can and will do where you live.

Chinese App ‘Live-Shames’ Debtors Within 500-Meter Radius (ZH)

Authorities in the northern Chinese province of Hebei have rolled out an app over WeChat which can tell people if they’re walking near someone in debt, according to China Daily. The program, aptly named “map of deadbeat debtors,” flashes a warning if someone in debt is within a 500-meter radius – showing their exact location according to a screenshot of the app. Whether the app reveals the debtors’ names or photos is unknown, nor does China Daily mention how much money is owed or to whom – but according to paper the app allows people to “whistle-blow on debtors capable of paying their debts.” “It’s a part of our measures to enforce our rulings and create a socially credible environment,” said a spokesman for the Higher People’s Court of Hebei – which is behind the app.

The “map of deadbeat debtors” is yet the latest in China’s push towards a shame-based “social credit score” system which has already been deployed in several parts of the country. According to a November report, Beijing has an ambitious plan to control China’s citizens through a system of social scoring that punishes behavior it does not approve. [..] Hangzhou, the capital city of China’s Zhejiang province, rolled out its social credit system earlier this year, rewarding “pro-social behaviors” such as blood donations, healthy lifestyles, and volunteer work while punishing those who violate traffic laws, smoke and drink, and speak poorly about government.

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Plastics. “A standard 5-kilogram (11-pound) wash of polyester fabrics has been estimated to release up to 6,000,000 microfibers.” ” European shellfish consumers could potentially ingest 11,000 microplastic particles per year.”

‘Never Good News Having Particles in Your Brain’ (Spiegel)

Microplastics come from many sources, for example from the breakdown of larger items, abrasion from tires, microbeads from cosmetics or synthetic clothing fibers. A standard 5-kilogram (11-pound) wash of polyester fabrics has been estimated to release up to 6,000,000 microfibers. Through surface runoff, manufacturing processes, agriculture or waste water treatment facilities, most of this ends up in the environment, for example in rivers, and is eventually lost to the seas. Extrapolations suggest that up to 250 million tons of plastic will be present in the oceans by 2025.

Filter feeders like mussels seem to readily internalize microplastics, because they are of the same size as their preferred diet. It has been estimated that European shellfish consumers could potentially ingest 11,000 microplastic particles per year. A lot of the plastic particles in the environment are present in the atmosphere and transported by the wind. When you breathe in air, microscopic plastic particles are inhaled as well. Salt and sugar, for example, have also been reported to be contaminated with plastic, as well as honey and German beer. The analysis of tap water and bottled water found that a high proportion of drinking water contains plastic fragments.

Bigger particles are not readily absorbed. Most of these just seem to pass through the body without doing much harm. It is currently believed that these bigger particles do not penetrate deeply into organs and, if at all, can only cause some limited local inflammation or tissue abrasion. Smaller particles however, referred to as nanoplastics, are a different thing altogether. The smaller the size of the plastic particles, the more likely they are to cross biological barriers such as cell membranes. What we know is that nanoparticles in general can interact with proteins, lipids and carbohydrates in the body. Nanoparticles can even cross the blood-brain barrier and it seems probable that they can affect the central nervous system. Reports of behavioral changes in shrimp and fish exposed to nanoplastics support this hypothesis.

Plastic particles made fish eat slower and explore their surroundings less. There is no concrete evidence right now that nanoplastics penetrate brain tissue in humans, let alone affect behavior. But it has been reported that plastic particles cause oxidative stress in human cell lines. This could potentially cause a number of problems including tissue degradation or inflammation, and it flags up the possibility that an individual with a high concentration of plastic contamination in the central nervous system might have an adverse reaction. Depression for instance has been linked to nanoparticle toxicity in the central nervous system. The plastic fragments might even initiate plaque formation and make Alzheimer’s more likely. It is never good news having particles in your brain.

Read more …

Jul 252018
 
 July 25, 2018  Posted by at 12:59 pm Finance Tagged with: , , , , , , , , , , ,  


René Magritte Empire of light 1950

 

There’s not a shade of a doubt that I’m not an expert on tariffs, trade barriers and subsidies, and I’d be the last to suggest any such thing. But I can read. Still, do correct me if I’m wrong anywhere. The whole field is so complicated -no doubt often on purpose- that there’s always the possibility that there are side issues involved for which one would need to actually be an expert.

But still. Now that EU chief Jean-Claude -‘When it becomes serious, you have to lie’- Juncker is due to arrive at the White House soon, I looked at some of the items involved. Last night Trump said that all tariffs, barriers and subsidies should be dropped between the EU and US. Why the TTiP doesn’t come anywhere close to that is anyone’s guess. Too complicated for the boys and girls?

In at least some major fields, Trump does seem to have a point or two. The US has a 2.5% tariff on European cars, while the EU slaps a 10% tariff on American cars. That’s 4x as much, or a 300% difference. Whoever said yes to that? Sure, the US has a 25% tariff on EU pickups, but nobody in Europe drives pickups, hence they don’t produce them, so that’s not consequential.

So what had Trump done? He’s threatened a 20% tariff on Beemers and Mercs, and added -for entertainment value only- that he doesn’t want to see any of them in on Fifth Avenue anymore. Cue EU carmakers warning about the cost to American customers.

That’s all fine and well, but those tariffs on personal cars are still 300% higher. So push your European government to make them equal. Easy as -American- pie. How about zero? I can see where Trump’s coming from. Issuing warnings to the American public about BMW’s getting more expensive doesn’t look entirely on the up and up.

 

Also, I was looking at agriculture. Now, I grew up in Europe, and I do have an idea about EU farm subsidies (they’re notorious even inside the EU, going all the way back to the 1950s-60s). There was a point where they were over 70% of the total EU budget. They’re 30% or even somewhat below that now, but that’s not because subsidies have gone down, it’s because the EU budget has grown exponentially.

US farm subsidies were some $23 billion last year, and a year ago the Trump administration proposed a $4.8 billion cut to that. Now that Trump has initiated a one-time $12 billion for farmers to make up for the effects of his tariff proposals, one half of America -Conservatives- cry foul because: “that’s Soviet-style politics”, and no doubt the EU will cry right with them.

But look: under the EU’s Common Agriculture Policy (CAP), EU farm subsidies for the 2021-2027 period will fall a whole 5% to ‘only’ $420 billion. And that’s just a proposal, and already France, the main beneficiary of the subsidies, has declared that such a cut is unacceptable. Soviet style?

The meeting of tee-totaller Trump and wine-totaller Juncker is interesting enough in and of itself, and you bet the Donald knows what and who Juncker is, but unless Jean-Claude comes with something very substantial, the numbers I cited above would seem to be very clear. And that’s without steel, aluminum etc etc.

If your side gives its farmers almost 20 times as much as the other side, what are you going to say? You may ask for some time to adapt, but that would seem to be it. However, Juncker could never sell egalization of subsidies ‘at home’. France and others would shave his head and ass and apply tar and feathers. And Macron would fear the same fate if he gives in. As Merkel would on the car issue.

Juncker has no room to wiggle on the whole shebang. All he can do is damage control and a good glass of wine (wonder if Trump instructed his staff not to give him any, or merely cut him off after the first bottle). It’s just that Trump has noticed the policy damage, and doesn‘t like it. And you have to wonder, who ever accepted those terms, and signed treaties like that TTiP that they are engraved in?

 

If you ask me, communities and countries should always make sure they remain in control of all their basic necessities. And food is certainly one of them. Also. if any politician near you ever proposes selling the rights to your drinking water to some foreign party, tar and feathers is your reply. Let Americans make their own cars, And German and French theirs. It’s not of the same importance as food, water, shelter and clothing, but you get the drift.

Schlepping food halfway across the planet is a dangerous thing once you become dependent on it to feed your children and your community (schlepping it halfway through Europe is as well). Selling your local water rights is even worse. That’s downright insane.

But if you’re going to trade, and once you’ve excluded basic necessities, zero tariffs or at least equal tariffs seems the way to go. Just wait till Trump starts that discussion with China for real. That conversation is largely about barriers, it’s different from Europe, though -hidden- subsidies feature ‘bigly’ as well.

 

Still, summarized, though I’m far from a Trumponado, I can see his point(s). I find it much harder to see what earlier US administrations were thinking when they agreed to all this stuff. And sure, his approach is brusque and perhaps brutal, but the country he’s, for better or for worse, president of, does seem to have gotten the short end of an very extensive array of sticks.

But by all means, don’t listen to me, listen to the experts. Then again, also look at the numbers.

 

 

Jul 252018
 
 July 25, 2018  Posted by at 8:19 am Finance Tagged with: , , , , , , , , , , ,  


Ivan Aivazovsky Lake Maggiore 1892

 

Trump Downbeat Ahead Of Trade Talks With EU (R.)
Trump’s $12 Billion Aid For Farmers Risks Unintended Consequences (CNBC)
ECB To Hold Steady Amid Heightened Risks Of A Trade War (CNBC)
Alphabet May Become The Berkshire Hathaway Of The Internet Age (CNBC)
Brexit: Raab ‘Sidelined’ As May Takes Control Of EU Negotiations (G.)
“Cliff Edge” Brexit Threatens $34 Trillion of Derivative Contracts (DQ)
UK Ministers Set To Be Given New Powers To Block Foreign Takeovers (G.)
Offshore Owners Of British Property To Be Forced To Reveal Names (G.)
The Greedy Little Nation That Sold Its Soul For House Prices (MB)
When America Was Ruled by a King (Davis)
Moon-Strzok No More, Lisa Page Spills the Beans (McGovern)
Novichok Victim Found Substance Disguised As Perfume In Sealed Box (G.)
US Intelligence Community as a Collapse Driver (Dmitry Orlov)
Holiday Hunger Should Be The Shame Of This Government And It Isn’t (G.)

 

 

The EU doesn’t have a lot of room to move. It’s made of tariffs, barriers and subsidies.

Trump Downbeat Ahead Of Trade Talks With EU (R.)

U.S. President Donald Trump took a pessimistic view of talks with European Commission President Jean-Claude Juncker set for Wednesday aimed at averting a trade war. In a tweet on Tuesday night, Trump said both the United States and the European Union should drop all tariffs, barriers and subsidies. “That would finally be called Free Market and Fair Trade!” Trump said. “Hope they do it, we are ready – but they won’t!” he said. Trump has accused the EU of unfair trade practices and has threatened to raise tariffs on cars imported from the bloc.

European Trade Commissioner Cecilia Malmstrom, who will accompany Juncker, said last week that the EU was preparing a list of U.S. products to hit if the United States imposed the tariffs. Juncker will not arrive in Washington with a specific trade offer, the commission said on Monday. “I do not wish to enter into a discussion about mandates, offers because there are no offers,” Commission spokesman Margaritis Schinas told a news conference in Brussels. White House economic adviser Larry Kudlow has said he expected Juncker to come with a “significant” trade offer.

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EU agriculture is built on enormous subsidies. No way they can let much of that go. Imagine the protests in France. Perhaps countries, but certainly continents should focud on producing their own food, not export it. But then the tiny Netherlands is the 2nd biggest tomato exporter in the world. That’s quite an applecart to upset.

Trump’s $12 Billion Aid For Farmers Risks Unintended Consequences (CNBC)

According to the statement from the USDA, the administration “will take several actions to assist farmers in response to trade damage from unjustified retaliation.” The plan authorizes the agency to spend “up to $12 billion in programs, which is in line with the estimated $11 billion impact of the unjustified retaliatory tariffs on U.S. agricultural goods. These programs will assist agricultural producers to meet the costs of disrupted markets.” “Our farmers, our producers, they don’t want bailouts,” Simon Wilson, executive director of the North Dakota Trade Office, told CNBC’s “Closing Bell” on Tuesday. “They don’t want this help in the short term. They want long-term stability.”

Wilson added, “A lot of people have been hurt, so that’s a lot of money that’s going to have to be shared.” Payments under the largest part of the federal government’s relief plan would be targeted to producers of soybeans, sorghum, corn, wheat, cotton, dairy and hogs. Some experts have warned in the past that government aid or new subsidies could distort or disrupt markets and ultimately have negative consequences for the agriculture industry. That also includes the possibility it could lead to more retaliation on other agricultural exports.

In any event, Glauber said the program is likely to be taken as “producer support” and appears to be targeted toward a drop in the market price of certain commodities, meaning it could get counted against the U.S. commitments from the WTO. “We’ve run pretty low levels of [producer] support in recent years, but it will certainly raise a lot of eyebrows and will make people look at those calculations very, very carefully,” said Glauber. “It also will look at the way we formulate those programs very, very carefully.”

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With Brexit and Trump in its face, the ECB is pretty much stuck.

ECB To Hold Steady Amid Heightened Risks Of A Trade War (CNBC)

After a surprisingly dovish meeting in June, the European Central Bank (ECB) is expected to strike a more balanced tone this week, given heightened uncertainties for the global economy. The focus will be on the ECB‘s assessments of these risks at its meeting Thursday, with investors concerned of the acute risk of a trade war escalation. “We expect Mario Draghi to aim for a ‘Goldilocks’ tone at the July 26 press conference — not too hawkish, not too dovish,” said Mark Wall, the chief economist at Deutsche Bank, in a research note. “The ECB only recently made a commitment to unchanged rates for the next year to lean against trade and volatility risks and avoid an unwarranted tightening of financial conditions.”

The ECB has committed itself to stop buying new bonds at the end of this year, but the onus clearly now is on the reinvestment of these purchases (as part of its crisis-era stimulus program) and its refined rate guidance. The euro zone’s central bank pledged to keep its key interest rate at minus 0.4 percent “at least through the summer of 2019” during its last meeting. The risks now are that the ECB is unwinding its monetary stimulus right at a time when the economy could head south. For now, its seems the ECB is convinced the region’s economy will remain resilient.

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Building empires.

Alphabet May Become The Berkshire Hathaway Of The Internet Age (CNBC)

Alphabet CEO Larry Page has long admired Warren Buffett’s business acumen in creating the industrial and investment conglomerate Berkshire Hathaway. And now analysts and investors are noticing Alphabet’s investments in emerging disparate businesses are starting to bear fruit — including YouTube, autonomous cars and cloud computing — drawing comparison to Berkshire Hathaway’s success. The internet giant reported better-than-expected second-quarter earnings Monday, driving Alphabet shares to a new all-time high the following day. It generated adjusted earnings per share of $11.75 versus the Wall Street consensus of $9.59 for the quarter. Alphabet also posted a $1.06 billion gain in its equity investments for the time period.

“Our investments are driving great experiences for users, strong results for advertisers, and new business opportunities for Google and Alphabet,” said Ruth Porat, CFO of Alphabet and Google in the earnings press release Monday. As a result one well-known investor believes Alphabet has a shot of being the Berkshire Hathaway of tomorrow. “What I’m really talking about is the diversified nature of what [Alphabet is] building away from the ad platform, in much the same way as Berkshire reinvested the float from insurance premiums into other investments. I guess I am also talking in terms of longevity, not just size,” Josh Brown said in an email Tuesday. “This quarter witnessed a host of Google’s other investments throwing off profits. Larry and Sergey were very open about their intention to create something Berkshire-like when they first announced the new structure and Alphabet.”

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She can’t escape a second vote anymore. If you have 2.5 years, and you waste the first two, that’s what happens. It’s just the illusion of control.

Brexit: Raab ‘Sidelined’ As May Takes Control Of EU Negotiations (G.)

Theresa May has taken back control of crucial negotiations with Brussels from her new Brexit secretary just hours after the government published its white paper on withdrawing from the EU. The prime minister announced she would now lead the crunch talks with the EU while Dominic Raab, who was appointed two weeks ago, would be left in charge of domestic preparations, no-deal planning and legislation. The move was swiftly characterised as a “sidelining” of the Brexit secretary by No 10’s Europe unit, led by May’s chief Brexit adviser, Olly Robbins, with the prime minister also taking officials from his department. In a written statement on the last sitting day of the Commons before the summer recess, May said: “I will lead the negotiations with the European Union, with the secretary of state for Exiting the European Union deputising on my behalf.

“Both of us will be supported by the Cabinet Office Europe Unit and with this in mind the Europe Unit will have overall responsibility for the preparation and conduct of the negotiations, drawing upon support from DExEU and other departments as required.” Robbins, appearing alongside Raab at the Commons’ Brexit committee, said: “The overall strategy for the conduct of these negotiations, she regards very much as her personal responsibility, now with the secretary of state very close at hand.” Raab described the changes as a “shifting of the Whitehall deckchairs” and said there would now be “one team, one chain of command” but pointed out that there would be “full assertion of ministerial accountability”.

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I’d swear it’s more. It’s dominoes.

“Cliff Edge” Brexit Threatens $34 Trillion of Derivative Contracts (DQ)

A messy, no-deal Brexit could throw 48 million insurance contracts and £26 trillion ($34 trillion) of derivatives deals into confusion. Nausicaa Delfas, head of international strategy at the Financial Conduct Authority (FCA), told delegates at a CityUK and Bloomberg event that there were “cliff-edge” risks due to uncertainty over the legality of financial contracts extending beyond the planned Brexit date, in March. The UK government has already passed regulations that would allow European banks and insurers to maintain their UK operations under current rules after Brexit. So far, the EU has refused to reciprocate, even on a temporary basis.

The EU has also ruled out extending passporting rights to UK financial institutions after Brexit. These rights allow UK-based institutions to sell financial products from the City to investors in the 27 other EU member states. Brussels has also turned down the UK government’s latest proposal for a system of “advanced equivalence” between British and EU financial services. If the EU continues to reject a temporary permissions regime and no cooperative Brexit deal is signed by the March 29 deadline, big doubts could be raised about the viability of certain derivatives contracts. And that could seriously disrupt an already highly volatile, deeply opaque, largely unregulated $600-trillion dollar industry.

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Cue Trump.

UK Ministers Set To Be Given New Powers To Block Foreign Takeovers (G.)

Ministers will have the power to block foreign takeovers across all sectors of the British economy on national security grounds under new government proposals designed to protect some of the UK’s most important and technically advanced businesses. The business secretary, Greg Clark, wants to widen the scope of the current system, which is limited to large transactions and certain industries such as defence, to cover all UK firms including small businesses as he seeks to keep vital firms and technologies out of foreign ownership. The proposals, which will be subject to a 12-week consultation, will allow ministers to halt or unwind takeovers and even the smallest asset sales that could be deemed to jeopardise Britain’s national security.

Potential targets under the new rules are likely to be Chinese and Russian takeovers of defence-related industries. Technology firms, including cybersecurity businesses that already have links with the Ministry of Defence, or are viewed as crucial to the development of the UK’s financial and commercial defence systems, are also expected to top the list of ministers’ national security concerns. Clark allowed the £74m takeover of the handset maker Sepura by the Hytera Corporation of China last year, making it only the second review of a transaction on national security grounds in 18 months, after the MoD raised concerns this month over the sale of Northern Aerospace to a Chinese buyer. The Competition and Markets Authority later cleared the Northern Aerospace transaction, by which time it had lapsed.

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Why would you want faceless foreigners owning your real estate?

Offshore Owners Of British Property To Be Forced To Reveal Names (G.)

Offshore owners of British property will be forced to reveal their true identities or face jail sentences and unlimited fines under draft laws that aim to end the UK’s reputation as a high-risk jurisdiction for money laundering. The legislation follows years of scandals involving the acquisition of high-value UK property by offshore companies, and concerns that a lack of regulation was allowing corrupt money into the housing market. The National Crime Agency said three years ago that overseas criminal gangs were using British property transactions to launder billions of pounds in corrupt funds. Parliament’s foreign affairs committee went further earlier this year, saying that corrupt Russian funds laundered through the UK, including via property, posed a threat to national security.

Under the new legislation, overseas companies that own UK properties will be required to identify their true owners on a publicly available register. The government said the register was part of a wider crackdown on money laundering in the property sector, and would make it easier for law enforcers to seize criminal assets. The anonymous ownership of property via offshore companies is perfectly legal, but it has also been a subject of concern for housing campaigners concerned about an influx of foreign money forcing up house prices.

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If it’s any consolation: you’re not alone.

The Greedy Little Nation That Sold Its Soul For House Prices (MB)

There was a time when Australia’s housing bubble was not much more than a curiosity. Contained mostly to Sydney it seemed it would pass with a little pop and be forgotten. Then there was a time when the bubble went national. And suddenly the little pop was going to be a big pop so monetary and fiscal policy began to distort in support of it. Next there was a time when moral hazard became so great that the bubble grew to engulf all policy and media, marginalising an entire generation from home ownership. Politicians routinely lied to cover the collapse in evidence based policy-making.

Finally, we come to today. When notions of managing the macro-economic levers of an economy now boil down to just one thing: • low interest rates to prevent the housing bubble bursting; • fiscal repair to prevent the bubble bursting, and • mass immigration to prevent the bubble bursting even though it is crushing living standards and gutting wages. [..] It’s all so bizarre. All we need to do is cut immigration and let house prices fall. There’ll be a period of adjustment while wages and the currency correct but it won’t be too bad. We’ll still be on the doorstep of Asia. The students and tourists will still come, in greater numbers than ever as we get cheaper, but they’ll also go home not pressuring living standards.

Broader tradables (40% of the economy) will boom. Commodity income will surge, lifting the Budget. Our maginalised youth will have much greater opportunities to advance their global opportunities as Dutch Disease ends. Incomes will ultimately be much more sustainable. Then we can all move on with a much healthier economy, polity, society and strategic outlook. The alternative is to sell our freedom to China, our standards of living to a few rich developers, our politics to carpet baggers and our society to fractious class wars. Just for higher house prices. If a more ignominious fate awaited any nation in history then I’m not aware of it.

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Did the US go down with Elvis? And in the same way?

When America Was Ruled by a King (Davis)

America emerged out of darkness and light – a proto-nation clouded by the genocide of native Americans and the enslavement of transshipped Africans but brilliantly shot through with shafts of luminescence – the liberal ideals of European philosophers such as Locke and Hume.The alternate red and white stripes of its flag have thus come to echo a nation born in the blood of its innocent victims yet ennobled, in parallel, by the spirit of the Enlightenment. Yet even after its ideals were enshrined in The Declaration of Independence, The Constitution and the Bill of Rights, the country continued to countenance slavery, the trading of domestic, purpose-bred Africans and the brutal killing of native peoples and their vibrant communities.

Today, the historic and contemporary horrors of the American nation are ground together with its liberal principles (in some mythic bedrock mortar) to produce a culture that proclaims its goodness to its people and to the world, yet is visibly marbled with the evils of state violence against refugees and minorities, the economic oppression of a population paradoxically made comatose through over-consumption and the global havoc wreaked by its Imperial killing machine. It is this grand chiaroscuro that Eugene Jarecki explores in The King, 2018, his new documentary on the life, death and after-life of Elvis Presley, now in select release following its acclaimed debuts at the film festivals in Sundance and Cannes.

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The FBI as a Shakespearean comedy.

Moon-Strzok No More, Lisa Page Spills the Beans (McGovern)

Former FBI attorney Lisa Page has reportedly told a joint committee of the House of Representatives that when FBI counterintelligence official Peter Strzok texted her on May 19, 2017 saying there was “no big there there,” he meant there was no evidence of collusion between the Trump campaign and Russia. It was clearly a bad-luck day for Strzok, when on Friday the 13th this month Page gave her explanation of the text to the House Judiciary and Oversight/Government Reform Committees and in effect threw her lover, Strzok, under the bus. Strzok’s apparent admission to Page about there being “no big there there” was reported on Friday by John Solomon in the Opinion section of The Hill based on multiple sources who he said were present during Page’s closed door interview.

Strzok’s text did not come out of the blue. For the previous ten months he and his FBI subordinates had been trying every-which-way to ferret out some “there” — preferably a big “there” — but had failed miserably. If Solomon’s sources are accurate, it is appearing more and more likely that there was nothing left for them to do but to make it up out of whole cloth, with the baton then passed to special counsel Robert Mueller. The “no there there” text came just two days after former FBI Director James Comey succeeded in getting his friend Mueller appointed to investigate the alleged collusion that Strzok was all but certain wasn’t there.

Robert Parry, the late founder and editor of Consortium News whom Solomon described to me last year as his model for journalistic courage and professionalism, was already able to discern as early as March 2017 the outlines of what is now Deep State-gate, and, typically, was the first to dare report on its implications. Parry’s article, written two and a half months before Strzok texted the self-incriminating comment to Page on there being “no big there there,” is a case study in professional journalism. His very first sentence entirely anticipated Strzok’s text: “The hysteria over ‘Russia-gate’ continues to grow … but at its core there may be no there there.”

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And entire article from the Guardian without blaming Russia. Wow. Story still makes little sense. Why does this guy get to talk, when the Skripals are still nowhere to be found?

Novichok Victim Found Substance Disguised As Perfume In Sealed Box (G.)

The British man poisoned with the nerve agent novichok has claimed the substance that killed his girlfriend and left him critically ill came in a bottle disguised as a legitimate perfume in a sealed box. Charlie Rowley claimed his partner, mother-of-three Dawn Sturgess, fell ill within 15 minutes of spraying the bottle, which he said he had found, on to her wrists at his home in Amesbury, Wiltshire. In his first interview since he was discharged from hospital, Rowley told ITV News: “I do have a memory of her spraying it on her wrists and rubbing them together. “I guess that’s how she applied it and became ill.

I guess how I got in contact with it is when I put the spray part to the bottle … I ended up tipping some on my hands but I washed it off under the tap. “It was an oily substance and I smelled it and it didn’t smell of perfume. It felt oily. I washed it off and I didn’t think anything of it. It all happened so quick. “Within 15 minutes, Dawn said she had a headache. She asked me if I had any headache tablets. In that time she said she felt peculiar and needed to lie down in the bath. I went into the bathroom and found her in the bath, fully clothed, in a very ill state.”

Counter-terrorism detectives are working on the theory that the poisoning of Rowley and Sturgess at the end of last month is directly linked to the poisoning of the Russian spy Sergei Skripal and his daughter, Yulia, in Salisbury in March. Experts from the top secret research facility at Porton Down in Wiltshire are trying to establish if the novichok was from the same batch. But if Rowley is correct about the perfume bottle being boxed and sealed, it may undermine the line of inquiry that the novichok that he and Sturgess came into contact with had been discarded by the attackers of the Skripals. It also opens up the possibility that there may yet be more novichok that has not been found in Wiltshire.

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“Intelligence”. Always good to see Dmitry.

US Intelligence Community as a Collapse Driver (Dmitry Orlov)

In today’s United States, the term “espionage” doesn’t get too much use outside of some specific contexts. There is still sporadic talk of industrial espionage, but with regard to Americans’ own efforts to understand the world beyond their borders, they prefer the term “intelligence.” This may be an intelligent choice, or not, depending on how you look at things. First of all, US “intelligence” is only vaguely related to the game of espionage as it has been traditionally played, and as it is still being played by countries such as Russia and China. Espionage involves collecting and validating strategically vital information and conveying it to just the pertinent decision-makers on your side while keeping the fact that you are collecting and validating it hidden from everyone else.

In eras past, a spy, if discovered, would try to bite down on a cyanide capsule; these days torture is considered ungentlemanly, and spies that get caught patiently wait to be exchanged in a spy swap. An unwritten, commonsense rule about spy swaps is that they are done quietly and that those released are never interfered with again because doing so would complicate negotiating future spy swaps. In recent years, the US intelligence agencies have decided that torturing prisoners is a good idea, but they have mostly been torturing innocent bystanders, not professional spies, sometimes forcing them to invent things, such as “Al Qaeda.” There was no such thing before US intelligence popularized it as a brand among Islamic terrorists.

Most recently, British “special services,” which are a sort of Mini-Me to the to the Dr. Evil that is the US intelligence apparatus, saw it fit to interfere with one of their own spies, Sergei Skripal, a double agent whom they sprung from a Russian jail in a spy swap. They poisoned him using an exotic chemical and then tried to pin the blame on Russia based on no evidence. There are unlikely to be any more British spy swaps with Russia, and British spies working in Russia should probably be issued good old-fashioned cyanide capsules (since that supposedly super-powerful Novichok stuff the British keep at their “secret” lab in Porton Down doesn’t work right and is only fatal 20% of the time).

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A country in downfall.

Holiday Hunger Should Be The Shame Of This Government And It Isn’t (G.)

As the summer holidays begin, many families look forward to breaks away from home, in the UK and abroad. Yet for thousands of families, the six-week school break is characterised not by play schemes and day trips in the sun, but acute financial stress, hunger and malnourishment, due to the absence of free school meals for children on low incomes that costs a family £30-£40 a week. With three million children at risk of hunger during the school holidays, the Trussell Trust has warned that food bank use spikes each summer. And last year, 593 organisations running holiday clubs across the UK provided more than 190,000 meals to over 22,000 school-aged children.

Feeding Britain, the charity set up by two Labour MPs, Emma Lewell-Buck and Frank Field, expects to provide meals for 27,000 children in 79 clubs across England this summer. In pilots in 2017, it provided a total of 43,314 meals in holiday fun clubs across eight areas, including Birkenhead, South Shields and Cornwall, in the summer holidays and October half term. Feeding Britain works with existing local charities, community groups, councils and others in the community providing funding and toolkits on how to run and roll out pilots, and creates networks for practical support. The clubs run in community centres, church halls, schools, children’s centres, libraries and parks, and they host games and activities for children, alongside breakfast, lunches, and lessons about food and nutrition for the young attendees.

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Mar 242018
 
 March 24, 2018  Posted by at 10:07 am Finance Tagged with: , , , , , , , , , ,  


Pablo Picasso Don Quixote 1955

 

EU In ‘State Of Denial’ Over Destructive Impact Of Farming On Wildlife (G.)
End the Fed. Are You Nuts? (Claire Connelly)
Stocks Suffer Biggest Weekly Drop In More Than 2 Years (BI)
The Stuff The US Imports From China That Causes A Huge Trade Deficit (MW)
Unspooling (Kunstler)
The Rise of the Trembling Hands (David Stockman)
2.8 Million Hongkongers To Get Cash Handout Of Up To HK$4,000 Each (SCMP)
Seven Days That Shattered Facebook’s Facade (G.)
UK Parties Spend Big On Facebook (G.)
Death Of The High Street (Ind.)

 

 

Denial my ass. What’s happening is the EU spends billions in taxpayers money to subsidize the complete demise of their ecosystems as well as their food supplies. The taxpayers may be in denial, but Brussels is not. The Bayer/Monsanto decision is not some stand-alone story.

EU In ‘State Of Denial’ Over Destructive Impact Of Farming On Wildlife (G.)

Europe’s crisis of collapsing bird and insect numbers will worsen further over the next decade because the EU is in a “state of denial” over destructive farming practices, environmental groups are warning. European agriculture ministers are pushing for a new common agriculture policy (CAP) from 2021 to 2028 which maintains generous subsidies for big farmers and ineffectual or even “fake” environmental or “greening” measures, they say. In a week when two new studies revealed drastic declines in French farmland birds – a pattern repeated across Europe – the EU presidency claimed that the CAP continued to provide safe food while defending farmers and “protecting the environment”.

“The whole system is in a state of denial,” said Ariel Brunner, head of policy at Birdlife Europe. “Most agriculture ministers across Europe are just pushing for business as usual. The message is, keep the subsidies flowing.” Farm subsidies devour 38% of the EU budget and 80% of the subsidies go to just 20% of farmers, via “basic payments” which hand European landowners £39bn each year. Because these payments are simply related to land area, big farmers receive more, can invest in more efficient food production – removing hedgerows to enlarge fields for instance – and put smaller, less intensive farmers out of business. France lost a quarter of its farm labourers in the first decade of the 21st century, while its average farm size continues to rise.

A smaller portion – £14.22bn annually – of EU farm subsidies support “greening” measures but basic payment rules work against wildlife-friendly farming: in Britain, farmers can’t receive basic payments for land featuring ponds, wide hedges, salt marsh or regenerating woodland. Signals from within the EU suggest that the next decade’s CAP – which will be decided alongside the EU budget by 2019 – will continue to pay farmers a no-strings subsidy, while cash for “greening”, or wildlife-friendly farming, may even be cut. Birdlife Europe said the “greening” was mostly “fake environmental spending” and wildlife-friendly measures had been “shredded” by “loophole upon loophole” introduced by member states.

[..] This week studies revealed that the abundance of farmland birds in France had fallen by a third in 15 years – with population falls intensifying in the last two years. It’s a pattern repeated across Europe: farmland bird abundance in 28 European countries has fallen by 55% over three decades, according to the European Bird Census Council. Conservationists say it’s indicative of a wider crisis – particularly the decimation of insect life linked to neonicotinoid pesticides.

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Not a general opinion.

End the Fed. Are You Nuts? (Claire Connelly)

We often see comments on this website from people who want to ‘end the Fed’ because they think it would address the rampant corruption and collusion of governments, central banks and the private sector. In reality, ending the Fed – or any one of the central banks outside of the European Union – would simply give more power to the banks and wealthy elites whose relationships with governments and central banks are already inappropriate. Abolishing central banks would simply formalise this arrangement, undermining democracy and removing the ability of governments to respond to changes in the domestic and global economy.

The claim that banks are privately owned is factually incorrect. With the exception of the EU which began life as an industrial cartel, created and controlled by Europe’s major heavy industries (coal, steel, car manufacturers and farmers), central banks are created by and belong to federal governments. Even the ECB is owned by the central banks of EU member countries, which in turn are owned by their governments, even if most do not have the right to issue their own currencies. The US Federal Reserve was created by Congress, and its chairman is appointed by the President; the Treasury receives nearly all its profits. The same applies to the Bank of England, the Reserve Bank of Australia, Bank of Canada etc which were created by their respective Parliaments.

What do advocates of ‘ending the Fed’ think will happen if the US got rid of central banking altogether? What currency would it use exactly? The only possibility would be to replace the Fed with another, private ‘Fed’ in which case central banks would go from being co-opted by the private sector, to being formally controlled by it. Ending the Fed would make central banks the property of the private sector, which, ironically, some people believe is already the case. So it’s a little bizarre that they think demolishing central banks would somehow address corruption and malfeasance. One need only look at what happened to Greece to understand what happens when a government gives up its central bank, and the right to issue its own currency. Ending central banking is the nail in the coffin of democracy. It is giving capitalism exactly what it wants: the complete takeover of the state by the market.

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What happens inside bubbles.

Stocks Suffer Biggest Weekly Drop In More Than 2 Years (BI)

US stocks sank in trading on Friday afternoon, pushing the S&P 500 to its biggest weekly decline in two years amid concerns about US trade policy and retaliation from China. The Dow Jones industrial average fell 360 points, or 1.5%, to its lowest level since November 22. The S&P 500 fell 56 points, or 2.13%, while the Nasdaq fell 148 points, or 2.23%. On Thursday, China announced planned to impose reciprocal tariffs on 128 US products that had an import value of about $3 billion last year. US President Donald Trump had earlier announced new tariffs on $50 billion worth of Chinese goods, with the aim of reducing the $375 billion trade deficit the US has with China.

The financials sector was the biggest loser among the 11 on the S&P 500. On the Dow, Boeing and Nike were the only stocks in positive territory. The drop on Friday pushed the S&P 500 9% below its peak in late January, just short of the 10% threshold at which the index enters a correction. Meanwhile, Dropbox soared during its trading debut. Shares of the cloud-computing company gained by as much as 44% in trading amid the broader market’s weakness. Treasurys rose slightly, with the 10-year yield up by less than 1 basis point, at 2.823%.

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The US will want to halt the selling off of technology.

The Stuff The US Imports From China That Causes A Huge Trade Deficit (MW)

President Donald Trump intends to apply tariffs on Chinese goods worth up to $60 billion in an effort to slash the huge U.S. trade deficit with China and protect sensitive technologies. It won’t be easy. It might even be impossible. The U.S. has run large deficits with China for years and in some cases no longer produces certain goods such as consumer electronics that are popular with Americans. In 2017, the U.S. posted a $375.2 billion deficit in goods with China. Most glaring is the huge deficit in computers and electronics, but the U.S. is a net importer from China in most market segments except for agriculture. China has been a big buyer of American-grown soybeans and other crops. Planes made by BA also are a product in demand in China.

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Little by little, the pieces fall together.

Unspooling (Kunstler)

With spring, things come unstuck; an unspooling has begun. The turnaround at the FBI and Department of Justice has been so swift that even The New York Times has shut up about collusion with Russia — at the same time omitting to report what appears to have been a wholly politicized FBI upper echelon intruding on the 2016 election campaign, and then laboring stealthily to un-do the election result.

The ominous silence enveloping the DOJ the week after Andrew McCabe’s firing — and before the release of the FBI Inspector General’s report — suggests to me that a grand jury is about to convene and indictments are in process, not necessarily from Special Prosecutor Robert Mueller’s office. The evidence already publicly-aired about FBI machinations and interventions on behalf of Hillary Clinton and against Donald Trump looks bad from any angle, and the wonder was that it took so long for anyone at the agency to answer for it.

McCabe is gone from office and, apparently hung out to dry on the recommendation of his own colleagues. Do not think for a moment that he will just ride off into the sunset. Meanwhile, Peter Strzok, Lisa Page, Bruce Ohr, have been sent to the FBI study hall pending some other shoes dropping in a grand jury room. James Comey is out hustling a book he slapped together to manage the optics of his own legal predicament (evidently, lying to a congressional committee). And way out in orbit beyond the gravitation of the FBI, lurk those two other scoundrels, John Brennan, former head of the CIA (now a CNN blabbermouth), and James Clapper, former Director of National Intelligence, a new and redundant post in the Deep State’s intel matrix (and ditto a CNN blabbermouth). Brennan especially has been provoked to issue blunt Twitter threats against Mr. Trump, suggesting he might be entering a legal squeeze himself.

None of these public servants have cut a plea bargain yet, as far as is publicly known, but they are all, for sure, in a lot of trouble. Culpability may not stop with them. Tendrils of evidence point to a coordinated campaign that included the Obama White House and the Democratic National Committee starring Hillary Clinton. Robert Mueller even comes into the picture both at the Uranium One end of the story and the other end concerning the activities of his old friend, Mr. Comey. Most tellingly of all, Attorney General Jeff Sessions was not shoved out of office but remains shrouded in silence and mystery as this melodrama plays out, tick, tick, tick.

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The old Washington insider doesn’t mince words.

The Rise of the Trembling Hands (David Stockman)

We call it State-Wreck and its been heading this way for a long-time. But the Donald is the coup d’ grace in flesh and blood. He will soon have the Imperial City tied in knots, and that’s even if he doesn’t fire Robert Mueller, which most surely he should and might. Either way, there is a massive partisan blood-letting coming and the ordinarily trans-partisan Deep State will be right in the middle of the brawl. That’s because partisan Democratic hacks – led by the detestable former CIA director John Brennan – got way beyond their skis, and baldly high-jacked the tools of the Deep State in a desperate effort to prevent the election and inauguration of Donald Trump. But the unveiling of what lies in its vasty deep is now beyond recall.

The very real attempt by the Obama/Clinton leadership of the CIA/FBI/NSC/NSA/DNI/State/Homeland Security complex to meddle in the 2016 election against the Donald will all come out – even as the Dems and their legal trolls on Mueller’s witch-hunting squad become ever more shrill in their McCarthyite hysteria about the Russians. Moreover, the coming quasi-civil war will potentially bring both indictments of Obama’s election meddlers and a counter-reaction from a Mueller based campaign to oust the Donald. Indeed, what portends in the months ahead is more incendiary than anything to rock the Imperial City during the last century, at least. But here’s the thing. This is not happening in a splendid vacuum with no import for the other end of the Acela Corridor.

In fact, the entire state-driven economic and financial fantasy that has been building for more than 30 years is now squarely in harm’s way. The former always depended upon Washington based stimulus, subventions, bailouts and booty. But now having attained an asymptotic high, the Great Bubble is stranded with no Washington fixers to keep it going; instead, it is fixing to slide into a long night of deflation, disorder and decay. That is to say, we printed 2870 on the S&P 500, $19.7 trillion of GDP and $97 trillion of household net worth, but those stats weren’t the embodiment of sustainable capitalist prosperity; they were the fruit of a $68 trillion national LBO, a central bank-driven financial asset bubble that has no historical antecedent and the rise of an Imperial Deep State in Washington that is a mortal threat to both democracy and national solvency.

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“..an effort to try to respond to the needs of the community in a proactive manner.”

2.8 Million Hongkongers To Get Cash Handout Of Up To HK$4,000 Each (SCMP)

Over one-third of Hongkongers, or 2.8 million people who did not benefit from the budget announced last month, will get a cash handout of up to HK$4,000 (US$510) each from the government, Financial Secretary Paul Chan Mo-po said on Friday. Chan’s announcement confirmed reports – including one by the Post – that the government would share the city’s HK$138 billion surplus more broadly. While it faced intense political and public pressure to do more for the needy, the government’s decision to fork out an extra HK$11 billion in handouts was not a U-turn, Chief Executive Carrie Lam Cheng Yuet-ngor insisted.

“First of all, I wouldn’t say that we are bowing to pressure, and secondly, we have not said we would not do something which we describe as a ‘share and care’ programme,” she said. Chan said he had heard the community “loud and clear”. “I think as government officials we need to have the capacity to step back and reflect the various views expressed and see how we may be able to better serve our people,” he explained. “So this scheme … is an effort to try to respond to the needs of the community in a proactive manner.” The money will be given to Hong Kong residents aged 18 years or above (as of December 31 this year) who do not own property, do not receive any government allowances, and will not pay income tax for the financial year ending next week.

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The Guardian is gradually shifting its story away from Cambridge Analytica. A bit late?

Seven Days That Shattered Facebook’s Facade (G.)

There are thousands of other developers, including the makers of dating app Tinder, games such as FarmVille as well as consultants to Barack Obama’s 2012 presidential campaign, who slurped huge quantities of data about users and their friends – all thanks to Facebook’s overly permissive “Graph API”, the interface through which third parties could interact with Facebook’s platform. Facebook opened up in order to attract app developers to join Facebook’s ecosystem at a time when the company was playing catch-up in shifting its business from desktops to people’s smartphones. It was a symbiotic relationship that was critical to Facebook’s growth.

“They wanted to push as much of the conversation, ad revenue and digital activity as possible and made it extremely friendly to app developers,” said Jeff Hauser, of the Center for Economic and Policy Research. “Now they are complaining that the developers abused them. They wanted that. They were encouraging it. They may now regret it but they knowingly unleashed the forces that have led to this lack of trust and loss of privacy.” The terms were updated in April 2014 to restrict the data new developers could get hold of, including to people’s friends’ data, but only after four years of access to the Facebook firehose. Companies that plugged inbefore April 2015 had another year before access was restricted.

“There are all sorts of companies that are in possession of terabytes of information from before 2015,” said Jeff Hauser of the Center for Economic Policy and Research. “Facebook’s practices don’t bear up to close, informed scrutiny nearly as well as they look from the 30,000ft view, which is how people had been viewing Facebook previously.” [..] “This is the biggest issue I’ve ever seen any technology company face in my time,” said Roger McNamee, Zuckerberg’s former mentor. “It’s not like tech hasn’t had a lot of scandals,” he said, mentioning the Theranos fraud and MiniScribe packing actual bricks into boxes instead of hard drives. “But no one else has played a role in undermining democracy or the persecution of monitories before. This is a whole new ball game in the tech world and it’s really, really horrible.”

Read more …

Isn’t it wonderful? When are people going to demand they stop doing this? But no political party can resist the temptation of influencing voters behavior, by whatever means.

UK Parties Spend Big On Facebook (G.)

Figures released this week by the Electoral Commission are the simplest way to demonstrate the growing influence of Facebook on British politics. Political parties nationally spent about £1.3m on Facebook during the 2015 general election campaign; two years later the figure soared to £3.2m. In each election it was the Conservatives that spent the most, with decidedly mixed results. For David Cameron’s successful re-election in 2015, the party spent £1.2m; that rose to £2.1m in 2017, but it was far less help to Theresa May. Sam Jeffers, the co-founder of Who Targets Me, a body that tries to monitor political Facebook advertising, says the difference stems from the fact that the Conservatives had a better overall strategy in 2015.

“In 2015 they targeted Lib Dem seats in the south-west; in 2017 they targeted Labour seats in London boroughs, spending money on seats they thought they would win but didn’t,” he says. Nevertheless, the Conservative success was so striking in 2015 that every other political party and campaign group felt it had to follow suit. The idea of marketing on Facebook was brought to the UK by the US political consultant Jim Messina, the campaign manager for Barack Obama in 2012, who Tory officials like to say boasted he had “1,000 pieces of data on every voter in the UK”.

It was a big change on the traditional model of supplementing canvass returns with broad demographic data supplied by Experian’s Mosaic, which divides people into groups such as “metro high flyers”, “classic grandparents” and “disconnected youth” – the kind of data used by all the main parties to help deliver targeted mailshots. The idea rapidly took hold – and was arguably tailor-made for the EU referendum in 2016. One of the reasons why the Conservatives made heavy use of Facebook marketing was because its canvassing operation is far weaker than Labour’s, forcing it to try to identify potential voters using technology.

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All sorts of theories and explanations; just admitting that people are dead broke remains a big taboo.

Death Of The High Street (Ind.)

On Friday, Next – broadly considered a bellwether of the UK fashion retail market – reported a punishing slump in profits, attributing the fall to a weak clothing market coinciding with “self-inflicted product ranging errors and omissions”. “In many ways,” Next said, “2017 was the most challenging year we have faced for 25 years.” Earlier in the week data from the Office for National Statistics showed that retail sales volumes had picked up by 0.8 per cent in February – which was significantly ahead of analyst expectations – but forecasters and economists are pessimistic. Volumes contracted in January, meaning that British retailers this year suffered their worst start to any year since 2013 and the headwinds are still raging.

Commenting on the latest data, economists Sreekala Kochugovindan and Fabrice Montagne at investment bank Barclays said that despite some relief in February, the rebound was not enough to offset the “Christmas drag”, when consumers largely shunned the high street in favour of the internet. And HSBC economist Elizabeth Martins dubbed February’s reading “the bounce before the beast”. She warned that figures next month would likely be additionally burdened by adverse weather conditions that disrupted transport links and kept shoppers from leaving their homes during the early part of March. “The data are better than expected, but considering they do not take into account the effects of the snow at all, they are not brilliant,” she said. “They reflect a small increase after two months of falls, and still point to underlying weakness in household spending.”

The British Retail Consortium, the trade association representing the UK retail sector, has also warned that sales are likely to remain sluggish throughout the rest of the year – a prognosis that will particularly pain shops like Ali’s on Oxford Street that sell items considered non-essential, like clothes, furniture and electronics, and those with a with a large bricks-and-mortar presence. Sarah Garrett, a 51-year old self-employed company director who lives in Notting Hill, speaks for many when she says that she’s of the opinion that “the high street is now a thing of the past”. “Online is definitely where it is at. Maybe I am lazy, but I just prefer home deliveries [from the likes of] Amazon,” she says. “Who wants to lug heavy bags from the supermarket anyway?”

Read more …

Aug 272017
 
 August 27, 2017  Posted by at 9:00 am Finance Tagged with: , , , , , , , , , ,  


Elliott Erwitt Downtown Hat Shop Window, Pittsburgh 1950

 

Phillips Curve Doesn’t Help Forecast Inflation, Fed Study Finds (BBG)
Where Do Consumers Spend The Most Money? (Mish)
Should California Spend $3 Billion To Help People Buy Electric Cars? (LAT)
Tesla: A Canary in the Wall Street Coal Mine (Barron’s)
UK Labour Party Makes Dramatic Shift On Brexit And Single Market (G.)
Controlled Demolition (Jim Kunstler)
The War That Time Forgot (CP)
It’s Time To Accept Carbon Capture Has Failed (Conv.)
Industrial Farming Is Driving The Sixth Mass Extinction Of Life On Earth (Ind.)

 

 

The incompetence is deafening. Trillions have been washed away on the theory.

Phillips Curve Doesn’t Help Forecast Inflation, Fed Study Finds (BBG)

A fundamental relationship of mainstream economic theory at the heart of the Federal Reserve’s strategy for setting interest rates has been a poor guide for policy makers for at least three decades, according to a study by the Philadelphia Fed’s top-ranking economist. The paper, co-authored by Philadelphia Fed Director of Research Michael Dotsey, shows that forecasting models based on the so-called Phillips curve, which asserts a link between unemployment and inflation, don’t actually help predict inflation. “Our results indicate that monetary policymakers should at best be very cautious in their reliance on the Phillips curve when gauging inflationary pressures,” Dotsey and Philadelphia Fed economists Shigeru Fujita and Tom Stark wrote.

Their study is timely. Fed officials have been surprised by a deceleration in U.S. inflation over the past several months despite a continued decline in unemployment, the opposite of what the Phillips curve relationship would predict. Minutes of the last meeting of the central bank’s rate-setting Federal Open Market Committee in July revealed that “a few participants cited evidence suggesting that this framework was not particularly useful in forecasting inflation,” while “most participants thought that the framework remained valid.” If the majority view on the FOMC is that the Phillips curve framework is still valid, it implies that central bankers should continue raising interest rates with unemployment at a 16-year low, because they expect inflation will rise in the medium term even though prices pressures have been disappointingly soft.

Kansas City Fed President Esther George, who has been more forceful than many of her colleagues in recent years about the need to raise rates, lent support to that view on the sidelines of this week’s annual gathering of central bankers from around the world in Jackson Hole, Wyoming. “There may in fact be something wrong with the models, I don’t know, I think that continues to be a question that many economists are asking,” George said during a TV interview with Bloomberg’s Michael McKee that aired Thursday. Even so, she favors another rate increase this year.

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Cars + gasoline account for almost 30% of all spending. Crazy.

Where Do Consumers Spend The Most Money? (Mish)

In Dealers “Wildly Overweight” SUVs as Sales Slow, I commented “Vehicles account for 20% of retail spending. A crash or even a significant slowdown will impact retail sales and thus GDP.” A reader asked me how I calculated that. Let’s take a look. My number came from the latest Census Department Advance Retail Sales Report. Here are some charts I created from 7-month totals (January-July) 2017.

Key Points
• Motor vehicles and parts account for 21.18% of retail sales. Gasoline stations account for 7.94%. Together that adds up to 29.12%.
• Food and beverage stores (grocery and liquor stores) account for 12.62 percent of retail sales. Food services and drinking places (restaurants and bars) account for 12.14. The food and drink total is 24.76%.
• Nonstore retailers (think Amazon) account 10.39% of retail sales.

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Yeah, let’s subsidize the car culture.

Should California Spend $3 Billion To Help People Buy Electric Cars? (LAT)

Over seven years, the state of California has spent $449 million on consumer rebates to boost sales of zero-emission vehicles. So far, the subsidies haven’t moved the needle much. In 2016, of the just over 2 million cars sold in the state, only 75,000 were pure-electric and plug-in hybrid cars. To date, out of 26 million cars and light trucks registered in California, just 315,000 are electric or plug-in hybrids. The California Legislature is pushing forward a bill that would double down on the rebate program. Sextuple down, in fact. If $449 million can’t do it, the thinking goes, maybe $3 billion will. That’s the essence of the plan that could lift state rebates from $2,500 to $10,000 or more for a compact electric car, making, for example, a Chevrolet Bolt EV electric car cost the same as a gasoline-driven Honda Civic.

Already approved by several Senate and Assembly committees, the bill will go to Gov. Jerry Brown for his approval or veto if the full Legislature approves it by the end of its current session on Sept. 15. California aims to reduce greenhouse gas emissions by 2030 to a level 40% below what they were in 1990. “If we want to hit our goals, we’re going to have to do something about transportation,” said Assemblyman Phil Ting (D-San Francisco), sponsor of Assembly Bill 1184. Without a dramatic boost in subsidies, Ting said, the state risks falling short of Gov. Brown’s goal of 1.5 million zero-emission vehicles on California highways by 2025, and the California Air Resources Board’s goal of 4 million such cars by 2030. The bill is opposed by Republicans averse to taxpayer subsidies and even the Legislature’s own analysts have called it “duplicative,” “unclear” and “problematic.”

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“Once again, history and reality are replaced by dreams with little substance.”

Tesla: A Canary in the Wall Street Coal Mine (Barron’s)

Those who think today’s stock market is unlike that of 2000, when baseless enthusiasm pushed stocks up to wild valuations, only to collapse in subsequent years, should take another look. Do they remember counting eyeballs as a basis for value? Once again, history and reality are replaced by dreams with little substance. Tesla, in which I have a short position, is becoming the loudest canary in Wall Street’s coal mine. Tesla requires repetitive capital raises to fund persistent operating losses. This requires bullish analysts and holders to keep the stock aloft with projections of imagined earnings from future products, while they overlook existing businesses, which continue to lose vast sums of money. Morgan Stanley, one of Tesla’s major underwriters, has an analyst covering Tesla named Adam Jonas. Astonishingly, he raised his price target for the stock, despite recognizing the need to slash his earnings forecast.

In May, Jonas had estimated per-share losses (excluding stock-option expense) of $3.53 in 2017 and $1.14 in 2018, and a profit of $2.43 in 2019. His latest estimates: losses of $7.60 and $3.66, and a 2019 profit of $2.01. Raising the target price while more than doubling the company’s projected loss indicates the craziness of the times. Price targets are fantasies, discounting distant earnings estimates by analysts who show little accuracy in estimating only a year ahead. For most companies, profit is the major objective. Tesla is different because its founder is different. Elon Musk is driven by a mission to replace fossil fuels with renewable energy. Unlike companies seeking profit maximization by using patents to establish exclusive rights to products, Musk encourages competitors and has made virtually all of his patents available. Almost all auto companies have imminent plans to compete.

Tesla has been first-to-market in electric cars, but this in no way guarantees success, as competition and technological change are major challenges. Remember Atari, Blackberry, AOL, Napster, Netscape, and Palm? Musk is smart and imaginative, but none of his major companies are profitable. Tesla has been around for 14 years and has cumulatively lost more than $3.7 billion, despite the massive subsidies that it and its customers have received. SolarCity, also a beneficiary of alternative-energy subsidies, lost hundreds of millions of dollars before being bailed out by Tesla. As subsidies diminish, and competition emerges, profits will be even more elusive. Tesla tries to convey the illusion of inexhaustible demand for its cars, yet sales of the Model S and Model X have been flat for four quarters. Tesla’s rising inventory and shrinking deposits suggest declining demand.

Tesla claims to have more than 400,000 deposits for the Model 3, but these aren’t orders. They reflect a decision by potential buyers to get in line for a $7,500 tax credit at virtually no cost. Shifting $1,000 from a savings account into a refundable Tesla deposit costs only about $1 per year in lost interest. Fewer than 100,000 of these depositors will actually get full tax credits before Tesla consumes its allowable allotment of them. Its competitors will be able to offer such credits to prospective buyers, just as Tesla’s expire.

Read more …

Jockeying for votes?

UK Labour Party Makes Dramatic Shift On Brexit And Single Market (G.)

Labour is to announce a dramatic policy shift by backing continued membership of the EU single market beyond March 2019, when Britain leaves the EU, establishing a clear dividing line with the Tories on Brexit for the first time. In a move that positions it decisively as the party of “soft Brexit”, Labour will support full participation in the single market and customs union during a lengthy “transitional period” that it believes could last between two and four years after the day of departure, it is to announce on Sunday. This will mean that under a Labour government the UK would continue to abide by the EU’s free movement rules, accept the jurisdiction of the European court of justice on trade and economic issues, and pay into the EU budget for a period of years after Brexit, in the hope of lessening the shock of leaving to the UK economy.

In a further move that will delight many pro-EU Labour backers, Jeremy Corbyn’s party will also leave open the option of the UK remaining a member of the customs union and single market for good, beyond the end of the transitional period. Permanent long-term membership would only be considered if a Labour government could by then have persuaded the rest of the EU to agree to a special deal on immigration and changes to freedom of movement rules. The announcement, revealed in the Observer by the shadow Brexit secretary, Keir Starmer, means voters will have a clear choice between the two main parties on the UK’s future relations with the EU after a year in which Labour’s approach has been criticised for lacking definition and appeared at times hard to distinguish from that of the Tories.

The decision to stay inside the single market and abide by all EU rules during the transitional period, and possibly beyond, was agreed after a week of intense discussion at the top of the party. It was signed off by the leadership and key members of the shadow cabinet on Thursday, according to Starmer’s office.

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“..to reassure the masses that effective spells for favor of the Gods have been cast — except that in our civilization money is God.”

Controlled Demolition (Jim Kunstler)

This is the week-of-weeks when the official grand viziers of finance gather at Jackson Hole, Wyoming, to confab and interpret the lay of animal neck-bones and other auguries scattered in the sand, with the hope of steering the awesome powers of the universe this was or that as they affect the operations of money. The exercise is hardly different in function from the sort of rude ceremonials that took place on top of Sumerian ziggurats and Aztec temples — to reassure the masses that effective spells for favor of the Gods have been cast — except that in our civilization money is God. Or “money,” we should say, because the old definitions don’t fit so well anymore. It used to have a straightforward relationship with the work required to produce actual things of value, but those days are gone.

“Money” nowadays is a byproduct of wishful analytics and computer legerdemain seasoned with generous measures of fraud and larceny. This is a big problem when everything is measured in money and it becomes quite impossible to state with assurance what the value of money actually is. Obviously, you end up not knowing the value of anything. That’s the perilous situation the world faces. And since the USA is the straw the stirs the world’s drink — at least for now — the utterances emanating from Jackson Hole may determine which way that situation turns. We should suppose that the officers of the Federal Reserve are upright, well-intentioned, patriotic people. No doubt they think they are. But the perilous situation is largely one of their own making, and seems to be veering out of their control, and reputations are at stake.

Their task at this year’s Jackson Hole confab is to maintain the appearance of confidence in their own rituals. But with a kicker. That kicker is named T-r-u-m-p. This modern Balaam, riding the ass of the Deep State into wickedness, must be stopped, perhaps at all costs. On his way to the oval office last fall, Trump prophesied that the stock markets represented “one big, fat, ugly bubble.” That was an offense to the grand viziers, for whom the elevated stock market valuations stood as the main testament to their power and wisdom. In fact, it was the only testament, and a rather flimsy one. More recently, though, the wicked Trump changed his tune and declared that the tower of stock market exaltation was his own doing, setting himself up for the revenge of the grand viziers.

Since nothing else has worked so far to dislodge Trump from the White House, a tumbling tower of stocks might seal his fate. The tower has to fall anyway, lest the moiling masses of flyover America think about besetting Wall Street with pitchforks and torches. A controlled demolition might be just the thing to appease these suffering holders of three part-time jobs (if they are so lucky) who have stood by in wonder and nausea while a tiny fraction of the elite gather unto themselves all the dwindling riches of the realm — at least in paper securities denominated in US dollars — while the wicked Trump will be left to the jackals of the Deep State, to be torn apart with the 25th Amenedment.

Read more …

Elizabeth War(ren).

The War That Time Forgot (CP)

If it’s Independence Day, then you can count on John McCain to be bunkered down in a remote outpost of the Empire growling for the Pentagon to unleash airstrikes on some unruly nation, tribe or gang. This July the Fourth found McCain making a return engagement to Kabul, an arrival that must have prompted many Afghans to scramble for the nearest air raid shelter. From the press room at NATO command, McCain announced that “none of us could say we are on a course to success here in Afghanistan.” The senator should have paused for a reflective moment and then called for an end to the war. Instead, McCain demanded that Trump send more US troops, more bombers and more drones to terrorize a population that has been riven by near constant war since the late 1970s.

McCain’s martial drool is now as familiar as the opening notes to the “Law & Order” theme song. What may surprise some, however, is the composition of the delegation that signed up to travel on his frequent flier program, notably the presence of two Democratic Senators with soaring profiles: Sheldon Whitehouse and Elizabeth Warren. Whitehouse, the former prosecutor (aren’t they all?) from Rhode Island, has lately taken a star turn in the role of chief inquisitor of suspected Russian witches in the Senate intelligence committee hearings. Perhaps he finally located one selling AK-47s to the Taliban to replace the guns they’d gotten from the CIA. (We now know that it’s the Saudis–not the Russians–who have been covertly funneling money to the Taliban, though don’t expect the Trump to impose any sanctions on the Kingdom of the Head-choppers.)

For her part, Warren largely echoed McCain’s bellicose banter that Trump needs to double down militarily to finish off the Taliban, the impossible dream. No real surprise here. To the extent that she’s advanced any foreign policy positions during her stint in the senate, Warren has been a dutiful supplicant to the demands of AIPAC and the Council on Foreign Relations, rarely diverging from the neocon playbook for the global war on Islam. Warren’s Afghan junket is a sure sign of her swelling presidential ambitions. These days “national security” experience is measured almost exclusively by how much blood you are willing to spill in countries you know almost nothing about. It didn’t take long for Warren to matriculate to the company position.

[..] Nothing better illustrates the eclipse of US global power than the fact that Afghanistan refuses to be subjugated or even managed, despite 16 years of hard-core carnage. Since the first US airstrikes hit Kandahar in October 2001, more than 150,000 Afghan civilians have been killed. Still Afghanistan resists imperial dictates. Even after Obama’s shameful troop surge in 2010, an escalation that went almost unopposed by the US antiwar movement, the Taliban now retains almost as much control of the country as it did in 2001. And for that Afghanistan must be punished. Eternally, it seems.

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There’s always a new theory. Don’t let’s stop using as much of the stuff as we can.

It’s Time To Accept Carbon Capture Has Failed (Conv.)

For years, optimists have talked up carbon capture and storage (CCS) as an essential part of taking emissions out of electricity generation. Yes, build wind and solar farms, they have said, but they can t be relied on to produce enough power all the time. So we ll still need our fleet of fossil-fuel-burning power stations; we just need to stop them pumping carbon dioxide (CO2) into the atmosphere. Most of their emphasis has been on post-combustion capture. This involves removing CO2 from power station flue gases by absorbing them into an aqueous solution containing chemicals known as amines. You then extract the CO2 , compress it into a liquid and pump it into a storage facility the vision in the UK being to use depleted offshore oil and gas fields. One of the big attractions with such a system is it could be retrofitted to existing power stations.

But ten years after the UK government first announced a £1 billion competition to design CCS, we re not much further forward. The reason is summed up by the geologist Lord Oxburgh in his contribution to the government-commissioned report on CCS published last year: “There is no serious commercial incentive and it will stay that way unless the state demonstrates there is a business there.” The problem is that the process is costly and energy intensive. For a gas-fired power station, you typically have to burn 16% more gas to provide the capture power. Not only this, you end up with a 16% increase in emissions of other serious air pollutants like sulphur dioxide, nitrogen oxides and particulate matter. Concerns have also been expressed about the potential health effects of the amine solvent used in the carbon capture.

You then have to contend with the extra emissions from processing and transporting 16% more gas. And all this before you factor in the pipeline costs of the CO2 storage and the uncertainties around whether it might escape once you ve got it in the ground. Around the world, the only places CCS looks viable are where there are heavy state subsidies or substantial additional revenue streams, such as from enhanced oil recovery from oilfields where the COC is being pumped in. Well, say the carbon capture advocates, maybe another technology is the answer. They point to oxy-combustion, a system which is close to reaching fruition at a plant in Texas.

First proposed many years ago by British engineer Rodney Allam, this involves separating oxygen from air, burning the oxygen with the fossil fuel, and using the combustion products -water and CO2- to drive a high-pressure turbine and produce electricity. The hot CO2 is pressurised and recycled back into the burners, which improves thermal efficiency. It has the additional advantage that CO12 is also available at pressures suitable for pipeline transportation.

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Small is beautiful.

Industrial Farming Is Driving The Sixth Mass Extinction Of Life On Earth (Ind.)

Industrial agriculture is bringing about the mass extinction of life on Earth, according to a leading academic. Professor Raj Patel said mass deforestation to clear the ground for single crops like palm oil and soy, the creation of vast dead zones in the sea by fertiliser and other chemicals, and the pillaging of fishing grounds to make feed for livestock show giant corporations can not be trusted to produce food for the world. The author of bestselling book The Value of Nothing: How to Reshape Market Society and Redefine Democracy will be one of the keynote speakers at the Extinction and Livestock Conference in London in October. Organised by campaign groups Compassion in World Farming and WWF, it is being held amid rising concern that the rapid rate of species loss could ultimately result in the sixth mass extinction of life.

This is just one reason why geologists are considering declaring a new epoch of the Earth, called the Anthropocene, as the fossils of soon-to-be extinct animals will form a line in the rocks of the future. The last mass extinction, which finished off the dinosaurs and more than three-quarters of all life about 65 million years ago, was caused by an asteroid strike that sent clouds of smoke all around the world, blocking out the sun for about 18 months. Prof Patel, of the University of Texas at Austin, said: “The footprint of global agriculture is vast. Industrial agriculture is absolutely responsible for driving deforestation, absolutely responsible for pushing industrial monoculture, and that means it is responsible for species loss. “We’re losing species we have never heard of, those we’ve yet to put a name to and industrial agriculture is very much at the spear-tip of that.”

Speaking to The Independent, he pointed to a “dead zone” – an area of water where there is too little oxygen for most marine life – in the Gulf of Mexico that has grown to the same size as Wales because of vast amounts of fertiliser that has washed from farms in mainland US, into the Mississippi River and then into the ocean. “That dead zone isn’t an accident. It’s a requirement of industrial agriculture to get rid of the sh*t and the run-off elsewhere because you cannot make industrial agriculture workable unless you kick the costs somewhere else,” he said. “The story of industrial agriculture is all about externalising costs and exploiting nature.” “Extinction is about the elimination of diversity. What happens in Brazil and other places is you get green deserts — monocultures of soy and nothing else. “Various kinds of chemistry is deployed to make sure it is only soy that’s grown on these mega-farms. “That’s what extinction looks like. If you ever go to a soy plantation, animal life is incredibly rare. It’s only soy, there’s nothing there for anything to feed on.”

Read more …

Aug 082017
 
 August 8, 2017  Posted by at 9:06 am Finance Tagged with: , , , , , , , , , , ,  Comments Off on Debt Rattle August 8 2017


Vincent van Gogh Tree Roots 1890 (painted July 28, the day before he died)

 

That Whoosh You Heard? It’s The Great Chinese Property Pullback (BBG)
Has China’s Rise Topped Out? (BBG)
Credit Card Debt; Student, Auto Loans All Set New Record Highs (ZH)
Asking Prices Slashed At High End of the House Price Bubble (WS)
Is Trump Winning? (Robert Gore)
Jeff Sessions Endorses Theft (Ron Paul)
Just Wait a Little While (Jim Kunstler)
Fossil Fuel Subsidies Are A Staggering $5 Trillion Per Year (G.)
Bernie Sanders Tells Big Pharma: Stop Making Americans Pay Twice
Call For ‘Military Schengen’ To Get NATO Troops Moving (Pol.)
Erdogan Says Turkey To Tackle – US-Supported – Kurds In Syria (R.)
Greece Accepts Resettlement of Refugees from Germany (GR)

 

 

China needs foreign reserves. It needs to stop bleeding them.

That Whoosh You Heard? It’s The Great Chinese Property Pullback (BBG)

That whoosh you just heard? It’s Chinese money pulling back from property in London to Sydney to New York. Capital centres globally should brace for tumbling real-estate prices as Beijing manages to do what Brexit and higher interest rates haven’t. Reflecting tighter regulations, China overseas direct property investment could drop 84% to $US1.7 billion ($2.15 billion) this year and about another 15% to $US1.4 billion in 2018, according to Morgan Stanley. Mainland money began piling into offshore commercial property in 2013. Land prices were expensive at home, and investors wanted to find a hedge against a weakening yuan. Another draw was the prospect of higher returns in cities such as Sydney where yield spreads – the difference between rental yields and what government bonds pay – are higher.

A slumping British pound post June 2016’s Brexit vote helped, too. While some marquee transactions are still being inked – think the purchase earlier this year of London’s “Cheesegrater” tower by Chongqing-based, Hong Kong-listed CC Land Holdings – their numbers are dwindling. A strengthening yuan, along with China’s One Belt One Road initiative that needs funding, will see many property deals dry up. Over the past few months, Beijing has made it tougher to get money out, clamped down on more fanciful transactions such as the buying of football clubs and luxury hotels, and is now going after some of the country’s most prolific acquirers. Dalian Wanda Group, Anbang Insurance Group, HNA Group and Fosun International have all included real estate in their global buying binges.

Against that backdrop, and with increasing foreign-government scrutiny thrown into the mix, it’s hard to see how Chinese offshore real estate acquisitions can continue at such a pace. Domestic developers are already finding it harder to tap international debt markets, and have been resorting to short-term securities instead. This matters because Chinese capital accounted for one-quarter of commercial property transactions in central London last year, up from 1% a decade ago. China is now the second-largest foreign investor in the US after Canada, and is responsible for between 12 and 25% of all office transactions by value in Australia over the past two to three years.

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Again, China needs foreign reserves: “Nowhere is the disconnect between China’s global ambitions and actual policy greater than with the government’s interference in overseas direct investment.”

Has China’s Rise Topped Out? (BBG)

Most people around the world still seem to believe China’s ascent is relentless and inevitable. A recent survey by the Pew Research Center showed that while more of those polled still see the U.S. as the world’s leading economy, China is quickly narrowing the gap. Chinese President Xi Jinping has been feeding that positive image by presenting his country as a champion of globalization, trade and economic progress. Statistics tell a different story. The common perception is that China is swamping the world with exports of everything from mobile phones to steel to sneakers. In fact, the entire Chinese export machine is sputtering. Between 2006 and 2011, China’s total merchandise exports nearly doubled, powering the country through the Great Recession. Since then, they’ve increased less than 11%, according to World Trade Organization data.

The same trend holds for China’s currency. In late 2014, the renminbi broke into the top five most-used currencies for global payments, reaching an almost 2.2% share. China seemed well on the way to achieving its long-stated goal of turning the yuan into a true rival to the dollar. But that progress has reversed. In June, the renminbi chalked up only a 2% share, according to Swift, slipping behind the Canadian dollar. The situation isn’t very different in China’s capital markets. While the government has cracked open its stock and bond markets to foreign investors, they still prefer buying Chinese shares listed in Hong Kong or New York to those in Shanghai or Shenzhen. For instance, domestically traded A-shares in a China equities fund managed by Zurich-based GAM account for less than 10% of its holdings.

In part, China is simply running into the difficult transition every country faces when losing its low-cost advantage. Facing stiff competition from countries like India and Vietnam, where wages are lower, China is losing ground in apparel and textile exports to the United States. Meanwhile, the Chinese economy isn’t replacing these traditional exports with new, high-value ones quickly enough. For example, in 2016, China exported 708,000 passenger and commercial vehicles, a sharp deterioration from the more than 910,000 shipped abroad in 2014. Rather than boosting China’s global expansion, government policy is holding it back. The renminbi remains a sideshow in currency markets because the state can’t stop fussing with its value. In May, the central bank actually reversed its stated policy to liberalize the renminbi’s trading and imposed more control.

[..] Nowhere is the disconnect between China’s global ambitions and actual policy greater than with the government’s interference in overseas direct investment. For a while, officials were encouraging big companies to shop abroad, resulting in a surge of deal-making by firms like Anbang. That led to a debt-crazed buying binge. Having created the problem, the government then stepped in to “fix” it, by suddenly changing course and clamping down on foreign deals. According to the American Enterprise Institute, China’s offshore investment still grew by 9% in the first half of 2017, but only because of one giant deal – state-owned China National Chemical Corp.’s acquisition of Syngenta AG. Take that one out, and overseas investment would have fallen by about a third.

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Masters and debt slaves.

Credit Card Debt; Student, Auto Loans All Set New Record Highs (ZH)

Who would have expected that today’s otherwise boring monthly consumer credit report would be the day’s most exciting event. Well, moments ago the monthly update from the Federal Reserve confirmed that as of the end of June, total revolving (i.e. credit card) credit rose to $1,021.7 billion, an increase of $4.1 billion on the month, and a new all time high, taking out the previous record high set during the summer of 2008.

Coupled with the monthly $8.3 billion increase in non-revolving credit, which also rose to an all time high of $2,834.1 billion…

… means that total consumer credit in June increased by $12.4 billion, slightly less than the $13.9 billion expected and modestly less than the $18.4 billion increase in May, to $3,855.8 billion, also a record high.

Taking a closer look at the quarterly update in non-revolving debt, we find that for another consecutive quarter, both student and auto loans hit record highs, of $1.450 trillion and $1.131 trillion respectively, although there does appears to be a modest slowdown in credit issuance for these two largest categories.

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“Aspirational pricing”: pumping the market.

Asking Prices Slashed At High End of the House Price Bubble (WS)

No, Cantor Fitzgerald CEO Howard Lutnick didn’t “save” $81 million when he bought the most expensive listing in New York City, the 12,000-square-foot, 16-room triplex penthouse on the 41st, 42nd, and 43rd floors of The Pierre, a co-op tower on Fifth Avenue dating from 1930s. By the way, the owner also pays monthly maintenance charges for the apartment of $51,840). Asking price was $125 million when it was first listed in March 2013. In December that year, the price was slashed to $95 million. In 2015, it was cut to $63 million. That’s half of the original asking price. But it still didn’t sell. So it was taken off the market. After it underwent a modern redesign, it was re-listed in April 2016 for $57 million. It still didn’t sell. But on August 2, Page Six reported that Lutnick bought it for $44 million. At 65% below asking.

“Cantor Fitzgerald CEO buys iconic triplex at $81M discount,” said the Page Six headline. “Best Real Estate Headline Ever,” said Jonathan Miller, real-estate appraiser and author of the Elliman Report series, in his Housing Notes. Miller has a word for this phenomenon of enormous blue-sky asking prices that trigger subsequent massive and serial price reductions until finally someone bites: “Aspirational pricing.” “The very idea that a home seller would discount their home by $81 million to make the sale is an insane thought. This speaks to the concept I call “aspirational pricing.” The asking price was set to a price so ridiculous that it would literally sit on the market for years and the market would unlikely catch up in a lifetime. More importantly, it serves as misdirection for other high-end properties coming to the market by influencing them to also wildly over price as well.”

The 6,800-square-foot fully furnished penthouse occupying the top floor of the beachfront condo tower at 321 Ocean in South Beach, Miami Beach, was listed for sale in December 2015 for $53 million. The sellers had bought it when the building was completed six months earlier, for $20 million. “Financier Aims for Ambitious $53 Million Miami Penthouse Flip,” The Wall Street Journal said at the time. The hopeful flippers are Boris Jordan and Elizabeth Jordan: Founder of the private-equity and advisory firm the Sputnik Group, Mr. Jordan previously served as chief executive of the state-controlled Russian media conglomerate Gazprom-Media, and as head of the Russian television network NTV. But the hot air has come out of the condo market in Miami Beach. In the second quarter, after years of soaring, the median sale price for non-distressed condos dropped 7.5%, and the average price plunged 15.2%, according to the Elliman Report.

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A different look.

Is Trump Winning? (Robert Gore)

We’ve asserted that President Trump is far smarter and the powers that be far stupider and weaker than current consensus estimates. Trump’s primary motivation is power. The nonstop vilification campaign against him has little to do with policy differences and instead reflects establishment fears that Trump will investigate, expose, and punish its criminality. The upshot of these hypotheses: Trump is winning and has consolidated his power. [..] Even the Washington Post has admitted the Russia probe is “crumbling.” Trump and Sessions know Special Prosecutor Robert Mueller won’t find much because there’s nothing there, although there may be a sacrificial offering or two to propitiate the investigatory gods.

Trump read Sessions the riot act via Twitter and a Wall Street Journal interview about not investigating Hillary Clinton, intelligence community leaks to the press, and Ukrainian efforts to sabotage his presidential campaign. He’s been roundly condemned for publicly criticizing Sessions, but here’s a speculative leap: perhaps publicly criticizing Sessions was not really what Trump was doing. Perhaps Trump was giving his attorney general political cover to pursue investigations against high-profile Democrats who cannot help Trump, sub rosa or otherwise. Investigations of Hillary Clinton, former Attorney General Loretta Lynch, Susan Rice, Samantha Power, Fusion GPS, and Debbie Wasserman Schultz would demoralize the Democrats, preoccupy and harass key players, expose criminality, and electrify Trump’s base.

Providing Sessions further cover, twenty Republican representatives have sent a letter to the Attorney General and Deputy Attorney General Rod Rosenstein demanding the appointment of a second Special Counsel to look into potentially illegal acts by Clinton, Lynch, and former FBI director James Comey. After recusing himself from the Russiagate investigation, which he knows is pointless, and being “scolded” by Trump, Sessions is now a sympathetic, squeaky-clean figure; even Democrats have expressed support. He has far more latitude to pursue the investigations his boss wants him to pursue. Most of the ensuing criticism will be directed at Trump, which will bother Trump not at all (although there will undoubtedly be answering Twitter blasts).

Trump has quietly (when Trump does anything quietly, take note) made two sea changes in US policy in Syria. At the G20 summit, he negotiated a cease fire with Vladimir Putin for southwest Syria. Last week he ended a CIA program that armed Syrian jihadists fighting Bashar al-Assad’s regime. Both changes are anathema to the US Deep State, the mainstream media, and US allies Saudi Arabia, the Gulf States, Israel, and Turkey, yet other than “rote denunciation,” they have been surprisingly docile. The latter change could presage abandonment of a pillar of US foreign and military policy since President Carter supplied arms and other aid to the mujahideen in Afghanistan during their successful fight against the Soviet Union. The US may be out of the business of arming Islamic insurgents against regimes it seeks to change.

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Another look, different from the last one.

Jeff Sessions Endorses Theft (Ron Paul)

Attorney General Jeff Sessions recently ordered the Justice Department to increase the use of civil asset forfeiture, thus once again endorsing an unconstitutional, authoritarian, and increasingly unpopular policy. Civil asset forfeiture, which should be called civil asset theft, is the practice of seizing property believed to be involved in a crime. The government keeps the property even if it never convicts, or even charges, the owner of the property. Police can even use civil asset theft to steal from people whose property was used in criminal activity without the owners’ knowledge. Some have even lost their homes because a renter or houseguest was dealing drugs on the premises behind the owners’ backs. Civil asset theft is a multi-billion dollar a year moneymaker for all levels of government.

Police and prosecutors receive more than their “fair share” of the loot. According to a 2016 study by the Institute for Justice, 43 states allow police and prosecutors to keep at least half of the loot they got from civil asset theft. Obviously, this gives police an incentive to aggressively use civil asset theft, even against those who are not even tangentially involved in a crime. For example, police in Tenaha, Texas literally engaged in highway robbery — seizing cash and other items from innocent motorists — while police in Detroit once seized every car in an art institute’s parking lot. The official justification for that seizure was that the cars belonged to attendees at an event for which the institute had failed to get a liquor license. The Tenaha police are not the only ones targeting those carrying large sums of cash.

Anyone traveling with “too much” cash runs the risk of having it stolen by a police officer, since carrying large amounts of cash is treated as evidence of involvement in criminal activity. Civil asset theft also provides an easy way for the IRS to squeeze more money from the American taxpayer. As the growing federal debt increases the pressure to increase tax collections without raising tax rates, the IRS will likely ramp up its use of civil asset forfeiture. Growing opposition to the legalized theft called civil asset forfeiture has led 24 states to pass laws limiting its use. Sadly, but not surprisingly, Attorney General Jeff Sessions is out of step with this growing consensus. After all, Sessions is a cheerleader for the drug war, and civil asset theft came into common usage as a tool in the drug war. President Trump could do the American people a favor by naming a new attorney general who opposes police state policies like the drug war and police state tactics like civil asset theft.

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“We’ll use every kind of duct tape and baling wire we can find to keep the current systems operating, and we have..”

Just Wait a Little While (Jim Kunstler)

The authorities in this nation, including government, business, and academia, routinely lie about our national financial operations for a couple of reasons. One is that they know the situation is hopeless but the consequences are so awful to contemplate that resorting to accounting fraud and pretense is preferable to facing reality. Secondarily, they do it to protect their jobs and reputations — which they will lose anyway as collapse proceeds and their record of feckless dishonesty reveals itself naturally.

The underlying issue is the scale of human activity in our time. It has exceeded its limits and we have to tune back a lot of what we do. Anything organized at the giant scale is headed for failure, so it comes down to a choice between outright collapse or severe re-scaling, which you might think of as managed contraction. That goes for government programs, military adventures, corporate enterprise, education, transportation, health care, agriculture, urban design, basically everything.

There is an unfortunate human inclination to not reform, revise, or re-scale familiar activities. We’ll use every kind of duct tape and baling wire we can find to keep the current systems operating, and we have, but we’re close to the point where that sort of cob-job maintenance won’t work anymore, especially where money is concerned. Why this is so has been attributed to intrinsic human brain programming that supposedly evolved optimally for short-term planning. But obviously many people and institutions dedicate themselves to long-term thinking. So there must be a big emotional over-ride represented by the fear of letting go of what used to work that tends to disable long-term thinking.

It’s hard to accept that our set-up is about to stop working — especially something as marvelous as techno-industrial society. But that’s exactly what’s happening. If you want a chance at keeping on keeping on, you’ll have to get with reality’s program. Start by choosing a place to live that has some prospect of remaining civilized. This probably doesn’t include our big cities. But there are plenty of small cities and small towns out in America that are scaled for the resource realities of the future, waiting to be reinhabited and reactivated. A lot of these lie along the country’s inland waterways — the Ohio, Mississippi, Missouri river system, the Great Lakes, the Hudson and St. Lawrence corridors — and they also exist in regions of the country were food can be grown.

You’ll have to shift your energies into a trade or vocation that makes you useful to other people. This probably precludes jobs like developing phone apps, day-trading, and teaching gender studies. Think: carpentry, blacksmithing, basic medicine, mule-breeding, simplified small retail, and especially farming, along with the value-added activities entailed in farm production. The entire digital economy is going to fade away like a drug-induced hallucination, so beware the current narcissistic blandishments of computer technology. Keep in mind that being in this world actually entitles you to nothing. One way or another, you’ll have to earn everything worth having, including self-respect and your next meal. Now, just wait a little while.

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Political power.

Fossil Fuel Subsidies Are A Staggering $5 Trillion Per Year (G.)

Fossil fuels have two major problems that paint a dim picture for their future energy dominance. These problems are inter-related but still should be discussed separately. First, they cause climate change. We know that, we’ve known it for decades, and we know that continued use of fossil fuels will cause enormous worldwide economic and social consequences. Second, fossil fuels are expensive. Much of their costs are hidden, however, as subsidies. If people knew how large their subsidies were, there would be a backlash against them from so-called financial conservatives. A study was just published in the journal World Development that quantifies the amount of subsidies directed toward fossil fuels globally, and the results are shocking. The authors work at the IMF and are well-skilled to quantify the subsidies discussed in the paper.

Let’s give the final numbers and then back up to dig into the details. The subsidies were $4.9 tn in 2013 and they rose to $5.3 tn just two years later. According to the authors, these subsidies are important because first, they promote fossil fuel use which damages the environment. Second, these are fiscally costly. Third, the subsidies discourage investments in energy efficiency and renewable energy that compete with the subsidized fossil fuels. Finally, subsidies are very inefficient means to support low-income households. With these truths made plain, why haven’t subsidies been eliminated? The answer to that is a bit complicated. Part of the answer to this question is that people do not fully appreciate the costs of fossil fuels to the rest of us. Often we think of them as all gain with no pain.

So what is a subsidy anyway? Well, that too isn’t black and white. Typically, people on the street think of a subsidy as a direct financial cost that result in consumers paying a price that is below the opportunity cost of the product (fossil fuel in this case). However, as pointed out by the authors, a more correct view of the costs would encompass: “..not only supply costs but also (most importantly) environmental costs like global warming and deaths from air pollution and taxes applied to consumer goods in general.” The authors argue, persuasively, that this broader view of subsidies is the correct view because they “reflect the gap between consumer prices and economically efficient prices.”

Without getting too deep into the weeds, the authors discuss both consumer subsidies (when the price paid by a consumer is below a benchmark price) and producer subsidies (when producers receive direct or indirect support which increases their profitability). The authors then quantify what benefits would be achieved if the fossil fuel subsidies were reformed. Interested readers are directed to the paper for further details, but the results are what surprised me. Pre-tax (the narrow view of subsidies) subsidies amount to 0.7% of global GDP in 2011 and 2013. But the more appropriate definition of subsidies is much larger (8 times larger than the pre-tax subsidies). We are talking enormous values of 5.8% of global GDP in 2011, rising to 6.5% in 2013.

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Just how simple it really is. If you can’t stop this, forget about it.

Bernie Sanders Tells Big Pharma: Stop Making Americans Pay Twice

While both political parties have denounced the rising cost of prescription drugs, neither Democrats nor Republicans have done much to address the problem. But this summer, a new tool to restrict the rising prices of drugs developed with taxpayer dollars has been introduced by the two U.S. senators who don’t belong to either party. The mechanism works like this: Drug manufacturers who take federal money to develop drugs must keep their U.S. prices in line with the prices they charge in other economically advanced nations — typically much lower than drug prices in the U.S. The system would prevent pharmaceutical companies from effectively double-charging U.S. consumers by using their tax money for research and then charging them some of the steepest prices in the world at the pharmacy.

Pharmaceutical companies, who pour millions of dollars into both the Democratic and Republican parties, are against the idea, which is perhaps why the fix is being pushed by Bernie Sanders of Vermont and Angus King of Maine, the only independents in congress. The U.S. has the highest level of per capita pharmaceutical spending of any nation on Earth, according to the OECD. And while Americans spend more than any other country to buy their drugs, they also spend more than any other country to develop those same drugs. In June, King successfully added an amendment to the 2018 military spending bill (still working its way through congress) that would allow the Department of Defense to take away exclusive patents from drug companies that benefitted from DoD funding if their drug price in the U.S. rises above the median price in seven foreign countries with similar economies.

Then last week, Sanders introduced legislation that would tie the prices of drugs made with government funding to costs in other countries. Unlike King’s amendment, Sanders’ bill would expand the concept beyond the DoD. The bill requires companies taking federal funds to develop drugs to enter into “reasonable pricing” agreements with the Secretary of Health and Human Services. “Under this insane system, Americans pay twice. First we pay to create these lifesaving drugs, then we pay high prices to buy those drugs,” wrote Sanders in a New York Times op-ed. “Our government must stop being pushovers for the pharmaceutical industry and its 1,400 lobbyists.”

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Soon to come: US soldiers parading in your streets. Will German and Estonian batallions appear in Kansas and Texas as well?

Call For ‘Military Schengen’ To Get NATO Troops Moving (Pol.)

European leaders have made a priority of greater military cooperation, yet the ability of NATO forces to operate in Europe is still hindered by border restrictions and mismatched infrastructure, according to uniformed commanders and EU defense ministers. While NATO has made substantial progress in surmounting legal hurdles to cross-border operations, lingering bureaucratic requirements — such as passport checks at some border crossings and infrastructure problems, like roads and bridges that can’t accommodate large military vehicles — could slow or even cripple any allied response to an emerging threat, officials warned. To lift the roadblocks, and speed coordinated military action, the Dutch defense minister, Jeanine Hennis-Plasschaert, called on EU officials to create a so-called military Schengen zone.

The idea, loosely modeled on the open-border travel zone that has covered most of Europe since 1996, has also been a long-time goal of the senior United States Army commander in Europe, Lieutenant General Ben Hodges. “We must be able to move quickly to any place where there is a threat,” Hennis-Plasschaert said in a statement announcing her proposal at a meeting of NATO defense ministers in June. NATO leaders insist they have addressed the most problematic obstacles to cross-border operations, but nonetheless welcomed the Dutch proposal as a way to raise political pressure and create a sense of urgency around further improving the “interoperability” of allied countries. Officials say the obstacles are only apparent during peacetime exercises and planning, and that during a real military emergency, NATO’s supreme allied commander for Europe — based in Mons, Belgium — would simply warn allies and deploy as needed.

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“Turkey, which has the second largest army in NATO after the United States..”

Erdogan Says Turkey To Tackle – US-Supported – Kurds In Syria (R.)

Days after a reshuffle of Turkey’s top military commanders, President Tayyip Erdogan has revived warnings of military action against Kurdish fighters in Syria that could set back the U.S.-led battle against Islamic State. Kurdish militia are spearheading an assault against the hardline militants in their Syrian stronghold Raqqa, from where Islamic State has planned attacks around the world for the past three years. But U.S. backing for the Kurdish YPG fighters in Syria has infuriated Turkey, which views their growing battlefield strength as a security threat due to a decades-old insurgency by the Kurdish PKK within in its borders. There have been regular exchanges of rocket and artillery fire in recent weeks between Turkish forces and YPG fighters who control part of Syria’s northwestern border.

Turkey, which has the second largest army in NATO after the United States, reinforced that section of the border at the weekend with artillery and tanks and Erdogan said Turkey was ready to take action. “We will not leave the separatist organization in peace in both Iraq and Syria,” Erdogan said in a speech on Saturday in the eastern town of Malatya, referring to the YPG in Syria and PKK bases in Iraq. “We know that if we do not drain the swamp, we cannot get rid of flies.” The YPG denies Turkish allegations of links with Kurdish militants inside Turkey, saying it is only interested in self-rule in Syria and warning that any Turkish assault will draw its fighters away from the battle against Islamic State which they are waging in an alliance with local Arab forces.

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Bend over. We have something for you.

Greece Accepts Resettlement of Refugees from Germany (GR)

For the first time since 2011, Germany will again begin the resettlement of refugees to Greece under the EU Dublin Regulation. Migration Policy Minister Yiannis Mouzalas confirmed on German television that Greece will accept refugees who are currently in Germany and whose first entry into the EU was from Greece. The regulation applies to all refugees entering the EU since March 2017. The Dublin Regulation determines the EU Member State responsible to examine an application for asylum seekers seeking international protection. Usually, the responsible Member State will be the state through which the asylum seeker first entered the EU.

In an interview with the German TV to be aired on Monday evening, Mouzalas says: “A few days ago, we approved a small number of refugee returns related to the Dublin Regulation, by Germany and some other EU member states. Greek asylum authorities have undertaken the implementation of the procedure. “There was pressure from EU countries to start accepting resettlements. I understand that governments want to convince their citizens that they are doing something [about the refugee crisis]. That’s why I want to help them.” Deutsche Welle reports that according to the German Ministry of Interior, up to July 31, a total of 392 applications for resettlement were filed with the Greek authorities. The German ministry adds that “the specific dates for their return to Greece depends on the Greek authorities.”

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


Fred Lyon Terrific Street, Barbary Coast, San Francisco 1947

 

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

Debt Is the Third Benjamin Franklin Certainty (Stockman)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Maine beat Illinois to it! Partial shutdown started today.

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

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

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

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Whack-a-state.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Expect Russia to react to this too, and soon.

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

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

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

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Or the Most Patriotic of Americans?

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

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

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

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

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

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

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

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

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

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Nobody takes Juncker serious anymore.

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

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

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

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

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Nov 032016
 
 November 3, 2016  Posted by at 9:46 am Finance Tagged with: , , , , , , , ,  Comments Off on Debt Rattle November 3 2016


Lewis Wickes Hine Berrie pickers, Seaford, Delaware. ’17 children and 5 elders live here’ 1910

S&P 500 Logs Longest Losing Streak Since 2011 (CNBC)
EU Plans New Rules To Cap US, UK’s £440bn Per Day Derivatives Business (Ind.)
Vancouver Home Sales Plunge 39% as New Rules Chill Market (BBG)
Clinton Foundation Case Moving Towards “Likely an Indictment” (RCP)
Obama Slams FBI Over New Hillary Clinton Emails (MJ)
Secret Recordings Fueled FBI Feud in Clinton Probe (WSJ)
Senior FBI Officials Were Told Of New Emails In Early October (WaPo)
South Korea’s Out-of-Control Presidential Crisis (CNBC)
UK High Court To Declare If Government Has Right To Trigger Brexit (G.)
Car Makers To Get More In Brexit Subsidies From UK Than They Pay Workers (R.)
Make Finance The Servant, Not The Master (Pettifor)
Western Australia: Masterclass In What Not To Do With A Resources Boom (Con.)

 

 

Long but shallow. There’s another 7 days of suspense. The next bombshell might energize the decline.

S&P 500 Logs Longest Losing Streak Since 2011 (CNBC)

The S&P 500 has fallen in seven straight sessions through Wednesday, the first time the large-cap index has done that since 2011. The last streak also came in a November, culminating with a 0.27% slip on Nov. 25. And while the market’s past can never predict its future, it is notable that the November 2011 seven-session losing streak was immediately followed by a jump of nearly 3%. Yet even amid all of the declines, the S&P has fallen less than 2.5% in the past seven sessions. To put that into context, the market has suffered a greater%age drop on two separate days this year.

And some see a bright side in all the losses. For Frank Cappelleri, a trader and technical analyst at Instinet, the losing streak is a sign that “the [S&P 500] SPX is sequentially oversold and seemingly ready for at least a counter-trend bounce.” However, he added in his Wednesday morning note that since the S&P hasn’t fallen by all that much, “the index doesn’t exactly appear washed out at this stage.” The recent market decline has come as oil has slid, and as Republican Donald Trump’s perceived chances of winning the presidential election have risen. Meanwhile, Wednesday afternoon’s Federal Reserve statement, which could have been the event of the week, delivered little that was unexpected.

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The insanity of the world of finance. “The loss of euro clearing would cost 100,000 UK jobs..”

EU Plans New Rules To Cap US, UK’s £440bn Per Day Derivatives Business (Ind.)

EU officials have discussed new laws to undermine the UK’s multi-billion pound clearing business after Brexit, London Stock Exchange chief executive, Xavier Rolet told a House of Lords Committee. Financial transactions can currently be cleared anywhere in the world and London has a dominant position in the market, processing £440 billion of trades every day and supporting 100,000 jobs. But the EU is now considering limiting the amount of euro transactions that can be processed outside the EU, so that it can force the industry to move within its borders after Brexit, according to Rolet Millions of euro-denominated transactions are currently cleared in New York, but a cap on US trades is now being considered, so that similar restrictions can be placed on London when it is outside the EU, a move that could fatally undermine the industry.

“I understand that some discussions have already originated in the EU for limiting the ability of US-based clearinghouses to clear euro-denominated securities by capping or somehow restricting their ability to engage meaningfully in their business,“ Rolet said. The loss of euro clearing would cost 100,000 UK jobs, fragment markets and force banks to tie up an extra £70 billion in “margin” or cash to back up trades. That money that could otherwise aid economic growth, Rolet said. If customers decided they cannot wait for the outcome of Britain’s trade negotiations with the EU, then the “whole engine” of clearing across all major currencies in London would be at risk, he added.

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But prices still rise.

Vancouver Home Sales Plunge 39% as New Rules Chill Market (BBG)

Vancouver home sales plunged 39% in October from a year earlier, the biggest drop since 2010, as new regulations chill Canada’s most expensive property market. Sales in the Pacific coast city fell to 2,233 in the month, from 3,646 a year earlier, the Real Estate Board of Greater Vancouver said Wednesday. That was 15% below the 10-year average for October. The slowdown follows a series of measures aimed at curbing price gains in Vancouver, which topped a list of global cities identified by UBS as most at risk of a housing bubble. The British Columbia government imposed a 15% tax on foreign buyers in August, the city plans to start taxing vacant homes next year and the federal government tightened mortgage insurance eligibility requirements on Oct. 3.

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If elected, Hillary will have two separate major investigations running against her.

Clinton Foundation Case Moving Towards “Likely an Indictment” (RCP)

BRET BAIER: Here’s the deal: We talked to two separate sources with intimate knowledge of the FBI investigations. One: The Clinton Foundation investigation is far more expansive than anybody has reported so far… Several offices separately have been doing their own investigations. Two: The immunity deal that Cheryl Mills and Heather Samuelson, two top aides to Hillary Clinton, got from the Justice Department in which it was beleived that the laptops they had, after a narrow review for classified materials, were going to be destroyed. We have been told that those have not been destroyed – they are at the FBI field office here on Washington and are being exploited. .

Three: The Clinton Foundation investigation is so expansive, they have interviewed and re-interviewed many people. They described the evidence they have as ‘a lot of it’ and said there is an ‘avalanche coming in every day.’ WikiLeaks and the new emails. They are “actively and aggressively pursuing this case.” Remember the Foundation case is about accusations of pay-for-play… They are taking the new information and some of them are going back to interview people for the third time. As opposed to what has been written about the Clinton Foundation investigation, it is expansive. The classified e-mail investigation is being run by the National Security division of the FBI. They are currently combing through Anthony Weiner’s laptop.

They are having some success – finding what they believe to be new emails, not duplicates, that have been transported through Hillary Clinton’s server. Finally, we learned there is a confidence from these sources that her server had been hacked. And that it was a 99% accuracy that it had been hacked by at least five foreign intelligence agencies, and that things had been taken from that… There has been some angst about Attorney General Loretta Lynch — what she has done or not done. She obviously did not impanel, or go to a grand jury at the beginning. They also have a problem, these sources do, with what President Obama said today and back in October of 2015… I pressed again and again on this very issue… The investigations will continue, there is a lot of evidence. And barring some obstruction in some way, they believe they will continue to likely an indictment.

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Not particularly presidential.

Obama Slams FBI Over New Hillary Clinton Emails (MJ)

President Barack Obama harshly criticized the FBI’s actions informing Congress about the discovery of new Hillary Clinton emails, suggesting to NowThisNews on Wednesday that the much-criticized letter was outside of law enforcement protocol. “We don’t operate on innuendo,” Obama said in his first remarks since the FBI’s announcement last Friday. “We don’t operate on incomplete information and we don’t operate on leaks. We operate based on concrete decisions that are made. “When this was investigated thoroughly, the last time, the conclusion of the FBI, the conclusion of the Justice Department, the conclusion of repeated congressional investigations was that she had made some mistakes but that there wasn’t anything there that was prosecutable.”

The president also reiterated his support for Clinton and urged young people not to allow the ongoing email investigation affect their votes. “I trust her, I know her,” he said. “I wouldn’t be supporting her if I didn’t have absolute confidence in her integrity and her interest in making sure that young people have a better future.” The interview comes just one day after White House Press Secretary Josh Earnest refused to defend or criticize FBI Director James Comey over the decision. Since the ambiguous letter was released on Friday, the Clinton campaign has accused Comey of improperly interfering with the election, thus benefiting her opponent. “That announcement has allowed for Donald Trump to take advantage of the absence of facts to wildly speculate and lie about Hillary Clinton,” campaign manager Robby Mook said on Monday.

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Is obstruction of FBI agents equal to obstruction of justice?

Secret Recordings Fueled FBI Feud in Clinton Probe (WSJ)

Secret recordings of a suspect talking about the Clinton Foundation fueled an internal battle between FBI agents who wanted to pursue the case and corruption prosecutors who viewed the statements as worthless hearsay, people familiar with the matter said. Agents, using informants and recordings from unrelated corruption investigations, thought they had found enough material to merit aggressively pursuing the investigation into the foundation that started in summer 2015 based on claims made in a book by a conservative author called “Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich,” these people said. The account of the case and resulting dispute comes from interviews with officials at multiple agencies.

Starting in February and continuing today, investigators from the Federal Bureau of Investigation and public-corruption prosecutors became increasingly frustrated with each other, as often happens within and between departments. At the center of the tension stood the U.S. attorney for Brooklyn, Robert Capers, who some at the FBI came to view as exacerbating the problems by telling each side what it wanted to hear, these people said. The roots of the dispute lie in a disagreement over the strength of the case, these people said, which broadly centered on whether Clinton Foundation contributors received favorable treatment from the State Department under Hillary Clinton. Senior officials in the Justice Department and the FBI didn’t think much of the evidence, while investigators believed they had promising leads their bosses wouldn’t let them pursue, they said.

These details on the probe are emerging amid the continuing furor surrounding FBI Director James Comey’s disclosure to Congress that new emails had emerged that could be relevant to a separate, previously closed FBI investigation of Mrs. Clinton’s email arrangement while she was secretary of state. [..] Amid the internal finger-pointing on the Clinton Foundation matter, some have blamed the FBI’s No. 2 official, deputy director Andrew McCabe, claiming he sought to stop agents from pursuing the case this summer. His defenders deny that, and say it was the Justice Department that kept pushing back on the investigation.

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Comey seems to have been prudent.

Senior FBI Officials Were Told Of New Emails In Early October (WaPo)

Senior FBI officials were informed about the discovery of new emails potentially relevant to the investigation of Hillary Clinton’s private email server at least two weeks before Director James B. Comey notified Congress, according to federal officials familiar with the investigation. The officials said that Comey was told that there were new emails before he received a formal briefing last Thursday, although the precise timing is unclear. The information goes beyond the details provided in the letter that Comey sent to lawmakers last week declaring that he was restarting the inquiry into whether Clinton mishandled classified material during her tenure as secretary of state. He wrote in the Friday letter that “the investigative team briefed me yesterday” about the additional emails.

[..] senior officials had been informed weeks earlier that a computer belonging to former congressman Anthony Weiner contained emails potentially pertinent to the Clinton investigation. [..] Comey did not notify Congress as soon as he learned about the emails because officials wanted additional information before proceeding, the officials said. [..] It is unclear what FBI agents have learned since discovering the emails in early October. But officials say they gained enough information from the email metadata to take the next step, seeking a warrant to review the actual emails. That legal step prompted Comey’s letter to Congress, which has made him a central figure during the stretch run of the presidential campaign. “He needed to make an informed decision, knowing that once he made that decision, he was taking it to another level,” an official said.

Soon after the investigators found the new trove of thousands of emails, they notified the separate team of FBI agents in Washington that worked on the probe into Clinton’s private email server, officials said. Comey said in July that the investigation was complete and that he would recommend to prosecutors that no charges be brought. After the agents on the Clinton case were notified in early October about the newly discovered emails, they in turn told FBI leaders about them. At that point, the leaders did not believe they had enough information to make a decision about what to do next, officials said.

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There was a time when this would have been crazier than what happens stateside.

South Korea’s Out-of-Control Presidential Crisis (CNBC)

South Korean President Park Geun-Hye, under fire in what critics are calling the nation’s biggest-ever political scandal, seems to be digging herself into a deeper hole. The President replaced her prime minister, finance minister and public safety minister on Wednesday in an attempt to contain public anger over a spiraling corruption scandal that has hit the ruling Saenuri party. But the surprise cabinet reshuffle may do more harm than good. “Despite her expectations, these snap nominations backfired. Critics angrily charged that the move is part of a strategy to maintain control and does not jive with plans being discussed to form a neutral cabinet with a prime minister empowered to dominant policymaking, with Park taking a back seat,” Scott Seaman, senior Asia analyst at Eurasia, explained in a note.

Opposition parties will now likely use their combined majority in the National Assembly to hinder Park’s attempts to install her candidates, he continued. Furthermore, Park is essentially powerless to ignore their objections given her current fragile standing, he added. Park, 64, faces calls to resign or face impeachment for allowing a close friend, Choi Soon-Sil, to interfere in state affairs. Choi reportedly had access to classified documents without security clearance and was involved in presidential decision making, local media said. Choi, 60, is also accused of embezzlement, forcing conglomerates to make massive donations to nonprofit foundations, and getting preferential treatment from banks for loans.

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Super Thursday today in Britain.

UK High Court To Declare If Government Has Right To Trigger Brexit (G.)

The lord chief justice is to deliver the high court’s momentous decision on whether parliament or the government has the constitutional power to trigger Brexit. After less than three weeks considering the politically charged case with two other senior judges, Lord Thomas of Cwmgiedd will read out a summary of their decision at 10am on Thursday to a packed courtroom in London’s Royal Courts of Justice. In order to prevent leaks of the market-sensitive ruling, which involves a large number of parties, preliminary drafts of the judgment have unusually not been sent out in advance to the lawyers. The outcome of the case, which ventures into constitutionally untested ground, will resolve whether MPs or ministers have the authority to formally inform Brussels about whether the UK intends to leave the EU.

The legal dispute focuses on article 50 of the treaty on EU, which states that any member state may leave “in accordance with its own constitutional requirements” – an undefined term that has allowed both sides to pursue rival interpretations. The arguments deployed during the three-day hearing last month appear, at the very least, to have reinforced political pressure for parliament to be given a greater role in negotiating Brexit. Whether the high court finds in favour of the claimants or Theresa May’s assertion that the prime minister has power under the royal prerogative to inform Brussels of the UK’s intention to leave, one side or the other is likely to appeal to the supreme court. However, there has been speculation that the government could decide not to appeal if it loses, calculating that enough MPs will feel bound by the result of the referendum to vote to leave the EU. There may be stiffer opposition in the House of Lords.

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What’s this other than a major step towards universal income?

Car Makers To Get More In Brexit Subsidies From UK Than They Pay Workers (R.)

Compensating carmakers in Britain for any post-Brexit tariffs on exports to Europe could see the government hand the companies more money than they need to pay the salaries of all their British workers, a Reuters analysis of corporate filings shows. Japan’s Nissan said in September it would only commit to new UK investment if it received a guarantee of compensation to offset any such tariffs. Last week, it agreed to build new models in the country after Prime Minister Theresa May assured it the government would provide support to preserve its competitiveness in the EU market after Brexit. The nature of the Nissan deal – which gave Britain a crucial corporate endorsement as it prepares for life outside the European Union – is unknown. The government said there hadn’t been a “detailed and specific” agreement on tariffs.

If Britain does not secure a free-trade deal with the EU, car makers in the country could face export tariffs of 10% – the level the EU imposes on cars imported from outside the bloc. The cost of compensating Nissan, which has £2.9 billion ($3.5 billion) of annual EU exports, would be £290 million a year. That would exceed the company’s British wage bill, which was £288 million in 2015, accounts for Nissan’s main UK operating unit show. The pattern is followed across Britain’s car-making industry. Reuters examined the accounts of eight of the biggest car exporters, including Jaguar Land Rover, Toyota, Bentley, Mini, Rolls-Royce, Aston Martin and Honda, which are all foreign-owned. Their wage bills averaged 7.5% of total operating costs and 7.7% of turnover. This suggests the cost of tariffs on vehicles exported from Britain to the continent – levied at 10% of turnover – would exceed the wages paid to British workers to build those vehicles.

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Long read by Ann Pettifor on the history of the growth paradigm, and what needs to be done now it’s dead.

Make Finance The Servant, Not The Master (Pettifor)

Before the Second World War the concept of ‘growth’ scarcely existed, as Geoff Tily explains in his PRIME essay On Prosperity, Growth and Finance. “National accounts and measures of national income (the forerunners of GDP) were devised in the 1930s, in the wake of the great depression. Policymakers and economists were preoccupied by getting the economy and financial system to function and addressing a crisis in unemployment. Later in the Second World War economic statistics were needed to try and prevent inflation, given that all resources – especially labour – were fully utilized. Then, later in the Bretton Woods era, full employment was regarded as the proper goal of economic policy-making.” With financial liberalization all this was to change.

Financiers could make extraordinary capital gains from financial speculation – far more than the average industrial capitalist could make in profits. This was largely because financiers can gamble and make gains in money markets without engaging with either the land – in the broadest sense of the word – or labour. Industrial capitalists by contrast have to engage with both land and labour. The substantial capital gains made from speculation by increasingly deregulated financiers were then pitted against the lower profits made by industrial capitalists from investment, employment and output. As financiers became more dominant, competition with industrial capitalists intensified. It is hard to pinpoint the exact timing for the shift of emphasis, but under the surface changes were underway from at least the 1950s.

The pressure on industrial capital was applied by both the finance sector, but also by friends in the economics profession, and in particular economic commentators. The latter began to reframe the key concept of levels of economic activity, and invented the term growth. Growth follows the trajectory of capital gains more closely than it follows that of more volatile profits. Capital gains – like those made from winning the lottery – can rise exponentially (until they crash). Profits rise and fall as capitalists battle the land and labour. In the UK one of the most prominent campaigners for the concept of ‘growth’ was Samuel Brittan of the Financial Times: he proudly identified himself as a ‘growthman’. At a time of full employment, he and other economists castigated the government (and industry) for what they regarded as an economy less profitable or dynamic than that seen in other countries.

To apply pressure on those active in the real economy, they had to raise the bar of economic expectations. Full employment was not a sufficient goal. It was to be abandoned. The concept of growth was subsequently adopted as the goal of all economy policy by the newly-founded OECD in 1961. In that year the organisation agreed an extraordinary fifty per cent growth target for the whole of the 1960s, as Tily explains: The aim of fixing the level of employment and output to sustainable levels had been abandoned. Instead the world had officially been set a systematic and improbable target: to chase growth. Nobody seems to have paused to consider whether growth derived as the rate of change of a continuous function was a meaningful or valid way to interpret changes in the size of economies over time.”

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Transferring back into a wasteland.

Western Australia: Masterclass In What Not To Do With A Resources Boom (Con.)

Every policymaker in Australia should be made to read Paul Cleary’s excellent analysis of the way Norway handled its boom: Trillion Dollar Baby. The experience could hardly be more different and the comparison would be laughable were it not for the fact that future generations will come to rue the folly and myopia of our current leaders. The key lesson that emerges from Cleary’s analysis is that even small states can have a big say in determining what happens to the windfall revenues booms generate – but only if they understand what is happening at present and have a plan for the long-term future of the country. Norway had both. First, they had a capable government and skilled bureaucrats (yes, they are valuable and important) who quickly realised that Norway’s oil boom had to be managed for the benefit of Norway, not the multinational oil companies.

This meant not being intimidated by powerful multinational corporations and recognising the inherent bargaining strength of national governments. You can only exploit resources where they are. Host governments can – and should – determine how they are developed. In contrast to successive state and federal governments in Australia, this is precisely what the Norwegians did. Firstly, they compelled the oil majors to build their required oil platforms in Norway, developing a world class manufacturing capability in the process. Secondly, and in another unflattering and revealing contrast to Australia, they ensured 90% of the windfall revenues derived from the oil boom in Norway remained there.

Norway’s “problem”, unlike ours, has been what to do with the astounding amounts of wealth generated as a direct consequence of its activist and enlightened policies. A third critical innovation was establishing a sovereign wealth fund. Sovereign wealth funds serve two purposes. First, they put aside the windfall revenues of today for future generations – a possibility our own leaders seem incapable of contemplating given their truncated political horizons. Second, by investing most of the wealth overseas, they put downward pressure on the domestic currency, allowing other domestic industries to survive. At a time when we are collectively waving farewell to much of the manufacturing sector, this is another sobering lesson – especially for the young who will not benefit from all that squandered wealth and may wonder where they will actually work.

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May 312015
 
 May 31, 2015  Posted by at 10:44 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle May 31 2015


Jack Allison “Utopia Children’s House, Harlem, New York.” 1938

There’s A Currency War Going On And The Fed Can’t Play (CNBC)
When Betting on QE Suddenly Goes Wrong (WolfStreet)
For The Fed, It’s The Rebound That Matters (MarketWatch)
What Bubble Vision Doesn’t Get About Q1’s Punk GDP Numbers (Stockman)
Why the Bank of Japan Can’t Stop a Sudden Collapse of the Yen (WolfStreet)
China Central Bank: We Want ‘Healthy’ Stock Market (Reuters)
What Do Falling Corporate Profits Mean With Stocks Near Their Highs? (Lyons)
Elon Musk’s Growing Empire Is Fueled By Government Subsidies (LA Times)
Economic Theory: Science Or Scam? (Hanauer)
New Arrests Coming in FIFA Corruption Probe, Says Investigator (Bloomberg)
Seymour Hersh And The Dangers Of Corporate Muckraking (Mark Ames)
Stephen Hawking: No Funding For Students With My Kind Of Condition (Guardian)
European Union Anger at Russian Travel Blacklist (BBC)
The Rebel of St. Peter’s Square (Spiegel)
‘Wanted Criminal’ Saakashvili Attempts a Napoleon as Governor of Odessa (RT)
Over 4,200 Migrants Rescued In Mediterranean In 1 Day As Crisis Grows (Reuters)
Kos Shows There Is No Escape From The Migrant Crisis (Guardian)
The Most Polluted City In The World?! (NY Times)

Emerging economies face the biggest threat from this.

There’s A Currency War Going On And The Fed Can’t Play (CNBC)

There is a currency war going on—one in which the Federal Reserve is the least able to play, said David Woo, head of global interest rates and currencies research at Bank of America Merrill Lynch, on Friday. The ECB statement during a dinner last week regarding the purchase of more bonds is a strong signal it doesn’t want the euro to go back over $1.15, said Woo during an interview with CNBC’s “Squawk on the Street.” “You could argue that the U.S. got back on the street playing that game,” explained Woo. “Now, the U.S. cannot tell others they cannot play this game.” With inflation picking up and better performance from U.S. companies, the Fed has less of a reason to get engaged in this war at the moment, said Woo.

As the deadline for a debt payment by Greece draws closer, the volatility of currencies has increased. The country is supposed to pay about €300 million to the IMF on June 5, but creditors have been worried about Greece’s ability to make the payment. Woo added that the latest data show €5.6 billion leaving the Greek banking system for elsewhere—double the March figure. He added that this might force a showdown into the end of June.

Meanwhile, Wells Fargo’s Scott Wren, also on “Squawk on the Street,” said that the volatility was creating more of a chance to buy stocks. “Volatility is going to hopefully cause more buying opportunities. Even in a worst-case scenario for Greece, which I don’t think is going to happen, they are going to Band-Aid this thing and kick it down the road,” said Wren. Woo said that his biggest worry is Asia, especially China. With the Chinese yuan one of the strongest currencies and Germany’s exposure to China, there might be some problems for the euro. “I think the euro will have an issue,” said Woo. “German exposure is more than U.S exposure to China.”

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One day, they’ll find themselves pushing on a string.

When Betting on QE Suddenly Goes Wrong (WolfStreet)

The ECB rode to the rescue. This sort of turmoil went against everything it had tried to accomplish. So it announced that it would frontload some of its bond-buying spree ahead of the summer, under the pretext that this would avoid having to buy so much debt at a time when European market players would be on vacation and nothing could get done. As far as the markets were concerned, the announcement meant an additional short-term mini-QE. It stopped the bleeding. Bonds recovered some, and yields settled down. By now, the German 10-year yield, after spiking from 0.05% to 0.77% during the weeks of turmoil, has dropped to 0.50%.

All this even though the ECB’s QE has barely begun. But it shows how these bouts of QE around the globe have perverted asset pricing mechanisms. The markets front-run QE as rumors and suggestions of QE run wild, and they’re driving up bonds and stocks in the hope of QE, as they have done in Europe, and when QE finally arrives as it did in March, stocks and bonds begin to sink. German stocks, for example, are down 7.4% from their peak in early April, after having shot up nearly 50% since October. And so central bank jawboning, rumors of QE, suggestions of QE, promises of QE, and finally QE itself work in driving up markets – until someday, they don’t. And that’s when “unexpected” turmoil sets in.

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Brilliant obfuscation: the lower the Q1 data are, the bigger the rebound can be. Even reality is just in the eye of the beholder.

For The Fed, It’s The Rebound That Matters (MarketWatch)

The Federal Reserve has already indicated that it isn’t too bothered by the weak first quarter. The key factor for the U.S. central bank going forward is the strength of the bounce back. “It’s the extent of the rebound that will be critical in determining the timing of the Fed’s first move on interest rates,” said Chris Williamson, chief economist at Markit, in a note to clients. New data from the government Friday showed that the economy got off to a weak start in 2015, shrinking at an 0.7% annual rate in the first quarter, down from the prior estimate of a tepid 0.2% increase. Bricklin Dwyer, economist at BNP Paribas, said the first quarter GDP report should give the Fed confidence that the soft patch was likely driven by temporary disruptions. What matters for the Fed is the second-quarter data.

St. Louis Fed President James Bullard on Thursday said he wanted to hike rates this year but needed “confirmation” of his hunch that the first quarter weakness wouldn’t last. Barclays said Friday its Q2 GDP tracking estimate was 2.5%. This is down from expectations earlier in the year, of second quarter growth over 3%. The Chicago PMI report also injected some concern that the economy may be struggling to move beyond the first quarter soft-patch, said Millan Mulraine at TD Securities. The index dipped back into contractionary territory, falling to 46.2 from 52.3 the month before. Fed officials will gather on June 16-17 to set policy for the next six weeks. While Fed officials have taken pains not to take a rate hike off the table at that meeting, economists don’t think policymakers will have enough data to justify a rate hike.

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“..you would think that after a recessionary plunge that was in a league all by itself that some account of that would be taken in assessing the recovery.”

What Bubble Vision Doesn’t Get About Q1’s Punk GDP Numbers (Stockman)

Promptly upon release of today’s GDP update, Steve Liesman and his Wall Street economist pals spent 10 minutes bloviating about why the negative print should be completely ignored. Herein is an essay on why it is they who should be given the heave-ho. According to Liesman & Co the GDP shrinkage reported by the BEA for Q1 was all a mistake due to winter, strikes and unseasonal seasonals. So don’t sweat the small stuff, they brayed to what remains of the CNBC audience, the US economy actually continues bounding along at a 2.5% growth rate, as it has for the entire recovery. Well, hold it right there. I am all for ignoring the quarterly jerks and flops embedded in the GDP data, too. But if you want to talk trend and context – let’s do exactly that.

And first and foremost there is no such trend as 2.5% growth. After all, Liesman and his Wall Street cronies have been cheerleaders for the Fed’s insane 80 months of ZIRP and massive QE on the grounds that extraordinary measures were needed to combat the deep economic plunge known as the Great Recession. In fact, measured from peak to trough, the latter was the worst downturn since 1950. Real GDP shrank by 4.2% compared to an average of 1.7% during the previous nine recessions, and handily topped the 2.6% decline in 1981-1982 and the 3.0% decline in 1973-1975. So you would think that after a recessionary plunge that was in a league all by itself that some account of that would be taken in assessing the recovery.

Indeed, that’s particularly pertinent in the present instance because the depth of the Great Recession was exacerbated by a violent inventory liquidation in the fall and winter quarters right after the Wall Street meltdown in September-October 2008. In fact, fully one-third of the $636 billion (2009 dollars) real GDP decline from peak to trough was accounted for by inventory liquidation; real final sales dropped by a far more modest 2.8%. Accordingly, the appropriate way to measure the trend is to remove the violent inventory swings from the numbers, and then to look at the path of real final sales after the peak – averaging in the down quarters and the subsequent rebound.

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Rate hike. “It will be the mother of all currency debasements.”

Why the Bank of Japan Can’t Stop a Sudden Collapse of the Yen (WolfStreet)

On Friday morning in Tokyo, the Nikkei stock index was up again, at 20,600, highest in 15 years. Since “Abenomics” has become a common word in December 2012, the Nikkei has soared 128% on a crummy economy, terrible government deficits, and an insurmountable mountain of government debt. This 10-day run of straight gains, or 11-day run if Friday plays out, is the longest glory streak since February 1988 when Japan was in one of the craziest bubbles the world had ever seen. The subsequent series of crashes had the net effect that the Bank of Japan became engaged in propping up the stock market not only by pushing interest rates to zero and dousing the market with money via waves of QE, but also by buying equity ETFs and J-REITs.

Prime Minister Shinzo Abe has made asset-price inflation his top priority. Under pressure from the BOJ and the government, state-controlled entities – such as the Government Pension Investment Fund with ¥137 trillion in assets – are dumping Japanese Government Bonds into the lap of the BOJ and are buying stocks with the proceeds. Foreign hedge funds have jumped into the fray, which is the hot money that can evaporate overnight. But fear not, every time the Nikkei drops 100 points or so, the BOJ starts buying, or creates the perception that it’s buying, and within minutes, stocks shoot back up. It’s part of the BOJ’s relentlessly communicated policy to inflate asset prices come hell or high water. And hell or high water may now be on the way. [..]

To keep the nation from descending to where Greece is, the BOJ will keep its iron fist on the government bond market. It will keep interest rates near zero. It will keep JGB prices inflated. And it will keep the government funded. It will do so by buying JGBs and handing out yen, no matter what. The rest is secondary – the yen and the stock market, both. So when the yen begins to crash past all jawboning, there might not be much of a floor underneath it. If Japan is lucky, there won’t be a sudden ruble-like 60% crash in the yen, on top of the 35% swoon it already experienced. Or it may come years down the road when another government is in place and when a different crew runs the BOJ. That’s the plan for those folks today. After us the deluge. But if something nevertheless triggers it in an untimely manner, or if it starts coming unglued on its own, it will get ugly. It will be the mother of all currency debasements.

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If only bloated would count as healthy.

China Central Bank: We Want ‘Healthy’ Stock Market (Reuters)

China’s central bank said on Friday it wants to see a “healthy” stock market, a day after surging Chinese shares slumped 6% in record trading volume as investors fled tighter borrowing rules. In its 2015 financial stability report, the People’s Bank of China (PBOC) warned of a slowing economy and rising debt levels, but repeated its vow to deepen China’s nascent financial market through reforms. The PBOC said in the report released online it was monitoring widely-recognised financial risks in the world’s second-biggest economy, including heavily-indebted local governments and a slowing real estate market. It did not address the dangers of China’s soaring shares, saying only that it wishes to promote a “stable” bourse. Chinese stocks have zoomed up 140% in the last 12 months.

“We will promote stable and healthy development of the stock market, and continue to expand the main board and the small-and medium boards,” the PBOC said, adding that there are plans to set up a new board on the Shanghai stock exchange. Chinese stocks, which ended flat on Friday after a volatile session, skidded earlier this week as more brokers tightened margin trading requirements and as the central bank drained cash from the money market. There are worries that China’s buoyant stock market is being powered by its looser monetary policy, at the expense of small businesses which are grappling with high real interest rates and a shortage in loans.

Even though the PBOC has cut interest rates three times in six months to stoke growth in China’s stuttering economy from a six-year low, real interest rates in China are still over 3%, Morgan Stanley said in a report this month. That is well above real rates in Japan, Europe and the United States, where borrowing costs are negative, the investment bank said. The PBOC acknowledged the problem of high borrowing cost in China, saying it would lower interest rates in a “targeted” fashion, but did not elaborate. “Downward pressure on the economy is increasing,” it said. “Some economic risks are showing up, and the overall debt level is still climbing.”

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That ticking sound.

What Do Falling Corporate Profits Mean With Stocks Near Their Highs? (Lyons)

If you’ve followed our commentary for awhile, you may have noticed that we don’t cover fundamental or economic data too often. That is for a good reason: we don’t use it, at all. Occasionally, however, a data point will cross the radar that piques our interest for whatever reason. So it is with the current state of U.S. Corporate Profits. The U.S. Bureau of Economic Analysis released the latest data today revealing that Corporate Profits (after Tax with Inventory Valuation Adjustment and Capital Consumption Adjustment) were down 9% for the 1st quarter and are now down 16% from their peak in the 3rd quarter of 2013. Perhaps we don’t run in the right circles but we haven’t heard much regarding the significance of this trend on the stock market, which continues to trade near its all-time highs.

Perhaps that’s a good thing considering we’ve found scant profitable uses for fundamental data in our investment approach (which is why we don’t use it). So we decided to take a look at it ourselves to see what effect similar historical precedents, assuming there were any, may have had on the stock market. This is what we looked for: Quarters when Corporate Profits were down at least 12% from their 2-year high, and the S&P 500 made a 2-year high at some point within the same quarter. As it turns out, there have been 21 quarters meeting that criteria since 1960.

Many of the occurrences came in clusters in 1980, 1986-1987 and 1998-2000. There were also single occurrences in 1961, 2007, 2011 and the 1st quarter of last year. Without going into great depth of analysis, one can tell by the inauspicious dates that these circumstances have not worked out well in the past. The stock market may not have rolled over immediately in every occasion (e.g., 1986, 1998, 2014), but it usually ended up paying the piper. Specifically, the average drawdown over the 2 years following these quarters was -18.6%. This compares with an average 2-year drawdown of -7.3% following all quarters since 1960.

We don’t follow economic and fundamental data too often since we’ve never found it very helpful in our investment decision-making process. At times, however, a certain data series will garner our attention. Often times, as is the case with Corporate Profits presently, it grabs our attention because it is receiving very little attention elsewhere. From just a cursory look at the current trend of falling Corporate Profits, however, it would appear to be a potential negative influence on the stock market that is trading near its all-time highs – if not immediately, then eventually.

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Pop.

Elon Musk’s Growing Empire Is Fueled By Government Subsidies (LA Times)

Los Angeles entrepreneur Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space. And he’s built those companies with the help of billions in government subsidies. Tesla Motors, SolarCity and Space Exploration Technologies, known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups. “He definitely goes where there is government money,” said Dan Dolev, an analyst at Jefferies Equity Research. “That’s a great strategy, but the government will cut you off one day.”

The figure compiled by The Times comprises a variety of government incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars. A looming question is whether the companies are moving toward self-sufficiency — as Dolev believes — and whether they can slash development costs before the public largesse ends. Tesla and SolarCity continue to report net losses after a decade in business, but the stocks of both companies have soared on their potential; Musk’s stake in the firms alone is worth about $10 billion. (SpaceX, a private company, does not publicly report financial performance.)

Musk and his companies’ investors enjoy most of the financial upside of the government support, while taxpayers shoulder the cost. The payoff for the public would come in the form of major pollution reductions, but only if solar panels and electric cars break through as viable mass-market products. For now, both remain niche products for mostly well-heeled customers. The subsidies have generally been disclosed in public records and company filings. But the full scope of the public assistance hasn’t been tallied because it has been granted over time from different levels of government. New York state is spending $750 million to build a solar panel factory in Buffalo for SolarCity.

The company will lease the plant for $1 a year. It will not pay property taxes for a decade, which would otherwise total an estimated $260 million. The federal government also provides grants or tax credits to cover 30% of the cost of solar installations. SolarCity reported receiving $497.5 million in direct grants from the Treasury Department. That figure, however, doesn’t capture the full value of the government’s support. Since 2006, SolarCity has installed systems for 217,595 customers, according to a corporate filing. If each paid the current average price for a residential system — about $23,000, according to the Union of Concerned Scientists — the cost to the government would total about $1.5 billion, which would include the Treasury grants paid to SolarCity.

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“..if paying workers more resulted in higher unemployment, we would have no restaurants in Seattle.”

Economic Theory: Science Or Scam? (Hanauer)

Noah Smith, a smart financial writer with a very good blog, wrote an article on the $15 minimum wage at Bloomberg earlier this week. The piece celebrated the fact that, finally, we’ll have some data on how the $15 minimum wage would affect jobs. Smith said he considered it a test because in theory “a higher minimum wage should cause increased unemployment.” The more I thought about it, the less sense this premise made. Noah’s article underscored two big things for me: first, the degree to which people see the evidence they want to see, and also how silly the idea of “economic theory” can be. Smith claims that we don’t know what the result of a $15 minimum wage will be. Will it kill jobs or not? But the truth is, there’s abundant and overwhelming evidence that this theory is wrong, and that higher minimum wages don’t hurt employment.

The evidence is there; you just have to choose to see it. Let’s just look in my own back yard for an example of that evidence. Washington State has had the highest minimum wage in the nation for several years—at $9.47, it’s a full 30% more than the federal minimum of $7.25. Washington’s unemployment rate of 5.5% isn’t the best in the country, but it’s not the worst, either. In fact, it perfectly matches the national rate. But Seattle was until recently the fastest growing big city in the country. And speaking of evidence, the first part of the $15 minimum wage rollout was successfully implemented in April, and unemployment in our county promptly plummeted to 3.3%.

An even more dramatic example of the goofiness of this so-called “economic theory” is the impact of the wages of tipped workers on the restaurant industry. In Washington, these workers earn at least $9.47 plus tips, a whopping 440% more than the federal tipped minimum of $2.13 plus tips. Despite the predictions of “economic theory,” and despite the warnings from the National Restaurant Association that eliminating the tip credit would cause food armageddon, Seattle has one of the most robust restaurant scenes in the USA. Why? Because when restaurants pay restaurant workers enough so that even they can afford to eat in restaurants, it’s really good for the restaurant business. If economic “theory” were correct, if paying workers more resulted in higher unemployment, we would have no restaurants in Seattle.

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Hornets nest.

New Arrests Coming in FIFA Corruption Probe, Says Investigator (Bloomberg)

The U.S. investigation of corruption in soccer’s governing body is moving to a new phase that will bring criminal charges against more people, the Internal Revenue Service’s chief investigator said in an interview. How the case develops hinges in part on the fate of nine FIFA officials and five sports marketing executives charged in a racketeering and bribery indictment unsealed May 27, said Richard Weber, chief of the IRS Criminal Investigation Division. The prosecution, which has garnered worldwide attention, came two days before FIFA re-elected its embattled president, Sepp Blatter, 79, for another four-year term. “It’s probably hard to say who is on the list for the next phase and the timing of that,” Weber said. “I’m confident in saying that an active case is ongoing, and we anticipate additional arrests, indictments and/or pleas.”

The IRS joined the Federal Bureau of Investigation and U.S. prosecutors in Brooklyn, New York, in building a case alleging sports-marketing executives paid more than $150 million in bribes and kickbacks over 24 years for media and marketing rights to soccer tournaments. Prosecutors charged Jeffrey Webb and Jack Warner, the current and former presidents of soccer’s governing body for North America, Central America and the Caribbean. They secured guilty pleas from Charles Blazer, 70, the group’s former general secretary; Jose Hawilla, a Brazilian sports marketing executive, who agreed to forfeit $151 million; and Warner’s two sons, Daryll and Daryan. “A lot depends on how the case unfolds from this point forward, depending on if other defendants decide to cooperate, whether or not other witnesses come forward based upon the allegations in the indictment,” Weber said.

“There are a lot of factors beyond our control, so it’s hard to put a specific timeframe on it,” he said. “But we do have evidence that we’re already developing and working on. It depends on how other pieces of the puzzle come together.” The IRS entered the case in 2011 when a Los Angeles-based agent, Steven Berryman, began a tax investigation of Blazer, Weber said. Blazer lived in a Trump Tower apartment, flew on private jets, dined at the world’s finest restaurants and hobnobbed with celebrities and world leaders. His blog, “Travels with Chuck Blazer and his Friends,” featured pictures of Blazer with Hillary Clinton, Nelson Mandela and Prince William, among others. Blazer, now fighting cancer, drew the IRS into FIFA, Weber said. In late 2011, the IRS joined the FBI, which was separately probing FIFA.

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Gulf and Western and Mario Puzo.

Seymour Hersh And The Dangers Of Corporate Muckraking (Mark Ames)

[..] it’s a wonder that Hersh and his collaborator on the Korshak articles, Jeff Gerth (now at ProPublica), didn’t find themselves in the obit pages shortly afterwards, their careers tragically cut short in mysterious car crashes or suicide overdoses. . . . Instead, Hersh smelled blood: the Korshak articles opened his eyes to a company that was, in the 1970s, the symbol of aggressive, shady corporate power: Gulf & Western. Most people have probably forgotten Gulf & Western, once considered the most aggressively acquisitive conglomerate in the US, so aggressive that even Wall Street nicknamed the company “Engulf & Devour” (immortalized as the evil corporation in Mel Brooks’ “Silent Movie”).

G&W’s best known subsidiary was Paramount Pictures, which Gulf & Western bought in the mid-1960s during its massive acquisition spree, underwritten by easy money from banking giants Chase Manhattan and Manufacturers Hanover. Under Gulf & Western, Paramount made some classic films including Chinatown, The Godfather, Airplane!, and Three Days of the Condor. G&W also made the career of future media tycoon Barry Diller, who was named Paramount’s CEO and chairman in 1974 and served there for a decade. Mob attorney Korshak was so integral to Gulf & Western’s Paramount subsidiary, he was known as the film company’s “consigliere,” and rumored to be the model for Robert Duvall’s consigliere character in Paramount’s “The Godfather.”

Two years after acquiring Paramount in 1968, G&W pulled off a mind-boggling transaction with notorious Sicilian mafia financier Michele Sindona, who oversaw the mafia’s global heroin money laundering operations, managed the Vatican’s global portfolio (earning the nickname “God’s banker”), and helped the CIA move money around the globe. Somehow, Gulf & Western managed to exchange reams of worthless commercial paper in a broke subsidiary, Commonwealth United, at a vastly inflated price in exchange for a 10.5% stake in Sindona’s investment empire, Societa General Immobilaire — which was followed by another shady transaction giving half of Paramount Studio’s movie lot to Sindona’s mafia bank.

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What did the people pay for their education who now cut funding for the next generation?

Stephen Hawking: No Funding For Students With My Kind Of Condition (Guardian)

World-renowned physicist and author Stephen Hawking has spoken of fears that a gifted academic with a condition as serious as his own would not be able to flourish in today’s tough economic times. The 73-year-old, Britain’s highest-profile scientist who found fame with a new audience following the release of award-winning film The Theory Of Everything, expressed the concerns at an event to celebrate his 50th year as a fellow at the University of Cambridge’s Gonville and Caius college. He praised the college for supporting him throughout the progression of motor neurone disease, allowing him to focus on his groundbreaking work. But, speaking before an invited audience at the college, he added: “I wonder whether a young ambitious academic, with my kind of severe condition now, would find the same generosity and support in much of higher education. “Even with the best goodwill, would the money still be there? I fear not.”

Although Hawking did not elaborate on his comments, he has previously raised concerns about cuts to government funding for research budgets. Seven years ago he warned that £80m of grant cuts threatened Britain’s international standing in the scientific community, saying: “These grants are the lifeblood of our research effort; cutting them will hurt young researchers and cause enormous damage both to British science and to our international reputation.” His comments come at a time when universities continue to lobby for sufficient resources. Speaking earlier this month, Wendy Platt, director general of the Russell Group, which represents the leading research universities, said: “The new government must ensure our universities have sufficient funding to carry out cutting-edge research and provide excellent teaching to students.”

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Because we can ban Russians, but they can’t ban us.

European Union Anger at Russian Travel Blacklist (BBC)

The European Union has responded angrily to Russia’s entry ban against 89 European politicians, officials and military leaders. Those banned are believed to include general secretary of the EU council Uwe Corsepius, and former British deputy prime minister Nick Clegg. Russia shared the list after several requests by diplomats, the EU said. The EU called the ban “totally arbitrary and unjustified” and said no explanation had been provided. Many of those on the list are outspoken critics of the Kremlin, and some have been turned away from Russia in recent months. The EU said that it had asked repeatedly for the list of those banned, but nothing had been provided until now. “The list with 89 names has now been shared by the Russian authorities.

We don’t have any other information on legal basis, criteria and process of this decision,” an EU spokesman said on Saturday. “We consider this measure as totally arbitrary and unjustified, especially in the absence of any further clarification and transparency,” he added. Swedish Foreign Minister Margot Wallstrom said the move did not “contribute to increasing the trust of Russian actions” The list of those barred from Russia has not been officially released, although what appears to be a leaked version (in German) is online. A Russian foreign ministry official would not confirm the names of those barred, but said that the ban was a result of EU sanctions against Russia.

“Why it was precisely these people who entered into the list… is simple – it was done in answer to the sanctions campaign which has been waged in relation to Russia by several states of the European Union,” the official, who was not named, told Russian news agency Tass. The official said Moscow had previously recommended that all diplomats from countries that imposed sanctions on Russia should check with Russian consular offices before travelling to see if they were banned. “Just one thing remains unclear: did our European co-workers want these lists to minimise inconveniences for potential ‘denied persons’ or to stage another political show?” he said.

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Long article about the frictions Francis allegedly causes.

The Rebel of St. Peter’s Square (Spiegel)

When Pope Francis, otherwise known as Jorge Mario Bergoglio, entered St. Peter’s Basilica at 10 a.m. on Pentecost Sunday for the Holy Mass, he had been in office for 797 days. Seven-hundred-ninety-seven days in which he has divided the Catholic rank-and-file into admirers and critics. At time during which more and more people have begun to wonder if he can live up to what he seems to have promised: renewal, reform and a more contemporary Catholic Church. Francis has had showers for homeless people erected near St. Peter’s Square, but has at the same time also spent millions on international consultants. He brought the Vatican Bank’s finances into order, but created confusion in the Curia. He has negotiated between Cuba and the United States, but also scared the Israelis by calling Palestinian President Mahmoud Abbas an “angel of peace.”

This pope is much more enigmatic than his predecessor – and that is becoming a problem. Right up to this day, many people have been trying to determine Francis’ true intentions. If you ask cardinals and bishops, or the pope’s advisors and colleagues, or veteran Vatican observers about his possible strategy these days – the Pope’s overarching plan – they seem to agree on one point: The man who sits on the Chair of St. Peter is a notorious troublemaker. Like a billiard player who nudges the balls and calmly studies the collisions during training, Francis is getting things rolling in the Vatican. His interest in experimentation may stem from his past as a chemical engineer. He makes decisions like Jesuit leaders – after thorough consultation, but ultimately on his own.

The Francis principle has a workshop character to it, with processes more important than positions. Traditional Catholics see things exactly the other way around from Bergoglio, the Jesuit, and this is creating confusion right up to the highest circles of the Vatican. People want to know where the pope is heading.

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Saakashvili had been ‘hiding’ in New York before being handed a Ukrainian passport. WIth Georgia on his mind.

‘Wanted Criminal’ Saakashvili Attempts a Napoleon as Governor of Odessa (RT)

Petro Poroshenko’s decision to appoint Georgia’s disgraced former President as Governor of the Odessa region just might be his most bizarre move yet. Mikhail Saakashvili is a wanted criminal suspect in his homeland. When the pro-Euromaidan activist Maxim Eristavi tweeted on Friday that Mikhail Saakashvili was to become Odessa’s new Governor, the Twittersphere didn’t seem to know whether shock or amusement was the most appropriate reaction. However, on closer inspection, the move isn’t such a surprise after all. There are myriad reasons why Saakhasvili would find Odessa’s top job attractive and equally as many why Poroshenko is most likely delighted to send him there.

It’s common knowledge that Ukraine is a tragically divided land, but Odessa is split like no other city in the country. 150 years ago, Odessa was one of Europe’s most vibrant destinations, at a time when it was a multi-ethnic smorgasbord of Russians, Jews, Greeks, Italians and Albanians. In fact, it even had two French governors – Duc De Richelieu and Count Andrault De Langeron. So famed was Odessa that in 1869, the legendary American writer, Mark Twain, predicted that it would become “one of the great cities of the old world.” Russia’s national poet Alexander Pushkin wrote of the Black Sea Pearl: “the air is filled with all Europe, French is spoken and there are European papers and magazines to read.” By 1897, 37%% of the city’s population was Jewish.

Post World War II, the Russian (largely to Moscow and Leningrad) and Jewish (mainly to Israel and the USA) elite moved out and the Soviets moved in Ukrainian villagers to replace them. The glory days have long since passed. Riddled with corruption, in the 21st century, Odessa is an extremely melancholic and economically moribund city better known for mafia activity and sex tourism (Odessa Dreams by the Guardian’s Shaun Walker is a useful read on the latter subject), than high culture. Despite its rich history, and striking Italianate architecture, any right-thinking visitor would find the place rather mournful.

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There are thousands a day now. When will Europe start shooting them?

Over 4,200 Migrants Rescued In Mediterranean In 1 Day As Crisis Grows (Reuters)

More than 4,200 migrants trying to reach Europe have been rescued from boats in the Mediterranean in last 24 hours, the Italian coastguard said on Saturday. In some of the most intense Mediterranean migrant traffic of the year, a total of 4,243 people have been saved from fishing boats and rubber dinghies in 22 operations involving ships from nations including Italy, Ireland, Germany, Belgium and Britain. On Friday the Italian navy said 17 dead bodies had been found on one of the boats off Libya. Details of the nationalities of the victims and how they died have not yet been released. The bodies and more than 200 survivors will be brought to the port of Augusta in eastern Sicily aboard the Italian navy corvette Fenice later on Saturday, the coastguard said.

Migrants escaping war and poverty in Africa and the Middle East this year have been pouring into Italy, which has been bearing the brunt of Mediterranean rescue operations. Most depart from the coast of Libya, which has descended into anarchy since Western powers backed a 2011 revolt that ousted Muammar Gaddafi. Calm seas are increasingly favoring departures as warm spring weather sets in. Last month around 800 migrants drowned off Libya in the Mediterranean’s most deadly shipwreck in living memory when their 20-metre long fishing boat capsized and sank. That spurred the European Union to agree on a naval mission to target gangs smuggling migrants from Libya, but a broader plan to deal with the influx is in doubt due to a dispute over national quotas for housing asylum seekers.

The EU plan to disperse 40,000 migrants from Italy and Greece to other countries met with resistance this week, with Britain saying it would not participate and some eastern countries calling for a voluntary scheme. Around 35,500 migrants arrived in Italy from the beginning of the year up to the first week of May, the UN refugee agency estimated, a number which has swelled considerably since. About 1,800 are either dead or missing. Most of those rescued on Friday and Saturday are expected to reach ports around southern Italy during the weekend. The British naval vessel HMS Bulwark offloaded more than 740 early on Saturday at the southeastern Italian port of Taranto. More than 200 migrants arrived at the Calabrian port of Crotone in south-west Italy on board the Belgian navy ship Godetia.

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They will keep coming. Move over and get used to it.

Kos Shows There Is No Escape From The Migrant Crisis (Guardian)

In the face of characteristic warnings (“misguided sentimentalism”) from the Daily Mail of 1938, some thousands of refugees were none the less allowed into Britain before the second world war, with 15,000 Jewish children arriving on the Kindertransport trains orchestrated by Sir Nicholas Winton. As well as finding foster parents, he had to raise £50 per head to pay for their eventual departure. The former prime minister, Stanley Baldwin, launched another fund to help refugees who needed “a hiding place from the wind, a covert from the tempest”. Margaret Thatcher’s family was among those who took in a refugee. “The honour of our country is challenged,” Baldwin said, in the years before Britons became so agitated, as in Kos, about correct refugee appearance.

But as much as they deserve international ridicule and disgust, the tales of holidaymakers’ “nightmares”, and pictures of studiously averted faces, are no more shame-inducing than Britain’s official approach to the migrant crisis, which they could not more vividly encapsulate. Our new government also averts its eyes from the hordes of displaced, regardless of their various origins and claims, and clearly has no truck with the sort of idealistic bilge once emitted by Winton and Baldwin. Nor with the principles that later made room – in an unenthusiastic Britain – for 28,000 Ugandan Asians and 19,000 Vietnamese boat people.

Rather, when the country’s honour is challenged, Cameron’s response appears to be modelled on the lines of the Sun columnist who described all the Mediterranean migrants – half of whom, says the UNHCR, are fleeing war and persecution – as “cockroaches”. After 46,000 Mediterranean migrants arrived in the first four months of this year, and more than 1,750 died or went missing, one of Cameron’s first acts, as prime minister, was to opt out of an EU proposal to allocate refugees evenly among member states. To date, Britain has formally resettled 187 refugees from Syria, a number that might be just, fractionally less inexcusable if it were accompanied by any inclination to discover and rescue eligible asylum seekers before thousands more are abused, cheated and drowned by smugglers.

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If this is not scary enough for you…

The Most Polluted City In The World?! (NY Times)

When I became a South Asia correspondent for The New York Times three years ago, my wife and I were both excited and prepared for difficulties – insistent beggars, endemic dengue and summertime temperatures that reach 120 degrees. But we had little inkling just how dangerous this city would be for our boys. We gradually learned that Delhi’s true menace came from its air, water, food and flies. These perils sicken, disable and kill millions in India annually, making for one of the worst public health disasters in the world. Delhi, we discovered, is quietly suffering from a dire pediatric respiratory crisis, with a recent study showing that nearly half of the city’s 4.4 million schoolchildren have irreversible lung damage from the poisonous air.

For most Indians, these are inescapable horrors. But there are thousands of others who have chosen to live here, including some trying to save the world, others hoping to describe it and still others intent on getting their own small piece of it. It is an eclectic community of expatriates and millionaires, including car executives from Detroit, tech geeks from the Bay Area, cancer researchers from Maryland and diplomats from Dublin. Over the last year, often over chai and samosas at local dhabas or whiskey and chicken tikka at glittering embassy parties, we have obsessively discussed whether we are pursuing our careers at our children’s expense.

Foreigners have lived in Delhi for centuries, of course, but the air and the mounting research into its effects have become so frightening that some feel it is unethical for those who have a choice to willingly raise children here. Similar discussions are doubtless underway in Beijing and other Asian megacities, but it is in Delhi – among the most populous, polluted, unsanitary and bacterially unsafe cities on earth – where the new calculus seems most urgent. The city’s air is more than twice as polluted as Beijing’s, according to the World Health Organization. (India, in fact, has 13 of the world’s 25 most polluted cities, while Lanzhou is the only Chinese city among the worst 50; Beijing ranks 79th.)

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May 192015
 
 May 19, 2015  Posted by at 10:04 am Finance Tagged with: , , , , , , , , , ,  


Harris&Ewing Car interior. Washington & Old Dominion R.R. 1930

We Are Now Entering The Terminal Phase Of The Global Financial System (Stockman)
Bank Of America Is Forecasting A ‘Scary Summer’ For Stock Market (MarketWatch)
Pay Bankers No More Than Civil Servants, Says Ex-Cameron Strategist (Guardian)
Fossil Fuel Companies Get $10 Million A Minute In Subsidies: IMF (Guardian)
UK Inflation Rate Below Zero for First Time Since 1960 (Bloomberg)
As The UK Has Discovered, There Is No Postindustrial Promised Land (Guardian)
The End of Meaningful Work: A World of Machines and Social Alienation (Drew)
Varoufakis: Deal With Creditors ‘A Matter Of One Week’ (Bloomberg)
Greece Sends Reform Proposals For Lenders’ Scrutiny (Kathimerini)
Juncker Steps In With Greek Rescue As Talks Reach ‘Final Stages’ (Telegraph)
Tsipras: Relaunch Of State Broadcaster ERT ‘Victory Of Democracy’ (Kathimerini)
Every Day Without A Deal Costs Greece €22.3 Million, 600 Jobs (Kathimerini)
China’s Lodestar Is Not Reform But Avoiding Chaos (Reuters)
China Corruption Purge Snares 115 State Owned Enterprise ‘Tigers’ (FT)
How China’s ‘Insane’ Rally Could Grind To A Halt (CNBC)
Ratings Agency Fitch To Downgrade Many European Banks (Reuters)
‘We Must Resist Corporations’: Le Pen Targets TTIP Deal In New Campaign (RT)
Debt-Choked Puerto Rico at Fiscal Brink as Bond Buyers Pull Back (Bloomberg)
Flamboyant Tycoon Ready To Revitalize Quebec’s Separatists (Guardian)
97% of Britain’s Wildflower Meadows Have Gone (Guardian)

“The financial inflation is obviously the great bubble that afflicts the entire financial system of the world. It’s becoming increasingly unstable and it will eventually collapse.”

We Are Now Entering The Terminal Phase Of The Global Financial System (Stockman)

Today David Stockman, the man President Ronald Reagan called upon along with Dr. Paul Craig Roberts to help save the United States from disaster in 1981, warned King World News that we are now entering the “terminal phase” of the global financial system that will end in total collapse. Eric King: “David, I wanted to get your thoughts on gold in the midst of this big deflation you think is in front of us. When you look at the collapse of 2008 – 2009, gold was one of the best performing asset classes. Gold went down but it went down much less relative to virtually everything else. Contrast that to 1973 – 1974, where we had a 47% stock market collapse. But during that time we had skyrocketing gold and silver. What’s in front of us because it looks like gold and silver may be ending a 4 year bear market and ready for a 1973 – 1974-style up-move?”

David Stockman: “Yes. I think the two periods are quite different. Although at the bottom it’s central bank errors that underlie each. But remember that in the 1970s we had just finally exited a semi-stable Bretton Woods Gold Exchange Standard system. There still was, at the end of the day, an anchor on the central banks that was thrown overboard by Nixon in 1971…. “So the first go-round was a rip-roaring price inflation because there had not yet been enough time under the fiat money and balance sheet expansion by the central banks to create excess capacity in the world industrial system. So as the boom in demand took off, commodity prices soared. That fed into domestic costs and labor wages in particular. There weren’t a million cheap workers coming out of the rice paddies in China yet because it was still in the Dark Ages of Mao and not part of the world economy.

And so you had a classic inflation blowoff and flight to gold in the 1970s as a result of that initial money printing cycle. Now, I think 40 years later central banks are erring to much greater extent but the cycle is different. We have now created massive excess industrial shipping, mining and manufacturing capacity in the world. Therefore we don’t have a short-run consumer price blowoff. We still have massive cheap labor in the world and so therefore we don’t have a wage price spiral. The result is that all of the massive stimulus from the central banks has gone into the financial inflation, not goods and services. The financial inflation is obviously the great bubble that afflicts the entire financial system of the world. It’s becoming increasingly unstable and it will eventually collapse. And when it does I think it will mark the complete failure of a monetary system that has basically been metastasizing since 1971.

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“.. investors are trapped in this “Twilight Zone”—the transition period between the end of quantitative easing and the first rate hike by the Fed..”

Bank Of America Is Forecasting A ‘Scary Summer’ For Stock Market (MarketWatch)

Investors might want to add a little cash and some gold to their portfolio’s summer outfit. So say analysts at Bank of America Merrill Lynch, who are forecasting a grim summer for stocks this year. In other words, it might be wise to apply ample dollops of market-correction block in addition to any sunscreen you might wear. While falling short of calling for an outright bear market, which needs a rise in interest rates and a decline in earnings per share, Bank of America is painting a pretty ugly picture for investors over the next several months. The Wall Street firm warns that the market will see a scary summer because investors are trapped in this “Twilight Zone”—the transition period between the end of quantitative easing and the first rate hike by the Fed, as it tries to normalize its fiscal policy.

In the interim, investors can expect mediocre returns, volatile trading, correlation breakdowns and flash crashes, says chief investment strategist Michael Hartnett. Harnett advises reducing risk rather than maximizing return for the midpoint of the year, saying it could be a “lose-lose” summer for risk assets. On the one hand, broad economic trends may improve and the Fed may get to raise rates for the first time in about a decade, which may cause volatility at least temporarily. On the other hand, “more ominously for consensus positioning, the macro doesn’t recover, in which case [earnings-per-share] downgrades drag risk-assets lower,” the Bank of America analyst says.

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Bright view: “The goal here is to create a much more secure financial system where you don’t have these giant companies that pose a threat to the whole economy.”

Pay Bankers No More Than Civil Servants, Says Ex-Cameron Strategist (Guardian)

David Cameron’s former strategy guru Steve Hilton has suggested bankers should be paid no more than senior civil servants as they rely on the implicit backing of the taxpayer. Hilton, who has been working as an academic in the US, floated the idea in an interview with the BBC. He is in the UK promoting his book, More Human, which argues that ordinary people feel shut out of policy-making and increasingly frustrated with the “obscene” pay of those at the very top of companies, which can lead to a dangerous anti-business mood. “We should all be pro-business because it is in all our interests that business succeeds,” he said. “The question is: what kind of business do we want to see?”

Capping pay could be an incentive for the banks to reform, meaning “they might decide to split themselves up or we could do that forcibly”, he said. “The goal here is to create a much more secure financial system where you don’t have these giant companies that pose a threat to the whole economy.” Hilton also called for the competition authorities to be much tougher in challenging dominant companies in a market. “I think the competition authorities need to be much more aggressive generally, and specifically where you have a concentration of power,” he said. “They should be using their powers to make the market more competitive. Now whether that is breaking them up or other means is for others to debate. The system ought to be geared to help the insurgents and not to protect the insiders.”

Hilton, who had a hippyish reputation for wandering around Downing Street in bare feet, is giving a talk this week expanding on his views. He is said to remain close to the prime minister but some of his remarks may be seen as a rebuke to Cameron’s membership of an elite Westminster class. In an article for the Sunday Times, Hilton launched a critique of an “insular ruling class” in which too many of the people who make decisions go to the same dinner parties and send their children to the same schools. “Our democracies are increasingly captured by a ruling class that seeks to perpetuate its privileges,” Hilton wrote. “Regardless of who’s in office, the same people are in power. It is a democracy in name only, operating on behalf of a tiny elite no matter the electoral outcome.”

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Incredible. But not surprising.

Fossil Fuel Companies Get $10 Million A Minute In Subsidies: IMF (Guardian)

Fossil fuel companies are benefitting from global subsidies of $5.3tn a year, equivalent to $10m every minute of every day, according to a startling new estimate by the International Monetary Fund. The IMF calls the revelation “shocking” and says the figure is an “extremely robust” estimate of the true cost of fossil fuels. The $5.3tn subsidy estimated for 2015 is greater than the total health spending of all the world’s governments. The vast subsidy derives largely from polluters not paying the costs imposed on governments by the burning of coal, oil and gas. These include the harm caused to local populations by air pollution as well as to people across the globe affected by the floods, droughts and storms being driven by climate change.

Lord Nicholas Stern, an eminent climate economist at the London School of Economics, said: “This very important analysis shatters the myth that fossil fuels are cheap by showing just how huge their real costs are. There is no justification for these enormous subsidies for fossil fuels, which distort markets and damages economies, particularly in poorer countries. Stern said that even the IMF’s vast subsidy figure was a significant underestimate: “A more complete estimate of the costs due to climate change would show the implicit subsidies for fossil fuels are much bigger even than this report suggests.”

The IMF, one of the world’s most respected financial institutions, said that ending the subsidies to fossil fuels would cut global carbon emissions by 20%. That would be a giant step towards taming global warming, an issue on which the world has made little progress to date. Ending the subsidies would also slash the number of premature deaths from outdoor air pollution by 50% – about 1.6m lives a year. Furthermore, the IMF said the resources freed by ending fossil fuel subsidies could be an economic “game changer” for many countries, by driving economic growth and poverty reduction through greater investment in infrastructure, health and education and also by cutting taxes that restrict growth.

Another consequence would be that the need for subsidies for renewable energy – a relatively tiny $120bn a year – would also disappear, if fossil fuel prices reflected the full cost of their impacts. “These [fossil fuel subsidy] estimates are shocking,” said Vitor Gaspar, the IMF’s head of fiscal affairs and former finance minister of Portugal. “Energy prices remain woefully below levels that reflect their true costs.” “When the [$5.3tn] number came out at first, we thought we had better double check this!” said David Coady, who heads the IMF’s fiscal affairs department. But the broad picture of huge global subsidies was “extremely robust”, he said. “It is the true cost associated with fossil fuel subsidies.”

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Amid the confusing use of the term ‘inflation’ for any and all pirce rises, the takeaway here is that the British people spend less.

UK Inflation Rate Below Zero for First Time Since 1960 (Bloomberg)

Britain’s inflation rate fell below zero for the first time in more than half a century, as the drop in food and energy prices depressed the cost of living. Consumer prices fell 0.1% from a year earlier, the Office for National Statistics said in London on Tuesday. Economists had forecast the rate to be zero, according to the median of 35 estimates in a Bloomberg News survey. Core inflation dropped to 0.8%, the lowest since 2001. With inflation so far below the Bank of England’s 2% target, policy makers are under little pressure now to raise the key interest rate from a record-low 0.5%.

Governor Mark Carney said last week that any period of falling prices will be temporary and an expected pickup in inflation at the end of the year means the next move in borrowing costs is likely to be an increase. “Inflation is likely to remain close to zero in the near term before starting to trend up gradually from the third quarter,” said Howard Archer, an economist at IHS Global Insight in London. “Nevertheless, inflation is still only seen reaching 1% by the end of 2015.”

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We are all discovering that.

As The UK Has Discovered, There Is No Postindustrial Promised Land (Guardian)

Anyone puzzled by Scotland’s increasing disaffection should take a look at a book called British Enterprise. Written by Alexander Howard and Ernest Newman, and published in 1952, the immediate afterglow of the festival of Britain, it consisted of short descriptions of each of more than 100 then world-beating British manufacturing companies. It strikingly illustrates how much more geographically balanced the British economy was in those days. In common with latter-day Germany, every region of 1950s Britain had plenty of industrial prowess to boast of. The Midlands had the British car industry, the world’s second-largest by total output and No 1 in exports.

Wales had toys, steel, and domestic appliances; Nottingham had bicycles; Newcastle and Belfast led the world in key areas of heavy engineering; and, of course, Lancashire had cotton. Then there was Scotland. Its roll-call of exporting titans included Renfrew-based Babcock and Wilcox, which made boilers for the world’s power stations. Other major Scottish exporters included North British Locomotive and the William Beardmore castings company. In Dundee there was National Cash Register’s major British subsidiary and in Kirkcaldy the Nairn linoleum company. The list went on and on, and at the top was the John Brown company. Although then one of the world’s most technically advanced manufacturers, John Brown is largely forgotten today.

Its products, however, are not. They included the Lusitania, HMS Repulse, the Queen Mary, the Queen Elizabeth, the QE2 and others. John Brown was the cornerstone of a Clydebank shipbuilding industry that built nearly a third of the world’s ships. All this was before the coming of postindustrialism, a superficially attractive but fundamentally disastrous intellectual fad. Espoused by London-based elites in the 1970s and powerfully championed by Margaret Thatcher in the 1980s, postindustrialism postulates that sophisticated states no longer need manufacturing. Instead they should promptly move to a new promised land of postindustrial services.

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And this is why there is no postindustrial promised land: meaningful work is disappearing. We don’t even know what gives work meaning anymore.

The End of Meaningful Work: A World of Machines and Social Alienation (Drew)

Many activists are clamoring for a higher minimum wage. That’s an admirable goal, but is that where the worst problem is? Even at the abysmally low wages of the present moment, we still have 938,000 people being turned away from McDonald’s because there aren’t enough McJobs. The real problem is the lack of meaningful work. In a world of machines and social alienation, meaningful work is as scarce as water in the drought-stricken California Central Valley. One cause of the employment crisis is relentless outsourcing to foreign countries. However, even more insidious has been the replacement of human workers by machines. For hundreds of years, the Protestant work ethic lauded hard work and efficiency as ideals to strive for. It’s not easy to object to those principles.

But what happens when efficiency means eliminating humans? It’s doubtful the early Protestants ever imagined that could be a possibility. Even up to the present day, many view new technology and efficiency as the main drivers of human progress. For awhile, it seemed like this was indisputable. In his book Rise of the Robots, Martin Ford describes the 25 years after World War II as the “golden age” of the American economy. Productivity, employment, and wages were increasing in synchrony. As with many trends, economists assumed they would continue indefinitely. It was the glorious free market at work. Then it all came crashing down at the turn of the century. This time, it really is different. The shift happened when machines transformed from mere tools to actual workers.

Martin Ford explained, “In 1998, workers in the US business sector put in a total of 194 billion hours of labor. A decade and a half later, in 2013, the value of the goods and services produced by American businesses had grown by about $3.5 trillion after adjusting for inflation – a 42% increase in output. The total amount of human labor required to accomplish that was…194 billion hours. Shawn Sprague, the BLS economist who prepared the report, noted that ‘this means that there was ultimately no growth at all in the number of hours worked over this 15-year-period, despite the fact that the US population gained over 40 million people during that time, and despite the fact that there were over thousands of new businesses established during that time.'”

If this trend continues a few more years, it will be two lost decades, which means an entire generation has gone by with no net new jobs created. This might be somewhat permissible if the population had stagnated or declined, but with 40 million new people, it sets the stage for a national disaster. It is truly a new era. Ford confirmed, “There has never been a postwar decade that produced less than a 20% increase in the number of available jobs. Even the 1970s, a decade associated with stagflation and an energy crisis, generated a 27% increase in jobs. This new reality is nothing less than the end of progress and the Protestant work ethic. Efficiency can no longer be held up as something that is unambiguously good. The Protestants were wrong. There is something much more important than efficiency: survival.

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Bold statement. And this morning, Labour Minister Panos Skourletis said on Greek TV: “De facto, in the coming days.”

Varoufakis: Deal With Creditors ‘A Matter Of One Week’ (Bloomberg)

Greek leaders expressed optimism a deal to unlock bailout funds is within reach, in the face of continuing warnings by creditors that the country has yet to comply with the terms of its emergency loans. “We are very close” to an agreement, Finance Minister Yanis Varoufakis said in an interview late Monday with Greece’s Star TV Channel. “I’d say it is a matter of one week.” Earlier Monday, Prime Minister Alexis Tsipras had told Greek industrialists that “we are now at the final stretch before striking a mutually beneficial agreement, after long and painful negotiations.” Greece’s anti-austerity government has repeatedly expressed confidence a deal was imminent, only to be rebuffed by creditors seeking more concrete actions in areas including labor market deregulation and pension-system overhaul.

Even though Greece has made some progress in meeting its bailout commitments, “we’re not there yet,” EU Economic Affairs Commissioner Pierre Moscovici said, just a few hours before Tsipras’s and Varoufakis’s assurances that an agreement is close. The country’s liquidity situation is “obviously tense,” and the time left to reach an agreement is “very limited,” Moscovici told reporters in Berlin. [.] The four-month standoff between Europe’s most indebted state and its lenders has triggered an unprecedented liquidity squeeze, which pulled the Mediterranean nation’s economy into a double-dip recession. Record deposit withdrawals, and the state’s increasing difficulty in meeting debt payments have sparked renewed doubts about the country’s place in the euro area.

Adopting a new currency is not “on our radar,” Varoufakis said in his Star TV interview, which started at 11:30 p.m. and was still dragging on at about 2 in the morning, in Athens. Euro-area member states haven’t made proposals to the Greek government to leave the currency bloc, according to Varoufakis. After months of brinkmanship, Varoufakis said Greece and its creditors still disagree on budget targets, labor market regulations and pension system reform. Negotiations continue, and Greece has suggested streamlining its sales tax by setting a 15% rate for most goods and a 6.5% rate for basic goods, according to Varoufakis.

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Note: there doesn’t seem to be agreement in the press on what the VAT rates will be. The Bloomberg piece above says 15% and 6.5%, this Kathimerini one says 18% and 9.5%. A curious difference.

Greece Sends Reform Proposals For Lenders’ Scrutiny (Kathimerini)

Athens sent its proposals to creditors on Monday for an overhaul of the value-added tax regime as Greek officials indicated that an agreement on a reforms-for-cash deal was close. In a bid to secure progress on the technical level of negotiations to enable a political decision that would unlock rescue loans, officials of the so-called Brussels Group were to hold a late-night teleconference on Monday that was expected to address these proposals. Greece’s VAT proposal is said to foresee two rates of value-added tax instead of the current three. The highest would be set at 18% and relate to virtually all services and commodities except food and medicines, with a discount of 3 percentage points for non-cash transactions. The lower rate would be set at 9.5% and would relate to food, drugs and books, with the same discount applying to cash-free transactions.

The proposals appear to be part of a broader bid by the government to boost non-cash transactions while curbing tax evasion. VAT evasion in Greece is estimated at 9.5 billion euros per year. The Greek proposal was sent to creditors at around the time that To Vima reported that European Commission President Jean-Claude Juncker had pitched a compromise proposal to Greece, foreseeing low primary surpluses and some 5 billion euros in reforms, chiefly tax measures. The report was quickly rebuffed by Greek and EC officials. Speaking generally and apparently not referring to a rumored Juncker proposal, European Economic and Monetary Affairs Commissioner Pierre Moscovici said Greece was quick to turn down proposals on reforms but slow to offer alternatives.

“They are more eager to say what they don’t want to keep in the program than to propose alternatives,” Moscovici told a news conference in Berlin, while noting that “some progress” had been made in recent days. In a speech at the annual general meeting of the Federation of Hellenic Enterprises (SEV) Alexis Tsipras was much more upbeat, claiming that Greece was “in final straight toward an agreement,” which, he said, “will come very soon.” “We are working, with absolute honesty and dedication, to reach a solution,” he said. He echoed the conditions he set out last Friday for a deal, saying it should include debt restructuring, no further cuts to wages and pensions, and an investment plan. He added that Greece is ready to compromise but that he wanted a deal that would allow Greece to return to markets soon.

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One detail from this much-denied plan: it says the government must address ‘the enormous problem of unemployment’. Well, so must the creditors. Athens just rehired 4000 civil workers, that’s a start.

Juncker Steps In With Greek Rescue As Talks Reach ‘Final Stages’ (Telegraph)

The president of the European Commission has reportedly intervened in Greece’s bail-out negotiations, proposing a reduction in Troika-imposed budget targets and a release of emergency cash to prevent Greece going bankrupt in the summer. According a blueprint leaked to Greek media, Jean-Claude Juncker’s “plan” to break Greece’s deadlock includes a relaxation of Athens’ primary budget surplus target to 0.75pc this year – half that previously sought by Greece’s paymasters. The proposals also include releasing €5bn to the government in June, and delaying a number of fiscal austerity measures until October. However, the blueprint maintained that Greece would have to retain a controversial property tax and push for flexible labour market reforms.

Despite refusing to confirm the plan, a spokesman for Mr Juncker said the EU chief was now “personally involved” in Greece’s talks. Speaking in Athens on Monday, Greek prime minister Alexis Tsipras said negotiations with creditors were reaching their “final stages”. He maintained the government would not agree to any plans to cut pensions and wages but said his government was willing to “accept compromises” to reach a deal should some form of bridging finance be agreed. The Leftist premier, who wrote to Mr Juncker earlier this month to say Greece would default to its creditors, added his country’s cash squeeze was being used as a “negotiating tactic”. Mr Tsipras also repeated calls for some form of debt restructuring as part of any agreement with Greece’s lenders.

Proposals from the Commission would represent an easing of the tough conditions demanded by Greece’s creditors over the last 110 days. Indicating a potential split among official creditors, the leaked memo highlighted objections to the plan from the IMF, and voiced concerns the Fund was willing to withdraw its support for Greece. The plan added that Athens’ Leftist government needed to “increase the competitiveness of the Greek economy and address the enormous problem of unemployment”. Greek markets rallied on the news of a potential compromise, jumping nearly 4pc in afternoon trading.

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Shut down by previous government on questionable grounds.

Tsipras: Relaunch Of State Broadcaster ERT ‘Victory Of Democracy’ (Kathimerini)

Public broadcaster ERT will reopen in a week, two years after it was shut down, leftist Prime Minister Alexis Tsipras said on Monday. Meeting with ERT chairman Dionysis Tsaknis and CEO Lambis Tagmatarchis, Tsipras urged the newly installed executives to work for a “pluralist and independent” network. “Your responsibility is to restore people’s bond with ERT, which was severed by the blackout,” he said. Tsipras added that June 11, the anniversary of ERT’s shutdown by the previous government and its replacement with NERIT, will be a day to celebrate “the victory of democracy.”

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They should urge Europe to strike a deal, not only Athens.

Every Day Without A Deal Costs Greece €22.3 Million, 600 Jobs (Kathimerini)

An average of 59 enterprises close every day of the working week and 613 jobs are lost, while every day, with the market facing a cash crunch, the economy loses 22.3 million euros from its gross domestic product, according to a report published by the Hellenic Confederation of Commerce and Enterprises (ESEE). A deal with the country’s creditors is more urgent than ever, ESEE stressed, but the economy would need as much as 25 billion euros in financing in order to restart, as losses from the first five months will be hard to cover over the rest of the year, argued ESEE. This uncertainty has hit the local economy after five years of crisis, during which retail commerce turnover shrank by 26.2%.

Things were worse for wholesale commerce, with turnover dropping 37.1%, while the car market crumbled by 61.9% in the same period, the confederation’s data show. Liquidity is becoming an unfamiliar term in the market as 95% of applications for loans are rejected every day by commercial banks, while only one in 10 enterprises dares to ask for funding from the country’s four systemic lenders, the ESEE report showed. The absorption of funding tools for business liquidity stands at 40%, while in the funding of commerce the rate does not exceed 12%. ESEE is urging the government in dramatic terms to reach a deal with Greece’s creditors even if it’s not a great deal.

“A final agreement, even if it is mediocre or below expectations, is certain to allow the Greek economy to feel free at last to operate for the remainder of 2015,” read Monday’s ESEE statement. “Financial and political time are running dangerously short, and reaching a sustainable agreement with our partners is vital as it is directly associated with the country’s capacity to draw liquidity from the European funding tools,” it added. “The official position of Greek commerce and small and medium-sized entrepreneurship is to end the market’s four months of stagnation caused by the ‘no deal, no Grexit’ situation, replacing the content of the original agreement offering ‘money for the debt and grace for the country’ with ‘money for the market and growth for the country’,” ESEE concluded.

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Which they can only do by keeping the spigot open.

China’s Lodestar Is Not Reform But Avoiding Chaos (Reuters)

China’s policymakers talk much of reform. What really drives them is something different: a fear of chaos. The treatment of the country’s local government debt pile is an example of risk aversion getting the upper hand. The strategy is imperfect, but also right. The ruling State Council on May 15 published an instruction to banks not to blindly “pull, pressure or stop” lending to borrowers linked to provincial governments, which have amassed an estimated 16 trillion ($2.6 trillion) of debt. Where creditors can’t pay, banks can extend lending. And where money has run out but construction continues, local governments can funnel in cash directly. That makes explicit what was already widely assumed.

The Chinese banking system’s suspiciously low reported bad loans, which rose to just 1.4% of total lending at the end of March, are due to the industry’s compulsive rolling over of doubtful debt. For a still-developing market, showing some mercy isn’t entirely foolish. Uncontrolled defaults would undermine confidence and real economic activity. Genuinely useful projects might be unable to find funding, to the dismay of the citizens who have to live among the ruins. The wider agenda may be to ring-fence those projects that deserve official support before identifying those that do not. Jiangsu and Xinjiang provinces will soon be the first to swap some safer government-backed credit into bonds. If failures can be kept at bay for a while, those trials are more likely to succeed.

Market-based debt restructurings are helpful in theory. But they are also messy, driven as much by bargaining and bullying as thoughtful analysis of assets and rights. Kaisa, a real estate developer in Shenzhen, is haggling with bondholders over a plan to delay repaying its existing loans by five years. Foreign creditors have almost no rights, but significant nuisance value. That situation replicated across a country with a fledgling legal system is a daunting prospect. Once a clear line has been drawn between what’s state-backed and what isn’t, other borrowers can be exposed to market forces. Hopefully the government’s latest largesse is part of that bigger plan. But if progress doesn’t come soon, a more dangerous kind of confidence crisis will emerge: the belief that the government hasn’t got a plan after all.

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How much of this is just politics? And how much is favoritism? What is the wealth accumulated by the current president and PM? And their families?

China Corruption Purge Snares 115 State Owned Enterprise ‘Tigers’ (FT)

More than 100 top executives from some of China’s largest state-owned enterprises have been detained on suspicion of corruption since the start of last year, according to official statistics. Since the beginning of 2014, China’s anti-corruption authorities have publicly named 115 C-suite officials from state groups including global giants such as PetroChina, China Southern Airlines, China Resources, FAW and Sinopec, who have been placed under investigation for graft. Because virtually all of them are also senior Communist party officials, they have mostly disappeared into the feared system of internal party discipline inspection , where they can be held indefinitely without trial and where torture is believed to be rife.

Since ascending to the top of the Chinese system in late 2012, Chinese President Xi Jinping has been engaged in a ferocious anti-corruption campaign that has already gone further and continued for longer than any other since the founding of the People’s Republic in 1949. Mr Xi has vowed to tackle high-ranking corrupt tigers as well as lowly flies in his quest to clean up the sprawling party bureaucracy. According to official announcements from China’s Central Commission for Discipline and Inspection, more than a fifth of the SOE tigers who have been toppled from their horses came from the energy sector. Executives at China’s enormous state energy monopolies command vast armies of employees and control budgets worth hundreds of billions of dollars.

They are often accused of acting like rulers over mini-states within the state. The enormous influence of companies such as Sinopec and PetroChina over government policy is sometimes blamed as one reason for weak enforcement of environmental standards and China’s shocking levels of pollution. But the energy sector is also the former power base of Zhou Yongkang, the most senior casualty of Mr Xi’s purge and the most senior party official to go on trial for corruption in the history of the People’s Republic. Until Mr Xi took power, Mr Zhou was a member of the all-powerful Politburo Standing Committee and controlled the Chinese courts, police, secret police, paramilitary and intelligence services. He is currently awaiting trial.

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“..Chinese stocks in general are looking “extremely” volatile and risky.”

How China’s ‘Insane’ Rally Could Grind To A Halt (CNBC)

Foreign flows, investors using borrowed money to buy equities and a taste for new public offerings have aided a mega-rally in Chinese stocks this year. But analysts are fretting that the good times could end in the blink of an eye. The blue-chip Shanghai Composite has seen gains of 32% year-to-date but has been outpaced by smaller domestic stocks, or A-share indexes, which have seen gains of over 70% so far in 2015. “They just treat their stock market like a casino, they just poor all the money in,” Dickie Wong, the executive director at Kingston Securities, told CNBC Monday, warning of the irrational exuberance of Chinese investors.

“And after the recent gains, they just pour the money into the IPOs,” he added. He called the Shenzhen index a “bubble” but stressed that Chinese stocks in general are looking “extremely” volatile and risky. Analysts have warned that investors are borrowing money from brokerage firms to buy more shares – known as margin trading. Despite a crackdown by the Chinese authorities, Wong believes that more regulation is on the horizon which could lead to a pullback. “(The authorities) will do something, they will say something to cool down the market,” he said.

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“The move would be a reaction to European governments having become less willing to prop up banks if they get into a crisis..”

Ratings Agency Fitch To Downgrade Many European Banks (Reuters)

Ratings agency Fitch will soon downgrade European banks en masse, possibly even at the start of the week, German newspaper Handelsblatt said, citing unnamed financial sources. In most cases the banks will be downgraded by between one and a maximum of four levels, according to an advance copy of an article due to be published on Monday. The move would be a reaction to European governments having become less willing to prop up banks if they get into a crisis, the newspaper said. The newspaper said dozens of banks would be affected by the downgrade, including Deutsche Bank, which would see its rating fall slightly, and Commerzbank, which would be hit much harder.

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It never feels good when the only people who share one’s views also have some really crazy ones. But sometimes it’s just like that.

‘We Must Resist Corporations’: Le Pen Targets TTIP Deal In New Campaign (RT)

Leader of France’s National Front party, Marine Le Pen, has launched a month-long blitz against the Transatlantic Trade and Investment Partnership (TTIP) – a proposed EU-US treaty, which has been criticized for secretiveness and lack of accountability. “It is vital that the French people know about TTIP’s content and its motivations in order to be able to fight it. Because our fellow countrymen must have the choice of their future, because they should impose a model for society that suits them, and not forced by multinational companies eager for profits, Brussels technocrats sold to the lobbies, politicians from the UMP [party of former president Nicolas Sarkozy], who are subservient to these technocrats,” Le Pen said during a press conference in Paris.

Since 2013, open-ended negotiations between Washington and Brussels have drawn up the framework for the agreement, intended to standardize legislation and bring down trade barriers between them. As per US practice, the contents of all economic treaties are classified. The EU has recently set up reading rooms throughout Europe for officials with clearance – but only a few thousand people have had access to the working documents. Le Pen hit out at the secrecy of the negotiations, which have featured mostly bureaucrats from the European Commission, the EU’s executive body, and nebulous “stakeholders” from businesses and public organizations. As a member of the European parliament, she forwarded a motion for greater transparency in negotiations last year. Le Pen’s motion was defeated.

She is now hoping for grassroots support. “I am convinced that we can push back the TTIP if the peoples are informed of its content, and if they decide themselves to join us in order to express their disagreement concerning this treaty,” Le Pen told journalists. Both of France’s leading parties have endorsed the treaty, but Le Pen is relying on strong the anti-European sentiment that propelled her party to first place in last year’s elections for the European parliament. While TTIP’s authors promise that the treaty will bring an extra 0.5% GDP to Europe and the US, figures across the political spectrum have expressed concern.

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Jacksonville, Detroit, Chicago, Puerto Rico.

Debt-Choked Puerto Rico at Fiscal Brink as Bond Buyers Pull Back (Bloomberg)

The sobering news arrived in San Juan via telephone from Washington. It was April 28, and U.S. Treasury Secretary Jacob J. Lew called to tell Puerto Rico officials they must confront one of the island’s gravest financial crises without a bailout. Saddled with $72 billion in debt, the commonwealth – a U.S. territory since the Spanish-American War – needs a “credible” plan, Lew said. The Caribbean island is hurtling toward the fiscal brink. After years of borrowing to paper over deficits, and with $630 million due to investors on July 1, Puerto Rico may confront the unthinkable: a default. The prospect has set Wall Street on edge as bond yields surpass those of Argentina and Greece; about half of municipal mutual funds hold commonwealth debt.

Puerto Ricans across the political spectrum are alarmed at the scale of the crisis, Rafael “Tatito” Hernandez, chair of the House Treasury Committee, said during a May 6 interview at the Capitol. Every mayor on the island will face angry constituents, he added, especially those whose work weeks may be cut to four days. “We used to have choices,” Hernandez said, a framed copy of his U.S. Navy honorable discharge on the wall behind him. Now “people have to realize where we’re really at. It may be late, but that’s the reality.”

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October 30 1995 was the last referendum, which the PQ lost 50.58% against 49.42%. I was with a bunch of friends in Montréal watching the drama unfold on TV, everyone was very nervous.

Flamboyant Tycoon Ready To Revitalize Quebec’s Separatists (Guardian)

Ice hockey is a religion in Quebec, but since the departure of the NHL’s Nordiques to Colorado in 1995, residents of the provincial capital, Quebec City, have had no icons to worship. So when Pierre Karl Péladeau – the CEO of Quebecor, Canada’s second biggest media group – announced in 2009 that he would invest C$33m to lease a new arena and bring a hockey club back to the city, he was hailed as a prophet. Now campaigners for Quebec independence hope that the media magnate can work miracles for their cause after Péladeau’s election as the new leader of the separatist Parti Québécois (PQ). Thousands of party delegates joined in chants of “PKP” even before victory was confirmed on Friday evening in Quebec City, home of the provincial parliament.

Visibly pleased with his 57.6% share of the vote, Péladeau hugged his wife, the television producer Julie Snyder with whom he forms the ultimate power couple in the province of 8 million people. “You have given me a clear and strong mandate: to make Quebec a country,” said the 53 year-old in a bilingual speech. Campaigners for independence have been starstruck ever since PKP joined the ranks of the Parti Québécois a mere 14 months ago, when he launched a successful bid for election to the provincial parliament (a vote which the Parti Libéral won by a landslide). Péladeau’s public embrace of independence had a galvanizing effect on the separatist cause. Separatists and federalists alike agree that PKP – dubbed “Citizen Péladeau” and often compared to the Italian media magnate-turned-politician Silvio Berlusconi – brought star quality to the PQ. “Is this the man who will break up Canada?” asked the national public affairs magazine Maclean’s.

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Only 3% of our living environment is left. We paved paradise.

97% of Britain’s Wildflower Meadows Have Gone (Guardian)

With its flower-rich meadows, woodland and ponds, Ash Common in the village of Ash Priors near Taunton is a lovely corner of unspoilt countryside. It is a local nature reserve and home to an endangered butterfly, the marsh fritillary. A local wildlife lover recently tweeted a photograph that suggests the common has undergone a close encounter with a scalpel: a wildflower meadow has been shaved like a football pitch. It wasn’t a vandal or a developer who did this, but Taunton Deane borough council, which has managed the common for more than 20 years. The decline of the marsh fritillary vividly demonstrates the drastic loss of 97% of UK wildflower meadows since the second world war.

And the fate of Ash Common reflects a much bigger, hidden story about the damage being done to precious, unprotected local nature reserves. There are 42,865 of these local wildlife sites in England, ranging from large commons to tiny treasures such as the old tennis court at Gresham’s school in Norfolk, which boasts more than 200 orchid spikes. Many are privately owned and there is almost nothing to protect them: when the Wildlife Trusts surveyed 6,590 local wildlife sites, they found that 717 were lost or damaged over five years to 2013. Wildflower meadows need cutting, but conservationists usually advise to do so in the autumn, after flowers have seeded and invertebrates are hunkered down for the winter.

Taunton Deane borough council’s ecologist, Barbara Collier, explained that staff restructuring and illness meant they failed to trim Ash Common last October and so cut it this spring to prevent it “scrubbing up” with trees. “I admit that this year we didn’t get it quite right. I’m really sorry about that,” she said. According to the Wildlife Trusts, which freely advises owners how to better manage their special sites, such mistakes are all too frequent. The only real solution is for local communities to get involved (if permitted by the landowner) as I saw when I visited a more inspirational local nature reserve, Hoe Common, in Norfolk, which residents are restoring. A few marsh fritillaries may yet have survived the scalpel at Ash Common; hopefully local vigilance will stop them being cut to pieces again.

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