Jul 262023
 


Andy Warhol Mick Jagger 1975

 

Glimpses Of An Endgame In Ukraine (Bhadrakumar)
Major Advancements For Russia, Ukraine On Its Last Legs – Macgregor (WF)
Even Strong Western Economies Turn Into Colonies – Zakharova (TASS)
Who Can Give Security Guarantees To Ukraine? (MoA)
IAEA Discovers Anti-Personnel Mines Near Zaporozhye Nuke Plant (TASS)
NATO Countries Using Ukraine to Get Rid of Outdated Weapons (Sp.)
The Polish Response To Putin’s Challenge (Helmer)
Zelensky Associate Was Present at Biden Bribery Meetings (GP)
Biden Claims To Have ‘Ended Cancer’ (RT)
Biden’s Dog Attacks 8 White House Staffers in Cover-Up (Sp.)
Biden Changes Long-Standing Position on Hunter’s Foreign Deals (Turley)
Hunter Biden’s Memoir Became Source of Tax Evasion Evidence (Sp.)
Members and the Media Panic as the Biden Scandal Mounts (Turley)
Twitter Rebrand to ‘X’ Fraught With Permit, Trademark Issues (DeMartino)
Musk: ‘X Will Become Most Valuable Brand on Earth’ (Sp.)

 

 

 

 

RFK Hannity
https://twitter.com/i/status/1684030867264643072
https://twitter.com/i/status/1684017271012995075

 

 

Azov

 

 

 

 

Tucker Ice Cube


https://twitter.com/i/status/1684017033174827008

 

 

 

 

“..Polish leadership’s concern, paradoxically, will be that Donald Trump may not return as president in 2024..”

Glimpses Of An Endgame In Ukraine (Bhadrakumar)

It is one thing that the Russian people are well aware that their country is de facto fighting the NATO in Ukraine. But it is an entirely different matter that the war may dramatically escalate to a war with Poland, a NATO army that the US regards as its most important partner in continental Europe. By dwelling at some length on Polish revanchism, which has a controversial record in modern European history, Putin probably calculated that in Europe, including in Poland, there could be resistance to the machinations that might drag NATO into a continental war with Russia. Equally, Poland must be dithering too. According to Politico, Poland’s military is about 150,000 strong, out of which 30,000 belong to a new territorial defence force who are “weekend soldiers who undergo 16 days of training followed up by refresher courses.”

Again, Poland’s military might doesn’t translate into political influence in Europe because the centrist forces that dominate the EU distrust Warsaw, which is controlled by the nationalist Law and Justice Party whose disregard for democratic norms and the rule of law has damaged Poland’s reputation across the bloc. Above all, Poland has reason to be worried about the reliability of Washington. Going forward, Polish leadership’s concern, paradoxically, will be that Donald Trump may not return as president in 2024. Despite the cooperation with the Pentagon over the Ukraine war, Poland’s current leadership remains distrustful of President Joe Biden — much like Hungary’s Prime Minister Viktor Orban.

On balance, therefore, it stands to reason that the sabre-rattling by Lukashenko and Putin’s lesson on European history can be taken as more of a forewarning to the West with a view to modulate an endgame in Ukraine that is optimal for Russian interests. A dismemberment of Ukraine or an uncontrollable expansion of the war beyond its borders will not be in the Russian interests. But the Kremlin leadership will factor in the contingency that Washington’s follies stemming out of its desperate need to save face from a humiliating defeat in the proxy war, may leave no choice to the Russian forces but to cross the Dnieper and advance all the way to Poland’s border to prevent an occupation of Western Ukraine by the so-called Lublin Triangle, a regional alliance with virulent anti-Russian orientation comprising Poland, Lithuania and Ukraine, formed in July 2020 and promoted by Washington.

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Article is bits and pieces thrown together, but still interesting.

Major Advancements For Russia, Ukraine On Its Last Legs – Macgregor (WF)

The same people driving this war in Eastern Europe and Ukraine are the people dominating the financial markets, dominating media and ultimately shaping policy for our government.. Government by donors. This is entirely a function of people with a lot of money. – Douglas MacGregor Ret. Col. Douglas Macgregor: “[Putin] represents, in the minds of many people around the world, someone who has decided to challenge not just American military and political hegemony, but American and Western financial hegemony.

Macgregor

The World Bank and associated institutions have effectively been puppets for the US… We talk all the time about the Chinese supposedly blackmailing people by lending them lots of money and then holding them accountable. Well, we do the same thing, only we do it in more subtle ways that are actually more damaging to the society, because we’re very intrusive… The bottom line is this is a new era that is coming, and they’ve already got 40 plus nations willing to join this new currency. India, China and Russia, of course, are at the center of this, at the core of it. And this is seen as a rebellion against our financial dominance. That has been so, from their standpoint, certainly destructive in so many ways for so long.”

WAKE UP: If Russia was the aggressor against Ukraine, the situation would be different now, and we would see Russians on the borders of Poland after they destroyed Ukraine, but this did not happen, because the Russians do not want this. – Col. Douglas Macgregor “It’s stupid to threaten Russia with nuclear weapons,” – said Douglas Macgregor, ex-adviser to the head of the Pentagon. “The Russians can flood the Atlantic with their submarines, as well as the Pacific Ocean, where they will be supported by the Chinese Navy..”

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They’re no longer strong.

Even Strong Western Economies Turn Into Colonies – Zakharova (TASS)

Even economically strong and developed Western countries have turned into colonies, Russian Foreign Ministry Spokeswoman Maria Zakharova said on Monday. “Western countries, even strong and developed economies, have become colonies,” the diplomat noted, addressing a Russian-African women’s forum. “The most interesting thing is that European Union nations and NATO countries have already become neo-colonies. They are economically strong; they have a long history of democratic development, and many have given birth to democratic freedoms in the past. However, today, they are not just dependent, but they are completely subordinate to the will of their metropolis – that is, the Anglo-Saxon world – in terms of the economy, politics and morality.


However, the world is unwilling to follow the old path, get back on the same old track and repeat the same mistakes,” she added. “We are not only fighting for ourselves; we are fighting for the future of the world, deciding whether it will be a free world or we will return to the colonial past,” Zakharova noted. Still, the diplomat pointed out that Russia and Africa weren’t ready to sacrifice freedom for material benefits the way some Western countries did. “Although we appreciate material welfare, there are more important things. Welfare turns against humans when there is no internal freedom, free will, and an understanding of what’s good and bad,” Zakharova emphasized.

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How about Russia?

Who Can Give Security Guarantees To Ukraine? (MoA)

In 2013 the European Union pressed the Ukraine to sign a free trade agreement with it. Russia, which was the biggest trading partner of Ukraine, made a counter offer that was financially better and had less political restrictions attached to it. Then President Victor Yanukovych of Ukraine had to reject the EU agreement. The U.S., together with the German secret service BND, had long standing ties with the right-wing groups in west-Ukraine which had previously cooperated with Nazi Germany and had been attached to the German Nazi-Wehrmacht. The CIA reactivated these groups and instigated a violent color-revolution in Kiev. That revolution led to a civil war as large parts of the ethic Russians in east Ukraine rejected the new regime that had been installed by a west Ukrainian minority.

While the ethnic Russians in Ukraine lost control over most of their original areas they also soon defeated what was left of the Ukraine army. They did so twice. Since 2015 the conflict was stalled. The Minsk agreements, under which Ukraine was supposed to became federalized, were signed, but Ukraine stalled their implementation. Meanwhile the U.S. and Britain used the time to reinstate and rearm the Ukrainian army. By 2021 the Ukraine was ready to attack the People’s Republics of Luhansk and Donetsk. Russia activated its army and warned that it would have to interfere with such plans. The imminent launch of an Ukrainian attack was called off. In early 2022 the U.S. gave the Ukrainians a green light to launch their long planned attack. Russia intervened and the current war started.

The U.S. plans behind the war expected that the pre-coordinated western sanctions that immediately followed would ruin Russia, that Russia would be shunned by the rest of the world and that a military defeat of the Russian army would lead to regime change in Moscow. The Ukraine expected that, after winning a war against its separatists, it would immediately become a member of NATO. Neither of the (totally unrealistic) expectations was met. The Ukraine is now obviously losing the war. It will soon need to sign a capitulation like ceasefire agreement with Russia. But who or what can guarantee that any such agreement will be held up? NATO membership is no longer an option.

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Whose are they?

IAEA Discovers Anti-Personnel Mines Near Zaporozhye Nuke Plant (TASS)

Experts from the International Atomic Energy Agency (IAEA) have observed directional anti-personnel mines on the periphery of the Zaporozhye Nuclear Power Plant (ZNPP), the agency’s Director General Rafael Grossi said. According to him, while inspecting the site on July 23, the IAEA experts saw some mines located in a buffer zone between the site’s internal and external perimeter barriers. The experts reported that the mines were in a restricted area that plant personnel cannot access. No mines were discovered within the site. “As I have reported earlier, the IAEA has been aware of the previous placement of mines outside the site perimeter and also at particular places inside. Our team has raised this specific finding with the plant and they have been told that it is a military decision, and in an area controlled by military,” Grossi said.

According to him, “having such explosives on the site is inconsistent with the IAEA safety standards and nuclear security guidance.” That said, the IAEA experts concluded that “any detonation of these mines should not affect the site’s nuclear safety and security systems.” On June 22, ahead of Grossi’s visit to Russia, Ukrainian President Vladimir Zelensky accused Russia of plotting a terror attack on the Zaporozhye NPP. He said as much to the United States, Brazil, India, China, European, Middle East and African countries but provided no evidence to back up his allegation.

Kremlin Spokesman Dmitry Peskov refuted these allegations as yet another lie. According to Renat Karchaa, adviser to the CEO of Russian state nuclear power corporation Rosenergoatom, Zelensky’s statements may indicate that Kiev is plotting a terror attack or a strike on the ZNPP in a bid to drag NATO into the conflict. Russia’s Permanent Representative to the United Nations Vasily Nebenzya said on June 23 that Russia was alarmed over Kiev’s repeated allegations that Russian forces were mining the nuclear facility.

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And they don’t produce enough to replace them.

NATO Countries Using Ukraine to Get Rid of Outdated Weapons (Sp.)

NATO countries have been pumping weapons into Ukraine since the beginning of the conflict with Russia, but most of them are outdated and have been mothballed for decades, military expert and former high-ranking NATO artillery officer Pierre Henrot told Sputnik. “NATO countries in fact only send their oldest equipment to Ukraine and take the opportunity to replenish their armament for their armies with new generations of equipment. Examples abound: the Poles, who are the most committed alongside Ukraine, to the point that they are talking about entering western Ukraine themselves, provided very early [on] all their Soviet-era tanks to the Ukrainians and have just received for the Polish army a first contingent of American Abrams tanks, brand new and manufactured for them,” Henrot said.

Other countries have also provided decommissioned equipment, including 88 German Leopard 1 tanks that were withdrawn from arsenals in 2003, and French AMX 10-RC light tanks that were developed in the 1970s and have been decommissioned by the French army as well, the former officer added. “The worst is probably the delivery by France of VAB armoured infantry vehicles (Vehicules de l’Avant Blindes), in a four-wheeled version, which invariably gets bogged down in the autumn mud. Entering service in 1979, it has proven to be a rolling coffin for Ukrainian infantry over the past year,” the expert further explained. Some countries, including the Czech Republic, Slovakia and Romania, also sent Ukraine all their Soviet MiG or Sukhoi fighters, he said.

Another problem with such ragtag deliveries is that the spare parts and ammunition for such weapons are often different and incompatible with one another, Henrot pointed out. “It is as if the NATO partners were getting rid of their outdated weapons, already mothballed,” the former officer said. However, some of Western military aid is useful for the Ukrainian military, and of good quality, the expert noted, adding that it is usually equipment for small arms, bulletproof vests and night sight systems, as well as US-made Stingers and Javelins. “Where the Americans provided suitable and effective weapons, it was with the 2,000 portable anti-aircraft Stingers delivered or with the 10,000 Javelin anti-armor weapons provided; formidable weapons in the hands of infantrymen. It is the same for the NLAW [Next Generation Light AntiTank Weapons], a useful weapon on the battlefield,” he stated.

At the same time, the Western countries often lack sufficient capacities to produce weapons required by the Ukrainian military, Henrot mentioned. “NATO countries fail to keep up with the production of ammunition for artillery and even for small arms. Again, the variety of calibres is very large; it’s a headache, but above all, there are not enough production chains, and industrialists are reluctant to launch production units for an effort that could stop quite quickly, and they have not received a firm long-term contract from Western governments,” the expert explained. Henrot believes that the recent widely criticized decision of the United States to send cluster bombs to Ukraine is the demonstration of the same problem. “The Americans for their part have almost openly admitted that it was their last ammo in stock and that they have nothing left to deliver,” Henrot concluded.

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“The Polish authorities, who are nurturing their revanchist ambitions, hide the truth from their people. The truth is that the Ukrainian cannon fodder is no longer enough for the West.”

The Polish Response To Putin’s Challenge (Helmer)

[Putin] warned that President Vladimir Zelensky’s regime in Kiev may be contemplating a trade with Poland of the territory around Lvov in exchange for Polish military intervention to support Kiev against Russia: “Today we see that the regime in Kiev is ready to go to any length to save its treacherous hide and to prolong its existence. They do not care for the people of Ukraine or Ukrainian sovereignty or national interests. They are ready to sell anything, including people and land, just like their ideological forefathers led by Petlyura, who signed the so-called secret conventions with Poland in 1920 under which they ceded Galicia and Western Volhynia to Poland in return for military support. Traitors like them are ready now to open the gate to their foreign handlers and to sell Ukraine again.”

“As for the Polish leaders, they probably hope to form a coalition under the NATO umbrella in order to directly intervene in the conflict in Ukraine and to bite off as much as possible, to ‘regain’, as they see it, their historical territories, that is, modern-day Western Ukraine. It is also common knowledge that they dream about Belarusian land.” If that were to happen, Putin said Russia would support a Ukrainian regime replacing Zelensky and opposing the Poles. “The Polish authorities, who are nurturing their revanchist ambitions, hide the truth from their people. The truth is that the Ukrainian cannon fodder is no longer enough for the West. That is why it is planning to use other expendables – Poles, Lithuanians and everyone else they do not care about. I can tell you that this is an extremely dangerous game, and the authors of such plans should think about the consequences.”

The Polish state media have ignored Putin’s historical precedents and the deal-making underway between the Ukrainian military command and its Polish counterpart. The Polish commercial network TVN24, which is owned by the US media corporation Warner Bros. Discovery, broadcast a discussion with a think-tank academic and a retired military intelligence colonel. “‘The Russians are trying to drive a wedge between Poland and Ukraine,’ Agnieszka Legucka, an analyst for Russia at the Polish Institute of International Affairs, said in the Fakty po Faktach [Facts after Facts] programme. ‘Putin has recently been portraying himself as such an expert in history. Anyway, in 2019 he launched attacks on Poland, in particular when it comes to this historical dimension. He accused us of starting World War II,’ she said.

‘And Poland now, especially when it supports Ukraine so much both militarily and humanely, has become one of the countries that is attacked by the Russian authorities directly, including Vladimir Putin and Dmitri Medvedev.’ According to the expert, the Russians ‘are trying to drive a wedge between Poland and Ukraine. And the issue of the alleged separation of Ukraine and even Belarus is very eagerly raised by both Russian and Belarusian propaganda,’ she added.”

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“..if that document is true, who wants to believe that President Zelensky and his administration have not used that as leverage over Joe Biden..”

Zelensky Associate Was Present at Biden Bribery Meetings (GP)

Author Peter Schweizer went on with Jesse Watters on Monday night where he proceeded to drop another bomb on the Biden Crime Family. According to Schweizer, who wrote a best-seller “Secret Empires” on the Biden Family crimes, told Jesse that one of Vlodomyr Zelensky’s top officials was sitting in the room when they were discussing bribing the Bidens, Joe and Hunter. Ukrainian President Zelensky has a top official who was sitting in on meetings where they talked about bribing the Bidens. Schweizer suggests Zelensky is using this as leverage over the Biden regime for weapons and billions in US dollars. Peter Schweizer: We’ve been at this since 2018. ** They initially said there were no foreign deals. ** Then they shifted and said there were. There might have been foreign deals, but the Bidens made no money. ** Then it became Joe Biden didn’t know about any of the deals. ** Then it became Joe Biden didn’t participate in any of the deals. ** And now it’s that he was not in business with his son.


Look, the implications for this are huge, Jesse. If you look at that 1023 form that the FBI released, if that document is true, that document reveals that one of the people that was at those meetings that heard the conversations about bribing the Bidens worked for – President Zelensky. Who really wants to believe, if that meeting took place and that document is accurate, that that individual did not go and report to President Zelensky what he heard? And again, if that document is true, who wants to believe that President Zelensky and his administration have not used that as leverage over Joe Biden when it comes to negotiations on Ukraine policy? We may all have to start learning the Ukrainian word for compromise because this is a very clear indication of how this has shaped this administration’s policy towards Ukraine and also towards China. It is also convenient for Zelensky that there is not a team of US auditors in his country tracking where all of this money went.

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“Biden cured cancer in the same way that he marched for civil rights, was arrested trying to see Nelson Mandela, grew up in the black church, was raised in the Puerto Rican community, was a professor at UPenn, built the greatest economy in the world, and never spoke to his son about business..”

Biden Claims To Have ‘Ended Cancer’ (RT)

During a speech on Tuesday, US President Joe Biden seemed to claim that his administration had cured cancer. “I said I’d cure cancer. They looked at me like, ‘Why cancer’? Because no one thinks we can. That’s why. And we can. We ended cancer as we know it,” Biden said during a speech in the East Room of the White House. Biden was scheduled to speak about expanding Americans’ access to mental health care. After the cancer remark, he continued to talk about healthcare for military veterans, which is run by the federal government. The strange claim was quickly noticed by Republicans, who have often accused the 80-year-old Democrat of behaving as if afflicted by dementia. “Biden just told everyone that he cured cancer. I feel like that would have at least gotten a press release,” quipped Congresswoman Lauren Boebert of Colorado.

“Biden cured cancer in the same way that he marched for civil rights, was arrested trying to see Nelson Mandela, grew up in the black church, was raised in the Puerto Rican community, was a professor at UPenn, built the greatest economy in the world, and never spoke to his son about business,” tweeted Texas activist Christian Collins. Those were just some of the claims Biden had made over his 50-year political career that turned out to be tall tales. The longtime Democrat also has a history of misspeaking in public. Just last week, he introduced himself as an artificial intelligence. The week before, in Europe, he urged Russia to “stop attacking Russia.” Earlier this month, he also claimed that Moscow was “losing the war in Iraq.”


Biden’s elder son Beau passed away in 2015 from an aggressive brain cancer, which his father has publicly attributed to “burn pits,” a method used by the US military to dispose of garbage. Beau Biden was reportedly exposed to the toxic pits during his 2008 deployment in Iraq as a military lawyer, and earlier as a contractor in Kosovo. In February 2022, Biden announced a government program to find a cure for cancer, dubbing it a re-launch of the Obama administration’s 2016 ‘Cancer Moonshot’. The new program’s goal was to “reduce the cancer death rate by half within 25 years and improve the lives of people with cancer and cancer survivors,” according to the National Cancer Institute. In March this year, Biden had surgery to remove from his chest a “small skin lesion” that had “basal cell carcinoma,” according to the White House physician.

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I think I count 8 reported cases. In 4 months. Madness.

Biden’s Dog Attacks 8 White House Staffers in Cover-Up (Sp.)

Commander, President Joe Biden’s soon-to-be two-year canine, has been implicated in seven biting assaults within four months, attacking Secret Service and White House personnel, reports have claimed. A series of alarming occurrences featuring Commander have emerged, all of which were kept undisclosed until now. These incidents are reminiscent of attacks associated with Major, whom the White House claimed was handed over to the president’s close acquaintances in 2021 due to his biting spree. On November 3, Commander was at the center of a serious biting incident when he attacked a Secret Service uniformed officer, inflicting injuries on the arm and thigh before the victim was hospitalized.

The details of this incident were brought to public attention when relevant emails were disclosed to the conservative legal organization Judicial Watch under the Freedom of Information Act. In another occurrence, Commander, broke the skin of another Secret Service member’s hand and arm. Additionally, Commander bit a security technician at President Biden’s home in Wilmington, Delaware, the following month. “This is a special sort of craziness and corruption where a president would allow his dog to repeatedly attack and bite Secret Service and White House personnel. And rather than protect its agents, the Secret Service tried to illegally hide documents about the abuse of its agents and officers by the Biden family,” Judicial Watch President Tom Fitton noted. Reports suggest that Biden doubted the claims about Major attacking a Secret Service agent. Moreover, the White House has not revealed any biting events implicating Commander.

According to the reported emails, agents disclosed a series of incidents that occurred discreetly. On October 3, 2022, near the East Wing garden, Commander “inflicted a ‘friendly soft bite’ on [a Secret Service agent’s] forearm as [he] held the door open,” regardless “no skin was broken from the bite.” On the morning of October 5, 2022, the first recorded incident involved Commander hopping on an emergency response technician on the grounds of the presidential villa and biting their “arm/wrist area.” On November 10, a Secret Service Uniformed Division officer was bitten on the left thigh as First Lady Jill Biden walked Commander in the Kennedy Garden near the East Wing. Media sources reveal that the officer reported experiencing “bruising, tenderness, and pain” in the bite area. On November 14, one other Secret Service officer recounted an incident via email where they had to defend themselves as Commander charged toward them.

The officer described grabbing a black chair they were sitting on, making eye contact with the dog, and backing away to avoid being attacked. On December 11, Commander bit a Secret Service special agent in the Presidential Protective Division. This event transpired after the president yanked Commander’s leash following a movie. The agent reported being double-bitten, first on the arm with a 1.5cm cut and lesions, and a 1cm cut on their hand and thumb sustained from a second bite. On December 16, another Secret Service member was attacked and inflicted with canine bites, as indicated in a workplace injury form available to media sources. “I was walking across the complex, and a dog bit my left arm,” the officer wrote, expressing the wound as “Dog bite, superficial laceration, contusion, soreness, and bruising.”

On 2022’s Christmas Eve, a Secret Service inspector notified colleagues that another officer had been wounded at [undisclosed location] the day before. The inspector’s email cited that nearly every official in the room discussed specific incidents involving the First Family’s dog. On January 2 this year, an agency technical security investigator was the victim of an attack while responding to an alarm at the president’s Wilmington residence, frequently visited during weekends. “Commander squeezed his way through the door and immediately bit/latched onto the lower right side of my back,” the attack victim emailed. “These shocking records raise fundamental questions about President Biden and the Secret Service,” Fitton remarked.

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“The answer remains the same. The president was never in business with his son.”

That’s not “the same”. It is a big change from “I never talked to him about his business”.

Biden Changes Long-Standing Position on Hunter’s Foreign Deals (Turley)

Starting with his campaign for the presidency and continuing until this week, President Joe Biden has maintained one clear and consistent position on his son’s influence peddling schemes. As a virtual mantra, Biden — and the White House staff — have categorically maintained that he had no knowledge of any foreign dealings of his son. That has been proven to be a lie, but Biden continued to maintain the position. Yet, on the eve of the testimony of a key Biden associate, the White House has changed its position. Now the President is only claiming that he was “not in business” with his son.Some of us have written multiple columns over the last four years arguing that the President was clearly and knowingly lying in his denials of knowledge and discussions of these deals. Even when he made the statement, it was clearly untrue but most of the media shrugged and happily walked away.

Then the evidence began to mount. The laptop includes pictures and appointments of Hunter’s foreign business associates with Joe Biden. There is also a recording of Joe Biden discussing a Times report on Dec. 12, 2018, detailing Hunter’s dealings with Ye Jianming, the head of CEFC China Energy Company. He assures his son that “I think you’re clear” after lawyers worked on the New York Times before the story ran. There is also a recording of his uncle James assuring Hunter that he and his father were going to arrange for “safe harbor” for him as his world began to collapse. Then there is the July 30, 2017 Whatsapp message from Hunter Biden to one of his Chinese associates, Henry Zhao, the director of Harvest Fund Management and Communist Party official. Zhao was funneling money to Hunter’s firm BHR Partners. Hunter is quoted as writing:

“I am sitting here with my father and we would like to understand why the commitment made has not been fulfilled. Tell the director that I would like to resolve this now before it gets out of hand, and now means tonight. And, Z, if I get a call or text from anyone involved in this other than you, Zhang, or the chairman, I will make certain that between the man sitting next to me and every person he knows and my ability to forever hold a grudge that you will regret not following my direction. I am sitting here waiting for the call with my father.” Nevertheless, the White House has maintained the total denial . . . until this week before the testimony of Devon Archer. White House press secretary Karine Jean-Pierre was asked by Fox News journalist Gillian Turner:

“Chairman James Comer today says that the Oversight Committee has evidence that the president in the past communicated directly with foreign business associates of his son Hunter Biden many times. Curious if the White House and the president still stand behind his comment that he’s never been involved and has never even spoken to his son about his business?” The response from Jean-Pierre was surprising: “So, I’ve been I’ve been asked this question a million times. The answer is not going to change. The answer remains the same. The president was never in business with his son. I just don’t have anything else to add.” It takes an utter contempt for the intelligence of the public to insist that “the answer remains the same” and then give an entirely new answer. However, that is only if most of the public is informed of the contradiction. None of the media in the White House press corp followed up on Turner’s questions when Jean-Pierre immediately moved on.

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“[Hunter Biden] was money laundering. He was racketeering. He committed wire fraud. He violated the Mann Act. The list goes on and on and on..”

Hunter’s plea deal covers two years of tax evasion. But “IRS agents saw evidence that the first son was engaged in tax evasion that “stretched back two decades.”

Hunter Biden’s Memoir Became Source of Tax Evasion Evidence (Sp.)

US Internal Revenue Service (IRS) agent Joseph Ziegler, who was known only as “Whistleblower X” in the Hunter Biden tax case prior to his testimony at the House Oversight Committee last Wednesday, said that some of the alleged tax evasion schemes in which Hunter Biden reportedly engaged in were detailed in his 2021 work, “Beautiful Things: A Memoir.” As per Ziegler, the opus showed that some of the expenses described by Hunter were for personal choices and not corporate benefit. “That’s almost the biggest component of this that I don’t think that the general public understands: You have statements being made in a book that are talking about going out to California, leaving your life and then going to start this new life. Yet, on your tax return you’re essentially stating things that are completely different,” Ziegler told the John Solomon Reports podcast.

The whistleblower said he and IRS supervisory agent Gary Shapley, also known as the first IRS whistleblower in Hunter Biden’s case, are gathering more documents to provide to Congress. The trove reportedly includes WhatsApp messages in addition to the one made public from 2017 in which Hunter invoked his father’s name to force his Chinese associate into forking out large sums of money. The whistleblower said there is evidence of US President Joe Biden’s association in the Hunter tax case. Earlier, the president repeatedly denied being related to his son’s business dealing or knowing anything about them. Ziegler told the media outlet that a family friend named Rob Walker told the FBI that then-Vice President Joe Biden attended a meeting with the Chinese executives, and that his son deducted as a business expense a hotel room in father’s name.

Ziegler highlighted his team was prevented from finding out whether Joe Biden actually used the room or was present at the hotel. “But what I think it’s important to know is that that was a deduction that was taken on Hunter’s tax return,” he said. Moreover, per the whistleblower, IRS agents saw evidence that the first son was engaged in tax evasion that “stretched back two decades.” “In my transcript, I talked about certain issues that Hunter had, I think, going back to the early 2000s,” he said.

In June, the younger Biden struck a plea deal with federal prosecutors on two minor tax crimes and a gun case. However, Republican congressmen said they are determined to get to the bottom of Hunter’s alleged crimes. Last week, House Oversight and Accountability Committee Chairman James Comer said he expects to file “between six and 10 criminal referrals” with the Justice Department related to Hunter after the congressional probe is completed.
“[Hunter Biden] was money laundering. He was racketeering. He committed wire fraud. He violated the Mann Act. The list goes on and on and on,” Comer alleged.

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Devon Archer is scheduled to testify on Friday. Will that happen? Will he be alive?

Members and the Media Panic as the Biden Scandal Mounts (Turley)

Now, Archer is expected to testify that Joe Biden participated in actual telephone calls with them. That will allow investigators to build further on the foundation Goldman laid. Archer will join other witnesses like Hunter’s business associate Tony Bobulinski, who said that he sat down with Joe Biden to discuss the deals. Bobulinski was instructed by Biden associate James Gilliar not to speak of the former veep’s connection to any transactions. No matter the severity of the revelations, the liberal media calls the investigations a “clown show.” Others have continued to tell the public that there remain no alleged ties from Hunter to President Biden despite emails, pictures and witness testimony. Yet it is becoming harder and harder to avoid these details.

With the possible testimony of Hunter’s business associates, the only hope is that Republicans might be convinced to “move on.” What was most notable about the question to Christie was the reference to the plea bargain. A year ago, I wrote a column on how the political and media establishment would likely use a “scandal implosion” approach as the evidence mounted over the corruption allegations. After the Democrats lost the House, there was a need to cap off the scandal and I suggested that the Justice Department would secure a light plea on a couple tax counts with little or no jail time. Members and the media would then declare the scandal closed and demand that we all “move on.” It is unnerving to see how the response unfolded so precisely as predicted. Members made repeated reference to the plea bargain to avoid further discussion.

Rep. Kweisi Mfume (D.-Md.) was positively irate that “We are doing this all over again for the Hunter Biden show to someone who has pleaded guilty and has taken responsibility for not filing taxes for two years. This is ludicrous. Beam me up, Scotty. There’s no intelligent life down here. None.” He then tore up papers in disgust. Members and the media were literally citing a plea bargain as dispositive, even as two lead investigators were saying it was fixed and politically influenced. Some in the media attacked these two IRS veterans as “so-called whistleblowers” (just as members previously attacked “so called journalists” for discussing censorship records). Others insisted that the allegations were still “unproven” or “unverified” while showing the same lack of interest in establishing the truth. Notably, these same media outlets did wall-to-wall coverage of the false Russian collusion claims in the Steele dossier.

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There’s a lot of X’s out there.

Twitter Rebrand to ‘X’ Fraught With Permit, Trademark Issues (DeMartino)

Later Sunday night, the logo began appearing in place of the social media site’s iconic bird logo for some users on some platforms. While the old Twitter branding remains for some users on some platforms, Musk promised in a Tweet (or an “X”) that the old branding would soon be gone completely. “And soon we shall bid adieu to the Twitter brand and, gradually, all the birds,” Musk wrote. Musk also changed his profile picture and the profile picture of the official “Twitter” account to the site’s new logo. X.com also now redirects to Twitter.com. X users responded to the delayed signage removal and the rebrand in general with a mix of mocking and indifference, while others took the opportunity to dunk on the city of San Francisco.

At present, there is also a question of whether the “X” branding is even available for Musk to use for social media sites. Both Microsoft and Meta* hold trademarks of “X.” The Meta patent lists the service as potentially “providing interactive websites featuring technology that enable online users to create personal profiles” that users can use “for broadcasting, transmitting, receiving, accessing, viewing, uploading, downloading, sharing, integrating, encoding, decoding, displaying, formatting, organizing, storing, caching, transferring and streaming of data, text, games, game content, digital media, images, music, audio, video and animations.” Another listed use for the Meta trademark of X includes “online social networking services.”

Microsoft’s patent, first filed in 2002, lists “on-line chatrooms” and “electronic bulletin boards” for users to share messages about video games and an online video game storefront. Both patents, particularly the Meta one, which seems related to a social media site, could cause legal problems for Musk, who has been in an online feud with Meta CEO Mark Zuckerberg. Musk has threatened to sue Meta for launching an X competitor called “Threads” and the two floated a potential cage fight being aired on Pay-Per-View.

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“Musk foresees these payment capabilities potentially becoming half of the global financial system.”

Musk: ‘X Will Become Most Valuable Brand on Earth’ (Sp.)

The rebranding of Twitter to “X” was announced over the weekend and near instantly began to face varying hurdles, from potential legal challenges to a barrage of criticism from users thrown off by the platform’s redesign. Some forecasts indicated the change could result in billions’ worth in losses for the firm’s value. Elon Musk, the billionaire entrepreneur and CEO of companies Tesla and SpaceX, announced his confidence in the success of X social media on Tuesday, vowing that the Twitter rebrand would make the platform the “most valuable brand on Earth.” Musk’s statement came in response to a US media article that estimated the rebranding could potentially decrease Twitter’s value by $4 billion to $20 billion.

Nevertheless, Musk remains undeterred, envisioning “X” as a comprehensive communication platform that also offers robust financial transactions. The potential integration of payment systems into Twitter/X has sparked speculation that users may soon be able to send and receive money directly through the platform. Musk foresees these payment capabilities potentially becoming half of the global financial system. While specific details about the payment systems have not been revealed, Musk emphasized the importance of executing them correctly for the magnum opus of Twitter/X to become a reality, noting his intentions to revolutionize the financial world. Linda Yaccarino, Twitter’s new CEO, has expressed enthusiasm about the transformation and hinted at more changes to come, signaling the company is just getting started.

Under Yaccarino’s leadership, the platform aims to fulfill its immense potential and meet the expectations of fans and critics alike. Since acquiring Twitter for $44 billion in October 2022, Musk has embarked on a series of changes to enhance the user experience and drive innovation on the platform. The rebranding to “X” was the latest in a series of moves aimed at revitalizing Twitter and positioning it as a leader in the ever-evolving social media landscape. With popular platforms such as TikTok vying for users’ attention, critics have underscored that the success of Musk’s rebranding strategy will undoubtedly face challenges as the viability of company’s future remains uncertain.

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Plimer

 

 

Viper
https://twitter.com/i/status/1683884068000215044

 

 

Peacock

 

 

Idolomantis diabolica
https://twitter.com/i/status/1683874828694982657

 

 


The exact moment the sunlight penetrates the wings of a Black and white Jacobin hummingbird revealing a secret of nature that cannot be seen with our eyes. No digital manipulation. IG: christianspencerphoto

 

 

Metallica
https://twitter.com/i/status/1683773227389140992

 

 

 

 

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Apr 152016
 
 April 15, 2016  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »


Gottscho-Schleisner Plaza buildings from Central Park, NY 1933

A Year After European Stocks Hit Record, Crash Angst Hits Traders (BBG)
The One Chart That Shows ECB Money Printing Is Failing (Ind.)
Oil Demand Falls Much Faster Than Supply (Berman)
Oil Producers Head For Doha Counting $315 Billion Cost Of Slump (BBG)
Soured Corporate Loans Surge at Biggest US Banks on Oil (BBG)
China’s Economy Faces Recovery Without Legs (WSJ)
China’s Giant Bonfire Of Debt Needs One Spark To Become An Inferno (MW)
Funny Numbers Show Money Leaving China (Balding)
China Is Set to Allow Banks to Swap Bad Loans for Equity in Borrowers (WSJ)
China’s Giant Steel Industry Just Churned Out Record Supply (BBG)
What Negative Interest Rates Mean for the World (WSJ)
Negative Rates: Danish Couple Gets Paid Interest on Their Mortgage (WSJ)
Deutsche Bank Settles Silver, Gold Price-Manipulation Suits (BBG)
IMF Says Greek Debt Numbers Don’t Add Up as EU Defends Its Plan (BBG)
UK and European Allies Plan To Deal ‘Hammer Blow’ To Tax Evasion (G.)
Spanish Industry Minister Resigns After Panama Papers Revelations (AFP)
Ten European Nations Want Military Planes For Refugee Deportations (AP)

Let that graph sink in.

A Year After European Stocks Hit Record, Crash Angst Hits Traders (BBG)

A year ago today, European equities hit their highest levels ever. But the euphoria about Mario Draghi’s stimulus program didn’t last, and trader skepticism is now rampant. The Stoxx Europe 600 Index has lost 17% since its record, and investors who piled in last year are now unwinding bets at the fastest rate since 2013 as analysts predict an earnings contraction. The trading pattern looks familiar: a fast run to just over 400 on the gauge, then disaster. Optimism has turned to doubt with ECB President Draghi’s bond-buying program doing little to bolster the economy while sowing concerns about bank profitability. To Benedict Goette of Crossbow Partners, the odds of another crisis are higher than a rally to fresh records.

“The 2009-2015 rally originated from two main drivers: a massive stimulus, and credit expansion in China,” said Goette. “European earnings have not followed suit so far. Skepticism regarding central-bank operations has started to emerge.” Even with a recent rebound, the Stoxx 600 remains 6% lower for the year, and strategists are predicting the gauge will end 2016 at about the same level where it started. Analysts, who in January called for earnings growth, are now expecting declines of 2.8%. Investors have withdrawn money from funds tracking the region’s equities for nine straight weeks, the longest streak since May 2013, according to a Bank of America note dated April 7 that cited EPFR Global data.

Since last year’s peak, all industry groups in the Stoxx 600 have fallen, with lenders, miners and automakers down more than 25%. Traders have had to contend with a rebound in the euro despite additional ECB stimulus, persistently low inflation and slowing growth from China. Fewer than one in five fund managers are confident Draghi’s easing will be a major source of growth for Europe, a Bank of America survey showed April 12.

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In case that wasn’t clear yet.

The One Chart That Shows ECB Money Printing Is Failing (Ind.)

Good news: prices are no longer falling in the eurozone. But don’t break out the champagne. According to the European number crunchers Eurostat consumer prices across the 19 nation bloc were flat on a year earlier in March. The inflation rate was zero. This means the eurozone remains very much within the deflationary danger zone. The ECB has been trying to break the grip of deflation – which can be lethal for economic growth – on the bloc for more than a year now. To this end the ECB’s president Mario Draghi announced a major programme to buy up eurozone government bonds and company debt in January 2015.

The central bank has been buying €60bn of these assets a month in the hope that that flood of money entering the continent’s financial system would lift inflation into positive territory. The trouble is, as the chart below shows, is that all that money printing doesn’t seem to be working in pushing up prices. But the ECB is not giving up. In December it announced that it would continue its programme until March 2017 “or beyond”. The programme was originally supposed to end in September 2016. And in March it upped the size of the monthly bond purchases to €80bn. In other words, the ECB will continue printing money until inflation rises to the central bank’s target of (just below) 2% a year.

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“Supply increased only 20,000 barrels per day in March. Consumption, however, decreased by 250,000 barrels per day.”

Oil Demand Falls Much Faster Than Supply (Berman)

Oil prices have increased 60% since late January. Is this an oil-price recovery? Two previous price rallies ended badly because they had little basis in market-balance fundamentals. The current rally will probably fail for the same reason. Although oil prices reached the highest levels so far in 2016 during the past few days, the global over-supply of oil worsened in March. EIA data released this week shows that the net surplus (supply minus consumption) increased to 1.45 million barrels per day (Figure 1). Compared to February, the surplus increased 270,000 barrels per day. That’s a bad sign for the durable price recovery that some believe is already underway.

The production freeze that OPEC plus Russia will discuss this weekend has already arrived. Supply increased only 20,000 barrels per day in March. Consumption, however, decreased by 250,000 barrels per day. That’s not good news for the world economy although first quarter consumption is commonly lower than levels during the second half of the year. Meanwhile on Wednesday, April 12, Brent futures closed at almost $45 and WTI futures at more than $42 per barrel, the highest oil prices since early December 2015.


Figure 1. EIA world liquids market balance (supply minus consumption). Source: EIA STEO April 2016 Labyrinth Consulting Services, Inc.

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Any agreement willl exist on paper only.

Oil Producers Head For Doha Counting $315 Billion Cost Of Slump (BBG)

The world’s top oil exporters are burning through their petrodollar assets at an accelerating pace, increasing the pressure to reach a deal to freeze production to bolster prices. The 18 nations set to gather in Doha on Sunday to discuss a production freeze have spent $315 billion of their foreign-exchange reserves – about a fifth of their total – since the oil slump started in November 2014, according to data compiled by Bloomberg. In the last three months of 2015, reserves fell nearly $54 billion, the largest quarterly drop since the crisis started. The petrodollar burn has consequences beyond the oil nations, affecting international fund managers like Aberdeen Asset Management and global currencies markets.

Oil nations have traditionally held their reserves in U.S. Treasuries and other liquid securities. Nonetheless, the impact in credit markets has been muted as central banks continue to buy debt. “We expect 2016 to be yet another painful year for most of the oil states,” said Abhishek Deshpande, oil analyst at Natixis in London. The gathering in Doha will comprise both OPEC and non-OPEC states, though any deal to boost prices will probably be largely cosmetic as countries are already pumping nearly at record levels. In a letter inviting countries to the Doha meeting, Qatar Energy Minister Mohammed Al Sada said oil countries need to stabilize the market in “the interest of a healthier world economy as the present low price is seen to be benefiting no one.”

Saudi Arabia accounts for nearly half of the decline in foreign-exchange reserves among oil producers, with $138 billion – or 23% of its total – followed by Russia, Algeria, Libya and Nigeria. In the final three months of last year, Saudi Arabia burned through $38.1 billion, the biggest quarterly reduction in data going back to 1962.

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“Soured loans to companies jumped 67% at the three biggest U.S. banks in the first quarter..”

Soured Corporate Loans Surge at Biggest US Banks on Oil (BBG)

Soured loans to companies jumped 67% at the three biggest U.S. banks in the first quarter, the latest sign that corporate credit quality is eroding after energy prices plunged. At Bank of America, JPMorgan and Wells Fargo, bad loans to companies reached their highest levels since at least 2013. For now, weakness is mainly confined to oil and gas and related industries, executives said. U.S. crude has tumbled more than 60% since June 2014, although they have rallied since February. Troubled loans have broadly been declining at big banks for years, and at JPMorgan and Bank of America, are less than 1% of total assets.

But there are signs that default risk is rising in sectors outside of energy, including health care, James Elder, a director in corporate and financial institutions at Standard & Poor’s, said in a presentation this week. Charles Peabody, a banking analyst at Portales Partners, downgraded JPMorgan to “underperform” from “market perform” in February in part because of concerns about the potential for mounting credit losses. “We’re at the very early stages of an inflection point in corporate credit quality, and it’s getting worse from here,” Peabody said. Pri de Silva, an analyst at CreditSights, is among those who see current credit problems as limited to oil and gas and related industries. “At this point, I don’t see much contagion,” he said.

Banks have been getting ready for loans to deteriorate – the industry added $1.43 billion in the fourth quarter to the total money it has set aside to cover bad loans, according to Federal Deposit Insurance Corp. data compiled by Bloomberg, the first time banks in aggregate added to reserves since 2009. Banks usually classify loans to companies as “nonperforming” after the borrower is delinquent for 90 days. Loans that are unlikely to be repaid are also typically designated as “nonperforming.” Now loans are actually souring. At JPMorgan, bad loans to companies more than doubled to $2.21 billion from $1.02 billion in the fourth quarter, according to company filings. Bank of America said they rose 32% to $1.6 billion. And at Wells Fargo, they rose 64% to $3.97 billion, which includes $343 million from loans it acquired from GE Capital.

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This is such a contradiction in terms it’s crazy the WSJ prints it: “China’s economy may have stabilized for now, thanks to gobs of new debt..”

China’s Economy Faces Recovery Without Legs (WSJ)

China’s economy may have stabilized for now, thanks to gobs of new debt and a reflating property bubble. Dipping into that old bag of tricks, however, seems likely to dredge up the same old problems. Official data showed China’s GDP slowed to 6.7% in the first quarter from a year earlier. As expected, that is the slowest in years, but underlying data showed activity picked up toward the end of the quarter. Home buyers, for instance, continued to splash out for new property, with residential sales rising 54% in the first quarter from a year earlier. That has emboldened developers to start to build again, with housing starts rising 16% in the first quarter, after falling 15% last year. That augurs well for employment and demand for raw materials. But it is hard to see China’s property market—which in past years generated directly and indirectly up to a third of all economic activity—returning to its past glory.

Much of the recovery in prices and activity has been in China’s so-called tier one cities—the four largest cities—and regulators there are already clamping down to prevent things from getting out of hand. In the rest of China, the property recovery is far more subdued, and inventories of unsold apartments remain substantial. Around 95% of real estate sales occur outside of those top four cities, notes Louis Kuijs of Oxford Economics, so unless the boom spreads, the impact on the broader economy will remain muted. China’s old economy sectors also seem to have awoken somewhat from their slumber. Industrial production grew 6.8% in March, the fastest in nine months. Fixed asset investment, spending on things like factories and infrastructure, grew 11.2%, much faster than the 6.8% low it hit in December.

Driving all this activity: easy money. Real interest rates have fallen. And nominal GDP grew faster than real GDP for the first time in five quarters, which in theory makes servicing debt easier. What should trouble investors is that while China’s economic activity is ticking up, debt is piling up faster. The stock of total financing in the economy, including bond issuance as part of a local government bailout program, rose 15.8% in March from a year ago, the fastest rate since mid-2014. With nominal GDP growing 7.2%, Beijing’s plans to deleverage the economy continue to be overwhelmed by the need to support growth. China bulls will be pleased by the data, hoping that a proper recovery is at hand. Those hopes may prove short lived. The more the recovery is fueled by debt and property, the more concerned Beijing will be that it is pushing the gas too hard and will have to ease off sooner than people think.

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“In a developed economy, Ponzi lending of such an enormous scale would lead to widespread bankruptcies, unemployment and massive losses for investors and lenders. This hasn’t happened yet because Chinese debt has been expanding at an ever-faster rate.”

China’s Giant Bonfire Of Debt Needs One Spark To Become An Inferno (MW)

China’s debt bonfire has been building for decades, but recent news and data points to it growing faster than ever with a greater risk of becoming an economy-scorching inferno. There are three key components to this analogy: the wood, the accelerant and the matches. First the wood, which is an ever-growing stockpile of debt that cannot be serviced from profits. Macquarie Research found that 23% of bonds issued were by companies that don’t generate enough operating profit to cover their interest. This aligns with a Bloomberg report that the median Chinese listed company generates enough operating profit to cover their interest two times, down from a ratio of six times in 2010. Another report found that 45% of new company debt is raised to pay interest on existing debt.

In a developed economy, Ponzi lending of such an enormous scale would lead to widespread bankruptcies, unemployment and massive losses for investors and lenders. This hasn’t happened yet because Chinese debt has been expanding at an ever-faster rate. China’s total debt levels grew to about 300% of GDP last year from about 250% of GDP in 2014 and set a new record for a single month in January, growing at roughly 5% of the size of the economy. Problems have been covered over as the Chinese banking regulator is forcing banks to lend to companies that can’t pay their interest and would otherwise default. We know the bonfire is big and the wood is dry. The next step is to figure how quickly a fire could spread once it begins.

The second key component is the accelerant, which is the relatively high proportion of debt borrowed for short periods. Chinese wealth management products are typically sold by banks as an alternative to term deposits that pay much higher interest rates. Borrowers are almost always promised their money back within six months. The underlying investments are typically loans to companies that banks are unwilling to lend to. These borrowers have little prospect of repaying the debt at maturity unless someone else is willing to provide more debt. Another source of short-term funding is peer-to-peer platforms. However, 28% of these are thought to be fraudulent. In the institutional funding market, there’s commercial paper, which is composed of corporate debts of 270 days or less. Outstanding Chinese commercial paper was $1.61 trillion at the end of 2015, far larger than the U.S. equivalent at $1.05 trillion.

As shown by the financial crisis in 2008, short-term debt is an accelerant to fires in credit systems. Within a week of the collapse of Lehman Brothers, 26% of U.S. commercial paper disappeared. Investors were no longer willing to lend without asking questions and borrowers were sent scurrying for other sources of capital. A run on short-term funding sources quickly spreads the fire from one bankrupt borrower to many other borrowers.

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“Chinese customs officials reported $1.68 trillion in imports last year. Banks, on the other hand, claimed to have paid $2.2 trillion for those same imports. While the official balance-of-payments records a current account surplus of $331 billion in 2015, banks’ payments and receipts show a $122 billion deficit.”

Funny Numbers Show Money Leaving China (Balding)

News that China’s foreign-exchange reserves rose by $10 billion in March rather than declining has quieted doomsayers. Worries that the reserves could dip to dangerous levels as soon as this summer – after shrinking by an estimated $1 trillion last year – appear to have been premature. Still, questions linger over exactly how much money is leaving China and why. The true picture may not be as rosy as the headline numbers suggest. Before the March upturn, capital had been flooding out of China at a rapid clip – an average of $48 billion per month over the previous six months, according to official bank data. The reasons were several. Fearing further declines in the value of the yuan, several companies paid off their dollar loans; others pursued big acquisitions abroad. Individual investors sought out higher returns as the Fed prepared to raise rates.

The government spent billions to prop up the value of the currency. Some individuals and companies reduced their offshore yuan deposits. Still others looked to spirit money out of the country to safer havens. The question is how much money has been leaving for which reasons. Some analysts, including economists at the Bank for International Settlements, have argued that the bulk of these outflows are healthy, mostly involving companies paying down their foreign debt. However, the BIS study, which estimates that such repayments accounted for nearly a quarter of the $163 billion of non-reserve outflows in the third quarter of 2015, focuses on a very narrow slice of time. Foreign debt obligations grew rapidly in late 2014 and the first half of 2015, then shrunk dramatically in the third quarter.

Moreover, what those official figures miss are hidden outflows, disguised primarily as payments for imports, which appear to have created a $71 billion current account deficit in the same quarter, according to bank payments data. In effect, enterprising Chinese are overpaying massively for the products they’re importing. Chinese customs officials reported $1.68 trillion in imports last year. Banks, on the other hand, claimed to have paid $2.2 trillion for those same imports. While the official balance-of-payments records a current account surplus of $331 billion in 2015, banks’ payments and receipts show a $122 billion deficit. Overpaying for imported goods and services is a clever way for Chinese companies and citizens to move money out of the country surreptitiously.

Let’s say a foreign country exports $1 million worth of goods to China. Chinese customs officials will faithfully record $1 million in imports. But when the importer goes to the bank, he’ll either use fraudulent documentation or bribe a bank official to record a $2 million payment to the foreign counterparty. Presumably, the excess $1 million ends up in a private bank account. While some discrepancies are to be expected in data like this, the size and steady increase in the gap since 2012 implies that something shadier is going on. When Chinese companies pay down debt, or make big acquisitions abroad, they do so openly. These other outflows – which topped half a trillion dollars last year – seem far more likely to be driven by individuals and companies simply seeking to get their money out of the country.

The timing is also telling. The discrepancy began to grow rapidly in 2012, just as growth peaked and concerns began to rise among affluent Chinese about the economy and a political transition. Since then, fake import payments have grown from $140 billion to $524 billion in 2015. During that period, growth in China has slowed, rates of return on investment have declined and surplus capacity has exploded. Investment opportunities have shrunk, while state-owned enterprises have crowded out private investors. Certainly the latter have good reason to seek better returns elsewhere.

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“Corporate debt now amounts to 160% of China’s GDP… That is up from 98% in 2008 and compares with a current U.S. level of 70%.”

China Is Set to Allow Banks to Swap Bad Loans for Equity in Borrowers (WSJ)

China is planning a debt-for-equity swap program that could provide large companies mired in overcapacity a way to reduce their debt burdens, the country’s top central banker said on Thursday. The deepening slowdown in the world’s second-largest economy has heightened the need for Chinese authorities to come up with ways to help the country’s heavily-indebted corporate sector deleverage. A plan in the works involves enabling banks to exchange bad loans for equity in companies they lend to. Speaking at a small-business financing event hosted by the OECD on Thursday, Zhou Xiaochuan, Gov. of the People’s Bank of China, said the planned debt-for-equity swap program would mainly help large companies plagued with excessive industrial capacity cut bank debt.

The event was held on the sidelines of a Group of 20 finance-chief meeting this week. Small Chinese companies, Mr. Zhou said, aren’t expected to benefit significantly from this program as they’re less indebted than their bigger brethren. He pointed to a persistent challenge faced by China’s policy makers: Despite a relative high leverage ratio in China’s economy, small businesses “still have difficulty in accessing bank loans.” In the past couple of years, the central bank has taken a number of steps—such as targeted credit-easing measures—to encourage banks to lend to small and private companies. But so far progress has been slow as large state banks, which dominate corporate lending in China, still prefer to lend to large state-owned corporate clients.

“We don’t have enough community banks to lend to small- and medium-sized enterprises,” Mr. Zhou said. The planned debt-for-equity swap program is a potentially controversial step that many Chinese bankers say could saddle banks with near-worthless stock and squeeze their liquidity. Analysts also say the move could risk keeping “zombie” companies afloat while making lenders even more strapped for capital. [..] Corporate debt now amounts to 160% of China’s GDP, according to Standard & Poor’s Ratings Services. That is up from 98% in 2008 and compares with a current U.S. level of 70%.

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Steel exports are Beijing’s only window to avert widespread job losses and hence unrest.

China’s Giant Steel Industry Just Churned Out Record Supply (BBG)

The world’s biggest steel producer pushed output to a record in March as mills in China fired up plants to take advantage of a price surge since the start of the year that’s rescued profit margins. Output rose 2.9% to 70.65 million metric tons from a year earlier, the National Bureau of Statistics said on Friday. That’s the highest ever, according to data from state-owned researcher Beijing Antaike Information. Still, for the first quarter, supply fell 3.2% to 192 million tons. The country’s steelmakers are ramping up output after cuts at the end of 2015 fueled a major price surge that has rippled out to world markets. The mills’ busiest-ever month came as figures showed that China’s economy stabilized, aided by a rebound in the property market.

Last year, the country’s steel output shrank for the first time since 1981 as demand contracted and mills battled surging losses and too much capacity, and forecasters including Australia’s government expect a further decline in 2016. “It’s normal to see higher output in March but this is a significant increase,” said Kevin Bai, a Beijing-based researcher at consultancy CRU Group. “Right now, the mills are making money. The market is still relatively tight and this has encouraged some producers to return.”

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They mean price discovery is dead for the moment. But it will be back. And what will central banks do then?

What Negative Interest Rates Mean for the World (WSJ)

Central bankers around the world are pushing deeper into the once-unthinkable world of negative interest rates — essentially charging customers to hold their cash. Denmark set negative interest rates as early as 2012, followed by the ECB in 2014. Since then, they’ve been joined by Switzerland and Sweden. In Asia, the Bank of Japan announced a negative interest rate policy in January this year. Hungary became the first emerging market to experiment with negative rates, taking the plunge in March. With more of the world’s central banks joining in, and rates pushing further below zero, The Wall Street Journal this week explores how negative rates appear to be working in various settings and what they mean for policymakers and markets.

In Denmark: Some mortgage holders are the envy of home owners around the world. With negative interest rates, they’re actually receiving interest payments from the banks they initially borrowed from.

In Switzerland: Few banks are dealing with negative interest rates by passing them on to their customers, but Alternative Bank Schweiz in Switzerland is bucking the trend, and charging clients to hold their deposits.

In Germany: Life insurance companies with long term liabilities are feeling the squeeze of negative interest rates. Some groups require an annual yield of more than 5% to sustain their businesses, driving a typically low risk industry into increasingly risky assets.

In Japan: The announcement of negative interest rates spurred a massive rise in prices on the government’s 40 year bond, gains only usually seen on bonds in emerging markets like Venezuela. But even in Japanese government bonds, investors are taking on a new risk: duration. Money market trading is also withering in Japan, as the new interest rates set into place. The trading confirmation system used by domestic banks wasn’t fully updated until a month after the Bank of Japan’s rate cut.

In the U.S: policymakers are weighing up whether the policy could work for them. The U.S. economy is preparing for higher rather than lower rates, but even the Federal Reserve is investigating whether going negative might work in the event of another downturn.

And for monetary policy: What comes after negative rates? Helicopter money is one answer, according to James Mackintosh, as perverse effects of negative rate policies begin to crop up. Around the world, it looks like negative interest rates are here to stay. And like it or not, so are their effects.

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“The ECB and the Bank of Japan, grappling with stagnant economies, are using subzero rates to stimulate growth.” Which clearly doesn’t work.

Negative Rates: Danish Couple Gets Paid Interest on Their Mortgage (WSJ)

Hans Peter Christensen got some unusual news when he opened his most recent mortgage statement. His quarterly interest payment was negative 249 Danish kroner. Instead of paying interest on the loan he got a decade ago to buy a house in [Aalborg] , his bank paid him the equivalent of $38 in interest for the quarter. As of Dec. 31, his mortgage rate, excluding fees, stood at negative 0.0562%. It has been nearly four years since Denmark entered the world of negative monetary policy, and borrowers and lenders alike are still trying to make sense of the upside-down world it has brought. “My parents said I should frame it, to prove to coming generations that this ever happened,” said Mr. Christensen, a 35-year-old financial consultant, about his bank statement.

Denmark isn’t the only place where central bankers are experimenting with negative rates. The ECB and the Bank of Japan, grappling with stagnant economies, are using subzero rates to stimulate growth. Switzerland and Sweden, like Denmark, are trying negative rates to keep their currencies in line with the struggling euro. Denmark, where the central bank’s benchmark rate stands at minus 0.65%, has lived in negative territory longer than any other country. Neighboring Sweden has been below zero for 14 months, and its central bank has said it would go lower than the current benchmark of negative 0.5% if it needs to. In Norway, the central bank still has positive rates, but it is considering resorting to negative ones to prop up an economy hit hard by the prolonged spell of low oil prices.

Scandinavia’s experience has given economists a chance to study what happens when rates drop below zero—long considered an inviolable floor on rates. Already, there are concerns about undesirable side effects. Consumer savings accounts pay no interest, and there is pressure on bank profitability. A boom in real-estate borrowing has kindled fears that problems will arise if rates bounce back up. “If you had said this would happen a few years ago, you would have been considered out of your mind,” said Torben Andersen, a professor at Denmark’s Aarhus University who serves on the government’s economic-advisory council.

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Watch derivatives.

Deutsche Bank Settles Silver, Gold Price-Manipulation Suits (BBG)

Deutsche Bank has reached settlements in lawsuits over allegations it manipulated gold and silver prices, lawyers for traders of the commodities said in court filings. Attorneys for futures contract traders in two private lawsuits said in letters filed Wednesday and Thursday in Manhattan federal court that the bank has executed term sheets and is negotiating final details for the accords. The German financial firm also agreed to help the plaintiffs pursue similar claims against other banks as part of the settlements, according to the letters. Vincent Briganti and Robert Eisler, attorneys for traders in the silver-fixing lawsuit, said Deutsche Bank will turn over instant messages and other communications to help further their case. Financial terms of the settlements weren’t disclosed.

“In addition to valuable monetary consideration to be paid into a settlement fund, the term sheet also provides for other valuable consideration such as provisions requiring Deutsche Bank’s cooperation in pursuing claims against the remaining defendants,” attorneys Daniel Brockett and Merrill Davidoff said in their letter Thursday in the gold-fixing lawsuit. Silver and gold futures traders sued groups of banks in 2014 alleging they rigged prices for the precious metals and their derivatives. Silver traders brought claims against Deutsche Bank, HSBC, Bank of Nova Scotia and UBS. Gold traders additionally sued Barclays and Societe Generale.

The traders alleged the banks abused their positions of controlling daily silver and gold fixes to reap illegitimate profits from trading and hurting other investors in those markets who use the benchmark in billions of dollars of transactions, according to versions of the complaints filed in 2015. Of those banks, only Deutsche Bank has reached a settlement.

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This discussion is sinking to Forrest Gump levels.

IMF Says Greek Debt Numbers Don’t Add Up as EU Defends Its Plan (BBG)

The IMF raised doubts about Greece’s ability to keep up repayments under a plan being negotiated with its European creditors, who insisted they’ve already provided plenty of debt relief. “Currently, as envisaged, the debt is not sustainable and what is required is a debt operation,” IMF Managing Director Christine Lagarde said Thursday in Washington, where finance ministers and central bankers are attending the fund’s spring meetings. Lagarde said she’s skeptical about Greece’s ability to meet the budget surplus target set under an €86 billion bailout by euro-area governments, who are reviewing whether to release the loan’s second installment. Under the EU program, Greece is committed to posting a fiscal surplus before interest payments of 3.5% of gross domestic product within two years.

The IMF has said it might be willing to pitch in a new loan itself, but Lagarde said the fund wants the country’s recovery plan to be based on “realism and sustainability.” “We cannot have far-fetched fantasy hypotheticals concerning the future of the Greek economy,” said the IMF chief, who was reappointed in February for a second five-year term. She said debt relief by euro-area countries doesn’t necessarily have to involve a “haircut” on principal, and could take the form of maturity extensions, interest reductions or a “debt holiday.” The more Greece cuts spending through reforms, the less debt restructuring will be required, Lagarde said. “Bottom line, it needs to all add up,” she said. The EU line has been that the numbers already add up.

On Thursday, a spokesman for euro-area finance ministers rejected the notion that Greece’s debt is unsustainable. “We did already a lot to make it more sustainable – lowering the interest rates, lengthening the maturities,” said Jeroen Dijsselbloem of the Netherlands, president of the Eurogroup, made up of the currency zone’s finance ministers. “So for the coming five to 10 years, I don’t think there is a big debt-service issue. I think the Greeks can pay on an annual basis.”

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What you find in the dictionary under both ‘Useless’ and ‘Lip service’. Nothing happened for years and years, and one leak later they’re all knights of justice?!

UK and European Allies Plan To Deal ‘Hammer Blow’ To Tax Evasion (G.)

Britain and its European allies have announced new “hammer blow” rules against tax evasion in direct response to the Panama Papers leak that exposed how the world’s richest and most powerful people hide their wealth from the taxman. George Osborne announced on Thursday, in partnership with his counterparts from France, Germany, Spain and Italy, new rules that will lead to the automatic sharing of information about the true owners of complex shell companies and overseas trusts. The chancellor said the new rules, agreed this week in direct response to the Panama Papers leak, were “a hammer blow against those that would illegally evade taxes and hide their wealth in the dark corners of the financial system.

“Britain will work with our major European partners to find out who really owns the secretive shell companies and trusts that have been used as conduits for evading tax, laundering money and benefiting from corruption. “Strong words of condemnation are not enough, populist outrage doesn’t by itself collect a single extra pound or dollar in tax or put a single criminal in jail,” Osborne said at the spring meetings of the IMF in Washington. “What we need is international action now, and that’s precisely what we are doing today with real concrete action in the war against tax evasion.” He said the transparency rules on beneficial ownership showed that Britain and other governments are working to shine a spotlight on “those hiding spaces, those dark corners of the global financial system”.

He said he hoped the rules, which will come into effect in January 2017, would be followed up by other countries. Ángel Gurría, the secretary general of the OECD, said the release of the Panama Papers showed that there was no room for complacency in the international effort to crack down on tax evasion. He said it was no surprise that the rich and the powerful were using Panama to evade tax as “it is one of the few jurisdictions that has pushed against” international measures to improve tax and ownership transparency. “We have to crack down on the professional enablers – lawyers, accountants, financial institutions – that play a key role in maintaining the veil of secrecy,” he said.

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Whackamole.

Spanish Industry Minister Resigns After Panama Papers Revelations (AFP)

Spain’s industry minister resigned Friday after he was named in the Panama Papers and other media revelations that claimed he had links to offshore firms, the latest political victim from the global scandal. Jose Manuel Soria said in a statement that he had tendered his resignation “in light of the succession of mistakes committed along the past few days, relating to my explanations over my business activities… and considering the obvious harm that this situation is doing to the Spanish government.” Soria’s troubles began on Monday when Spanish online daily El Confidencial, which has had access to the Panama Papers – files leaked from law firm Mossack Fonseca – said he had was an administrator of an offshore firm for two months in 1992.

Soria called a news conference to deny any link to any Panamanian company, but as the week went by, more allegations emerged from other media outlets, revealing further alleged connections to offshore havens. It is unclear as yet whether any of his alleged actions were illegal. Soria is the latest political victim of the Panama Papers, which resulted from what the law firm blamed on a computer hack launched from abroad, and revealed how the world’s wealthy stashed assets in offshore companies. Iceland’s Prime Minister Sigmundur David Gunnlaugsson was also forced to resign over the leaks.

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We keep thinking it’s not possible, but Europe keeps finding ways to sink deeper in its moral morass. It’s almost an achievement.

Ten European Nations Want Military Planes For Refugee Deportations (AP)

Austria and nine East European and Balkan states are calling for an EU declaration endorsing the use of military aircraft for the deportation of migrants who have no chance for asylum, or whose request for that status have been rejected. The Austria Press Agency says the request is being made in a letter to EU foreign policy chief Federica Mogherini, signed by Austrian Defense Minister Hans Peter Doskozil on behalf of Austria and the other countries. APA on Thursday quoted the letter as saying the use of military aircraft should be “seen as an integral and decisive element of a full repatriation program.” The agency said the letter asked for the issue to be on the agenda of the next EU foreign ministers’ meeting in Luxembourg on April 19.

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Apr 102016
 
 April 10, 2016  Posted by at 9:43 am Finance Tagged with: , , , , , , , ,  3 Responses »


Jack Delano Bridge with 5-ton coal bucket, Milwaukee Western Fuel Co 1942

Britain Is The Heart And Soul Of Tax Evasion (RT)
How a US president and JP Morgan Made Panama and Turned It Into A Tax Haven (G.)
Cameron Faces Questions Over £200,000 Gift From Mother (Observer)
Panama Papers: Act Now. Don’t Wait For Another Crisis (Piketty)
The Next Recession Will Blow Out the US Budget (Mauldin)
Schäuble: Time is Near to End Central Banks’ Easy-Money Policies (WSJ)
Why US Infrastructure Costs So Much (BBG)
SYRIZA, IMF and EU: Gambling With The Future Of Greece (SE)
Lesbos Hopes Pope’s Visit Will Shine Light On Island’s Refugee Role (Observer)
Greece Says It Will Take At Least Two Weeks To Fix Deporation System (Kath.)

Why the City of London got so big.

Britain Is The Heart And Soul Of Tax Evasion (RT)

The British government’s claim to be tackling tax evasion is about as credible as Al Capone claiming to be leading the fight against organized crime. In fact, Britain is at the heart of the global tax haven network, and continues to lead the fight against its regulation. The 11 and a half million leaked documents from Panamanian law firm Mossack Fonseca have proven, once again, what we have already known for some time – that the ‘offshore world’ of tax havens is a den of money laundering and tax evasion right at the heart of the global financial system. Despite attempts by Western media to twist the revelations into a story about the ‘corruption’ of official enemies – North Korea, Syria, China and, of course, Putin, who is not even mentioned in the documents – the real story is the British government’s assiduous cultivation of the offshore world.

For whilst corruption exists in every country, what enables that corruption to flourish and become institutionalized is the network of secretive financial regimes that allow the world’s biggest criminals and fraudsters to escape taxation, regulation and oversight of their activities. And this network is a conscious creation of the British state. Of the 215,000 companies identified in the Mossack Fonseca documents, over half were incorporated in the British Virgin Islands, one single territory in what tax haven expert Nicholas Shaxson calls a “spider’s web” of well over a dozen separate UK-controlled dens of financial chicanery. In addition, the UK was ranked number two of those jurisdictions where the banks, law firms and other middlemen associated with the Panama Papers operate, only topped by Hong Kong, whose institutional environment is itself a creation of the UK.

And of the ten banks who most frequently asked Mossack Fonseca to set up paper companies to hide their client’s finances, four were British: HSBC, Coutts, Rothschild and UBS. HSBC, recently fined $1.9bn for laundering the money of Mexico’s most violent drug cartels, used the Panamanian firm to create 2,300 offshore companies, whilst Coutts – the family bank of the Windsors – set up just under 500. And, of course, David Cameron’s own father was named in the papers, having “helped create and develop” Blairmore Holdings, worth $20million, from its inception in 1982 till his death in 2010.

Blairmore, in which Cameron junior was also a shareholder, was registered in the Bahamas, and was specifically advertised to investors as a means of avoiding UK tax. The Daily Mail noted that: “Even though he lived in London, the Prime Minister’s father would leave the country and fly to Switzerland or the Bahamas for board meetings of Blairmore Holdings – to ensure it would not have to pay UK income tax or corporation tax. He hired a small army of Bahamas residents, including a part-time bishop, to sign its paperwork – as part of another bid to show his firm was not British-based.”

That Britain should emerge as central to this scandal is no surprise. For as Nicholas Shaxson, a leading authority on tax havens put it when I interviewed him in 2011, “The City of London is effectively the grand-daddy of the global offshore system.” Whilst there are various different lists of tax havens in existence, depending on how exactly they are defined, on any one of them explains Shaxson, “you will see that about half of the tax havens on there, of the ones that matter, are in some way British or partly British.” Firstly, are “Jersey, Guernsey and the Isle of Man: the crown dependencies. They’re very fundamentally controlled by Britain.” Then there are the Overseas Territories, such as the Caymans, Bermuda, and the Virgin Islands, in which “all the things that matter are effectively controlled by Great Britain.”

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History counts too.

How a US president and JP Morgan Made Panama and Turned It Into A Tax Haven (G.)

This goes back a long way. The Panamanian state was originally created to function on behalf of the rich and self-seeking of this world – or rather their antecedents in America – when the 20th century was barely born. Panama was created by the United States for purely selfish commercial reasons, right on that historical hinge between the imminent demise of Britain as the great global empire, and the rise of the new American imperium. The writer Ken Silverstein put it with estimable simplicity in an article for Vice magazine two years ago: “In 1903, the administration of Theodore Roosevelt created the country after bullying Colombia into handing over what was then the province of Panama. Roosevelt acted at the behest of various banking groups, among them JP Morgan, which was appointed as the country’s ‘fiscal agent’ in charge of managing $10m in aid that the US had rushed down to the new nation.”

The reason, of course, was to gain access to, and control of, the canal across the Panamanian isthmus that would open in 1914 to connect the world’s two great oceans, and the commerce that sailed them. The Panamanian elite had learned early that their future lay more lucratively in accommodating the far-off rich than in being part of South America. Annuities paid by the Panama Railroad Company sent more into the Colombian exchequer than Panama ever got back from Bogotá, and it is likely that the province would have seceded anyway – had not a treaty been signed in September 1902 for the Americans to construct a canal under terms that, as the country’s leading historian in English, David Bushnell, writes, “accurately reflected the weak bargaining position of the Colombian negotiator”.

Colombia was, at the time, riven by what it calls the “thousand-day war” between its Liberal and Historical Conservative parties. Panama was one of the battlefields for the war’s later stages. The canal treaty was closely followed by the “Panamanian revolution”, which was led by a French promoter of the canal and backed by what Bushnell calls “the evident complicity of the United States” – and was aided by the fact that the terms of the canal treaty forbade Colombian troops from landing to suppress it, lest they disturb the free transit of goods. The Roosevelt/JP Morgan connection in the setting-up of the new state was a direct one. The Americans’ paperwork was done by a Republican party lawyer close to the administration, William Cromwell, who acted as legal counsel for JP Morgan.

JP Morgan led the American banks in gradually turning Panama into a financial centre – and a haven for tax evasion and money laundering – as well as a passage for shipping, with which these practices were at first entwined when Panama began to register foreign ships to carry fuel for the Standard Oil company in order for the corporation to avoid US tax liabilities.

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He’s not done answering. In his circles, everyone has offshore accounts. That being PM means holding a higher standard is a mere nuisance to him.

Cameron Faces Questions Over £200,000 Gift From Mother (Observer)

The prime minister took the unprecedented decision to release his personal tax records on Saturday, as growing anger over revelations in the Panama Papers threatened to derail his premiership. But the extraordinary move seems set to plunge David Cameron into further controversy, as it emerged that his mother transferred two separate payments of £100,000 to his accounts in 2011, allowing the family estate to avoid a potential £80,000 worth of inheritance tax. Four years after first promising to open his financial affairs to public view, Downing Street published a document detailing Cameron’s income and tax payments from 2009-10 to 2014-15. The move came after an emotional Cameron admitted to the Conservative party’s spring forum that he alone was to blame for the furore caused by his failure to be frank about his profits from an offshore investment fund.

On Monday, Cameron will announce the establishment of a taskforce, led by HM Revenue & Customs and the National Crime Agency, to examine the legality of the financial affairs of companies mentioned in the Panama Papers, where documents relating to his father’s offshore fund were discovered by the Guardian and the International Consortium of Investigative Journalists. The taskforce will draw on investigators, compliance specialists and analysts from HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority. There will be new money provided of up to £10m. But following the release of the prime minister’s tax records, Cameron now faces questions over whether his family took elaborate steps to minimise the amount of inheritance tax that would eventually be due on their estate.

The records show that the prime minister received a considerable boost to his savings in 2011. Following the death of his father in 2010, Cameron was left £300,000 tax free as an inheritance. However, his mother also transferred two payments of £100,000 to him in May and July 2011. Inheritance tax is not payable on gifts up to £325,000 that are paid at least seven years before the source of the possession dies, be it property or money. A spokesman for the prime minister said that Cameron’s mother and father had “some years earlier” transferred the family home to their eldest son, Alexander Cameron, and the sums paid in 2011 were considered to be Cameron’s share.

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Not going to happen. Too much money means too much power.

Panama Papers: Act Now. Don’t Wait For Another Crisis (Piketty)

The question of tax havens and financial opacity has been headline news for years now. Unfortunately, in this area there is a huge gap between the triumphant declarations of governments and the reality of what they actually do. In 2014, the LuxLeaks investigation revealed that multinationals paid almost no tax in Europe, thanks to their subsidiaries in Luxembourg. In 2016, the Panama Papers have shown the extent to which financial and political elites in the north and the south conceal their assets. We can be glad to see that the journalists are doing their job. The problem is that the governments are not doing theirs. The truth is that almost nothing has been done since the crisis in 2008. In some ways, things have even got worse.

Let’s take each topic in turn. Exacerbated fiscal competition on the taxing of profits of big companies has reached new heights in Europe. The United Kingdom is going to reduce its rate to 17%, something unheard of for a major country, while continuing to protect the predatory practices of the Virgin Islands and other offshore centres under the British Crown. If nothing is done, we will all ultimately align ourselves on the 12% of Ireland, or possibly on 0%, or even on grants to investments, as is already sometimes the case. In the meantime, in the United States where there is a federal tax on profits, that rate is 35% (not including the taxes levelled by states, ranging between 5% and 10%). It is the political fragmentation of Europe and the lack of a strong public authority which puts us at the mercy of private interests.

The good news is that there is a way out of the current political impasse. If four countries, France, Germany, Italy and Spain, who together account for over 75% of the GDP and the population in the eurozone put forward a new treaty based on democracy and fiscal justice, with as a strong measure the adoption of a common tax system for large corporations, then the other countries would be forced to follow them. If they did not do so they would not be in compliance with the improvement in transparency which public opinions have been demanding for years and would be open to sanctions.

There is still a complete lack of transparency as far as private assets held in tax havens are concerned. In many areas of the world, the biggest fortunes have continued to grow since 2008 much more quickly than the size of the economy, partly because they pay less tax than the others. In France in 2013 a junior minister for the budget calmly explained that he did not have an account in Switzerland, with no fear that his ministry might find out about it. Once again, it took journalists to reveal the truth.

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“Next year, the US national debt will top $20 trillion. The deficit is running close to $500 billion, and the Congressional Budget Office projects that figure to rise. Add another $3 trillion or so in state and local debt.”

The Next Recession Will Blow Out the US Budget (Mauldin)

The weakest recovery in modern history has stretched on for 69 months. By 2017, it will be the third-longest recovery without a recession since the Great Depression. By 2018, it will be the second longest. Only during the halcyon economic days of the 1960s have we seen a longer recovery; but that record, too, will be eclipsed sometime in 2019—if we don’t see a recession first. And note that we were growing at well over 3% in the 1960s, not the anemic 2% we have averaged during this recovery and certainly not the positively puny 1.5% we have endured lately. Global growth is slowing down. Given the limited number of arrows left in the Federal Reserve’s monetary policy quiver, the US is going to have a difficult time dealing with the fallout from a recession. Even worse, a number of factors are coming together that will require serious crisis management.

Next year, the US national debt will top $20 trillion. The deficit is running close to $500 billion, and the Congressional Budget Office projects that figure to rise. Add another $3 trillion or so in state and local debt. As you may imagine, the interest on that debt is beginning to add up, even at the extraordinarily low rates we have today. Sometime in 2019, entitlement spending, defense, and interest will consume all the tax revenues collected by the US government. That means all spending for everything else will have to be borrowed. The CBO projects the deficit will rise to over $1 trillion by 2023. By that point, entitlement spending and net interest will be consuming almost all tax revenues, and we will be borrowing to pay for our defense. Let’s look at the following chart, which comes from CBO data:

By 2019, the deficit is projected to be $738 billion. There are only three ways to reduce that deficit: cut spending, raise taxes, or authorize the Federal Reserve to monetize the debt. At the numbers we are now talking about, getting rid of fraud and wasted government expenditures is a rounding error. Let’s say you could find $100 billion here or there. You are still a long, long way from a balanced budget. But implicit in the CBO projections is the assumption that we will not have a recession in the next 10 years. Plus, the CBO assumes growth above what we’ve seen in the last year or so.

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Trouble with Berlin is brewing.

Schäuble: Time is Near to End Central Banks’ Easy-Money Policies (WSJ)

German Finance Minister Wolfgang Schäuble called on governments in Europe and the U.S. to encourage their central banks to gradually exit easy-money policies, in the strongest sign yet of Berlin’s growing impatience with the ultralow interest rates of the ECB. “There is a growing understanding that excessive liquidity has become more a cause than a solution to the problem,” Mr. Schäuble said, comparing the move away from easy-money policies to ending a drug addiction. The unusually blunt comments from Chancellor Angela Merkel’s closest political ally come as the ECB has repeatedly ramped up its stimulus in recent months, seeking to support economic growth in the face of rising global headwinds and financial-market volatility.

While Mr. Schäuble’s opposition to the ECB’s monetary policy is well known, the veteran politician has voiced his criticism more openly lately, suggesting Berlin is growing impatient amid a mounting popular backlash against a policy that has depleted the returns on the savings of millions of Germans. Government officials and central bankers are preparing to converge on Washington, D.C., next week for the Spring meetings of the IMF, where they are expected to discuss policies to revive global growth. Speaking in Kronberg near Frankfurt late Friday at a prize ceremony organized by a German economic think tank, Mr. Schäuble said he had just discussed central-bank policies with his U.S. counterpart, Treasury Secretary Jacob Lew. “I just said to Jack Lew that you should encourage the Federal Reserve and we should encourage the ECB and the Bank of England in a concerted action, to carefully but slowly exit,” Mr. Schäuble said.

In the U.S., the Treasury secretary doesn’t have authority over the Federal Reserve, which is tasked with setting monetary policy. The ECB has twice ramped up its €1.5 trillion stimulus since December, most recently in March, when it rolled out a series of rate cuts, cheap loans for banks and an acceleration of bond purchases. Top ECB officials have stressed in recent days that they are ready to do even more to support the bloc’s economy. Meanwhile Federal Reserve officials have signaled that the U.S. central bank will raise rates only gradually until the global economy picks up steam, according to the minutes of their March policy meeting. Japan’s central bank stunned the markets in January by setting the country’s first negative interest rates.

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Not sure this explains the entire issue.

Why US Infrastructure Costs So Much (BBG)

The U.S. ought to be spending more on infrastructure. This is the view of all right-thinking people, and as a right-thinking person I of course endorse it. With interest rates near record lows and the working-age population still, by historical and international standards, underemployed, governments (or in some cases entrepreneurs) should be borrowing much more to repave roads, shore up bridges, expand mass-transit systems, build new sewage-treatment plants, replace water mains, you name it. Such borrowing and spending would make the nation richer by stimulating economic activity now and paving the way for stronger economic growth in the future.

That said, the U.S. probably also ought to be spending less on infrastructure. Not overall, but on something like a per-mile basis. Broad international cost comparisons across all kinds of infrastructure don’t seem to be available, but there is a growing body of evidence on one particular infrastructure area that matters a lot to me as a New York City commuter: subways and other rail systems. And it shows that U.S. construction costs are among the world’s highest.

Transportation blogger Alon Levy has probably done the most to raise awareness of this, with five years of posts documenting the cost differences. And last year, Tracy Gordon of the Urban-Brookings Tax Policy Center and David Schleicher of Yale Law School examined 144 planned and finished rail projects in 44 countries and found that the four most expensive on a per-kilometer basis (and six of the top 12) were in the U.S. To put these numbers in global perspective, New York’s Second Avenue Subway will cost roughly eight times more than Tokyo’s Koto Waterfront line and 36 times more than Madrid’s Metrosur tunnels on a per-kilometer, purchasing power parity (PPP) basis.

Why is this? It’s actually pretty hard to answer. Here’s Levy, writing in November 2014: “I try to avoid giving explanations for these patterns of construction costs. If I knew for certain what caused them, I would not be blogging; I would be forming a consultancy and teaching New York and other high-cost cities how to build subways for less than $100 million per kilometer.” Still, others have been willing to offer explanations. In a 2012 Bloomberg View piece, New York land-use and transit writer Stephen Smith blamed over-reliance on outside consultants, overly ambitious station architecture and a legal system that favors contractors over the agencies paying them to build things.

Gordon and Schleicher agreed that the legal system may be an issue, but for other reasons: “Many of the world’s most expensive projects are in the United Kingdom, Australia, and New Zealand, which, like the United States, have common-law systems. So it might be that common-law systems provide legal protections for property owners – allowing more lawsuits over noise, smoke, and other nuisances, as well as limits on eminent domain – that increase costs by forcing the government to pay off opponents or to locate projects inefficiently to avoid angering property owners.” They also cite political fragmentation as a factor that drives up costs – U.S. commuter rail systems often cross city and state lines, which brings coordination challenges – and note that when regional authorities are created to manage these challenges, they can bring a whole new set of problems.

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“The agreement is effectively dead and all parties involved are aware of that, even if they are not openly admitting it.”

SYRIZA, IMF and EU: Gambling With The Future Of Greece (SE)

The latest flare up regarding Greece has followed publication by Wikileaks of illegally taped discussions among IMF officials. To analyse the significance of this event it is vital to bear one point in mind: Greece cannot meet the terms of the bailout agreement struck on July 2015 by Prime Minister, Alexis Tsipras. The agreement is effectively dead and all parties involved are aware of that, even if they are not openly admitting it. To establish this point there is no need to engage either in Debt Sustainability Analysis, or in macroeconomic projections of output. Suffice to mention that the agreement requires Greece to ensure a primary surplus of 3.5% of GDP in 2018.

The Greek economy actually returned to recession in the last quarter of 2015 and the available indicators since the end of 2015 have ranged from bad to appalling: industrial turnover in December was down 13.5%, retail turnover in January down 3.8%, unemployment in the last quarter of 2015 up to 24.4%, job vacancies for the whole of the economy in the last quarter of 2015 stood at a pitiful 3119, and the banking system currently has perhaps €115bn of non-performing exposure, roughly 50% of its loan book. Once the austerity measures of the bailout agreement kick in, substantially reducing aggregate demand for 2016-17 via tax increases and lower pensions, the recession will become deeper. There is no way that this ruined economy could generate a 3.5% primary surplus in 2018. The problems thereby created for all parties to this disastrous bailout are legion.

In the worst position is the Greek government, which signed up to the bailout in direct contravention of everything that it had promised to do in 2015. As the reality of its deception and the harshness of the squeeze have begun to sink in, electoral support for Tsipras has vanished. All competent polls show the opposition New Democracy – with a new leader – comfortably ahead. The outlook has become even worse for SYRIZA via the refugee wave, which has turned Greece into a kind of EU repository for refugees and migrants. For the time being the country has avoided a major crisis, but the situation remains extremely fraught as the deportation of migrants to Turkey has just started.

In this context, the last thing that the Tsipras government would like to do is to impose further pressure on wage earners, or tax payers in an attempt to meet the impossible target of 3.5%. On the contrary, it is extremely keen to complete the first review of the bailout programme on a nod and a wink, pretending that current measures are sufficient to hit the bailout targets. It then hopes to receive a tranche of bailout money that will give it breathing space for a few months. The government’s further hope is that investment will pick up by the end of 2016, possibly through foreign capital inflows, thus allowing the economy to recover somewhat.

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He should put his money where his mouth is.

Lesbos Hopes Pope’s Visit Will Shine Light On Island’s Refugee Role (Observer)

The island of Lesbos tends to go to town when celebrities descend. The last time it welcomed a VIP, the razorwire running along large parts of its infamous detention centre was hastily removed. Angelina Jolie got a brief glimpse of it as she walked in, but reportedly not as she later walked around the camp greeting migrants and refugees. The superstar special envoy of the UN high commissioner for refugees (UNHCR) was instead given an edited view of the camp, volunteers say. It will be different when Pope Francis flies in on Saturday. The purpose of the pontiff’s visit to the Aegean is to see the migrant emergency up close, and the authorities are keen that no blinkers are involved. This time, the island on the frontline of the biggest movement of people in modern times intends to show it as it is.

“We won’t be changing anything,” says mayor Spyros Galinos when asked if municipal workers will at least be cleaning up the graffiti on the camp’s walls. “His visit has huge symbolism. It is what we have wanted, what we have seen in our sleep, what we have dreamed of for years.” For four hours, Francis will grant that wish when he arrives in Greece for what will be a rare papal visit. The leader of the worldwide Catholic church will be accompanied by the Istanbul-based spiritual leader of the world’s 300 million Orthodox Christians, Bartholomew I, and Ieronymos II of Athens, head of the Greek Orthodox church. It will be a whirlwind tour of the island traversed by many of the 1.1 million men, women and children who have streamed into Europe, mostly from Syria but also from other parts of the Middle East, Africa and Asia last year.

The pope has long had refugees in his sights – and encyclicals. The trip, say Vatican officials, is aimed squarely at drawing attention to the centre of Europe’s migration crisis. By highlighting the “increasingly precarious living conditions for thousands of refugees and migrants” who have reached Lesbos, the Holy See’s newspaper, L’Osservatore Romano, said Francis hoped to offer a “Christian response to the tragedy that is unfolding”. [..] “His visit is not going to do anything for one single refugee in this country,” laments Alison Terry-Evans, who runs Dirty Girls, an organisation in Lesbos that launders blankets distributed by the UNHCR and the wet clothes of arriving refugees. “It is so hypocritical that a man who heads a multibillion-dollar corporation like the Vatican is unlikely to take any action that will contribute financially. That is the pity of it. ”

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It won’t be fixed. Wanna bet? Europe goes for chaos as a deterrent. The use of the term ‘deportation system’ says it all in all its ugliness.

Meanwhile, this morning FYROM started shooting dozens of tear gas cannisters across its border with Greece to disperse the refugees camped out there.

Greece Says It Will Take At Least Two Weeks To Fix Deporation System (Kath.)

Greece says it will take at least two weeks to fix the process of deporting migrants from the eastern Aegean islands to Turkey. The country’s deputy foreign minister for European affairs, Nikos Xydakis, admitted as much at a press conference attended also by his colleagues from France, Italy, Malta and Portugal, as well as the foreign ministers of the Netherlands and Slovakia. Deportations from Greece to Turkey have been temporarily halted as most of the 6,750 migrants in the Greek islands are applying for asylum and there is a lack of qualified officials such as translators to process the applications.

Most of the experts promised by the EU have not yet arrived. French European affairs minister Harlem Desir is urging refugees from war-torn Syria and Iraq to follow legal procedures to seek asylum in Europe rather than risk their lives in the perilous sea crossing into Greece, which now leads only back to Turkey, since Balkan countries north of Greece have shut their borders. Desir says France will welcome 200 refugees directly from Turkey “in the coming days and weeks.”

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Apr 092016
 
 April 9, 2016  Posted by at 10:20 am Finance Tagged with: , , , , , , , , ,  1 Response »


Wyland Stanley Pedestrians ascending steep grade, San Francisco 1935

David Cameron’s Gift To The World: Trickle-Down Tax-Dodging (G.)
The Brexit Nightmare Is Becoming Reality (G.)
Swiss Finance Minister Offers Defense For Rich Caught Up In Panama Papers (R.)
Tax Scandal Reheats Iceland Politics (FT)
Germany Takes Aim at the European Central Bank (Spiegel)
The Eurodollar As An Economic No-Man’s Land (Kaminska)
Iran Steps Up Offense in Oil Market War With Price Discount (BBG)
China’s Robot Army Set To Surge (FT)
Shanghai Wealth Management Firm Crashes To Earth As Executives Arrested (R.)
Melting Ice Sheets Change The Way The Earth Wobbles On Its Axis (AP)
Weaknesses Emerge in EU-Turkey Refugee Deal (Spiegel)
5 Refugees Drown Off Greek Island Of Samos In Aegean (AP)

Demonstrations as we speak in London for Cameron to stand down. He will release tax files instead. But will that stem the protests?!

David Cameron’s Gift To The World: Trickle-Down Tax-Dodging (G.)

An intriguing approach to damage limitation by Panama prat David Cameron, particularly considering the prime minister’s only real life job ever was as a PR. The prime minister appears to have been the last person to realise what everyone else in Westminster could see on Monday. Namely, that he’d be sitting down for an awkward tell-all – or at least a tell-some – by Thursday. My absolute favourite tale from Cameron’s era as press chief for the culturocidal Carlton Television comes courtesy of the Guardian’s then media correspondent, who rang him up on a story. Like all mediocre PRs, a large part of his strategy was ignoring calls, but having accidentally answered this one he was cornered – and consequently pretended to be his own cleaner. “I can’t prove it was him,” the journalist reflected later, “but it certainly sounded a lot like him.”

Well, he does have that central casting cleaner’s voice, so perhaps we ought to leave the case file open. Even so, for the journalists who recall the barefaced whoppers Cameron was able to tell them back in those days, this week has not been an occasion to break out the smelling salts. “I’ve never tried to be anything I’m not,” Cameron claimed to Robert Peston in his belated confession. What about a cleaner? Or a football fan? Evidently the PM judged it the wrong moment to bring up either impersonations of the help, or Aston Villa. Or, indeed, West Ham. Still, at some point, Fortune was always going to collect on the deal Cameron foolishly made when he called the comedian Jimmy Carr’s (also legal) tax arrangements “morally wrong”. Showbiz now joins football on the list of things upon which he ought never to comment again.

Explaining to Peston that “my dad was a man I love and miss every day”, Cameron admitted that he and his wife had in fact invested in Ian Cameron’s offshore firm Blairmore in 1997, then sold their stake in 2010 for “something like £30,000”. That Cameron’s shifty cover-up has been more damaging than his non-crime is almost too insultingly obvious to state. He will not be assisted by the subconscious dismissiveness in that styling – “something like £30,000”. There is a fine line between fastidious precision and sounding like something north of the average British salary is rather forgettable, and the PM fell on the wrong side of it.

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Cameron as PM now guarantees a Brexit vote. But who to replace him? Can’t be Osborne.

The Brexit Nightmare Is Becoming Reality (G.)

[..] Three years ago Cameron put the future of the UK – and even its territorial integrity (think Scotland) – at stake by setting off towards an in-out referendum on the EU as a way of managing his own party. It is obvious he has failed to put internal Tory dissent to rest. That Boris Johnson has sided with leave brings to mind how in 2005 Laurent Fabius, one of France’s socialist heavyweights, opted for no against his own party’s leadership in the referendum campaign on the EU constitution. That led to disastrous results – despite a majority of the French media calling for a yes vote. In Britain the media has long been Eurosceptic. Even the BBC seems hesitant these days. The Daily Telegraph describes the EU as either a threatening entity for Britain, or too weak an institution to protect it.

And long gone are the days when authoritative European voices could reach out to British voters in a convincing manner – as when Jacques Delors singlehandedly swayed the British left towards a pro-European position in 1988. The French president, François Hollande, is dismally weak, and Angela Merkel is less politically sturdy than she once was. Populist movements whose leaders believe they stand to benefit from a British exit are on the rise across the continent. The deeper phenomenon at work is a wider one. British society suffers from an identity crisis not unlike those that have hit other western countries in the wake of globalisation and the 2008 financial crisis. Fragmentation is spreading everywhere as nations become more inward-looking and worried about how the world is changing.

In the British case this general sense of disarray now has the opportunity to express itself in a referendum. Britain’s image has often been associated with common decency, sober assessment and cool-headedness. But this is an age of extremes when moderate voices are fast drowned out by radical slogans. Of course, Cassandras have been wrong before about the European project. The eurozone has held together. Grexit didn’t happen. Merkel may be weaker, but she has not lost power. Yet it would be foolish not to see that the omens for Britain remaining in the EU are very poor. But does anyone care? If they do, they need to wake up now and shout stop.

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Curious: in defense of tax evaders, saying that they pay so much tax.

Swiss Finance Minister Offers Defense For Rich Caught Up In Panama Papers (R.)

Switzerland’s finance minister has defended the use of offshore companies by the world’s wealthy to cut their tax bills, now under scrutiny after publication of the “Panama Papers”. “You have to create these opportunities,” Finance Minister Ueli Maurer, from the right-wing Swiss People’s Party (SVP), told Swiss newspaper Blick in an interview published on Friday. “Rich people pay a lot more tax than me,” said Maurer. “I am not rich – and without the rich I would have to pay more tax.” Four decades of documents from Panamanian law firm Mossack Fonseca, which specializes in setting up offshore companies and has offices in Zurich and Geneva, showed widespread use of those instruments by global banks and triggered investigations around the world.

Maurer’s comments were not echoed by the head of Switzerland’s financial watchdog Mark Branson on Thursday. He said the country’s banks must clamp down on money laundering in the wake of the Panama Papers. The Geneva prosecutor has also opened a criminal inquiry in connection with the millions of documents leaked to the German newspaper Sueddeutsche Zeitung. They then became part of a broader investigation coordinated by the International Consortium of Investigative Journalists. Switzerland is the world’s biggest international wealth management center with around $2.5 trillion in assets and has taken on more wealth of late from emerging markets, from which it is harder determine the origin of assets, Branson said.

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Iceland is all of us, on a more practical scale.

Tax Scandal Reheats Iceland Politics (FT)

In the years since the 2008 financial crisis, Iceland – one of its unlikely epicentres – has recovered far better than most. It is enjoying robust economic growth, low income inequality and a 4 per cent unemployment rate that would make southern Europe’s lost generation salivate. So why are so many Icelanders now trying to topple their government, hurling eggs, Skyr yoghurt and even fish heads at the parliament? The immediate answer is buried within the Panama Papers of the Mossack Fonseca law firm, which this week revealed prime minister Sigurdur David Gunnlaugsson’s links with an offshore company. In so doing, they prompted protests that rocked Reykjavik and eventually forced Mr Gunnlaugsson’s resignation.

Yet the episode has also laid bare the deep divisions and unresolved anger still festering beneath the subarctic island’s social surface since the 2008 crisis. The politics that have flowed from it are all the more intimate on an island of just 330,000 souls. There are two nations in this country, the ones who own everything… and the rest of us, said Kristjan Saevald, a 28-year-old graphic designer and keen participant in demonstrations outside Iceland’s parliament and presidential residence. “We are sick of it. It’s not just a change of government we want, it’s a change of the system,” Mr Saevald said. For him and others who feel that the pain of Iceland’s rebuilding has not been shared equally, the ruling coalition’s replacement of Mr Gunnlaugsson with his fisheries minister, Sigurdur Ingi Johannsson, is unlikely to assuage their anger.

Just minutes after Mr Johannsson’s appointment, Asdis Thoroddsen, a tour guide and film-maker, stood in a chill wind outside Iceland’s presidential residence on a spit of coastal land near Reykjavik to show the new prime minister a symbolic red card. Ms Thoroddsen accused Mr Johannsson’s Progressives and his coalition partner, the Independence party, of presiding over a longstanding political system of patronage and state favour. “The cronyism here is very deep rooted and very hard to get rid of,” she said. Iceland’s ills were papered over by the extraordinary boom that preceded the last crisis, when a fishing-dominated economy suddenly became a global banking hub — sucking in foreign money with promises of high returns. Its citizens suddenly enjoyed among the world’s highest per-capita GDP.

Of course, the country’s overly-leveraged banks ended up crashing in spectacular fashion. This week’s demonstrations have echoed Iceland’s 2009 “pots and pans revolution”, when large crowds bashing kitchen utensils together to make more noise besieged parliament in fury and eventually forced then Independence party-led government to resign.

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One delusion fights the other.

Germany Takes Aim at the European Central Bank (Spiegel)

There was a time when the German chancellor and the head of the ECB had nice things to say about each other. Mario Draghi spoke of a “good working relationship,” while Angela Merkel noted “broad agreement.” Draghi, said Merkel, is extremely supportive “when it comes to European competitiveness.” These days, though, meetings between the two most powerful politicians in the euro zone are often no different than their face-to-face at the most recent summit in Brussels. She observed that his forced policy of cheap money is endangering the business model of Germany’s Sparkassen savings banks and retirement insurance companies. He snarled back that the sectors would simply have to adapt, just as the American financial sector has. The alienation between Germany and the ECB has reached a new level.

Back in deutsche mark times, Europeans often joked that the Germans “may not believe in God, but they believe in the Bundesbank,” as Germany’s central bank is called. Today, though, when it comes to relations between the ECB and the German population, people are more likely to speak of “parallel universes.” ECB head Draghi doesn’t understand why he is getting so much resistance from the country that has profited from the euro more than any other. Yet Germans blame Draghi for miniscule yields on savings accounts and life/retirement insurance policies. Frustration is growing. Draghi has pushed the prime rate down to zero and now even charges commercial banks a fee for parking their money at the ECB. He has also bought almost €2 trillion worth of bonds from euro-zone member states, making the ECB one of the largest state creditors of all time.

During his most recent appearance before the Frankfurt reporter pool, he went even further. The idea of pumping money directly into the economy, he said, was a “very interesting concept,” with a helicopter to distribute the money across the country if necessary, as economists have half-jokingly recommended. Doing so is seen as a way of boosting the economy. German money being thrown out of a helicopter: It would be difficult to find a more fitting image to show people that the money they have set aside for retirement may soon be worth very little. The criticism of Draghi had already been significant, but his public ruminations about so-called “helicopter money” have magnified it to extreme levels.

Even economists that tend to back the ECB, such as Peter Bofinger, who is one of Merkel’s economic advisors, are now accusing Draghi of constantly “pulling new rabbits out of the hat.” Leading representatives of the banking and insurance sectors are openly speaking of legal violations. And strategists within Merkel’s governing coalition, which pairs her conservatives with the center-left Social Democrats (SPD), are concerned that Draghi is handing the right-wing populist Alternative for Germany (AfD) yet another issue where they can score points with the voters. There is hardly any other issue that enrages Germans at town meetings and political party conventions as much as the disappearance of their savings due to the “unconventional measures” adopted by the ECB in Frankfurt.

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“..laissez-faire market experimentation intended to prove a fundamental point about the capacity of free markets to organise the economy without the necessary subjugation of free will..”

The Eurodollar As An Economic No-Man’s Land (Kaminska)

What’s the euro really? The collective currency of sovereigns subscribed to the European monetary system? Or an international bridging platform — a no man’s land if you will — for laissez-faire market experimentation intended to prove a fundamental point about the capacity of free markets to organise the economy without the necessary subjugation of free will? The euro-zone, we propose, is not what it seems. And if we see it as something it’s not, it’s mainly because we’ve forgotten the history which made it the thing it is today. That though is the story of the rise and dominance of European-brokered international capital markets from the 1960s onwards, a system itself predicated on the rise of the no-man’s land neutral security: Eurodollars. Euromoney. Eurocurrency. Eurobonds. Eurosecurities.

But also… Offshore arrangements. Through this particular looking glass, offshore doesn’t stand for a safe haven loophole which allows the elite to escape their social duties and obligations. It stands for something entirely different. A honey trap designed to lure capital away from outrageous spending in the consumption markets today, and over to the funding of much riskier development in territories or classes yet to be assimilated to westernised cultural norms. It also provides a neutral territory or common ground were capital can be ranked pari passu irrespective of where it’s come from, for the good of international agreement, trade and neutrality. Hence why the likes of James Quarmby, a wealth structuring expert at law firm Stephenson Harwood, argue the offshore system is the essential “grease on the wheels in international trade”.

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Let the price wars begin.

Iran Steps Up Offense in Oil Market War With Price Discount (BBG)

Iran ratcheted up its offense in the oil market after breaking a pricing tradition, signaling it’s seeking to win market share at a time when rival producers are trying to forge a deal on freezing output. State-run National Iranian Oil Co. will sell the Forozan Blend crude for May to Asia below the level offered by rival Saudi Aramco for Arab Medium, the third month the Persian Gulf state is giving the discount after setting it at a premium for almost seven years through February 2016, data compiled by Bloomberg show. NIOC will also sell the Iranian Light grade to Asian customers at 60 cents below Middle East benchmark prices, a company official said on Friday, asking not to be identified because of internal policy.

While producers including Saudi Arabia, OPEC’s biggest member, and Russia are due to meet in Doha on April 17 to discuss a deal to freeze output in a step toward clearing a global glut, Iran is determined to regain market share lost over the past few years due to sanctions over its nuclear program. To pry away customers relishing oil that is cheaper than mid-2014 levels by more than 50 percent, the Persian Gulf state is expected to focus on pricing and boosting supply. “Unquestionably, since the lifting of sanctions, the Iranians have become a force to be reckoned with in global oil markets,” said John Driscoll, chief strategist at JTD Energy Services Pte, who has spent more than 30 years trading crude and petroleum in Singapore. “Their mission is to recapture market share, pure and simple.”

NIOC will sell the Forozan Blend in May for Asian customers at $2.43 a barrel below the average of the Oman and Dubai benchmark grades, according to the company official. That’s 3 cents lower than state-run Saudi Aramco’s price for the similar Arab Medium variety for a third month, data compiled by Bloomberg show. Forozan was at a premium of 7 cents to the Saudi oil for February sales. The Iranian Heavy grade will sell in May to Asia at a discount of $2.60 a barrel to the Oman-Dubai average while the Soroosh variety’s price was set at $5.65 a barrel below Iranian Heavy, according to the official.

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How about that consumer society, though?!

China’s Robot Army Set To Surge (FT)

China’s uptake of industrial robots is set to rise rapidly in the coming years as higher labour costs and the heightened aspirations of workers push manufacturers to embrace automation. The development may add to fears that workers in poorer countries are most in danger of being displaced by automation, with analysis by Citi and the Oxford Martin School, a research and policy unit of the UK university, published earlier this year suggesting that more than 75% of jobs in China are at a “high risk” of computerisation. Mirae Asset Management, an Asia-focused house with $75bn of assets, predicts that China’s robot army will expand at a compound annual growth rate of 35% until 2020.

Given that the International Federation of Robotics estimates that China had 260,000 industrial robots last year, Rahul Chadha, chief investment officer of Mirae, says: “Using the rule thumb that one industrial robot replaces four to five workers, this suggests that robots have rendered more than 1m people jobless.” This figure is set to rise sharply in the coming years. As the first chart shows, the number of robots per 1,000 employees in China, as of 2013, was just 30% of the level in North America, 11% of the German figure, 9% of Japan’s tally and 7% of that in South Korea. Mirae argues that China’s use of robots is tracing the path blazed by Japan a quarter of a century ago, and still has several years of rapid expansion ahead of it, as the second chart shows.

This concurs with forecasts from the IFR, which says China acquired 57,000 robots in 2014 but is likely to be buying 150,000 a year by 2018. Mr Chadha, who calculates that robots will replace around 3.5m Chinese workers over the next five years, says: “The message that comes from the leadership is on improving productivity via automation. They are paranoid about doing things quickly, they believe they have got to because their competitors will do the same. “When I meet companies on the ground, they say ‘the demand environment is not great, what we can do is improve our processes, improve our productivity’.”

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Shadow banking.

Shanghai Wealth Management Firm Crashes To Earth As Executives Arrested (R.)

Zhongjin Capital Management made a splash in the past couple of years in Shanghai. The wealth management firm’s imposing branch office on Shanghai’s historic Bund pulled in many eager investors seeking the double-digit returns it promised on short-term financing products. It had a big profile, sponsoring popular Shanghai TV dating program “Saturday Date” and signed up domestic billiards star Pan Xiaoting as a spokesperson. But this week, the image of riches and success that it had cultivated came crashing down. Police said they arrested 21 executives linked to Zhongjin Capital on April 5 on suspicion of “illegal fundraising,” a loosely defined term applied to irregular behavior in China’s energetic but opaque shadow banking sector.

The only person named by Shanghai police so far has been top executive Xu Qin, who local media said had been arrested at the Shanghai airport on his way to get married in the Vatican. Xu has been described by domestic media as a high roller, who is under 30 years of age. Chen Jiajing, the 29-year-old chairwoman of Zhongjin’s parent Guotai Investment Holdings, cannot be located. Public statements issued this week by two Hong Kong-listed companies in which Guotai is a major stakeholder indicated they had been unable to reach her. Zhongjin employees told Reuters that other senior managers had been arrested during a raid on company offices. They were interrogated, allowed to use the bathroom only if they had a police escort, then hauled off, the staff said.

Calls to Zhongjin and Guotai headquarters in Shanghai went unanswered. Both company websites were inaccessible on Friday. The authorities did not provide further information about the case, and what the investigation’s focus is. “The really strange part was that our business hit a new all-time high on April 5, but the next day the offices were closed,” one employee who gave her name as Jiang said in a phone interview, adding that investors had been paid off on schedule the day prior to the arrests, but were unable to withdraw funds that were scheduled to mature on April 6. “The victims are the small investors and the low-level employees. We all got our friends and family to invest in the company’s products,” she said.

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Playing God.

Melting Ice Sheets Change The Way The Earth Wobbles On Its Axis (AP)

Global warming is changing the way the Earth wobbles on its polar axis, a new Nasa study has found. Melting ice sheets, especially in Greenland, are changing the distribution of weight on Earth. And that has caused both the North Pole and the wobble, which is called polar motion, to change course, according to a study published on Friday in the journal Science Advances. Scientists and navigators have been accurately measuring the true pole and polar motion since 1899, and for almost the entire 20th century they migrated a bit toward Canada. But that has changed with this century, and now it’s moving toward England, according to study lead author Surendra Adhikari at Nasa’s Jet Propulsion Lab. “The recent shift from the 20th-century direction is very dramatic,” Adhikari said.

While scientists say the shift is harmless, it is meaningful. Jonathan Overpeck, professor of geosciences at the University of Arizona, who wasn’t part of the study, said that “this highlights how real and profoundly large an impact humans are having on the planet.” Since 2003, Greenland has lost on average more than 272 trillion kilograms of ice a year, and that affects the way the Earth wobbles in a manner similar to a figure skater lifting one leg while spinning, said Nasa scientist Eirk Ivins, the study’s co-author. On top of that, West Antarctica loses 124 trillion kgs of ice and East Antarctica gains about 74 trillion kgs of ice yearly, helping tilt the wobble further, Ivins said. They all combine to pull polar motion toward the east, Adhikari said.

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“Monday was an expensive, but meaningless show..”

Weaknesses Emerge in EU-Turkey Refugee Deal (Spiegel)

When the Greek authorities announced last week that they were unable to carry out additional mass deportations because some migrants had suddenly disappeared, they were referring to people like Mohammed. Just as quickly as the deportations had begun, they came to a halt. In the dawn hours on Monday, the EU began implementing the refugee deal it recently reached with Turkey. At least that’s the way things looked. That day, 202 migrants were deported from Lesbos and Chios to Dikili in Turkey. The action was intended to show that the major exchange of refugees had begun. The same day, Syrian refugees arrived in Germany legally on flights from Turkey. By the middle of the week, no more refugees were arriving on the Greek islands. The message appeared to be getting across.

So was the deal working? The short answer is: No. “Perhaps we should wait and see a bit longer,” Dimitris Vitsas, the deputy Greek defense minister responsible for addressing the refugee crisis, says. He says the weather may have played a part and that he doesn’t want to draw premature conclusions. “But the numbers do show that something is working.” But what? Is it the deal with Turkey or the PR machinery that has accompanied it? The deportations that took place on Monday aren’t very telling in terms of whether the mechanism will ultimately work or not. The EU had set April 4 as the day of implementation because it wanted to finally show that it could produce results. The overly hasty operation had one aim: that of sending a strong message.

What went unnoticed by most, though, is that the people sent back to Turkey from Lesbos and Chios on Monday were exclusively migrants who had wanted to continue their journey to Northern Europe and had not submitted applications for asylum in Greece. But Greece had already had the ability to deport these “illegal” migrants to Turkey since 2002 within the scope of a so-called readmission agreement that both countries had agreed to. So the new deal hadn’t even been necessary for the deportations to happen. “Monday was an expensive, but meaningless show,” says Angeliki Dimitriadi, a visiting researcher at the European Council on Foreign Relations in Berlin. “Now the truly delicate work begins.”

Of the more than 3,000 migrants who are still on Lesbos, almost all have since submitted asylum applications. They hope that doing so will enable them to prevent being deported. The refugees are assuming that it will take weeks or months to process their applications. With the submission of the applications, the Greek government no longer has the right to automatically deport them; the country is legally obligated to review every application. Refugees who have applied can only be deported once asylum status has been rejected. The worry now is that thousands of people may be stuck on the island for months to come without any certainty.

Things will get more difficult when Greece soon begins rejecting Syrian refugees as planned and sending them back to Turkey. At that point, a complicated legal dispute is expected to ensue. First, it remains questionable whether Greece will be capable of carrying out the asylum procedures within only a matter of days as planned. The country lacks both money and the necessary personnel. The Greek asylum agency currently has only 295 employees at its disposal across the entire country. It often takes months if not years before decisions are made.

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And the beat goes on..

5 Refugees Drown Off Greek Island Of Samos In Aegean (AP)

Greece’s coast guard says at least five refugees have drowned in the eastern Aegean Sea after a small plastic boat capsized. The five victims, four women and a child, were found around dawn Saturday northeast of the Greek island of Samos, close to the Turkish coast. A coast guard spokeswoman says there were also five survivors: two women, two men and a child. The spokeswoman spoke on customary condition of anonymity. She says the coast guard has no information about the ages and nationalities of the refugees or the children’s gender. The survivors, who are in a state of shock, told authorities a total of 11 people were aboard the 3.5-meter boat.

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 February 23, 2015  Posted by at 4:15 pm Finance Tagged with: , , , , , ,  9 Responses »


DPC “Ice fountain on Washington Boulevard, Detroit” 1906

1 In 3 Americans On Verge Of Financial Ruin (MarketWatch)
BofA Leads Charge Into Bonds as Banks Hoard $2 Trillion (Bloomberg)
Can A Bitcoin-Style Virtual Currency Solve The Greek Financial Crisis? (Guardian)
Greece Debt Deal: Reforms Will ‘Combat Tax Evasion’ (BBC)
Greece Draws Up €7.3 Billion Tax Hit List Aimed At Oligarchs And Criminals (AFP)
Greece Scrambles To Finalise Fiscal Reform List (Guardian)
Who Made Germany Europe’s Boss? (Bloomberg)
Why Germany Might Not Be Bluffing in Greece (Bloomberg)
The Greek Debt Deal: Victory Or Defeat? (Guardian ed.)
Greece’s Tsipras Is on a High Wire (Bloomberg)
Spain Said to Lead EU Push to Force Terms on Greece (Bloomberg)
Why Greece Will Never Repay Its Debt (CNBC)
Rebuilding Crumbling America Shouldn’t Wait (Bloomberg)
Global Central Bank Easing Quadruples In 2015 (Zero Hedge)
French Analyst Calls For France-Germany-Russia Alliance (TASS)
Homeless Britons Are Turning To The Sikh Community For Food (BBC)

More debt than savings.

1 In 3 Americans On Verge Of Financial Ruin (MarketWatch)

The rich keep getting richer. The rest of us aren’t so lucky. According to a survey released Monday by Bankrate.com of more than 1,000 adults, 37% of Americans have credit card debt that equals or exceeds their emergency savings. “These numbers mean that three out of every eight Americans are teetering on the edge of financial disaster” — thanks to the fact that many of these folks might be hard-pressed to pay for an emergency should one arise, says Greg McBride, Bankrate.com’s chief financial analyst. “Not only do most of them not have enough savings, they’ve all used up some portion of their available credit — they are running out of options.” That’s particularly problematic considering that emergencies happen more often than you might think.

A 2014 survey by American Express found that half of all Americans had experienced an unforeseen expense in the past year — some of which could be considered an emergency. Indeed, 44% of those who had an unforeseen expense(s) had one for health care and 46% for car trouble — two items that for many Americans are must-pay items, as you need a car to get to work and your health expenses are usually not optional. Some groups — for example, the 30 to 49 age group — are in worse off than others when it comes to credit card debt and savings. This group is in particularly rough shape, likely it faces child-related and mortgage expenses. For consumers, the ideal situation is to have no credit card debt and at least six months of savings in an emergency fund (more if you have dependents), experts say. But the reality is that most of us don’t have even close to that (just 58% of Americans have more emergency savings than credit card debt, the Bankrate survey revealed).

The good news: If you have no emergency savings, or more debt than savings, experts say you can remedy that situation. Some recommend paying off your credit card debt first (focus on paying as much as you can on the highest-interest-rate debt and the minimums on all others) and then building up savings, but others say you should try to do both at once. “When you have high interest credit card debt, I recommend saving just enough to cover short-term emergencies (your washer or dryer breaks, your car needs new brakes) — that might be one or two thousand dollars,” says Doug Bellfy at Synergy Financial Planning. “Then attack the credit cards and only then go back and complete building your emergency fund.”

Wan McCormick at Reliable Alliance Financial agrees with the split strategy: “Based purely on the numbers, one might recommend to focus on the high-interest rate credit debt since it costs more money out of pocket…however, oftentimes, unexpected events happen, and without an emergency fund, consumers with high-interest rate debts usually resort back to loans and most frequently, the credit card, since it is the easiest form of accessing money,” he says. To do both at once, McBride recommends setting up a direct deposit with part going into savings and part toward your credit card.

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What makes ECB QE likely to fail.

BofA Leads Charge Into Bonds as Banks Hoard $2 Trillion (Bloomberg)

What do America’s banks know about the state of the U.S. economy that has them hording ultra-safe bonds? Growth is on a tear, hiring is the strongest in decades and households are the most upbeat since 2011. Yet banks such as Bank of America Corp. keep plowing their burgeoning deposits into U.S. government and related debt – pushing the industry’s holdings past $2 trillion – instead of lending it all out. Part of the buildup has to do with rules that require banks to hold more high-quality assets in the wake of the worst financial crisis since the Great Depression. But it also reflects that borrowers, particularly among Americans scarred by the housing bust, are still repairing their finances rather than going into debt to splurge on big-ticket items. And that, may mean the U.S. recovery isn’t quite as robust as all the upbeat data would suggest.

“Banks have so much cash,” said Peter Tchir, the New York-based head of macro strategy at Brean Capital. “Lending has loosened, but it is still just simpler for banks to own Treasuries.” While the buying may help to contain any jump in Treasury yields as the Federal Reserve moves toward raising interest rates, what it says about loan demand also has implications for how soon benchmark borrowing costs will rise this year. Minutes from the Fed’s January meeting released last week said than many policy makers were in favor of keeping rates lower for longer to avoid jeopardizing the recovery. Yields on five-year U.S. notes, which dropped as low as 1.15% last month, have since climbed as job and wage gains boosted the outlook for U.S. growth. They ended at 1.59% last week.

Investing in government bonds is proving to be a profitable move for banks. They’re making over a 100 basis-point spread by purchasing five-year Treasuries as opposed to leaving idle cash parked at the Fed where they earn only 25 basis points. U.S. commercial banks held $2.83 trillion in cash as of Feb. 11, up from $2.57 trillion at the end of last year. Having cash invested in five-year Treasuries is also netting banks an attractive spread over what they are paying depositors. The gap between the spread of the government yield over the average deposit rate for the four largest U.S. banks is above its norm over the past decade. For Bank of America that gap is about 1.44 %age points, according to data compiled by Bloomberg.

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Interesting, but…

Can A Bitcoin-Style Virtual Currency Solve The Greek Financial Crisis? (Guardian)

There’s almost no upside to a eurocrisis. You become part of a rolling maul of politicians, journalists and economists ripping and gouging at each other, both in private and on Twitter. The only advantage of being there is that it forces you to think laterally about money. Soon – if the Greek crisis is not resolved – one of the most audacious pieces of lateral thinking ever could get a try-out: a parallel digital currency, issued by the Greek government, modelled on Bitcoin, but with a crucial difference. In orthodox economics, money barely figures. It’s just there, acting as a lubricant to supply and demand. The assumption is: markets create money, and the state’s role is to make sure it’s not fake or diluted.

Bitcoin is an audacious attempt to create money beyond the control of any state. It is a digital currency, in the form of a limited number of tokens. It is championed by people who would, if they could, return to a gold standard – where states are obliged to limit the amount of money in the economy. What these money fundamentalists worry about is states creating so much money that booms and busts become inevitable and inflation erodes wealth. In this sense, Bitcoin’s aim is to function as “digital gold”. If things go badly for Greece, finance minister Yanis Varoufakis has said he would consider creating a parallel digital currency, using Bitcoin’s digital security and transparency, but doing the exact opposite of what the money fundamentalists intend.

Let’s recap the problem. The Greek debt is unpayable; the austerity required to pay it down is socially unbearable. So whether it’s this week or in six months’ time, there will come a point when Athens cannot meet conditions acceptable to the European Central Bank. Then, the normal sequence would be: bank closures, capital controls, an angry standoff and ultimately a Greek default. If you insert a parallel currency into this sequence, you can delay the moment of default and gain a lot of leeway. Varoufakis outlined, in a detailed blog post 12 months ago, how a Bitcoin-like virtual currency could be used to get around the ECB’s refusal to boost demand through quantitative easing. Just like Bitcoin, it would be exchangeable one for one with euros.

But it would be issued by the state – and if you were prepared to hold it for two years, you would earn a profit paid for by taxes. For this reason, Varoufakis called it “future-tax coin”. If the Greek government issued a parallel digital currency, and forced banks and businesses to use it, this would boost the money supply in defiance of the policy of the European Central Bank, said Varoufakis. In addition, he predicted, the currency would provide “a source of liquidity for the governments that is outside the bond markets, which does not involve the banks and which lies outside any of the restrictions imposed by Brussels or the various troikas”.

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“There can be no compromise… between a slave and a conqueror, the only solution is freedom..”

Greece Debt Deal: Reforms Will ‘Combat Tax Evasion’ (BBC)

Greece will crack down on tax evasion and streamline its civil service in its bid to secure a bailout extension, minister of state Nikos Pappas says. The government is working on a package of reforms that it must submit to international creditors on Monday. If the reforms are approved, Greece will be granted a vital four-month extension on its debt repayments. Mr Pappas said the reforms being proposed would take the Greek economy “out of sedation”. “We are compiling a list of measures to make the Greek civil service more effective and to combat tax evasion,” he told Greece’s Mega Channel. He added that talks this week would be “a daily battle… every centimetre of ground must be won with effort”. The agreement reached on Friday with European finance ministers extends Greece’s financial rescue programme by four months – but creditors gave Athens till Monday to come up with a list of reforms.

The reforms must then be approved before eurozone members ratify a bailout extension on Tuesday. Many analysts have described Friday’s agreement as a climb-down and one prominent Syriza euro-MP has expressed his frustration. In a blog Manolis Glezos, a 92-year-old wartime resistance hero, said: “I apologise to the Greek people because I took part in this illusion.” “There can be no compromise… between a slave and a conqueror, the only solution is freedom,” Mr Glezos said. On Saturday Greek Prime Minister Alexis Tspiras said in a televised address that his government had “won a battle, not the war”. If the reforms are approved and the deal stands, the immediate risk of Greece running out of money would be removed, giving the country time to negotiate further to change the terms of the bailout.

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Can they get to it?

Greece Draws Up €7.3 Billion Tax Hit List Aimed At Oligarchs And Criminals (AFP)

Greece has drawn up a €7.3bn tax hit list aimed at the country’s oligarchs and lucrative smuggling industry, a German newspaper said, as part of reform proposals due to its creditors. European finance ministers on Friday gave Athens just over three days to draw up a list acceptable to its international creditors in exchange for a four-month extension of its debt bailout. The German tabloid Bild reported that the Greek government hopes to garner €2.5bn in tax receipts from the fortunes of powerful Greek tycoons, citing sources close to the hard-left Syriza government. A similar amount would be drawn from back taxes owed to the state by individuals and businesses, Bild said. The report said an additional crackdown on illegal smuggling of petrol and cigarettes would yield another €2.3bn for the government coffers.

Greece’s government is walking a tightrope between its commitments to European creditors and its electoral pledges to end austerity in a country struggling to recover from severe economic crisis. Two previous rounds of talks ended in acrimony with Greece accusing Germany and other hardline EU member states of sabotaging a deal. To win Friday’s hard-fought deal, Athens pledged to refrain from one-sided measures that could compromise its fiscal targets and had to abandon plans to use some €11bn in leftover European bank support funds to help restart the Greek economy. “Europe has some breathing space, nothing more, and certainly not a resolution. Now it’s up to Athens,” German foreign minister Frank-Walter Steinmeier told Bild. “The fundamentals – namely assistance in exchange for reform – must remain the same.”

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How much resistance will there be from the rich?

Greece Scrambles To Finalise Fiscal Reform List (Guardian)

Greek government officials are racing to complete a list of reform proposals that will be scrutinised by the country’s international creditors this week as Athens seeks an extension to its €240bn (£177bn) bailout.Finance ministry experts have spent the weekend finalising the fiscal and structural measures that Athens’ left-led government will submit under the terms of an agreement reached at a eurozone summit last Friday. Yanis Varoufakis, the Greek finance minister, sent draft proposals to creditors at the EU, the ECB and the IMF on Sunday, in order to receive feedback before making a formal submission by Monday’s deadline. If the reforms are accepted, Friday’s tentative agreement for a vital four-month loan extension will go ahead.

“We are compiling a list of proposals to make the Greek civil service more effective and to combat tax evasion,” the minister of state, Nikos Pappas, told Mega TV on Sunday. Claiming Greece was “at the start of a new phase” as it prepares for a four-month reprieve that will allow it to devise its own economic agenda, the politician said the inventory would include labour law reforms and changes to legislation regarding non-performing loans. Both are seen as especially sensitive for a nation worn down by five years of gruelling austerity – the price of its rescue funds. Alexis Tsipras’s government, catapulted into power a month ago, is playing a delicate balancing act between placating the bodies keeping Greece afloat and sticking to the anti-austerity policies on which it was elected.

In Friday’s outline agreement, the administration won time, “ownership” of its reform programme, and a sizeable reduction in the scale of its primary surplus – the difference between state expenditure and income once interest payments are stripped out. It was also forced, however, to give considerable ground in agreeing to an accord that staved off the prospect of a financial collapse, with the Greek banking system relying on ECB support. Concessions included seeking an extension to the bailout and agreeing to further oversight from the EU, ECB and IMF. Capital flight on the day the deal was announced had reached €1bn as worried depositors rushed to withdraw funds from accounts.

Highlighting the difficulties the government would almost certainly face, the German finance minister, Wolfgang Schäuble, conceded on Friday that Athens would have “a hard time explaining the deal to Greek voters”. On Sunday, that premonition appeared to come true. There were signs of dissent within Tsipras’s radical left Syriza party over the concessions made in Brussels. Piling on the pressure, the veteran leftist, second world war hero and Euro MP, Manolis Glezos, not only lambasted the deal but called on Greeks to rise up against it. “I apologise to the Greek people that I cooperated in this illusion,” the 92-year-old wrote on his blog. “Some claim that as part of a deal you have to back down. First of all, there can be no compromise between the oppressor and oppressed, just as there cannot between the slave and the tyrant, the only solution is freedom.”

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Good question.

Who Made Germany Europe’s Boss? (Bloomberg)

There are two main lines of analysis about Germany’s role in the European Union. The first, favored by populist euro-skeptic politicians, is that Germany seeks to reverse the setbacks of the 20th century and rule Europe by other means. The second, popular with political commentators and other members of the European elite, is that German guilt over the setbacks of the 20th century inhibits it from exercising the leadership that the EU actually needs. If the past several weeks are any guide, reports of German inhibitions have been exaggerated. We’ll see whether Friday’s tentative agreement over Greece sticks. Tomorrow, Athens is to present a list of measures to the so-called troika, with which Greece’s new government vowed not to deal. If the supervisors sign off, the plan must go to various national parliaments for approval, including Germany’s.

This thing isn’t over yet. Whatever the outcome, Germany’s role in the stand-off has been striking. The struggle between Greece and the euro-zone finance ministers has been reported as though it were a battle between Greece and Germany, with the rest looking on. This was an impression that German officials went out of their way to reinforce. Last Thursday, as another in an extended series of final deadlines loomed, Greece presented an amended proposal for discussion. Euro-zone officials were guardedly optimistic, saying its letter could be a basis for negotiation; the Dutch chairman of the so-called euro group of finance ministers, Jeroen Dijsselbloem, called another meeting to discuss it. Meanwhile a German government spokesman dismissed the document out of hand: “The letter from Athens is not a substantive proposal for a solution,” he ruled; German officials called the letter a “Trojan horse.”

German Finance Minister Wolfgang Schaeuble continued to declare that Greece already had an assistance program, so there was nothing to discuss. He dared Greece to defy the troika and suffer the consequences. The Financial Times reported: Mr Schaeuble declines to publicly discuss Grexit, he has repeatedly said that Greece can choose to leave the €172bn financing programme – with all that implies. “I’m ready for any kind of help, but if my help is not wanted, that’s fine,” he said recently. By the way, I think when he said “my help,” he was talking about the euro group’s help. It began to seem plausible – which came as a surprise to me, I admit – that the German government actually wanted the euro system to split. Some German officials, again according to Financial Times, have been advocating that very course. Hawkish German officials accept what they call “the amputated leg theory,” which says Greece should be cut off like a gangrenous limb to spare the rest of the eurozone body.

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How German banks were saved.

Why Germany Might Not Be Bluffing in Greece (Bloomberg)

As Europe’s high-stakes debt negotiations with Greece reach an impasse, Germany has appeared surprisingly willing to drive the country out of the euro, regardless of the potentially dire repercussions for Italy, Portugal, Spain and the entire currency union. One possible explanation for Germany’s brinkmanship: Its banks have a lot less to lose than they once did. When the European debt crisis first flared up in 2010, Germany’s finances were closely linked to those of the euro area’s more economically fragile members. Its banks’ claims on Greece, Italy, Portugal and Spain – including money lent to governments and companies – amounted to more than €350 billion, about equal to all the capital in the German banking system. If the periphery countries had forced losses on private creditors, which they arguably should have done, Germany would have had to recapitalize its banks or face an immediate meltdown.

The picture is very different now. The ECB, the IMF and other taxpayer-backed creditors have pumped hundreds of billions of euros of loans into the periphery countries, making it possible for German banks to extract themselves with minimal damage. Thanks in part to this back-door rescue, the banks have also been able to raise some capital. As a result, they are in much better shape to withstand a Greek disaster. As of September 2014, their claims on Greece, Italy, Portugal and Spain had declined to about €216 billion, or 46% of capital. The upshot: Greece is left with more debt than it can pay, and Germany – with its banks effectively bailed out – has one less pressing reason to give Greece a break. Hardly the right incentives for a happy ending.

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“The last thing Greece needs right now is another public turn of the screw.”

The Greek Debt Deal: Victory Or Defeat? (Guardian ed.)

ALexis Tsipras campaigned for office on the promise that he could both end Greece’s subservience to the humiliating fiscal and political conditions that the European Union had imposed on the country and keep Greece in the eurozone. Greeks wanted an end to austerity, and they wanted to retain the euro, seemingly contradictory desires. But they could have both, the Syriza leader implied, if they voted for a bold government ready to go to Brussels and take the game to the edge. A Greek exit from the euro would be such a huge disaster that the EU would, if pushed hard, be ready to give in. The Greeks went to Brussels and pushed, but in the end it was they who gave in.

They got a few concessions, particularly on the primary surplus they are required to run, and some cosmetic changes in what things are called, the old vocabulary having become untouchable. But the same reality lies beneath. Greece still has to put together a schedule of reforms, to be presented on Monday and discussed over the week. On the face of it, Greek and EU objectives in this area are close: Syriza is pledged to battle tax evasion, to remodel the civil service, to streamline business regulation, and to create an accurate property register, for example. But the Germans want detail, not rhetoric. It is not beyond the realms of possibility that the EU, under pressure from Germany and other northern countries, will send any programme back for more work if it feels it lacks substance.

The EU would do well to resist that temptation, or to disguise the process in some way if it does, however. The last thing Greece needs right now is another public turn of the screw. For the moment, at least, Greeks seem to be in a mood to give Syriza credit for trying to change the terms of what is not now to be called the bailout, and getting them softened in such a way as to give the government a little more flexibility in domestic spending. Mr Tsipras claims a “victory”. Greeks know there has been no victory, but they also know that the odds were heavily against Greece, and that the effort, although perhaps foolhardy, had to be made by a government that had made the promises it had.

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“One way or another they will manage to strike a compromise on the list of measures required for the extension of the program.”

Greece’s Tsipras Is on a High Wire (Bloomberg)

Greek Prime Minister Alexis Tsipras walks another high wire over the next 24 hours as he tries to come up with financial measures that satisfy both the demands of euro-region creditors and his anti-austerity party. After talks in Brussels between officials from the 19 euro members concluded late on Feb. 20 with an agreement to extend bailout funds for four months, the government in Athens now has until the end of Monday to complete a list of policies in return for the continued funding. Finance chiefs will then decide whether the proposals go far enough or trigger another round of emergency negotiations this week. “The stakes are too high for the euro area and mostly for Greece, as the country’s economy and especially banking system may face an imminent collapse,” said Panos Tsakloglou at Athens University of Economic and Business.

“One way or another they will manage to strike a compromise on the list of measures required for the extension of the program.” The agreement potentially frees up money to meet some of the pledges made by Tsipras before disgruntled Greeks catapulted his Syriza party into power almost a month ago. The outcome may still prove politically bruising for him after he was forced to ditch plans to take back control of Greece’s beleaguered finances so he could raise wages and pensions. The new policies remain subject to validation by the IMF, the ECB and the EC, the institutions collectively known as the troika from which Tsipras vowed to break free. The 40-year-old premier began the task of selling domestically the provisional deal to extend bailout funds after securing the reprieve from the prospect of national insolvency.

“We won a battle, but not the war,” he said in a nationally televised address on Saturday. “The difficulties, the real difficulties, not only those related to the discussions and the relationship with our partners, are ahead of us.” While the government has discussed the measures with the institutions, the proposals are Greek and haven’t been put forward by creditors, Finance Minister Yanis Varoufakis said after a cabinet meeting the same day. There is no disagreement and “we are almost certain that we will get a yes from the institutions,” he said. The European Commission is currently involved in constructive talks with its Greek partners after Friday’s decisions, a spokeswoman said on Sunday.

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Politics. Throw Podemos under the bus.

Spain Said to Lead EU Push to Force Terms on Greece (Bloomberg)

As euro-region finance ministers turned the screw on Greece in Friday’s talks, the group’s usual enforcer, Wolfgang Schaeuble of Germany, was eclipsed by Spain’s Luis de Guindos, according to two people with direct knowledge of the talks. De Guindos took the toughest line with Greek Finance Minister Yanis Varoufakis as the bloc forced forced him to adhere to the terms of the country’s existing bailout to retain access to official financing, the people said, asking not to be named because the conversations were private. When the group rejected Schaeuble’s call for a Tuesday meeting to scrutinize Greece’s plans to meet those conditions, De Guindos insisted, winning agreement for a teleconference, they said.

The Spanish government is particularly sensitive to the fortunes of the Syriza government in Greece because the party’s Spanish ally, Podemos, has surged to the top of some recent polls. A victory for Varoufakis would have strengthened Podemos’s argument that De Guindos’s boss, Prime Minister Mariano Rajoy, was wrong to impose austerity on Spain. The Spanish government “has always been constructive but it has to defend its interests,” Guindos said on Friday. “A climate is developing in which the new Greek government is adapting to the rules that affect us all.” A spokeswoman for De Guindos said Spain is in favor of dialogue and flexibility within the existing rules and has shown its solidarity with Greece by contributing €26 billion euros to its bailout at a time when its own financing conditions were not good.

Struggling to fend off a sovereign default, the Greek government acceded to European demands that it respect the conditions of its existing bailout package at Friday’s meeting in Brussels. The Greek government must submit a list of economic measures it will undertake by Monday and finance chiefs will then decide whether the proposals go far enough. De Guindos, at times raising his voice, railed against Varoufakis in Friday’s meeting, telling him he has to win the trust of his euro-region counterparts and learn how politics is conducted at the European level, one of the people said. De Guindos has been in the running to replace Jeroen Dijsselbloem of the Netherlands as head of the euro-region finance ministers’ group when the Dutchman’s term expires this year.

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Math.

Why Greece Will Never Repay Its Debt (CNBC)

European officials should accept that Greece may never repay its $366 billion debt, analysts told CNBC, even if the troubled economy secures a bailout extension. Greek debt is not repayable in this life, Kingsley Jones, founder and CIO of Jevons Global, told CNBC on Monday: “We have to be realistic here. Greek debt is now 175% of gross domestic product (GDP); it’s higher than it was when this whole business first started.” “Just look at Japan. It has government debt rapidly approaching 300% of GDP. One day, that debt pile simply implodes. It is not ever going to be repaid, nor will the Greek debt. There is no use standing on the high moral ground,” Jones said.

Athens’ current bailout program with European creditors requires Greece to reduce its debt to below 110% of GDP by 2022. The program was extended for another four months in a last-minute deal on Friday, failing to meet ruling party Syriza’s request for an official haircut, or reduction, on outstanding debt – a promise that brought the leftist party to power last year. However, final confirmation of Friday’s bailout extension hinges on the list of reforms Prime Minister Alexis Tsipras submits on Monday. “The terms of the current agreement pretty much require Greece to attempt to run a primary budget surplus over 4% for well over a decade…No country with an unhealthy economy has ever managed to do that. So, we think that the current terms that are required of Greece are frankly pretty unrealistic,” Jones added.

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Raise taxes?

Rebuilding Crumbling America Shouldn’t Wait (Bloomberg)

If Washington were a rational place, a major measure to rebuild roads, bridges, ports and airports would be a slam-dunk. Few doubt the need. The U.S. has underinvested in infrastructure: It was ranked 12th in the World Economic Forum’s Global Competitiveness Report for 2014-2015. Road repair needs are pervasive, a quarter of bridges require upgrades, the fast-rail system falls further behind other countries every year. There is a broad consensus that infrastructure investment is a significant job-creator. It is embraced by the Chamber of Commerce, the AFL-CIO and many governors and mayors of both parties. Republican congressional leaders want selective big accomplishments to prove they can govern. President Barack Obama wants a few more successes in his final years. Infrastructure is one of the very few areas where they’re on roughly the same page.

Moreover, the Highway Trust Fund, which finances federal transportation projects, expires in May. Yet there is little reason to be sanguine. There likely will be a short-term fix for the highway fund. But the necessary longer-term systemic investments will be kicked down the road, a casualty of partisan gridlock. The logical approach to extending the fund would be to raise the 18.4 cents a gallon gasoline tax that is dedicated to transportation. It hasn’t been increased in more than two decades and gasoline prices today are at a five-year low. It was the patron saint of low taxes, Ronald Reagan, who lauded these kinds of “user fees.”

Yet today’s Republicans recoil at any tax increase. And Democrats fear that it would be used against them (Obama ducked it in his budget). And they worry that working and middle-class citizens would be hardest hit by the tax, though there are ways to soften that impact. The president’s budget proposed a one-time 14% tax on the almost $2 trillion in foreign earnings that U.S. companies hold overseas. Obama would use those proceeds for infrastructure. Additionally, he proposed a 19% tax on future foreign earnings as part of a reform of corporate taxes. Privately, the administration acknowledges that this is an opening bargaining position and that it would have to accept a lower rate to get Republicans on board. Last year, House Ways and Means Committee Chairman Dave Camp had a proposal with an 8.75% top rate.

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Where could it possibly lead?

Global Central Bank Easing Quadruples In 2015 (Zero Hedge)

Thanks to global disinflationary pressures driven by the savings glut, an oil glut, and universally high (peak) debt levels (crushing the transmission mechanisms of textbook economists), central planners have gone full ease-tard in 2015. From a ‘balanced’ 10 easing, 9 tightening bias (~1:1) in December, Morgan Stanley illustrates in the following chart there are now 16 central banks easing and only 4 with a tightening bias (4:1) as it appears the one-trick pony brigade are trying moar of what didn’t work the first, second, and last times in an effort to prove this time is different… With so many central planners piling up in the lower left corner… and global growth expectations crashing… when oh when does the world wake up to smoke and mirrors they have been witnessing and, as Marc Faber recently warned, lose faith in central bank omnipotence?

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“.. the only chance for Europe to get rid of the United States protectorate and become, in the words of General de Gaulle, a ‘Free Europe’.”

French Analyst Calls For France-Germany-Russia Alliance (TASS)

France and Germany, following the historical tradition, should work on forming an alliance with Russia, prominent French writer and political journalist Eric Zemmour said in newspaper comments on Friday. “NATO is doing its utmost to present Russia as an enemy of the West and thereby justify its existence,” Zemmour wrote in Le Figaro Magazine. “Fortunately, France and Germany in due time blocked Ukraine’s accession to NATO, and that’s a positive fact,” the journalist said. “Now when they finally coordinated their positions on establishing relations with Moscow, they should not stop halfway and should move towards forming a tripartite alliance with Russia,” he said, recalling numerous efforts in the past by “kings, emperors and presidents” of the three countries to set up such an alliance.

The analyst stressed that the tripartite bloc “will be the only chance for Europe to get rid of the United States protectorate and become, in the words of General de Gaulle, a ‘Free Europe’.” “An alliance with Russia is absolutely necessary to fight against Islamists in Syria, Libya, Iraq, Mali, Central African Republic, Nigeria, Pakistan and Afghanistan, where these extremists are trying not only to erase all the traces of a Western and Christian presence, but to pave the way for carrying the war into the European territory,” Zemmour added.

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Light in darkness.

Homeless Britons Are Turning To The Sikh Community For Food (BBC)

“We come here because we get food… A hot meal. It’s a luxury for me.” John Davidson is 55 and homeless. He is one of 250 people who have just received a hand-out of hot soup, drinks, chocolate bars and other supplies from the Sikh Welfare and Awareness Team van parked up on the Strand in central London on a cold Sunday evening. The Swat team, as they’re known, park at the same spot every week so a group of volunteers from the Sikh community can hand out vital supplies. Homeless people, who overwhelmingly are not Sikh, patiently wait in line to be served. For the volunteers handing out food here, this is more than just good charitable work. For them this is a religious duty enshrined by the founder of the Sikh religion, Guru Nanak, over 500 years ago.

At a time of deep division by caste and religious infighting between Hindus and Muslims in India, Guru Nanak called for equality for all and set forward the concept of Langar – a kitchen where donated produce, prepared into wholesome vegetarian curry by volunteers, is freely served to the community on a daily basis. Today, thousands of free Langar meals are served every day in Sikh temples throughout the UK. The Guru Singh Sabha Gurdwara in Southall, thought to be the biggest Sikh temple outside of India, says it alone serves 5,000 meals on weekdays and 10,000 meals on weekends. Every Sikh has the duty to carry out Seva, or selfless service, says Surinder Singh Purewal, a senior member of the temple management team. “It means we’re never short of donations or volunteers to help prepare the Langar.”

In recent times the Langar meal has acted as a barometer for the state of the economy. After the 2008 recession many Sikh temples reported a surge in the numbers of non-Sikhs coming in for the free Langar meals. It’s now common to see non-Sikhs inside the temple, Purewal says: “We don’t mind it. As long as people show respect, are not intoxicated and cover their heads in line with our traditions, then everyone is welcome.” The Swat team say they decided to take the concept of Langar outside its traditional setting in temples and out onto the streets when they saw a growing homelessness problem in London. Randeep Singh who founded SWAT says: “When you go to the temple, what’s the message? The message is to help others, help your neighbours. That’s what we are doing.”

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