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
 


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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Nov 112014
 
 November 11, 2014  Posted by at 7:24 pm Finance Tagged with: , , , , ,  12 Responses »


Marjory Collins Window of Jewish religious shop on Broome Street, New York Aug 1942

There are things in this world which simply look plain stupid, and then there are those that at closer examination prove to be way beyond stupid. How about this one:

1) G20 taxpayers (you, me) subsidize the fossil fuel industry. That in itself is crazy enough, and it should stop as per last week; industry participants must be able to fend for themselves, or fold. That they don’t, speaks to a very unhealthy level of power in and over our political systems. Subsidizing coal and oil is as insane as bailing out Wall Street banks. It’s money that defies gravity, by flowing from the bottom to the top, from the poor to the rich.

2) Then there’s the huge amount of the subsidies: $88 billion a year. That could solve a lot of misery for a lot of people. It adds up to well over $1 trillion in this century alone. Next time you feel good about prices at the pump, please add that number, it should set you straight.

3) But that’s just the start. Those $88 billion go towards exploration for new oil, gas and coal resources which, according to the UN’s IPCC climate panel, can never even be ‘consumed’ lest we go way beyond our – minimum – goals for CO2 concentrations and a global 2ºC warming limit.

4) And it keeps getting better. For who do you think pays for the research conducted for the IPCC reports? That’s right, the same G20 taxpayer. As in: you and me. We pay for both ends of the divine tragedy. We got it al covered. We pay for exploratory drilling in the Arctic, the Gulf of Mexico and all other ever harder to find, riskier and more polluting resources.

If this were not about us, we’d undoubtedly declare ourselves stark raving mad. Since it does directly involve us, though, we of course favor a more nuanced approach. Like sticking our heads in the sand.

I got that $88 billion a year number from a new report by British thinktank the Overseas Development Institute (ODI) and Washington-based analysts Oil Change International, The Fossil Fuel Bailout: G20 Subsidies For Oil, Gas And Coal Exploration. The Guardian has a few more juicy tidbits:

Rich Countries Subsidising Oil, Gas And Coal Companies By $88 Billion A Year

Rich countries are subsidising oil, gas and coal companies by about $88bn (£55.4bn) a year to explore for new reserves, despite evidence that most fossil fuels must be left in the ground if the world is to avoid dangerous climate change.

The most detailed breakdown yet of global fossil fuel subsidies has found that the US government provided companies with $5.2bn for fossil fuel exploration in 2013, Australia spent $3.5bn, Russia $2.4bn and the UK $1.2bn. Most of the support was in the form of tax breaks for exploration in deep offshore fields.

The public money went to major multinationals as well as smaller ones who specialise in exploratory work, according to British thinktank the Overseas Development Institute (ODI) and Washington-based analysts Oil Change International.

Britain, says their report, proved to be one of the most generous countries. In the five year period to 2014 it gave tax breaks totalling over $4.5bn to French, US, Middle Eastern and north American companies to explore the North Sea for fast-declining oil and gas reserves. A breakdown of that figure showed over $1.2bn of British money went to two French companies, GDF-Suez and Total, $450m went to five US companies including Chevron, and $992m to five British companies.

Britain also spent public funds for foreign companies to explore in Azerbaijan, Brazil, Ghana, Guinea, India and Indonesia, as well as Russia, Uganda and Qatar, according to the report’s data, which is drawn from the OECD, government documents, company reports and institutions.

The figures, published ahead of this week’s G20 summit in Brisbane, Australia, contains the first detailed breakdown of global fossil fuel exploration subsidies. It shows an extraordinary “merry-go-round” of countries supporting each others’ companies. The US spends $1.4bn a year for exploration in Columbia, Nigeria and Russia, while Russia is subsidising exploration in Venezuela and China, which in turn supports companies exploring Canada, Brazil and Mexico.

“The evidence points to a publicly financed bail-out for carbon-intensive companies, and support for uneconomic investments that could drive the planet far beyond the internationally agreed target of limiting global temperature increases to no more than 2C,” say the report’s authors.

“This is real money which could be put into schools or hospitals. It is simply not economic to invest like this. This is the insanity of the situation. They are diverting investment from economic low-carbon alternatives such as solar, wind and hydro-power and they are undermining the prospects for an ambitious UN climate deal in 2015,” said Kevin Watkins, director of the ODI.

“The IPCC [UN climate science panel] is quite clear about the need to leave the vast majority of already proven reserves in the ground, if we are to meet the 2C goal. The fact that despite this science, governments are spending billions of tax dollars each year to find more fossil fuels that we cannot ever afford to burn, reveals the extent of climate denial still ongoing within the G20,” said Oil Change International director Steve Kretzman.

The report further criticises the G20 countries for providing over $520m a year of indirect exploration subsidies via the World Bank group and other multilateral development banks (MDBs) to which they contribute funds.

That’s right, as you see in the graph we pay more towards Big Oil’s future profits then the companies do themselves. Without getting shares in those companies, mind you. We pay Big Oil and coal to produce more fossil fuels, and at the same time we pay the UN to publish reports demanding they produce less of them. Feel crazy yet?

Did you have any idea that your government sponsors oil companies with your money, which they don’t need, and certainly shouldn’t? Aren’t we supposed to at least take a serious look at alternative energy sources, and more importantly, use less energy, whether it’s coal or solar? If only to show we do indeed understand the 2nd law of thermodynamics?!

Big Oil, like Wall Street banks, should be, and can, take care of themselves, and very well. May I suggest you try and find out who in your respective government has given the thumbs up to these crazy handouts, and when you do, make sure they’re fired.

Nov 112014
 
 November 11, 2014  Posted by at 11:07 am Finance Tagged with: , , , , , , , , , ,  1 Response »


Dorothea Lange Country filling station, Granville County, NC July 1939

Is ‘Too Big To Fail’ For Banks Really Coming To An End? (BBC)
Banks Poised to Settle With Derivatives Regulator in FX-Rigging Cases (BW)
Bond Swings Draw Scrutiny (WSJ)
China, Japan And An Ugly Currency War (Steen Jakobsen)
Subprime Credit Card Lending Swells (CNBC)
Why Iron Ore’s Meltdown Is Far From Over (CNBC)
It’s Time to Put Juncker on the Hot Seat (Spiegel Ed.)
The Ghosts of Juncker’s Past Come Back to Haunt Him (Spiegel)
The Return Of The US Dollar (El-Erian)
Fears Of German Recession As Moment Of Truth Looms (CNBC)
Russia Ends Dollar/Euro Currency Peg, Moves To Free Float (RT)
Police Use Department Wish List When Deciding Which Assets to Seize (NY Times)
Alleged Sarkozy Plot Rocks French Political Establishment (FT)
Nearly A Third Of Indian Cabinet Charged With Crimes (Reuters)
Energy Is Europe’s ‘Big Disadvantage’: Deutsche Bank Co-Ceo (CNBC)
Rich Nations Subsidize Fossil Fuel Industry By $88 Billion A Year (Guardian)
The Real Story Of US Coal: Inside The World’s Biggest Coalmine (Guardian)
Angry Canary Islanders Brace For An Unwanted Guest: The Oil Industry (Guardian)
Fukushima Radiation Found in Pacific Off California Coast (Bloomberg)
The Fate of the Turtle (James Howard Kunstler)

Make that a no.

Is ‘Too Big To Fail’ For Banks Really Coming To An End? (BBC)

Interviewing Alistair Darling in 2011, three years after the financial crisis during which he was chancellor, his most striking answer to me was not about the fear that Britain’s economic system was on the point of collapse. It wasn’t even his worry that ATMs up and down the country might simply stop functioning. Those answers were of course chilling. But they were symptoms of a wider disease. Mr Darling’s most striking answer was the “absolute astonishment” he felt when he asked Britain’s largest banks to account for the risks contained in their businesses – and they were unable to come up with a coherent answer. This total lack of knowledge – coupled with the hubris of profit-taking built on lax credit – went to the heart of the financial crisis. Regulators appeared similarly non-plussed.

Such was the global complexity and lack of governance in the international financial system, when it came to rescuing the banks from having to eat their own sick, the UK government – and many other governments around the world – initially had no idea how large the bill would be. And neither did the banks. The only funding avenues large enough to contain such unquantifiable risks were those provided by central banks and the taxpayer. The alternative was financial meltdown. The numbers turned out to be astronomical. A National Audit Office report in August this year suggested the value of the UK government’s total support for the financial system alone exceeded £1.1tn at its height. Many tens of billions of pounds worth of capital was directly injected into failing banks and building societies.

The rest of that dizzying £1.1tn was the total value of liability insurance – the government guaranteeing banks’ security as lender of last resort. Put simply, the taxpayer had become the guarantor of the global financial system and the banks that are the essential plumbing of that system. In direct capital the UK government (the taxpayer) ultimately had to find over £100bn. More than £66bn was used to rescue the Royal Bank of Scotland (still 80% owned by the government) and Lloyds Bank (still 25% owned by the government). Of that, the sale of two chunks of Lloyds since the last election in 2010 has raised the princely sum of £7.4bn.

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For rigging a $5.300.000.000.000 a day market, banks are fined $300.000.000. Remove a few zeroes and it’s like being fined $300 for rigging a $5.300.000 million market. Sounds profitable.

Banks Poised to Settle With Derivatives Regulator in FX-Rigging Cases (BW)

Banks suspected of rigging the $5.3 trillion-a-day currency market are preparing to reach settlements as early as this week with the main U.S. derivatives regulator, according to a person with knowledge of the cases. The Commodity Futures Trading Commission may levy fines of about $300 million against each firm, depending on the level of their involvement, said the person, who spoke on condition of anonymity because deals haven’t been announced. It’s unclear how many firms may settle with the CFTC as U.K. and U.S. bank regulators prepare to levy related penalties this week, the person said. There was no immediate response to an e-mailed request for comment from the CFTC after normal business hours. The New York Times reported late yesterday on the talks with the agency.

Investigations are under way on three continents as authorities probe allegations that dealers at the world’s biggest banks traded ahead of clients and colluded to rig benchmarks used by pension funds and money managers to determine what they pay for foreign currencies. The U.K. Financial Conduct Authority is poised to reach settlements as soon as this week with six banks, which together have set aside about $5.3 billion in recent weeks for legal matters including the currency investigations, people with knowledge of those talks have said. Barclays, Citigroup, HSBC, JPMorgan, Royal Bank of Scotland and UBSare in settlement talks with the FCA, people with knowledge of the situation have said.

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How many years is the investigation going to take?

Bond Swings Draw Scrutiny (WSJ)

The day’s trading was just hitting its stride in New York on the morning of Oct. 15 when bond investors, traders and strategists were stunned by an unusual move in the $12 trillion U.S. Treasury market playing out on their computer screens. The yield on the 10-year Treasury note took a sharp dive below 2% within minutes, and few could understand exactly why. Some dealers immediately pulled the plug on automated trading systems that provided price quotes to customers. Fund managers rushed to convene meetings. Many investors scrambled to pinpoint the reason behind the accelerating decline. “It starts moving faster and faster, and you can’t point to anything,” recalled Mark Cernicky, managing director at Principal Global Investors , which oversees $78 billion. Now, investors and regulators are burrowing into the causes of the plunge in yields to try to understand whether electronic trading and new regulations are fueling sudden price swings in a market that acts as a key benchmark for interest rates, investments and U.S. home loans.

At the time, bond-market analysts attributed the fall in yields to weak U.S. economic data, shaky European markets and hedge funds scrambling to cover wrong-way bets. But many investors felt that didn’t fully explain why the yield on the 10-year Treasury note tumbled to its biggest one-day decline since 2009. When yields fall, prices rise. Regulators and other experts are examining deep-seated shifts in trading since the financial crisis, which could help explain the unusual size of the move in a market many investors rely on for its relative stability. “What happened on Oct. 15 is the result of things that had been building for a while,” said Alex Roever, a strategist at J.P. Morgan Chase & Co. who follows the government-bond market. The Federal Reserve, Treasury and Commodity Futures Trading Commission are looking at that day’s trading activity, according to people familiar with the situation. One focus is the role of high-speed electronic trading in the bond market, although regulators haven’t yet drawn any conclusions, these people said.

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More trouble for Tokyo.

China, Japan And An Ugly Currency War (Steen Jakobsen)

There’s increasing risk we’ll soon see a “significant paradigm shift” from China in its attitude to the strength of its currency. So says Saxo Bank’s Chief Economist, Steen Jakobsen. He says we’re about to see a full-scale currency war, notably between China and Japan, two of the world’s greatest exporting countries. There are a number of important world meetings over the coming few weeks and the Chinese will be “very vocal”, says Steen, as it’s getting increasingly worried about its loss of growth momentum. The yuan has strengthened significantly in recent weeks while the yen has declined substantially. The country’s determined, he says, to refocus and maintain its export share of total growth.

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And Washington just sits by and lets it happen all over again.

Subprime Credit Card Lending Swells (CNBC)

Consumers with dinged credit are back in a borrowing mood, and lenders are more than happy to give them new credit cards, according to new data. Since the Great Recession ended five years ago, consumers have been gradually taking on more debt and lenders have been accommodating them, easing up on tighter standards. Much of the growth has been in so-called non-revolving credit, especially car loans, thanks to record low interest rates. But revolving credit—mainly in the form of credit cards—is picking up. And the biggest growth in new credit cards is coming from so-called subprime borrowers whose credit scores are less than 660, according to the latest Equifax data.

Through July of this year, banks handed out cards to 9.8 million subprime consumers, a six-year high and an increase of 43% from the same period last year. Another 7.8 million cards have been issued to subprime borrowers by retailers this year, up 13% from 2013 to an eight-year high. Lenders are also giving subprime borrowers higher credit limits. Bank-issued card limits jumped to $12.7 billion for the first seven months of the year—up 4% from the same period a year ago to a six-year high. Retailers lifted their card limits by 16% to $6.8 billion, an eight-year high. Part of the growth is the result of an easing of the tighter standards that followed the 2008 credit bust after the boom of the early-2000s. Now that banks have repaired the damage from billions of dollars in bad debts, they’re better able to take on more risk. A stronger job market is also putting more consumers in a borrowing mood, according to economists at Wells Fargo.

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Chinese fake numbers have distorted the market for years.

Why Iron Ore’s Meltdown Is Far From Over (CNBC)

Iron ore prices have dived an eye-watering 44% this year and there’s no respite ahead for the metal, according to Citi, which forecasts double-digit declines in 2015. The bank on Tuesday slashed its price forecasts for the metal to average $74 dollars per ton in the first quarter of next year, before moving down to $60 in the third quarter. It previously forecast $82 and $78, respectively. “We expect renewed supply growth to once again drive the market lower in 2015, combined with further demand weakness,” Ivan Szpakowski, analyst at Citi wrote in a report, noting that prices could briefly dip into the $50 range in the third quarter. The price of spot iron ore fell $75.50 this week, its lowest level since 2009, according to Reuters.

Price declines in the first half of this year were driven by rapid growth in export supply, which has slowed in the second half of the year. In recent months, deteriorating Chinese steel demand and deleveraging by traders and Chinese steel mills has dragged the metal. Iron ore is an important raw material for steel production. However, iron ore supply growth will return in the first half of next year, Citi said, as industry heavyweights Rio Tinto, BHP Billiton and Vale rev up expansions and Anglo American’s Minas-Rio iron ore project in Brazil ramps up. Meanwhile, demand out of China – the world’s biggest buyer of iron ore – will remain under pressure due subdued steel demand. Demand for steel is being compressed due to tighter credit conditions and an uncertain export outlook.

“Chinese manufacturing exports have improved in recent months, helping to boost steel demand for machinery, metal products, etc. However, with European growth having slowed such positive momentum is unlikely to continue,” Szpakowski said. ANZ also substantially downgraded its 2015 price forecast for iron ore this week. However, it was not quite as bearish as Citi. The bank, in a report published on Monday, said the metal will not breach $100 a ton again, forecasting prices to average $78 next year, 22% lower than its previous estimate. “Recent trip to China highlights that demand conditions are more challenging than we thought,” ANZ said.

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I bet he thinks he’s awfully smart.

The Ghosts of Juncker’s Past Come Back to Haunt Him (Spiegel)

Jean-Claude Juncker’s first public appearance as the new European Commission president was a symbolic one. Early this month, he traveled to Frankfurt to present former German Chancellor Helmut Kohl’s new book in the luxury hotel Villa Kennedy. Called “Aus Sorge um Europa” – “Out of Concern for Europe” – the book warns that the pursuit of national interests represents a danger to the European ideal. And Juncker is quick to endorse Kohl, a man he calls “a friend and role model.” “Kohl is right in deploring the fact that we are increasingly sliding down the slope toward reflexive regionalism and nationalism,” Juncker said. It is certainly not the first time Juncker has uttered such a sentence. Indeed, his delivery of the message has often been even more direct. “I’ve had it,” he erupted during an EU summit in December of 2012, for example. “80% of the time, only national interests are being presented. We can’t go on like this!”

Such sentiments have served Juncker well throughout his career and have helped transform the politician from tiny Luxembourg into a well-known defender of Europe. Now, though, at the apex of his European career, Juncker and his beloved European Union are facing a significant problem. And it is one that has led even advisors close to Juncker to wonder whether he may soon have to step down from his new position, despite having taken office only recently. Last week, several media outlets, including the Munich-based Süddeutsche Zeitung, published the most detailed accounts yet of the tricks used – and the eagerness brought to bear – by Luxembourg officials to help companies avoid paying taxes. The strategies were often developed together with company leaders and served to entice multinationals to set up shop in Luxembourg. The tiny country on Germany’s western border, for its part, benefited from tax revenues it wouldn’t otherwise have seen. It was, in short, a reciprocal relationship.

But it was also a relationship that was disadvantageous for Luxembourg’s EU partners – and for European cooperation itself. Many of the companies that set up shop in Luxembourg, after all, no longer paid taxes in their home countries where they produced or sold the lion’s share of their products.

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But with the Spiegel editorial board turning against him, how long can Jean-Claude last?

It’s Time to Put Juncker on the Hot Seat (Spiegel Ed.)

Can the European Commission be led by a man who transformed his own country into a tax oasis? [..] The European Union has a problem – and a serious one at that. On the surface, the issue is about the tax avoidance schemes in Luxembourg that were engineered during former Prime Minister Jean-Claude Juncker’s tenure. And about the billions of euros in revenues lost by other EU countries as a result. But the true problem in this affair actually runs a lot deeper. At issue is just how seriously we take the new European democracy that Juncker himself often touts. The criticism of Juncker came less than a week after he took office. Leaked tax documents released last Wednesday by the International Consortium of Investigative Journalists showed how large corporations have taken advantage of loose policies in Luxembourg to evade paying taxes. At a time of slow economic growth and tight national budgets, sensitivity has grown in large parts of the EU over countries that facilitate legal tax evasion.

Juncker is fond of pointing out proudly that he was Europe’s first “leading candidate,” and the first to be more-or-less directly elected as president of the European Commission. Across Europe, many celebrated it as the moment when more democracy came to the EU. Unfortunately, optimism blinded people to one salient fact: European politicians themselves never took this newfound democracy particularly seriously. In contrast to the United States, where getting to know the candidates is a matter of course, the EU never had any intent of truly introducing its leading politicians to the people. This has created a situation in which a person like Juncker can effectively lead two lives. One as an (honest) proponent of the EU and the other as a cunning former leader of an EU member state who promoted Luxembourg’s self-interest by blocking treaties that would have forced the country to adopt stricter tax policies.

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Mo talks his book.

The Return Of The US Dollar (El-Erian)

The US dollar is on the move. In the last four months alone, it has soared by more than 7% compared with a basket of more than a dozen global currencies, and by even more against the euro and the Japanese yen. This dollar rally, the result of genuine economic progress and divergent policy developments, could contribute to the “rebalancing” that has long eluded the world economy. But that outcome is far from guaranteed, especially given the related risks of financial instability. Two major factors are currently working in the dollar’s favour, particularly compared to the euro and the yen. First, the United States is consistently outperforming Europe and Japan in terms of economic growth and dynamism – and will likely continue to do so – owing not only to its economic flexibility and entrepreneurial energy, but also to its more decisive policy action since the start of the global financial crisis.

Second, after a period of alignment, the monetary policies of these three large and systemically important economies are diverging, taking the world economy from a multi-speed trajectory to a multi-track one. Indeed, whereas the US Federal Reserve terminated its large-scale securities purchases, known as “quantitative easing” (QE), last month, the Bank of Japan and the European Central Bank recently announced the expansion of their monetary-stimulus programs. In fact, ECB President Mario Draghi signalled a willingness to expand his institution’s balance sheet by a massive €1 trillion ($1.25 trillion). With higher US market interest rates attracting additional capital inflows and pushing the dollar even higher, the currency’s revaluation would appear to be just what the doctor ordered when it comes to catalysing a long-awaited global rebalancing – one that promotes stronger growth and mitigates deflation risk in Europe and Japan.

Specifically, an appreciating dollar improves the price competitiveness of European and Japanese companies in the US and other markets, while moderating some of the structural deflationary pressure in the lagging economies by causing import prices to rise. Yet the benefits of the dollar’s rally are far from guaranteed, for both economic and financial reasons. While the US economy is more resilient and agile than its developed counterparts, it is not yet robust enough to be able to adjust smoothly to a significant shift in external demand to other countries. There is also the risk that, given the role of the ECB and the Bank of Japan in shaping their currencies’ performance, such a shift could be characterized as a “currency war” in the US Congress, prompting a retaliatory policy response. Furthermore, sudden large currency moves tend to translate into financial-market instability.

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Not looking good.

Fears Of German Recession As Moment Of Truth Looms (CNBC)

Just days before Germany’s much anticipated third quarter gross domestic product (GDP) data is released, business leaders and policy makers warn that the euro zone’s largest economy has lost its competitiveness and is on the brink of a recession. The chair of the German Banking Association, Juergen Fitschen, told CNBC on Monday that it was “undeniable that we have slowed down recently.” “We cannot insulate ourselves against the factors that have contributed to the current state of affairs…But, also, [thereis a] slow recovery in some of our neighboring countries and also a lack o fdemand to finance infrastructure projects in Germany itself,” he said. Speaking to CNBC on the sidelines of a press conference held by the association, he said: “We have to remind ourselves that we have not spared continuing efforts to renew our competitiveness and that is something that applies obviously to our neighboring countries as well,” he continued.

Fitschen’s comments came amid other severe critiques of the German economy and outlook, just days before the release of the GDP data on Friday. Second quarter data in August showed data showed Germany’s economy had lost momentum, contracting for the first time in over a year. Quarter-on-quarter, GDP contracted 0.2%. If the economy contracts again in the third quarter, Germany will technically be in recession. The head of Germany’s influential Ifo economic research institute said that was a distinct possibility on Monday.Speaking to Reuters, Hans-Werner Sinn said that Germany was teetering on the brink of a recession due to weakness in major emerging trading partners. “It is going to be really close,” Sinn warned, saying that surveys by the Ifo institute pointed more towards a recession.

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Flipping the west the bird.

Russia Ends Dollar/Euro Currency Peg, Moves To Free Float (RT)

The Bank of Russia took another step towards a free float ruble by abolishing the dual currency soft peg, as well as automatic interventions. Before, the bank propped up the ruble when the exchange rate against the euro and dollar exceeded its boundaries. “Instead, we will intervene in the currency market at whichever moment and amount needed to decrease the speculative demand,” the bank’s chairwoman, Elvira Nabiullina, said in an interview with Rossiya 24 Monday. The move is edging towards a floating exchange rate, which the bank hopes to attain by 2015. “Effective starting November 10, 2014, the Bank of Russia abolished the acting exchange rate policy mechanism by cancelling the allowed range of the dual-currency basket ruble values (operational band) and regular interventions within and outside the borders of this band,” the bank said in a statement Monday.

“As a result of the decision the ruble exchange rate will be determined by market factors, which should promote efficiency of the monetary policy of the Bank of Russia and ensure price stability,” the central bank said. Foreign exchange intervention is still at the bank’s disposal, and is ready to use in the case of “threats to financial stability,” according to the statement. Propping up the ruble can cost the Central Bank of Russia billions of dollars per day, coming out of the country’s reserve fund. In October alone, the bank was forced to spend $30 billion to defend the weakening ruble. On November 5, the bank announced it had limited the reserves it is willing to spend to inflate the ruble to $350 million per day in order to slash speculation and volatility. The decision triggered a 3-day plunge for the Russian currency. On Monday, the ruble recovered slightly after Russian President Vladimir Putin assured speculative drops would cease in the near future.

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Welcome to the third world.

Police Use Department Wish List When Deciding Which Assets to Seize (NY Times)

The seminars offered police officers some useful tips on seizing property from suspected criminals. Don’t bother with jewelry (too hard to dispose of) and computers (“everybody’s got one already”), the experts counseled. Do go after flat screen TVs, cash and cars. Especially nice cars. In one seminar, captured on video in September, Harry S. Connelly Jr., the city attorney of Las Cruces, N.M., called them “little goodies.” And then Mr. Connelly described how officers in his jurisdiction could not wait to seize one man’s “exotic vehicle” outside a local bar. “A guy drives up in a 2008 Mercedes, brand new,” he explained. “Just so beautiful, I mean, the cops were undercover and they were just like ‘Ahhhh.’ And he gets out and he’s just reeking of alcohol. And it’s like, ‘Oh, my goodness, we can hardly wait.’ ”Mr. Connelly was talking about a practice known as civil asset forfeiture, which allows the government, without ever securing a conviction or even filing a criminal charge, to seize property suspected of having ties to crime.

The practice, expanded during the war on drugs in the 1980s, has become a staple of law enforcement agencies because it helps finance their work. It is difficult to tell how much has been seized by state and local law enforcement, but under a Justice Department program, the value of assets seized has ballooned to $4.3 billion in the 2012 fiscal year from $407 million in 2001. Much of that money is shared with local police forces. The practice of civil forfeiture has come under fire in recent months, amid a spate of negative press reports and growing outrage among civil rights advocates, libertarians and members of Congress who have raised serious questions about the fairness of the practice, which critics say runs roughshod over due process rights. In one oft-cited case, a Philadelphia couple’s home was seized after their son made $40 worth of drug sales on the porch.

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Politicians caught up in their own lies and denials. It shows you what France is made of. Marine Le Pen’s popularity doesn’t come out of nowhere.

Alleged Sarkozy Plot Rocks French Political Establishment (FT)

Leading figures from France’s two traditional parties have been enmeshed in a fresh political scandal involving former president Nicolas Sarkozy, complicating their attempts to halt voter defection to the far-right National Front. The latest “affair” to rock France’s political establishment involves the chief of staff of President François Hollande, who is already struggling with the lowest popularity ratings of any French leader since the second world war. It also touches François Fillon, a leading figure in the country’s centre-right UMP party and a former prime minister who has stated his determination to run for the presidency in 2017.

The scandal centres on a lunch in June during which Mr Fillon reportedly asked Jean-Pierre Jouyet, Mr Hollande’s chief of staff, to speed up judicial investigations into an alleged UMP cover-up of illegal overspending during the 2012 presidential re-election campaign of Mr Sarkozy, the UMP’s then candidate. “Hit him quickly,” Mr Fillon is alleged to have said to Mr Jouyet, referring to Mr Sarkozy. “If you don’t hit him quickly, you will see him come back.” Mr Sarkozy recently announced his return to French politics, and is campaigning to become head of his party in elections at the end of the month. The move is seen widely as the first step in a longer-term goal of competing for the presidency in 2017. Mr Fillon has vehemently denied the conversation about campaign financing with Mr Jouyet, which was first reported by two journalists at Le Monde, the French daily newspaper.

“I can only see in these incredible attacks an attempt at destabilisation and a plot,” Mr Fillon said on Sunday. He threatened the two Le Monde journalists with legal action and then turned his wrath on Mr Jouyet, accusing him of lying and threatening to take him to court. Mr Jouyet, a close personal friend of Mr Hollande but who also served in the previous centre-right government of Mr Sarkozy, on Sunday admitted he had discussed the alleged illegal overspending issue during the lunch with Mr Fillon – though stopped short of confirming Mr Fillon’s alleged request to speed up the judicial investigations against Mr Sarkozy. Mr Jouyet’s admission, reported by France’s AFP, came just a few days after he had told the news agency that the subject of the UMP campaign financing had not come up during the June lunch with Mr Fillon.

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Almost funny: “At least five people in the cabinet have been charged with serious offences such as rape and rioting. Finance Minister Arun Jaitley said any suggestions there were criminals in the cabinet were “completely baseless. “These are cases arising out of criminal accusations, not cases out of a crime .. ”

Nearly A Third Of Indian Cabinet Charged With Crimes (Reuters)

Attempted murder, waging war on the state, criminal intimidation and fraud are some of the charges on the rap sheets of ministers Indian Prime Minister Narendra Modi appointed to the cabinet on Sunday, jarring with his pledge to clean up politics. Seven of 21 new ministers face prosecution, taking the total in the 66-member cabinet to almost one third, a higher proportion than before the weekend expansion. At least five people in the cabinet have been charged with serious offences such as rape and rioting. Finance Minister Arun Jaitley said any suggestions there were criminals in the cabinet were “completely baseless. “These are cases arising out of criminal accusations, not cases out of a crime,” he told reporters on Monday, adding that Modi had personally vetted the new ministers. Ram Shankar Katheria, a lawmaker from Agra, was appointed junior education minister yet has been accused of more than 20 criminal offences including attempted murder and promoting religious or racial hostility.

The inclusion of such politicians does not sit easily with Modi’s election promise to root out corruption, and has led to criticism that he is failing to change the political culture in India where wealthy, tainted politicians sometimes find it easier to win votes. “It shows scant respect for the rule of law or public sentiment,” said Jagdeep Chhokar, co-founder of the Association for Democratic Reforms (ADR) which campaigns for better governance. “Including these people in the cabinet is a bad omen for our democracy.”Modi won the biggest parliamentary majority in three decades in May with a promise of graft-free governance after the previous government led by Congress party was mired in a series of damaging corruption scandals.

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” ..High energy prices and resistance to fracking are two key reasons why Europe’s economic recovery has lagged the U.S.”

Energy Is Europe’s ‘Big Disadvantage’: Deutsche Bank Co-Ceo (CNBC)

High energy prices and resistance to fracking are two key reasons why Europe’s economic recovery has lagged the U.S., the joint head of Germany’s largest bank by assets told CNBC. Jürgen Fitschen, co-chief executive of Deutsche Bank, said bureaucracy, education and productivity partially explained Europe’s difficulties, but laid much of the blame on the cost of energy in the region. “It is undeniable that Europe overall faces one very big disadvantage: that is cost of energy,” Fitschen, who is also head of the German Bankers Association, told CNBC in Frankfurt on Monday. “That (low energy prices) has been one of the factors that have stimulated the euphoria and the growth momentum in the States. That is something that cannot be replicated easily in Europe.”

Including taxes, domestic U.S. gas prices fell by 2.2% in 2013 on the previous year to 2.18 U.K. pence (3 U.S. cents) per kilowatt hour (kWh), according to the International Energy Agency. By comparison, Spanish domestic prices rose by 7.8% to 6.93 pence and British prices rose by 7.7% to 4.90 pence respectively. Fitschen said that the shale gas revolution helped explain why U.S. energy prices had fallen. The U.S. has embraced fracking—or hydraulic fracturing—for shale, which has helped lead a revival in some manufacturing industries and helped the country become less reliant on oil and gas imports. However, the process has met with far more opposition in Europe, due to environmental concerns relating to possible seismic tremors and a risk to water supplies.

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” .. an extraordinary “merry-go-round” of countries supporting each others’ companies. The US spends $1.4bn a year for exploration in Columbia, Nigeria and Russia, while Russia is subsidising exploration in Venezuela and China, which in turn supports companies exploring Canada, Brazil and Mexico. ”

Rich Nations Subsidize Fossil Fuel Industry By $88 Billion A Year (Guardian)

Rich countries are subsidising oil, gas and coal companies by about $88bn (£55.4bn) a year to explore for new reserves, despite evidence that most fossil fuels must be left in the ground if the world is to avoid dangerous climate change. The most detailed breakdown yet of global fossil fuel subsidies has found that the US government provided companies with $5.2bn for fossil fuel exploration in 2013, Australia spent $3.5bn, Russia $2.4bn and the UK $1.2bn. Most of the support was in the form of tax breaks for exploration in deep offshore fields. The public money went to major multinationals as well as smaller ones who specialise in exploratory work, according to British thinktank the Overseas Development Institute (ODI) and Washington-based analysts Oil Change International. Britain, says their report, proved to be one of the most generous countries. In the five year period to 2014 it gave tax breaks totalling over $4.5bn to French, US, Middle Eastern and north American companies to explore the North Sea for fast-declining oil and gas reserves.

A breakdown of that figure showed over $1.2bn of British money went to two French companies, GDF-Suez and Total, $450m went to five US companies including Chevron, and $992m to five British companies. Britain also spent public funds for foreign companies to explore in Azerbaijan, Brazil, Ghana, Guinea, India and Indonesia, as well as Russia, Uganda and Qatar, according to the report’s data, which is drawn from the OECD, government documents, company reports and institutions. The figures, published ahead of this week’s G20 summit in Brisbane, Australia, contains the first detailed breakdown of global fossil fuel exploration subsidies. It shows an extraordinary “merry-go-round” of countries supporting each others’ companies. The US spends $1.4bn a year for exploration in Columbia, Nigeria and Russia, while Russia is subsidising exploration in Venezuela and China, which in turn supports companies exploring Canada, Brazil and Mexico.

“The evidence points to a publicly financed bail-out for carbon-intensive companies, and support for uneconomic investments that could drive the planet far beyond the internationally agreed target of limiting global temperature increases to no more than 2C,” say the report’s authors. “This is real money which could be put into schools or hospitals. It is simply not economic to invest like this. This is the insanity of the situation. They are diverting investment from economic low-carbon alternatives such as solar, wind and hydro-power and they are undermining the prospects for an ambitious UN climate deal in 2015,” said Kevin Watkins, director of the ODI. [..] “The IPCC is quite clear about the need to leave the vast majority of already proven reserves in the ground, if we are to meet the 2C goal. The fact that despite this science, governments are spending billions of tax dollars each year to find more fossil fuels that we cannot ever afford to burn, reveals the extent of climate denial still ongoing within the G20,” said Oil Change International director Steve Kretzman.

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” .. It’s not for the United States. They want to sell it overseas, and I want to see that stopped.”

The Real Story Of US Coal: Inside The World’s Biggest Coalmine (Guardian)

In the world’s biggest coalmine, even a 400 tonne truck looks like a toy. Everything about the scale of Peabody Energy’s operations in the Powder River Basin of Wyoming is big and the mines are only going to get bigger – despite new warnings from the United Nations on the dangerous burning of fossil fuels, despite Barack Obama’s promises to fight climate change, and despite reports that coal is in its death throes. At the east pit of Peabody’s North Antelope Rochelle mine, the layer of coal takes up 60ft of a 250ft trough in the earth, and runs in an interrupted black stripe for 50 miles. With those vast, easy-to-reach deposits, Powder River has overtaken West Virginia and Kentucky as the big coalmining territory. The pro-coal Republicans’ takeover of Congress in the mid-term elections also favours Powder River.

“You’re looking at the world’s largest mine,” said Scott Durgin, senior vice-president for Peabody’s operations in the Powder River Basin, watching the giant machinery at work. “This is one of the biggest seams you will ever see. This particular shovel is one of the largest shovels you can buy, and that is the largest truck you can buy.” By Durgin’s rough estimate, the mine occupies 100 square miles of high treeless prairie, about the same size as Washington DC. It contains an estimated three billion tonnes of coal reserves. It would take Peabody 25 or 30 years to mine it all. But it’s still not big enough. On the conference room wall, a map of North Antelope Rochelle shows two big shaded areas containing an estimated one billion tonnes of coal. Peabody is preparing to acquire leasing rights when they come up in about 2022 or 2024. “You’ve got to think way ahead,” said Durgin.

In the fossil fuel jackpot that is Wyoming, it can be hard to see a future beyond coal. One of the few who can is LJ Turner, whose grandfather and father homesteaded on the high treeless plains nearly a century ago. Turner, who raises sheep and cattle, said his business had suffered in the 30 years of the mines’ explosive growth. Dust from the mines was aggravating pneumonia among his Red Angus calves. One year, he lost 25 calves, he said. “We are making a national sacrifice out of this region,” he said. “Peabody coal and other coal companies want to keep on mining, and mine this country out and leave it as a sacrifice and they want to do it for their bottom line. It’s not for the United States. They want to sell it overseas, and I want to see that stopped.”

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There’s a pattern here: ” .. the Madrid government contrived to have the plebiscite banned as unconstitutional”.

Angry Canary Islanders Brace For An Unwanted Guest: The Oil Industry (Guardian)

In most places the news that you’ve struck oil would be cause to crack open the champagne. But not in the Canary Islands where Spain’s biggest oil company Repsol is due to begin drilling off Lanzarote and Fuerteventura. “Our wealth is in our climate, our sky, our sea and the archipelago’s extraordinary biodiversity and landscape,” the Canary Islands president, Paulino Rivero, said. “Its value is that it’s natural and this is what attracts tourism. Oil is incompatible with tourism and a sustainable economy.” Rivero, a former primary school teacher, is on a crusade against oil and he is not alone. Protest marches have drawn as many as 200,000 of the islands’ 2 million inhabitants on to the streets. The regional government planned to consolidate public opinion with a referendum on 23 November. Voters were to be asked: “Do you believe the Canaries should exchange its environmental and tourism model for oil and gas exploration?”

As with the weekend’s scheduled referendum on Catalan independence, the Madrid government contrived to have the plebiscite banned as unconstitutional and Rivero has now commissioned a private poll he hopes will demonstrate the strength of public opinion. “The banning of the referendum reveals a huge weakness in the system,” said Rivero. “You have to listen to the people. There’s a serious discrepancy between what people here want and what the Spanish government wants. You are allowed to hold consultations under the Spanish constitution and what we wanted to do was completely legal. The problem we have is that some government departments have too close a relationship with Repsol.” Repsol is flush with cash after settling a long dispute with Argentina and is keen to develop what may be the country’s biggest oilfield after winning permission to drill in August. The company believes the fields may contain as much as 2.2bn barrels of oil and is investing €7.5bn to explore two sites about 40 miles (60km) east of Fuerteventura.

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Don’t worry be happy, nuke style.

Fukushima Radiation Found in Pacific Off California Coast (Bloomberg)

Oceanographers have detected isotopes linked to Japan’s wrecked Fukushima nuclear plant off California’s coast, though at levels far below those that could pose a measurable health risk. Volunteer ocean monitors collected the samples that tested positive for trace amounts of the isotope cesium-134 about 100 miles (160 kilometers) west of Eureka, California, the Massachusetts-based Woods Hole Oceanographic Institution said yesterday on its website. Tepco’s Fukushima Dai-Ichi plant, which released “unprecedented levels” of radioactivity during the March 2011 accident, was the only conceivable source of the detected isotopes, Woods Hole oceanographer Ken Buesseler said in the release.

Explosions during the accident, during which three reactors suffered meltdowns, sent a burst of radioactivity into the atmosphere, while water used to cool overheating fuel rods flowed into the ocean in the weeks after the disaster. Lower levels of radiation have continued to trickle into the ocean via contaminated groundwater. The radioactivity detected off the California coast was at levels deemed by international health agencies to be “far below where one might expect any measurable risk to human health or marine life,” according to Woods Hole. It’s also more than 1,000 times lower than acceptable limits in drinking water set by the U.S. Environmental Protection Agency, the organization said.

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” .. the background reality is too difficult to contemplate: an American living arrangement with no future.”

The Fate of the Turtle (James Howard Kunstler)

Anybody truly interested in government, and therefore politics, should be cognizant above all that ours have already entered systemic failure. The management of societal affairs is on an arc to become more inept and ineffectual, no matter how either of the current major parties pretends to control things. Instead of Big Brother, government in our time turns out to be Autistic Brother. It makes weird noises and flaps its appendages, but can barely tie its own shoelaces. The one thing it does exceedingly well is drain the remaining capital from endeavors that might contribute to the greater good. This includes intellectual capital, by the way, which, under better circumstances, might gird the political will to reform the sub-systems that civilized life depends on. These include: food production (industrial agri-business), commerce (the WalMart model), transportation (Happy Motoring), school (a matrix of rackets), medicine (ditto with the patient as hostage), and banking (a matrix of fraud and swindling).

All of these systems have something in common: they’ve exceeded their fragility threshold and crossed into the frontier of criticality. They have nowhere to go except failure. It would be nice if we could construct leaner and more local systems to replace these monsters, but there is too much vested interest in them. For instance, the voters slapped down virtually every major ballot proposition to invest in light rail and public transit around the country. The likely explanation is that they’ve bought the story that shale oil will allow them to drive to WalMart forever. That story is false, by the way. The politicos put it over because they believe the Wall Street fraudsters who are pimping a junk finance racket in shale oil for short-term, high-yield returns. The politicos want desperately to believe the story because the background reality is too difficult to contemplate: an American living arrangement with no future. The public, of course, is eager to believe the same story for the same reasons, but at some point they’ll flip and blame the story-tellers, and their wrath could truly wreck what remains of this polity. When it is really too late to fix any of these things, they’ll beg someone to tell them what to do, and the job-description for that position is ‘dictator’.

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