Apr 302017
 
 April 30, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , , , ,  No Responses »
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Pablo Picasso Self portrait 1965

 


Are Canada’s Homes and Mortgages Worth Just 50 Cents on the Dollar? (WS)
US Congress Does Bare Minimum to Keep Government Open Next Week (BBG)
All the Plenary’s Men (BestEvidence)
The National Blues (Jim Kunstler)
‘Taxation Is Theft’ Meme Goes Mainstream (TAM)
Erdogan: Turkey and US Can Wipe Out ISIL in Raqqa (AlJ)
ISIS Suffers Heavy Casualties In Kurdish Fighters’ Advances In Raqqa (FNA)
Russia Backs China Call To Stop N. Korea Nuke Tests, US-S. Korea Drills (RT)
Brazil Paralyzed by Nationwide Strike, Driven by Corruption and Impunity (GG)
Mélenchon: France To Choose Between Extreme Right And Extreme Finance (IC)
Matteo Renzi Tries The Macron Approach (Pol.)
EU Throws Down Brexit Gauntlet to Britain as Talks Edge Closer (BBG)
Merkel Talks Tough on Migrants in Election Campaign Warm-Up (BBG)
PwC: Greece Must Reform Or Forget Recovery (K.)

 

 

“On April 28, HOOPP CEO Jim Keohane told BNN in an interview that “for every $1 we lend Home Capital, they’re going to provide us with $2 of mortgages as collateral. That’s where we get our protection from.” So the C$2 billion loan would be backed by C$4 billion in mortgages. In other words, in the eyes of Keohane, these mortgages might be actually worth, when push comes to shove, 50 cents on the dollar.”

Are Canada’s Homes and Mortgages Worth Just 50 Cents on the Dollar? (WS)

Home Capital is Canada’s biggest “alternative” mortgage lender. It’s not a bank – which today is part of its problem because it cannot create money to lend out; it has to obtain it first by attracting deposits and borrowing money through other channels. Through its subsidiary, Home Trust, it specializes in high-profit mortgages to risky borrowers, with dented credit or unreliable incomes who don’t qualify for mortgage insurance and were turned down by the banks. This includes subprime borrowers. Since revelations of liar loans surfaced in 2015, things have gone to heck. Now it’s experiencing a run on its deposits. Teetering at the abyss, it obtained a $2 billion bailout loan on Thursday. The terms are onerous. And on Friday, the crux of the deal emerged – the amount of mortgages it has to post as collateral. It’s a doozie.

It sheds some light on what insiders think mortgages and the homes that back them are worth when push comes to shove. A bone-chilling wake-up call for the Canadian housing and mortgage market. This is when the whole construct started falling apart: On July 15, 2015, Home Capital announced that originations of high-margin uninsured mortgages had plunged 16% and originations of lower-margin insured mortgages had plummeted 55%, and that it had axed an unspecified number of brokers. Shares plunged 25% in two days. On July 30, 2015, it disclosed, upon the urging of the Ontario Securities Commission, the results of an investigation that had been going on secretly since September 2014 into “falsification of income information.” Liar loans. It suspended 45 mortgage brokers who’d together originated in 2014 nearly C$1 billion in residential mortgages, or 12.5% of its total.

The scandal festered. Short sellers circled in formation. On April 26, 2017, Home Capital announced that it’s experiencing a run on its deposits. As of the end of March, its subsidiary Home Trust sat on about C$2 billion in high-interest savings accounts (HISA) it is offering to regular savers. But these folks were pulling their money out, it said, and the pace of the run was accelerating. It also disclosed that it was finalizing a $2 billion bailout loan from the Healthcare of Ontario Pension Plan (HOOPP) which has about $70 billion in assets. The loan would “have a material impact on earnings….” So an expensive loan.

Home Trust would pay a non-refundable commitment fee of $100 million; would be required to make an initial draw of $1 billion at an interest rate of 10%; and would pay a 2.5% standby fee on undrawn funds. So the initial $1 billion for the first 12 months would cost it $225 million in fees and interest, a juicy 22.5%! Once the credit line is fully utilized, the cost of the loan would drop to 15%. Its shares collapsed by 65%. On Friday, April 28, it announced that another C$290 million in deposits were yanked out on Thursday, after C$472 had been yanked out on Wednesday. Its HISA deposits were down to C$521 million, having plunged 75% since late March.y

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Kept the lights on for 100 days.

US Congress Does Bare Minimum to Keep Government Open Next Week (BBG)

Congress gave itself one more week to agree on a spending bill to fund the U.S. government through September, leading into President Donald Trump’s 100th day in office Saturday by keeping the lights on. The 382-30 House vote Friday was followed quickly by unanimous Senate passage of the stopgap spending bill hours before the shutdown deadline. Trump signed the bill Friday evening, according to a White House official. “We feel very good” that lawmakers will be able to pass a full spending bill next week, White House press secretary Sean Spicer told reporters earlier in the day. Leaders of both parties say they’re close to agreement on a broader spending plan after Republicans signaled they would accept Democratic demands that the Trump administration promise to continue paying Obamacare subsidies and to drop its bid for immediate funds for a wall on the Mexican border.

“You shouldn’t create artificial deadlines,” Alabama Republican Representative Gary Palmer said in support of the short-term measure. “If there are things we need to work through, we need to take the time to work through them.” Vermont Senator Patrick Leahy, the top Democrat on the Appropriations Committee, said both sides have made progress on issues including more funds for the National Institutes of Health, opioid funding for states, Pell college grants and money for transit. But he said the talks remain snagged over Republican demands for policy “riders.” “Let’s not govern by partisan manufactured crisis,” he said on the Senate floor. “Stop posturing,” he added as he called for a speedy resolution on the bill sometime next week. “This is no way to govern,” Leahy said before the Senate vote.

Sixteen House Republicans voted against Friday’s stopgap measure. The short-term fix to ward off a government shutdown – on a deadline set months ago – shows the stubborn dysfunction of Congress even with a unified Republican government. House GOP leaders on Thursday abandoned efforts to vote this week on their plan to repeal and replace Obamacare for lack of support in their party. A vote is still possible next week.

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Eye-opening to say the least. Make the coffee extra strong before viewing. Lots of ground gets covered, quickly. And don’t mothball those pitchforks and torches just yet.

All the Plenary’s Men (BestEvidence)

“The King can do no wrong.”
—William Blackstone, Commentaries on the Laws of England

“When the president does it, that means that it is not illegal.”
—Ex-President Richard Nixon, interview with David Frost

The question at bar is why the U.S. Department of Justice has failed to prosecute any too-big-to-fail banks or—more importantly—their bankers, even for admitted crimes. It’s a crucial question, because after eight straight years of unremitting prosecutorial failure, it looks very much as if a select group of top banks can, in fact, do no wrong. If that’s the case, then our constitutional republic isn’t merely in trouble. It’s dead. A person or group of people who satisfy Blackstone’s criterion for ultimate sovereign power—the power to commit crimes with impunity—can’t exist in a nation where the law reigns supreme. And yet here we are a decade after the financial crisis began in earnest, and not one TBTF bank executive has gone to jail.

Legally, the TBTF banks are indistinguishable from the King, since the power to commit crimes with impunity swallows all other sovereign powers; such a power isn’t even supposed to exist in the U.S., and yet it does. Moreover, since there can’t be two kings in a kingdom, the entire U.S. government, from the president on down, is just one of the King’s men under this formulation of power. The real job of the U.S. government, then, isn’t to represent the will of the people at all, it’s to do the King’s bidding. A nation that isn’t governed by law is governed by instead by a king—it’s one or the other—and the president’s inferiority to such an above-the-law sovereign was confirmed over 40 years ago with Nixon’s ouster. The president, unlike the King, answers to the law (despite Nixon’s opinion).

Now, you may say that while the TBTF banks might arguably have the de facto power of the King, that’s a far cry from wielding such power formally (i.e., having de jure criminal immunity). The reply to that objection is set forth in this film, “All the Plenary’s Men,” which is a sequel to “The Veneer of Justice in a Kingdom of Crime.” Another objection, raised by the DOJ itself, is that it HAS prosecuted TBTF bankers, citing cases like that of Raj Rajaratnam. These cases, however, in fact reveal the DOJ acting on behalf of the criminal global banking cartel. On that score, the DOJ’s abysmal track record is by now so extensive and so thorough that it’s possible to spot legal patterns in the DOJ’s protracted miscarriage of justice, and, as you’re about to see, those patterns are very deeply disturbing indeed.

What’s been going on cuts right past a garden variety constitutional crisis like Watergate straight to a crisis of sovereignty. The backdrop for all of this is HSBC’s exoneration in December of 2012 for laundering money for drug dealers and terrorists, about which the House Financial Services Committee issued a report in July of 2016. Whether it was due to the political circus in town at the time, or to the Republican authorship of that report (albeit without dissent), it didn’t get nearly the scrutiny it deserved. You see, prosecutors working on the HSBC case were actually going to indict the bank, but they got overruled, and HSBC and its team of criminals skated. The story of how exactly that reversal came about reveals, if not the King himself, then certainly many of the King’s top men.

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“It concentrates the mind, as Samuel Johnson once remarked, like waiting to be hanged.”

The National Blues (Jim Kunstler)

You can read it in the bodies of the people in the new town square, i.e. the supermarket: people prematurely old, fattened and sickened by bad food made to look and taste irresistible to con those sunk in despair, a deadly consolation for lives otherwise filled by empty hours, trash television, addictive computer games, and their own family melodramas concocted to give some narrative meaning to lives otherwise bereft of event or effort. These are people who have suffered their economic and social roles in life to be stolen from them. They do not work at things that matter. They have no prospects for a better life — and, anyway, the sheer notion of that has been reduced to absurd fantasies of Kardashian luxury, i.e. maximum comfort with no purpose other than to enable self-dramatization. And nothing dramatizes a desperate life like a drug habit. It concentrates the mind, as Samuel Johnson once remarked, like waiting to be hanged.

[..] The eerie thing about reading the landscape of despair is that you can see the ghosts of purpose and meaning in it. Before 1970, there were at least five factories in my little town, all designed originally to run on the water power (or hydro-electric) of the Battenkill River, a tributary of the nearby Hudson. The ruins of these enterprises are still there, the red brick walls with the roofs caved in, the twisted chain-link fence that no longer has anything to protect, the broken masonry mill-races. The ghosts of commerce are also plainly visible in the bones of Main Street. These were businesses owned by people who lived in town, who employed other people who lived in town, who often bought and sold things grown or made in and around town.

Every level of this activity occupied people and gave purpose and meaning to their lives, even if the work associated with it was sometimes hard. Altogether, it formed a rich network of interdependence, of networked human lives and family histories. What galls me is how casually the country accepts the forces that it has enabled to wreck these relationships. None of the news reports or “studies” done about opioid addiction will challenge or even mention the deadly logic of Wal Mart and operations like it that systematically destroyed local retail economies (and the lives entailed in them.) The news media would have you believe that we still value “bargain shopping” above all other social dynamics. In the end, we don’t know what we’re talking about.

I’ve maintained for many years that it will probably require the collapse of the current arrangements for the nation to reacquire a reality-based sense of purpose and meaning. I’m kind of glad to see national chain retail failing, one less major bad thing in American life. Trump was just a crude symptom of the sore-beset public’s longing for a new disposition of things. He’ll be swept away in the collapse of the rackets, including the real estate racket that he built his career on. Once the collapse gets underway in earnest, starting with the most toxic racket of all, contemporary finance, there will be a lot to do. The day may dawn in America when people are too busy to resort to opioids, and actually derive some satisfaction from the busy-ness that occupies them.

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Funny but true.

‘Taxation Is Theft’ Meme Goes Mainstream (TAM)

The month of April is a nightmare for anyone with a conscience, as we only have until “tax day” — which usually falls on April 15 — to give the taxman what he says he deserves. So if you pay taxes to Uncle Sam and you’re also aware you’re paying for mass murder in the Middle East and in U.S. streets due to the drug war, you should also feel sick to your stomach as you write that check. To a restaurant customer, this may have served as enough incentive to remind his server that taxation is always immoral — but he didn’t stop there. Last week, a customer at a Missouri restaurant gave the waitress a “personal gift” instead of a tip, writing the now popular line “Taxation is theft” in the tip section of the receipt. In a second note, the fiscally conscious customer added: “This is not a tip. This is a personal gift and not subject to federal or state income taxes.”

With major progressive news outlets like ATTN: reporting on this story, left-leaning reporters started to debate wages in the food and service industries, discussing the fact that tips end up being factored as wages, meaning they are always taxable. But as that discussion developed, reporters were quick to realize that when personal gifts are in the mix, the taxman can’t take part of those earnings away. After all, a gift would have to exceed $13,000 to be subject to taxation, meaning that even if the customer had spent hundreds, the “personal gift” would not amount to anything close to the requirements stipulated by the IRS.

With that, ladies and gentlemen, it becomes easier to not only tip with class, but also with substance, giving your waiter a lesson on what’s moral and how to legally go around the rules to make sure they enjoy their full tip — not just the percentage deemed to be fit by the federal government. As this story becomes part of the popular movement ignited by libertarians, expect to see more progressive news outlets becoming familiarized with the actual concept of taxation. What’s left for us to find out is if they are going to change their tune and start attacking people like this customer when the two-party pendulum swings once again and a fully Democratic slate takes over Washington. Are they going to remain consistent in discussing taxation from the point of view of the worker, or are they going to side with the leech? Only time will tell.

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From separate map picked up on Twitter: “When ISIS was winning Turkey was just watching. Now when ISIS is getting defeated by Kurds, Turkey starts attacking Kurds. Turkey = ISIS.”

Erdogan: Turkey and US Can Wipe Out ISIL in Raqqa (AlJ)

Turkish President Recep Tayyip Erdogan said on Saturday if Ankara and Washington were to join forces they could turn the Syrian city of Raqqa into a “graveyard” for Islamic State of Iraq and the Levant (ISIL). Erdogan also suggested he could launch cross-border operations against Kurdish rebels at any time, just days after the military carried out air strikes in Syria and Iraq, drawing concern from the United States. “America, the coalition, and Turkey can join hands and turn Raqqa into a graveyard for [ISIL],” Erdogan told a business summit in Istanbul. “They [ISIL] will look for a place to hide.” Erdogan’s comments come ahead of a meeting with US President Donald Trump on May 16 – their first face-to-face summit since the real estate mogul and reality TV star took office in January.

Ankara is hopeful about a relationship with Washington under Trump after ties frayed in the final years of Barack Obama’s administration, which limited cooperation between the NATO allies. The two countries have bitterly disagreed over the role of the Kurdish People’s Protection Units (YPG) in Syria. Turkey views the YPG as the Syrian extension of the Kurdish PKK group, which has waged a deadly insurgency against the Turkish state since 1984. But the US is concerned that Turkey’s military operations in Syria are more focused on preventing Syrian Kurds from forming an autonomous region in northern Syria, along Turkey’s border, that could embolden Turkey’s own Kurdish minority.


@Furiouskurd: When ISIS was winning Turkey was just watching. Now when ISIS is getting defeated by Kurds, Turkey starts attacking Kurds. Turkey = ISIS.

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As the only party involved, the Kurds fight for their own land. And they have liberated lots of prisoners, women, children.

ISIS Suffers Heavy Casualties In Kurdish Fighters’ Advances In Raqqa (FNA)

The Kurdish-led Syrian Democratic Forces (SDF) continued the anti-ISIL Euphrates Rage Operation in Western Raqqa and managed to drive the terrorists out of more neighborhoods in al-Tabaqa city, killing over 40 of them. The SDF engaged in heavy fighting with ISIL in al-Tabaqa city and managed to take control of the neighborhoods of al-Nababeleh, al-Zahra and al-Wahab, killing 23 militants. In the meantime, the Kurdish fighters managed to push ISIL back from al-Wahabah and Radio Station in al-Tabaqa, killing 20 militants and capturing 10 others. In relevant developments in the province on Tuesday, the SDF stormed ISIL’s defense lines and took full control over the villages and settlements of Kabash al-Sharqi, Um al-Tonok, Rayan, Tishrin farm, Mosheirehe al-Shamaliyeh, Mosheirefeh al-Janoubiyeh, al-Rahiyat, Beir Jarbou, Jarwa, al-Hattash, Hazimeh, Khalwa Abideh, Holo Abd, Abareh, al-Kaleteh, Sukriyeh and Zohra, inflicting major losses on ISIL.

The Kurdish forces also won back a key neighborhood in the Southern sector of Tabaqa city following a large advance on its Western urban. In the meantime, the SDF managed to seize control over the Alexandria suburb, and now the Kurds have swept through the adjacent Wahab neighborhood. Kurdish forces also secured the island of Jazirat al-Ayd, a few kilometers North of Lake Assad. According to latest reports, around 40% of Tabaqa city has been brought under Kurdish control with just a few hundred ISIL militants left in its Northern sector and around the city center.

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‘..double suspension..’

Russia Backs China Call To Stop N. Korea Nuke Tests, US-S. Korea Drills (RT)

Russia has supported a Chinese initiative in the UNSC intended to stabilize the situation on the Korean peninsula. It calls on the North to refrain from missile and nuclear testing, while the US and South Korea should halt military drills in the area.
“Members of the [UN] Security Council have unanimously called upon DPRK [Democratic People’s Republic of Korea] to stop missile and nuclear tests and to fulfil UNSC resolutions,” the Russian Foreign Ministry said in a statement on Saturday following a United Nations Security Council (UNSC) session held in New York earlier on Friday. The UNSC called for a political and diplomatic solution to the nuclear crisis on the Korean Peninsula, the ministry added.

“In this context, the Russian Federation supported a Chinese proposal for a ‘double suspension’ (Pyongyang is to stop missile and nuclear tests and the US and South Korean militaries are to halt drills near North Korea) as a starting point for political negotiations.” However, the council was not able to agree on a common solution, the ministry added. The UNSC session was joined by Russian Deputy Foreign Minister Gennady Gatilov, who urged Washington and Seoul to reconsider their decision to station a THAAD anti-missile system on the Korean Peninsula, warning that it will serve as a “destabilizing factor” in the region.

Gatilov said the Terminal High Altitude Area Defense (THAAD) had been deployed “in line with the vicious logic of creating a global missile shield,” while warning that it is also undermining the security and deterrent capacities of adjacent states, such as China, thus threatening “the existing military balance in the region.” “It is not only we who perceived this step very negatively. We are once again urging both the United States and the Republic of Korea to reconsider its expediency, and other regional states not to yield to the temptation of joining such destabilizing efforts,” the deputy foreign minister said. Ahead of the UNSC session, Chinese Foreign Minister Wang Yi told reporters that a peaceful solution to the Korean crisis is the “only right choice.” “Peaceful settlement of the nuclear issue on the Korean Peninsula through dialogue and negotiations represents the only right choice that is practical and viable,” Wang said.

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Very few Brazil politicians are not involved in one scam or another.

Brazil Paralyzed by Nationwide Strike, Driven by Corruption and Impunity (GG)

Just over one year ago, Brazil’s elected President, Dilma Rousseff, was impeached – ostensibly due to budgetary lawbreaking – and replaced with her centrist Vice President, Michel Temer. Since then, virtually every aspect of the nation’s political and economic crisis – especially corruption – has worsened. Temer’s approval ratings have collapsed to single digits. His closest political allies – the same officials who engineered Dilma’s impeachment and installed him in the presidency – recently became the official targets of a sprawling criminal investigation. The President himself has been implicated by new revelations, saved only by the legal immunity he enjoys. It’s almost impossible to imagine a presidency imploding more completely and rapidly than the unelected one imposed by elites on the Brazilian population in the wake of Dilma’s impeachment.

The disgust validly generated by all of these failures finally exploded this week. A nationwide strike, and tumultuous protests in numerous cities, today has paralyzed much of the country, shutting roads, airports and schools. It is the largest strike to hit Brazil in at least two decades. The protests were largely peaceful, but some random violence emerged. The proximate cause of the anger is a set of “reforms” that the Temer government is ushering in that will limit the rights of workers, raise their retirement age by several years, and cut various pension and social security benefits. These austerity measures are being imposed at a time of great suffering, with the unemployment rate rising dramatically and social improvements of the last decade, which raised millions of people out of poverty, unravelling.

[..] During the past three years, Brazilians have been subjected to one revelation after the next of extreme corruption pervading the country’s political and economic class. Scores of corporate executives and long-time party leaders are imprisoned. They include the head of the Brazilian construction giant Odebrecht, the House Speaker who presided over Dilma’s impeachment, and the former governor of the state of Rio de Janeiro. The current House Speaker, and Senate President, and nine of Temer’s ministers are now targets of criminal investigations for bribery and money laundering, as are numerous governors.

In sum, the vast bulk of the top-shelf political and economic elite have proven to be radically corrupt. Billions upon billions of dollars have been stolen from the Brazilian public. Recently released recordings from the judicial confessions of Marcelo Odebrecht, scion of one of Brazil’s richest families, depict a country ruled almost entirely through bribes and criminality, regardless of the ideology or party of political leaders. And yet, even in the wake of this oozing and incomparable elite corruption, the price that is being paid falls overwhelmingly on the victims – ordinary Brazilians – while the culprits prosper.

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Melenchon seeks to hold on to his voters for the June parliamentary elections.

Mélenchon: France To Choose Between Extreme Right And Extreme Finance (IC)

The leader of a far-left movement who won nearly 20% of the vote in the first round of France’s presidential election, Jean-Luc Mélenchon, told his seven million voters in a YouTube address on Friday that he would not tell them how to vote in the final-round run-off next weekend. As for himself, Mélenchon said that he would cast a ballot, and that it would not be for Marine Le Pen, the candidate of the far-right National Front, who courted his voters in a video of her own on Friday. But Mélenchon also refused to say, like the leaders of other parties across the political spectrum – and celebrities including the French soccer legend Zinedine Zidane – that he would vote for Le Pen’s centrist rival, the former banker Emmanuel Macron, to stop the far-right from gaining power.

Instead, Mélenchon predicted that forcing France to choose between a candidate of “the extreme right” and one of “extreme finance” would led to a political crisis, and left open the possibility that he would submit a blank ballot, a form of protest vote permitted under French electoral law. (Mélenchon’s platform included provisions for voting to be made mandatory, and for blank ballots to be recognized under law.) The appeal for unity, to construct a barrage, or dam, against the rising tide of the far-right, Mélenchon said, was, in fact, a disguised attempt to force voters like him, who profoundly disagree with Macron’s economic policies, to endorse his project. Amid fears that widespread abstention and protest votes for neither candidate could lower the threshold for Le Pen to win with 50% of the valid votes cast, Mélenchon’s refusal to join the sort of united front against Le Pen that led to her father’s defeat in 2002 caused anxiety to spike.

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Chameleons and parrots are us.

Matteo Renzi Tries The Macron Approach (Pol.)

Matteo Renzi toned down the EU-critical rhetoric of his final months as Italian prime minister during his visit to Brussels on Friday to drum up support for his bid to be restored as head of the Democratic Party (PD) in its primaries this weekend. With aides suggesting on social media that French presidential hopeful Emmanuel Macron’s pro-EU stance, which helped him beat Euroskeptic Marine Le Pen in the election’s first round, could be a boost for Renzi, he talked about “Angela, François and I” when referring to German Chancellor Angela Merkel and French President François Hollande. Renzi even stood in front of a display showing the EU flag, and felt the need to explain why, in the run-up to his failed constitutional referendum that cost him the prime ministership last December, he had removed the EU flag from behind his desk.

“It wasn’t anger, it was calculated gesture,” Renzi told PD followers at a hotel near the European Parliament, adding that it was in response to the European Commission demanding Italian action on its budget deficit when it had been hit by an earthquake. The Italian and international media have speculated about the similarities between Renzi and Macron, with Renzi’s slogan for the PD primary this Sunday — In Cammino (“on the way”) — almost a direct translation of the name of Macron’s centrist political movement, En Marche. One close Renzi aide, Giuliano Da Empoli, wrote on Facebook the day after Macron’s first-round victory on April 23 that the French result “shows that one can be at the same time a convinced pro-European and a harsh critic of the status quo.”

That was the tone Renzi tried to strike in Brussels on Friday, repeating his line that the EU “needs radical change” and taking a dig at Germany for its trade surplus, while warning about the dangers of populism. “With the radicals you win the primary elections but then you lose the elections,” he told the audience. In the French campaign, which comes to a head with the second-round vote on May 7, the candidate closest to Renzi’s Democratic Party was Benoît Hamon, who won the ruling Socialist Party’s primaries but took only 6% of the vote on election night. That must resonate for Renzi, who wants to regain control of the PD to prepare a bid for a new term as prime minister in elections due early next year.

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“Nobody has united here against the U.K.,” German Chancellor Angela Merkel told reporters..” She’s right, all everyone’s done is side WITH Germany. Without a word.

EU Throws Down Brexit Gauntlet to Britain as Talks Edge Closer (BBG)

European Union governments threw down the gauntlet to the U.K. ahead of Brexit talks, listing demands Prime Minister Theresa May must satisfy before they will discuss the trade deal she wants and urging her to be more realistic in her expectations. Any doubts about the scale of the task facing Britain in withdrawing from the EU after four decades were laid to rest at a Brussels summit of the region’s leaders on Saturday. A tough negotiating stance was endorsed unanimously, within minutes and to applause. The U.K. responded by saying it’s bracing for a confrontation. The complexity comes down to the fact that a departure from the world’s biggest trading bloc has never been done and was never supposed to happen. The EU is striving to ensure the U.K. is worse off outside it than inside, not least to avoid setting a precedent.

After agreeing to the terms of separation, then it’s a matter of getting down to the business of what a future relationship might look like. “Nobody has united here against the U.K.,” German Chancellor Angela Merkel told reporters as she left the meeting. “The British people have made a decision, which we will have to respect. But we remaining 27 now get together in order to speak with one voice.” The Brexit discussions will begin soon after the U.K.’s June election, which May called in part to strengthen her mandate going into talks. The first orders of business will be guaranteeing the rights of 3 million EU citizens living in the Britain and calculating a financial settlement one leader said would be at least €40 billion euros ($44 billion). Only once “sufficient progress’’ is made on those thorny topics and reinforcing the border between the two Irelands will the EU’s attention turn to trade. That looks unlikely to happen before December.

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Merkel tries to deflect the blame for what’s gone wrong, blames local officials for sweeping things under the carpet. Yeah, she would never have had any reason to do just that herself. Plus, she blames ‘Europe’s haphazard policing of its outer borders’, something for which no-one carries more responsibility than … Merkel, the de facto boss of the EU. Mutti Merkel’s just another politician going wherever the wind blows.

Merkel Talks Tough on Migrants in Election Campaign Warm-Up (BBG)

German Chancellor Angela Merkel is talking tough on migrants and crime as she hits the campaign trail for two state elections next month, giving a foretaste of her bid for a fourth term in September. Merkel’s hardened rhetoric was on display in North Rhine-Westphalia, Germany’s most populous state, where her Christian Democratic Union is seeking to end seven years of Social Democratic rule on May 14. On Friday, she’s campaigning east of Hamburg in Schleswig-Holstein, where two polls this week suggest her party has a slim lead over the SPD ahead of a regional vote on May 7. At a CDU rally in the rural Westphalian town of Beverungen, Merkel reaffirmed her push to return migrants who don’t qualify for asylum and attacked the state’s Social Democrat-led government as soft on crime.

She said local officials “tried to sweep under the carpet” lapses in policing around mass sexual assaults on women in Cologne on New Year’s Eve in 2015, an incident that stoked an anti-immigration backlash. “The opportunity for improvement was there,” Merkel told the crowd on Thursday. “Things didn’t get better, so it’s time for a change.” As polls suggest that both Germany’s anti-immigration AfD party and her Social Democratic challenger Martin Schulz are in retreat for now, Merkel is using the opening to rally her CDU behind traditional themes of public safety. At a security conference this week, she said Europe’s haphazard policing of its outer borders compares unfavorably to U.S. immigration checks and must be strengthened.

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PricewaterhouseCoopers gets the first half right: as I’ve said numerous times, Greece cannot recover under present conditions imposed by the Troika. But then PwC loses the thread. Pity but predictable.

PwC: Greece Must Reform Or Forget Recovery (K.)

The extent of the destruction the Greek economy has suffered in the last few years, also undermining the effort to restructure it, becomes clear when comparing specific data, not on a quarterly or annual basis, but over the longer term. The country remains in a vicious cycle of recession, the economy will not grow by more than 1% this year, and any positive signs have proved temporary or insufficient to alter the overall picture. According to “Economic Outlook for Greece 2017-2018,” a study by PricewaterhouseCoopers (PwC), investment in the country’s economy dropped from €60 billion in 2010 to €20 billion last year. Investments are showing no signs of sustainable recovery as savings remain in the red and banks continue to deleverage their financial reports.

Consumption has been in constant decline, with a small recovery last year followed by a fresh drop in recent months. The average disposable income has gone down primarily due to the increased taxation and hikes in social security contributions, while the capital controls remain and banks are dependent on emergency liquidity assistance (ELA) for their financing. PwC notes that disposable incomes are unlikely to grow significantly anytime soon. There are just a few domestic investments that could fuel a recovery and no significant funding for investments is expected from abroad. At the same time it will be hard for fiscal performance to post a significant improvement without any deep structural reforms, including in the social security system.

The banks’ lack of liquidity, the delayed repayment of the state’s dues to its suppliers and the capital controls are likely to persist. PwC further argues that despite the delays in the second bailout review, Greece could avoid any unforeseeable tension and political events and achieve some growth, but not any greater than 1%, and the same challenges will remain next year too. An exit from the vicious cycle, says PwC, will require not only a change in the Greek debt’s sustainability terms, but also a drastic acceleration of structural reforms and the boosting of competitiveness and growth.

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Apr 182017
 
 April 18, 2017  Posted by at 9:26 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Albrecht Dürer Study of the left hand of an apostle (for the Heller Altar) c.1508

 


Trump’s Next Big Policy Reversal Could Be On The TPP (CNBC)
Strong Dollar Could Cause Bond Market Crash – Martin Armstrong (USAW)
Stocks, Bonds Diverge Over Trump Tax Reform, Stimulus Odds (CNBC)
We’re Borrowing Our Way to Economic Disaster – Stockman (DR)
BMO Bundles Uninsured Mortgages in a Canadian Bond First
UK Will Never Build Enough Homes To Keep Prices Down (Tel.)
Greek Insurance Company Can Become a Weapon for China in Europe (GR)
Greek Debt Must Be Sustainable For IMF To Join Bailout – Lagarde (R.)
Taxation is Theft (Napolitano)
Is America’s Alliance with Turkey Doomed? (SCF)
Erdogan Says He Doesn’t Care What Europe Thinks About Turkey’s Vote (BBG)
Opening Of UN Files On Holocaust Will ‘Rewrite Chapters Of History’ (G.)
Critically Endangered Species Poached In World’s Protected Natural Sites (AFP)
At Least 8,500 Migrants Rescued From Mediterranean In Three Days (CNN)

 

 

And why not? He flip-flopped 5 times in one day last week, and his popularity rose.

Trump’s Next Big Policy Reversal Could Be On The TPP (CNBC)

From NATO to health care, President Donald Trump has evidenced he is comfortable making major policy flip-flops. His most recent reversal came last week, when a U.S. Treasury report declined to name China as a currency manipulator despite Trump’s repeated promises to formally accuse Beijing — a signature pledge during his campaign trail. So, what could Trump backtrack on next? One analyst said he hopes it will be the Trans-Pacific Partnership, the world’s largest trade deal that Trump withdrew from in January on the claim that it would hurt U.S. manufacturing. “Whoever thought that Trump would let China, a rival, off the hook on currency? If he can do that with a country that’s clearly not a friend, maybe he could reconsider reversing himself on TPP for a friend like Japan,” Sean King, senior vice president of Park Strategies, told CNBC on Tuesday.

Japan was set to be a major beneficiary of TPP, particularly the country’s auto sector that would have obtained cheaper access to U.S. markets. Tokyo, which has long lamented the trade pact would be “meaningless” without the U.S., has decided to forge ahead with the other remaining 10 participating nations to revive the deal but many are doubtful of whether the TPP will be a game-changer in Washington’s absence. Trump still has time to change his mind on TPP, King warned, noting that the treaty text remains valid until February 2018. “Trump said [TPP] was a disaster, but I’m sure the other members would be willing to make concessions to get the U.S. back in, just like South Korea was willing to make concessions to Obama for his endorsement of the U.S.-Korea [free trade agreement],” King said. “He’s certainly made greater reversals and claimed victory. Why not do this for our friends who want to stand with us against countries like China and North Korea? I’m all for it.”

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“There is no place to go but the dollar at this point.” “..you don’t collapse the core economy. It’s always the peripheral coming in.”

Strong Dollar Could Cause Bond Market Crash – Martin Armstrong (USAW)

Renowned financial expert Martin Armstrong says the biggest risk out there is the effect a strong U.S. dollar has on the global bond market. Armstrong explains, “There’s these people who keep saying the dollar is going to crash. If the dollar crashes, the world is happier and basically celebrating. You have half the U.S. debt equivalent in emerging market debt issued in dollars. If the dollar goes up, they are in trouble. Then you are going to see sovereign defaults .. The U.S. is not going to default, but as you start defaults elsewhere outside the country, it makes people begin to get concerned about sovereign debt. Sovereign debt is the worst of all. It’s not secured. If the U.S. government defaulted on its debt, what would happen? You cannot go down to the National Gallery and start lifting Picassos.”

So, a bond market crash is a distinct possibility? Armstrong says, “Yes. All these things are contagions .. The real risk is coming from Europe and Asia. That is the real risk .. There is no place to go but the dollar at this point.” If and when a global collapse comes, it will come from China or Europe. Armstrong says, “Yes, because you don’t collapse the core economy. It’s always the peripheral coming in. It was the same thing in the Great Depression. It wasn’t the fact that the U.S. defaulted. The problem was the first bank that went down was in Austria, and it happened to be owned in part by the Rothschilds. When people hear a bank owned by the Rothschilds went down, people started to sell off all other banks. Then all the countries defaulted.”

Armstrong says there is going to be a major “monetary reform” in the not so distant future, and the U.S. will end up with a dollar for domestic use and a dollar used for international trade, sort of like a “domestic dollar” and an “international trade dollar.” Armstrong says, “Yes. All it is doing is replacing the dollar as the reserve currency. That would satisfy China and Russia, and it would simply be maintained by an international board. I strongly advise against the IMF. It’s way, way too corrupt.” So, is gold a good asset to have with a coming currency reset? Armstrong says, “Yes, at that point, you are talking about a hedge against government. When you go through these monetary crises, effectively, all tangible assets rise in price, not just gold and silver. . . .

Tangible assets have a value to everybody globally. The downside is on real estate. I would never put 100% of my money in real estate because it is not moveable.” Fast-forward to now, and Armstrong predicts, “The economy is not going to come back. We are not going to see economic growth.” Where is all this taking the world? Armstrong, who is an expert on economic and political cycles, says, “You have to understand what makes war even take place? It does not unfold when everybody is fat and happy. Simple as that. You turn the economy down, and that’s when you get war. It’s the way politics works.”

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Are bonds the lesser bubble then?

Stocks, Bonds Diverge Over Trump Tax Reform, Stimulus Odds (CNBC)

Optimism that the Trump administration will be able to drive through a hefty pro-growth plan or tax package this year is fading by the day. Treasury Secretary Steve Mnuchin on Monday became the latest official to dial back expectations for a time table that included a tax plan by August. In an interview with the Financial Times, Mnuchin said getting tax reform by August was an “aggressive timeline” and would probably be delayed because of health care. In the bond market, there was little surprise. Bond yields, which move inversely to prices, have been falling for weeks as traders have become more skeptical that Washington will adopt any pro-growth policy this year. Stocks, meanwhile, have traded side ways recently, and the S&P 500 is still up 10% since election day, boosted by hope of fiscal stimulus and tax cuts.

Mnuchin’s remarks did not surprise markets, and, in fact, stocks rallied hard based on his comments that Treasury is looking at ways to raise funds to pay for the tax plan without the controversial border-adjustment tax. “That’s exactly why the [stock] market rallied. People hate the border-adjustment tax,” said Peter Boockvar at Lindsey Group. The tax is part of the Congressional tax reform plan and would slap a 20% tax on all imports but not tax exports. Opponents claim it could cause inflation and penalize consumers, while proponents say it would encourage more manufacturing in the U.S. and level the playing field for U.S. companies. The market was not surprised by the push back in the timeline for tax reform, since President Trump last week said health care would come ahead of taxes. Ever since Congress failed to vote on health care in March, the market has become increasingly doubtful a tax plan would get done any time soon.

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“Donald Trump is a tourist in the Imperial City of Washington D.C. He’s flipping, flopping and making it up as he goes.”

We’re Borrowing Our Way to Economic Disaster – Stockman (DR)

David Stockman joined the Fox Business and the show Mornings with Maria to discuss the tax reform highlights for the current White House and GOP platform and what he views as a real threat of economic disaster in the U.S. During the discussion Stockman highlights what to expect from a border adjustment tax possibility, the creation of jobs and the impact on Wall Street in the age of Donald Trump. Stockman takes to point the cause of tax reform in the current White House. He begins the segment noting, “I think the border adjustment tax will come out of the retailers margin – and it should. We do need revenue. We need to have a consumption tax, or a value added tax or a border adjustment tax – so that we may reduce taxation on wages and income. We desperately need more jobs in this country.

If you keep taxing the payroll at 15.5%, which we’re doing today, you’re not going to encourage the creation of jobs. You’re going to take what jobs there are and impact the take-home pay of those jobs.” David Stockman was then asked about his read on Donald Trump’s border tax proposals and the possibility of what the President described as a ‘reciprocal tax.’ “He has no idea what he’s talking about. He’s making it up as he goes along. Donald Trump is a tourist in the Imperial City of Washington D.C. He’s flipping, flopping and making it up as he goes.” “The border adjustment tax, or a value added tax is the way to get at the problem he’s talking about. Every other country in the world has a value added tax. You take it off the exports and put it on the imports. There is a proper way to do it and he ought to allow the republicans on the hill who understand that to move forward.

The idea that we can have a multi-trillion dollar tax cut and not pay for it with new revenue or spending cuts is dangerous. We are at $20 trillion in debt and it is headed to $30 trillion.” When asked about the pragmatic nature of a border adjustment tax, Stockman pressed “I think it’s basic math. If you want to cut the corporate tax rate to 20%, which I think would be wonderful, you’ve got to raise $2 trillion over the next ten years to pay for it. Where are you going to get the money? Are you going to close loopholes? I doubt that. The lobby effort will kill that. You need a new revenue source. If you don’t do that you’re stuck with the current tax system. You’re stuck with massive deficits that are going to kill this country. We are basically borrowing our way to economic disaster.”

[..] We are so “deep in the soup” debt wise and have such a massive, and building deficit that you have to have revenue neutral tax cuts. The border adjustment tax is dead. Without that you are not going to reduce the corporate tax rate down to 20% or 15%, etc.” “The Trump reflation fantasy is over. It is all downhill from here. The market it heading down 20 to 30% down, the 1600 on the S&P. We’re going to have negative shock after negative shock. It is about time they sober up. On April 28th the U.S government is going to shut down. That will be spring training on the continuing resolution until we get to MOAD in the summer.”

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Never been tried before.

BMO Bundles Uninsured Mortgages in a Canadian Bond First

Bank of Montreal is bundling uninsured residential mortgages into bonds in what could be the start of a new financing market for Canadian banks as the government scales back its support for home loans. The Toronto-based lender is planning to sell debt backed by nearly C$2 billion ($1.5 billion) of prime uninsured mortgages. That’s a new development in a country where big banks have historically packaged government-insured mortgages into bonds. If the Bank of Montreal deal is successful, other Canadian banks may follow its lead, providing banks with more financing to keep making mortgages, said Marc Goldfried, CIO at Canoe Financial. The net result may be that housing prices in Canada keep rising. “Right now the banks don’t have any other way to fund it, so there’s probably some form of internal limit on this kind of mortgage financing they’ll do,” Goldfried said by phone from Toronto.

But the Bank of Montreal deal may find headwinds, said Paul Gardner, partner and portfolio manager at Avenue Investment. Canada last year tightened access to the federal insurance to help tamp down rapid home price growth in areas like Toronto and Vancouver. The federal government or Ontario could craft more legislation to cool the housing market, Gardner said. The province’s finance minister is considering a foreign-buyers tax like the one that helped cool home prices in Vancouver. Canadian finance minister Bill Morneau, Ontario finance minister Charles Sousa, and Mayor John Tory are meeting in Toronto Tuesday to discuss the housing market in the Greater Toronto Area. “Residential mortgages, my God, it’s the last thing you want to invest in right now,” Gardner said by phone from Toronto. “When the capital markets are flush with cash, it makes sense that they would try at least to issue this stuff.”

[..] The bank will offer to renew the mortgage loans at the end of their term if the borrower is not in default, and if the borrowers satisfies the bank’s underwriting criteria at the time, which mitigates some of the risk of borrowers not being able to refinance. Canadian mortgage loans generally have a five-year term, and borrowers pay down their principal at a 25-to-30-year pace meaning they usually have to refinance a significant portion of their loan every five years.

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Oh boy. If these are the kind of people you rely on for advice, you’re in trouble.

UK Will Never Build Enough Homes To Keep Prices Down (Tel.)

Britain will never build enough houses to make property affordable for young people, according to research. A study presented to the Royal Economic Society’s annual conference said those hoping to get on the ladder may have to rely on windows of opportunity created by periodic slumps in the market. However, the overall trend will remain for residential property price rises to outpace salary growth, according to economists at the University of Reading. “The increases in housing supply required to improve affordability have to be very large and long-lasting; the step change would need to be much larger than has ever been experienced before on a permanent basis,” said Geoffrey Meen, Alexander Mihailov and Yehui Wang. The government has discussed moves to increase the supply of homes but the changes are on far too small a scale to act as a brake on price rises.

House prices in the UK stood at an average of £217,500 according to the Office for National Statistics. That is 7.7-times the average full-time salary in the UK of £28,200. By contrast in 2005 the average home cost £150,500, approximately 6.5-times the then-average full time salary of £22,888. Former Bank of England policymaker Kate Barker believes the country needs an additional 60,000 homes per year on top of those already being built. But the new paper argues there is little chance of this happening. “Although higher levels of house building are certainly desirable, the paper shows that there is a limit to what can be achieved by this route,” the report found. “The required increase in supply to stabilise the price to income ratio … is not feasible – permanent increases in construction would be required that have never been achieved in history.”

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The risks of garage-selling an entire country.

Greek Insurance Company Can Become a Weapon for China in Europe (GR)

It is no secret that the Chinese see Greece as a country that could help them get their foot (and saying) in the European Union. In GreekReporter’s recent documentary Athens Chinatown, it is the Cosco managing director in Greece who says the mediterranean country offers a strategic location and it was this factor that attracted Cosco to take over the Greek port of Piraeus. Furthermore, the editor of China-Greece times also states that the Chinese “see Greece as the gate to Europe.” The past few years, silently, China has looked into many Greek investments. After acquiring the Greek Port of Piraeus, now three Chinese companies are bidding for Greece’s biggest private insurer, Ethniki Asfalistiki. However what looks like a simple bidding, could possibly be of great importance to the future of Greece.

Established in 1891, Ethini Asfalistiki has invaluable contribution to the Greek economy for over a century. It is the largest insurance company in the country with total premiums of over €440 million and 18% market share, while it is in cooperation with the banking network for the sale of bank assurance products, provides access to a broad distribution network of about 500 offices. The estimated earnings for 2016 are €52 million. Ethniki Asfalistiki is also a sister company of Greece’s Ethniki Bank (National Bank), one of Greece’s four systemic banks. Whoever gets this bid will most likely acquire the bank as well. At the same time, another Chinese group has shown interest for Piraeus Bank. If they manage to close that deal then two out of Greece’s four main banks will be controlled by the Chinese. Eventually they will be able to have an important saying in the country’s economy, and maybe that’s what they are aiming for.

While the Chinese have done serious investments in Greece, this one, in combination with everything else they control can become a decisive factor on how much of a saying does Greece want the Chinese to have on the country’s future. Letting Ethniki Asfalistiki in the hands of China is probably allowing too much of their foothold in the Greek economy, which would mean a great political influence as well. China of course would like to be able to control and play with Greece’s economy in order to advance their interests. But it is dangerous for Greece when the country’s future becomes another argument on a geostrategic dialogue between the big powers. A forced Grexit threat, for example, could definitely be on the table and be directed to the EU or the U.S.A.

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That record is definitely broken beyond repair.

Greek Debt Must Be Sustainable For IMF To Join Bailout – Lagarde (R.)

The IMF will not take part in a bailout program for Greece if it deems the country’s debt is unsustainable, the international lender’s chief Christine Lagarde said in an interview published on Tuesday. Greece needs to implement reforms agreed by euro zone finance ministers earlier this month to secure a new loan under its €86 billion bailout programme, the third since 2010. The loan is needed to pay debt due in July, but talks continue and the IMF has not yet decided whether to join the bailout. The fund’s participation is seen as a condition for Germany to unblock new funds to Greece. “If Greek debts are not sustainable based on IMF rules and reasonable parameters, we will not take part in the program,” Lagarde told German newspaper Die Welt when asked if the IMF would take part in the plan if Greek debt is not restructured.

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Minor problem: so many people are dependent on Social Security. Highly relevant going forward.

Taxation is Theft (Napolitano)

With a tax code that exceeds 72,000 pages in length and consumes more than six billion person hours per year to determine taxpayers’ taxable income, with an IRS that has become a feared law unto itself, and with a government that continues to extract more wealth from every taxpaying American every year, is it any wonder that April 15th is a day of dread in America? Social Security taxes and income taxes have dogged us all since their institution during the last century, and few politicians have been willing to address these ploys for what they are: theft. During the 2012 election, then-Texas Gov. Rick Perry caused a firestorm among big-government types during the Republican presidential primaries last year when he called Social Security a Ponzi scheme. He was right. It’s been a scam from its inception, and it’s still a scam today.

When Social Security was established in 1935, it was intended to provide minimal financial assistance to those too old to work. It was also intended to cause voters to become dependent on Franklin Delano Roosevelt’s Democrats. FDR copied the idea from a system established in Italy by Mussolini. The plan was to have certain workers and their employers make small contributions to a fund that would be held in trust for the workers by the government. At the time, the average life expectancy of Americans was 61 years of age, but Social Security didn’t kick in until age 65. Thus, the system was geared to take money from the average American worker that he would never see returned.

Over time, life expectancy grew and surpassed 65, the so-called trust fund was raided and spent, and the system was paying out more money than it was taking in – just like a Ponzi scheme. FDR called Social Security an insurance policy. In reality, it has become forced savings. However, the custodian of the funds – Congress – has stolen the savings and spent it. And the value of the savings has been diminished by inflation. Today, the best one can hope to receive from Social Security is dollars with the buying power of 75 cents for every dollar contributed. That makes Social Security worse than a Ponzi scheme. You can get out of a Ponzi investment. You can’t get out of Social Security. Who would stay with a bank that returned only 75% of one’s savings?

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Essential reading on how the region came to be what it is.

Is America’s Alliance with Turkey Doomed? (SCF)

Shortly before his death in 1869, the pro-Western former Ottoman grand vizier and foreign minister Keçecizâde Mehmed Fuad Pasha commented, “It appeared preferable that . . . we should relinquish several of our provinces rather than see England abandon us.” In response to this commitment, the British made the territorial integrity of the Ottoman Empire against Russian aggression a key pillar of their foreign policy. Yet, in spite of the significance that Istanbul and London attached to their alliance in the 1850s, both sides were determined to eradicate each other by 1914. As Prime Minister Herbert Asquith put it, Britain was “determined to ring the death-knell of Ottoman dominion, not only in Europe, but in Asia as well.” In response, the Ottoman government described the British as “the greatest enemy” of not only the sultan’s empire but also of Islam itself.

The Anglo-Russian Great Game, waged across the vast lands stretching from Europe to Central Asia during the nineteenth century, rendered the Ottoman Empire an invaluable strategic asset in the eyes of British policymakers. Although the British public frowned upon the Ottoman Turks’ “peculiar Oriental ways,” and regarded them as “uncivilized Mohammedan barbarians” for their treatment of Christian subjects, Whitehall recognized that they could serve as a bulwark against Russia. The Ottomans, likewise, recognized the value of having Britain as an ally given the looming threats posed by their neighbors, Russia and Austria. Though the Ottomans previously regarded the British as an untrustworthy non-Muslim power, the cooperation was a win-win venture, and the two powers agreed to partner economically and militarily. The strategic collaboration between them reached its zenith in 1853 when, along with other allies, they successfully waged war against Russia in Crimea.

America’s relative indifference to the Ottoman Empire and the early Turkish Republic was reminiscent of Otto von Bismarck’s famous remark that European Turkey “was not worth the bones of a single Pomeranian grenadier.” The United States and the Ottoman Empire fought World War I on opposite sides, but did not clash with each other. Moreover, while President Woodrow Wilson discussed the future of the Ottoman Empire in his Fourteen Points, the United States did not actively participate in its partition. In 1922–23, Washington merely sent observers to the Conference of Lausanne, which produced the final peace treaty between the victors of World War I and Turkey.

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Only Trump has congratulated him.

Erdogan Says He Doesn’t Care What Europe Thinks About Turkey’s Vote (BBG)

Turkish President Recep Tayyip Erdogan treated a crowd of supporters gathered outside his presidential palace on Monday evening to a speech laced with invective against Europe, saying his victory in a referendum on Sunday took place under conditions that were democratic beyond compare. Erdogan belittled both domestic and foreign critics of the voting process, which culminated in a slim majority of Turks approving changes to 18 articles of the constitution that concentrate more power in his hands. A monitoring group from the Organization for Security and Cooperation in Europe – which said the referendum took place on an “unlevel playing field” – “should know its place,” he said. “We don’t care about the opinions of ‘Hans’ or ‘George,’” Erdogan said, using the names as stand-ins for his European critics. “All debates about the constitutional referendum are now over.”

The OSCE’s head of mission, Tana de Zulueta, said on Monday that freedom of expression was inhibited during the campaign, that the conditions of the vote fell “well short” of international standards, and that the OSCE was inhibited from the election monitoring that it was invited to do. The vote was held under a state of emergency that’s been in place since just after a failed coup last July, and which Turkey’s security council will meet tonight to consider extending. Since the coup attempt, some 40,000 of Erdogan’s alleged opponents have been jailed, and at least 100,000 more fired by decree. The European monitoring organization’s criticisms were echoed by opposition parties inside Turkey, which are asking for the result of the vote to be annulled, as well as by the U.S. state department, whose spokesman Mark Toner cited “observed irregularities” in the way the election was carried out.

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Wonder how redacted the files are.

Opening Of UN Files On Holocaust Will ‘Rewrite Chapters Of History’ (G.)

War crimes files revealing early evidence of Holocaust death camps that was smuggled out of eastern Europe are among tens of thousands of files to be made public for the first time this week. The once-inaccessible archive of the UN war crimes commission, dating back to 1943, is being opened by the Wiener Library in London with a catalogue that can be searched online. The files establish that some of the first demands for justice came from countries that had been invaded, such as Poland and China, rather than Britain, the US and Russia, which eventually coordinated the post-war Nuremberg trials. The archive, along with the UNWCC, was closed in the late 1940s as West Germany was transformed into a pivotal ally at the start of the cold war and use of the records was effectively suppressed.

Around the same time, many convicted Nazis were granted early release after the anti-communist US senator Joseph McCarthy lobbied to end war crimes trials. Access to the vast quantity of evidence and indictments is timed to coincide with the publication on Tuesday of Human Rights After Hitler: The Lost History of Prosecuting Axis War Crimes by Dan Plesch, a researcher who has been working on the documents for a decade. The documents record the gathering of evidence shortly after the UN was founded in January 1942. They demonstrate that rape and forced prostitution were being prosecuted as war crimes in tribunals as far apart as Greece, the Philippines and Poland in the late 1940s, despite more recent suggestions that this was a legal innovation following the 1990s Bosnian conflict.

[..] By the late 1940s, the US and British governments were winding down prosecutions of Nazis. President Harry Truman made anti-communism, rather than holding Nazis to account, a priority, Plesch says. “Even action against the perpetrators of the massacre of British RAF officers attempting to escape from prison camp Stalag Luft III, a flight made iconic by films such as The Great Escape, was curtailed.”

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One of the most important questions we can ask ourselves, said polio vaccine pioneer Dr Jonas Salke, is “Are we being good ancestors?”

Critically Endangered Species Poached In World’s Protected Natural Sites (AFP)

Illegal poaching, logging and fishing of sometimes critically endangered species is taking place in nearly half of the world’s most protected natural sites, environmental campaigners WWF warned Tuesday. Natural world heritage sites such as Australia’s Great Barrier Reef, Virunga National Park in the Democratic Republic of Congo and the Galapagos Islands support large populations of rare plant and animal species. But in a report WWF said species listed by the Convention on International Trade in Endangered Species (CITES) faced the threat of illegal harvesting and trafficking in 45% of the more than 200 natural world heritage sites on the planet. “Natural world heritage sites are among the most recognised natural sites for their universal value,” said Marco Lambertini, head of WWF International.

“Yet many are threatened by destructive industrial activities and… their often unique animals and plants are also affected by overexploitation and trafficking,” he added, stressing that “unless they are protected effectively, we will lose them forever.” Almost a third of the world’s remaining 3,890 wild tigers and 40% of all African elephants are found in UNESCO-listed sites, which are often a last refuge for critically endangered species such as the Javan rhino in Indonesia, the report said. Illegal poaching, logging and fishing inside such sites is therefore “driving endangered species to the brink of extinction”, WWF warned. The species most at risk because of illegal activity within natural world heritage sites is probably the vaquita, the world’s smallest porpoise, which is indigenous to Mexico’s Gulf of California, Colman O’Criodain, WWF’s wildlife policy manager, told AFP.

While the vaquita itself is not being fished illegally, it is being caught in nets used to poach the totoaba – a giant Mexican fish coveted in China for its swim bladder, which itself is considered a threatened species. “When I started working on the issue of vaquita two years ago, there were 96 left. Now it is less than 30,” O’Criodain said, adding that at the current rate the tiny porpoise could be extinct within a year. According to Tuesday’s report, poaching of vulnerable and endangered animal species such as elephants, rhinos and tigers occurs in 42 of the UNESCO-listed natural sites, while illegal logging of rosewood, ebony and other valuable plant species happens in 26 of them. Illegal fishing, including of sharks and rays occurs in 18 of 39 listed marine coastal world heritage sites, it said.

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Until the world finally has the emergency UN conference I’ve been calling for, I don’t see this change. It’s a global issue, and no-one wants to touch it because it’s so politically toxic.

At Least 8,500 Migrants Rescued From Mediterranean In Three Days (CNN)

Italian authorities were still bringing migrants and refugees to shore Monday after one of the busiest weekends ever for rescue services operating in the central Mediterranean sea. At least 8,500 refugees and migrants were plucked from small boats over the past three days in 73 separate rescue operations, the Italian Coastguard told CNN Monday. Thirteen bodies were recovered, including a pregnant woman and an eight-year-old boy. It is not known how many died before they were sighted. One 35-year-old woman from the Ivory Coast was giving birth as she was pulled aboard a rescue ship, Italian newspapers reported. The youngest migrant rescued over the weekend was just two weeks old. Asar was rescued along with her mother by the Migrant Offshore Aid Station (MOAS).

The Sea-Eye, a German charity boat that helped bring to safety hundreds of people stranded on rubber dinghies off the coast of Libya Sunday said in a statement it still had 210 on board “crowded closely together, exposed to the wind, the waves and the cold without protection. It said the Italian tanker La Donna and the coast guard ship CP920 was now accompanying the boat, whilst it waits for two smaller boats from the Italian island of Lampedusa, to bring the migrants to shore. The Italian Coastguard said 1004 migrants rescued on the board the ship the Panther would be disembarked in Messina in Sicily shortly. Frontex, the European Border and Coast Guard Agency, said in a statement it rescued more than 1,400 migrants in the central Mediterranean in 13 search and rescue operations from Friday to Sunday.

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Jun 052016
 
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Unknown General Patrick’s headquarters, City Point, Virginia 1865


World Faces Pensions Crisis, Warns OECD (Tel.)
The Case For A Super Glass-Steagall (David Stockman)
Payday Loans a Crony Capitalist Target (WSJ)
What Makes this Jobs Report so Truly Ugly (WS)
Americans Not In The Labor Force Soar To Record 94.7 Million (ZH)
Higher Australian Household Debt Mounts To ‘Unsustainable’ Levels (Aus.)
A Guaranteed Income for Every American (WSJ)
Italy And France Are Urging Caution Over Bank Capital (R.)
Self-Harming Taxation, Or The Liquidation Of The Kulaks (Georganas)

The OECD is late to the game, and fails to comprehend the scale and urgency of that crisis.

World Faces Pensions Crisis, Warns OECD (Tel.)

The global pensions crisis has been laid bare by new analysis that shows people retiring today can expect half the income of those who became pensioners at the start of the millennium. The stark findings by the OECD will be presented in a report this week that highlights the impact of ultra-low interest rates on global retirement incomes. It shows that a person buying an annuity today who saved 10pc of their wages into a pension for 40 years can expect just over half the earnings of someone who saved the same amount but retired 15 years ago. The think-tank’s analysis of defined contribution schemes, where the value of pension pots can rise or fall depending on how investments perform, highlights the challenge faced by many pension providers in the current low growth and low inflation environment

Pension funds invest around 40pc of their assets in fixed income securities, according to the OECD, including lower yielding government bonds. “We’ve had more than half a decade of very low interest rates and that means someone who has been putting money into a savings account or into a pension fund – the value of their lifetime retirement is about half the value of someone who retired in 2000,” said Catherine Mann, the OECD’s chief economist. Tom McPhail, head of pensions research at Hargreaves Lansdown, said the OECD’s findings were consistent with its UK research. “Someone that started putting money in a pension in the 1960s was investing at a time when baby boomers were entering the workforce. But the last 16 years and the financial crisis have had an extremely negative impact on asset prices.”

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Sometime down the line, the big banks will be broken up. But it’s not something the politicial system can achieve with a few votes. Because it is owned by those same banks.

The Case For A Super Glass-Steagall (David Stockman)

Donald Trump can instantly get to the left of Hillary with respect to Wall Street and the one percenters by embracing Super Glass-Steagall. The latter would cap U.S. banks at $180 billion in assets (<1% of GDP) if they wished to have access to the Fed’s discount window and have their deposits backed by FDIC insurance. Such Federally privileged institutions would also be prohibited from engaging in trading, underwriting, investment banking, private equity, hedge funds, derivatives and other activities outside of deposit taking and lending. Instead, these latter inherently risky economic functions would be performed on the free market by at-risk banks and financial services companies.

The latter could never get too big to fail or to manage because the market would stop them first or they would be disciplined by the fail-safe institution of bankruptcy. No taxpayer would ever be put in harms’ way of trades like those of the London Whale. By embracing this kind of Super Glass-Steagall Trump would consolidate his base in the flyover zones and reel in some of the Bernie Sanders throng, too. The latter will never forgive Clinton for her Goldman Sachs speech whoring. And that’s to say nothing of her full-throated support for the 2008 bank bailouts and the Fed’s subsequent giant gifts of QE and ZIRP to the Wall Street gamblers. Besides, breaking up the big banks and putting Wall Street back on a free market based level playing field is the right thing to do.

Today’s multi-trillion banks are simply not free enterprise institutions entitled to be let alone. Instead, they are wards of the state dependent upon its subsidies, safety nets, regulatory protections and legal privileges. Consequently, they have gotten far larger, more risky and dangerous to society than could ever happen in an honest, disciplined market. Foremost among these artificial props is the Fed’s discount window. The latter provides cheap, unlimited funding at a moment’s notice with no questions asked. The purpose is to insure banking system liquidity and stability and to thwart contagion, but it also nullifies the essential bank management discipline and prudence that comes from fear of depositor flight.

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The big boys smell big profits.

Payday Loans a Crony Capitalist Target (WSJ)

To voters living comfortably in Cambridge, Mass., or the suburbs of Seattle, the payday lending crackdown sounds just right: Those storefront entrepreneurs of dubious extraction are preying upon the poor. They should be banned. But for the Consumer Financial Protection Bureau, the creation of Dodd-Frank which has been busy demonstrating the dangers of an unrestrained regulatory state, a slogan that polls well with liberal voters is only a starting point. The end result of its new payday rules, like all Obama regulatory endeavors, is to concentrate more power in the hands of Washington lobbyists and politicians and the companies that can afford to pay for them.

CFPB director Richard Corday’s 1,300-page regulatory edict will require payday lenders, an industry largely made up of thousands of storefront operators, to run full credit checks on prospective borrowers (average loan $392) to test their sources of income, need for the loan, and ability to keep financing their living expenses while paying it back. Perversely, this will make it hard or impossible to serve those customers who use the payday lending service most appropriately—who borrow when pinched but then promptly repay and don’t roll over their debt. The industry will become more focused on retaining habitual users, those who take out loans many times a year and get caught in “debt traps,” continually rolling over what are supposed to be short-term, high-margin loans.

The massive record-keeping and data requirements that Mr. Corday is foisting on the industry will have another effect: It will drive out the small, local players who have dominated the industry in favor of big firms and consolidators who can afford the regulatory overhead. It will also favor companies that can substitute big data for local knowledge like, like . . . Well, like LendUp, the Google-backed venture that issued a statement Thursday applauding the CFPB rules. Google’s self-interest has become a recurrent theme in Obama policy making, not surprising considering a study in April that found that 250 Googlers had come or gone from administration employment, and Google lobbyist visits to the Obama White House vastly outnumbered those of any other company.

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“Something has to give – and it’s starting to..”

What Makes this Jobs Report so Truly Ugly (WS)

[..] ..we suspected that the March jobs report, released in early April, would be a debacle. We based this on an analysis of the divergence over time between the reports issued by payroll processing company ADP and the jobs reports issued by the Bureau of Labor Statistics. That divergence had been going on for months. Eventually it reverts to the mean. We postulated that March would be that month. Instead, it happened two months behind schedule, so to speak, as today’s jobs report was precisely that sort of debacle. This is what was “expected”: The Labor Department was expected to report, according to Wall Street economists, a “moderate” gain of 158,000 jobs in May, “moderate” given that the Verizon strike kept 35,000 workers off their jobs. The “whisper number” was around 200,000 jobs.

And this is what we got: The BLS reported that the economy had added 38,000 jobs, the lowest since September 2010. Furthermore, the April job gains of 160,000 were chopped down by 37,000 and the March job gains of 208,000 were chopped down by 22,000. Hence, with 59,000 jobs revised away, and with only 38,000 jobs “created” in May, the net total in today’s report was a net loss of 21,000 jobs. We haven’t seen that since the Financial Crisis. A number of sectors, including manufacturing, shed jobs, and the labor participation rate dropped for the second month in a row, to 62.6%. Just about the only good number was the magic headline unemployment rate, which fell sharply, from 5% in April to 4.7%, the lowest since the Great Recession began, leaving some folks scratching their heads and searching for answers.

[.] Staffing agencies are cutting back because companies no longer need that many workers. Total business sales in the US have been declining since mid-2014. Productivity has been crummy and getting worse. Earnings are down for the fourth quarter in a row. Companies see that demand for their products is faltering, so the expense-cutting has started. The first to go are the hapless temporary workers. This is the reality for businesses: The chart below shows the gaping disconnect between declining total business sales (all businesses, not just the S&P 500 companies) and total nonfarm employment. Something has to give – and it’s starting to:

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Anything else is just noise. Unemployment stats become illusionary.

Americans Not In The Labor Force Soar To Record 94.7 Million (ZH)

So much for that much anticipated rebound in the participation rate. After it had managed to rise for 5 months in a row through March, hitting the highest level in one year, the disenchantment with working has returned, and the labor force participation rate promptly slumped in both April and May, sliding 0.4% in the past two months to 62.60%, just shy of its 35 year low of 62.4% hit last October.

This can be seen in the surge of Americans who are no longer in the labor force, who spiked by 664,000 in May, hitting an all time high of 94.7 million. As a result of this the US labor force shrank by over 400,000 to 158,466K, down from 158,924K a month ago, and helped the unemployment rate tumble to 4.7%, the lowest level since 2007. Adding the number of unemployed workers to the people not in the labor force, there are now over 102 million Americans who are either unemployment or no longer looking for work.

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Cooked.

Higher Australian Household Debt Mounts To ‘Unsustainable’ Levels (Aus.)

‘If something cannot go on forever, it will stop’, said Herbert Stein, economic adviser to presidents Nixon and Ford. Stein was mocking concerns about the “unsustainable” US current account and budget deficits in the late 1980s. He had a point, both grew much larger. Calling things unsustainable is often a cover for expressing disapproval for other reasons. The federal budget has been in surplus in fewer than 20 of the 116 years since Federation, so deficits are clearly sustainable. What isn’t sustainable is a rising stock of public debt (and interest payments) as a share of national income. Both main political parties are rightly and routinely admonished for doing little to stem the rising tide of federal and state government debt, which has tripled to about 34% of GDP over the past 10 years.

But the spectacular ascent of private debt, which has doubled to about 160% of GDP over the past 20 years, hasn’t rated a mention by either side of politics in this election. Public debt peaked above 170% of GDP during the Great Depression but private, and in particular household, debt has never been remotely close to its present proportion. Its previous peak of just over 60% occurred in the 1880s property boom, and we know what happened after that. Almost all the increase in private debt since the 1990s has entailed households borrowing to buy houses to live in and (increasingly) to rent out. Ever lower interest rates and financial deregulation have fuelled a mutually reinforcing explosion of dwelling prices and debt.

Finance textbooks teach that banks lend to businesses, which reinvest the funds in the economy. But the reality is that they lend to households to buy and invest in houses. In the past 20 years the stock of business credit, $852 billion in April, has dropped from half to a third of the total lending. Australian households overtook the Swiss as the world’s most indebted this year, with outstanding debt equivalent to 125% of GDP and no let up in sight. Combined owner-occupier and investor loans outstanding have risen from $1.2 trillion to $1.6 trillion in the past five years. While the national accounts this week showed gross national income shrank 0.4% over the year to March, housing credit increased 7.2%.

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A conversation that must and will be conducted. This from Charles Murray is not all that bad.

A Guaranteed Income for Every American (WSJ)

First, my big caveat: A UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them. If the guaranteed income is an add-on to the existing system, it will be as destructive as its critics fear. Second, the system has to be designed with certain key features. In my version, every American citizen age 21 and older would get a $13,000 annual grant deposited electronically into a bank account in monthly installments. Three thousand dollars must be used for health insurance (a complicated provision I won’t try to explain here), leaving every adult with $10,000 in disposable annual income for the rest of their lives. People can make up to $30,000 in earned income without losing a penny of the grant.

After $30,000, a graduated surtax reimburses part of the grant, which would drop to $6,500 (but no lower) when an individual reaches $60,000 of earned income. Why should people making good incomes retain any part of the UBI? Because they will be losing Social Security and Medicare, and they need to be compensated. The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper.

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After bringing down Greek banks, they now try to keep their own standing.

Italy And France Are Urging Caution Over Bank Capital (R.)

Excessive capital requirements can backfire, Italy’s economy minister said on Saturday, defending a joint French-Italian proposal to cap the amount of reserves that euro zone banks should have to wipe out before they can be rescued. Rules in force since the beginning of this year require euro zone banks to respect a minimum requirement for their own funds and eligible liabilities (MREL) in order to qualify for access to a bank-financed rescue fund in case of failure, and avoid full liquidation. In a joint paper, seen by Reuters, Paris and Rome raised doubts on the rationale of introducing a floor for MREL and urged instead a cap that should not exceed 8% of banks’ debt. IEconomy Minister Pier Carlo Padoan told an economic conference on Saturday there was a risk banks could be asked to raise too much capital too quickly, which would leave them vulnerable if tough markets made it hard to raise funds.

“Instead of stronger banks we end up with weaker ones,” he said. “The French-Italian initiative at this very delicate stage of the creation of a banking union is a voice calling for caution. We’re all going in the same direction, a stronger banking system, let’s do so at the right pace, let’s not exaggerate please.” Following the euro zone debt and banking crisis, EU countries have designed a banking union meant to strengthen lenders’ financial stability, but have not yet brought the plan to completion. Germany, the dominant power in the euro zone, is dragging its feet on a European bank deposit guarantee scheme, widely regarded as a missing link in the project. “If we don’t accept risk-sharing why are we wasting our time with the euro?,” Padoan said.

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A hilarious example of where EU-induced Greek tax measures can and do lead.

Self-Harming Taxation, Or The Liquidation Of The Kulaks (Georganas)

[..] Even the infamous case of the VAT in Greece (which has risen to be among the highest in the EU) does not yield a clear negative fiscal effect. Of course it’s not enough to show that VAT revenues fell after the rates rose, since at the same time, many other factors changed, harming the Greek economy. It is notoriously hard to isolate the effect of every change, the same way as it’s hard to predict what the effect of smaller fiscal deficits in the middle of a multidimensional crisis will be (by the way that’s the issue at the heart of the whole fiscal multipliers debate, involving the IMF, Greece and the EU).

In the recent Ryanair case though, economic investigators would probably be able to find a smoking gun. Because of a €12 tax per passenger, the no-frills airline recently decided to reduce its flights to Greece. The total damage for the country due to lower visitor numbers is clearly higher than the benefit of the tax revenue. This is an extreme case of a long bureacratic tradition in Greece, agencies taking measures with a. a very narrow own-receipts goal, which is also viewed b. in a very myopic sense, ignoring second-level effects (what we call general equilibrium effects) Typically, an agency or ministry that wants to be able to boast of “results” takes a measure with immediate benefit for itself, that could however be causing a net loss for the country as a whole, or even its own government.

A classic example is the “voluntary exit”: civil servants at government agencies or utilities being let go to lower the salary item on the agency’s budget (as the government has requested), but increasing the burden for pension funds, that again is covered by the same government, often at greater cost. In the tourism sector, the €12 per capita tax is negligible next to the more than €700 that the average European summer visitor spends in the country (that’s why in Hania, for example, hoteliers have allied to subsidize Ryanair’s activity). Even if the government ignores the country’s benefit and only cares about its tax revenues, it seems to be ignoring the €300 of additional VAT and income tax that every tourist brings.

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