Jan 012017
 
 January 1, 2017  Posted by at 11:29 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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Claude Monet The Japanese Bridge 7 1924


Trump Leaves Open Possible Taiwan Meet, Questions Russia Hacking (R.)
Was Claim by DHS and FBI About Russian Hacking Fake News? (Spring)
Is the “Trump Trade” Already Unwinding? (WS)
Senator McCain Says US Stands With Ukraine Against Russia (R.)
Here’s How Much Each EU Nation Puts In And Takes Out Of The EU Budget (BI)
Universal Basic Income Trials Being Considered In Scotland (G.)
China’s Xi Offers Populist Message In New Year’s Eve Address (AP)
Narendra Modi Just Dug Himself a Great Big Hole (Varadarajan)
Turkish Policy Sets Syria On New Path (Sayigh)
Humanity May Self-Destruct, But The Universe Can Cope Perfectly Without Us (G.)

 

 

Trump’s been -partially- briefed: ”I also know things that other people don’t know so we cannot be sure..”. And he’s obviously not convinced, to say the least.

Trump Leaves Open Possible Taiwan Meet, Questions Russia Hacking (R.)

U.S. President-elect Donald Trump on Saturday left open the possibility of meeting with Taiwan’s president if she visits the United States after he is sworn in on Jan. 20 and also expressed continued skepticism over whether Russia was responsible for computer hacks of Democratic Party officials. In remarks to reporters upon entering a New Year’s Eve celebration at his Mar-a-Lago estate, Trump said, “We’ll see,” when pressed on whether he would meet Tsai Ing-wen, Taiwan’s president if she were to be in the United States at any point after he becomes president. Taiwan’s president will be in transit in Houston on Jan. 7 and again will be in transit in San Francisco on Jan. 13. Beijing bristled when Trump, shortly after his Nov. 8 victory, accepted a congratulatory telephone call from the Taiwan leader and has warned against steps that would upset the “one-China” policy China and the United States have maintained for decades.

Talk of a stop-over in the United States by the Taiwan president has further rattled Washington-Beijing relations. On another foreign policy matter, Trump warned against being quick to pin the blame on Russia for the hacking of U.S. emails. The Washington Post also reported on Friday that Moscow could be behind intrusion into a laptop owned by a Vermont electric utility. U.S. intelligence officials have said that they are confident Russia was behind the hacks, which could have played a role in Trump’s defeat over Democratic presidential candidate Hillary Clinton. “I think it’s unfair if we don’t know. It could be somebody else. I also know things that other people don’t know so we cannot be sure,” Trump said. Asked what that information included, the Republican President-elect said, “You will find out on Tuesday or Wednesday.” He did not elaborate.

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Seems to depend on who reports on it.

Was Claim by DHS and FBI About Russian Hacking Fake News? (Spring)

An important research principle is to follow the money. People around the world need to ask themselves who has the money and technical ability to be running hundreds and perhaps thousands of real servers and real IP addresses from fake corporations using fake websites in fake locations in more than 40 nations around the world? What agency has already been proven to be running mass surveillance on billions of people in more than 40 nations all around the world? Whose military cyber budget is more than 10 times larger than the cyber warfare budget of the rest of the world combined? There is certainly an elephant in the room – but it is not a Russian elephant. At a televised press conference in April 2016, former NSA agent Edward Snowden asked the Russian leader Vladimir Putin if the Russian government engaged in mass surveillance of millions of people in a manner similar to the NSA.

Putin replied that Russian law prohibited the Russian government from engaging in mass surveillance. Putin then pointed out that the Russian military budget was less than 10% of the US military budget. So even if they wanted to engage in mass surveillance, they simply did not have the money. People also need to ask themselves why the FBI/DHS chose to place their evidence in a CSV file and XML file rather than a normal document or spreadsheet. If this were real evidence, it would have been placed directly in the PDF report for everyone to read – not hidden away in a file the general public has little ability to read. Finally, for the FBI or the DHS to claim that the XML-CSV file contains evidence or even indicators of Russian hacking is simply a false statement. It is a perfect example of fake news. Any news agency promoting this claim without doing even the most basic of research that would easily confirm it is false should be listed as a fake news agency.

The real question that we should all be asking is why the DHS and FBI would destroy their reputation by posting such a fake report? Several years ago, our CIA claimed that Iraq had weapons of mass destruction. We now know that Iraq had no weapons of mass destruction – meaning that we went to war and spent over a trillion dollars on a fake report. Is this new fake report a pretext for launching a cyber war against Russia? Is it intended to justify increasing US military spending? It is hard to say what the real purpose of this fake DHS-FBI report is. But the fact that this silly list of IP addresses was the best evidence they could provide should be a strong indication that there really is no evidence of Russian hacking. Instead, it is more likely that Wikileaks is telling the truth in stating that they got the emails from a disgruntled Democratic Party insider.

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There’s so much downside there it’s scary.

Is the “Trump Trade” Already Unwinding? (WS)

The S&P 500, after having ended 2015 down 0.7%, ended 2016 up 9.5%, including a big swoon early in the year. From February 11, when it bottomed out at 1,810, it has surged 23.6%. And bonds went on a wild ride. The 10-year Treasury yield ended 2016 at 2.445% up from 2.273% at end of 2015. It hit 2.57% at peak Trump Trade, up over a full percentage point from the summer. Over the fourth quarter, the yield jumped 84 basis points, the largest quarterly jump since 1994. And prices, which move inverse to yields, clobbered bondholders. But note the decline in yield since December 20:

And stocks partied. Since the election, financials surged, bringing the gain for the year to 29.1%, the best-performing sector in the S&P 500. Goldman Sachs, whose ex-executives are now heavily represented in the Trump administration, shot up 36% since the election and 51% since the beginning of October when Trump’s victory became more than just a possibility. GS was one of the best Trump Trades out there. Alas, it too has started to peter out. GS is now down 2.5% from peak Trump-Trade, and other banks have followed. Insiders at the banks were preparing for it, it seems, because on December 9, just before bank stocks started losing ground, we found…

Mortgage rates have soared from around 3.4% for much of the summer to 4.32%, according to Freddie Mac. This is now reverberating through the housing market in multiple ways, with some people rushing to buy to lock in the rates before they go even higher, and others waiting for rates to come down and not buying, and still others being completely priced out by mortgage rates that are nearly a percentage point higher than they’d been a few months ago, and the first red flags on home sales are now cropping up:

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Oh, go away!

Senator McCain Says US Stands With Ukraine Against Russia (R.)

Republican U.S. Senator John McCain promised on Saturday continued support for Kiev in the face of aggression from Moscow, as he spent New Year’s Eve on the front line in Ukraine’s eastern conflict zone. McCain was one of a bipartisan group of 27 U.S. senators who sent a letter to President-elect Donald Trump in December, urging him to take a tough line against Russia over what they termed its “military land grab” in Ukraine. “I send the message from the American people – we are with you, your fight is our fight and we will win together,” McCain was quoted as saying by Ukrainian President Poroshenko’s press service. “In 2017 we will defeat the invaders and send them back where they came from. To Vladimir Putin – you will never defeat the Ukrainian people and deprive them of their independence and freedom,” McCain said after a visit to a military base in the southeastern town of Shyrokyne.

Trump signaled during his campaign that he might take a softer line in dealings with Moscow, repeatedly praising Russian President Putin’s leadership. Trump’s election caused jitters in Ukraine but officials in Kiev hope that the incoming president’s policies, influenced by Republican hawks and a Republican-voting Ukrainian diaspora, will be friendlier towards Ukraine than his campaign rhetoric might have suggested. Ukraine has relied on Western support and economic aid since street protests in 2014 which toppled a Kremlin-backed president and were followed by a war with pro-Russian separatists and Russia’s annexation of the Crimea peninsula from Ukraine.

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The enormous amounts going to France, Spain, Italy, Belgium are something to be very concerned about.

Here’s How Much Each EU Nation Puts In And Takes Out Of The EU Budget (BI)

One of the biggest political stories of 2016 has been Brexit and much of the debate both before and after June’s vote to leave the EU has focused around whether Britain will be financially better or worse off after leaving the EU. The “Vote Leave” campaign famously emblazoned their battle bus with a figure of £350 million, claiming that was what the UK sent to Brussels each week and that sum could be spent on the NHS instead. The figure was subsequently discredited, as it was a gross sum and didn’t take into account the fact that Britain also benefits from EU grants and funding. However, a recent House of Commons briefing paper on the UK’s funding from the EU shows that Britain does, in fact, put more into the EU budget than it takes out.

The UK has averaged around €12 billion in EU funding each year between 2011-15 but over that same period made an average net contribution of €15 billion. Britain is one of nine EU members that are net contributors to the European Union’s budget (meaning they put in more money than they take out.) Here’s the House of Commons chart showing each member states net contributions against their EU funding:EU funding House of Commons Briefing Paper The fact that Britain is a net contributor means that, in theory, the UK could stand to gain money after it leaves the EU. However, this does not account for any potential economic fluctuations as a result of Brexit — if the economy suffers then any gains from not paying into the budget could easily be wiped out by falling tax receipts.

There is also a very real possibility that the UK may have to keep paying into the EU budget if it wants to maintain access to the EU Single Market. The UK will also have to continue paying into the EU budget until it formally leaves the EU and senior European negotiators have signalled they will try and make Britain pay up to €60 billion to leave, to cover previous budget commitments, pension liabilities, and other costs. In other words, while on paper it might look like leaving the EU will give Britain more money for inward investment, Brexit could end up costing the UK just as much as EU membership — or worse, more.

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I’m all for a good basic income trial. But I’m very afraid that none of them will be adequate, and that this will be used to discredit the entire idea. And please don’t use the term universal for small scale experiments, it’s misleading.

Universal Basic Income Trials Being Considered In Scotland (G.)

Scotland looks set to be the first part of the UK to pilot a basic income for every citizen, as councils in Fife and Glasgow investigate trial schemes in 2017. The councillor Matt Kerr has been championing the idea through the ornate halls of Glasgow City Chambers, and is frank about the challenges it poses. “Like a lot of people, I was interested in the idea but never completely convinced,” he said. But working as Labour’s anti-poverty lead on the council, Kerr says that he “kept coming back to the basic income”. Kerr sees the basic income as a way of simplifying the UK’s byzantine welfare system. “But it is also about solidarity: it says that everyone is valued and the government will support you. It changes the relationship between the individual and the state.”

The concept of a universal basic income revolves around the idea of offering every individual, regardless of existing welfare benefits or earned income, a non-conditional flat-rate payment, with any income earned above that taxed progressively. The intention is to provide a basic economic platform on which people can build their lives, whether they choose to earn, learn, care or set up a business. The shadow chancellor, John McDonnell, has suggested that it is likely to appear in his party’s next manifesto, while there has been a groundswell of interest among anti-poverty groups who see it as a means of changing not only the relationship between people and the state, but between workers and increasingly insecure employment in the gig economy.

Kerr accepts that, while he is hopeful of cross-party support in Glasgow, there are “months of work ahead”, including first arranging a feasibility study in order to present a strong enough evidence base for a pilot. “But if there is ever a case to be made then you need to test it in a place like Glasgow, with the sheers numbers and levels of health inequality. If you can make it work here then it can work anywhere.”

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Now Xi is designated populist too, because he said: “On this new year, I am most concerned about the difficulties of the masses: how they eat, how they live, whether they can have a good New Year, or a good Spring Festival..” And I thought when incumbents say these things, that’s not populist. I may never understand.

China’s Xi Offers Populist Message In New Year’s Eve Address (AP)

Chinese President Xi Jinping said Saturday that his government would continue to focus on poverty alleviation at home and resolutely defending China’s territorial rights on the foreign front. Xi made the televised remarks in his annual New Year’s Eve address, in which he touted China’s scientific accomplishments, highlighting its large new radio telescope and space missions, and the country’s growing role as a leader in global affairs. Standing before a mural of the Great Wall, Xi said his administration successfully hosted a G-20 summit, pushed forward with China’s “One Belt One Road” pan-Eurasian infrastructure project and established the Asian Infrastructure Investment Bank.

China has upheld its peaceful development while resolutely defending its territorial sovereignty and maritime rights, Xi said, making a reference to an international tribunal ruling last summer against China’s claims in the contested South China Sea. “If anyone makes this an issue of question, the Chinese people will never agree!” he said, one of the few points in his 10-minute address when his voice rose noticeably. For most of his address, Xi struck a populist tone, saying he was above all concerned about the living conditions of the people and vowed that improving employment, education, housing and health care would be a responsibility that his ruling Communist Party would never shirk from. China lifted 10 million people out of poverty in 2016, Xi said.

“On this new year, I am most concerned about the difficulties of the masses: how they eat, how they live, whether they can have a good New Year, or a good Spring Festival,” Xi said, as the television broadcast cut to footage of his visits this year to impoverished rural areas. Xi also promised to shore up Communist Party discipline and “unwaveringly” maintain his anticorruption campaign against high- and low-ranking officials alike. He said that “supply-side” economic reforms were making progress and that the party would continue to push reform and rule by law during the 19th National Congress, scheduled for late 2017. “As long as the party forever stands with the people, we will be able to walk the long march of our generation,” he said.

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A Lakh is one hundred thousand. Still confusing as f**k.

Narendra Modi Just Dug Himself a Great Big Hole (Varadarajan)

It was a speech of not just shifting goalposts but vanishing playing fields, and yet Narendra Modi couldn’t resist making a rhetorical point about black money that might well prove costly for him by the time 2019 comes around. “I wish to share some information with you, which will either make you laugh, or make you angry,” he said, with a flourish half-way through his speech. This was the point where everyone expected him to reveal how many old Rs 500 and 1000 notes had become ‘worthless paper’ thanks to demonetisation but he had another number in mind: “According to information with the government, there are only 24 lakh people in India who accept that their annual income is more than 10 lakh rupees. Can we digest this? Look at the big bungalows and big cars around you… If we look at any big city, it would have lakhs of people with annual income of more than 10 lakh.”

Until then, the prime minister had sought to sweep the growing public concerns about the effects of his demonetisation decision under a fraying carpet of nationalism. But by drawing attention to a stark statistic in an attempt to provide some justification for the chaos he has unleashed in the lives of hundreds of millions of poor Indians, Modi has unwittingly laid down a new metric by which the success or failure of his supposed drive against black money must be judged: will he manage to add the “lakhs of people” who have an income of more than Rs 10 lakh to the list of those who pay income tax? If he doesn’t, then what was the point of subjecting the whole country to so much disruption and pain? Finance minister Arun Jaitley initially claimed that a certain proportion of the demonetised notes would remain outside the banking system and get extinguished, thus providing a blow to the black economy and a fiscal boost to the government.

When they realised there was unlikely to be significant extinguishing and that most of the high denomination notes in circulation would probably end up getting deposited, Modi and Jaitley claimed the income tax authorities would be able to track down the owners of black money since their funds had entered the banking system. Now that it is apparent the IT department will not find it that easy to undertake such a massive exercise – its inefficiency is the reason the list of those with official incomes of Rs 10 lakh and over is just 24 lakh to begin with and is unlikely to grow – Modi has tried to sell another bizarre idea to the public about why the cashless hardship they are putting up with is in the national interest.

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Putin is tightening his grip on Erdogan. Who held a speech yesterday proclaiming that Turkey is in the first independence war in 93 years, or something like that. But that’s strictly for domestic use.

Turkish Policy Sets Syria On New Path (Sayigh)

Turkish policy has been evolving at a quickening pace. The decision to lean on the opposition to allow thousands of its fighters to abandon the effort to lift the regime siege of eastern Aleppo in order to spearhead a Turkish-backed push against Kurdish-held areas to the north last August ensured the fall of one of the most important opposition strongholds in Syria four months later. Remaining opposition forces in the northwest have significant stockpiles of weapons and ammunition, but are wholly dependent on Turkey for further military resupply and for the flow of trade and international humanitarian assistance. Turkey has not abandoned the opposition completely, but it is clearly working to a new set of policy assumptions and objectives in Syria.

That these include a strategic decision to abandon the effort to force Assad from power is already plain. Talk of setting up a safe zone in northern Syria has never been credible, despite considerable bluster. Moscow insiders claim Turkish President Recep Tayyip Erdogan is also abandoning his categorical rejection of significant Kurdish autonomy in northern Syria, so long as he can block the same thing in Turkey. With President-Elect Donald Trump about to take office in the US, there is little reason for Turkey to expect to counter-balance Russian policy proposals on Syria. These calculations prompted Turkey to accept the fate of Aleppo – which it had long presented as a “red line” that the Assad regime should not cross – and then to broker a ceasefire with Russia immediately after its fall.

The alacrity with which the main political and military opposition groupings have announced their support for the latest ceasefire is the surest measure of the extent of the shift in Turkey’s policy and of its determination to enforce compliance, whatever the provocations from the government side. The real question, then, is not whether the latest ceasefire will hold, but how far Turkey will go in making the Syrian opposition accept what comes next, should the peace talks jointly sponsored by Russia and Turkey take place within the next month as officially scheduled. Indeed, even if the ceasefire fails or if the talks are unsuccessful – or not held at all – Turkish policy towards Syria is set on a new path.

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Destruction as a religious comfort zone. Oh well, people go for what feels good.

Humanity May Self-Destruct, But The Universe Can Cope Perfectly Without Us (G.)

In a Scandinavian hotel a few years ago, I came across a documentary I didn’t expect to watch for more than a minute or two, but at least it was in English. It was past time to go to bed, but I ended up watching the whole thing. Aftermath: Population Zero imagines that overnight humanity vanishes from the planet. You may have seen it. The immediate effects of human departure are sentimentally saddening: pets die, no longer competent to fend for themselves. Some livestock fares poorly, though other domesticated animals romp happily into the wild. Water cooling fuel rods of nuclear power plants evaporate, and you’d think that would be the end of everything – but it isn’t. Radioactivity subsides. Mankind’s monuments to itself decay, until every last skyscraper has rusted and returned to dirt.

Animals proliferate, flora thrive, forests rise. Bounty, abundance and beauty abound. Antelopes leap from wafting golden grasses. It was all very exhilarating, really. I went to sleep that night with a lightened heart. Ever since, that wafting grasses image has been a comforting touchstone. We speak often of “destroying the planet” when what we mean is destroying its habitability for humans. The humblingly immense else-ness of what is, in which our species is collectively a speck, extant for an eye blink, lets us off the hook. Global warming, Syrian civil war, domestic violence, Donald Trump? This too shall pass.

I’m not a religious person. Chances are that the universe neither treasures nor regrets us. It permits us, with a marvellous neutrality, and later it may permit artificial intelligence, humanity 2.0, or a lot more bugs instead. We can’t comprehend all that phantasmagorical stuff out there, but we also can’t kill it. That gives me hope. Although we’re a remarkably successful biological manifestation – and so is mould – our aptitude for annihilation is largely limited to wiping ourselves out. The gift of self-destruction is a minor, not to mention stupid, power, and apparently humanity’s suicide would be relatively safe, like a controlled explosion. The universe would get on perfectly well without us once we’d gone.

I strongly associate the notion of aftermath with TC Boyle’s short story Chicxulub. While relating the intimate, personal account of learning that his teenage daughter has been hit, perhaps fatally, by a car, the narrator digresses to explain the shockingly high likelihood that our planet will be hit by an asteroid large enough to extinguish our species. For the narrator, his daughter’s death and the end of the world are indistinguishable. The text is shot through with a piercing sorrow, over all our pending losses – of children, of the world we’ve made together as a race. This, too, gives me hope – that I’m not a misanthrope after all. I would miss my brother, my husband; with all our shortcomings, I would also miss the family of man. The capacity for grief, the flipside of love, consoles me as much as the detached long view of aftermath.

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Dec 282016
 
 December 28, 2016  Posted by at 10:23 am Finance Tagged with: , , , , , , , , , ,  No Responses »
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Albert Kahn Paris, Autochrome Lumière color photo 1914


Turkey and Russia Agree on Syria Ceasefire, Into Effect by Midnight (R.)
Erdogan Says He Has Evidence US-Led Coalition Has Given Support To ISIS (Ind.)
Turkey Says Saudis, Qatar Should Attend Syria Peace Talks (AP)
‘US Raised Middle East Terrorists & Wants Them To Stay’ – Iran Def Min (RT)
Toshiba Shares Fall 20%, Hit Limit, As US Nuclear Writedown Sinks In (AFP)
China To Rein In Outward Investment As Domestic Growth Stalls (G.)
Chinese Interbank Funding Freezes Again As Overnight Repo Hits 33% (ZH)
No Happy New Year in China as Currency, Liquidity Fears Loom (BBG)
Greek Taxpayers Face €4 Billion Tax Bill By New Year’s Eve (Xinhua)
Clash Over New Government Sends Romania Spiraling Toward Crisis (BBG)
Inequality and Skin in the Game (Taleb)
The New Normal ‘Safety Net’: Surging Disability Benefits Claims (ZH)
The Battle Against The ‘Superbugs’: Transplants, Chemotherapy At Risk (CNBC)

 

 

Obama’s PR fiasco widens.

Turkey and Russia Agree on Syria Ceasefire, Into Effect by Midnight (R.)

Turkey and Russia have agreed on a proposal toward a general ceasefire in Syria, Turkey’s state-run Anadolu Agency said on Wednesday, and will aim to put it into effect by midnight. Anadolu, citing sources, said the two countries have reached a consensus that will be presented to participants in the conflict on expanding the ceasefire that was established in Aleppo earlier this month. Russia, Iran and Turkey said last week they were ready to help broker a peace deal after holding talks in Moscow where they adopted a declaration setting out the principles any agreement should adhere to. Arrangements for the talks, which would not include the United States and be distinct from separate intermittent U.N.-brokered negotiations, remain hazy, but Moscow has said they would take place in Kazakhstan, a close ally. Russia’s foreign minister on Tuesday said the Syrian government was consulting with the opposition ahead of possible peace talks, while a Saudi-backed opposition group said it knew nothing of the negotiations but supported a ceasefire.

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Accuse the accuser.

Erdogan Says He Has Evidence US-Led Coalition Has Given Support To ISIS (Ind.)

The Turkish President Recep Tayyip Erdogan says he has uncovered evidence that US-led coalition forces have helped support terrorists in Syria – including Isis. American-led forces have been working alongside Syrian rebels fighting President Bashar al-Assad but have attempted to avoid helping Isis and other Islamist militant groups. However, speaking on Tuesday in the Turkish capital, Ankara, he said he believed they had given support to a variety of militant groups, including Isis Kurdish outfits YPG and PYD. “They were accusing us of supporting Daesh [Islamic State],” he told a press conference, according to Reuters. “Now they give support to terrorist groups including Daesh, YPG, PYD. It’s very clear. We have confirmed evidence, with pictures, photos and videos.”

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So Turkey is accused of aiding ISIS, now accuses the US of doing just that, and wants known ISIS backers to join peace talks. Enter Putin stage left.

Turkey Says Saudis, Qatar Should Attend Syria Peace Talks (AP)

Turkish President Recep Tayyip Erdogan says Saudi Arabia and Qatar should join its meeting with Russia and Iran to discuss Syrian peace efforts. Russia, Turkey and Iran, which helped broker the withdrawal of civilians and militants from the Syrian city of Aleppo, have agreed to hold talks on Syria in Kazakhstan next month. Erdogan said Tuesday the meeting of foreign ministers should include Saudi Arabia and Qatar, saying they had “shown goodwill and given support” to Syria. Turkey, Saudi Arabia and Qatar are the main backers of rebels seeking to topple Syrian President Bashar Assad, who is closely allied with Moscow and Tehran. Erdogan added, however, that Turkey would not take part if any “terror organizations” are also invited, referring to Syrian Kurdish groups affiliated with Kurdish insurgents in Turkey.

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All the US has ever bet on is chaos.

‘US Raised Middle East Terrorists & Wants Them To Stay’ – Iran Def Min (RT)

Washington appears unready to play a serious role in fighting Islamic State (IS, formerly ISIS/ISIL), as it has fostered terrorists itself and now wants them to remain in the Middle East, Iranian Defense Minister Hossein Dehghan told RT. “The Western coalition is of a formal nature, they have no real intention to fight neither in Syria nor in Iraq. We don’t see any readiness on their part to play a truly useful and meaningful role in fighting IS, because it’s them who have raised terrorists and they are interested in keeping them there,” Dehghan said. According to the Iranian defense minister, Tehran has never coordinated its operations with the Americans and “will never collaborate with them.”

“Maybe the coalition forces would like to see terrorists weakened, but certainly not destroyed, because those terrorists are their tool for destabilizing this region and some other parts of the world.” He also mentioned Al-Nusra Front (also known as Jabhat Fateh al-Sham) and said that terrorists in Syria receive support from the US, Saudi Arabia and Qatar. He also accused Turkey of supporting terrorists on the ground. “If Iran, Russia and Syria were to reach an agreement with Turkey to end Turkish support for those terrorist groups, particularly IS and Jabhat al-Nusra, and start fighting them, then I think we would see the situation in Syria improve,” he added. According to the minister, any ceasefire in Syria demands guarantees and all parties should agree to fulfill the conditions for a truce.

“We shouldn’t let Islamic State or Al-Nusra groups take part in the ceasefire. All other groups should start a political process and negotiations with the Syrian government.” He added that after the truce comes into force, it is important to separate terrorists and opposition groups ready to negotiate with the Syrian government. All sides should fight IS and Al-Nusra Front, Dehghan stated, adding that everyone should stop supporting terrorists in political, financial and military areas.

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That’s a big company to have this happen to.

Toshiba Shares Fall 20%, Hit Limit, As US Nuclear Writedown Sinks In (AFP)

Toshiba shares dived more than 20% on Wednesday in their second straight double-digit plunge as the company said it may book a one-time loss of several billion dollars over its US nuclear business. Toshiba’s stock price dropped by 20.42% to 311.60 yen, the largest fall allowed for a single day, about 30 minutes after the opening bell, as the company failed to remove investor worries over the potential risk. On Tuesday the Tokyo-based conglomerate said costs linked to the acquisition in 2015 by its US subsidiary of a nuclear service company would possibly come to “several billion US dollars, resulting in a negative impact on Toshiba’s financial results”. The exact figure of the potential writedown was still being worked out, Toshiba president Satoshi Tsunakawa said after the announcement, apologising for “causing concern”.

The company statement suggested the figure would be released soon, citing an end-of-year deadline. Toshiba shares had closed nearly 12% lower on Tuesday on media reports about the potential loss. Analysts said uncertainty was fuelling investor anxiety. “Concerns have yet to be cleared away as they said they didn’t know the figure,” Yukihiko Shimada, senior analyst at SMBC Nikko Securities, told AFP. SMBC Nikko credit analysts Yutaka Ban and Kentaro Harada said in a report that investors “can’t be optimistic about the situation” even though the total writedown may not end up as big as the 500 billion yen (US$4.3bn) reported by local media. Nomura Securities analyst Masaya Yamasaki said in a report issued late on Tuesday that the expected loss “is negative for the company as its financial standing is fragile”.

Tsunakawa answered in the affirmative when asked if Toshiba was considering boosting capital. Its chief financial officer, Masayoshi Hirata, said that after the figure was confirmed the company would “explain and seek support” from financial institutions. Toshiba said the possible loss was related to the valuation of the purchase by subsidiary Westinghouse Electric of the nuclear construction and services business of Chicago Bridge and Iron.

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Something’s not right.

China To Rein In Outward Investment As Domestic Growth Stalls (G.)

Beijing has signalled plans to curb Chinese firms’ investment in foreign assets, after revealing that companies from China are on course to spend 1.12 trillion yuan (£130bn) on everything from British football clubs to a Hollywood film producer in 2016. Companies from China ramped up their spending on overseas assets during the year, as a weakening domestic economy saw investors turn their attention overseas. A diverse array of targets included the maker of Godzilla, Aston Villa Football Club and the pub in which former prime minister David Cameron and Chinese premier Xi Jinping once shared a pint. The spending spree boosted non-financial overseas investment 55% in the first 11 months of 2016, putting Chinese companies on course to spend £130bn this year, compared with £86bn in 2015, said commerce minister Gao Hucheng.

While foreign investment has soared, the amount of money flowing into the country is set to remain broadly flat at £92bn. This means the difference between investments abroad and those coming into China has reached an unprecedented £39bn. The widening gap has triggered concerns about capital flight, where investors send their money out of the country rather than investing it to spur domestic growth. Gao signalled that Beijing would move to address the investment gap by reining in Chinese firms’ overseas spending and making it easier for firms from abroad to access the Chinese economy.

He said the government would “promote the healthy and orderly development of outbound investment and cooperation in 2017”, in remarks at a conference that were published on the commerce ministry’s website. In November it was reported that China was preparing a clampdown on non-Chinese mergers and acquisitions. Separately, the ministry said on its blog that China would sharply reduce restrictions on foreign investment access in 2017 to make it easier for overseas firms to spend their cash in the People’s Republic. No details were given on what restrictions would be changed.

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Even worse than in other years, and there’s a reason for that.

Chinese Interbank Funding Freezes Again As Overnight Repo Hits 33% (ZH)

… when it comes to more traditional unsecured short-term funding markets, like the simple overnight repo, these reflect overall levels of liquidity in the interbank market, or as the case may be, complete absence thereof. And while China is notorious for suffering major liquidity shortages heading into a new year (including the non-lunar variety), what happened overnight in China is worth pointing out because according to Bloomberg data, the overnight repo rate traded on Shanghai Stock Exchange soared as much as 30.87% to 33%, the highest since September 29, before closing at 18.55%.

And while some of the liquidity squeeze was certainly calendar driven, what is more concerning for Chinese markets, where as we reported recently the local authorities, regulators and even press are confirming that the government crackdown on the credit and housing bubble may be serious for once due to fears about “rising social tensions”, much of the overnight repo rate spike was driven by the PBOC which pulled a net 150 billion yuan of funds in open-market operations today, the most since December 7. The result was another brief, but painful, freeze of the interbank lending market. Should the PBOC continue to not only not inject liquidity among banks, but aggressively withdraw it, it is possible that a repeat of the 2013 bank crisis when as a result of the government’s eagerness to delever the economy it almost crushed its financial sector (it ultimately gave up, with Chinese debt/GDP subsequently rising to 300% according to the IIF), should be one of the more notable risk factors for 2017.

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How can Beijing NOT devalue?

No Happy New Year in China as Currency, Liquidity Fears Loom (BBG)

China bulls could be facing a grim New Year’s eve. The first day of 2017 is when an annual $50,000 quota to convert the yuan into foreign exchange resets, stoking concern there will be a rush to sell the local currency. With tax payments and a regulatory assessment also tightening liquidity in the money market toward year-end, January may bring scant relief as lenders prepare for stronger cash demand before Lunar New Year holidays, which are only a month away. China’s markets are seeing renewed pressure this month as the Federal Reserve projects a faster pace of rate increases for 2017 and its Chinese counterpart tightens monetary conditions to spur deleveraging and defend the exchange rate. The declines are capping off a tough year for investors during which bonds, shares and currency all slumped.

“You have Chinese New Year quite early, and because of that one-month window, most of the banks will try to lock the money in a three-month cycle,” said Arthur Lau, Hong Kong-based head of Asia ex-Japan fixed income at PineBridge Investments. “The current situation in the bond market is partly because of year-end and because of Chinese New Year.” The week-long Lunar New Year holidays are traditionally a time when people give out cash gifts and companies pay employee bonuses. China’s 10-year government bond yield has surged 21 basis points in December, poised for its biggest monthly increase since August 2013, and its first annual gain since that same year. The yuan’s 6.6% decline in 2016 puts it on course for its worst year since 1994, while the Shanghai Composite Index is headed for its largest drop in five years.

The three-month interbank rate known as Shibor rose for a 50th day, its longest streak since 2010, to an 18-month high on Wednesday. The overnight repurchase rate on the Shanghai Stock Exchange jumped to as high as 33% the day before, the highest since Sept. 29. As banks become more reluctant to offer cash to other types of institutions, the latter have to turn to the exchange for money, said Xu Hanfei at Guotai Junan Securities in Shanghai. Bond and money markets may stabilize after Lunar New Year holidays – which start Jan. 27 and end Feb. 2 – though they’re unlikely to return to levels before the latest rout owing to yuan weakness and tighter monetary policy, said Lau. The People Bank of China’s yuan position – a gauge of capital flows – dropped the most in 10 months in November amid expectations for faster U.S. rate increases.

The onshore yuan’s surging trading volume suggests outflows are quickening, according to Harrison Hu, chief greater China economist at RBS. The daily average value of transactions in Shanghai climbed to $34 billion in December as of Monday, the highest since at least April 2014, according to data from China Foreign Exchange Trade System. “In the new year, the new foreign-exchange purchase quota starts, so we expect yuan positions in January to drop significantly,” Liu Dongliang at China Merchants Bank wrote in a note this month. “Within the foreseeable future, the market will be pessimistic about funding conditions. It happens to be near year-end now, where money markets are tight, and after New Year’s Day it’s almost Chinese New Year.”

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“Happy New Year with fewer taxes!”

Greek Taxpayers Face €4 Billion Tax Bill By New Year’s Eve (Xinhua)

Greek taxpayers are obliged to pay some €4 billion in taxes by New Year Eve, as outstanding debts to the state have soared to more than €94 billion by November, according to Finance Ministry data. However, some recession-hit taxpayers seem unable to pay the full taxes within deadlines and apply for settlements to pay their debts in more installments. To collect as much as possible to reach bailout targets, the Greek state has launched confiscation procedures for debtors. According to official data, in the first 10 months of 2016, the procedures had been applied onto 108,729 debtors. And another 1.6 million debtors are facing confiscation in early 2017 should they do not immediately settle their debts to the Tax office.

However, some debtors complained about the levies, saying they can not afford any more as they have been struggling to make ends meet amid seven-year austerity. Many financial analysts also warned that Greek society has reached a breaking point due to over-taxation combined with salary, pension cuts and high unemployment rates. Despite the levies, the country’s tax evasion still exists. According to a recent study conducted by the independent Greek research organization diaNEOsis, tax evasion in Greece is estimated range between 6% and 9% of the country’s GDP, which means a loss of some €16 billion in taxes a year. Experts as well as ordinary citizens urge the government to do more to address widespread tax evasion instead of adding more burdens on those who are trying to pay their share.

While mentioning the tax obligations due by Friday, the Hellenic Confederation of Commerce and Entrepreneurship (ESEE), which represents small and medium-sized companies in Greece, wishes in an e-mailed card to its members on Tuesday “Happy New Year with fewer taxes!”

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is this just a stunt to get rid of the president, proposing a female Muslim for PM?

Clash Over New Government Sends Romania Spiraling Toward Crisis (BBG)

Romania tumbled toward a new political crisis after President Klaus Iohannis rejected a prime minister nominee from the Social Democratic Party, which threatened to suspend him after winning a landslide election victory this month. Iohannis called on the party to pick someone else to lead a government after Sevil Shhaideh, a former development minister with little previous political influence, was picked by Social Democrat leader Liviu Dragnea last week. Dragnea, who can’t take the post himself because he was previously convicted of rigging a referendum, called the decision unjustified. He said he’ll consider his options, including potentially starting the procedure to suspend Iohannis, and will announce a decision by Dec. 29.

“It seems the president clearly wants to be suspended,” Dragnea said in a speech in Bucharest on Tuesday. “We’ll weigh our options very carefully, because we don’t want to take emotional decisions. We don’t want to trigger a political crisis for nothing, but if we come to the conclusion that the president must be suspended, I won’t hesitate.” The standoff in the European Union’s second-poorest country raises the risk of returning to the type of crisis that led to months of bickering between top leaders and culminated in Traian Basescu’s suspension from the presidency in 2012. It may also undermine one of the fastest paces of growth in the EU by delaying investment and the tapping of development funds, an area where Romania has ranked last in the 28-member club.

Iohannis has the constitutional right to reject any premier candidate that he doesn’t consider fit for the job. He didn’t give a reason for his decision. The choice of Shhaideh, a member of the mainly Orthodox country’s tiny Muslim minority, had fueled speculation that Dragnea may try to run the government himself from the sidelines.

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“..the detractors of Donald Trump, when he was a candidate, failed to realize that [..] there is something respectable in losing a billion dollars, provided it is your own money.

Inequality and Skin in the Game (Taleb)

There is inequality and inequality. The first is the inequality people tolerate, such as one’s understanding compared to that of people deemed heroes, say Einstein, Michelangelo, or the recluse mathematician Grisha Perelman, in comparison to whom one has no difficulty acknowledging a large surplus. This applies to entrepreneurs, artists, soldiers, heroes, the singer Bob Dylan, Socrates, the current local celebrity chef, some Roman Emperor of good repute, say Marcus Aurelius; in short those for whom one can naturally be a “fan”. You may like to imitate them, you may aspire to be like them; but you don’t resent them.

The second is the inequality people find intolerable because the subject appears to be just a person like you, except that he has been playing the system, and getting himself into rent seeking, acquiring privileges that are not warranted –and although he has something you would not mind having (which may include his Russian girlfriend), he is exactly the type of whom you cannot possibly become a fan. The latter category includes bankers, bureaucrats who get rich, former senators shilling for the evil firm Monsanto, clean-shaven chief executives who wear ties, and talking heads on television making outsized bonuses. You don’t just envy them; you take umbrage at their fame, and the sight of their expensive or even semi-expensive car trigger some feeling of bitterness. They make you feel smaller.

There may be something dissonant in the spectacle of a rich slave. The author Joan Williams, in an insightful article, explains that the working class is impressed by the rich, as role models. Michèle Lamont, the author of The Dignity of Working Men, whom she cites, did a systematic interview of blue collar Americans and found present a resentment of professionals but, unexpectedly, not of the rich. It is safe to accept that the American public –actually all public –despise people who make a lot of money on a salary, or, rather, salarymen who make a lot of money. This is indeed generalized to other countries: a few years ago the Swiss, of all people almost voted a law capping salaries of managers . But the same Swiss hold rich entrepreneurs, and people who have derived their celebrity by other means, in some respect.

In this chapter I will propose that effectively what people resent –or should resent –is the person at the top who has no skin in the game, that is, because he doesn’t bear his allotted risk, is immune to the possibility of falling from his pedestal, exiting the income or wealth bracket, and getting to the soup kitchen. Again, on that account, the detractors of Donald Trump, when he was a candidate, failed to realize that, by advertising his episode of bankruptcy and his personal losses of close to a billion dollars, they removed the resentment (the second type of inequality) one may have towards him. There is something respectable in losing a billion dollars, provided it is your own money.

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Many countries use these ‘outlets’, pushing people into programs not intended for them.

The New Normal ‘Safety Net’: Surging Disability Benefits Claims (ZH)

If you’ve paid into Social Security, become injured or sick, and can no longer earn more than $1,130 a month, you can get a monthly subsidy from the Disability Insurance Trust Fund. As Bloomberg notes, in 1990 fewer than 2.5% of working-age Americans were “on the check;” by 2015 the number stood at 5.2%, with geographical “disability belts” appearing across America. That growth has left the fund in periodic need of rescues by Congress – most recently in 2015, when the Bipartisan Budget Act shifted money from Social Security’s old-age survivors’ fund to extend the solvency of the disability fund to 2023. Something changed in 2000…

“None of us should be surprised that the cost of the program was rising,” says Stephen Goss, Social Security’s chief actuary. He says the program’s growth is mostly a consequence of demographic change. Older workers are more likely to get sick, and as women have entered the workforce, they too have become eligible for benefits.”

In 1956, when the disability insurance fund was created, qualification was based on a list of accepted medical conditions. In 1984, Congress broadened the criteria, giving more weight to chronic pain and mental disorders. The qualification process also became more subjective. Now, rather than check diagnostic conditions against a list, the process determines whether applicants are able to perform work that’s available. It’s not as if you go to the doctor, the doctor says, “I’m sorry, son, you’ve got disability, Autor says. “It’s a social construct, because it’s about whether you can work.”

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I’m prety sure it’s worse than this: “..more than 70% of the antibiotics considered medically important for human health sold in the U.S. are actually used in livestock.”

But also: “..half of antibiotic use in humans is unnecessary.”

The Battle Against The ‘Superbugs’: Transplants, Chemotherapy At Risk (CNBC)

Headlines about antibiotic resistance – the increase in so-called “superbugs” – have been persistent in 2016. The issue of infection-causing bacteria becoming increasingly resistant to the drugs used to fight them poses a pressing risk to public health worldwide, and according to a 2014 report from the World Health Organization, “threatens the achievements of modern medicine.” The Review on Antimicrobial Resistance, commissioned by the U.K. government, estimated that “by 2050, 10 million lives a year and a cumulative $100 trillion of economic output are at risk due to the rise of drug resistant infections.” For perspective, cancer currently kills 8.2 million people annually. In September of this year, the United Nations agreed on a declaration to fight antibiotic resistance.

This was only the fourth time in the organisation’s 71-year history that a health issue has been treated with such gravity, putting antibiotic resistance on par with HIV and ebola. “It’s hard to be too dramatic,” Prof. Michael Gardam, associate professor of medicine at the University of Toronto, told CNBC via telephone. Echoing this severity, Prof. Toby Jenkins, a biophysical chemist at the University of Bath, said that “a Doomsday scenario is that transplant surgery will be impossible, chemotherapy likewise.” “Even a dental abscess could become deadly, or at least very painful,” he added. The overprescription of antibiotics is one cause of the problem, with Gardam saying that it is “becoming the norm to use last line drugs” in treating bacterial infections, and that “just in case” prescriptions should be handled with care. The U.S.-based Centers for Disease Control and Prevention estimates that half of antibiotic use in humans is unnecessary.

But, other contributing factors well integrated into daily life are also to blame. Gardam also criticized antibacterial soap and toothpaste, particularly prevalent in North America. Deeming such products unnecessary, Gardam warned that “your mouth is not meant to be a sterile zone.” He also stressed the importance of “not messing around with the natural flora of the body,” as such consumer products are wont to do. The food industry also plays a significant part in the antibiotic resistance dilemma, with healthy food-producing animals fed drugs to both prevent disease and promote growth. According to 2012 data from the U.S. Food and Drug Administration and research firm IMS Health, more than 70% of the antibiotics considered medically important for human health sold in the U.S. are actually used in livestock.

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Oct 262016
 
 October 26, 2016  Posted by at 9:52 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle October 26 2016
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Dorothea Lange Depression refugee family from Tulsa, Oklahoma 1936


The Euro Has Been A Disaster For Southern European Production (Gefira)
Washington: Don’t Think It’s Over When Trump Loses (Steve Keen)
213 North American Oil Industry Companies Have Now Declared Bankruptcy (FF)
China Tightens Capital Controls Amid Yuan’s Continuing Slide (Nikkei)
London House Prices Forecast to Plunge as Brexit Chokes Market (BBG)
AT&T Is Spying On Americans For Profit (DB)
The US Is Currently Bombing Seven Countries (PF)
Trump Says Clinton Policy On Syria Would Lead To World War Three (R.)
Most Americans Do Not Feel Represented By Democrats Or Republicans (G.)
The Biggest F*ck Ever Recorded In Human History (Michael Moore)
Antarctic Glaciers Are Melting at a ‘Staggering’ Rate (Gizm.)

 

 

Why it has to stop. Or rather, why it will be stopped.

The Euro Has Been A Disaster For Southern European Production (Gefira)

Some say that the common currency prevents less productive economies from cheating by weakening their national currencies and forces them to become more efficient and competitive. Industrial production data shows that it is not the case. Italy, France, Greece and Portugal have not only stopped producing more; they are producing now less than in 1990! The decay started immediately after the introduction of the euro in 2002! The OECD industrial production data analysis leads to the following conclusions: 1. since 1990 industrial production (manufacturing and construction included) has been growing in volume at large, even in the most developed countries; 2. the disproportion between industrial output in Germany and two other biggest euroarea economies, Italy and France, occurred already just after the 2001-2002 crisis; 3. Southern Europe’s economies have lost their ability to rebound in industrial production alongside the adoption of the euro.

1. Industrial output can increase In most of the most developed countries in the world industrial production has grown in volume since 1990, although a great deal of manufacturing capacities have been moved from the West to the emerging markets. Moreover, in countries like the USA, Israel, Switzerland, Austria and Germany the output has surpassed the 2008 pre-crisis levels. However, if we take a look at the euroarea or the Group of Seven (G7), then numbers are still lower than in 2008 but definitely higher than in 1990.

2. The euroarea has a problem A closer look at the European industrial production numbers gives a clear signal: something bad has happened after 2000. Before the introduction of euro, production trends ran more or less in the same direction. Meanwhile after the 2001-2002 crisis, French and Italian output did not rebound, while production in Germany expanded enormously and was able to reach the 2008 level quickly after the last crisis. Industry in France and Italy not only has not rebounded but also has started to curb.

3. Southern Europe will not rebound with the euro
Countries with a sovereign currency can easily build up their economies because of one simple mechanism: depreciation. A relatively strong currency (strong in comparison to the economic condition) would not have to be a problem for Italy or Greece if there still were some capacities for more debt. Then internal consumption could prop up industrial production. But Spain, Greece, Italy and Portugal have had neither a weak sovereign currency nor the possibility of incurring more debt.

Industry is very important for the economy, as it creates jobs and innovations. The euroarea in the current form is preventing Southern Europe’s industry from developing because of a different type of economy there. “Roman” economies are not worse than than Germany’s. They just need other tools, so restricting all these various economies in the German fashion will destroy the euro as well as the European unity.

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Steve Keen on which employment numbers are actually relevant. Curious to see how many people think Hillary’s got it in the bag. As an example, here’s a Bloomberg poll that just came out:

Washington: Don’t Think It’s Over When Trump Loses (Steve Keen)

Trump’s fans certainly have their “dark fantasies”, but Washington and Krugman have a “bright fantasy” if they believe that unemployment is genuinely low. My favourite and unimpeachable proof that this is false is an easily-obtained data series: the percentage of Americans aged 25-54 who have a job. While the “Unemployment Rate” is back within half a per cent of its pre-crisis low, the percentage of Americans aged 25-54 who have a job today is 2% lower than it was before the crisis. Perhaps an even more important fact that explains the anger behind Trump (and Sanders too, before he was eliminated by the Democratic Party’s peculiar primary process) is that the employment rate actually peaked in 2000, and even after this recovery, it is still 4% lower than in 2000 (78% today versus 82% in 2000).

What that means in terms of people with jobs is even more telling. The number of people aged 25-54 with a job in the USA peaked at 104.7 million in December 2007. It bottomed at 100.3 million in October 2013, and as of February 2015 (the most recent data) it was 101.2 million. So when Washington is talking about achieving “full employment” again, there are still more than 3 million less people employed today than in 2007. Demographic change has caused this segment of the population to decline since December 2007—from 126 million then to 125 million in February 2015—but that still means 2 million more people are unemployed today than in 2007. So if you look at the unemployment rate, everything is wonderful. That seems to be what Washington insiders—all with well-paying jobs—are doing. But if you look at the employment rate, the economy is still in the doldrums. Which series is telling the truth about the US economy?

The employment to population ratio is telling the truth, because it’s derived by asking employers how many people they have on their payroll. The unemployment rate, on the other hand, lies about the real level of unemployment, because it is derived by asking individuals whether they fulfil a number of criteria, including whether they have looked for a job in the last 4 weeks. The employment ratio accurately tells you the number of people receiving a salary; the unemployment ratio does not accurately tell you who is not receiving one. It’s no comfort to someone not receiving a salary to be told that they are not also unemployed, according to the official definition. Their justified reaction is to tell the “official definition” what to do with itself.

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A few billion here and a few billion there in debt.

213 North American Oil Industry Companies Have Now Declared Bankruptcy (FF)

Fewer and fewer oil exploration and production companies are declaring bankruptcy. But more oilfield service companies are. So far this month, only one North American E&P firm filed for Chapter 11 protection, according to data released on Tuesday by the Dallas law firm Haynes & Boone. That’s down from two in September, three in August and four in July. But it’s been an especially tough few months for service companies. As crude prices began crashing in 2014, drillers started idling rigs. That led to fewer jobs for the companies that make their money helping producers pump oil and gas. Moreover, when producers did hire service companies, they often forced them to heavily discount their rates.

Eight service companies filed this month. Seven filed last month, and eight again the month before. Almost 50 have filed in the last six months, half of the 108 over two years. In total, 213 North American oil and gas companies have now filed for bankruptcy since the start of 2015, listing more than $85 billion in debt. The most recent exploration firm: the private oil and gas company Mountain Divide, based in Montana, filed on Oct. 14, and listed $83 million in debt. On the oilfield services side, Houston-based Key Energy Services filed on Monday, with more than $1 billion in debt. And Basic Energy Services, headquartered in Fort Worth, said Monday it had reached an agreement with debt holders to file by Tuesday.

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While at the same time letting Chinese foreign purchases escalate.

China Tightens Capital Controls Amid Yuan’s Continuing Slide (Nikkei)

China has toughened restrictions on capital flows to prevent a negative feedback loop between a weakening yuan and capital flight. The State Administration of Foreign Exchange has introduced new capital measures in areas such as Shanghai and Guangzhou since the beginning of autumn, asking foreign and regional banks to cap the amount of foreign currency they will sell to customers during 2016. These limits, though ostensibly up to banks’ discretion, are set by negotiation with authorities and so are essentially directed by the government, a financial sector source said. A gag order has been imposed surrounding the measures, the source said. Some banks apparently have set steep exchange rates to pre-emptively curb foreign currency sales, a practice that could pose issues for foreign companies in China trying to repatriate earnings, for example.

China’s trade has flagged in recent months, with exports dropping 10% in September from the year-earlier level in dollar terms. The prospect of an interest rate hike in the U.S., meanwhile, has market players expecting further declines in the yuan’s value. Stashing assets abroad, rather than keeping them in China, is increasingly seen as the safer option. This view has led to further selling of the yuan, giving rise to a downward spiral that capital controls aim to break. Both the foreign exchange regulator and the People’s Bank of China have given banks several directives this year to curb outflows and the currency’s slide. Institutions are asked to report on corporate clients’ plans for buying foreign currency. Large fund transfers that involve foreign currency purchases must be explained by the institutions ahead of time. Individuals traveling overseas are asked to make reservations when exchanging money.

The yuan continues to depreciate despite these efforts. The central bank Tuesday set its daily guidance rate for the Chinese currency at 6.77 yuan to the dollar – just a little shy of the 6.82- to 6.83-to-the-dollar range at which the yuan was fixed for nearly two years following the September 2008 financial crisis. At the time, the goal was to prevent the currency from strengthening to stave off an economic slump. The concern now is that the yuan will become weaker and capital will flow out.

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The best thing to could happen in Britain.

London House Prices Forecast to Plunge as Brexit Chokes Market (BBG)

London property prices are set to fall next year as uncertainty about Britain’s exit from the EU damps the U.K. housing market, according to the Centre for Economics and Business Research. London, and especially the priciest areas of the capital’s housing market, will be most affected, with prices dropping 5.6% in 2017, according to the consultancy’s predictions. Across the U.K., while property value growth will accelerate to 6.9% in 2016, it’s set to slow to 2.6% next year. “Nervousness and uncertainty are starting to show,” said Kay Daniel Neufeld, an economist at Cebr. “We expect to see house-price growth across the U.K. slowing considerably in the fourth quarter of 2016, a trend that is set to continue in 2017.”

While the housing market was already facing headwinds from tax changes before June’s EU referendum, investors are becoming increasingly nervous about the possibility of a so-called hard Brexit. That could see the U.K. giving up membership of Europe’s single market for goods and services to secure greater control of immigration. Accelerating inflation, increasing unemployment and slowing business investment are all set to weigh on house prices, while curbs on migration and a retreat from the single market could slow demand from international buyers, the Cebr said.

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Wait till we find out what Google does.

AT&T Is Spying On Americans For Profit (DB)

In 2013, Hemisphere was revealed by The New York Times and described only within a Powerpoint presentation made by the Drug Enforcement Administration. The Times described it as a “partnership” between AT&T and the U.S. government; the Justice Department said it was an essential, and prudently deployed, counter-narcotics tool. However, AT&T’s own documentation—reported here by The Daily Beast for the first time—shows Hemisphere was used far beyond the war on drugs to include everything from investigations of homicide to Medicaid fraud. Hemisphere isn’t a “partnership” but rather a product AT&T developed, marketed, and sold at a cost of millions of dollars per year to taxpayers.

No warrant is required to make use of the company’s massive trove of data, according to AT&T documents, only a promise from law enforcement to not disclose Hemisphere if an investigation using it becomes public. These new revelations come as the company seeks to acquire Time Warner in the face of vocal opposition saying the deal would be bad for consumers. Donald Trump told supporters over the weekend he would kill the acquisition if he’s elected president; Hillary Clinton has urged regulators to scrutinize the deal. While telecommunications companies are legally obligated to hand over records, AT&T appears to have gone much further to make the enterprise profitable, according to ACLU technology policy analyst Christopher Soghoian.

“Companies have to give this data to law enforcement upon request, if they have it. AT&T doesn’t have to data-mine its database to help police come up with new numbers to investigate,” Soghoian said. AT&T has a unique power to extract information from its metadata because it retains so much of it. The company owns more than three-quarters of U.S. landline switches, and the second largest share of the nation’s wireless infrastructure and cellphone towers, behind Verizon. AT&T retains its cell tower data going back to July 2008, longer than other providers. Verizon holds records for a year and Sprint for 18 months, according to a 2011 retention schedule obtained by The Daily Beast.

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Just so you know.

The US Is Currently Bombing Seven Countries (PF)

For this fact check, we wondered if the U.S. is bombing seven countries. That at least has been so: In September 2014, PunditFact rated True a bombed-countries claim by Ryan Lizza of The New Yorker. Lizza referred to President George W. Bush and his successor, Barack Obama, in a tweet that said: “Countries bombed: Obama 7, Bush 4.” At the time, the U.S. on Obama’s watch had bombed Afghanistan, Iraq, Pakistan, Somalia, Yemen, Libya and Syria. When we asked Stein for her backup information, spokeswoman Meleiza Figueroa pointed out various web posts including a September 2014 CNN news story stating that Obama had ordered air strikes in seven countries through the bulk of his eight years in the office.

[..] The Bureau of Investigative Journalism, a nonprofit news service based at City University London, maintains a running list of U.S. military actions in a number of countries. The bureau annotates each incident with links to press reports. When we looked, the bureau’s accounts by country indicated the latest U.S drone strike in Pakistan occurred in May 2016; the latest strike in Somalia was in September 2016; and the latest U.S. strikes in Yemen and Afghanistan were in October 2016. Separately, we noticed, the Department of Defense said in an Oct. 11, 2016, web post that countries including the U.S. battling the Islamic State of Iraq and the Levant, or ISIL, have conducted 15,634 air strikes to date – 10,129 in Iraq, 5,505 in Syria – with the U.S. conducting 6,868 in Iraq and 5,227 in Syria. In a Sept. 30, 2016, post, the U.S. Air Force said attacks from the air have affected ISIL’s “ability to fight and conduct operations in Iraq, Syria and Afghanistan.”

Too, in August 2016, the New York Times reported the U.S. had “stepped up a new bombing campaign against the Islamic State in Libya, conducting its first armed drone flights from Jordan to strike militant targets” in Libya’s coastal city of Sirte. That news story quoted Obama saying during a news conference that the airstrikes were critical to helping Libya’s fragile United Nations-backed government to drive Islamic State militants out of Sirte, which the group has controlled since June 2015. Obama promised the air campaign would continue as long as necessary to make sure that the extremist group “does not get a stronghold in Libya,” the newspaper said.

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Trump -rightly- mirrors something I said a few days ago in Ungovernability “..her harsh criticism of Putin raised questions about “how she is going to go back and negotiate with this man who she has made to be so evil,” if she wins the presidency.”

Trump Says Clinton Policy On Syria Would Lead To World War Three (R.)

U.S. Republican presidential nominee Donald Trump said on Tuesday that Democrat Hillary Clinton’s plan for Syria would “lead to World War Three,” because of the potential for conflict with military forces from nuclear-armed Russia. In an interview focused largely on foreign policy, Trump said defeating Islamic State is a higher priority than persuading Syrian President Bashar al-Assad to step down, playing down a long-held goal of U.S. policy. Trump questioned how Clinton would negotiate with Russian President Vladimir Putin after demonizing him; blamed President Barack Obama for a downturn in U.S. relations with the Philippines under its new president, Rodrigo Duterte; bemoaned a lack of Republican unity behind his candidacy, and said he would easily win the election if the party leaders would support him.

“If we had party unity, we couldn’t lose this election to Hillary Clinton,” he said. On Syria’s civil war, Trump said Clinton could drag the United States into a world war with a more aggressive posture toward resolving the conflict. Clinton has called for the establishment of a no-fly zone and “safe zones” on the ground to protect non-combatants. Some analysts fear that protecting those zones could bring the United States into direct conflict with Russian fighter jets. “What we should do is focus on ISIS. We should not be focusing on Syria,” said Trump as he dined on fried eggs and sausage at his Trump National Doral golf resort. “You’re going to end up in World War Three over Syria if we listen to Hillary Clinton.”

[..] On Russia, Trump again knocked Clinton’s handling of U.S.-Russian relations while secretary of state and said her harsh criticism of Putin raised questions about “how she is going to go back and negotiate with this man who she has made to be so evil,” if she wins the presidency.

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“Less than half the public (43%) say they have a great deal of confidence that their vote will be counted accurately..”

Most Americans Do Not Feel Represented By Democrats Or Republicans (G.)

As they go to the polls in a historic presidential election, more than six in 10 Americans say neither major political party represents their views any longer, a survey has found. Dissatisfaction with both Democrats and Republicans has risen sharply since 1990, when less than half held that neither reflected their opinions, according to research by the Public Religion Research Institute (PRRI). The seventh annual 2016 American Values Survey was carried out throughout September among a random sample of 2,010 adults in all 50 states. Both party establishments have been rattled by the outsider challenges of Donald Trump, who was successful in winning his party’s nomination, and Bernie Sanders, who was not. In a year that seems ripe for third-party candidates, Libertarian Gary Johnson and Jill Stein of the Green party are seeking to capitalise but have fallen back in the polls in recent weeks.

61% of survey respondents say neither political party reflects their opinions today, while 38% disagree. 77% of independents and a majority (54%) of Republicans took this position, while less than half (46%) of Democrats agree. There was virtually no variation across class or race. Both Democratic presidential nominee Hillary Clinton and Republican standard bearer Trump continue to suffer historically low favourability ratings, with less than half of the public viewing each candidate positively (41% v 33%). Clinton is viewed less favourably than the Democratic party (49%), but Trump’s low rating is more consistent with the Republican party’s own favourability (36%).

The discontent with parties and candidates extends to the electoral process itself, which Trump claims is rigged against him. Less than half the public (43%) say they have a great deal of confidence that their vote will be counted accurately, while 38% have some confidence and 17% have hardly any confidence. [..] The PRRI found that pessimism about the direction of the US is significantly higher today (74%) than it was at this time during the 2012 presidential race, when 57% of the public said the country was on the wrong track.

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Slightly confused: I thought he was pro-Hillary?!

The Biggest F*ck Ever Recorded In Human History (Michael Moore)

I know a lot of people in Michigan that are planning to vote for Trump and they don’t necessarily agree with him. They’re not racist or redneck, they’re actually pretty decent people and so after talking to a number of them I wanted to write this. Donald Trump came to the Detroit Economic Club and stood there in front of Ford Motor executives and said “if you close these factories as you’re planning to do in Detroit and build them in Mexico, I’m going to put a 35% tariff on those cars when you send them back and nobody’s going to buy them.” It was an amazing thing to see. No politician, Republican or Democrat, had ever said anything like that to these executives, and it was music to the ears of people in Michigan and Ohio and Pennsylvania and Wisconsin – the “Brexit” states.

You live here in Ohio, you know what I’m talking about. Whether Trump means it or not, is kind of irrelevant because he’s saying the things to people who are hurting, and that’s why every beaten-down, nameless, forgotten working stiff who used to be part of what was called the middle class loves Trump. He is the human Molotov Cocktail that they’ve been waiting for; the human hand grande that they can legally throw into the system that stole their lives from them. And on November 8, although they lost their jobs, although they’ve been foreclose on by the bank, next came the divorce and now the wife and kids are gone, the car’s been repoed, they haven’t had a real vacation in years, they’re stuck with the shitty Obamacare bronze plan where you can’t even get a fucking percocet, they’ve essentially lost everything they had except one thing – the one thing that doesn’t cost them a cent and is guaranteed to them by the American constitution: the right to vote.

They might be penniless, they might be homeless, they might be fucked over and fucked up it doesn’t matter, because it’s equalized on that day – a millionaire has the same number of votes as the person without a job: one. And there’s more of the former middle class than there are in the millionaire class. So on November 8 the dispossessed will walk into the voting booth, be handed a ballot, close the curtain, and take that lever or felt pen or touchscreen and put a big fucking X in the box by the name of the man who has threatened to upend and overturn the very system that has ruined their lives: Donald J Trump.

They see that the elite who ruined their lives hate Trump. Corporate America hates Trump. Wall Street hates Trump. The career politicians hate Trump. The media hates Trump, after they loved him and created him, and now hate. Thank you media: the enemy of my enemy is who I’m voting for on November 8. Yes, on November 8, you Joe Blow, Steve Blow, Bob Blow, Billy Blow, all the Blows get to go and blow up the whole goddamn system because it’s your right. Trump’s election is going to be the biggest fuck ever recorded in human history and it will feel good.

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“.. like ice cubes rising as a soft drink is poured into a glass.”

Antarctic Glaciers Are Melting at a ‘Staggering’ Rate (Gizm.)

Scientists have long viewed the Amundsen sea embayment as the Achilles heel of West Antarctica, with papers in the 1970s and ‘80s describing it as “uniquely vulnerable,” “unstable,” and the “weak underbelly” of the continent. The fear, then and now, was that warm ocean waters lapping against the foot of the glaciers could cause the ice to pop up off of its rocky floor, like ice cubes rising as a soft drink is poured into a glass. When ice detaches from its so-called “grounding line,” it kickstarts a chain reaction that can trigger a lot of melting. “When water gets between ice and land, it moves quickly, bringing lots of heat in, and melting the ice above it more rapidly,” said Thomas Wagner, the director of NASA’s polar science program. “The Amundsen sea embayment is a place where we know this is happening.”

Indeed, satellite and radar data show that two of West Antarctica’s largest glaciers, Pine Island and Thwaites, have seen their grounding line retreat many miles since 2000, causing fresh water to pour off the ice and into the ocean. This process is so effective that glaciologists recently declared the total collapse of the Amundsen sea embayment—whose glaciers contain enough water to raise global sea levels by four feet—to be “unstoppable.” Here’s the rub: We still have no idea how quickly all of that ice will go, meaning we have no idea whether to prepare for a lot more sea level rise in ten years, in a generation, or at the end of the century. A new study, led by glaciologist Ala Khazendar of NASA’s Jet Propulsion Laboratory, points to ice disappearing sooner rather than later.

For years, NASA has been conducting an airborne campaign called Operation Ice Bridge, flying across sections of our planet’s north and south polar ice sheets and using ground-penetrating radar to measure changes beneath the surface. When Khazendar examined Ice Bridge’s datasets for the Amundsen sea embayment, he realized that NASA flew almost exactly the same path in 2009 that it did in 2002. “This presented an excellent opportunity to look at how ice thickness changed,” he said.

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NOTE: we know our Comments section doesn’t function properly. We’re looking into it.

Oct 062016
 
 October 6, 2016  Posted by at 9:19 am Finance Tagged with: , , , , , , , ,  1 Response »
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Lewis Wickes Hine 12-year-old newsie, Hyman Alpert, been selling 3 years, New Haven CT 1909


World Is Swimming In Record $152 Trillion In Debt: IMF (R.)
Australia Private-Sector Debt Rises Faster Than Almost Anywhere Else (Aus.)
One-Third Of European Banks Fail IMF Stress Test: (WSJ)
EU Readies Plan for Derivatives Clearing Crisis, the New Too-Big-to-Fail (BBG)
The Noose Is Tightening Quickly On The Global Economy (Alt-M)
Fed’s Fischer Says Low Neutral Rate A Sign Of Potential Economic Trouble (R.)
Goldman Warns Of “Upward Shock” To Rates, Hints At Trillions In Losses (ZH)
Stiglitz Sees Italy, Others Leaving Euro Zone In Coming Years (R.)
Two Thirds Of Young American Adults Live With Their Parents (ZH)
The Math of Escaping From Syria (R.)
Nearly Half Of All Children In Sub-Saharan Africa Live In Extreme Poverty (G.)

 

 

Never mind public debt. $100 trillion in private debt is the big number.

World Is Swimming In Record $152 Trillion In Debt: IMF (R.)

The world is swimming in a record $152 trillion in debt, the IMF said on Wednesday, even as the institution encourages some countries to spend more to boost flagging growth if they can afford it. Global debt, both public and private, reached 225% of global economic output last year, up from about 200% in 2002, the IMF said in its new Fiscal Monitor report. The IMF said about two thirds of the 2015 total, or about $100 trillion, is owed by private sector borrowers, and noted that rapid increases in private debt often lead to financial crises. While debt profiles vary by country, the report said that the sheer size of the debt could set the stage for an unprecedented private deleveraging that could thwart a still-fragile economic recovery.

“Excessive private debt is a major headwind against the global recovery and a risk to financial stability,” IMF Fiscal Affairs Director Vitor Gaspar told a news conference. “Financial recessions are longer and deeper than normal recessions.” While the United States has de-leveraged since the 2008-2009 financial crisis, the report cited the buildup of private debt in China and Brazil as a significant concern, fueled in part by a long era of low interest rates. The report comes as IMF managing director Christine Lagarde is urging the Fund’s 189 member governments that have “fiscal space” – the ability to sustainably borrow and spend more – to do so to boost persistently weak growth.

The Fund’s call for targeted fiscal support for consumer demand comes is accompanied by calls for continued accommodative monetary policy and accelerated structural reforms aimed at boosting countries’ economic efficiency. If a major deleveraging of private debt were to occur, the IMF report recommends that fiscal policy should include targeted interventions to restructure private debt or repair bank balance sheets to mininize damage to the overall economy.

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An Australian take on the IMF debt report, which singles out the country along with Canada.

Australia Private-Sector Debt Rises Faster Than Almost Anywhere Else (Aus.)

Private-sector debt is rising faster in Australia than almost anywhere else in the world, according to the IMF, which is concerned record debt globally may be setting the stage for a future downturn. The fund estimates that total debt levels have kept climbing since the global financial crisis, and are now equivalent to 225% of global GDP, up from 200% before the crisis. “Excessive private debt is a major headwind against the global recovery and a risk to financial stability”, said the head of the fund’s fiscal department, Vitor Gaspar, releasing the fund’s latest review of government finances. The IMF says private-sector debt in most advanced countries reached a peak in 2012 and started coming down, with the biggest reductions recorded in countries such as Ireland and Slovenia that entered the financial crisis with elevated debts.

The IMF says private-sector debt in most advanced countries reached a peak in 2012 and started coming down, with the biggest reductions recorded in countries such as Ireland and Slovenia that entered the financial crisis with elevated debts. In some cases, however, private debt has continued to accumulate at a fast pace-notably, Australia, Canada, and Singapore, the fund says. The IMF estimates that, since 2013, private debt has risen as a share of GDP by 15 percentage points, more than in any other advanced nation. Private debt in Australia has risen from 188% of GDP to 225% since the global financial crisis, mostly driven by lending to households. Mr Gaspar said the risk was not just that private debt could revert to the government in a crisis, as occurred when many advanced country governments had to take over banks during the financial crisis.

“Rapid increases in private debt often end up in financial crises and financial recessions are longer and deeper than normal recessions”, he said. The fund says even without a financial crisis, high private-sector debt will hamper growth because highly indebted borrowers eventually cut back their consumption and investment. It says there is no consensus about the threshold at which debt levels start affecting growth, but says the longer that debt keeps rising, the greater becomes the sensitivity of the economy to any unexpected shocks. The IMF report shows that Australia s federal and state government debt remains one of the lowest in the advanced world, projected to peak at 21.6% of GDP in 2018, compared with an average of 80.5% for the advanced countries in the G20.

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Why Draghi said there are too many banks in Europe. M&A can hide a lot of debt, or have taxpayers shoulder it.

One-Third Of European Banks Fail IMF Stress Test: (WSJ)

Historic debt levels and dwindling policy ammunition risk derailing the meager recovery forecast for next year. Anemic global growth is “setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown,” the emergency lender warned. The IMF lays out three major risks to the financial system. First, European banks are facing a chronic profitability crisis. Many haven’t been able to clear the legacy debt off their balance sheets and investors are increasingly skeptical they’ll be remain profitable based on their current structures. But it’s not just market perceptions. The IMF estimates that the recent plunge in bank equity price could curb lending until 2018.

It also conducted a survey of more than 280 banks covering most of the banking systems in the U.S. and Europe to see if an economic recovery would be enough to propel them into long-term profitability. While a large majority of U.S. banks passed, nearly one-third of Europe’s banking system flunked. “A cyclical recovery helps but is not enough,” Mr. Dattels says. Those banking duds—representing $8.5 trillion in assets—remain weak and unable to generate sustainable profits even if growth picks up in the fund’s stress test. “Banks and policy makers need to tackle substantial structural challenges to survive in this new era.” Banks need to first resolve the massive stock of nonperforming loans. That requires banking authorities to fix their insolvency rules, a problem the IMF has been bugging Europe about for years. If officials could finally resolve that problem, it could turn a net capital cost to European banks of €85 billion to a net gain of €60 billion, the fund estimates.

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One goal in mind: save large financial institutions. Not citizens.

EU Readies Plan for Derivatives Clearing Crisis, the New Too-Big-to-Fail (BBG)

The EU plans to give authorities sweeping powers to tackle ailing derivatives clearinghouses to prevent their failure from wreaking havoc throughout the financial system. Draft EU legislation seen by Bloomberg sets out rules on saving or shuttering clearinghouses that would apply to firms such as London-based LCH. The proposals cover everything from the creation of resolution authorities to the powers they would have when winding a company down, including writing down shares, debt and collateral. Having forced most clearing to go through central counterparties to manage risk in the financial system, the EU will come out with recovery and resolution proposals by year-end. Clearing has come into focus after emerging as a pawn in the post-Brexit battle for London’s financial-services industry.

“If we are going to rely more on CCPs, we need to have a clear system in place to resolve them if things go wrong,” Valdis Dombrovskis, the EU’s financial-services chief, said last month. Governments around the world were spooked by the damage inflicted by derivatives trades that went awry during the financial crisis. Since then, they’ve taken steps to ensure trading in the contracts is reported and centrally cleared. Clearinghouses stand between the two sides of a derivative wager and hold collateral, known as margin, from both in case a member defaults. Many transactions were previously conducted directly between traders without a third party requiring collateral. Swaps trading, when it was largely unregulated, amplified the 2008 meltdown and prompted a $182 billion U.S. rescue of AIG.

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“The very system they are built around is a corrupt and unsustainable model, and I hold that this is by design.”

The Noose Is Tightening Quickly On The Global Economy (Alt-M)

The supposed “catalyst” for the 2008 crash is primarily attributed to the fall of Lehman Brothers. I highly recommend any of the “bullish” economists out there arguing today that the central banks intend to prolong a stock rally indefinitely examine the statements made in the mainstream about Lehman and by Lehman leading up to their eventual death rattle. Then, absorb and really think on some of the recent statements and tactics used by Deutsche Bank. Specifically, note Lehman’s use of accounting and derivatives gimmicks and the cycling of funds through various accounts in order to make the company appear solvent. Then, take a look at revelations coming out of places like Italy that Deutsche Bank has been using the same model of false accounts and market manipulation, once again, with derivatives as a main tool for fraud.

Also notice the same outright dismissals of all pertinent evidence that Deutsche Bank might be suffering a capital shortfall, as CEO John Cryan blames “speculators” for the companies losses. Lehman’s Dick Fuld and Bear Stearns’ Jimmy Cain both blamed “speculators” and “rumors and conspiracies” for the fall of their companies during the derivatives debacle eight years ago. It would seem that history doesn’t just rhyme, it sometimes repeats exactly. Below is a rather revealing chart from the folks at Zero Hedge comparing the collapse of Lehman Brothers stock value to the steady decline of Deutsche Bank. To be clear, Lehman was no catalyst. It was only a litmus test for a system completely devoid of tangible value and drowning in toxic debt. Lehman was a part of a much larger problem, it was not the cause of the problem. The same is true for Deutsche Bank.

The panic growing around Germany’s second largest financial institution, Commerzbank, as it moves to lay off nearly 10,000 employees and suspend its dividend is another crisis indicator separate from Deutsche Bank. The clear solvency issues in Italy’s major banks, including Monte dei Paschi, are yet another explosive element.

Keep in mind that when these edifices begin to crumble and Europe enters a state of financial emergency, the mainstream media and numerous governments will continue to blame speculators. They will also claim that the entire disaster was set in motion through a “domino effect”; the first domino probably being Deutsche Bank. This will be a lie. There is no line of dominoes. One bank will not be bringing down the other banks — yes, there is terrible interdependency, but the real issue is that ALL of these banks are falling due to their own cancerous behaviors. The very system they are built around is a corrupt and unsustainable model, and I hold that this is by design.

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Wow, he presents what has long been obvious as some sort of epiphany: “We could be stuck in a new longer-run equilibrium characterized by sluggish growth.”

Fed’s Fischer Says Low Neutral Rate A Sign Of Potential Economic Trouble (R.)

Evidence that the so-called natural rate of interest has fallen to low levels could mean the economy is stuck in a low-growth rut that could prove hard to escape, Federal Reserve Vice Chair Stanley Fischer said on Wednesday. Speaking to a central banking seminar in New York, the Fed’s second-in-command said he was concerned that the changes in world savings and investment patterns that may have driven down the natural rate could “prove to be quite persistent…We could be stuck in a new longer-run equilibrium characterized by sluggish growth.” As a result, he said, central bankers may face a future where the short-term interest rates set by policymakers never get far above zero, and the unconventional tools used during the financial crisis become a “recurrent” fact of life.

“Ultralow interest rates may reflect more than just cyclical forces,” Fischer said, but “be yet another indication that the economy’s growth potential may have dimmed considerably.” Fischer’s remarks did not address current Fed policy or interest rate plans. It is not the first time a Fed official has openly expressed concerns about an underlying decline in U.S. economic potential, or fretted that the crisis shifted savings and investment patterns in a damaging way. Over the past year in particular there has been a vigorous debate, backed up by fresh research, about the “natural” rate of interest. Sometimes referred to as a neutral or equilibrium rate, it is in many ways an abstraction – not a rate that is set by the Fed or used in transactions, but an estimate of the underlying rate that would keep the price level stable while the economy grows at potential.

A number of developments have led many at the Fed to conclude that the natural rate is currently very low, and that its decline may reflect a loss of economic potential. There are immediate implications for the Fed: a low natural rate means the Fed could not move its short-term federal funds rate very high before policy becomes too tight.

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Nothing new here either.

Goldman Warns Of “Upward Shock” To Rates, Hints At Trillions In Losses (ZH)

[..] “The total face value of all US bonds, including Treasuries, Federal agency debt, mortgages, corporates, municipals and ABS, is $40 trillion (Securities Industry and Financial Markets Association). The Barclays US aggregate is a smaller number, $17 trillion, as the index excludes some categories of debt, such as money markets, with low duration. To end up with a more palatable number, Goldman uses the Barclays measure of debt outstanding, although it admits this may lead to an understatement of the total loss potential. Using either measure, total debt outstanding has grown by over 60% in real Dollars since 2000.”

[..] Doing the math, and combining a duration estimate of 5.6 years with the SIFMA total estimated notional exposure of $40trn, and current Dollar price of bonds of $105.6, indicates that, to first order, a 100bp shock to interest rates would translate into a market value loss estimate would be $2.4 trillion. That is the part Garzarelli forgot to write about. Which is ironic, because in trying to paint a bullish picture, the Goldman strategist in effect admitted that not just the Fed, but the entire world is trapped: should the global economy continue to contract, global bond yields will continue to sink, with trillions more bonds going negative yield, leading to even more debt issuance, and resulting in a ZIRP (and NIRP) trap from which there is no escape.

On the other hand, if – as Goldman hopes – inflation does materialize, however briefly, the resultant MTM loss will be staggering. Keep in mind that $2.4 trillion is only in the US. Now add tens of trillions of record low yielding global debt, including some $10.5 trillion in negative yield bonds around the globe, and one can make the case that the global MTM hit from an even 1% rise in rates would be somewhere between $5 and $8 trilion dollars! So, according to Goldman, here is the rather unpleasant choice facing the world: continue slowly sinking into a deflationary singularity, coupled with ever greater systemic leverage which makes escape from the ZIRP/NIRP trap impossible as social unrest builds up and ultimately spills over into the streets, or unleash an inflationary impulse, one which crushes countless debt holders, leads to trillions in losses, and requires yet another consolidated bailout…. oh, and also more social unrest.

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If Italy leaves, there’s no EU left.

Stiglitz Sees Italy, Others Leaving Euro Zone In Coming Years (R.)

Nobel Prize-winning economist Joseph Stiglitz predicted in a interview out on Wednesday that Italy and other countries would leave the euro zone in coming years, and he blamed the euro and German austerity policies for Europe’s economic problems. Europe lacks the decisiveness to undertake needed reforms such as the creation of a banking union involving joint bank deposit guarantees, and also lacks solidarity across national boundaries, Stiglitz was quoted as saying by Die Welt newspaper. “There will still be a euro zone in 10 years, but the question is, what will it look like? It’s very unlikely that it will still have 19 members. It’s difficult to say who will still belong,” the paper quoted Stiglitz as saying. “The people in Italy are increasingly disappointed in the euro.”

“Italians are starting to realize that Italy doesn’t work in the euro,” he added. He said Germany had already accepted that Greece would leave the euro zone, noting that he had advised both Greece and Portugal in the past to exit the single currency. Concerns about the euro zone have escalated in Germany in recent months amid growing concern about a shift away from austerity in southern Europe, the loose money policies of the ECB and the rise of the right-wing Alternative for Germany party. Stiglitz told the paper the euro and austerity policies in Germany were at fault for Europe’s economic malaise. The break-up of the single currency or the division into a north euro and a south euro were the only realistic options for reviving Europe’s stalled economy, the paper quoted him as saying.

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‘Target groups’ may be somewhat confusing: one survey looks at 15-29 year-olds, the other at 18-34 year-olds. But the trends are clear enough.

Two Thirds Of Young American Adults Live With Their Parents (ZH)

As part of its periodic report on “Society at a Glance” which looks at how youth across member states are faring in terms of several social indicators, such as employment, poverty, marriage and health, the OECD also provided a unique glimpse into modern household composition, namely the%age of young adults, those aged 15-29, living at home. What it found is that since the Great Recession, there have been significant shifts worldwide in the number of young adults living at home. From 2007 to 2014, the number of youth living at home in countries belonging to the OECD increased by 0.7%, rising to 59.4%.

As expected, the nations hit hardest by the global economic slowdown such as Italy, Slovenia and Greece had the highest%age of youth living at home with their parents, at 80.6%, 76.4% and 76.3%, respectively. In itself, that is hardly surprising, since countries like Greece and Italy were not only among the harfest hit by the recession, and have a culture of young adults living longer at home, but also have some of the highest unemployment rates for young people. In fact, as the chart below shows, some 15% of young adults in OECD countries, or a whopping 40 million, were what the report classifies as NEET: not in employment, education or training, with both Italy and Greece at the very top, just behind Turkey.

On the other end of the spectrum, Canada had the lowest%age of youth living with parents, with just 30% of the country’s youth still living at home. The Nordic countries, including Denmark, Sweden, Finland and Norway, also had low numbers of young adults living at home. In terms of deterioration, France was by far the leader, with the number of young people cohabitating with their parents rising 12.5% to 53.5% from 2007 to 2014. Report authors attribute the increase in part to the high numbers of young adults in France who are not in the workforce or in education. In France, some 16.6% of young adults were not in a job or education institution in 2015, also a notable an increase over the previous few years.

Cited by US News, Claire Keane, an economist with the OECD’s social policy division said that “we really think this is a crisis story,” In France, she says, many benefits flow through families to reach young people. “They are relying on parents for financial support.” As for the US, there has been a 3.9% increase in the proportion of youth living with their parents from 2007 to 2014, significantly higher than the OECD average. As a result, today, about 66.6% of American 15- to 29 year-olds live with their parents as opposed to on their own or with a roommate, compared to around 62.8% before the crisis.

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Syria was a relatively wealthy country not long ago. So was Libya. Guess what happened?

The Math of Escaping From Syria (R.)

– Duration of Syrian Civil War: 5 years, 6 months, approximately. – Number of refugees through Oct. 1: 302,975. – Number of refugees drowned en route to Europe: 3,502 We’ve seen the pictures. We’ve read the stories. The numbers are stark. A single boat crossing on the Mediterranean cost $2,200 per passenger in the summer of 2015, up from an average $1,500 a year earlier, according to refugees’ accounts. For Syrians, as with most migrants seeking asylum, money is scarce; a report by the Syrian Economic Forum showed average monthly income for a citizen of Aleppo was around $80 last year. So if you’re a refugee, you face the prospect of spending as much as two years of your wages for a journey on which 1 of 87 refugees have drowned.

How bad is the economy you’re leaving behind? Let’s take the Great Recession of 2007 to 2009 in the U.S. as a comparison. GDP decreased at an average annual rate of 3.5%. Unemployment reached a high of 10% in Oct. 2009. In that year, 14.3% of the U.S. were living below the poverty line. In Syria, GDP fell 30% in 2013 and another 36% in 2014; 82% of the population lives below the poverty line; unemployment is at 60%. And 2016 looks pretty bleak as well. And that’s leaving aside falling bombs, chemical weapons and woefully inadequate medical care. Also connecting with international aid groups takes time, as many Syrians are located in hard to reach areas.

And let’s not forget you are probably a kid. More than 50% of refugees are under the age of 18 – and haven’t had educational access for years; not to mention the added trauma of witnessing extreme violence. So spending up to two years of your wages and risking your life to get to a safe haven, versus staying in a country where it’s likely you will die a violent death suddenly seems like a remarkably sound decision.

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How many billions have been spent on ending world hunger? Or maybe we should ask how many have been spent on warfare.

Nearly Half Of All Children In Sub-Saharan Africa Live In Extreme Poverty (G.)

Nearly half of all children in sub-Saharan Africa are living in extreme poverty, according to a joint Unicef-World Bank report released on Tuesday, with figures showing that almost 385 million children worldwide survive on less than $1.90 (£1.50) a day, the World Bank international poverty line. Extreme poverty leads to stunted development, limited future productivity as adults, and intergenerational transmission of poverty, the report (pdf) says. The figures – based on data from 89 countries, and representing 84% of the developing world’s population – indicate that much work will be needed to meet the sustainable development goal of eradicating extreme poverty by 2030.

Children are disproportionately affected by extreme poverty – they make up just a third of the population studied, but comprise half of the extreme poor. They are twice as likely as adults to be living on less than $1.90 a day, the report claims, with 19.5% of children in developing countries living in extremely poor households, compared to just 9.2% of adults. “It’s almost a double blow – firstly, that children are twice as likely as an adult to live in extreme poverty, but also that children are much less likely than an adult to be able to cope with extreme poverty because of stunting, infant mortality, and early childhood development,” said Unicef’s deputy executive director, Justin Forsyth. “Extreme poverty can either kill you, or ruin your potential for the rest of your life.”

Read more …

Sep 182016
 
 September 18, 2016  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 18 2016
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John Collier FSA housing project for Martin aircraft workers, Middle River, MD 1943


Rogoff’s Cashless Society Proposal Is An Admission Of US Insolvency (Sprott)
How A ‘Twist’ By The Bank Of Japan Could Upstage The Fed (MW)
China ‘Tulip Fever’ Sees House Prices Skyrocket 76% (CNBC)
Italian Banking Crisis Turns into Mission Impossible (DQ)
Most Likely Scenario For Hanjin Is Liquidation (WSJ)
US Bombs Assad’s Troops, ISIS Makes Dramatic Advance as Result (McAdams)
Italian PM Renzi Says He Is Tired Of Wasting Time At European Summits (DW)
Greek Public Assets Being Sold For A Fraction Of Their Actual Value (Kath.)
Hundreds Of Thousands Take To Streets In Germany To Protest TTiP (CNBC)
France Bans All Plastic Cups, Plates And Cutlery (Ind.)

 

 

“..the US government and the Federal Reserve have spent, borrowed, and printed so much that there is no future left to mortgage.”

Rogoff’s Cashless Society Proposal Is An Admission Of US Insolvency (Sprott)

Ken Rogoff is by all accounts a brilliant man. The Harvard professor and former IMF chief economist is a chess grandmaster. His thesis committee included current Fed vice-chair Stanley Fischer. But like many survivors of Ivy League hoop jumping, the poor fellow appears to have emerged punch drunk. That’s the only conclusion to be drawn from Rogoff’s new book, The Curse of Cash , which, in effect, proposes a ban on paper currency. It’s terrifying piece of work, for several reasons. [..]

Rogoff’s “cashless society” is an elegant solution to a key problem bedeviling the Federal Reserve: with interest rates at the zero bound, the US central bank has no ammunition left to fight the next recession – because if cuts rates below zero, savers will withdraw their cash and put it under their mattresses. “In principle, cutting interest rates below zero ought to stimulate consumption and investment in the same way as normal monetary policy,” Rogoff writes. “Unfortunately, the existence of cash gums up the works.” That argument is spurious at best. By now, it is fairly clear from experiences in Japan and the US since 2008 that below neutral level interest rates provide little or no net new economic stimulus. At best, easy monetary policy brings forward spending and investment from the future into the present.

However, the US government and the Federal Reserve have spent, borrowed, and printed so much that there is no future left to mortgage. Rogoff, one of the country’s top economists, knows this; which is an important clue that there is much more to his proposals than meet the eye. It seems clear that Rogoff’s negative interest rate/cashless society proposal is structured to engineer a back-door US government debt default. Over the long term, by forcing savers, businesses, and banks to give the US government their money, and allowing Washington to repay less of that money each year, the US can legally default – on all that it owes. More worrying for investors: the fact that Rogoff, Ben Bernanke and others are proposing negative rates despite the considerable evidence that they will do no economic good suggests that they believe that the US government cannot pay back its debts – that it is already insolvent.

[..] maybe Rogoff is just as good a player on the public policy front as he is on the chess board. There is a possibility that he wrote The Curse of Cash as a quasi-job application for a higher government post, possibly as Treasury Secretary in a Clinton Administration. “If you give me the job, I’ll help make sure that government can borrow all it wants and it won’t have to pay any of it back,” may be the sub-text to Rogoff’s book. There is a precedent for this. Ben Bernanke’s 2002 “helicopter money” speech is widely credited with having set the ground for his appointment as Fed Chairman several years later. Brilliant? Cynical? Delusional? Or maybe all three? Take your pick. Either way, you haven’t heard the last of Ken Rogoff.

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“Speculation has mounted that the Bank of Japan could undertake an “inverse twist,” shifting its bond purchases away from the longer end of the yield curve. ..”

How A ‘Twist’ By The Bank Of Japan Could Upstage The Fed (MW)

News reports paint a picture of a Bank of Japan board that remains solidly in favor of maintaining an ultra-easy monetary policy, but is sharply divided over the best way to proceed as the country’s banking sector feels the pinch of low rates and a flat yield curve. Ideas the Bank of Japan could ultimately move to adjust its program in a way designed to further steepen the yield curve are behind recent market moves, analysts said, and could pave the way for further steepening of yield curves around the world, including U.S. Treasurys. Speculation has mounted that the Bank of Japan could undertake an “inverse twist,” shifting its bond purchases away from the longer end of the yield curve.

That would be a mirror image of a Federal Reserve maneuver dubbed “Operation Twist” that the central bank used in 1961 and 2011 to flatten the yield curve by buying long-term debt and selling short term debt. Bond yields move inversely to prices. There are other measures the Bank of Japan could take to try to steepen the yield curve, including simply changing the mix of maturities it buys or setting a yield target. Christoph Rieger at Commerzbank urged against undertaking an inverse twist, noting that Kuroda has expressed concerns that a “bear steepening” of the yield curve—a phenomenon in which long-term rates rise faster than short term rates—tends to tighten monetary conditions. Obviously, that would blunt the impact of the BOJ’s easing efforts and prove unwelcome in an economy that’s contracting.

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“The (stock) market exploded to the upside and then crashed dramatically. That money had to go somewhere, so it washed around the system … so a lot of it has gone into housing.”

China ‘Tulip Fever’ Sees House Prices Skyrocket 76% (CNBC)

Housing in major cities in China has seen price hikes over the last year that resemble the famous Dutch “Tulip Fever” bubble of 1637, according to new research by economic consultancy firm Longview Economics. “I think what’s going on in China is troubling … some of the valuations there are really quite extraordinary,” Chris Watling, the CEO of Longview Economics, told CNBC Thursday. “We’ve double checked these numbers about seven times, because I found them quite hard to believe.” The firm’s research found that only San Jose in the Silicon Valley is more expensive than Shenzhen. The Chinese city has seen prices rise 76% since the start of 2015, with the acceleration beginning in April 2015 as the country’s stock market was nearing its peak.

The situation in Beijing and Shanghai is similar, albeit less extreme, the company states. “Housing in some of the tier 1 cities is more expensive than it is in London, which I think itself is on a bubble, Watling added. “The (stock) market exploded to the upside and then crashed dramatically. That money had to go somewhere, so it washed around the system … so a lot of it has gone into housing.” The analysis suggests that the typical home in Shenzhen costs approximately $800,000. Watling said that the house-income ratio in Shenzhen is now running at 70 times, compared to around 16 times in somewhere like London.

China, the biggest economic story of the last 30 years, has soured in the eyes of many analysts. A stock market crash that began in the country last summer has highlighted the vast difficulties Chinese lawmakers are now facing. Watling said Chinese housing was a story built on credit, lots of liquidity and lots of debt. He added that all bubbles, though, once established, will eventually burst and deflate. “It’s simply a question of when,” Watling said in a research note earlier this week, adding that the removal of cheap money would be the likely scenario that would lead to the beginning of the tightening and subsequent prices falls.

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“.. the collapse of Unicredit, which has vast, sprawling operations across Germany and Eastern Europe, would threaten the stability of the entire Eurozone.”

Italian Banking Crisis Turns into Mission Impossible (DQ)

[..] for Monte dei Paschi’s latest rescue plan to have any chance of working, both parts of the plan — Part A and Part B — must succeed. Part A consists of a €28 billion bad-loan sale for which JP Morgan Chase, Citi and Italian investment bank Mediobanca are already assembling a bridge loan, in return for very handsome fees. Atlante, Italy’s deeply opaque, Luxembourg-based bank rescue fund, has reportedly agreed to buy the so-called mezzanine tranche in Monte dei Paschi’s bad loan securitization. Apparently demand for heavily discounted, slowly-decomposing bank debt in Italy is high, which is great news considering Italy is purportedly home to roughly a third of all of the bad debt at EU banks.

In a perfect sign of our yield-starved times, last week saw around 250 global investors converge on Venice to attend Banca Ifi s SpA’s “Non-performing Loan” conference. That’s twice as many as last year, reports Bloomberg. In other words, Part A of the rescue plan seems to be coming along nicely — as long as no one asks who will make up the difference between the book value of the bank’s toxic assets and the discount value at which they’re now being sold. As for Part B of the Plan — MPS’ €5 billion cash call scheduled for the end of this year — it’s going nowhere fast. Twice-bitten, thrice-shy investors are no longer buying the hype. Gennaro Pucci at London-based PVE Capital said that even if a significant proportion of MPS’ bad loans were “spun off into a special vehicle,” he would not buy more MPS shares out of fear that the bank could suffer further losses from the remaining soured debt.

This is a serious problem in today’s Italy: as long as the economy continues to stagnate, much of the supposedly good debt currently on the banks’ books will also, sooner or later, end up putrefying. It’s already happened to Banca Popolare di Vicenza, a regional lender that was rescued from bankruptcy late last year by the Atlante fund, but which is already in need of fresh funds. So, too, is Italy’s biggest and only global systemically important financial institution, Unicredit, which has a staggering €80 billion in bad debt on its balance sheets — more than any other European bank. While the downfall of MPS would be enough to cause serious damage to Italy’s already fragile financial system, the collapse of Unicredit, which has vast, sprawling operations across Germany and Eastern Europe, would threaten the stability of the entire Eurozone.

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But first a fire sale.

Most Likely Scenario For Hanjin Is Liquidation (WSJ)

Debt-ridden Hanjin Shipping is working on a restructuring plan that calls for the drastic reduction of its owned fleet and returning the vast majority of the ships it charters to their owners, according to people with direct knowledge of the matter. Despite the efforts, these people say the most likely scenario is still that the Korean operator— the world’s seventh-biggest in terms of capacity—will be liquidated, marking one of the shipping industry’s biggest failures. Hanjin filed for bankruptcy protection last month. The South Korean government has strongly indicated it has no plans to bail out the company. A Korean court will decide in December whether to accept the plan or let the company go under, according to court officials in Seoul.

One person with knowledge of Hanjin’s efforts to restructure said the operator is considering a number of scenarios but focusing on one that involves Hanjin keeping up to 15 of its 37 ships, and returning to owners almost all of the 61 chartered vessels. Under that scenario, which is subject to approval by the bankruptcy court, “Hanjin will emerge as a small regional operator in Asia that will move a small part of Korea’s exports,” the person said. [..] Hanjin’s main charterers, including Danaos, Navios and Seaspan, with a combined exposure of more than $1 billion to Hanjin, were hoping for a last-minute intervention by the Korean government that would allow Hanjin to honor its vessel-leasing commitments. That looks less and less likely.

“Hanjin now has two alternatives: either to drastically downsize or to liquidate,” said Iraklis Prokopakis, Danaos’s COO. “We have eight ships chartered to Hanjin and five will be returned. The other three still have cargo on them so I don’t know what will happen.” Danaos has a $560 million exposure to Hanjin. Mr. Prokopakis said the key issue at the December court hearing will be whether Hanjin has enough cash to continue operating, even at a much smaller scale.

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“Yesterday, US-backed FSA “moderate” opposition troops chased US Special Forces out of one town in Syria.”

US Bombs Assad’s Troops, ISIS Makes Dramatic Advance as Result (McAdams)

The US military has bombed Syrian government positions in the eastern province of Deir el-Zour today, where the Syrian military had been battling ISIS. According to the report, the US attack on Syrian troops “enabled an [ISIS] advance on the hill overlooking the air base.” This is the second time US forces have directly targeted Syrian government troops inside Syria. It would be the first time such an attack produced a battlefield advantage to ISIS. The US attack has killed at least 62 and perhaps as many as 100 Syrian government troops. Earlier today it was reported that the Syrian government had sent some 1,000 members of the elite Republican Guard into the Deir el-Zour province, as battles with ISIS in the area increase.

This US attack has wiped out perhaps 10% of this force and has obliterated Syrian army weapons and other materiel. The US government has admitted to the attack, but claims it was all a mistake. As some observers have pointed out, however, ISIS does not behave as traditional military units. They do not generally gather in large numbers like this or establish “bases.” The US Central Command released a statement earlier today claiming that the US coordinated the strike with the Russians, but Moscow has vehemently denied the claim. In fact, spokesman for the Russian Foreign Ministry Maria Zakharova was quoted by the state news agency Tass as saying that “after today’s attack on the Syrian army, we come to the terrible conclusion that the White House is defending the Islamic State.”

This dramatic development comes as the latest ceasefire begins to crumble. Russia has condemned Washington’s refusal to implement a key component of the agreement, to press US-backed rebels to cease fighting alongside al-Qaeda; and the main US-backed “moderate” Islamist group, Ahrar al-Sham, has refused to take part in the ceasefire at all. Yesterday, US-backed FSA “moderate” opposition troops chased US Special Forces out of one town in Syria. Is today’s attack a turning point in the war, where the US will begin to strike Syrian government forces more frequently? If so, how will Russia and Iran react to this overt shift in US strategy? Is this the flashpoint?

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But that’s all he’s going to get.

Italian PM Renzi Says He Is Tired Of Wasting Time At European Summits (DW)

Italian Prime Minister Matteo Renzi blasted the latest European Union summit in Bratislava on Saturday, effectively labeling Friday’s high-level meeting a waste of time. “I don’t think it would be right for Italy to pretend not to notice when things are not getting any better,” Renzi said at a conference in Florence. Hours earlier, he criticized the summit in an interview with TV broadcaster RTV38. “As Italy, we strongly believe that the EU has a future, but we need to be doing things for real, because we have no use for staged events,” he said. Renzi also said he did not partake in the closing press conference with Angela Merkel and Francois Hollande because he was unhappy with the decisions reached concerning economic and migrant policy.

Renzi said Italy would not “serve as a fig leaf” for the likes of France or Germany. In what was the first European summit without the United Kingdom in over four decades, European leaders sought to show unity in the wake of this summer’s Brexit vote. This, Renzi said, “signals a small step forward, but it is still a rather long way away from the idea of Europe that we have in mind.” Renzi castigated the summit for not raising the African migrant issue. The documents “didn’t even mention Africa,” he said. As the first European destination for migrants arriving from Africa, Italy has been left to cope with the influx of refugees largely on its own while politicians debate how to address refugees in Turkey and along the so-called Balkan Route though Greece, eastern and central Europe.

Italy has long pushed for an international agreement with African states that would close migrant routes to Europe in exchange for increased investment. Renzi repeated his critiques of the EU’s austerity policy. While the country is respecting the EU’s strict budget disciplinary rules, he said Italy retains the right to stress that the rules are not working and it is not prepared “to pretend not to notice.”

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Insult to injury. It never stops. Electricity prices were raised 4-5% in Greece. Who can afford that?

Greek Public Assets Being Sold For A Fraction Of Their Actual Value (Kath.)

Public properties, including real estate assets, are very often sold for extremely low prices, as the political risk factor supersedes even the crucial financial risk that comes with investing in Greece. The Hellenic Federation of Enterprises (SEV) this week commented on the issue, saying that this institutional shortfall of the Greek state and the lack of trust this generates in the three pillars of power (legislative, executive, judiciary) have turned the optimum utilization of state property into “a political point-scoring battle among parties.” As SEV pointed out, “in many instances we see the state’s assets devalued, owing to the delays that political tensions bring about in privatizations, so that they are sold off at particularly low prices. In other instances the prevailing criterion becomes the price of the privatization, without taking into consideration any distortions created in the market from incomplete planning.”

For the industrialists’ association there is no doubt that “the correct utilization of public property along clear and stable rules and terms of economic efficiency, both for state revenues and for the operation of markets, can become a key growth factor for the economy.” All this becomes clearer when one considers the tenders that the state privatization fund (TAIPED) has been conducting for the concession of real estate assets. As property market professionals observe, in most cases the prices investors offer – particularly in instances of plot development – are just a fraction of each asset’s actual value. The reason for that is not to be found in the financial crisis and the drop in market prices, but in investors’ need to factor the political risk into their calculations regarding the sustainability of their chosen investment, in order to secure the desired returns.

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CNBC tries an odd twist by claiming it’s not really a TTiP protest, but a form of general ‘easy anti-Americanism’. The same tactics as used in Brexit and the US elections. Curious to see when these people will realize these are losing tactics.

Hundreds Of Thousands Take To Streets In Germany To Protest TTiP (CNBC)

Hundreds of thousands of Germans took to the streets Saturday, in protest of pending trade deals with the United States and Canada. The deals in question are the Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union and the Comprehensive Economic and Trade Agreement (CETA) for the Canadian-EU relationship. Neither free trade agreement has been ratified yet, but popular outcry has been growing for the last few years. The demonstrations took place in seven cities throughout Germany: Berlin, Frankfurt, Hamburg, Cologne, Leipzig, Munich and Stuttgart. Organizers told CNBC that the official estimate is 320,000 demonstrators across Germany.

In Berlin, where discussions of trade policy are frequently overheard in cafes and most available surfaces are plastered in posters and stickers against the deals, the largest demonstration of the day took place with about 70,000 attendees, according to the organizers. Earlier, local reports had indicated there could be as many as 80,000 in the German capital, but a heavy downpour close to the start time may have depressed turnout. A broad coalition of organizations helped plan the event, but the stated rationale for opposing the agreements centers on the belief that such deals “primarily serve the interests of powerful economic interest groups, and thus only cement the imbalance between the common good and economic interests,” according to one organization.

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Under TTiP, this would have been impossible.

France Bans All Plastic Cups, Plates And Cutlery (Ind.)

France has passed a new law to ensure all plastic cups, cutlery and plates can be composted and are made of biologically-sourced materials. The law, which comes into effect in 2020, is part of the Energy Transition for Green Growth – an ambitious plan that aims to allow France to make a more effective contribution to tackling climate change. Although some ecologists’ organisations are in favour of the ban, others argue that it has violated European Union rules on free movement of goods. Pack2Go Europe, a Brussels-based organization representing European packaging manufacturers, says it will keep fighting the new law and hopes it doesn’t spread to the rest of the continent. “We are urging the European Commission to do the right thing and to take legal action against France for infringing European law,” Pack2Go Europe secretary general Eamonn Bates told AP. “If they don’t, we will.”

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Sep 172016
 
 September 17, 2016  Posted by at 9:01 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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DPC Near Lewiston, Minnesota – The Pulpit. 1899


The Beginning of the End of the World (Umair Haque)
US Household Net Worth Hits Record $89 Trillion, But There’s A Catch (ZH)
China’s Holdings of US Treasuries Fall to Lowest Since 2013 (BBG)
Trump’s Economic Plan: Some Decent Ideas, Lots Of Really Bad Fiscal Math (DS)
US Is Investigating Bosch in Widening VW Diesel-Cheat Scandal (BBG)
Why the Fed Destroyed the Market Economy (Gordon)
IMF’s Lagarde: Big Salary, Big Ideas (TO Sun)
House Intelligence Committee’s Terrible, Horrible, Very Bad Snowden Report (TCF)
Western Media Credibility In Free Fall Collapse (Paul Craig Roberts)
The Intellectual Yet Idiot (Taleb)
The Existential Madness of Putin-Bashing (Robert Parry)
Russia Says US Refuses To Share Syria Truce Deal With UN Council (R.)

 

 

Nice attempt by Haque, but no, some kind of ‘leadership’ would not solve our problems.

The Beginning of the End of the World (Umair Haque)

The beginning of the end of the world means that yesterday’s model of prosperity – let’s call it capitalist liberal democracy – has reached its limits. It is like an aging machine that shudders and backfires more violently and regularly, because it is broken. And yet, we are unsure, as a world, where to go next.

Let’s take it in four levels. At the macro level, liberal capitalism’s a set of agreements and institutions. These agreements are being torn up, rejected, abandoned. Witness Brexit. The world is left in a state of void, just as the UK is now. Let me try to translate that: there is not a single leader in the world today who appears to have a vision for a stagnant global economy. The kind of great and radical vision that Keynes, Marshall, JFK had. Maybe we don’t agree with the vision – but what is important is that are visions to discuss, debate, inspire, cohere, lead. That level of vision is missing when it is most badly needed. Without such a vision, what happens?

A void of vision, leadership, direction to fix any of the existential threats of inequality, fragility, insecurity, at the global level inevitably means social discontent, decay, decline. Why be a part of societies and unions that step on your future? The beginning of the end of the world at the social level means: entire societies are beginning to fracture. As they fracture, so there is a return to tribalism, dynasty, feudal and authoritarian ways of ordering society. You don’t have to look much further than the US election to see it. In the void of democracy, feudalism is the darkness, and fascism is midnight. What happens when societies begin to splinter and fracture, regress and decline?

At the institutional level, the level of corporations and organisations, the end of the world means that there is now an even more severe power imbalance. Institutions hold far more power than relatively powerless, ossified, fractured states. And they exercise it. They set the terms and define the rules of trade, freedom, work, reward. What does that mean for people? At the personal level, the end of the world is already here. This is the first generation in modern history that’s going to suffer worse living standards than their parents. The question is: how much worse? Very badly worse. With stagnant incomes, no savings, this generation will never retire, vacation, advance, enjoy, or own. Their relationships, health, and productivity will suffer as a result. The quality of their lives is going to be long, bleak, and pointless. Worked to the grave to make a dwindling number of dynasties wealthy, largely by serving them hand and foot, not really enhancing human life.

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Tyler presents inequality as the catch, but the -admittedly related- asset bubble is a much bigger one.

US Household Net Worth Hits Record $89 Trillion, But There’s A Catch (ZH)

As part of its quarterly Flow of Funds update, earlier today the Fed released snapshot of the US “household” sector as of June 30. What it revealed is that with $103.8 trillion in assets and a modest $14.7 trillion in liabilities, the net worth of the average US household rose to a new all time high of $89.1 trillion, up $1.1 trillion as a result of an estimated $474 billion increase in real estate values, and mostly $750 billion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds. Household borrowing rose at a 4.4% annual rate, with total household liabilities grew growing by $200 billion from $14.5 trillion to $14.7 trillion, the bulk of which was $9.6 trillion in home mortgages. The breakdown of the total household balance sheet as of Q2 is shown below.

And while it would be great news if wealth across America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans. As a reminder, from the CBO’s latest Trends in Family Wealth analysis, here is a breakdown of the above chart by wealth group, which sadly shows how the “average” American wealth is anything but. While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits.

Here is how the CBO recently explained the wealth is distributed: In 2013, families in the top 10% of the wealth distribution held 76% of all family wealth, families in the 51st to the 90th %iles held 23%, and those in the bottom half of the distribution held 1%. Average wealth was about $4 million for families in the top 10% of the wealth distribution, $316,000 for families in the 51st to 90th%iles, and $36,000 for families in the 26th to 50th %iles. On average, families at or below the 25th %ile were $13,000 in debt.

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Maybe Draghi and Kuroda can buy them all.

China’s Holdings of US Treasuries Fall to Lowest Since 2013 (BBG)

China’s holdings of U.S. Treasuries fell in July to the lowest level in more than three years, as the world’s second-largest economy pares its foreign-exchange reserves to support the yuan. The biggest foreign holder of U.S. government debt had $1.22 trillion in bonds, notes and bills in July, down $22 billion from the prior month, in the biggest drop since 2013, according to U.S. Treasury Department data released Friday in Washington and previous figures compiled by Bloomberg. The portfolio of Japan, the largest holder after China, rose $6.9 billion to $1.15 trillion. Saudi Arabia’s holdings of Treasuries declined for a sixth straight month, to $96.5 billion.

The figures compare with official Chinese data showing that the nation’s foreign-exchange reserves were little changed in July at $3.2 trillion, though they’re down from a peak of close to $4 trillion in 2014. The reserves dropped $16 billion in August to the lowest level since 2011. The report, which also contains data on international capital flows, showed net foreign buying of long-term securities totaling $103.9 billion in July. It showed a total cross-border inflow, including short-term securities such as Treasury bills and stock swaps, of $140.6 billion. Net foreign selling of U.S. Treasuries was $13.1 billion in July, while foreigners scooped up a net $26.1 billion in equities, $20.7 billion of corporate debt and $38.9 billion in agency debt, according to the report.

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Stockman knows what he’s talking about on this issue, far more than most. Not perfect, but useful.

Trump’s Economic Plan: Some Decent Ideas, Lots Of Really Bad Fiscal Math (DS)

[..] the Reagan White House—me included – fell for the theory of “dynamic scoring” and that the big cuts in the income tax rates would partially pay for themselves via revenue “flowback”. Back in those days the latter was expressed in an economic forecast known as Rosy Scenario, which assumed that in response to the supply side tax cuts, the US economy would get up on its hind legs and leap forward at a real GDP growth rate of more than 4% per year, and as far as the eye could see. What happened instead, of course, is that the US economy plunged into the drink of the deep 1982 recession and the Federal deficit soared to 5% of GDP—a truly shocking outcome back in those innocent days when the old-time fiscal religion still had roots inside the beltway.

And it would have also caused enormous economic havoc had not the Gipper’s advisors—me included—talked him to signing three tax bills over 1982-1984 that recaptured roughly 40% of the revenue loss from his cherished tax cuts. Even then, the public debt grew by 250% during Reagan’s eight years – or by more than under any peacetime President in American history. Yet even to this day the GOP politicians and their economic advisers profess a case of heavy duty amnesia about what happened, claiming that real GDP grew by upwards of 4.5% and that these results were proof positive that “dynamic scoring” of tax cuts is valid.

Worse still, they appear to have convinced Donald Trump of this same fallacious revisionist history because it was embedded at the core of the Thursday speech’s fiscal math. To wit, Trump claimed that $2.6 trillion or 60% of the revenue loss from his $4.4 trillion tax cut would be recouped by, yes, 4% economic growth as far as the eye can see.

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As Merkel pushes back.

US Is Investigating Bosch in Widening VW Diesel-Cheat Scandal (BBG)

U.S. prosecutors are investigating whether Germany’s Robert Bosch, which provided software to Volkswagen, conspired with the automaker to engineer diesel cars that would cheat U.S. emissions testing, according to two people familiar with the matter. Among the questions the Justice Department is asking in the criminal probe, one of them said, is whether automakers in addition to VW used Bosch software to skirt environmental standards. Bosch, which is also under U.S. civil probe and German inquiry, is cooperating in investigations and can’t comment on them, said spokesman Rene Ziegler.

The line of inquiry broadens what is already the costliest scandal in U.S. automaking history. VW faces an industry-record $16.5 billion, and counting, in criminal and civil litigation fines after admitting last year that its diesel cars were outfitted with a “defeat device” that lowered emissions to legal levels only when it detected the vehicle was being tested. More than a half dozen big manufacturers sell diesel-powered vehicles in the U.S. The people familiar with the matter declined to say whether specific makers are under scrutiny. A second supplier may also be part of the widening probe: When prosecutors in Detroit outlined their case last week against a VW engineer who pleaded guilty to conspiracy in the matter, they said he had help from a Berlin-based company that is 50% owned by Volkswagen, described as “Company A” in a court filing. That company, according to a another person familiar with the matter, is IAV, which supplies VW and other automakers.

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“..the data told them to…”

Why the Fed Destroyed the Market Economy (Gordon)

Kashkari’s a man with crazy eyes. But he’s also a man with even crazier ideas. After stating that politics is not part of presidential election year Fed policy, Kashkari explained how Fed policy is set. “We look at the data,” he said. In hindsight, this clarification was more revealing than the initial denial. Clearly, Kashkari’s never thought about what exactly it is he’s looking at when looking at the data. If he had, he’d likely conclude that the approach of using data to identify apparent aggregate demand insufficiencies and perceived supply gluts is crazy. Unemployment. GDP. Price inflation. These data points are all fabricated and fudged to the government number crunchers’ liking. What’s more, for each headline number there are a list of footnotes and qualifiers. Hedonic price adjustments. Price deflators. Seasonal adjustments. Discouraged worker disappearances. These subjective adjustments greatly affect the results.

Yet what’s even crazier is that Kashkari believes that by finagling around with the price of money the Fed can improve the outputs of their bogus data. According to central planners, better data – i.e. higher GDP, greater consumer demand, 2% inflation – means a better economy. But after 100-years of mismanagement, the last eight being in the radically extreme, the Fed has scored a big fat rotten tomato. The data still stinks – GDP’s still anemic. But the downside of their actions is downright putrid. Policy makers have pushed public and private debt well past their serviceable limits. They’ve debased the dollar to less than 5% of its former value and propagated bubbles and busts in real estate, stock markets, emerging markets, mining, oil and gas, and just about every other market there is. Aside from enriching private bankers, we now know the answer to why the Fed destroyed the market economy. According to Kashkari, the data told them to.

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“..a former French finance minister who has more than a passing knowledge of the debt crisis in the country formerly known as Greece..”

IMF’s Lagarde: Big Salary, Big Ideas (TO Sun)

You probably didn’t get invited to the International Forum of the Americas conference held in Toronto this week. Neither did I. Just as well. From $700 for a “regular” one-day pass to $3,500 for an “executive club” three-day pass, the croissants and coffee must have been vastly superior to the fare at Tim Hortons. We both missed the opportunity to hear Christine Lagarde, the managing director of the IMF, pontificate on the rise of protectionist political rhetoric in the developed world. Lagarde drew criticism for praising Prime Minister Justin Trudeau’s fiscal plan from my friends Tony Clement, who’s in the running for the leadership of the federal Conservatives and Lisa Raitt, who hasn’t yet said whether she will run. Lagarde commented that she hoped Trudeau’s fiscal approach of spend now, pay later would go viral.

It’s an interesting take on how to build a strong, national economy, particularly from a former French finance minister who has more than a passing knowledge of the debt crisis in the country formerly known as Greece. The IMF has been intricately involved in the economic and political meltdown of Greece and, early in her tenure as managing director, Lagarde raised hackles by agreeing Greeks had “had a nice time” but it was now “payback time”. It’s hard to square the gap between praising Trudeau for “stimulus” spending and borrowing, while criticizing Greeks for not paying their way.

[..] I found Lagarde’s comments on the protectionist political wave sweeping over much of the developed world more interesting, and unintentionally, insightful. I had the pleasure of hearing her speak at a forum in New York. She is intelligent, informed and opinionated, all things I like. She’s also an elite, globe-traveling bureaucrat with a $500,000 tax-free salary and an expense account commensurate with a lifestyle unrecognizable to average folk. From her lofty, enlightened position Lagarde offered that blue-collar workers in developed countries should be offered educational opportunities. Apparently that will help them adjust to factory closings.

The author was a cabinet minister in the Conservative government of Ontario premier Mike Harris from 1995 to 2002.

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Barton Gellman takes down an idiot report.

House Intelligence Committee’s Terrible, Horrible, Very Bad Snowden Report (TCF)

Since I’m on record claiming the report is dishonest, let’s skip straight to the fourth section. That’s the one that describes Snowden as “a serial exaggerator and fabricator,” with “a pattern of intentional lying.” Here is the evidence adduced for that finding, in its entirety.

“He claimed to have left Army basic training because of broken legs when in fact he washed out because of shin splints.” This is verifiably false for anyone who, as the committee asserts it did, performs a “close review of Snowden’s official employment records.” Snowden’s Army paperwork, some of which I have examined, says he met the demanding standards of an 18X Special Forces recruit and mustered into the Army on June 3, 2004. The diagnosis that led to his discharge, on crutches, was bilateral tibial stress fractures.

“He claimed to have obtained a high school degree equivalent when in fact he never did.” I do not know how the committee could get this one wrong in good faith. According to the official Maryland State Department of Education test report, which I have reviewed, Snowden sat for the high school equivalency test on May 4, 2004. He needed a score of 2250 to pass. He scored 3550. His Diploma No. 269403 was dated June 2, 2004, the same month he would have graduated had he returned to Arundel High School after losing his sophomore year to mononucleosis. In the interim, he took courses at Anne Arundel Community College.

“He claimed to have worked for the CIA as a ‘senior advisor,’ which was a gross exaggeration of his entry-level duties as a computer technician.” Judge for yourself. Here are the three main roles Snowden played at the Central Intelligence Agency (CIA). (1) His entry level position, as a contractor, was system administrator (one among several) of the agency’s Washington metropolitan area network. (2) After that he was selected for and spent six months in training as a telecommunications information security officer, responsible for all classified technology in U.S. embassies overseas. The CIA deployed him to Geneva under diplomatic cover, complete with an alias identity and a badge describing him as a State Department attache. (3) In his third CIA job, the title on his Dell business card was “solutions consultant / cyber referent” for the intelligence community writ large—the company’s principal point of contact for cyber contracts and proposals. In that role, Snowden met regularly with the chiefs and deputy chiefs of the CIA’s technical branches to talk through their cutting edge computer needs.

“He also doctored his performance evaluations…” Truly deceptive, this. I will tell the story in my book. Suffice to say that Snowden discovered and reported a security hole in the CIA’s human resources intranet page. With his supervisor’s permission, he made a benign demonstration of how a hostile actor could take control. He did not change the content of his performance evaluation. He changed the way it displayed on screen.

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But they control.

Western Media Credibility In Free Fall Collapse (Paul Craig Roberts)

The latest from the Gallup Poll is that only 32% of Amerians trust the print and TV media to tell the truth. Republicans, 18 to 49 year old Americans, and independents trust the media even less, with trust rates of 14%, 26%, and 30%. The only group that can produce a majority that still trusts the media are Democrats with a 51% trust rate in print and TV reporting. The next highest trust rate is Americans over 50 years of age with a trust rate of 38%. The conclusion is that old people who are Democrats are the only remaining group that barely trusts the media. This mistaken trust is due to their enculturation. For older Democrats belief in government takes the place of Republican belief in evangelical Christianity.

Older Democrats are firm believers that it was government under the leadership of President Franklin D. Roosevelt that saved America from the Great Depression. As the print and TV media in the 21st century are firmly aligned with the government, the trust in government spills over into trust of the media that is serving the government. As the generation of Democrats enculturated with this mythology die off, Democratic trust rates will plummet toward Republican levels. It is not difficult to see why trust in the media has collapsed. The corrupt Clinton regime, which we might be on the verge of repeating, allowed a somewhat diverse and independent media to be 90% acquired by six mega-corporations. The result was the disappearance of independence in reporting and opinion.

The constraints that corporate ownership and drive for profits put on journalistic freedom and resources reduced reporting to regurgitations of government and corporate press releases, always the cheapest and uncontroversial way to report. With journalistic families driven out of journalism by estate taxes, the few remaining newspapers become acquisitions like a trophy wife or a collector Ferrari. Jeff Bezos, CEO and founder of amazon.com, handed over $250 million in cash for the Washington Post. Jeff might be a whiz in e-commerce, but when it comes to journalism he could just as well be named Jeff Bozo.

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Taleb’s been tweeting on this for a long time. Wonder if he’s read Ivan Illich’s work on institutionalism.

The Intellectual Yet Idiot (Taleb)

The Intellectual Yet Idiot is a production of modernity hence has been accelerating since the mid twentieth century, to reach its local supremum today, along with the broad category of people without skin-in-the-game who have been invading many walks of life. Why? Simply, in most countries, the government’s role is between five and ten times what it was a century ago (expressed in%age of GDP). The IYI seems ubiquitous in our lives but is still a small minority and is rarely seen outside specialized outlets, think tanks, the media, and universities – most people have proper jobs and there are not many openings for the IYI. Beware the semi-erudite who thinks he is an erudite. He fails to naturally detect sophistry.

The IYI pathologizes others for doing things he doesn’t understand without ever realizing it is his understanding that may be limited. He thinks people should act according to their best interests and he knows their interests, particularly if they are “red necks” or English non-crisp-vowel class who voted for Brexit. When Plebeians do something that makes sense to them, but not to him, the IYI uses the term “uneducated”. What we generally call participation in the political process, he calls by two distinct designations: “democracy” when it fits the IYI, and “populism” when the plebeians dare voting in a way that contradicts his preferences. While rich people believe in one tax dollar one vote, more humanistic ones in one man one vote, Monsanto in one lobbyist one vote, the IYI believes in one Ivy League degree one-vote, with some equivalence for foreign elite schools, and PhDs as these are needed in the club.

More socially, the IYI subscribes to The New Yorker. He never curses on twitter. He speaks of “equality of races” and “economic equality” but never went out drinking with a minority cab driver. Those in the U.K. have been taken for a ride by Tony Blair. The modern IYI has attended more than one TEDx talks in person or watched more than two TED talks on Youtube. Not only will he vote for Hillary Monsanto-Malmaison because she seems electable and some other such circular reasoning, but holds that anyone who doesn’t do so is mentally ill. The IYI has a copy of the first hardback edition of The Black Swan on his shelves, but mistakes absence of evidence for evidence of absence. He believes that GMOs are “science”, that the “technology” is not different from conventional breeding as a result of his readiness to confuse science with scientism.

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Everyone should read this. And then realize that Russia in not a threat to us.

The Existential Madness of Putin-Bashing (Robert Parry)

the United States dispatched financial “experts” – many from Harvard Business School – who arrived in Moscow with neoliberal plans for “shock therapy” to “privatize” Russia’s resources, which turned a handful of corrupt insiders into powerful billionaires, known as “oligarchs,” and the “Harvard Boys” into well-rewarded consultants. But the result for the average Russian was horrific as the population experienced a drop in life expectancy unprecedented in a country not at war. While a Russian could expect to live to be almost 70 in the mid-1980s, that expectation had dropped to less than 65 by the mid-1990s.

The “Harvard Boys” were living the high-life with beautiful women, caviar and champagne in the lavish enclaves of Moscow – as Yeltsin drank himself into stupors – but there were reports of starvation in villages in the Russian heartland and organized crime murdered people on the street with near impunity. Meanwhile, Presidents Bill Clinton and George W. Bush cast aside any restraint regarding Russia’s national pride and historic fears by expanding NATO across Eastern Europe, including the incorporation of former Soviet republics. In the 1990s, the “triumphalist” neocons formulated a doctrine for permanent U.S. global dominance with their thinking reaching its most belligerent form during George W. Bush’s presidency, which asserted the virtually unlimited right for the United States to intervene militarily anywhere in the world regardless of international law and treaties.

Without recognizing the desperation and despair of the Russian people during the Yeltsin era – and the soaring American arrogance in the 1990s – it is hard to comprehend the political rise and enduring popularity of Vladimir Putin, who became president after Yeltsin abruptly resigned on New Year’s Eve 1999. (In declining health, Yeltsin died on April 23, 2007). Putin, a former KGB officer with a strong devotion to his native land, began to put Russia’s house back in order. Though he collaborated with some oligarchs, he reined in others by putting them in jail for corruption or forcing them into exile.

Putin cracked down on crime and terrorism, often employing harsh means to restore order, including smashing Islamist rebels seeking to take Chechnya out of the Russian Federation. Gradually, Russia regained its economic footing and the condition of the average Russian improved. By 2012, Russian life expectancy had rebounded to more than 70 years. Putin also won praise from many Russians for reestablishing the country’s national pride and reasserting its position on the world stage.

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Why?

Russia Says US Refuses To Share Syria Truce Deal With UN Council (R.)

Russia said on Friday that a U.N. Security Council endorsement of a Syria ceasefire deal between Moscow and Washington appeared unlikely because the United States does not want to share the documents detailing the agreement with the 15-member body. Russian U.N. Ambassador Vitaly Churkin and U.S. Ambassador Samantha Power had been due to brief the council behind closed-doors on Friday but that was canceled at the last minute. “The main problem … which in my mind makes it impossible to produce any resolution, is that they are refusing to give those documents to members of the Security Council or even to read those documents to the members of the Security Council,” Churkin told reporters.

“We believe that we cannot ask them (council members) to support documents which they haven’t seen,” said Churkin, suggesting there was lack of unity in U.S. President Barack Obama’s administration toward the agreement. The U.S. mission to the United Nations said it could not agree with Russia on a way to brief the council that would “not compromise the operational security of the arrangement.” [..] Churkin said Russia has given two drafts of a possible Security Council resolution to the United States. He said on Thursday that Moscow hoped a resolution could be adopted next week during the annual U.N. gathering of world leaders. “They, in their typical way, came up with a completely different thing, which is trying to interpret and reinterpret the agreement,” Churkin said, referring to U.S. officials.

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Jul 312016
 
 July 31, 2016  Posted by at 10:13 pm Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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Vincent van Gogh Branches Of An Almond Tree In Blossom in Red 1890

Think about it for a second: If America -and UK, France- were to announce today that they would immediately cease bombing Syria, Iraq, Libya, Afghanistan, would the US be any less safe? Would Europe?

How about if we’d promise to spend all the billions saved by not throwing bombs on them, to help rebuild these countries? Would that make us less safe, from terrorists, from anyone at all? Do you think ‘they’ would ‘hate’ us for that?

It becomes a pretty stupid non-discussion pretty fast, doesn’t it?

 

 

Mar 162016
 
 March 16, 2016  Posted by at 9:53 am Finance Tagged with: , , , , , , ,  Comments Off on Debt Rattle March 16 2016
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William Henry Jackson Camp wagon on a Texas roundup 1901


Chinese PM Li Keqiang Says It Is ‘Impossible’ to Miss Economic Targets (WSJ)
Chinese Buying In US Rekindles Memories Of Japan’s 1980s Merger Mania (Forbes)
China Mixes Cash, Coercion to Ease Labor Unrest (WSJ)
China To Target Shadow Lending For Housing Down-Payments (BBG)
Asia Hedge Funds Had Worst-Ever Start to Year (BBG)
Retirement Is Impossible With Negative Rates (Mauldin)
JP Morgan Brings Back Mortgage-Backed Securities (WSJ)
Despair Fatigue (Graeber)
Disaster Capitalists Fan Flames Of War In Syria (II)
EU Approves Refugee Support Mechanism For Greece (Kath.)
FYROM Accuses Greece Over the “Exodus” of Refugees (PP)
FYROM Dumps Refugees Back In Greece As EU-Turkey Deal Falters (Reuters)
Refugees On Lesbos Offered Sanctuary Thanks To Brit Couple (Mirror)
UNHCR To Ask World To Take In 400,000 Syrian Refugees (A.)

Not a smart thing to say.

Chinese PM Li Keqiang Says It Is ‘Impossible’ to Miss Economic Targets (WSJ)

Chinese Premier Li Keqiang said it would be “impossible” for China to fall short in meeting its relatively high economic-growth targets even as it pushes ahead with structural reforms. Speaking to reporters at the conclusion of China’s annual legislative session, Mr. Li said China won’t suffer a “hard landing,” or sharp downturn, and can achieve growth and reform simultaneously. “Reform and development aren’t contradictory,” he said. “We should be able to stimulate market vitality and support economic development via structural reforms.” At the opening of the National People’s Congress earlier this month, China set growth targets of 6.5% to 7% for this year and an average benchmark of at least 6.5% from now until 2020.

Economists say this relatively high growth target at a time when the economy is losing momentum suggests China is favoring growth over structural reform, which could prevent massive job losses and social instability but set back the shift of China’s economy from investment and manufacturing to consumption and services. The real test will be in whether tough restructuring steps are implemented, Commerzbank economist Zhou Hao said in a report following Mr. Li’s comments. “China needs to proceed with the deleveraging more decisively, and should prevent the leverage ratio from soaring again,” he wrote. “At the end of the day, policy execution is crucial to restore the market confidence.”

Mr. Li said capital-adequacy ratios at China’s financial institutions are sound, bad loans are well covered by reserves and the nation is making progress in cutting corporate debt using debt-for-equity swaps. Mr. Li signaled that China will do what it takes to maintain its growth targets and that it has a “good reserve” of policy instruments in the event that growth falls outside an acceptable range, He said China will employ “innovative measures” to ensure steady economic progress.

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What could go wrong?

Chinese Buying In US Rekindles Memories Of Japan’s 1980s Merger Mania (Forbes)

Nearly three decades ago, Japanese corporations flooded the United States with a boom of takeover deals, much of it focused on prime U.S. real estate. They snapped up properties like Rockefeller Center and The Plaza Hotel, in addition to Columbia Pictures, causing consternation among those in the U.S. who wondered when, or if, the buying boom would ever end. “If you don’t want Japan to buy it.. don’t sell it,” Akio Morita, founder of Sony , famously said when bidding for Columbia. The buying stopped when a 1980s stock market bubble in Japan popped, depleting the dealmaking currency and animal spirits of overseas acquirers. Within years, targets like Rock Center and The Plaza were in the hands of new ownership and a quarter century later, Japanese corporations are still trying to dig out from under the bubble.

Now, it appears there’s a new foreign buyer rushing into U.S. markets and exhibiting similarities to the heady, 1980s Japanese M&A binge. Chinese corporations have opened 2016 with an unprecedented surge in overseas dealmaking and this frenzy of activity is no coincidence. It comes as China’s currency is in the process of readjusting to account for it slowing economic growth, causing hundreds of billions of dollars in capital outflows. Roughly half a trillion dollars poured out of China in 2015 according to the Institute for International Finance and that pace continues this year. Capital leaving China has found its way into single and multifamily real estate properties in North America – in addition to financial assets like stocks, bonds and currencies.

Now, the money is rushing directly towards large domestic corporations through takeover deals. Just two and a half months into the year, Chinese overseas corporate M&A activity is roughly in line with the $108 billion in outbound M&A conducted all of last year, according to Dealogic. If Chinese corporates are beginning to exhibit similar symptoms to the Japanese merger mania, a set of deals in the works this weekend cements the comparison. Anbang Insurance Group, which is run by Deng Xiaoping’s grandson-in-law, is trying to negotiate what looks to be an unprecedented bonanza of real estate acquisitions, targeted at famous U.S. properties. Anbang ponied up $2 billion to buy the Waldorf-Astoria Hotel from Blackstone-controlled Hilton Hotels in late 2014, and the group is back at it with two deals that would increase its buying by many multiples.

The insurer is reportedly offering to buy Strategic Hotels and Resorts (SH&R) — the owner of properties including Essex House and Hotel del Coronado — from Blackstone. That offer comes just months after the ink dried on the PE giant’s $4 billion takeover of SH&R in September. And Anbang is leading a consortium of investors who are challenging Marriott International’s $12 billion takeover of Starwood Hotels, operator of upscale hotel brands including Westin, W Hotels and Le Meridien.

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How China keeps its zombies alive.

China Mixes Cash, Coercion to Ease Labor Unrest (WSJ)

A protest by Chinese coal workers over unpaid wages drew a swift, expected response: payoffs to get them off the streets and threats of police action if they don’t. The effort underscores the government’s long-standing worries about labor strife and its newly cautious approach to restructuring unprofitable state firms. Unrest in the northeastern city of Shuangyashan appeared to ease as Longmay Mining Holding, a huge employer, started disbursing some back pay on Monday, workers said. Hundreds took to the streets there last week, drawing a large police presence, after the provincial governor said Longmay didn’t owe its miners wages.

The response by Longmay and Heilongjiang province Gov. Lu Hao, who later said he had misspoken about the wage arrears, mirrored past efforts by Chinese officials to ease labor unrest with a mix of cash, coercion and pledges of redress. Chinese call the strategy “buying stability,” part of the government’s well-worn playbook for defusing public anger. Beyond being a troubled coal company, Longmay is a test case for government resolve in carrying out a key economic initiative—the restructuring of uncompetitive state industries whose drain on resources is impeding a transition to an economy driven more by services and consumers. Many Longmay workers in Shuangyashan are among the 1.8 million steel and coal workers Beijing plans to lay off over the next five years.

The retrenchment, and the allocation of 100 billion yuan ($15.4 billion) in restructuring funds to pay for workers’ severance, retraining and relocation, are part of a five-year economic program Chinese lawmakers are set to adopt at the end of their annual session in Beijing on Wednesday. Economists have said China needs deeper cuts to shed excess industrial capacity and divert labor and capital to more productive industries. Instead, the government is encouraging businesses to keep workers on the payrolls, often at reduced hours and pay, avoiding fueling a continuing surge in labor unrest but at the cost of dragging out an economic transition. Some ailing enterprises can expect official support to stay in business, including in Longmay’s case tax cuts and cash incentives that Fitch Ratings says allowed the mining company to avoid defaulting on bonds.

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“His property agent offered him a zero-interest loan, funded entirely online by peer-to-peer lenders, that covered almost half his deposit..”

China To Target Shadow Lending For Housing Down-Payments (BBG)

When Fu Songtao found his ideal home in the suburbs of Shanghai, he faced the typical problem of would-be homebuyers: Coming up with enough cash for a down payment. So Fu turned to an online solution. His property agent offered him a zero-interest loan, funded entirely online by peer-to-peer lenders, that covered almost half his deposit. “Everybody I know took out these loans,” said Fu, a 29-year-old employee of a state-owned enterprise, who borrowed 380,000 yuan ($58,000) a year ago, with interest payments to lenders subsidized by the property agent, for his 3 million yuan apartment, and has seen its value increase to 3.3 million yuan since. “If you can borrow like that, why not?” The lending platform of his real estate agency, E-House China, is one of China’s hundreds of P2P lenders allowing home buyers to seek down-payment loans online.

Total P2P borrowing for home deposits reached 924 million yuan in January, more than three times the level of last July, according to data provider Yingcan. Lending for property down payments, a phenomenon all but unheard of a year ago, has now prompted plans by the government to halt such borrowing. The response underscores the stakes as shadow-banking leverage creeps into China’s housing market – a development similar to the margin financing that fueled last year’s stock market bubble, but with potentially more damaging consequences. “Down-payment financing would definitely cause risks to the financial system, similar to the subprime crisis in the U.S.,” said Hu Xingdou, an economics professor at the Beijing Institute of Technology.

“China has learned a lesson from the U.S. subprime crisis. The Chinese government understands that they have to solve problems like housing and overcapacity. At the same time, they can’t bring further risks to the financial system, as the banks already have a lot of bad debt.” People’s Bank of China Deputy Governor Pan Gongsheng said at a press conference on Saturday that down-payment loans offered by developers, real estate agents, and P2P lenders not only raised leverage of home buyers, they also undermined effectiveness of macroeconomic policies and increased risks to the financial system and property markets. The central bank together with other government departments will soon start a campaign to clean up such activities, he said. New rules being drafted by the central bank, the China Banking Regulatory Commission and other bodies would bar developers, peer-to-peer networks and other non-banks from offering down-payment loans

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Casino’s on steroids.

Asia Hedge Funds Had Worst-Ever Start to Year (BBG)

Hedge funds in Asia, which beat counterparts in the U.S. and Europe in 2015, are off to their worst annual start on record this year, as the region’s stock markets have plunged amid a dimming outlook for growth. Asia hedge funds, excluding those that invest in Japan, fell 1.5% in February, bringing their loss for the first two months of 2016 to 6.6%, according to Singapore-based data provider Eurekahedge. Apart from being the biggest drop ever for the first two months of the year, that’s also the worst start among the world’s major regions, Eurekahedge said. Hedge funds including those from Greenwoods Asset Management and Zeal Asset Management extended declines they suffered in January.

After successfully navigating turbulent markets in 2015, hedge funds in Asia are seeing a reversal this year as worries about a global slowdown have deepened. The Shanghai Composite Index has tumbled 19% this year to rank among the worst-performing equity markets in the world, and most of the region’s benchmarks have been whipsawed by volatility amid scant signs of global growth. “Hedge fund managers in the region, especially those focusing on long-short strategies, had been stung by volatility in underlying markets,” said Mohammad Hassan at Eurekahedge. As it becomes more difficult to post consistent returns, investors are increasingly shifting their money to the largest or most promising managers, prompting many smaller-scale firms to exit the business or return money to investors.

That’s creating a bifurcation in Asia’s hedge fund industry. The losses for hedge funds investing in Asia ex-Japan compares with a decline of 3.2% in Europe through the end of February and a decrease of 1.7% in North America, according to the Eurekahedge website. Last year, Asia ex-Japan hedge funds rose 7.5%, beating rivals in other parts of the world. Greenwoods Asset’s Golden China Fund fell 3.7% in February, bringing its losses to 14.4% so far this year, according to Joseph Zeng, a Hong Kong-based partner at the hedge fund firm. The fund, which managed $1.7 billion as of January, was one of the top performers last year, posting gains of almost 22%.

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“This situation would wreak havoc on every pension fund—but that’s not even the worst part.”

Retirement Is Impossible With Negative Rates (Mauldin)

Since 2008, the Fed has relied on near-zero interest rates to stimulate economic growth, and they still sincerely believe that low interest rates will do the job they’re supposed to. However, the hard evidence of the past few years is that ultra-low rates, combined with quantitative easing, haven’t stimulated much growth. Unemployment has fallen, which is good—but probably not as good as the numbers suggest because people have gone back to work for lower pay and are now even deeper in debt. Personal income growth has stagnated, too. Are we better off now than we were five years ago? The answer is a qualified yes. But it is not entirely clear, at least to your humble analyst, that the halting economic recovery is the result of low interest rates and not other less manipulable factors such as entrepreneurial initiative and good old muddling through.

In fact, an ultra-easy monetary policy may be part of the reason we’ve been stuck with low growth. Witness Japan and Europe. Just saying… Seriously, no one fully understands how all the moving parts influence each other. Years of ZIRP did help businesses and consumers reduce their debt burdens. ZIRP and multiple rounds of QE have also done wonders for stock prices… but not much for the kind of business expansion that creates jobs and GDP growth. If year upon year of ultra-low rates were enough to create an economic boom, Japan would be the world’s strongest economy right now. It obviously isn’t—which says something about ZIRP’s efficacy as a stimulus tool. What isn’t a mystery, however, is that ZIRP has created a massive problem for retirement savers and pension fund managers.

If ZIRP is bad, NIRP will be far worse for retirement planning. Bond-return assumptions will have to be even lower and potentially below zero. This situation would wreak havoc on every pension fund—but that’s not even the worst part. Most asset allocations are generally in the ballpark of 60% equities and 40% bonds, so that is the standard portfolio we will be discussing. Other allocations will make some differences, but not change the general direction. In other words, “your mileage may vary,” but probably not by much. In an ideal world—which is the world that pension consultants live in—equities will return 10% nominal and bonds will return 5%. A 60/40 portfolio blend will then yield an 8% overall return after fees, expenses, and management costs.

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“J.P. Morgan is using the Federal Deposit Insurance Corp.’s safe harbor, which isolates them from the assets and protects investors if the mortgages go bad.”

JP Morgan Brings Back Mortgage-Backed Securities (WSJ)

J.P. Morgan Chase & Co. is trying to sell new securities that would pass along most of the credit risk on $1.9 billion in mortgages, in an attempt to revive a debt market that has been largely left to the government since the financial crisis. The largest U.S. bank by assets is expected to price the residential mortgage-backed deal over the next two weeks. J.P. Morgan would hold 90% of the deal by keeping the safest parts, or the most senior tranches, and plans to sell off the riskier pieces to investors. Government-sponsored entities Fannie Mae and Freddie Mac have dominated the market in their absence. The two companies have recently been selling new securities that use derivatives to unload the risk of default on the mortgages they guarantee.

The new deal is J.P. Morgan’s first “house transaction” since the financial crisis, meaning it is entirely backed by mortgages the bank owns. The pool includes a mix of more than 6,000 mortgages, both newer and refinancings, around 75% of them conforming with the underwriting standards set by Fannie and Freddie. J.P. Morgan could have sold those loans directly to Fannie and Freddie, so the deal indicates it thinks it can get a better deal with private investors or holding parts on its balance sheet.

The New York bank hopes this new method could offer more competitive pricing and help broaden the market for such deals, people familiar with the matter said. J.P. Morgan is using the Federal Deposit Insurance Corp.’s safe harbor, which isolates them from the assets and protects investors if the mortgages go bad. The deal is the first of its kind to be issued by a major bank, according to Fitch Ratings, which gave the securities mostly investment-grade credit ratings. “This is an important step to bring private capital back into the mortgage market,” J.P. Morgan Chief Operating Officer Matt Zames said.

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“.. the historical defeat and humiliation of the British working classes is now the island’s primary export product.”

Despair Fatigue (Graeber)

In the United Kingdom, “finance” is based above all in real estate, and the real estate bubble that sustains the City is itself sustained by the fact that pretty much every billionaire in the world feels they have to maintain at least a flat, and more often a townhouse, in a fashionable part of London. Why? There are plenty of other well-appointed modern cities in the world, most of which have a decidedly more appealing climate. Yet even more than, say, New York or San Francisco, London real estate has become something like U.S. treasury bonds, a basic currency of the international rich. It’s when one asks questions like these that economics and politics become indistinguishable. Those who have investigated the situation find that London’s appeal—and by extension, Britain’s—rests on two factors.

First of all, Russian oligarchs or Saudi princesses know they can get pretty much anything they want in London, from antique candelabras and high-tech spy devices, to Mary Poppins–style nannies for their children, fresh lobsters delivered by bicycle in the wee hours, and every conceivable variety of exotic sexual service, music, and food. What’s more, the boodles will be delivered by a cheerful, creative, and subservient working-class population who, drawing on centuries of tradition, know exactly how to be butlers. The second factor is security. If one is a nouveau riche construction magnate or diamond trader from Hong Kong, Delhi, or Bahrain, one is keenly aware that at home, something could still go terribly wrong: revolution, a sudden U-turn of government policy, expropriation, violent unrest. None of this could possibly happen in Notting Hill or Chelsea.

Any political change that would significantly affect the most wealthy was effectively taken off the table with the Glorious Revolution of 1688. In other words, the historical defeat and humiliation of the British working classes is now the island’s primary export product. By organizing the entire economy around the resultant housing bubble, the Tories have ensured that the bulk of the British population is aware, at least on some tacit level, that it is precisely the global appeal of the English class system, up to and including the contemptuous sneer of the Oxbridge graduates in Parliament chuckling over the impending removal of housing benefits, that is also keeping affordable track shoes, beer, and consumer electronics flowing into the country. It’s an impossible dilemma.

It’s hardly surprising, then, that so many turn to cynical right-wing populists like UKIP, who manipulate the resulting indignation by fomenting rage against Polish construction workers instead of Russian oligarchs, Bangladeshi drivers instead of Qatari princes, and West Indian porters instead of Brazilian steel tycoons. This marketing of class subservience is the essence of Tory economic strategy. Industry may be trounced and the university system turned (back) into a playground for the rich, but even if this leads to a collapse of technology and the knowledge economy, the end result will only seal in more firmly the class system that produces Tory politicians: England will literally have nothing else to sell.

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Lest we forget. Good read, lots of details.

Disaster Capitalists Fan Flames Of War In Syria (II)

If Naomi Klein were to rewrite The Shock Doctrine now, I hope she d agree that the situation in Syria is playing out as a textbook example of her terrifying concept because I believe that’s what we are witnessing. To understand the actions of each nation involved in Syria, you first have to recognise their motivation. It is, as always, fossil fuels and the dollar with human life at a lowly position down the pecking order. The crux of the matter is that Bashar al-Assad put paid to the construction of an oil and gas pipeline, which would have ended Europe s reliance on Russia for its natural gas, by refusing to sign an agreement with Qatar. Instead, he opted for a partnership with Iran (after which the civil war in Syria intensified). While the construction of the pipeline had previously been put on hold, it was quietly announced last July that Iran was forging ahead with a trunkline (IGAT6) to supply Iraq with natural gas; in theory, this could be the beginning of an Iran-Iraq-Syria pipeline or one that goes direct to Turkey.

The Iranian pipeline would be unacceptable to both Washington and Brussels, as it would mean energy co-ordination from Iran, Iraq, Syria and Russia (putting pressure on their Sunni-led cohorts in the region), and also because the product from such would be traded in a basket of currencies not exclusively the petrodollar. Moreover, with Iran now emerging from sanctions (and forecast to produce 3.1mbpd), its gas fields, the second largest reserves on the planet, are up for grabs to exporters. There is, in Syria and across the spectrum of corporate interests of the countries involved, everything to play for and the disaster capitalists are piling into the game, full throttle.

The refugee crisis ostensibly splintering the governments of the EU is set to balloon. Already this year, 133,549 people have reached Europe by sea up more than 10 fold from 2015. The demographic has altered drastically as well: whereas last year, the breakdown of migrants/refugees by gender was 62% male, 16% women and 22% children, so far this year it has been 47%, 20% and 34% respectively. The chaotic propaganda surrounding the refugee crisis continues unabated, each country pointing fingers at the other, for instance, when a NATO general accused Russia and Syria of weaponising the refugee crisis (while simultaneously characterising the people fleeing war as a hotbed of ISIS recruits).

Meanwhile, Greece, in the midst of its own economic turmoil, is left to accommodate 122,000 souls under the UNHCR’s warning of an ‘imminent humanitarian disaster’ unless other EU countries begin to take in these refugees. In effect, the intentional bottleneck in Greece functions as yet another form of shock inflicted by the EU and Troika on an already flailing Syriza administration and its embattled leader Tsipras. With its third bailout looking unsteady amidst mutterings of the IMF pulling out of the deal, the Greek administration has no chips to bargain with, and holds minimal leverage within the EU.

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More disgrace. Greece spends €600 million alone, EU ‘approves’ €300 million in support of the entire ‘refugee effort’.

EU Approves Refugee Support Mechanism For Greece (Kath.)

The presidency of the European Council on Tuesday announced that it has approved a new support mechanism for Greece and other European countries struggling with the bloc’s biggest immigration crisis since World War II. “This Council decision shows that the EU stands by Greece at this difficult time. The Netherlands presidency will do all it can to ensure that the necessary EU funds are mobilized as quickly as possible,” said Dutch Foreign Minister Bert Koenders, whose country holds the six-month rotating presidency of the EU. The European Commission estimates that the refugee effort will require €300 million this year and an additional €200 million each in 2017 and 2018.

The help that will be provided under the new mechanism includes food, shelter, water, medicine and other basic necessities. It will be delivered by the Commission itself or by partner organizations selected in cooperation with Greek authorities. Tuesday’s statement put the number of migrants and refugees currently trapped in Greece due to border closures at 35,000. Government sources estimate that number to be closer to 44,000. The Bank of Greece, meanwhile, on Monday said the cost of the handling the refugee crisis for Greece alone will likely exceed a previous estimate of €600 million.

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Sour and bitter relations. The Greeks say ‘Skopje’. Rumors say accidentally calling the country Macedonia forced the Greek migration minister to resign today.

FYROM Accuses Greece Over the “Exodus” of Refugees (PP)

The Minister of foreign affairs of FYROM, Nikola Poposki, stated that Greece is responsible for the “organised push” of several hundreds of migrants who attempted to cross over yesterday In a series of tweets, Poposki claimed that the growing numbers of migrants at the borders between Greece and FYROM intensifies smuggling while it worsens the human treatment of those living in the refugee camps. He claims that only a united and humane EU reaction will be able to provide a solution for both migrants as well as the involved countries. Those statements came after the effort, on Monday, of almost a thousand refugees to cross the river of Axios and attempt to get into FYROM via an opening in the fence separating the two countries.

While three people were drowned, the rest managed to enter FYROM where they were intercepted by FYROM army and were captured. The refugees decided to make that desperate “exodus” towards FYROM after a flyer was distributed between them, describing in English and Arabic where, and how they could pass over to FYROM. The incident creates further confusion and difficulties in what is already a complex situation between the countries involved. In any case it is not a development which aids Greece, or in fact the efforts of the refugees as it allows those countries which have decided to seal their borders to claim that Greece is not able to control the waves of migrants.

The Greek chief of the Administration for the migrant problem stated that, should FYROM make a petition for the re-entrance of the refugees back to Greece, the Greek side will evaluate and decide on it. It should be noted that there is no formal agreement between FYROM and Greece for the re-acceptance of migrants. At the same time, the Greek government is beckoning to NGOs as well as volunteering organizations to be in close contact with the authorities in order to avoid cases of misinformation. On Monday afternoon the Prime Minister presided over a meeting with all concerned authorities regarding those latest developments.

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That is illegal.

FYROM Dumps Refugees Back In Greece As EU-Turkey Deal Falters (Reuters)

Macedonia dumped about 1,500 migrants and refugees back into Greece overnight after they forced their way across the border, as European nations continued to pass the buck in a migration crisis that risks tearing the European Union apart. The police action was part of a drive by Western Balkans states to shut down a migration route from Greece to Germany used by nearly a million people fleeing war and poverty in the Middle East and Asia over the last year in Europe’s biggest refugee influx since World War Two. EU efforts to conclude a deal with Turkey to halt the human tide in return for political and economic rewards hit a setback on Tuesday when EU member Cyprus vowed to block efforts to speed up Ankara’s EU accession talks unless Turkey meets its obligations to recognize its nationhood.

European Council President Donald Tusk, who will chair an EU summit with Turkey on Thursday and Friday, was flying on to Ankara to discuss the fraying pact with Turkish leaders after tough talks with Cypriot President Nicos Anastasiades. Tusk acknowledged to reporters that the tentative deal put together last week by German Chancellor Angela Merkel and Dutch Prime Minister Mark Rutte with Turkish Prime Minister Ahmet Davutoglu raised legal problems and needed to be “rebalanced” to win acceptance from all 28 EU members. The European Commission meanwhile postponed proposals to reform the bloc’s flawed asylum system, which puts the onus on the state where migrants first arrive, in an attempt to avoid further controversy before the Turkey deal is finalised. Some 43,000 migrants are bottled up in Greece, overstraining the economically shattered euro zone country’s capacity to cope, and more continue to cross the Aegean daily from Turkey despite new NATO sea patrols.

An estimated 1,500 people marched out of a squalid transit camp near the northern Greek town of Idomeni on Monday, hiked for hours along muddy paths and forded a rain-swollen river to get around the border fence. Most were picked up by Macedonian security forces, put into trucks and driven back over the border into Greece late Monday or overnight, a Macedonian police official said. Greek authorities said they could not confirm the return as there had been no official contact from the Macedonian side. Ties between the two neighbors are fraught because of Greece’s long-standing refusal to recognize Macedonia’s name, which is the same as that of a northern Greek province. A second group of about 600 migrants was prevented from crossing into Macedonia and many of them spent the night camping in the Greek mountains.

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The Kempsons are fabulous. But where’s the rest of Britain?

Refugees On Lesbos Offered Sanctuary Thanks To Brit Couple (Mirror)

Many British couples dream of leaving Blighty behind and opening a hotel on an island in the sun. It was no different for Eric and Philippa Kempson when they thought about their future together. But it was the global refugee crisis which pushed them to buy their seafront guest house on the Greek island of Lesbos. And rather than welcoming British tourists, they have opened their doors to the hundreds of fleeing refugees who land on its shores each month. Now, as Turkey and the EU agree their “one in, one out” policy in response to the migrant crisis, Philippa says: “I’m absolutely speechless about these latest measures -they’re farcical. Labels like “irregular migration” are meaningless.” “We need to remember these are human beings fleeing horrific circumstances.

Hotel Elpis, on tranquil Eftalou Beach, gives desperate refugees shelter, somewhere to wash and a meal when they land on Lesbos. The 20-room hotel welcomed its first 110 residents two weeks ago. “In Greek Elpis is the goddess of hope, so it seemed fitting that we called the hotel the Hope Centre“ says Philippa, 43. First and foremost that’s what we provide these people with: hope. We are trying to give the families a few hours of dignity and somewhere where they are treated as people, not as refugees. We hadn’t planned to open our doors so early, as we are still waiting for our health and safety licenses. But last week one of the aid agencies begged us to help 110 people who had just arrived on boats. Every facility on the island was full. Philippa and Eric, 60, got involved in the crisis last summer, when they started handing out water to refugees.

Philippa explains: “We thought bigger agencies would come to help, but when none did, we thought, we have to help these people ourselves”. It was then that they decided to open the hotel. “We ve used our own savings and are working on the project 24/7”, she says. Tourists have been kind enough to leave money at supermarkets so we can buy supplies to hand out. The couple have also been given help with the hotel’s rent by Glasgow housing charity PAIH. Philippa adds: “Eric is an artist and makes oak products we sell. But last summer he didn’t have the time to do that because of our work with refugees. So I don t know how we are going to survive ourselves financially this year, but we will deal with those issues when they come.”

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Good luck.

UNHCR To Ask World To Take In 400,000 Syrian Refugees (A.)

The United Nations High Commissioner for Refugees said on Tuesday he will ask countries to step forward and agree to take in another 400,000 Syrian refugees. On his first visit to Washington since being appointed to head the UN refugee effort, Filippo Grandi said the world must do more to end the crisis. “On March 30, I’m going to chair a meeting in Geneva at which I ask the international community to take 10% of all the Syrian refugees,” he said. “10% is a lot of people. It’s more than 400,000 people,” he told reporters on the fifth anniversary of Syria’s bloody civil war. More than four million Syrians have fled their war-torn country since the conflict erupted, and more than six million are displaced within its borders. Neighboring Turkey, Lebanon and Jordan are struggling to cope with the exodus and the onward flow has created a political and humanitarian crisis in Europe.

Canada and Germany have been praised for stepping up to welcome tens of thousands as refugees, but others, including the United States have been criticized. Historically the United States has been by far the world’s leading host of refugees and it still is for those fleeing many other conflicts around the world. But amid a bitter atmosphere in the run up to November’s presidential election, Washington has struggled to offer new homes to desperate Syrians. US President Barack Obama ordered that 10,000 be admitted during the 2016 fiscal year, but half-way through the period only 1,115 have been processed. Grandi was careful not to criticize his hosts in Washington, praising the leading US role in hosting refugees of other nationalities.

But he lamented the tone of the debate in both the US and Europe, where anti-immigration politicians have claimed that terrorists hide among Muslim refugees. Grandi complained that on a visit to the European parliament he had heard “language we haven’t heard since the 30s” from opponents of resettlement. But he added that the new 400,000 target figure could be met in part by means short of the full resettlement package that the United States offers. Rather than providing Syrian refugees with new lives and permanent residence, some countries may offer temporary jobs, scholarships or humanitarian visas. For this, he said, his office would work with private firms and universities in partnership with states, to try to reduce the pressure on Syria’s neighbors.

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Mar 052016
 
 March 5, 2016  Posted by at 9:42 am Finance Tagged with: , , , , , , , , ,  1 Response »
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DPC Country store, Venezuela 1905


China Intervenes in Stock Markets Ahead of Annual Policy Meeting (BBG)
China’s Rebalancing Is Overrated (Balding)
China Lays Out Its Vision To Become A Tech Power (Reuters)
Jim Rogers: There’s a 100% Probability of a US Recession Within a Year (BBG)
US Watchdog To Probe Fed’s Lax Oversight Of Wall Street (Reuters)
It Begins: Palace Revolt Against ECB’s NIRP (WS)
What’s Best For UK Savers Who’ve Lost £160 Billion Of Interest In 7 Years? (G.)
Argentina To Issue $11.68 Billion In Bonds To Pay For Defaulted Bonds (Reuters)
Brazil Ex-President Lula Detained In Corruption Probe (Reuters)
Brazil’s Ruling Party To Tap FX Reserves As Policy Fight Escalates (AEP)
Giant California Pension Funds To Sue VW Over Diesel Scandal (LA Times)
BP CEO Gets 20% Pay Rise Despite 2015 Record Loss, 1000s of Jobs Lost (Ind.)
Turkey Seizes Control Of Anti-Erdogan Daily In Midnight Raid (AFP)
What The NY Times Won’t Tell You About The US Adventure In Ukraine (Salon)
The Syrian Exodus: Epic In Scale, Inconceivable Till You Witness It (Flanagan)
Athens Given Deadlines For Schengen Requirements (Kath.)
Tsipras Says Greece Can’t Stop Migrants Headed For Northern Europe (AFP)
Europe Yanks Welcome Mat Out From Under Its War Refugees (Sputnik)

Saw that coming from miles away.

China Intervenes in Stock Markets Ahead of Annual Policy Meeting (BBG)

China intervened to support its stock market on Friday, helping the benchmark index cap its best weekly gain of 2016 before policy makers meet to approve a five-year road map for the economy, according to two people with direct knowledge of the situation. State-backed funds bought primarily bank shares, while some local branches of the securities regulator asked listed companies, mutual funds and brokerages to stabilize the market during the National People’s Congress and the Chinese People’s Political Consultative Conference, said the people, who asked not to be named because the matter isn’t public. China’s biggest banks, seen as prime targets for state support because of their large weightings in benchmark indexes, paced gains in the $5.5 trillion market on Friday even as small-capitalization shares tumbled.

Authorities have been known to intervene in markets before key national events, with government funds stepping in to boost share prices last August before a military parade celebrating the 70th anniversary of the World War II victory over Japan. “It looks like the national team has been buying as large caps of the Shanghai index jumped, while small caps fell,” said Steve Wang at Reorient Financial Markets in Hong Kong. China’s stock market has become one of the most visible symbols of anxiety toward Asia’s largest economy after a $5 trillion crash last summer rattled global investors. By publicly intervening to support equity prices in 2015, President Xi Jinping’s government has staked some of its credibility as a steward of the economy on the state’s ability to stabilize one of the world’s most volatile markets.

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It’s just word, really: “..by helping keep afloat those state-owned zombie companies in order to boost GDP, Chinese banks are further delaying the process of rebalancing.”

China’s Rebalancing Is Overrated (Balding)

The optimists’ case for China is fairly straightforward. Yes, the world’s second-largest economy is grinding to its slowest pace in decades. But as investment and manufacturing – traditionally the key drivers of Chinese growth – decline in importance, domestic consumption and services are playing a bigger role: For the first time, services accounted for just over 50% of GDP last year. This much-desired rebalancing should move China toward a far more sustainable growth model. New economy companies in technology, health-care, finance and retail are more productive and less polluting than smokestack industries. Robust consumption – rail traffic is growing at 10% as Chinese spend more on leisure travel, while mobile Internet traffic has doubled – is key to weaning the economy off its addiction to investment.

As unproductive coal mines and steel factories shed workers, labor-intensive services should pick up the slack. A closer look at the data, however, paints a different and decidedly gloomier picture. Take travel. While overall rail traffic is up, total passenger turnover, which accounts for the number of kilometers traveled, grew only 3.1% in 2015. Moreover, it’s important to remember that only 11% of trips are done by rail. (International air travel, which grew 34% last year, only covers 0.2% of trips.) The vast majority of travel takes place by road and highway traffic actually declined last year. If so many more Chinese are going on pleasure trips, why is hotel revenue flat? Similarly, sales at the 100 biggest retailers in China, which one would expect to be thriving if the economy were rebalancing, were down 0.1% in 2015.

Luxury brands have been hit particularly hard (in part because of the ongoing anti-corruption campaign) and sales of even basic consumer durables such as TVs, refrigerators, audio equipment and washing machines are flat or declining. Services are certainly growing faster than manufacturing and real estate. But much of that growth comes from two sectors. The first, financial services, got a major boost in 2015 from the stock-market boom in the first half of the year and from the continuing flood of lending encouraged by the government. If one strips out the contribution made by the sector, consumption continued to slow last year. The bursting of the equity bubble is sure to crimp growth, as may a souring of loans, many of which are going to loss-making heavy industries. Indeed, by helping keep afloat those state-owned zombie companies in order to boost GDP, Chinese banks are further delaying the process of rebalancing.

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By exercising more state control…

China Lays Out Its Vision To Become A Tech Power (Reuters)

China aims to become a world leader in advanced industries such as semiconductors and in the next generation of chip materials, robotics, aviation equipment and satellites, the government said in its blueprint for development between 2016 and 2020. In its new draft five-year development plan unveiled on Saturday, Beijing also said it aims to use the internet to bolster a slowing economy and make the country a cyber power. China aims to boost its R&D spending to 2.5% of GDP for the five-year period, compared with 2.1% of GDP in 2011-to-2015. Innovation is the primary driving force for the country’s development, Premier Li Keqiang said in a speech at the start of the annual full session of parliament.

China is hoping to marry its tech sector’s nimbleness and ability to gather and process mountains of data to make other, traditional areas of the economy more advanced and efficient, with an eye to shoring up its slowing economy and helping transition to a growth model that is driven more by services and consumption than by exports and investment. This policy, known as “Internet Plus”, also applies to government, health care and education. As technology has come to permeate every layer of Chinese business and society, controlling technology and using technology to exert control have become key priorities for the government.

China will implement its “cyber power strategy”, the five-year plan said, underscoring the weight Beijing gives to controlling the Internet, both for domestic national security and the aim of becoming a powerful voice in international governance of the web. China aims to increase Internet control capabilities, set up a network security review system, strengthen cyberspace control and promote a multilateral, democratic and transparent international Internet governance system, according to the plan. Since President Xi Jinping came to power in early 2013, the government has increasingly reined in the Internet, seeing the web as a crucial domain for controlling public opinion and eliminating anti-Communist Party sentiment.

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“..if markets around the world are crashing, let’s just say that scenario happens, everybody’s going to put their money in the U.S. dollar—it could turn into a bubble.”

Jim Rogers: There’s a 100% Probability of a US Recession Within a Year (BBG)

Rogers Holdings Chairman Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months. During an interview on Bloomberg TV with Guy Johnson, the famous investor said that there was a 100% probability that the U.S. economy would be in a downturn within one year. “It’s been seven years, eight years since we had the last recession in the U.S., and normally, historically we have them every four to seven years for whatever reason—at least we always have,” he said. “It doesn’t have to happen in four to seven years, but look at the debt, the debt is staggering.” Most Wall Street economists see a much smaller chance of a U.S. recession within this span, with odds typically below 33%.

Rogers was not specific on what could trigger a disorderly deleveraging process and recession but claimed that sluggish or slowing economies in China, Japan, and the euro zone mean that there are many possible channels of contagion. The former partner of George Soros suggested that if investors focus on the right data, there are signs that the U.S. economy is already faltering. “If you look at the … payroll tax figures [in the U.S.], you see they’re already flat,” he concluded. “Don’t pay attention to the government numbers, pay attention to the real numbers.” In light of the economic turmoil envisioned by Rogers, he is long the U.S. dollar.

“It might even turn into a bubble,” he said of the greenback. “I mean, if markets around the world are crashing, let’s just say that scenario happens, everybody’s going to put their money in the U.S. dollar—it could turn into a bubble.” Rogers added that a strengthening U.S. dollar has historically been negative for commodities—the asset class that the investor is best-known for. While the yen is often designated as a risk-off currency, it won’t benefit in the event of a flight to safety due to the massive, continued expansion of the Bank of Japan’s balance sheet, according to Rogers, who said he exited his position in the yen last Friday.

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Don’t hold your breath.

US Watchdog To Probe Fed’s Lax Oversight Of Wall Street (Reuters)

A U.S. watchdog agency is preparing to investigate whether the Federal Reserve and other regulators are too soft on the banks they are meant to police, after a written request from Democratic lawmakers that marks the latest sign of distrust between Congress and the central bank. Ranking representatives Maxine Waters of the House Financial Services Committee and Al Green of the Subcommittee on Oversight and Investigations asked the Government Accountability Office on Oct. 8 to launch a probe of “regulatory capture” and to focus on the New York Fed, according to a letter obtained by Reuters. In an interview, the congressional agency said it has begun planning its approach. The probe, which had not been previously reported or made public, is the first by an outside agency into the perception that government regulators are “captured” by and too deferential toward the bankers they supervise, so that Wall Street benefits at the public’s expense.

Such perceptions have dogged the U.S. central bank since it failed to head off the 2007-2009 financial crisis that sparked a global recession. The Fed’s biggest critics have since been Republicans looking to curb its policy independence, but the request by Democrats could cool its somewhat warmer relationship with the left. “We currently do have some ongoing work looking at the concept known as regulatory capture. We’re in initial stages of outlining that engagement,” Lawrance Evans, director of the GAO’s financial markets and community investment division, said in an interview. The agency will conduct “an assessment across all financial regulators, and the Federal Reserve will be one institution,” he said. It was unclear whether the majority Republicans on the House committee, including Chairman Jeb Hensarling, backed the request from the minority Democrats.

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This is how simple it is. The NIRP boomerang.

It Begins: Palace Revolt Against ECB’s NIRP (WS)

The Association of Bavarian Savings Banks, which represents 71 savings banks in the German State of Bavaria, has had it with the ECB’s negative deposit-rate absurdity, and it’s now instigating a palace revolt. In 2014, when negative interest rates first hit Eurozone banks and ricocheted out from there, Germans called it “punishment interest” (Strafzinsen) because these rates were designed to flog banks and savers until their mood improves. But inexplicably, their mood hasn’t improved. Bank stocks have gotten clobbered as their profits have gotten hit by the negative interest rate environment. Stocks of Eurozone companies in general have come down hard, and the Eurozone economy simply hasn’t responded very well though the ECB is flogging it on a daily basis with its punishment interest.

And so Bavarian savings banks have had enough. The Frankfurter Algemeine has obtained a memo by the Association of Bavarian Savings Banks that openly encourages its member banks to stash cash in their own vaults rather than depositing it at the ECB and paying the penalty interest of 0.3% to the ECB on these deposits. The savings banks therefore are asking if it might be more economical for them to keep high cash values in their safes and not -as usual- store them at the ECB, the memo said. To estimate total costs and determine which would be the better deal -hang on to the cash or send it to the ECB- the association analyzed the costs of additional insurance coverage needed for these higher levels of cash-in-vault and further discussed some options concerning this insurance coverage, or as it says, for ECB-cash protection.

According to its analysis, insurance coverage on cash costs 0.15%, plus insurance tax, in total 0.1785%. This is below the ECB’s punishment rate of 0.3%. Each additional €1,000 of cash in its vault would therefore cost the bank €1.785 per year. But if the bank deposited that €1,000 at the ECB, it would cost €3.00 per year. Multiply the difference of €1.21 by tens or hundreds of millions, and pretty soon you’re talking about some real money. Banks have a total of €245 billion deposited at the ECB. At a deposit rate of negative 0.3%, extrapolated over a year, it costs them €735 million in punishment interest. “Punishment interest is already costing real money,” is how a senior central bankers explained it to the Frankfurter Algemeine.

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More interest rate manipulation damage.

What’s Best For UK Savers Who’ve Lost £160 Billion Of Interest In 7 Years? (G.)

Not many experts thought that the “emergency” base rate cut to 0.5% on March 5, 2009 would last for long. But seven years later savers have lost around £160bn in interest, while the prospect of rate rises are slipping further into the distance. In the immediate aftermath of the cut to 0.5%, rates for savers remained relatively high. Our analysis shows how cash Isas were offering 3%, and notice accounts 3.5%, in March 2009, and for the next couple of years they hovered around this level. After all, most banks and building societies were desperate for deposits after the great financial crash, so they were willing to pay far above the Bank of England base rate. The real villain turns out to be the Funding for Lending government programme introduced in July 2012, which effectively provided cheap money for cash-strapped lenders.

The effect was almost instantaneous: banks no longer needed to attract cash from savers, so they cut the rates on offer. Susan Hannums of Savingschampion.co.uk says: “While the base rate hitting the record 0.5% was bad enough, it was Funding for Lending that had one of the biggest impacts. Almost overnight, best-buy rates for savers dropped like a stone, followed by an unprecedented number of reductions on existing rates. “Today we’ve hit over 4,000 rate reductions for existing savers, with little sign of this slowing down. This means all savers would be wise to keep checking the rate they are getting, and to switch to improve returns when they are no longer competitive. “With almost 50% of easy-access accounts paying 0.5% or less, and the best-paying 1.55%, it’s easy to see why so many need to switch.”

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Bizarro.

Argentina To Issue $11.68 Billion In Bonds To Pay For Defaulted Bonds (Reuters)

Argentina plans to return to international credit markets in April with three bonds sales totaling $11.68 billion under U.S. law if Congress swiftly approves a debt deal for holdout creditors, top finance ministry officials told Congress on Friday. Finance Minister Alfonso Prat-Gay said the bonds, which will be used to finance the payouts to investors holding unpaid debt stemming from the country’s 2002 default, would carry maturities of five, ten and thirty years. Prat-Gay and his deputy, Luis Caputo, on Friday presented a package of debt agreements brokered with creditors, including a $4.65 billion cash payout to the main holdouts suing in a Manhattan court led by billionaire Paul Singer. Argentina has now reached provisional settlements with about 85% of bondholders and says negotiations continue with the rest.

“If the deal extends to all holdout investors, the bond issue will be for $11.684 billion. That’s what we need to close this chapter definitively,” Prat-Gay said. The debate in Congress is the first major political test of President Mauricio Macri’s ability to garner cross-party support for his economic reform package, the success of which hinges on ending the festering 14-year debt battle. Legislators will also be asked to repeal two laws blocking settlement of the debt case. Macri’s government is confident it can corral the votes needed to win approval even though the opposition holds a majority in the Senate and Macri holds only the largest minority in the lower chamber. Caputo told legislators the bonds would carry an interest rate of about 7.5%. While debt brokers see healthy appetite for Argentine debt after its prolonged absence from global debt markets, the gloomy global context may weigh.

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“News of Lula’s brief detention sparked a rally in Brazilian assets as traders bet that the political upheaval could empower a more market-friendly coalition.”

Brazil Ex-President Lula Detained In Corruption Probe (Reuters)

Former Brazilian President Luiz Inacio Lula da Silva was briefly detained for questioning on Friday in a federal investigation of a vast corruption scheme, fanning a political crisis that threatens to topple his successor, President Dilma Rousseff. Lula’s questioning in police custody was the highest profile development in a two-year-old graft probe centered on the state oil company Petrobras, which has rocked Brazil’s political and business establishment and deepened the worst recession in decades in Latin America’s biggest economy. The investigation threatens to tarnish the legacy of Brazil’s most powerful politician, whose humble roots and anti-poverty programs made him a folk hero, by putting a legal spotlight on how his left-leaning Workers’ Party consolidated its position since rising to power 13 years ago.

Police picked up Lula at his home on the outskirts of Sao Paulo and released him after three hours of questioning. They said evidence suggested Lula had received illicit benefits from kickbacks at the oil company, Petrobras, in the form of payments and luxury real estate. The evidence against the former president brought the graft investigation closer to his protege Rousseff. She is already fighting off impeachment for allegedly breaking budget rules, weakening her efforts to pull the economy out of recession. Rousseff expressed her disagreement with the police taking her mentor into custody, saying it was “unnecessary” after his voluntary testimony. But she repeated her backing for institutions investigating corruption and said the probe must continue until those responsible were punished. News of Lula’s brief detention sparked a rally in Brazilian assets as traders bet that the political upheaval could empower a more market-friendly coalition.

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Yeah, do fear for the Olympics.

Brazil’s Ruling Party To Tap FX Reserves As Policy Fight Escalates (AEP)

The ruling party in Brazil has drawn up crisis plans to tap the country’s foreign exchange reserves to fight recession and prevent a surge in unemployment, heightening fears of a populist lurch as the economic crisis deepens. Any such move by Brazil would mark an escalation in the emerging market crisis, leading to intense scrutiny of other countries across the world facing similar difficulties following the collapse of the commodity boom and the end of cheap dollar liquidity from the US Federal Reserve. The plan is in direct conflict with the policies of president Dilma Rousseff and implies a head-on clash between the government and its own political base in the Workers Party (PT), with serious implications for the stability of the currency and Brazil’s debt markets.

It came as official data showed Brazil’s economy contracted sharply in 2015 as businesses slashed investment plans and laid off more than 1.5 million workers, setting the stage for what could be the country’s deepest recession on record. Brazil’s gross domestic product shrank 3.8pc in 2015, capped by another steep contraction in the fourth quarter. It was the steepest annual drop for the country’s GDP since 1990, when hyperinflation and debt default blighted the country’s recent return to democracy. Rui Falcão, the PT’s president, personally drafted the crisis document known as the National Emergency Plan. He reportedly has the backing of former president Lula, Luiz Inacio da Silva. It calls for a draw-down on the country’s $371bn foreign reserves to finance a development and jobs fund, as well as demanding a sharp cut in interest rates, a move that would effectively strip the central bank of its independence.

The 16 proposals together mark a dramatic shift back to the party’s Marxist roots and a rejection of its free-market concordat over recent years. While investors might be willing to accept use of the reserves to back up a stabilisation policy and radical reform, they would be horrified if it was used to finance a last-ditch populist agenda. “If the PT taps the reserves, they risk setting off a run on the currency. This is very dangerous,” said one economist, dismissing the scheme as complete madness. While the reserves are large, they are also opaque since the central bank has taken out $115bn in currency swaps, partly in order to support companies struggling to cope with dollar debts that have suddenly doubled in local terms due to the devaluation of the Brazilian real.

Lisa Schineller, a director of sovereign ratings at Standard & Poor’s, said Brazil’s safety margin on external debt is weaker than it looks, a key reason why the agency downgraded the country deeper into junk status in late February. Total external debt is $470bn, but on top of this there are $200bn of inter-company loans that have a “debt-like” character. “This is a very large order of magnitude. Brazil’s situation is not as strong as some people suggest,” she told The Daily Telegraph. “Their external assets do not exceed their external debts. They are much lower than they have been historically.”

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“There’s lots of precedent in the U.S., but I don’t think the precedent is anywhere near as well established in Germany,” he said. “It’s going to be interesting to watch where this goes.”

Giant California Pension Funds To Sue VW Over Diesel Scandal (LA Times)

Two giant California pension funds plan to sue Volkswagen in a German court, joining other institutional investors who argue the automaker should pay for losses they experienced since the revelation last year that VW cheated on emissions tests. The California State Teachers’ Retirement System, or CalSTRS, on Friday announced plans to join in a securities case against VW. A spokesman for the California Public Employees’ Retirement System, or CalPERS, confirmed that fund is separately pursuing a similar action. CalSTRS owned about 354,000 common and preferred shares of VW as of Dec. 31. Common shares fell by as much as 37%, and preferreds by as much as 43%, in the first weeks of the mushrooming scandal that began in September. Shares have since recovered somewhat.

CalSTRS said its holdings are now worth $52 million, though the pension fund has not said how much it believes it has lost. Its VW investment is a tiny fraction of the fund’s roughly $180 billion portfolio. “The emissions cheating scandal has badly hurt [VW’s] value,” CalSTRS Chief Executive Jack Ehnes said in a statement Friday. “Volkswagen’s actions are particularly heinous since the company marketed itself as a forward-thinking steward of the environment.” Ehnes said the pension fund hopes to recover money, as well as send a message to VW and the auto industry “that we will not tolerate these illegal actions.” CalPERS, the nation’s largest pension fund, with assets of $279 billion, also holds VW shares, though it has not publicly reported the number of shares since the summer of 2014.

It is not clear whether either pension fund has sold or acquired shares since the emissions scandal. It’s relatively common in the United States for investors to sue public companies following scandal-driven stock slumps, but such suits are less common in Europe, said Bruce Simon, a partner at law firm Pearson Simon & Warshaw, which specializes in class-action and securities litigation. He said the big question for the pension funds and other U.S. investors in VW is how much they’ll be able to recover under German securities law. “There’s lots of precedent in the U.S., but I don’t think the precedent is anywhere near as well established in Germany,” he said. “It’s going to be interesting to watch where this goes.”

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“The oil price is outside BP’s control, but executives performed strongly in managing the things they could control and for which they are accountable..”

BP CEO Gets 20% Pay Rise Despite 2015 Record Loss, 1000s of Jobs Lost (Ind.)

The pay package for BP chief executive Bob Dudley jumped by $3.2m (£2.1m) last year, despite profits plunging at the oil giant and thousands more staff facing the axe. His total package rose by 20% from $16.4m to $19.6m and was condemned by critics for being the latest example of a company losing “contact with reality” – after BP said a further 3,000 workers would lose their jobs on top of 4,000 gone in January. A further 4,000 went last year, with BP predicting that the oil price downturn would be long-lasting. About 250,000 jobs have been cut in the sector in 18 months. Mr Dudley’s base salary was unchanged at $1.85m but his annual cash bonus rose by $300,000 to $1.3m. Pension contributions soared from $3m to $6.5m.

But the biggest contributor to his package was $7.1m worth of vested performance shares, which he will receive during the current year. BP said one third of this award was based on total shareholder returns, one third on “strategic imperatives”, including safety and operational risk, and the final third on operating cashflow. The company added that the executive directors had “responded early and decisively to the lower oil price environment” – and said Mr Dudley deserved his extra cash because of his performance in a difficult period. “Despite the very challenging environment,” it stated, “BP delivered strong operating and safety performance throughout 2015.

“The oil price is outside BP’s control, but executives performed strongly in managing the things they could control and for which they are accountable. BP surpassed expectations on most measures ,and directors’ remuneration reflects this.” The pay boost came as the falling oil price and continuing liabilities related to the Gulf of Mexico oil spill in 2010 led BP to report a record 2015 deficit of $6.5bn.

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As talks with EU are ongoing. Too much.

Turkey Seizes Control Of Anti-Erdogan Daily In Midnight Raid (AFP)

Turkish police on Friday raided the premises of a daily newspaper staunchly opposed to President Recep Tayyip Erdogan, using tear gas and water cannon to disperse supporters and enter the building to impose a court order placing the media business under administration. Police fired the tear gas and water cannon to move away a hundreds-strong crowd that had formed outside the headquarters of the Zaman newspaper in Istanbul following the court order that was issued earlier in the day, an AFP photographer said. Zaman, closely linked to Erdogan’s arch-foe the US-based preacher Fethullah Gulen, was ordered into administration by the court on the request of Istanbul prosecutors, the state-run Anatolia news agency said.

There was no immediate official explanation for the court’s decision. The move means the court will appoint new managers to run the newspaper, who will be expected to transform its editorial line. Hundreds of supporters had gathered outside the paper’s headquarters in Istanbul awaiting the arrival of bailiffs and security forces after the court order. “We will fight for a free press,” and “We will not remain silent” said placards held by protestors, according to live images broadcast on the pro-Gulen Samanyolu TV. “Democracy will continue and free media will not be silent,” Zaman’s editor-in-chief Abdulhamit Bilici was quoted as saying by the Cihan news agency outside its headquarters. “I believe that free media will continue even if we have to write on the walls. I don’t think it is possible to silence media in the digital age,” he told Cihan, part of the Zaman media group.

[..] The court order had already aroused the concern of the United States, which said it was “the latest in a series of troubling judicial and law enforcement actions taken by the Turkish government targeting media outlets and others critical of it.” “We urge Turkish authorities to ensure their actions uphold the universal democratic values enshrined in their own constitution, including freedom of speech and especially freedom of the press,” State Department spokesman John Kirby said.

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Somehow it’s hard to believe this still continues.

What The NY Times Won’t Tell You About The US Adventure In Ukraine (Salon)

This column has cheered for an American failure in Ukraine since first forecasting one in the spring of 2014. Brilliant that it is upon us at last. Forcing a nation to live under a neoliberal economic regime so that American corporations can exploit it freely, as the Obama administration proposed when it designated Arseniy Yatsenyuk as prime minister in 2014, is never to be cheered. Turning a nation of 46 million into a bare-toothed front line in America’s obsessive campaign against Russia is never to be cheered. Forcing the Russian-speaking half of the country to live under a government that would ban Russian as a national language if it could is never to be cheered. The only regret, a great regret of mind and heart, is that American failures almost always prove so costly in consequence of the blindness and arrogance of the policy cliques.

Readers may remember when, with a defense authorization bill in debate last June, two congressmen advanced an amendment banning military assistance to “openly neo-Nazi” and “fascist” militias waging war against Ukraine’s eastern regions. John Conyers and Ted Yoho got two things done in a stroke: They forced public acknowledgment that “the repulsive neo-Nazi Azov battalion,” as Conyers put it, was active, and they shamed the (also repulsive) Republican House to pass their legislative amendment unanimously. Obama signed the defense bill then at issue into law just before Thanksgiving. The Conyers-Yoho amendment was deleted but for a single phrase. The bill thus authorizes, among much, much else, $300 million in aid this year to “the military and national security forces in Ukraine.” In a land ruled by euphemisms, the latter category designates the Azov battalion and the numerous other fascist militias on which the Poroshenko government is wholly dependent for its existence.

An omnibus spending bill Obama signed a month later included an additional $250 million for the Ukraine army and its rightist adjuncts. This is your money, taxpayers, should you need reminding. As Obama signed these bills, the White House expressed its satisfaction that “ideological riders” had been stripped out of them. No, you read next to nothing of this in any American newspaper. Yes, you now know what the often-lethal combination of blindness and arrogance looks like in action. Yes, you can now see why American policy in Ukraine must fail if this crisis is ever to come to a rational, humane resolution.

The funds just noted are in addition to a $1 billion loan guarantee—in essence another form of aid—that Secretary of State Kerry announced with fanfare last year. And that is in addition to the International Monetary Fund’s $40 billion bailout program, a $17.5 billion tranche of which is now pending. Since the I.M.F. is the external-relations arm of the U.S. Treasury (and Managing Director Christine Lagarde thus the Treasury’s public-relations face) this is a big commitment on the Obama administration’s part (which is to say yours and mine).

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“Then something happened. Ramadan looks up. He seems 70 but is 54. “We lost track of where the children were,” Ramadan says.”

The Syrian Exodus: Epic In Scale, Inconceivable Till You Witness It (Flanagan)

“Yesterday was the funeral,” Ramadan says. “It was very cold. We make sure Yasmin always has family around her.” Yasmin wears a red scarf, maroon jumper and blue jeans. She is small and slight. Her face seems unable to assemble itself into any form of meaning. Nothing shapes it. Her eyes are terrible to behold. Blank and pitiless. Yet, in the bare backstreet apartment in Mytilini on the Greek island of Lesbos in which we meet on a sub-zero winter’s night, she is the centre of the room, physically, emotionally, spiritually. The large extended family gathered around Yasmin – a dozen or more brothers, sisters, cousins, nephews, nieces, her mother and her father, Ramadan, an aged carpenter – seem to spin around her. And in this strange vortex nothing holds.

Yasmin’s family has come from Bassouta, an ancient Kurdish town in Afrin, near Aleppo, and joined the great exodus of our age, that of 5 million Syrians fleeing their country to anywhere they can find sanctuary. Old Testament in its stories, epic in scale, inconceivable until you witness it, that great river of refugees spills into neighbouring countries such as Lebanon, Jordan and Turkey, and the overflow – to date more than a million people – washes into Europe across the fatal waters of the Aegean Sea. “We were three hours in a black rubber boat,” Ramadan says. “There were 50 people. We were all on top of each other.” The family show me. They entwine limbs and contort torsos in strange and terrible poses. Yasmin’s nine months pregnant sister, Hanna, says that people were lying on top of her.

I am told how Yasmin was on her knees holding her four-year-old son, Ramo, above her. The air temperature just above freezing, the boat was soon half sunk, and Yasmin wet through. But if she didn’t continue holding Ramo up he might have been crushed to death or drowned beneath the compressed mass of desperate people. Then something happened. Ramadan looks up. He seems 70 but is 54. “We lost track of where the children were,” Ramadan says.

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But how do they see this? How is this not as hollow as can be?

Athens Given Deadlines For Schengen Requirements (Kath.)

Greece was handed Friday a timeline for the improvements it has to make in its border controls by May, as the European Commission presented a step-by-step plan to implement measures, including a new EU border and coast guard, to curb the influx of refugees and migrants to Europe. “We cannot have free movement internally if we cannot manage our external borders effectively,” Migration Commissioner Dimitris Avramopoulos said, as he presented the report ahead of Monday’s summit between the EU and Turkey. According to the Commission’s document, Greece has by March 12 to present its action plan to address concerns about its border controls and explain what action it is taking to correct failings discovered during an inspection in November.

Exactly a month later, Brussels will deliver its assessment on the Greek action plan. A new Schengen evaluation will be carried out by EU experts, who will inspect Greece’s land and sea borders, from April 11-17. Finally, Athens will have to report to the European Council by May 12 on the steps it has taken to meet its recommendations. The report presented Friday estimates that the collapse of passport-free travel in the 26-nation Schengen zone could cost the European economy up to €18 billionß a year.

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10,000 kilometers of coastline.

Tsipras Says Greece Can’t Stop Migrants Headed For Northern Europe (AFP)

Greek Prime Minister Alexis Tsipras said Friday his country can’t stop migrants who want to head to northern Europe, and sharply criticized Balkan countries for shutting their borders. “How can we stop people if they want to keep going?” Tsipras, whose country has faced a major refugee influx via Turkey, told Germany’s top-selling Bild daily. “We cannot imprison people, that would contravene international agreements. We can only help to rescue these people at sea, to supply and register them. Then they all want to move on. That’s why a resettlement process is the only solution.” “They have been bombed in their homes, have risked their lives to escape to come to Greece, the gateway to Europe. But the refugees’ ‘Mecca’ lies to the north.”

Tsipras’s comments came a day after Austria’s foreign minister urged Greece to stop migrants from pursuing their journey to northern Europe, saying Athens should hold new arrivals at registration “hot spots.” Sebastian Kurz told the Sueddeutsche Zeitung in an interview that “those who manage to arrive in Greece should not be allowed to continue on their journey.” But Tsipras retorted that while Greece, as Europe’s main gateway for refugees, had “met more than 100% of our obligations, others haven’t even met 10% and love to criticize us”. “What some countries have agreed and decided goes against all the rules, against the whole of Europe, and we consider it an unfriendly act.” “These countries are destroying Europe!” he charged, according to the German translation.

Athens has been seething over a series of border restrictions along the migrant trail, from Austria to the Former Yugoslav Republic of Macedonia, that has caused a bottleneck in Greece. “Greece is the only country that is fulfilling its obligations,” the leftist leader said, adding that it was now hosting 30,000 refugees. While Greece can protect its land borders, it can’t do the same for some 10,000 kilometers (6,000 miles) of coastline, he said. Tsipras said that “in the end those who are now putting up barbed wire, expelling refugees by force and turning their countries into fortresses, will be isolated in Europe. “We, however, are in an alliance with the countries showing solidarity,” he added, in an apparent reference to Germany, Europe’s top destination for migrants. “And these are the countries with which we had very big problems during the financial crisis,” he said, hinting at Berlin’s tough austerity demands from Greece in return for international bail-out loans.

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Somone better stop Tusk. “..if you insist that these people are refugees then you have a duty to welcome them under all EU constitutions.” By contrast, “if you refer to them as migrants then you have no duty towards them..”

Europe Yanks Welcome Mat Out From Under Its War Refugees (Sputnik)

On Thursday, European Council President Donald Tusk, dismissing refugees fleeing war-torn Syria as “economic migrants,” stated, “Do not come to Europe.” Middle East analyst Hafsa Kara-Mustapha sat down with Sputnik’s Brian Becker to discuss the dire status of Middle Eastern refugees in Europe. What will be the impact of European Council President Tusk’s Statements? “First of all, I have to talk about the wording he used,” Kara-Mustapha told Loud & Clear. “He insisted on using the word migrant and specifically using the phrase ‘economic migrant’ when all the people presently coming into Europe are actually war refugees fleeing conflict.” Kara-Mustapha expressed concern that by rebranding the refugees as economic migrants, the EU aims to alter the requirements of member states to provide asylum.

“In effect, when he says that Europe should stop welcoming economic migrants he is actually changing the whole subject and making the issue about economy and migration when simply it is about refugees,” she noted, adding that, “if you insist that these people are refugees then you have a duty to welcome them under all EU constitutions.” By contrast, “if you refer to them as migrants then you have no duty towards them because these people are just coming for financial gain and nobody owes them anything,” observed Kara-Mustapha. In reality, however, “these people are coming to Europe for safety and to avoid the horrors of war.” She also noted that the current aim of European leadership appears to be to fundamentally change public opinion toward refugees by referring to them as “migrants.” The wording, she said, “makes the topic less acceptable to ensure people turn against these refugees… the underlying meaning is that they are coming here for the benefits, to raid the welfare system, and to make money.”

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Feb 252016
 
 February 25, 2016  Posted by at 2:58 pm Finance Tagged with: , , , , , , , , ,  4 Responses »
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Danae Stratou, Ilargi, Yanis Varoufakis and Steve Keen Feb 16 2016

When my mate Steve Keen took me to meet Yanis Varoufakis for dinner last week when we all happened to find ourselves in Athens together, I at least sort of regretted not having the time and space to talk to Yanis about his DiEM25 project for the democratization of Europe. It was a private occasion, there were other people at the dinner table, Steve and Yanis had no seen each other for a while, it was simply not about that.

I did think afterward that it would be great to do this kind of get together more often, and get ideas running, but then realized we are all workaholics and we all live thousands of miles apart, so the odds of that happening are slim at best. And that in turn made me think of how inspiring the years were when I toured the world with my Automatic Earth partner in crime Nicole Foss, how important it is to have people around to bounce off your ideas of what’s going on, how much faster that crystallizes your own ideas.

But as things are, and as they happened, I didn’t have that time with Yanis. And not nearly enough with Steve either, for that matter, who has/is a brain that I would love to pick for days if not weeks, he’s such a brilliant mind. When you have just a few hours, though, the time is filled with drinking wine and catching up with what’s happened in each other’s personal lives, it had been 3 years since we met, and professionally, since Steve knows Nicole very well, they did quite a few presentations together, yada yada.

Immensely gratifying, of course, to be able to renew a friendship like that, but almost as frustrating to not be able to expand on it.

But to get back to Yanis: I think I have two major problems with his DiEM25 project. One is that, as I have written umpteen times before, the very structure of the EU (self-)selects for sociopaths to take up its leading positions. None of them have been democratically elected, and that would be very hard to begin with because no Greek or Portuguese has ever heard of, or has any connection with, some guy from Finland or Poland with a name they can’t pronounce. It wouldn’t just take democratization, you’d have to rewrite the entire machine from scratch.

The second is that I don’t think the EU will last long enough to pull through the democratization process he envisions, and appear at the ‘other end of the tunnel’ in 2025. I just don’t see it. For one thing, because the whole world is set to be hit with the most severe financial crisis in its history between now and then, and Europe will be in the eye of the storm center of that crisis. Talk about democratization, well-intended and needed as it may seem, will be on a back-back burner when that hits.

I first said about a year ago that Angela Merkel should call a UN emergency meeting over the refugee crisis, but she still hasn’t yet. The EU problem in a nutshell: Merkel is the de facto leader of both the EU and Germany. When EU interests, or interests of one or more other EU nations clash with German ones, she has no choice but to pick the German side. Because the Germans elected her, not Europe.

You can either hand over German sovereignty to Brussels or you can fall into trap after trap. These traps will not hurt Germany most -since Merkel calls the shots-, they will hurt the poorer nations first and most. But it is still the worst model one could ever have invented. And since neither Germany nor any other EU member is willing -or ever will be- to give up that sovereignty, there’s only one option: leave the EU.

There are many ways in which European sovereign nations can work together, open borders, promote trade and all these things. The worst possible way is through a bureaucracy like the EU, which may promise an equal voice and treatment and opportunities for all countries, but down the line will always be controlled by the biggest ones. It’s not a coincidence that Germany has a trade surplus.

The clampdown on Greece to keep French and German banks safe should have made clear once and for all where the EU fails. If it’s any consolation: the big economies, too, will fall.

But chances are that before that happens, the union will have splintered apart back into its separate member states. Britain toys with the Brexit idea, the Czechs say if Britain leaves there’ll be a Czexit, Holland wants a referendum on EU membership (Hexit), Marine Le Pen patiently waits for the French economy to go south so she can be elected president and fulfill her promise to take France into a Frexit. And those are just a few examples. Trouble brews just about everywhere.

And there is of course no bigger trouble than the refugee situation. If only European nations would stop bombing the places the refugees were from, that would send a signal that they’re serious about this. But instead after the Paris attacks France and Britain increased their bombing efforts in Syria, supported by Germany and Holland. If that doesn’t say enough about where their priorities lie, what can?

The Balkanization of Europe is well on its way in, appropriately, the Balkan area and surrounding nations. A conference on closing borders in Austria yesterday was attended by Albania, Bosnia, Bulgaria, Kosovo, Croatia, Macedonia, Montenegro, Serbia and Slovenia. But not Greece or Germany. These are not all EU members, but most would like to be. Greece doesn’t like it one bit, it has threatened to block all EU decision until this is resolved, and recalled its ambassador to Vienna today..

Six countries has (re-)introduced border checks: Belgium, France, Austria, Denmark, Norway and Sweden. Many more have have erected razor wire fences. Hungary has the loudest voice; it announced a referendum on refugee quota yesterday. Quota that by the way are not worth the paper they’re written and translated into 20-odd languages on. Out of 160,000 agreed on, only some 500 refugees have been relocated.

The EU’s response so far has been a sort of para-military police force, Frontex, and now even NATO. As if refugees are a military threat. It’s amusing to see that many nations accuse Greece of not closing its borders properly, but never explain how that should be done when that border happens to be at sea. Just like they’ve never sent the people or equipment they vowed to make available. The EU in the end is proving to be toothless.

A German newspaper reports that a government document in Berlin talks about 3.6 million refugees in the country by 2020. That can only make one wonder what Europe will look like in 2020. But more importantly, we should wonder what Greece will look like in, say, a month from now. Since Frontex and NATO can’t stop the refugee flow any more than Greece itself can, and borders to countries to the north are closed, tens if not hundreds of thousands of people may get stranded in the country.

Europe has played a major role in turning Ukraine into a failed state, and did the same in Libya, Iraq and Syria. Unless someone shows some leadership soon and the chaos is stopped from spreading further, Greece could well be next on the list.

What I personally find deep black hilarious is that many if not all of the countries involved have signed a whole slew of both European and international laws, but even something as elementary as the Geneva convention gets thrown out the window seemingly at will. Just as black is the question: do refugees also have the right to asylum when they’re fleeing your own bombs?

The worst choice the EU -and Berlin- have made is to ally with Turkey’s Erdogan the way they have. And to force this inane alliance on Greece too. Erdogan plays everyone off against everyone while pocketing millions from ISIS oil sales to refugee smuggling, and now stands to be paid €3 billion per year to -not- stop refugees from ‘sailing’ from Turkey to Greece. Erdogan will soon start talking about Aegean territorial rights too.

There are bad partnerships -the US and EU with Saudi Arabia, just to name another example-, but relying on Turkey to stop the refugee flow is a real whopper. You could just not bomb Syria, and ask Jordan and Lebanon how you can assist with the refugee situation that’s overwhelming their nations, and even rebuild what you’ve just bombed.

Making a deal with Erdogan only seems to highlight that Europe really couldn’t care less. That they truly see the crisis as their crisis, and not that of the refugees. That it’s the people living in Berlin and Vienna and Amsterdam who get the short end of the stick, not those no longer living in Aleppo.

So when do we get to see a real Balkanization, with armies in streets and confronting each other on borders? And what will the EU ‘leadership’ and Hollande and Merkel do when that time comes?

No, I don’t see an EU left in 2025 ‘to be democratized’. I see a lot of old rifts in Europe’s future. And that’s without even having asked how Europe is going to ‘save’ its banks -and banking system- this time around. Or how they’re planning to tell their present and future pensioners that sorry, but the coffers are empty.

These things will start to play out well before 2025. It won’t be a good time to be a refugee living in Europe.