The Automatic Earth

Jack Delano Family of Dennis Decosta, Portuguese Farm Security Administration client Dec 1940

“This Is What It’s Come To: Letting Syria Die, Watching Syrians Drown..”

• Syrians are the Famine Irish of the 21st Century (Glavin)

“The worst part of it is the feeling that we don’t have any allies,” Montreal’s Faisal Alazem, the tireless 32-year-old campaigner for the Syrian-Canadian Council, told me the other day. “That is what people in the Syrian community are feeling.” There are feelings of deep gratitude for having been welcomed into Canada, Alazem said. But with their homeland being reduced to an apocalyptic nightmare – the barrel-bombing of Aleppo and Homs, the beheadings of university professors, the demolition of Palmyra’s ancient temples – among Syrian Canadians there is also an unquenchable sorrow. Bashar Assad’s genocidal regime clings to power in Damascus and the jihadist psychopaths of the Islamic State of Iraq and the Levant (ISIL) are ascendant almost everywhere else.

The one thing the democratic opposition wanted from the world was a no-fly zone and air-patrolled humanitarian corridors. Even that was too much to ask. There is no going home now. But among Syrian-Canadians, the worst thing of all, Alazem said, is a suffocating feeling of solitude and betrayal. “In the western countries, the civil society groups – it’s not just their inaction, they fight you as well,” he said. “They are crying crocodile tears about refugees now, but they have played the biggest role in throwing lifelines to the regime. And so I have to say to them, this is the reality, this is the result of all your anti-war activism, and now the people are drowning in the sea.”

Drowning in the sea: a little boy in a red t-shirt and shorts, found face-down in the surf. The boy was among 11 corpses that washed up on a Turkish beach Tuesday. Last Friday, as many as 200 refugees drowned when the fishing boat they were being smuggled in capsized off the Libyan coast. At least 2,500 people, most of them Syrians, have drowned in this way in the Mediterranean already this year.

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Europe is comfortably Teflon coated.

• Shocking Images Of Drowned Syrian Boy Show Tragic Plight Of Refugees (Guardian)

The full horror of the human tragedy unfolding on the shores of Europe was brought home on Wednesday as images of the lifeless body of a young boy – one of at least 12 Syrians who drowned attempting to reach the Greek island of Kos – encapsulated the extraordinary risks refugees are taking to reach the west. The picture, taken on Wednesday morning, depicted the dark-haired toddler, wearing a bright-red T-shirt and shorts, washed up on a beach, lying face down in the surf not far from Turkey’s fashionable resort town of Bodrum. A second image portrays a grim-faced policeman carrying the tiny body away. Within hours it had gone viral becoming the top trending picture on Twitter under the hashtag #KiyiyaVuranInsanlik (humanity washed ashore).

Greek authorities, coping with what has become the biggest migration crisis in living memory, said the boy was among a group of refugees escaping Islamic State in Syria. Turkish officials, corroborating the reports, said 12 people died after two boats carrying a total of 23 people, capsized after setting off separately from the Akyarlar area of the Bodrum peninsula. Among the dead were five children and a woman. Seven others were rescued and two reached the shore in lifejackets but hopes were fading of saving the two people still missing. The casualties were among thousands of people, mostly Syrians, fleeing war and the brutal occupation by Islamic fundamentalists in their homeland.

Kos, facing Turkey’s Aegean coast, has become a magnet for people determined to reach Europe. An estimated 2,500 refugees, also believed to be from Syria, landed on Lesbos on Wednesday in what local officials described as more than 60 dinghies and other “unseaworthy” vessels. Some 15,000 refugees are in Lesbos awaiting passage by cruise ship to Athens’ port of Piraeus before continuing their journey northwards to Macedonia and up through Serbia to Hungary and Germany. Wednesday’s dead were part of a grim toll of some 2,500 people who have died this summer attempting to cross the Mediterranean to Europe, according to the UN refugee agency, UNHCR.

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“The frustration of waiting and the inaction has been terrible.”

• Family Of Drowned Syrian Boy Had Been Rejected By Canada For Refugee Status (NP)

The drowned child washed up on a Turkish beach captured in a photograph that went around the world Wednesday was three-year-old Aylan Kurdi. He died, along with his five-year-old brother Galip and their mother Rehan, in a desperate attempt to reach Canada. The Syrian-Kurds from Kobane died along with eight other refugees early Wednesday. The father of the two boys, Abdullah, survived. The father’s family says his only wish now is to return to Kobane with his dead wife and children, bury them, and be buried alongside them. “I heard the news at five o’clock in this morning,” Teema Kurdi, Abdullah’s sister, said Wednesday. She learned of the drowning through a telephone call from Ghuson Kurdi, the wife of another brother, Mohammad. “She had got a call from Abdullah, and all he said was, my wife and two boys are dead.”

Teema, a Vancouver hairdresser who emigrated to Canada more than 20 years ago, said Abdullah and Rehan Kurdi and their two boys were the subject of a “G5” privately sponsored refugee application that the ministry of citizenship and immigration rejected in June, owing to the complexities involved in refugee applications from Turkey. Citizenship and Immigration Minister Chris Alexander could not be reached for comment, but Port Moody – Coquitlam NDP MP Fin Donnelly said he’d hand-delivered the Kurdis’ file to Alexander earlier this year. Alexander said he’d look into it, Donnelly said, but the Kurdis’ application was rejected in June. “This is horrific and heartbreaking news,” Donnelly said. “The frustration of waiting and the inaction has been terrible.”

The family had two strikes against it — like thousands of other Syrian-Kurdish refugees in Turkey, the United Nations would not register them as refugees, and the Turkish government would not grant them exit visas. “I was trying to sponsor them, and I have my friends and my neighbours who helped me with the bank deposits, but we couldn’t get them out, and that is why they went in the boat. I was even paying rent for them in Turkey, but it is horrible the way they treat Syrians there,” Teema said.

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That’s 4 weeks?! Clearly Germany does not see a crisis, nor an emergency. They don’t care if people drown.

• Germany Targets Billions in Refugee Aid by Late September (Bloomberg)

Chancellor Angela Merkel’s government is facing up to the cost of caring for refugees pouring into Germany as estimates of the budget impact from Europe’s biggest migrant crisis since World War II increase. Interior Minister Thomas de Maiziere said Wednesday he’ll present a package of measures within three weeks to help fund municipalities, ease building rules and streamline bureaucracy for housing and registering refugees. “We need clarity quickly on financial assistance,” Maiziere told reporters in Berlin. Deputy Finance Minister Jens Spahn, asked in a Bloomberg Television interview in Frankfurt about the price tag of aid to refugees, said, “it will be billions, we’re still calculating.”

As migrants seeking refuge from war and poverty squeeze onto trains to Germany, Merkel says her country may see as many as 800,000 arrivals this year, about four times the level in 2014. That means federal support payments for asylum seekers this year will increase by as much as €3.3 billion, Labor Minister Andrea Nahles told reporters Tuesday. Party leaders of Merkel’s governing coalition will discuss the measures on Sunday and probably complete the legislation by Sept. 24 when Merkel and leaders of Germany’s 16 states meet, de Maiziere said. The measures could be approved by the lower house in October, he said.

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And so it starts.

• Italy Revives Border Checks (Deutsche Welle)

Italy has temporarily reinstated border patrols at the frontier with Austria. The move follows an appeal from the southern German state of Bavaria. Following a request from Germany to help stem the flow of refugees, Italy reimposed identification checks in its northern region of South Tyrol on Wednesday. The bilingual province on the border with Austria is the last stop in Italy for migrants who arrive in the country from northern Africa, hoping to travel on other nations in Europe. The regional capital Bolzano said it was ready to “reactivate” controls at the Alpine town of Brennero just as it did for the G7 summit in June, but that it was “a temporary measure to allow Bavaria to reorganize and face the emergency.”

Bavaria registered around 2,500 new refugees on Tuesday, with a total of almost 4,300 new arrivals in the week so far. South Tyrol also agreed to take in 300-400 migrants who had arrived in Munich “for a few days” to take some pressure off the southern German state whose facilities are swamped by migrants arriving not only from the Middle East and Africa, but some Balkan nations as well. Although Italy, Germany, and Austria belong to the Schengen Zone, which largely abolished border controls between signatory countries beginning in the 1990s, its provisions may be lifted in exceptional situations. When Rome suspended Schengen for the G7 in June it caused serious overcrowding in South Tyrol as migrants were forced to postpone their journeys.

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Well, not all of them. But still.

• European Police ‘Scarier Than ISIS Terrorists’ (Finian Cunningham)

In what is being described as the worse refugee crisis in Europe since the Second World War, tens of thousands of desperate migrants are streaming across EU borders. They have risked their lives to get there, only to be then attacked by EU «border police», or else targeted by racist street mobs. Welcome to Europe! Destitute and carrying their worldly possessions in nothing but a haversack, men, women and young children are having to outwit truncheon-wielding police ranks in order to try to reach safety. This is in the European Union, whose treaties proclaim to the rest of the world the sanctity of human rights and dignity. Hungary, Romania and Greece have emerged as the new crisis points, replacing Italy as the formerly main refugee route. Crying mothers run with petrified children jostled on their backs into forests or ditches just to escape from teargas-firing riot police.

One distraught woman told a France 24 news crew how she had become separated from her family in the melee. She didn’t know how she would ever find them because she was stranded on the other side of the police cordon. Her missing children and husband had to run away before they were captured by the cops. One young boy from Syria told CNN reporter Awra Damon that his family and many others were forced back by a phalanx of helmet-clad police officers as they attempted to cross the Hungarian border. The little boy said his family fled an area in Syria that is under control of the Islamic State (or ISIS) terror group – the cult jihadist militia notorious for beheading civilians. (The CNN reporter didn’t seem to notice the irony that her TV channel has previously made heaps of news stories out of accusing the Syrian government as being the one who is terrorising its people.)

What does that say about the Hungarian border police when beleaguered refugees are cowering before them? It’s a graphic condemnation of the EU’s border controls being scarier than blood-thirsty terrorists. Last month alone, more than 100,000 migrants crossed EU borders. This is a humanitarian crisis on a scale that evokes the harrowing grainy footage showing wandering masses in the aftermath of World War Two. The vast majority of the refugees to the EU are from war-torn Syria, according to the UN’s International Organisation for Migration. Up to 12 million of Syria’s population – half the total – have been displaced by more than four years of conflict in that country. A war that has been fuelled covertly by the United States, Britain and France seeking regime change against President Bashar al Assad. Also fuelling the war in Syria are Western allies Saudi Arabia, Qatar, Jordan, Turkey and Israel.

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“..the debacle in Asia’s number one economy has blown a hole in a string of hitherto long-held beliefs.”

• The End Of A Flawed Globalisation (Guardian)

Clad as it is in jargon and technicalities, financial meltdowns can often seem like an elaborate spectacle taking place in a foreign country. So it is with the trillions wiped off shares since 24 August’s “Black Monday”. Obviously it’s a huge deal, but beyond the numbers on Bloomberg terminals it’s hard to put into perspective. Yet one way to think about what has happened in China over the past couple of weeks is the drawing to a close of an entire system for running the world economy. Over the past two decades, globalisation has fired on two engines: the belief that Americans would always buy the world’s goods, of which the Chinese would make the lion’s share – and lend their income to the Americans to buy more.

That policy regime was made explicit during the Asian crisis of the late 90s, when Federal Reserve head Alan Greenspan slashed US borrowing rates, making it cheaper for Americans to buy imports. And it was talked about throughout the noughties by central bankers fretting about the “Great Wall of Cash” flooding out of China and into western assets. The first big blow to that system came with the banking crisis of 2008, which made plain that the US could no longer afford to continue as the world’s backstop consumer. The latest dent has been made over the past couple of weeks in China. Because the debacle in Asia’s number one economy has blown a hole in a string of hitherto long-held beliefs.

First, it exploded the assumption that China can keep racking up double-digit growth rates forever. Stock markets are only the aggregate of investors’ estimates of the future profitability of the companies listed on them. The crash on the Shanghai Composite suggests that shareholders are no longer so confident of the prospects for Chinese businesses – and with reason: data shows that China’s manufacturing, investment and demand for commodities are all on the slide. More importantly, the last few weeks have shattered faith in the Beijing politburo as technocrats with an incomparably sure touch. Whatever doubts economists might have had over the sustainability of China’s dirty-tech, investment-heavy economic model, they would normally be quelled with the thought that Beijing’s “super-elite” had a textbook for every occasion.

But that was before the shock devaluation of the yuan on 11 August, followed by a jittery press conference called by the People’s Bank of China – after which it spent hundreds of billions buying yuan to keep it strong, effectively reversing the devaluation. Couple all this with the national government’s cack-handed attempts to shore up the stock market and this week’s bizarre and reprehensible “confession” on state TV from a journalist for talking down the stock market – and a picture emerges of a state government unsure how to deal with financial jitters and lashing out at any convenient target.

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Or not.

• Devaluation Strengthens China’s Hand at IMF (WSJ)

China’s sudden decision last month to devalue its currency riled neighbors and fueled investors’ fears about a sharp slowdown in the world’s No. 2 economy. But the move has won over the IMF and even secured restrained praise from the U.S. Treasury Department. The currency maneuver has positioned the Chinese government to press for a greater international role for the yuan during visits to a series of Group of 20 meetings starting this week and a visit to Washington later this month. For more than a decade, the U.S. and other countries castigated China for its currency policy, saying the yuan’s level gave the country’s exporters an unfair advantage at the expense of its trading partners.

The Aug. 11 depreciation initially spurred worries in global financial markets as investors saw it as a signal that Beijing was reverting to its old policy playbook in a desperate effort to revive a flagging economy. A number of China experts and Western officials close to the matter say China likely isn’t regressing. “If they wanted to revert to their mercantilist trade policies, they would have moved sooner and they would have moved by a much bigger amount,” said Nick Lardy, a China expert at the Peterson Institute for International Economics. Instead, economists are generally viewing the depreciation as China presented it: as a move to make the country’s exchange rate more market-determined.

Combined with Beijing’s careful management of the currency since then, it is bolstering China’s bid to get the yuan included in the IMF’s basket of reserve currencies after the IMF board’s vote in November, according to people familiar with the matter. They and other experts say China is holding to its currency commitments for now despite discord in its financial markets and deepening international worries about the Chinese economy. Contrary to initial expectations, China’s depreciation of the yuan might actually help mitigate long-simmering tensions between the U.S. and China over the country’s currency policy ahead of a visit by Chinese President Xi Jinping to Washington in late September.

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Volatility.

• Wall Street Surges As Turbulence Becomes The Norm (Reuters)

Wall Street stocks jumped almost 2% on Wednesday in the latest volatile session as investors weighed the impact of a stumbling Chinese economy and global market turmoil on the Federal Reserve’s impending decision about when to raise interest rates. U.S. investors have weathered over two weeks of unusually wide-swinging trade that has left the S&P 500 with its worst monthly drop in three years and a loss of 8.5% from an all-time high in May. “What we’re seeing today is not a recovery. It’s market volatility, it’s nervousness, it’s an inability to call the direction of the market,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “Through now and October we’re going to see a lot more of this, a lot of volatility.”

U.S. labor markets were tight enough to fuel small wage gains in some professions in recent weeks, though some companies already felt a chill from an economic slowdown in China, the Fed said. The combination of more demand for workers and worries about Chinese economic growth underscores the challenge faced by the Fed at a Sept 16-17 meeting where it may decide to raise interest rates for the first time since 2006. The Dow Jones industrial average jumped 1.82% to end at 16,351.31 points. The S&P 500 climbed 1.83% to 1,948.85 and the Nasdaq Composite surged 2.46% to 4,749.98. The CBOE Volatility index .VIX, Wall Street’s “fear gauge,” dipped 11% but stayed in territory not seen since 2011 after Standard & Poor’s cut its credit rating on the United States for the first time.

The recent turbulence has left the S&P 500’s valuation at 15.1 times expected earnings, inexpensive compared to around 17 for much of 2015, according to Thomson Reuters StarMine data. But investors fear that the outlook for earnings may darken as China’s economy loses steam.

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“The big danger is if the results of this failure are total poverty for more and more nations and total war.”

• We Are In A Great Transition Period (Ron Paul)

It’s a shame to see what has happened so far in this new century. The last century ended with a victory over defeated communism. I think that was the greatest victory of the 20th century. Events showed that communism did not work. Unfortunately, we jumped to the conclusion that we had an Empire to defend, and that Keynesian economics would solve all of our problems. Printing money, spending money, and debt wouldn’t matter, and we would bring peace to the world and make everyone good democrats. Right now, the refugee crisis that we see in Europe is a failure of government policies and a failure of central banking. In some ways, I think we are in a great transition period. This cannot continue. The big danger is if the results of this failure are total poverty for more and more nations and total war. Or, hopefully, we can wise up and say that these policies have failed.

The American people should lead the charge on this. The policies are lousy, and yet government is always adding more and more of the same. The worse the economy gets, the more we’re starting to hear about socialism and authoritarianism as the cures. So we live in an age in which the policies of the past are coming to an end. The Keynesian model does not work, and our Empire does not work. This total failure has to change, and we need to present the alternative. For me, the alternative is free markets, free society, civil liberties, and a foreign policy where we mind our own business. The alternative is peace and prosperity. We were told about these things in our early years, but it seems they’ve been forgotten. We’d be much better off in this country with such a policy and we could set a standard for the rest of the world.

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Nice set of numbers.

• Wall Street and the Military are Draining Americans High and Dry (Edstrom)

The US government often cites $18 trillion as the amount of money that they owe, but their actual debts are higher. Much higher. The government in the USA owes $13.2 trillion in US Treasury Bonds, $5 trillion in money borrowed by the US Federal government from Federal government trust funds like the Social Security trust fund, $0.7 trillion for state bonds issued by the 50 states, $3.7 trillion for the municipal bond market (US towns, cities and counties), $1.97 trillion still owing by Freddie Mac and Fannie Mae, mostly for bad mortgages in years gone by, $6.23 trillion owed by US government authorities other than Fannie Mae and Freddie Mac, $1.04 trillion in loans taken out by the US Federal government (e.g. government credit card balances, short term loans) and $0.63 trillion in loans owed by government authorities (e.g. their government credit card balances, short term loans).

As of April 1, 2015, according to the Federal Reserve Bank’s Financial Accounts of the US report, the government in the USA has $32.77 trillion in debt excluding unfunded government pension debts and unfunded government healthcare costs Debt is money that has to be paid. The government in the USA also has to pay $6.62 trillion for unfunded pension liabilities, as of April 1, 2015. There are thousands of government pension plans in the USA. The Federal Employees Pension Plan is now short $1.9 trillion according to the Fed’s March 2015 statement plus $4.7 trillion in unfunded state and municipal pension liabilities according to State Budget Solutions which calculates on actual pension returns (approx. 2.5% per year from 2009 to 2014, instead of the fantasy ‘assumption’ of an 8% return used by the Fed to guesstimate pension fund money).

The largest governmental pension fund in Puerto Rico ran out money (became insolvent) in 2012 and the government now has to pay $20.5 billion for that. Pension contributions into government pension plans have been less than what these pension plans pay out to retirees which is why the government was short by $6.62 trillion for government pensions as of April 1, 2015. The DJIA has gone down 9.5% since the Spring. $6.3 trillion in governmental pension plan money was invested in Wall Street as of April 1st. Additional government pension plan losses have been, so far this year, $0.6 trillion. As of August 29, 2015, the government in the US owes $7.2 trillion for pensions. Every additional 10% the DJIA drops is another $0.6 trillion in unfunded pension costs that the government has to pay.

The Federal government owed $1.95 trillion in unfunded entitlements for the Federal Employees Pension Fund as of April 1, 2015. Unfunded entitlements are health care benefits for retirees above and beyond Medicare benefits. States, municipalities and governmental authorities owe an additional $4.2 trillion for retiree health benefits. Medicare and Medicaid costs, about $0.83 trillion in 2014, escalate 6% a year and Obamacare adds $0.18 trillion a year in governmental health costs, mostly for subsidies. Medicare, Medicaid and Obamacare costs will escalate to $1.28 trillion in 2018. Bottom line, as of August 29, 2015, the government in the USA owes $46.1 trillion (bonds, unfunded pension costs, unfunded healthcare costs, credit card balances and loans).

Footprints. The US government has paid Wall Street’s way when Wall Street can’t pay it’s own way. Wall Street has promised to pay more than the US government has promised to pay. $0.5 trillion in margin loans and $3.95 trillion in repurchase agreements pale in comparison to $21 trillion in open credit default swaps, a type of derivative. Bankruptcy legislation in 2005 gave derivatives “super priority” status to be paid first when banks go bankrupt. According to BIS, there were $630 trillion in outstanding derivatives earlier this year, about half in the USA. Since wall street doesn’t have $315 trillion to pay their derivatives, who will pay this amount? And how? Even if only 15% of US derivatives go bad, that’s $47 trillion. How would the US government pay for that? The derivative liabilities arising, due to ongoing Wall Street instability, is an elephant in the room.

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“Since 2008, all the advanced economies have entered a phase of credit contraction (deleverage), whereas China has been moving in the opposite direction..”

• The Chinese Bubble (Beppe Grillo)

The devaluation of the currency decided by China’s Central Bank has surprised financial markets. After anchoring the yuan to the dollar within a minimum margin of oscillation, after the Lehman crisis, the Chinese authorities have progressively broadened the oscillation zone and in 2014, they altered it from 1% to 2%. The decision in August to disconnect the yuan from the dollar has made it possible for the market to stabilise fluctuations in the currency and China did not intervene to correct the oscillation in the value of the yuan and thus it allowed the currency to devalue. Why?

Reasons for the devaluation An initial response can be found in the 8% annual fall in Chinese exports reported in the month of July. Connecting the yuan to the dollar after the crisis in 2008, eliminated the exchange rate risk and it facilitated the flow of foreign investments but it also brought about a devaluation of the yuan that penalised the balance of trade. In fact the real Chinese exchange rate increased by 30% between 2008 and 2014, most of which was in that last year following on from expectations of the rise in USA interest rates and the relative increase in the value of the dollar. The result saw a decline in exports to such an extent that it now needs explaining – now at no more than 20% of China’s GDP as compared to 40% a few years ago. Devalue to maintain growth is thus the first and most obvious way of looking at this new mercantilist spirit on the part of the Chinese monetary authorities.

The Chinese property bubble 2008 was the start of the Chinese property bubble. The de facto regime of fixed exchange rates with the dollar and the enormous reserves in foreign currencies have guaranteed the convertibility of the yuan and this has facilitated the flow of capital and the disproportionate expansion of credit to families. Since 2008, all the advanced economies have entered a phase of credit contraction (deleverage), whereas China has been moving in the opposite direction: from 2008 to 2014 private debt in China as a%age of GDP, has gone from 100% to 180% (of this, corporate debt as a%age of GDP has gone from 85% to 140% and for families it has gone up by a bit less than a multiple of three: – from 15% in 2008 to 40% today). This means that the ratio of private debt to GDP in China reached and went beyond the levels that Japan and the United States recorded in a 17 year period: from 1993 to 2010.

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More reasons than we have time to mention.

• Why The Federal Reserve Should Be Audited (John Crudele)

It is time for a comprehensive audit of Janet Yellen ’s Federal Reserve — and not just for the reasons presidential candidate Rand Paul and others have given. The Fed needs to be audited to see if its ruling body has broken the law by manipulating financial markets that are outside its jurisdiction. A thorough investigation of the Fed will show once and for all if its former chief Ben Bernanke and current Chairwoman Yellen should go to jail. I know, that’s a bold statement coming as it does on Sept. 1, 2015, with Wall Street still in half-bloom. But it won’t be so preposterous some day in the future if the stock market suffers a full-blown economy-busting collapse and Congress and everyone else are looking for scalps.

The Fed should be audited as a brokerage firm would be — its financial holdings, its transactions, market orders, emails and phone calls. Special attention should be given to what is called the “trade blotter” at the Federal Reserve Bank of New York, which handles all market transactions for the Fed. The Fed’s dealing with foreign central banks — especially at times of market stress — should be given special attention. Trades in the wee hours of the morning should be in the spotlight. Not surprisingly, the Fed is strongly opposed to an audit and sees it as an intrusion into its autonomy. Washington shouldn’t be intimidated. Autonomy? Hah! That ended when the central bank started playing footsie with Wall Street.

Let’s look at what happened to the stock market last week, and it’ll explain what I think those who audit the Fed need to look for. As you probably remember, stocks were headed for oblivion on Monday, Aug. 24. The Dow Jones industrial average was down 1,089 points early in the day before the index rallied for a close that was “only” 588 points lower. China’s problems. Weak US economic growth. Greece. The possibility of an interest-rate hike. Those and other issues were the root causes of last Monday’s woe. But Wall Street’s real problem is that there is a bubble in stock prices created by years of risky monetary policy by the Fed. Quantitative easing, or QE — the experiment in money printing that has kept interest rates super-low — hasn’t helped the economy (and even the Fed of St. Louis concluded that). But QE did force savers into the stock market whether they wanted to take the risk or not.

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“..we have precise statistics who actually benefited from the stock market boom post-2009. This is not even 1% of the population. It’s 0.01%.”

• Marc Faber Warns “There Are No Safe Assets Anymore” (ZH)

Markets have “reached some kind of a tipping point,” warns Marc Faber in a brief Bloomberg TV interview. Simply put, he explains, “because of modern central banking and repeated interventions with monetary policy, in other words, with QE, all around the world by central banks – there is no safe asset anymore.” The purchasing power of money is going down, and Faber “would rather focus on precious metals because they do not depend on the industrial demand as much as base metals or industrial commodities,” as it’s now “obvious that the Chinese economy is growing at nowhere near what the Ministry of Truth is publishing.” Faber explains more… “I have to laugh when someone like you tries to lecture me what creates prosperity” Some key exceprts…

On what central banks hath wrought… I think that because of modern central banking and repeated interventions with monetary policy, in other words, with QE, all around the world by central banks there is no safe asset anymore. When I grew up in the ’50s it was safe to put your money in the bank on deposit. The yields were low, but it was safe. But nowadays, you don’t know what will happen next in terms of purchasing power of money. What we know is that it’s going down.

On the idiocy of QE…..in my humble book of economics, wealth is being created through, essentially, a mixture of capital spending, and land and labor. And if these three production factors are used efficiently, it then creates a prosperous society, as America became prosperous from its humble beginnings in 1800, or thereabout, to the 1960s, ’70s. But it’s ludicrous to believe that you will create prosperity in a system by printing money. That is economic sophism at its best.

On the causes of iunequality… ..unfortunately the money that was made in U.S. stocks wasn’t distributed evenly. And we have precise statistics, by the way published by the Federal Reserve, who actually benefited from the stock market boom post-2009. This is not even 1% of the population. It’s 0.01%. They took the bulk. And the majority of Americans, roughly 50%, they don’t own any shares anyway. And in other countries, 90% of the population do not own any shares. So the printing of money has a very limited impact on creating wealth.

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Scream.

• Giant US Pension Fund To Sell 12% Of Stocks In Fear Of “Another Downturn” (WSJ)

The nation’s second-largest pension fund is considering a significant shift away from some stocks and bonds, one of the most aggressive moves yet by a major retirement system to protect itself against another downturn. Top investment officers of the California State Teachers’ Retirement System have discussed moving as much as 12% of the fund’s portfolio—or more than $20 billion—into U.S. Treasurys, hedge funds and other complex investments that they hope will perform well if markets tumble, according to public documents and people close to the fund. Its holdings of U.S. stocks and other bonds would likely decline to make room for the new investments. The board of the $191 billion fund, which is known by its abbreviation Calstrs, discussed the proposal at a meeting Wednesday. A final decision won’t be made until November.

A wave of deep selloffs over the past two weeks has shattered years of steady gains for U.S. stocks. Calstrs isn’t reacting directly to those sharp price swings, but they are a reminder of the volatility in stocks and how exposed Calstrs is when markets swoon. “There’s no question,” Calstrs Chief Investment Officer Christopher Ailman said in an interview. The recent market volatility “has been painful.” Calstrs currently has about 55% of its portfolio in stocks. The fund’s investment officers began discussing the new tactic—called “Risk-Mitigating Strategies” in Calstrs documents—several months ago as they prepared for a regular three-year review of how Calstrs invests assets for nearly 880,000 active and retired school employees. Mr. Ailman, who has been chief investment officer at the fund since 2000, said he hopes a move away from certain stocks and bonds could help stub out heavy losses during future gyrations. This could include moving out of some U.S. stocks as well as investment-grade bonds.

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“..leaving it with about a third of the money it managed at its 2013 peak..”

• Pimco Assets Drop Below $100 Billion For The First Time Since ’07 (Reuters)

Pacific Investment Management Co’s flagship fund dropped below $100 billion in assets for the first time in more than eight years, leaving it with about a third of the money it managed at its 2013 peak. Investors pulled $1.8 billion in assets from the Pimco Total Return Fund in August, down from $2.5 billion the previous month, according to the Newport Beach, California-based firm on Wednesday. After 28 consecutive months of outflows, assets plunged to $98.5 billion as of Aug. 31 from a peak of $293 billion in April 2013, when the mutual fund was the world’s largest and run by Pimco co-founder Bill Gross.

Gross, the bond market’s most renowned investor and long known as the “Bond King,” shocked the investment world nearly a year ago when he quit Pimco for distant rival Janus Capital Group. This is the first time that Total Return assets had less than $100 billion since January 2007, before strong risk-adjusted returns during the financial crisis attracted monstrous inflows of cash from investors seeking the relative safety of bonds. Assets were $99.86 billion in January 2007, according to Morningstar data. Investors have withdrawn record amounts of money since April 2013 because of erratic performance exacerbated by last year’s departures by Gross and Mohamed El-Erian, the former chief executive officer of Pimco and Gross’ heir apparent.

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Sales down 27%, prices down 2%. Next step is obvious.

• House Sales Plunge In Calgary As Energy Sector Job Losses Mount (Globe and Mail)

Calgary’s housing market is showing signs of fracturing amid a fresh wave of layoffs announced by major energy companies in the city. Home sales plunged 27% in August from a year earlier, while the benchmark and average resale prices both fell, the Calgary real estate board said Tuesday. The benchmark price slipped 0.09% to $456,300. The average resale price in the city tumbled nearly 2% to $466,570. On a year-to-date basis, average prices fell roughly 1.7% while benchmark prices rose about 2.4% as the number of new listings eased. But overall inventories are swollen at 44% above the same period in 2014 so far this year, pointing to more weakness ahead as job losses in the oil and gas sector mount. Total sales so far this year are down 25%.

“While we’ve managed to come through the spring market with not a lot of change, because there is further expectations of softness in the employment market, these things will start weighing on the housing market as we move into the end of the year,” said Ann-Marie Lurie, chief economist with the board. The weakening housing market is another symptom of oil’s collapse to under $50 a barrel from more than $100 (U.S.) last year – a sharp drop that has forced the city’s energy industry into survival mode. ConocoPhillips and Penn West Petroleum on Tuesday shed a combined 900 positions, adding to thousands of job losses that have piled up as companies dial back spending and halt drilling projects. Alberta’s oil-dependent economy is now expected to contract by 0.6% this year and its deficit could top $6.5-billion (Canadian) as the downturn intensifies, the province’s NDP government said this week.

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The price of a bailout.

• Tens Of Thousands Of Greek Companies Fear Closure In Coming Months (Kath.)

Many of the country’s very small enterprises believe the returning recession and the capital controls are likely to finally put them out of business, with about 30% of them facing the threat of closure in the next six months, a survey by the Small Enterprises’ Institute of the Hellenic Confederation of Professionals, Craftsmen and Merchants has shown. It is estimated that the number of enterprises in Greece will drop by about 63,000 in the next six months, and the toll will be higher for very small companies. Indications that appeared in the second half of last year suggesting that the country was finally emerging from its recession have been eclipsed in the last couple of months.

According to the study’s baseline scenario, business closures will lead to some 138,000 people losing their jobs (including employers, the self-employed and salary workers), of whom about 55,000 will be salary workers. In the first half of the year, total job losses in small and very small enterprises amounted to 25,000, of which 15,000 concerned salary workers. The marginal decline in the jobless rate, which came to 25% in May according to the latest ELSTAT figures, seems unlikely to be reproduced in the second half of the year: The survey showed that over 20% of enterprises consider it probable they will have to lay off staff in the next six months. This rate is considerably greater (40.2%) among enterprises employing more than five people.

Three in every seven businesses (43%) are facing difficulties in making salary payments, while one in every four reduced its employees’ salaries during the first half of the year. Over two in five enterprises (41.1%) say they are likely to cut salaries or working hours during the latter half of the year.

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This can only go wrong, as technohappy does: “Access to storage will be much more valuable than the fossil fuels themselves.”[..] “..Coal producers now see carbon capture as their saviour.”

• Lucky Britain To Win 21st Century Jackpot From Carbon Capture (AEP)

The energy sheikhs of the next generation will not be those who control vast reserves of oil, gas or coal. Sweeping climate rules are about to turn the calculus upside-down. Greater riches will accrue to those best able to capture carbon as it is burned, and are then able to transport it through a network of pipelines and store it cheaply a mile or more underground. As it happens, Britain is perfectly placed to win the jackpot of the 21st century. China and the US – the twin CO2 giants – have already reached a far-reaching deal to curb greenhouse gases. China has pledged to cap total emissions by 2030. Mexico has vowed to cut gases by 40pc within 15 years, and Gabon by even more. The poisonous North-South conflict that doomed the Copenhagen summit in 2009 has given way to a more subtle mosaic of interests.

There is a high likelihood that 40,000 delegates from 200 countries will agree to legally-binding rules at the COP 21 climate talks in Paris in December. As a matter of pure economics, it makes no difference whether or not you accept the hypothesis of man-made global warming. The political argument has been settled by the world’s dominant powers. The messy compromise will fall far short of capping carbon emissions at 3,000 gigatonnes, the outer limit deemed necessary by scientists to stop temperatures rising by more than two degrees Celsius above pre-industrial levels. (We have used up two-thirds) But it will probably usher in some sort of regime that puts a “non-trivial” price on burning carbon, the first of several escalating accords. Eventually it will be draconian.

“I don’t think people have fully realised that there is a finite budget, and when it’s used up, that’s it,” said Professor Jon Gibbins from Edinburgh University. “We will have to go negative and capture carbon from the air, which will be very expensive.” A new report by Cititgroup – “Energy Darwinism” – says an ambitious COP 21 implies that a third of global oil reserves, half the gas and 80pc of coal reserves cannot be burned, unless carbon capture and storage (CCS) comes to the rescue. It is precisely this prospect of “fossil-dämmerung” that is at last concentrating the mind. The fossil industry itself is embracing the CCS revolution because its own survival depends on it in a “two degree” political world.

Carbon capture has long been dismissed as a pipe-dream. But as so often with technology, the facts on the ground are rapidly pulling ahead of a stale narrative. The Canadian utility SaskPower has already retro-fitted a filtering system onto a 110 megawatt (MW) coal-fired plant at Boundary Dam, extracting 90pc of the CO2 at a tolerable cost. It used Cansolv technology from Shell. “We didn’t intend to build the first one in the world, but everybody else quit,” said Mike Monea, the head of the project. “We have learned so much from the design flaws that we could cut 30pc off the cost of the next plant, but it is already as competitive as gas in Asia,” he said. The capture process uses up 18pc of the power – a cost known as the “parasitic load” – but it is less than the 21pc expected.

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Greece and Latvia.

• Two More European Countries Ban Monsanto GMO Crops (EcoWatch)

Two more European countries are rejecting genetically modified organisms (GMOs). Lativia and Greece have specifically said no to growing Monsanto‘s genetically modified maize, or MON810, that’s widely grown in America and Asia but is the only variety grown in Europe. Latvia and Greece have chosen the “opt-out” clause of a European Union rule passed in March that allows member countries to abstain from growing GM crops, even if they are authorized by the EU. Scotland and Germany also made headlines in recent weeks for seeking a similar ban on GMOs. According to Reuters, in many European countries, there is widespread criticism against the agribusiness giant’s pest-resistant crops, claiming that GM-cultivation threatens biodiversity.

Monsanto said it would abide by Latvia’s and Greece’s request to not grow the crops. The company, however, accused the two countries of ignoring science and refusing GMOs out of “arbitrary political grounds.” In a statement, Monsanto said that the move from the two countries “contradicts and undermines the scientific consensus on the safety of MON810.” Monsanto also told Reuters that since the growth of GM-crops in Europe is so small, the opt-outs will not affect their business. “Nevertheless,” the company continued, “we regret that some countries are deviating from a science-based approach to innovation in agriculture and have elected to prohibit the cultivation of a successful GM product on arbitrary political grounds.”

According to NewsWire, the EU’s opt-out clause “directly confronts U.S. free trade deal supported by EU, under which the Union should open its doors widely for the US GM industry.” In a statement on Thursday, the European Commission confirmed its zero-tolerance policy against non-authorized GM products. The commission said that it’s also consulting with the European Food Safety Authority (EFSA) in order to answer “a scientific question” on GMO crops that’s unrelated to trade negotiations with the U.S. The EFSA announced that it would release a scientific opinion on the question by the end of 2017.

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