Nov 122017
 
 November 12, 2017  Posted by at 9:47 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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Fifth Avenue at 25th Street. New York City 1905

 

“Bitcoin Cash” Quadruples in 2 Days. Bitcoin Crashes by $35 Billion (WS)
Podesta Group “Will Not Exist At The End Of The Year” (ZH)
Global Banks, City of London Raise “Disorderly Brexit” Alarm (DQ)
Forty UK Conservative Lawmakers Ready To Oust PM May (R.)
Theresa May Faces Defeat By MPs Demanding Vote On Final Brexit Deal (G.)
Sack Boris Johnson For Shaming Our Nation, Jeremy Corbyn Tells PM (G.)
German War Reparations ‘Matter Of Honor’ For Poland (R.)
750,000 Protesters Flood Barcelona Demanding Release Of Catalan Leaders (R.)
EU Has Become A ‘Caricature’ Of Its Founding Values – Puidgemont (RT)
Trafficking Laws ‘Target Refugee Aid Workers In EU’ (G.)
Greece’s Middle Incomes Go Under The Knife (K.)

 

 

Safe to say that Wolf Richter is not a big fan.

“Bitcoin Cash” Quadruples in 2 Days. Bitcoin Crashes by $35 Billion (WS)

I’m writing this Saturday night, Pacific Time, and cryptos never rest. By Sunday morning, “Bitcoin Cash” might have soared another $1,000 or crashed by $1,000; and bitcoin might have soared or crashed by another $1,500. Neither would surprise me, the way these things are going. One thing for sure, you’re not watching grass grow. Bitcoin Cash, which was split from bitcoin in August, began surging from $630 on Thursday mid-day Pacific Time. Within 24 hours, it jumped 50% (or by $320) to $950. It then lost steam. But in the wee hours of Saturday morning, it fired up again and soared another $450 to $1,400 by late morning. It then fell off, but Saturday night, it returned to form and spiked to $2,448 at the moment, nearly quadrupling in two days. Here is what the move looks like in US dollars in a seven-day chart (via WorldCoinIndex):

Its market valuation jumped by $30 billion over the two days, from $10.6 billion to $41 billion. I mean why even bother with the stock market. Bitcoin went the opposite way. It plunged from a peak of $7,771 on November 8 mid-morning to $5,519 at this moment, losing $2,252 or 29% in three days. It’s now back where it first had been in late October. Its market valuation plunged by $35 billion from $127 billion to $92 billion. $35 billion is starting to add up, so to speak (via WorldCoinIndex):

Bitcoin ran into an entanglement on November 8, when developers called off a planned software upgrade, SegWit2x. The upgrade was supposed to have improved transactions speeds. This was blamed for the plunge that started on Wednesday. Then the fun focused on Bitcoin Cash. By Friday, as Bitcoin Cash had soared 50% while bitcoin was crashing, it was blamed on traders that were switching from chasing after bitcoin to chasing after Bitcoin Cash. At the time, Joshua Raymond, a director at the foreign-exchange and CFD broker XTB, told Business Insider: “The delay to Segwit2x has damaged confidence amongst bitcoin investors concerning the much-needed resolution to speed up bitcoin’s slow processing speed.

“Everyone was hoping the Segwit2x would address this but unfortunately, the delay due to a lack of consensus on the mechanics has affected confidence. Confidence on transaction speed in Bitcoin has deteriorated significantly in recent months. As Bitcoin Cash enjoys much faster transaction speeds, we have started to see a recycling of positions out of Bitcoin into Bitcoin Cash as a consequence.” Just don’t call cryptos an investment or asset or asset class or currency. While they could be used as currency, in reality, these kinds of violent moves make their use as currency way too risky and nonsensical. What’s left? The blockchain technology, which underpins these cryptos, is free and open source. Currently a lot of smart brains are trying to figure out how to put the technology to work in all kinds of industries.

Some of them will likely succeed. I’m looking forward to the moment when there is a way of transferring money around the world that is universal, convenient, cheap, fast, not subject to violent fluctuations, and 100% reliable. But that moment isn’t here yet, and neither bitcoin nor Bitcoin Cash will have anything to do with it. Instead of being usable currencies, cryptos – CoinMarketCap lists nearly 1,300 of them, with many of them already worthless – are a form of online betting based on a new technology, and they’re subject to different dynamics than classic online betting, but not regulated or forbidden by governments, unlike classic online betting.

Read more …

“..both sides of the swamp should probably control themselves in any premature celebrations as this appears to be far from over..”

Podesta Group “Will Not Exist At The End Of The Year” (ZH)

Just three weeks after we reported that special counsel Mueller was targeting lobbying firm Podesta Group. and just two weeks after Tony Podesta resigned from his position at the firm he founded, The Hill reports that Kimberley Fritts, the Podesta Group’s chief executive, told employees on Thursday that the firm would not exist at the end of the year and that they would likely not be paid through the end of November, sources told CNN. Fritts announced her resignation from the top Washington lobbying group after Podesta left the company amid ties to indictments filed in the Russia investigation. Fritts is beginning work on launching a new firm. Her last day at the company Friday created new uncertainty for the Podesta Group after the departure of Podesta on Oct. 30.

Multiple employees who spoke to The Hill said the mood at the firm was mostly optimistic, though they said many of the firm’s dozens of employees could be in limbo as Fritts sets up the new firm and brings Podesta Group talent and clients with her. As a reminder, Mueller is now investigating whether the Podesta Group properly identified to U.S. authorities its foreign work on behalf of a Ukrainian advocacy group in Europe, CNN reported. An NBC report found that the Podesta Group was one of several firms working on Paul Manafort’s public relations campaign for European Centre for a Modern Ukraine, which the Podesta Group claims it thought was a nonpartisan think tank, something which this site reported first last August. And here is one reason why we suspect more than a few on the left are now concerned…

It goes without saying, that Podesta’s brother, John, is arguably one of the top figure in Democratic politics, serving most recently as chief of staff in the Bill Clinton White House and also as the chairman of Hillary Clinton’s 2016 presidential campaign. What happens next to Tony (and perhaps his brother John) is to be determined, but one thing is clear: both sides of the swamp should probably control themselves in any premature celebrations as this appears to be far from over.

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“..the Brexit vote has presented rival European nations and the ECB with a golden opportunity to undermine the UK’s domination of Europe’s financial industry. They won’t let it go to waste.”

Global Banks, City of London Raise “Disorderly Brexit” Alarm (DQ)

For the City of London Corporation, the prospect of a messy Brexit is even more terrifying than it is for many of the global banks it hosts within its coveted Square Mile. The Bank of England has warned that up to 75,000 jobs could be lost in the financial sector following Britain’s departure from the European Union. But it’s not just jobs that are on the line; so, too, is the Square Mile’s role as the world’s most important financial center, not to mention the backbone of the UK economy. In recent months the European Commission and the European Central Bank have redoubled their efforts to compel financial institutions to move at least some of their operations onto the continent. “I have a very clear message to both smaller and larger banks: the clock is ticking,” said Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB.

“No one knows how Brexit will play out, and that’s why all affected banks should prepare themselves with a hard Brexit in mind.” Some banks are already taking action. Goldman has set aside the top eight floors of a 37-story block under construction in Frankfurt which is expected to be ready for occupation in the third quarter of 2019. Just a few months before that, construction work on the bank’s new £350m European headquarters in central London should be completed. Ten days ago, Goldman Sachs CEO Lloyd Blankfein, posted a tweet of an aerial shot of the half-finished construction in London, with the words “expecting/hoping to fill it up, but so much outside our control.” As the head of an organization with alumni at the very top of both the Bank of England and the ECB as well as tentacles that reach out to just about every corner of the old continent, Blankfein is clearly selling Goldman short, if you’ll excuse the pun.

Goldman’s not the only major bank hedging its bets. On Tuesday Germany’s struggling behemoth, Deutsche Bank, announced that it had signed an agreement to occupy at least 469,000 square feet at a site under construction in the City of London. The move comes despite a warning in April that thousands of Deutsche Bank’s UK staff may have to relocate after Brexit. To that end, Deutsche has begun work on a Frankfurt booking center that would take up some of the slack if the German lender was forced to turn its London branch into a subsidiary when Britain leaves the EU.

Most banks would prefer the status quo to continue, with the lion’s share of their operations remaining in London, which already has the physical infrastructure, legal apparatus and friendly political and regulatory culture needed to support the full gamut of global financial services. But the Brexit vote has presented rival European nations and the ECB with a golden opportunity to undermine the UK’s domination of Europe’s financial industry. They won’t let it go to waste.

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It truly is Monty Python by now.

Forty UK Conservative Lawmakers Ready To Oust PM May (R.)

Forty members of parliament from Prime Minister Theresa May’s Conservative Party have agreed to sign a letter of no-confidence in her, the Sunday Times newspaper reported. That is eight short of the number needed to trigger a party leadership contest, the mechanism through which May could be forced from office and replaced by another Conservative. May has been struggling to maintain her authority over her party since a snap election on June 8 which she called thinking she would win by a wide margin but instead resulted in her losing her parliamentary majority. Divided over how to extricate Britain from the European Union and hit by multiple scandals involving ministers, May’s government has failed to assert control over a chaotic political situation that is weakening London’s hand in Brexit talks.

An earlier attempt to unseat May in the wake of her disastrous speech at the annual party conference fizzled out, but many Conservatives remain unhappy with the prime minister’s performance and talk of a leadership contest has not gone away. May has lost two cabinet ministers in as many weeks: Michael Fallon stepped down as defense secretary after becoming implicated in a wider scandal about sexual misconduct in parliament, while Priti Patel resigned as aid minister after she was found to have had secret meetings with top Israeli officials.

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So there’s those who just want her gone, and then there’s the ones who look for a reason.

Theresa May Faces Defeat By MPs Demanding Vote On Final Brexit Deal (G.)

Theresa May faces a devastating Commons defeat over Brexit within weeks if she continues to deny parliament a meaningful vote on the final deal with the EU, Tory and Labour MPs have warned. With the withdrawal bill returning to the Commons on Tuesday, a cross-party group who oppose a hard Brexit and are co-operating on tactics say they believe they have the numbers to defeat the government if they are denied such a vote. While the critical amendments and closest votes are not expected to be taken until next month, Tories who oppose a hard Brexit insist there is no softening of their position and that they are biding their time ready to strike before Christmas. Some Tories say they are even more determined to insist on parliament’s right to veto a bad or no deal because the prime minister appears not to have responded to any of their concerns over recent weeks.

Instead, in what was seen by many as a provocative move, she announced last week that the government had tabled its own amendment that would commit the UK to formally leaving on 29 March 2019, whatever the outcome of negotiations and even if there were no deal. Meanwhile, a secret memo to May written by Boris Johnson and Michael Gove dictating terms for a hard Brexit has emerged. In blunt terms, the pair tell the prime minister to “underline her resolve” to achieve a total break with Brussels, and name 30 June 2021 as the fixed end of Britain’s transition period after leaving the EU in March 2019. The missive will undoubtedly lead critics to say the prime minister is being held hostage by the leading Brexiters. A Commons defeat for May over Brexit, at a time when her government is reeling from the loss of two cabinet ministers in six days – and may lose more – would raise further questions over her ability to survive as prime minister.

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She better be quick then, or she won’t have the job anymore.

Sack Boris Johnson For Shaming Our Nation, Jeremy Corbyn Tells PM (G.)

jeremy Corbyn has fired an extraordinary broadside against Boris Johnson, calling for him to be sacked immediately as foreign secretary for “undermining our country” and “putting our citizens at risk”. The blistering attack – and demand that Theresa May fire him – was delivered exclusively in a statement to the Observer on Saturday night, as pressure mounted on Johnson over his diplomatic blunder in the case of Nazanin Zaghari-Ratcliffe, the British mother imprisoned in Iran. The Labour leader cites a litany of undiplomatic and ill-chosen statements from Johnson since his appointment by May as foreign secretary in July last year. Corbyn accuses him of having a “colonial throwback take on the world”, and of repeatedly “letting our country down”.

It is the mishandling of the “heartbreaking” case of Zaghari-Ratcliffe that persuaded Corbyn to call for his dismissal. His statement ends: “We’ve put up with Johnson embarrassing and undermining our country with his incompetence and colonial throwback views and putting our citizens at risk for long enough. It’s time for him to go.” The intervention places both May and Johnson under renewed pressure after 10 days in which the prime minister has been forced to dismiss defence secretary Sir Michael Fallon for inappropriate behaviour towards women, and the international development secretary, Priti Patel, for conducting a freelance aid policy in the Middle East without informing No 10 or the Foreign Office.

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Get in line.

German War Reparations ‘Matter Of Honor’ For Poland (R.)

Demanding reparations from Germany for its actions in Poland during World War Two is a matter of honor for Warsaw, Jaroslaw Kaczynski, the leader of Polish ruling Law and Justice (PiS) party, said on Saturday. The issue of reparations, revived by Poland’s eurosceptic PiS after decades of improving relations with Germany, could escalate tensions between the two European Union members. In September Polish parliamentary legal experts ruled that Warsaw has the right to demand reparations from Germany, although Poland’s foreign minister indicated that no immediate claim would be made. “The French were paid, Jews were paid, many other nations were paid for the losses they suffered during World War Two. Poles were not,” Kaczynski said.

“It is not only about material funds. It is about our status, our honor … And this is not theater. This is our demand, a totally serious demand,” added Kaczynski, Poland’s de facto leader. The PiS government, deeply distrustful of Germany, has raised calls for wartime compensation in recent months but Foreign Minister Witold Waszczykowski has said further analysis was needed before any claims were lodged. Six million Poles, including three million Polish Jews, were killed during the war, and the capital Warsaw was razed to the ground in 1944 after a failed uprising in which 200,000 civilians died.

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They’ll have to do a lot more demonstrating.

750,000 Protesters Flood Barcelona Demanding Release Of Catalan Leaders (R.)

Hundreds of thousands of Catalan independence supporters clogged one of Barcelona’s main avenues on Saturday to demand the release of separatist leaders held in prison for their roles in the region’s banned drive to split from Spain. Wearing yellow ribbons on their lapels to signify support, they filled the length of the Avenue Marina that runs from the beach to Barcelona’s iconic Sagrada Familia church, while the jailed leaders’ families made speeches. Catalonia’s two main grassroots independence groups called the march, under the slogan “Freedom for the political prisoners,” after their leaders were remanded in custody on charges of sedition last month. The protest is seen as a test of how the independence movement’s support has fared since the Catalan government declared independence on Oct. 27, prompting Spanish Prime Minister Mariano Rajoy to fire its members, dissolve the regional parliament and call new elections for December.

An opinion poll this week showed that pro-independence parties would win the largest share of the vote, though a majority was not assured and question marks remain over ousted regional head Carles Puigdemont’s leadership of the separatist cause. “Look at all the people here,” said 63-year-old Pep Morales. “The independence movement is still going strong.” Barcelona police said about 750,000 people had attended, many from across Catalonia. The protesters carried photos with the faces of those in prison, waved the red-and-yellow striped Catalan independence flag and shone lights from their phones. The Spanish High Court has jailed eight former Catalan government members, along with the leaders of the Catalan National Assembly (ANC) and Omnium Cultural, while investigations continue.

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That’s true in many ways.

EU Has Become A ‘Caricature’ Of Its Founding Values – Puidgemont (RT)

Sacked Catalan leader Carles Puigdemont has lashed out against the European Union (EU) over its response to the Catalan crisis, in which Brussels sided with Madrid in suppressing the independence drive of the region. Puigdemont criticized the EU as a “caricature of what Europe is and of what we want Europe to be,” claiming, there is “no will to help solve the politics of the conflict.” Catalonia staged a regional independence referendum on October 1, amid a massive crackdown by police on voters in which nearly 900 people were injured. Following the ‘yes’ vote, Barcelona attempted to initiate dialogue with the central government, hoping the EU would step in and act as mediator to help defuse tensions.

Leaders of European nations, as well as the EU’s main institutions, sided with the Spanish Prime Minister Mariano Rajoy instead, and refused to recognize Catalonia’s self-determination call, referring to the crisis as an internal Spanish matter. The former Catalan leader sees it as a betrayal of the fundamental “values that took us to constitute Europe.” Puigdemont believes the EU leadership, which he said comprises “four or five governments,” are “probably not the most appropriate to lead the EU.” “What will the EU become in hands of this people?” the former Catalan leader asked, pointing out that he does not want the EU’s leadership to “confuse” traditional European values with “their political and economic interests.”

Just this week, European Commission President Jean-Claude Juncker called on all member nations to fight against separatist tendencies in Europe, apparently in reference to Scotland, Lombardy, Venice and other regions throughout the continent which have expressed strong self-determination ambitions. “Nationalisms are a poison that prevent Europe from working together,” Juncker said Thursday in the Spanish city of Salamanca. “We cannot stay with our arms crossed because it is time for us to do what needs to be done. I say ‘no’ to any form of separatism that weakens Europe and further widens the existing fissures.” [..] “To be treated like a criminal, like a drug-trafficker, like a paedophile, like a serial killer, I think this is abuse,” the Catalan leader lamented. “This isn’t politics, this is using the courts to do politics.”

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The shame of the EU keeps getting bigger and deeper.

Trafficking Laws ‘Target Refugee Aid Workers In EU’ (G.)

Aid workers are being targeted throughout Europe as countries including the UK use laws aimed at traffickers and smugglers to discourage humanitarian activity, a study claims. A six-month investigation by the London-based Institute of Race Relations documented the prosecutions of 45 individual “humanitarian actors” under anti-smuggling or immigration laws in 26 separate actions over the past two years. Examples include a 25-year-old British volunteer with a refugee support group, who last January sought to bring an Albanian mother and two children to the UK in the boot of her car so they could join their husband and father. She was sentenced in March to 14 months in jail, although the sentence was suspended to take into account her “misguided humanitarianism”.

UK law does not distinguish between humanitarian and commercial motives in such prosecutions, but does take such factors into account in sentencing. In Switzerland, a 43-year-old woman known to refugees as Mother Teresa for her work in providing food for those stranded on the Italian side of the border, was sentenced in September to a fine and a suspended 80-day jail term for helping unaccompanied children into the country. In France, British volunteers helping refugees in Calais have frequently been harassed by the authorities. In October 2015, former British soldier Rob Lawrie was arrested at the border for hiding a four-year-old Afghan child in his van in response to her father’s pleas to take her to relatives in Leeds. Lawrie, from West Yorkshire, avoided jail after a French court found him guilty of the lesser charge of endangerment rather than assisting illegal entry.

And in March this year three French and British volunteers with charity Roya Citoyenne were arrested for distributing food to migrants. The 68-page IRR report chronicles a culture of criminalisation in which volunteers for charities and aid groups, attempting to fill the gaps in state provision, are targeted for providing food, shelter and clean water to migrants in informal encampments or on streets. The EU’s border force, Frontex, has accused aid groups including Médecins Sans Frontières of co-operating with migrant traffickers in the Mediterranean. The report criticises senior Frontex officials for “attempts to bully and delegitimise” NGO search and rescue missions in the Mediterranean by accusing aid groups of working with smugglers and encouraging trafficking. The IRR’s vice-chair, Frances Webber, said: “Across the continent, criminal laws designed to target organised smuggling gangs and profiteers are distorted and stretched to fit an anti-refugee, anti-humanitarian agenda, and in the process criminalise decency itself.”

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Disposable income down by 50%. Taxes and social security up 96.8%. The Troika is taxing Greece to death. On purpose. It’ll be a tourist destination only. And a refugee camp.

Greece’s Middle Incomes Go Under The Knife (K.)

The disposable income of Greece’s average earners has been slashed by more than 50% due to overtaxation in recent years, according to the latest data examined by Kathimerini, which also paints a grim picture for the coming years. What’s more, the reduction of the income tax threshold is expected to further impact the disposable income of households. Brussels expects Greece’s primary surplus to beat its target of 3.5% of GDP again next year, rising to 3.9%, and then to 3.7% in 2019. However, the primary surpluses Greece has posted in the last two years are largely due to exorbitant taxes rather the result of growth. Moreover, while the European Commission’s statistics point to a disproportionate increase in taxation in Greece, at a time when the economy was shrinking, the country’s industrialists and political opposition say overtaxation has led to more tax evasion and the failure of the tax system.

Those hardest hit have been freelance professionals, who since 2009 have been subjected to unprecedented raids by the tax office, and more recently by social insurance contribution hikes, resulting in the gradual exhaustion of their income. And high taxes, including property taxes, are the reason why both freelancers and self-employed professionals submitted incomes last year that were 20% lower than their actual earnings. A telling example of overtaxation concerns freelance professionals who own a car and an apartment and earn 50,000 euros a year: In 2009 they had to pay 16,333 euros of their annual income to the tax office and their social security fund, leaving them with a net income of 33,667 euros. Five years later, their clear income dropped by a further 4,344 euros to 29,323.

The situation today is even more dire as the same self-employed professional making 50,000 euros must pay 32,151 euros in taxes and contributions, leaving them with a disposable income of 17,849. Taxes and social security contributions have rocketed by 96.8% since 2009, while compared to 2014 they have risen by 55.5%.

Read more …

Nov 112017
 
 November 11, 2017  Posted by at 9:15 pm Finance Tagged with: , , , , , , , , ,  8 Responses »
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Jean-Léon Gérôme Truth Coming Out of Her Well to Shame Mankind 1896

 

An entire library of articles about Big Tech is coming out these days, and I find that much of it is written so well, and the ideas in them so well expressed, that I have little to add. Except, I think I may have the solution to the problems many people see. But I also have a concern that I don’t see addressed, and that may well prevent that solution from being adopted. If so, we’re very far away from any solution at all. And that’s seriously bad news.

Let’s start with a general -even ‘light’- critique of social media by Claire Wardle and Hossein Derakhshan for the Guardian:

 

How Did The News Go ‘Fake’? When The Media Went Social

Social media force us to live our lives in public, positioned centre-stage in our very own daily performances. Erving Goffman, the American sociologist, articulated the idea of “life as theatre” in his 1956 book The Presentation of Self in Everyday Life, and while the book was published more than half a century ago, the concept is even more relevant today. It is increasingly difficult to live a private life, in terms not just of keeping our personal data away from governments or corporations, but also of keeping our movements, interests and, most worryingly, information consumption habits from the wider world.

The social networks are engineered so that we are constantly assessing others – and being assessed ourselves. In fact our “selves” are scattered across different platforms, and our decisions, which are public or semi-public performances, are driven by our desire to make a good impression on our audiences, imagined and actual. We grudgingly accept these public performances when it comes to our travels, shopping, dating, and dining. We know the deal. The online tools that we use are free in return for us giving up our data, and we understand that they need us to publicly share our lifestyle decisions to encourage people in our network to join, connect and purchase.

But, critically, the same forces have impacted the way we consume news and information. Before our media became “social”, only our closest family or friends knew what we read or watched, and if we wanted to keep our guilty pleasures secret, we could. Now, for those of us who consume news via the social networks, what we “like” and what we follow is visible to many [..] Consumption of the news has become a performance that can’t be solely about seeking information or even entertainment. What we choose to “like” or follow is part of our identity, an indication of our social class and status, and most frequently our political persuasion.

That sets the scene. People sell their lives, their souls, to join a network that then sells these lives -and souls- to the highest bidder, for a profit the people themselves get nothing of. This is not some far-fetched idea. As noted further down, in terms of scale, Facebook is a present day Christianity. And these concerns are not only coming from ‘concerned citizens’, some of the early participants are speaking out as well. Like Facebook co-founder Sean Parker:

 

Facebook: God Only Knows What It’s Doing To Our Children’s Brains

Sean Parker, the founding president of Facebook, gave me a candid insider’s look at how social networks purposely hook and potentially hurt our brains. Be smart: Parker’s I-was-there account provides priceless perspective in the rising debate about the power and effects of the social networks, which now have scale and reach unknown in human history. [..]

“When Facebook was getting going, I had these people who would come up to me and they would say, ‘I’m not on social media.’ And I would say, ‘OK. You know, you will be.’ And then they would say, ‘No, no, no. I value my real-life interactions. I value the moment. I value presence. I value intimacy.’ And I would say, … ‘We’ll get you eventually.'”

“I don’t know if I really understood the consequences of what I was saying, because [of] the unintended consequences of a network when it grows to a billion or 2 billion people and … it literally changes your relationship with society, with each other … It probably interferes with productivity in weird ways. God only knows what it’s doing to our children’s brains.”

“The thought process that went into building these applications, Facebook being the first of them, … was all about: ‘How do we consume as much of your time and conscious attention as possible?'” “And that means that we need to sort of give you a little dopamine hit every once in a while, because someone liked or commented on a photo or a post or whatever. And that’s going to get you to contribute more content, and that’s going to get you … more likes and comments.”

“It’s a social-validation feedback loop … exactly the kind of thing that a hacker like myself would come up with, because you’re exploiting a vulnerability in human psychology.” “The inventors, creators — it’s me, it’s Mark [Zuckerberg], it’s Kevin Systrom on Instagram, it’s all of these people — understood this consciously. And we did it anyway.”

Early stage investor in Facebook, Roger McNamee, also has some words to add along the same lines as Parker. They make it sound like they’re Frankenstein and Facebook is their monster.

 

How Facebook and Google Threaten Public Health – and Democracy

The term “addiction” is no exaggeration. The average consumer checks his or her smartphone 150 times a day, making more than 2,000 swipes and touches. The applications they use most frequently are owned by Facebook and Alphabet, and the usage of those products is still increasing. In terms of scale, Facebook and YouTube are similar to Christianity and Islam respectively. More than 2 billion people use Facebook every month, 1.3 billion check in every day. More than 1.5 billion people use YouTube. Other services owned by these companies also have user populations of 1 billion or more.

Facebook and Alphabet are huge because users are willing to trade privacy and openness for “convenient and free.” Content creators resisted at first, but user demand forced them to surrender control and profits to Facebook and Alphabet. The sad truth is that Facebook and Alphabet have behaved irresponsibly in the pursuit of massive profits. They have consciously combined persuasive techniques developed by propagandists and the gambling industry with technology in ways that threaten public health and democracy.

The issue, however, is not social networking or search. It is advertising business models. Let me explain. From the earliest days of tabloid newspapers, publishers realized the power of exploiting human emotions. To win a battle for attention, publishers must give users “what they want,” content that appeals to emotions, rather than intellect. Substance cannot compete with sensation, which must be amplified constantly, lest consumers get distracted and move on. “If it bleeds, it leads” has guided editorial choices for more than 150 years, but has only become a threat to society in the past decade, since the introduction of smartphones.

Media delivery platforms like newspapers, television, books, and even computers are persuasive, but people only engage with them for a few hours each day and every person receives the same content. Today’s battle for attention is not a fair fight. Every competitor exploits the same techniques, but Facebook and Alphabet have prohibitive advantages: personalization and smartphones. Unlike older media, Facebook and Alphabet know essentially everything about their users, tracking them everywhere they go on the web and often beyond.

By making every experience free and easy, Facebook and Alphabet became gatekeepers on the internet, giving them levels of control and profitability previously unknown in media. They exploit data to customize each user’s experience and siphon profits from content creators. Thanks to smartphones, the battle for attention now takes place on a single platform that is available every waking moment. Competitors to Facebook and Alphabet do not have a prayer.

Facebook and Alphabet monetize content through advertising that is targeted more precisely than has ever been possible before. The platforms create “filter bubbles” around each user, confirming pre-existing beliefs and often creating the illusion that everyone shares the same views. Platforms do this because it is profitable. The downside of filter bubbles is that beliefs become more rigid and extreme. Users are less open to new ideas and even to facts.

Of the millions of pieces of content that Facebook can show each user at a given time, they choose the handful most likely to maximize profits. If it were not for the advertising business model, Facebook might choose content that informs, inspires, or enriches users. Instead, the user experience on Facebook is dominated by appeals to fear and anger. This would be bad enough, but reality is worse.

And in a Daily Mail article, McNamee’s ideas are taken a mile or so further. Goebbels, Bernays, fear, anger, personalization, civility.

 

Early Facebook Investor Compares The Social Network To Nazi Propaganda

Facebook officials have been compared to the Nazi propaganda chief Joseph Goebbels by a former investor. Roger McNamee also likened the company’s methods to those of Edward Bernays, the ‘father of public’ relations who promoted smoking for women. Mr McNamee, who made a fortune backing the social network in its infancy, has spoken out about his concern about the techniques the tech giants use to engage users and advertisers. [..] the former investor said everyone was now ‘in one degree or another addicted’ to the site while he feared the platform was causing people to swap real relationships for phoney ones.

And he likened the techniques of the company to Mr Bernays and Hitler’s public relations minister. ‘In order to maintain your attention they have taken all the techniques of Edward Bernays and Joseph Goebbels, and all of the other people from the world of persuasion, and all the big ad agencies, and they’ve mapped it onto an all day product with highly personalised information in order to addict you,’ Mr McNamee told The Telegraph. Mr McNamee said Facebook was creating a culture of ‘fear and anger’. ‘We have lowered the civil discourse, people have become less civil to each other..’

He said the tech giant had ‘weaponised’ the First Amendment to ‘essentially absolve themselves of responsibility’. He added: ‘I say this as somebody who was there at the beginning.’ Mr McNamee’s comments come as a further blow to Facebook as just last month former employee Justin Rosenstein spoke out about his concerns. Mr Rosenstein, the Facebook engineer who built a prototype of the network’s ‘like’ button, called the creation the ‘bright dings of pseudo-pleasure’. He said he was forced to limit his own use of the social network because he was worried about the impact it had on him.

As for the economic, not the societal or personal, effects of social media, Yanis Varoufakis had this to say a few weeks ago:

 

Capitalism Is Ending Because It Has Made Itself Obsolete – Varoufakis

Former Greek finance minister Yanis Varoufakis has claimed capitalism is coming to an end because it is making itself obsolete. The former economics professor told an audience at University College London that the rise of giant technology corporations and artificial intelligence will cause the current economic system to undermine itself. Mr Varoufakis said companies such as Google and Facebook, for the first time ever, are having their capital bought and produced by consumers.

“Firstly the technologies were funded by some government grant; secondly every time you search for something on Google, you contribute to Google’s capital,” he said. “And who gets the returns from capital? Google, not you. “So now there is no doubt capital is being socially produced, and the returns are being privatised. This with artificial intelligence is going to be the end of capitalism.”

Ergo, as people sell their lives and their souls to Facebook and Alphabet, they sell their economies along with them. That’s what that means. And you were just checking what your friends were doing. Or, that’s what you thought you were doing.

The solution to all these pains is, likely unintentionally, provided by Umair Haque’s critique of economics. It’s interesting to see how the topics ‘blend’, ‘intertwine’.

 

How Economics Failed the Economy

When, in the 1930s, the great economist Simon Kuznets created GDP, he deliberately left two industries out of this then novel, revolutionary idea of a national income : finance and advertising. [..] Kuznets logic was simple, and it was not mere opinion, but analytical fact: finance and advertising don’t create new value, they only allocate, or distribute existing value in the same way that a loan to buy a television isn’t the television, or an ad for healthcare isn’t healthcare. They are only means to goods, not goods themselves. Now we come to two tragedies of history.

What happened next is that Congress laughed, as Congresses do, ignored Kuznets, and included advertising and finance anyways for political reasons -after all, bigger, to the politicians mind, has always been better, and therefore, a bigger national income must have been better. Right? Let’s think about it. Today, something very curious has taken place.

If we do what Kuznets originally suggested, and subtract finance and advertising from GDP, what does that picture -a picture of the economy as it actually is reveal? Well, since the lion’s share of growth, more than 50% every year, comes from finance and advertising -whether via Facebook or Google or Wall St and hedge funds and so on- we would immediately see that the economic growth that the US has chased so desperately, so furiously, never actually existed at all.

Growth itself has only been an illusion, a trick of numbers, generated by including what should have been left out in the first place. If we subtracted allocative industries from GDP, we’d see that economic growth is in fact below population growth, and has been for a very long time now, probably since the 1980s and in that way, the US economy has been stagnant, which is (surprise) what everyday life feels like. Feels like.

Economic indicators do not anymore tell us a realistic, worthwhile, and accurate story about the truth of the economy, and they never did -only, for a while, the trick convinced us that reality wasn’t. Today, that trick is over, and economies grow , but people’s lives, their well-being, incomes, and wealth, do not, and that, of course, is why extremism is sweeping the globe. Perhaps now you begin to see why the two have grown divorced from one another: economics failed the economy.

Now let us go one step, then two steps, further. Finance and advertising are no longer merely allocative industries today. They are now extractive industries. That is, they internalize value from society, and shift costs onto society, all the while creating no value themselves.

The story is easiest to understand via Facebook’s example: it makes its users sadder, lonelier, and unhappier, and also corrodes democracy in spectacular and catastrophic ways. There is not a single upside of any kind that is discernible -and yet, all the above is counted as a benefit, not a cost, in national income, so the economy can thus grow, even while a society of miserable people are being manipulated by foreign actors into destroying their own democracy. Pretty neat, huh?

It was BECAUSE finance and advertising were counted as creative, productive, when they were only allocative, distributive that they soon became extractive. After all, if we had said from the beginning that these industries do not count, perhaps they would not have needed to maximize profits (or for VCs to pour money into them, and so on) endlessly to count more. But we didn’t.

And so soon, they had no choice but to become extractive: chasing more and more profits, to juice up the illusion of growth, and soon enough, these industries began to eat the economy whole, because of course, as Kuznets observed, they allocate everything else in the economy, and therefore, they control it.

Thus, the truly creative, productive, life-giving parts of the economy shrank in relative, and even in absolute terms, as they were taken apart, strip-mined, and consumed in order to feed the predatory parts of the economy, which do not expand human potential. The economy did eat itself, just as Marx had supposed – only the reason was not something inherent in it, but a choice, a mistake, a tragedy.

[..] Life is not flourishing, growing, or developing in a single way that I or even you can readily identify or name. And yet, the economy appears to be growing, because purely allocative and distributive enterprises like Uber, Facebook, credit rating agencies, endless nameless hedge funds, shady personal info brokers, and so on, which fail to contribute positively to human life in any discernible way whatsoever, are all counted as beneficial. Do you see the absurdity of it?

[..] It’s not a coincidence that the good has failed to grow, nor is it an act of the gods. It was a choice. A simple cause-effect relationship, of a society tricking itself into desperately pretending it was growing, versus truly growing. Remember not subtracting finance and advertising from GDP, to create the illusion of growth? Had America not done that, then perhaps it might have had to work hard to find ways to genuinely, authentically, meaningfully grow, instead of taken the easy way out, only to end up stagnating today, and unable to really even figure out why yet.

Industries that are not productive, but instead only extract money from society, need to be taxed so heavily they have trouble surviving. If that doesn’t happen, your economy will never thrive, or even survive. The whole service economy fata morgana must be thrown as far away as we can throw it. Economies must produce real, tangible things, or they die.

For the finance industry this means: tax the sh*t out of any transactions they engage in. Want to make money on complex derivatives? We’ll take 75+%. Upfront. And no, you can’t take your company overseas. Don’t even try.

For Uber and Airbnb it means pay taxes up the wazoo, either as a company or as individual home slash car owners. Uber and Airbnb take huge amounts of money out of local economies, societies, communities, which is nonsense, unnecessary and detrimental. Every city can set up its own local car- or home rental schemes. Their profits should stay within the community, and be invested in it.

For Google and Facebook as the world’s new major -only?!- ad agencies: Tax the heebies out of them or forbid them from running any ads at all. Why? Because they extract enormous amounts of productive capital from society. Capital they, as Varoufakis says, do not even themselves create.

YOU are creating the capital, and YOU then must pay for access to the capital created. Yeah, it feels like you can just hook up and look at what your friends are doing, but the price extracted from you, your friends, and your community is so high you would never volunteer to pay for it if you had any idea.

 

The one thing that I don’t see anyone address, and that might prevent these pretty straightforward ”tax-them-til they-bleed!” answers to the threat of New Big Tech, is that Facebook, Alphabet et al have built a very strong relationship with various intelligence communities. And then you have Goebbels and Bernays in the service of the CIA.

As Google, Facebook and the CIA are ever more entwined, these companies become so important to what ‘the spooks’ consider the interests of the nation that they will become mutually protective. And once CIA headquarters in Langley, VA, aka the aptly named “George Bush Center for Intelligence”, openly as well as secretly protects you, you’re pretty much set for life. A long life.

Next up: they’ll be taking over entire economies, societies. This is happening as we speak. I know, you were thinking it was ‘the Russians’ with a few as yet unproven bucks in Facebook ads that were threatening US and European democracies. Well, you’re really going to have to think again.

The world has never seen such technologies. It has never seen such intensity, depth of, or such dependence on, information. We are simply not prepared for any of this. But we need to learn fast, or become patsies and slaves in a full blown 1984 style piece of absurd theater. Our politicians are AWOL and MIA for all of it, they have no idea what to say or think, they don’t understand what Google or bitcoin or Uber really mean.

In the meantime, we know one thing we can do, and we can justify doing it through the concept of non-productive and extractive industries. That is, tax them till they bleed. That we would hit the finance industry with that as well is a welcome bonus. Long overdue. We need productive economies or we’re done. And Facebook and Alphabet -and Goldman Sachs- don’t produce d*ck all.

When you think about it, the only growth that’s left in the US economy is that of companies spying on American citizens. Well, that and Europeans. China has banned Facebook and Google. Why do you think they have? Because Google and Facebook ARE 1984, that’s why. And if there’s going to be a Big Brother in the Middle Kingdom, it’s not going to be Silicon Valley.

 

 

Aug 282017
 
 August 28, 2017  Posted by at 9:01 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Lou Reed New York City 1966

 

Harvey’s Cost Reaches Catastrophe: Only 15% Of Homes Have Flood Insurance (BBG)
Gasoline Surges, Oil Holds Near $48 as Harvey Shuts Refineries (BBG)
Mammoth Flood Disaster in Houston: More Rain Yet to Come (WU)
The Coming Collapse Of China’s Ponzi Scheme Economy (SCMP)
What’s Driving The Growth In US ‘Shadow Banking’ (CBR)
Volatility Makes a Comeback (Rickards)
YouTube “Economically Censors” Ron Paul (ZH)
Should The Rich Be Taxed More? (G.)
The West’s Wealth Is Based On Slavery. Reparations Should Be Paid (G.)
Danone Sends 5,000 Cows to Siberia in Quest for Cheaper Milk (BBG)

 

 

The real tragedy takes place below the surface. Sort of literally. Much more rain to come.

Harvey’s Cost Reaches Catastrophe: Only 15% Of Homes Have Flood Insurance (BBG)

Hurricane Harvey’s second act across southern Texas is turning into an economic catastrophe – with damages likely to stretch into tens of billions of dollars and an unusually large share of victims lacking adequate insurance, according to early estimates. Harvey’s cost could mount to $24 billion when including the impact of relentless flooding on the labor force, power grid, transportation and other elements that support the region’s energy sector, Chuck Watson, a disaster modeler with Enki Research, said by phone on Sunday. That would place it among the top eight hurricanes to ever strike the U.S. “A historic event is currently unfolding in Texas,” Aon wrote in an alert to clients. “It will take weeks until the full scope and magnitude of the damage is realized,” and already it’s clear that “an abnormally high portion of economic damage caused by flooding will not be covered,” the insurance broker said.

[..] Most people with flood insurance buy policies backed by the federal government’s National Flood Insurance Program. As of April, less than one-sixth of homes in Houston’s Harris County had federal coverage, according to Aon. That would leave more than 1 million homes unprotected in the county. Coverage rates are similar in neighboring areas. Many cars also will be totaled. “A lot of these people are going to be in very serious financial situations,” said Loretta Worters, a spokeswoman for the Insurance Information Institute. “Most people who are living in these areas do not have flood insurance. They may be able to collect some grants from the government, but there are not a lot, usually they’re very limited. There are no-interest to low-interest loans, but you have to pay them back.”

The federal program itself is already struggling with $25 billion of debt. The existing program is set to expire on Sept. 30 and is up for review in Congress, which ends its recess Sept. 5. Costs still will likely soar for insurance companies and their reinsurers, biting into earnings. As Harvey bore down on the coastline Friday, William Blair, a securities firm that tracks the industry, said the storm could theoretically inflict $25 billion of insured losses if it landed as a “large category 3 hurricane.” Policyholder-owned State Farm Mutual Automobile Insurance has the largest share in the market for home coverage in Texas, followed by Allstate, which is publicly traded. William Blair estimated that, in that scenario, Allstate could incur $500 million of pretax catastrophe losses, shaving 89 cents off of earnings per share.

Read more …

Most shutdowns so far are precautionary. But…

Gasoline Surges, Oil Holds Near $48 as Harvey Shuts Refineries (BBG)

Gasoline surged to the highest in two years and oil was steady as flooding from Tropical Storm Harvey inundated refining centers along the Texas coast, shutting more than 10% of U.S. fuel-making capacity. Motor fuel prices rose as much as 6.8%, while oil held gains near $48 a barrel. Harvey, the strongest storm to hit the U.S. since 2004, made landfall as a hurricane Friday, flooding cities and shutting plants able to process some 2.26 million barrels of oil a day. Pipelines were closed, potentially stranding some crude in West Texas and starving New York Harbor of gasoline. Gasoline prices are going to continue to rise this week as we expect another three days of rain in the Houston area,” Andy Lipow, president of consultant Lipow Oil in Houston, said by phone.

“With pipeline operators beginning to shut down their crude oil and refined product infrastructure, I expect to see further curtailment of refinery operations. A spike in gasoline and diesel prices will drag up crude oil prices.” Oil has traded this month in the tightest range since February as investors weigh rising global supply against output cuts by members of OPEC and its allies. As Harvey led to widespread flooding, Shell shut its Deer Park plant, while Magellan Midstream suspended its inbound and outbound refined products and crude pipeline transportation services in the Houston area. Gasoline for September delivery climbed as much as 11.33 cents to $1.7799 a gallon on the New York Mercantile Exchange, the highest intraday price for a front-month contract since July 2015.

It traded at $1.7621 at 12:36 p.m. in Hong Kong. West Texas Intermediate oil for October delivery fell 16 cents to $47.71 a barrel after advancing 0.9% on Friday. Brent crude’s premium to WTI widened to the largest in two years with the global benchmark trading at as much as $4.96 above the U.S. marker. Brent for October settlement gained 18 cents, or 0.3%, to $52.59 a barrel on the London-based ICE Futures Europe exchange.

Read more …

Waether Underground is probably the best source.

Mammoth Flood Disaster in Houston: More Rain Yet to Come (WU)

Harvey’s winds are expected to remain modest, and it could become a tropical depression at any point, but winds are not the problem here. The NOAA/NWS National Hurricane Center now predicts that Harvey will inch its way into the Gulf of Mexico—though just barely—by Monday night, then arc northeast and make a second landfall just west of Houston on Wednesday. The 12Z GFS and 00Z European model runs agree on a general northward motion for Harvey across eastern Texas, beginning around midweek. At this point it may make little difference whether Harvey stays just inland or moves just offshore, since rainbands would continue to be funneled toward Houston either way. The fine-scale particulars of this outlook may shift over time, but the overall message is consistent: Harvey will be a devastating rainmaking presence in southeast Texas for days to come.

Harvey’s circulation is located in a near-ideal spot for funneling vast amounts of moisture from the Gulf of Mexico toward the upper Texas coast. Here, converging winds at low levels have been concentrating the moisture into north-south-oriented bands of intense thunderstorms with torrential rain. Since Harvey is barely moving, these bands are creeping only slowly eastward as individual cells race north along them—a “training” set-up that is common in major flood events. Mesoscale models, our best guidance for short-term, small-scale behavior of thunderstorms, show little sign of relief for southeast Texas anytime soon. Convection-resolving mesoscale models, which have a tight enough resolution to depict individual thunderstorms, are an invaluable tool in situations like this. The mesoscale nested NAM model predicts that 20” – 30” of additional rainfall is likely through Tuesday across the Houston metro area, with even larger totals at some points.

Read more …

Hmm. But what if China manages to unload all its overcapacity on the Belt Road, and makes other countries pay?

The Coming Collapse Of China’s Ponzi Scheme Economy (SCMP)

Friends who have a greater interest than I do in reading the tea leaves in Beijing tell me that the emphasis in relations with Hong Kong from now on will be on one country rather than two systems. I think this phrases things the wrong way. The one country bit was never in issue. What they actually mean to say is that Beijing’s system of state command of the economy will become dominant and Hong Kong’s more freewheeling system will fade away. I don’t think it will happen. In my view human society is so dynamic that no command system can last long in charge of an economy. Attempts at this particular form of hubris inevitably end in either war or financial crisis. For the Soviet Union it was financial crisis. I think the same fate awaits Beijing.

Consider crude steel production, a test-tube example of how command economies get it wrong. In the mainland this stood in June at an all time monthly record of 73 million tonnes, five times the total production in all of Europe. Steel was recently targeted for a reduction in capacity but then a regime of easy money intended to help the industry overcome a difficult period of contraction instead stimulated production. It has happened across the mainland’s rust belt industries. Why is so much steel needed? Simple. It is needed to build more steel mills so as to build more shipyards, ports, railways and bridges so that more ships can be built to carry more iron ore to more ports and thence along more rails and bridges to more steel mills so as to build more shipyards, ports, railways …

What we have here, in short, is a giant Ponzi scheme. In a Ponzi scheme you pay out the winnings of the first entrants with what others later pay into it. As long as it keeps growing everything is fine. When it stops growing it collapses. In this case you justify production with demand based purely on more production. As long as you keep pushing production up everything looks fine. At its peak in 2014 China turned out 30 times more cement than the United States, and the latest production figures are only a smidgen less than 2014’s.

Read more …

What do you think? A good sign? It isn’t in China….

What’s Driving The Growth In US ‘Shadow Banking’ (CBR)

In the wake of the 2007–10 financial crisis, there’s been sizeable growth of “shadow banking”— companies without banking charters entering lines of business traditionally associated with deposit-taking banks. Hedge funds that make direct loans to midsize businesses, online mortgage originators, peer-to-peer lending platforms, and payday lenders have all been on the rise. What’s behind this? According to Chicago Booth’s Gregor Matvos, Booth PhD candidate Greg Buchak, Columbia’s Tomasz Piskorski, and Stanford’s Amit Seru, much of the growth is due to regulations that have pushed banks out of traditional lending businesses. The researchers also attribute some growth to online technology that has lowered the barrier to entry in markets where lenders once needed networks of physical branches to have any hope of building business.

The researchers focus on the US residential lending market, the largest consumer loan market in the country—and the market that drew the most attention from regulators after 2008. Between 2007 and 2015, shadow banks nearly tripled their market share, from 14% to 38%. They gained the most in the Federal Housing Administration (FHA) mortgage market, which serves lower-quality borrowers and is where shadow banks’ share rose from 20% to 75%. Traditional banks retreated from sectors of the mortgage market where the regulatory burden grew the most, the researchers note. Traditional banks have been particularly hindered by rules that increased monitoring of balance-sheet holdings and constrained what banks could hold in their own accounts.

Their retreat helped shadow banking succeed in the riskier FHA market and in more-traditional, conforming mortgages. The researchers also separated shadow banks into those that did and didn’t originate loans online. During the study period, lenders that originated loans online (fintech lenders) saw market share rise from 4% to 13%—but that remains less than half of the shadow-banking sector.

Read more …

Super spikes.

Volatility Makes a Comeback (Rickards)

Volatility has languished near all-time lows for months on end. That’s about to change. For almost a year, one of the most profitable trading strategies has been to sell volatility. Since the election of Donald Trump stocks have been a one-way bet. They almost always go up, and have hit record highs day after day. The strategy of selling volatility has been so profitable that promoters tout it to investors as a source of “steady, low-risk income.” Nothing could be further from the truth. Yes, sellers of volatility have made steady profits the past year. But the strategy is extremely risky and you could lose all of your profits in a single bad day. Think of this strategy as betting your life’s savings on red at a roulette table. If the wheel comes up red, you double your money. But if you keep playing eventually the wheel will come up black and you’ll lose everything.

That’s what it’s like to sell volatility. It feels good for a while, but eventually a black swan appears like the black number on the roulette wheel, and the sellers get wiped out. I focus on the shocks and unexpected events that others don’t see. Right now looks like one of those highly favorable windows when the purchase of volatility is the right move. You could collect huge winnings as the short sellers scramble to cover their bets before they are wiped out completely. The chart below shows a 20-year history of volatility spikes. You can observe long periods of relatively low volatility such as 2004 to 2007, and 2013 to mid-2015, but these are inevitably followed by volatility super-spikes. During these super-spikes the sellers of volatility are crushed, sometimes to the point of bankruptcy because they can’t cover their bets.

The period from mid-2015 to late 2016 saw some brief volatility spikes associated with the Chinese devaluation (August and December 2015), Brexit (June 23, 2016) and the election of Donald Trump (Nov. 8, 2016). But, none of these spikes reached the super-spike levels of 2008 – 2012. In short, we have been on a volatility holiday. Volatility is historically low and has remained so for an unusually long period of time. The sellers of volatility have been collecting “steady income,” yet this is really just a winning streak at the volatility casino. The wheel of fortune is about to turn and luck is about to run out for the sellers. It will soon be time for the buyers of volatility to collect their winnings, big time.

Read more …

Sliding scales. One step before large tech is declared utility?!

YouTube “Economically Censors” Ron Paul (ZH)

Former US Congressman Ron Paul has joined a growing list of independent political journalists and commentators who’re being economically punished by YouTube despite producing videos that routinely receive hundreds of thousands of views. In a tweet published Saturday, Wikileaks founder Julian Assange tweeted a screenshot of Paul’s “Liberty Report” page showing that his videos had been labeled “not suitable” for all advertisers by YouTube’s content arbiters. Assange claims that Paul was being punished for speaking out about President Donald Trump’s decision to increase the number of US troops in Afghanistan, after Paul published a video on the subject earlier this week. The notion that YouTube would want to economically punish a former US Congressman for sharing his views on US foreign policy – a topic that he is unequivocally qualified to speak about – is absurd.

Furthermore, the “review requested” marking on one of Paul’s videos reveals that they were initially flagged by users before YouTube’s moderators confirmed that the videos were unsuitable for a broad audience. Other political commentators who’ve been censored by YouTube include Paul Joseph Watson and Tim Black – both ostensibly for sharing political views that differ from the mainstream neo-liberal ideology favored by the Silicon Valley elite. Last week, Google – another Alphabet Inc. company – briefly banned Salil Mehta, an adjunct professor at Columbia and Georgetown who teaches probability and data science, from using its service, freezing his accounts without providing an explanation. He was later allowed to return to the service. Conservative journalist Lauren Southern spoke out about YouTube’s drive to stifle politically divergent journalists and commentators during an interview with the Daily Caller.

“I think it would be insane to suggest there’s not an active effort to censor conservative and independent views,” said Southern. “Considering most of Silicon Valley participate in the censorship of alleged ‘hate speech,’ diversity hiring and inclusivity committees. Their entire model is based around a far left outline. There’s no merit hiring, there’s no support of free speech and there certainly is not an equal representation of political views at these companies.” Of course, Google isn’t the only Silicon Valley company that’s enamored with censorship. Facebook has promised to eradicate “fake news,” which, by its definition, includes political content that falls outside of the mainstream. Still, economically punishing a former US Congressman and medical doctor is a new low in Silicon Valley’s campaign to stamp out dissent.

Read more …

The most prosperous times of our societies coincide with the highest tax levels for the rich.

Should The Rich Be Taxed More? (G.)

The past four decades have been extremely kind to those at the top. They have seen their incomes grow faster than the rest of the population and hold a far bigger share of wealth in the form of property and financial investments than the rest of the population. Over the years a bigger slice of national income has gone to capital at the expense of labour, and the rich have been the beneficiaries of that, because they are more likely to own shares and expensive houses. The trend has been particularly strong in the US, where labour’s share of income has fallen from a recent peak of 57% at the end of Bill Clinton’s presidency to 53% by 2015. The Gini coefficient – a measure of inequality – has been steadily rising since 1970 and is now at levels normally seen in developing rather than advanced economies.

Hatgioannides, Karanassou and Sala seek to take account of these profound changes in the distribution of income and wealth. They do so by dividing the average income tax rate of a particular slice of the US population by the%age of national income commanded by that same group and by their share of wealth. They then look at whether by this measure – the fiscal inequality coefficient – the US tax system has become more or less progressive over time. The findings show quite clearly that it has become less progressive. In terms of income, the poorest 99% of the US population paid nine times as much income tax as the richest 1%, both when John F Kennedy was president in the early 1960s and when Ronald Reagan beat Jimmy Carter in the 1980 race for the White House. By 2014, they paid 21 times as much.

Similarly, the bottom 99.9% in the US paid 28 times as much tax as the elite 0.1% in the early 1960s and the early 1980s, but by 2014 they were paying 76 times as much. The same trend applies – although it is not pronounced – when income tax is divided by the share of wealth. The bottom 99% paid 22 times as much income tax as the wealthiest 1% in 1980 but were paying 47 times as much in 2014. The bottom 99.9% paid 58 times as much income tax as the top 0.1% before the onset of Reaganomics; by 2014 they were paying 175 times as much. [..] As the authors note, since 1980, economic policy making has been dominated by the idea that deregulation, less generous welfare and tax cuts will stimulate higher investment, higher productivity, higher growth and higher living standards for all. None of this has occurred and, what’s more, the social mobility in the decades after the second world war has been thrown into reverse. The great American dream – the notion that anybody can strike it rich – is dead.

Read more …

They won’t be.

The West’s Wealth Is Based On Slavery. Reparations Should Be Paid (G.)

Malcolm X explained that “if you stick a knife in my back nine inches and pull it out six inches, that’s not progress. If you pull it all the way out, that’s not progress. The progress comes from healing the wound that the blow made”. Instead of attempting to fix the damage, we are completely unable to progress on issues of equality because countries such as Britain “won’t even admit the knife is there”. It is the height of delusion to think that the impact of slavery ended with emancipation, or that empire was absolved by the charade of independence being bestowed on the former colonies.

[..]It is not just governments that owe a debt; some of the biggest institutions and corporations built their wealth on slavery. Lloyds of London is one of Britain’s most successful companies and its roots lie in insuring the merchant trade in the 17th century. The fact that this was the slave trade has already led to civil action being taken by African Americans in New York. The church, many of the biggest banks, much of the ironworks industry and port cities gorged themselves on the profits from human flesh. It is clear that it would be just to pay reparations, and it is also possible to calculate the amount that Britain and other nations owe. A lot of work has been done in the United States to determine the damages owed to African Americans. The figure owed comes to far more than the “forty acres and a mule” that were promised to some African Americans who fought in the civil war.

The latest calculations from researchers estimates that for unpaid labour, taking into account interest and inflation, African Americans are owed anywhere between $5.9tn and $14.2tn. It would not be prohibitively complicated to work out the debts owed by the western powers, or the companies that enriched themselves off exploitation. The obviousness of the issue is such that a federation of Caribbean countries (Caricom) is now demanding reparations, as is the Movement for Black Lives in America and Pan-Afrikan Reparations Coalition in Europe. In many ways the calls for reparatory justice do not take go far enough. Caricom includes a demand to cancel third world debt, and the Movement for Black Lives for free tuition for African Americans.

Both of these are examples of removing the knife from our backs, rather than healing the wound. Third world debt was an unjust mechanism for maintaining colonial economic control and; allowing free access to a deeply problematic school system will not eradicate the impacts of centuries of oppression. In order to have racial justice we need to hit the reset button and have the west account for the wealth stolen and devastation caused. Nothing short of a massive transfer of wealth from the developed to the underdeveloped world, and to the descendants of slavery and colonialism in the west, can heal the deep wounds inflicted.

Read more …

Cows to Qatar, cown to SIberia: the new backpackers?!

Danone Sends 5,000 Cows to Siberia in Quest for Cheaper Milk (BBG)

President Vladimir Putin’s ban on European Union cheese imports has driven up milk prices in Russia by so much that French yogurt maker Danone is transporting almost 5,000 cows to a farm in Siberia to ensure it has an affordable supply. The Holstein cows are traveling as many as 2,800 miles (4,500 kilometers) in trucks from the Netherlands and Germany, boosting the herd on a farm near the city of Tyumen, according to Charlie Cappetti, head of Danone’s Russian unit. That should protect the company from the increase in raw milk prices, which are up 14% this year, he said. “Milk prices have been going up steadily,” Cappetti said in an interview in Moscow. “That puts products such as yogurt under pressure.” While the French dairy company doesn’t normally invest in agriculture, it made an exception for Russia.

After Putin’s ban on dairy imports took hold in 2014, demand for milk surged as local cheesemakers rushed to replace French camembert and Italian pecorino. That has exacerbated the inflationary effects of the ruble’s weakness. Danone invested in the 60-hectare (150-acre) farm with local producer Damate, Cappetti said. The first cows started to provide milk for Danone in May, and a final shipment of cattle is due to arrive in September. “We hope that Russian milk inflation will slow down next year,” the executive said. The difference between supply and demand is narrowing as new milk is coming to the market, including from the Siberian farm. While easing milk inflation may help the Russian dairy market rebound in volume terms, Danone isn’t expecting a fast economic recovery in the country, according to Cappetti. Sales in Russia have been growing in line with inflation in the first half and should rise in 2018, he said.

Read more …

Jul 172017
 
 July 17, 2017  Posted by at 9:37 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Willem de Kooning Woman III 1953

 

Donald Trump Approval Rating At 70-Year Low (G.)
China Blacklists Winnie the Pooh (CNBC)
Private Equity Fund Once Valued at $2 Billion Is Now ‘Nearly Worthless’ (R.)
The Credit Bubble Only Seems To Blow Larger And Larger (Exp.)
United Arab Emirates Behind Hacking Of Qatari Media That Incited Crisis (AP)
Australia Moves To Dial Down Financial Stability Risks In Home Loans (R.)
EU: May Should Make Corbyn Part Of Brexit Negotiating Team (Ind.)
China: Ghost Cities and Ghost Recovery (Snider)
IMF To Insist On ‘Unsustainable Debt’, Says Greek Banks Need €10 Billion (K.)
Greek Taxpayers Have A Mountain Of Taxes To Climb (K.)
Other EU Nations Are Inviting Rich Greeks (K.)

 

 

Had to include this one just for the headline. Anything goes at the Guardian. And it’s a WaPo poll, so who cares? Still, did they poll him when he was a baby? But good for Trump that he’s been more popular all his life than he is now. Only way is up?!

Donald Trump Approval Rating At 70-Year Low (G.)

Donald Trump’s approval rating has plunged in a national poll, published on Sunday, that charts Americans’ perceptions of a stalling domestic policy agenda and declining leadership on the world stage. The Washington Post/ABC News poll, which put Trump’s six-month approval rating at a historic 70-year low, came amid mounting controversy over Russian interference in the 2016 election. It emerged on Saturday that Trump’s campaign committee made a payment to the legal firm representing the president’s eldest son almost two weeks before a meeting between Trump Jr and a Russian lawyer promising compromising information on Hillary Clinton was made public.

Trump now has a 36% approval rating, down six points from his first 100 days’ rating. The poll found that 48% believed America’s leadership in the world is weaker than before the billionaire took office, while support for Republican plans to replace Barack Obama’s Affordable Care Act was at just 24% compared with 50% who support the former president’s signature healthcare policy. Trump, who has spent the weekend at his private golf club in Bedminster, New Jersey, attempted to downplay the poll’s findings. On Sunday morning he used Twitter to claim, incorrectly, that “almost 40% [approval] is not bad at this time” and that the poll in question had been “just about the most inaccurate around election time!”.

Read more …

And while we’re selecting for headlines…

Wait, I just saw another one (not really a headline, but worth citing): “Today could be a good day to sell your tulips.”

China Blacklists Winnie the Pooh (CNBC)

Winnie the Pooh has been blacked out from Chinese social media in the lead-up to the country’s 19th Communist Party Congress this fall, the Financial Times reported Sunday. No official explanation was given, but the FT cited observers who said the crackdown may be related to past comparisons of the physical appearance of President Xi Jinping to the fictional bear. One observer said “talking about the president” appeared to be among activities deemed sensitive ahead of the upcoming party congress, when leadership renewal is expected. The following year, the comparison was extended to Xi’s meeting with Japanese Prime Minister Shinzo Abe, who was pictured as Eeyore, the sad donkey, alongside the bear.

Comparisons between Xi and Disney-owned Winnie the Pooh first circulated in 2013 during the Chinese leader’s visit with then U.S. President Barack Obama. A photo of Xi standing up through the roof of a parade car, next to a picture of Winnie the Pooh in a toy car, was named the “most censored image of 2015” by political consultancy Global Risk Insights. The FT report said posts with the Chinese name of the portly character were censored on China’s Twitter-like platform Sina Weibo. A collection of animated gifs featuring the bear were also removed from social messaging app WeChat, according to the FT.

Read more …

Why am I thinking we’ll see many more of these stories? It ain’t fun if it’s YOUR pension fund.

Private Equity Fund Once Valued at $2 Billion Is Now ‘Nearly Worthless’ (R.)

Wells Fargo and a number of other lenders are negotiating to take control of a hedge fund previously valued at more than $2 billion that is now worth close to nothing, according to a report from the Wall Street Journal. EnerVest, a Houston private equity firm that focuses on energy investments, manages the private equity fund that focused on oil investments. The fund will leave clients, including major pensions, endowments and charitable foundations, with at most pennies on the dollar, WSJ reported. The firm raised and started investing money beginning in 2013 when oil was trading at around $90 a barrel and added $1.3 billion of borrowed money to boost its buying power. West Texas Intermediate crude prices closed at $46.54 a barrel on Friday. “We are not proud of the result,” John Walker, EnerVest’s co-founder and chief executive, wrote in an email to the Journal.

Only seven private – equity fund s worth more than $1 billion have ever lost money for investors, according to data from investment firm Cambridge Associates cited in the report. Among those of any size to end in the red, losses greater than around 25% are extremely rare, though there are several energy-focused fund s in danger of doing so, according to public pension records. Clients included the J. Paul Getty Trust, John D. and Catherine T. MacArthur and Fletcher Jones foundations, which each invested millions in the fund , according to their tax filings, the Journal reported. Michigan State University and a foundation that supports Arizona State University also disclosed investments in the fund. The Orange County Employees Retirement System was also an investor and has reportedly marked the value of its investment down to zero.

Read more …

Story of our lives: “The Bank is trapped between rock-bottom rates and a hard place. So are the rest of us.”

The Credit Bubble Only Seems To Blow Larger And Larger (Exp.)

The decision by the Bank of England and other central bankers to slash interest rates to near zero after the financial crisis may have averted financial meltdown, but only by triggering another debt binge. British household debt recently soared to a record high of more than £1.5 trillion, after growing at the fastest pace since before the credit crunch, according to The Money Charity. The Bank of England is now forcing banks to strengthen their financial position by another £11.4 billion in the face of rapid growth in borrowing on credit cards, car finance and personal loans, up another 10 per cent over the last year. Record low mortgage rates have also driven house prices to dizzying highs.

The average UK property now costs 7.6 times earnings, more than double the figure 20 years ago, squeezing the next generation off the property ladder. The problem is getting more acute as rising inflation is pushing the Bank ever closer to hiking base rates for the first time in a decade. It needs to do something to deter yet more borrowing, and to offer some hope for hard-pressed savers. Its dilemma is that higher borrowing costs could finally prick the consumer debt bubble it has helped to create. The Bank is trapped between rock-bottom rates and a hard place. So are the rest of us.

Read more …

Why do I think I smell CIA? Then again, this is about a WaPo report, and who believes them? Anyway, can’t be the Russians, pretty sure they were otherwise occupied.

United Arab Emirates Behind Hacking Of Qatari Media That Incited Crisis (AP)

The United Arab Emirates orchestrated the hacking of a Qatari government news site in May, planting a false story that was used as a pretext for the current crisis between Qatar and several Arab countries, according to a Sunday report by The Washington Post. The Emirati Embassy in Washington released a statement in response calling the Post report “false” and insisting that the UAE “had no role whatsoever” in the alleged hacking. The report quotes unnamed U.S. intelligence officials as saying that senior members of the Emirati government discussed the plan on May 23. On the following day, a story appeared on the Qatari News Agency’s website quoting a speech by Qatar’s emir, Sheikh Tamim Bin Hamad al Thani, in which he allegedly praised Iran and said Qatar has a good relationship with Israel. Similarly incendiary statements appeared on the news agency’s Twitter feed.

The agency quickly claimed it was hacked and removed the article. But Saudi Arabia, the UAE, Bahrain and Egypt all blocked Qatari media and later severed diplomatic ties. The ongoing crisis has threatened to complicate the U.S.-led coalition’s fight against the Islamic State group as all participants are U.S. allies and members of the anti-IS coalition. Qatar is home to more than 10,000 U.S. troops and the regional headquarters of the U.S. Central Command while Bahrain is the home of the U.S. Navy’s 5th Fleet. President Donald Trump has sided strongly with Saudi Arabia and the UAE in the dispute, publicly backing their contention that Doha is a supporter of Islamic militant groups and a destabilizing force in the Middle East. Secretary of State Rex Tillerson recently concluded several days of shuttle diplomacy in the Gulf, but he departed the region without any public signs of a resolution.

Read more …

Horses, barns and fake news.

Australia Moves To Dial Down Financial Stability Risks In Home Loans (R.)

The Australian government is seeking to broaden the powers of the country’s prudential regulator to include non-bank lenders as concerns about financial stability take center stage amid bubble risks in the nation’s sizzling property market. A draft legislation released by the government on Monday, if passed, will help the Australian Prudential Regulatory Authority (APRA) dial down some of the risky lending in the A$1.7 trillion ($1.33 trillion) mortgage market, the size of the country’s economic output. Australia’s four biggest banks have already cut back on home loans in recent months and pulled away from institutional lending to real estate developers, as regulators force them to keep aside more capital and slow lending to speculative property investors.

Non-bank lenders have been quick to pick up the slack, with their loan-books expanding at a much faster clip than the banking sector’s 6.5 percent overall credit growth. This development is stoking concerns for authorities as a combination of record-high property prices and stratospheric household debt sit uncomfortably with slow wages growth. “APRA does not have powers over the lending activities of non-bank lenders, even where they materially contribute to financial stability risks,” Treasurer Scott Morrison and financial services minister Kelly O’Dwyer said in a joint statement. “Today, the government is releasing draft legislation for public consultation that will provide APRA with new powers. These new powers will allow APRA to manage the financial stability risks posed by the activities of non-bank lenders, complementing APRA’s current powers.”

Read more …

Brussels smells blood.

EU: May Should Make Corbyn Part Of Brexit Negotiating Team (Ind.)

Theresa May should make Jeremy Corbyn a member of her Brexit negotiating team, a top EU official has suggested. Guy Verhofstadt, the European Parliament’s Brexit coordinator, said the Prime Minister losing her majority in the general election was a “rejection” of her hard Brexit plan and other voices should be listened to as negotiations with the European Union get into full swing. The former Prime Minister of Belgium was critical of Ms May and described the election result as an “own goal”. He said it was now the Government’s responsibility to determine whether or not they would take the result into account when determining their negotiating position. “Brexit is about the whole of the UK. It will affect all UK citizens, and EU citizens in the UK. This is much bigger than one political party’s internal divisions or short term electoral positioning. It’s about people’s lives.”

“I believe the negotiations should involve more people with more diverse opinions. Some recognition that the election result was, in part, a rejection of Theresa May’s vision for a hard Brexit would be welcome.” Asked if that meant Ms May should include other party leaders in her negotiating team, a spokesman for Mr Verhofstadt said: “Absolutely.” Mr Verhofstadt was also highly critical of the manner in which Ms May has handled the negotiations thus far, describing her actions as “somewhat chaotic”, but stopped short of offering any advice. “I am not going to give Theresa May advice on the Brexit negotiations,” he told The Independent. “That is a matter for her and her government. However, in line with the European Parliament’s resolution, I do think that the negotiations need to be conducted with full transparency. But that is a general point.

Read more …

I think people just love the China miracle too much to let it go.

China: Ghost Cities and Ghost Recovery (Snider)

To the naked eye, it represents progress. China has still an enormous rural population doing subsistence level farming. As the nation grows economically, such a way of life is an inherent drag, an anchor on aggregate efficiency Chinese officials would rather not put up with. Moving a quarter of a billion people into cities in an historically condensed time period calls for radical thinking, and radical doing. In one official party plan, it was or has to happen before 2026. The idea has been to build 20 new cities for this urbanization, and then maybe 20 more. It led to places like Yujiapu in Tianjin. China’s answer to Manhattan was to include a replica Lincoln Center, a Rockefeller Center and even twin towers. Built to fit half a million, barely 100,000 live there. There are numerous other examples of these ghost cities, including Kangbashi dug out of the grassy plains of Inner Mongolia.

It is in every sense a modern marvel, 137 sq. miles of tower blocks and skyscrapers that sit almost entirely empty. There are now plans to build yet another one, south of the capital Beijing this time, to supposedly relieve pressure and pollution of that city’s urban sprawl. In the Xiongan New Area, this newest city will be three times the size of NYC, enough, if plans were ever to actually work out, to draw almost 7 million Chinese. These are mind-boggling numbers and end up making truly eerie places for the few times when their existence is allowed to be acknowledged in the mainstream. The reasons for them are really not hard to comprehend, however. The older ghost cities started out as pure demographics, a place for China’s new middle class to urbanize and economize. The more the rest of the world demanded for China to produce and ship, the more Chinese (cheap) labor it would all require.

And there had to be something other than slums for this to happen, else any such intrusive transformation risked what was and remains a delicate power balance. Then in 2008 suddenly the world paused in its love affair of Chinese-made goods. No problem, though, as Chinese officials assuming it was temporary merely sped up the process of building for the future, getting ahead of the curve, as it were. Surely China would need to after the full global recovery get right back on the same trajectory as before. That never happened, and though some economists in particular still believe it will, there isn’t the slightest sign of global demand getting nearly that far back. What do you do, then, if you are China? There is logic to keeping up the illusion, that the future will eventually look a lot like the “miracle” past, because what else would China Inc. otherwise do? If it won’t be building stuff for export to the West, then it will have to be building something.

No matter how many times in the Western media they say demand is robust, catching up, or resilient, the Chinese know better. “China’s overseas shipments rose from a year earlier as global demand held up and trade tensions with the U.S. were kept in check amid ongoing talks. At home, resilient demand led to a rise in imports. Demand for Chinese products has proven resilient this year as global demand holds up.” Chinese exports in June 2017 are estimated (currently) to have risen 11.3% year-over-year. It sounds like what was written above about the global condition. But in truth, 11% growth, as 15% or even 20% growth at this stage, keeps China in the ghost city state. It isn’t anything close to “resilient”, let alone enough to make up for lost time and absorb the empty cities already built.

Read more …

Angela Merkel owns Christine Lagarde.

IMF To Insist On ‘Unsustainable Debt’, Says Greek Banks Need €10 Billion (K.)

The IMF has again found that Greece’s debt is unsustainable under every scenario, according to the report the Executive Council will be discussing on Thursday to decide on the Fund’s participation in the Greek program, sources say. The word from Washington is that the Fund’s technocrats have included various scenarios in their debt sustainability analysis (DSA), including one that incorporates the eurozone’s commitments for short-term measures and a high primary surplus, but none see Greece’s debt becoming sustainable. Washington sources suggest that the Executive Council will tell the eurozone that unless creditors offer more debt-relief measures, the IMF will not be able to participate in the Greek program with funds.

The IMF’s baseline scenario is identical to the one presented in February, with the debt being unsustainable after 2030, as servicing it will require more than 20% of GDP. The IMF will also likely warn about weaknesses in the Greek credit system, claiming it will need additional funding of €10 billion. An IMF source said that the chances of the fund disbursing the €1.6 billion Athens has requested “are limited.” However, what it seems the Fund is really waiting for is whether a government more amenable to Greek debt relief will emerge from September’s elections in Germany, something that is not at all certain right now.

As things stand, we are probably heading for the worst combination, as Finance Minister Euclid Tsakalotos said in May: that the IMF is heeded only in its demands for more austerity and not for debt relief. This is why, according to IMF sources, the report to be discussed includes no time limit for the review of the debt’s sustainability that would determine the Fund’s definitive participation in the program.

Read more …

Tax arrears to the state are a huge problem in Greece. The EU is hellbent on aggravating the issue.

Greek Taxpayers Have A Mountain Of Taxes To Climb (K.)

Greek taxpayers are being stunned by the realization that demands concerning their 2016 incomes are up to twice as high as last year. Changes to the tax system have sent rates soaring for the 40% of taxpayers that have been notified of the additional tax they will have to pay. Changes in income brackets as well as in the brackets used for calculating the solidarity tax are mainly responsible for increasing taxpayers’ burden this year. This mainly concerns salaried workers and freelance professionals, as well as taxpayers with revenues from properties. In some cases the annual difference in the tax due is more than the difference between the incomes of 2015 and 2016.

For instance, a taxpayer with incomes of €66,000 in 2015 and €76,000 in 2016 is now forced to pay tax amounting to €21,646, against €10,692 last year. This means that the extra €10,000 he or she managed to earn last year is being siphoned off by the taxman. The huge amounts of tax due are virtually impossible to pay in the three installments (in July, September and November) foreseen by the government. Many taxpayers are considering signing up now for the 12-installment pay plan, while others fear they will simply fail to meet their obligations, particularly as the Single Property Tax (ENFIA) is also coming soon.

Read more …

Greece tax policy is decided in Brussels, not Athens. So how is it possible people pay much more in Greece than in other EU nations?

Other EU Nations Are Inviting Rich Greeks (K.)

Ever more European states are trying to attract rich Greeks and other European Union nationals suffering from overtaxation at home. Cyprus, Malta, Ireland, Luxembourg, Monaco, Portugal and the Netherlands, as well as bigger countries such as France, Spain and Italy, are offering generous incentives to bring on to their registers people with high incomes that would benefit their economies in a number of ways. The relocation “invitation” concerns Greek entrepreneurs as well, given the excessive taxation the government has imposed on them and the uncertainty regarding the future tax situation that high incomes will face.

The concept behind the tax policies adopted in other countries so as to attract wealthy citizens is focused on a steady annual lump sum tax and their exemption from any other burdens, except for those concerning their activities at their new tax home. Italy’s case is interesting, as it is a country in the hard core of the EU that has created a favorable framework: It allows rich individuals with large international incomes to become “non-doms” (ie paying tax without being residents) by paying an annual levy of €100,000 plus €25,000 for each family member. They are relieved of any other tax on incomes abroad or imported into Italy and only pay regular tax on activities within the country. This boosts revenues, the property market and consumption.

Read more …

Oct 102016
 
 October 10, 2016  Posted by at 6:46 pm Finance Tagged with: , , , , , , , , ,  9 Responses »
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Elliot Erwitt New York 1955

If the US presidential debate last night showed anything, it must be that just about everyone has dug themselves into their trenches and had no desire whatsoever to ever came out.

This seemed especially clear on the Hillary side, which appeared to include -to an extent- ‘moderators’ Anderson Cooper and Martha Raddatz, judging from their interruptions. But, granted, they were the only biased side in the discussion, so we don’t really know what trenches the Republicans have dug.

The biggest problem with biased moderators is that people notice their bias. Not those who are on one side already, it passes them by. But others do. And perhaps more importantly, -in this case-, Hillary’s team loses its ability to adopt a neutral view. And she will therefore hear so much praise that she can’t figure out if she’s not done too well.

To illustrate that point: the main takeaway must be that Trump won the debate hands down, but that’s the opposite of what Hillary sympathizers concluded and what various polls said. It’s still true though, if only for one simple reason. That is, for 48 hours straight all talk and ‘reporting’ had been about Trumps lewd ‘words’ on the Access Hollywood tapes.

Trump really was cornered, and he knew it, everyone knew it. But after the second debate, and within 90 minutes, most of the talk turned towards how he ‘threatened’ to jail Hillary. Now, that’s not what he said, but even if he had, it’s something a lot more people sympathize with than with his language on the tapes. That’s a lot of territory ‘conquered’.

Meanwhile, even the likes of Paul Ryan don’t seem to grasp what happened overnight (he apparently think Hillary already won). What he doesn’t appear to see is, again, that Trump looked completely lost for 48 hours, but doesn’t look so lost now. There are 4 weeks and a day left in the campaign, and a lot can still happen.

Look, Trump is a buffoon. The word could have been invented specifically to define him. And it would be a very bad idea to make him president of the US. But that doesn’t mean the idea of making Hillary president is any better. It may well be worse, for a variety of reasons.

What the debate made clear once more is that America stands face to face with itself, it’s looking in a giant mirror, one which -only- in choice moments does not contort its own image, and America finds there’s nothing to like about what it sees in those brief moments in that mirror. And then therefore immediately proceeds to contort that image like it’s used to doing.

America may not like to look at its own stone cold hard reality, but it’s better than any culture ever in painting a picture of itself that it does like. In fact, it’s the first nation ever that made exactly that its main goal in life.

The Brits, the French and the Dutch try to hide their dark colonial and slave trading pasts, but America built an entire culture around contorting its history, right there in Hollywood, with ‘stars’ like John Wayne and John Ford being celebrated for movies that celebrate the annihilation and violent submission by the white man of both Native Americans and African slave populations.

In that same vein, the ‘heroic exploits’ of US soldiers in Muslim countries from Libya to Afghanistan in the past decades are now a major topic for the next generation of twisted history in movies and other media, in which invasions, drone killings and carpet bombings are portrayed as acts of bravery that warrant Purple Hearts. While the people whose lives and cultures are destroyed are swept under the first available carpet.

 

But that’s another story for another time. Back to last night’s debate. Trump may have won big, but he left some substantial scraps on the table that he may yet come to regret. Perhaps he was too focused on digging himself out of the ‘grab that pu**y’ hole -and yes, that is foul- to notice he was already out. Hard to say. He has the intuition, but does he have the brain?!

The first thing either The Donald or one of his team members must hammer down, urgently, is the way past stupid narrative of Russia’s involvement in US politics. Hillary repeatedly brought it up again, and it’s cheap fare for her, she can say anything she likes on the issue, no-one will contradict her or check any facts.

There were all these alleged fact-checkers ‘active’, but they dare not check the facts on this (there are none). Anything the Democratic Party wants to hide, it is free to hide behind Putin. No questions asked. That is insane at best, and Trump should have halted the narrative.

As should Cooper and Raddatz, and the army of fact checkers, but the fix was in. The low point must have been the allegation that Wikileaks is linked to Putin. Really? Come with facts, or forever hold your tongue. Too much cheap fare, hollow as can be, and Hillary build much of her story on it. Not good on the part of the Trump people.

I was reading an August 2 piece by Timothy O’Brien at Bloomberg the other day on Trump’s Russian connections, and Tim seems to start off with good hope of ‘inking the deal’, but ends up admitting there’s no there there.. The entire narrative of Trump’s Russian connections is as false as John Wayne’s heroism in slaughtering Native Americans. He should have cut that tale short in the debate, He didn’t.

Hillary gets to say, without any interruption or fact checking that “Russia has decided who it wants to be president, and it’s not me.” and that is way beyond any comprehension, really. There is zero proof of that, as there is of everything the US claims about Russia.

For all we know, Putin would much prefer Hillary to be president, because he sees Trump as a much stronger opponent when the chips are down. Hillary’s allegations are just a narrative she thinks will appeal to voters. She’s wrong. At least when it comes to those who wouldn’t have voted for her regardless of the narrative.

 

The second issue Trump desperately needs to put to bed is the one of his taxes. And mind you, I did say Trump should not ever be president of the US. That’s my perspective.

Hillary again last night painted a picture of Trump leaving US veterans out in the cold by not paying enough taxes. Trump retorted by saying Buffett (not Jimmy) and Soros do the same. But that’s a huge missed opportunity.

Paying taxes in America, and in any western nation, is not some voluntary exercise; there are laws, and they are some of the most stringent and most punishable there are. You cheat on your taxes, and the IRS or their equivalent in other countries have the power to go after you like no other government institution. Tax cheats very often go to jail.

That none of this has happened to Trump means, it’s that simple, that he did not break the law. He has used to the law to his advantage, just like everyone else who could, sure, But there’s not an inch of evidence, not even a hint, that he did anything illegal.

Hillary’s campaign is well aware of this, so the issue gets presented as some -pretty opaque- moral issue: ‘You didn’t do well by our veterans’. But what could he have done? Should Trump be the only American, or only western citizen, to tell the IRS to please take another extra $10 million or so, or $100 million, after they were done auditing him? So he wouldn’t be attacked 20 years on when running for office? It makes no sense in any sense.

And yes, the situation is very different if you’re on a payroll for some company, you can’t deduct what Trump could. But he’s not alone in that; in fact, all American entrepreneurs are in the same boat, and they will all try to swing that boat in the direction that fits them best. And Hillary loves these entrepreneurs as much as anyone when it suits her purposes. And her accountants do the same thing, they follow the same principle. Perhaps for lesser amounts, but that’s not the point.

Trump’s taxes are a non-issue, a brainless narrative. Not something for Hillary or anyone else to use as some innuendo-laden topic, anymore than Trump can use Hillary’s tax files against her in an ‘innuendo illegal’ way. Any judgment on that is up to the IRS, not either the Republican or Democratic campaigns. It’s ridiculous that Hillary can use that in a debate, and Trump and his people should have shut that venue down long ago.

But anyway, we have that 4 weeks and a day to go, and there’ll by much more to ‘enjoy’. Still, Trump came back last night from very very far away. No matter what CNN and other polls may say. Those polls are as biased as the night’s moderators.

It might be a good idea to realize that a year ago nobody ever gave Trump a shot at the gold medal, and his support never came from the people who conform with CNN (which nobody watches stateside anyway) or ABC.

We’ll talk again soon. Meanwhile, I’m with Susan Sarandon, who says bring it on, bring on Trump, because she despises Hillary, and because:

Donald Trump will bring the revolution immediately; if he gets in then things will really explode.”

Sort of like what I wrote before, that if you must choose between two very bad options, might as well pick the worst and get it over with:

 

 

 

Oct 022016
 
 October 2, 2016  Posted by at 10:25 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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DPC Belle Isle Park Aquarium, Detroit 1905

Some Comments On The NYT Story About Donald Trump’s Tax Returns (Hempton)
US Government Deficit Numbers are a BIG Lie (WS)
Six (Ex-)Deutsche Bank Executives Charged in Monte dei Paschi Probe (BBG)
‘Merkel Cannot Afford To Bail Out Deutsche Bank’ (R.)
Theresa May To Propose ‘Great Repeal’ Bill To Unwind EU Laws (G.)
Stupefied: How Organisations Enshrine Collective Stupidity (Aeon)
How Brussels Is Obstructing The Prosecution Of Corruption Cases In Greece (IE)
Erdogan Says Turkey In ‘Endgame’ Over EU Membership (AFP)
Erdogan Slams US Congress Over Saudi 9/11 Law (AFP)
Hungary Votes On Government’s Rejection Of EU Refugee Quotas (AP)
Czech President Calls For Deportation Of Economic Migrants (Pol.)
Germany Interior Minister Urges Athens To Implement Dublin Rules (Kath.)

 

 

John Hempton doesn’t leave much of the NYT story standing.

Some Comments On The NYT Story About Donald Trump’s Tax Returns (Hempton)

The New York Times has published a story (including extracts) about Donald Trump’s tax returns over two decades ago. The money-quote is this: “Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years…” According to the NYT the losses came … through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan. There is an issue here. Donald Trump did not repay all the debt associated with those investments.

Either the loss is a real loss and the Donald was really was out of pocket by $916 million (in which case he has legitimate NOLs) or the loss was passed on to someone else by The Donald defaulting on debt – in which case Donald Trump should be assessed for income from debt forgiveness. After all if the debt is forgiven it is not Donald Trump’s loss. The loss is borne by the person who lent Donald money and did not get it back. That – clearly stated by example – is why most income tax systems assess debt forgiveness as income. I do not know whether Donald Trump had the wherewithal in 1995 to bear $916 million of losses personally. But I doubt it. (If he did his financial career is different from what is popularly accepted.)

So the alternative is the debt was forgiven in some way. But then the story the New York Times is running is wrong – because the $916 million of losses would not have survived the debt forgiveness and hence would have wiped out his NOLs and thus he would not be allowed to shelter his income for the next 18 years. Unless that is there is an avoidance scheme the New York Times has not worked out. Those schemes go by the name of “debt parking”. Here is how debt parking works. Suppose the debtor (in this case The Donald) is going to get his debt cancelled for (say) 1c in the dollar. When he gets the debt wiped out the debtor (ie The Donald) will have to report assessable income equal to the debt wiped out (in this case 99% of $916 million).

The alternative though is for the debtor to set up a dummy party. The dummy party might be his wife or children or some company or trust set up by them or more likely some completely opaque offshore trust. And that dummy party goes and buys the debt for say 1.1 cents in the dollar. Then they just sit there. They don’t force the debtor (ie The Donald) to repay. They don’t make a profit or loss on the debt. And because the debtor never has his debt forgiven he never gets the assessment on debt forgiveness and he gets to keep his NOLs even though the losses did not come out of his pocket. Every tax system worth its salt has some rules on “effective debt forgiveness” to prevent debt parking. And – from my experience which is now over twenty years old – none of them work entirely.

Now if Donald really has all those tax losses its pretty clear that the debt must be parked somewhere. There is a vehicle out there (say an offshore trust or other undisclosed related party effectively controlled by Donald Trump) – which owns over $900 million in debt and is not bothering to collect it. I do not have the time or energy to find that vehicle. But it is there. Now that this blog has gone public journalists are going to look for it. There is a Pulitzer prize for whoever finds it. Just give me a nod at the acceptance ceremony.

Read more …

“What happened to the $4 trillion that the government borrowed but never officially spent since 2013? Where did this money go?”

US Government Deficit Numbers are a BIG Lie (WS)

Remember when the US government had “surpluses” in the years 1998-2001? Well, yes, according to the Office of Management and Budget, those four years produced a combined $559 billion in “surpluses”: So did the debt fall by that amount? Nope. The debt continued to rise each year, as the government continued to borrow more and more money though it had a “surplus”: over the four years of “surpluses,” the government added $394 billion to its debt, as the scary chart below shows. But that was then and this is now. Now, the hole through which money disappears has gotten a lot bigger. In Fiscal 2016, the government ran a deficit of $590 billion, per the latest estimate of the Office of Management and Budget. Last year, the deficit was $438 billion. So combined over $1.0 trillion.

But it borrowed an additional $1.7 trillion to pay for $1.0 trillion in deficit spending. What happened to the $700 billion that it borrowed and that were not officially spent? It disappeared. Is it just a timing difference that averages out over the years? Nope. Since 2003, the government deficits published by the Office of Management and Budget amounted to $9.26 trillion. So the Treasury should have had to borrow that much to make up the difference. But over the same period, the national debt rose by $13.3 trillion. Meaning, $4.04 trillion had gone up in smoke. This chart shows the official deficits (red columns) and the increase in outstanding debt (blue columns) each year:

The $4 trillion was borrowed and the bonds were issued and the amounts are still outstanding, but the proceeds from the bond sales went out the door, off the books! We’ve all heard the stories of how the Pentagon’s books are sordid fiction [..] But that’s a different – and additional – matter. [..] With the missing $4 trillion, I’m talking about money that the government borrowed but never spent officially, that it never acknowledged even existed. This $4 trillion is on top of all the internal shenanigans at various departments, including the Department of Defense. What happened to the $700 billion in real money that the government borrowed over the past two fiscal years but never officially spent? What happened to the $4 trillion that the government borrowed but never officially spent since 2013? Where did this money go?

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6 out of the 13 charged were/are Deutsche execs. And yes, it’s derivatives again, i.e. attempts to hide losses from the books. Same practice, and same time period, as Goldman’s dealings with the then Greek government.

Six (Ex-)Deutsche Bank Executives Charged in Monte dei Paschi Probe (BBG)

Six current and former managers of Deutsche Bank – including ex-asset and wealth management head Michele Faissola – along with former executives at Nomura Holdings and Banca Monte dei Paschi di Siena were charged in Milan for colluding to falsify the accounts of Italy’s third-biggest bank and manipulate the market. A judge in Milan approved a request by prosecutors to try 13 bankers on charges over separate derivative transactions Paschi arranged with the securities firms, said a lawyer involved in the case, who attended the closed-door hearing Saturday, where the decision was announced.

The charges deal another blow to Deutsche Bank, which is seeking to reassure investors and clients that it will be able to withstand pending U.S. penalties over the bank’s sale of mortgage-backed securities and its dealings with some Russian clients. Monte Paschi, the world’s oldest bank, restated its accounts and has been forced to tap investors twice to replenish capital amid a surge in bad loans and losses on derivatives. It’s now attempting to convince investors to buy billions of soured debt before a fresh stock sale. Deutsche Bank’s shares have slumped 49% in Frankfurt this year, swinging wildly last week on news that hedge-fund clients withdrew some funds. Monte Paschi has dropped 84% this year amid concern it will struggle to restore profitability and strengthen its finances.

The charges culminate a three-year investigation by prosecutors that showed Monte Paschi used the transactions to hide losses, leading to a misrepresentation of its accounts between 2008 and 2012. The deals came to light in January 2013, when Bloomberg News reported that Monte Paschi used derivatives struck with Deutsche Bank to mask losses from an earlier derivative contract dubbed Santorini.

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Between refugees and banks, Merkel has sure screwed up.

‘Merkel Cannot Afford To Bail Out Deutsche Bank’ (R.)

German Chancellor Angela Merkel cannot afford to bail out Deutsche Bank given the hard line Berlin has taken against state aid in other European nations and the risk of a political backlash at home, German media wrote on Saturday. The government denied a newspaper report on Wednesday that it was working on a rescue plan for Germany’s biggest bank, as its shares went into a tailspin fueled by a demand for up to $14 billion from U.S. authorities for misselling mortgage-backed securities before the financial crisis. Germany, which has insisted Italy and others accept tough conditions in tackling their problem lenders, can ill afford to be seen to go soft on its flagship bank, the Frankfurter Allgemeine wrote. “Of course Chancellor Merkel doesn’t want to give Deutsche Bank any state aid,” it wrote in a front-page editorial.

“She cannot afford it from the point of view of foreign policy because Berlin is taking a hard line in the Italian bank rescue.” The Sueddeutsche Zeitung wrote that Merkel would be breaking a promise to taxpayers if she were to bail the bank out, which could spell disaster for her re-election bid next year as the anti-immigration AfD party gains ground. The AfD is already benefiting from a backlash against Merkel’s open-door refugee policy, making huge gains in two regional elections last month and hitting an all-time high of 16% support in an opinion poll last week. “A state aid package would drive voters into the arms of the AfD,” the Sueddeutsche wrote in an editorial. “Domestic political considerations make it unlikely that Berlin would play this joker. Even more unlikely is that the European Commission would agree. The political risk would be simply too high.”

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Before the end of March 2017, she said this morning.

Theresa May To Propose ‘Great Repeal’ Bill To Unwind EU Laws (G.)

Theresa May will set Brexit in motion on Sunday , unveiling plans for a ‘great repeal bill’ to enshrine all EU regulations in UK law as soon as Brexit takes effect. In opening speeches at Conservative party conference in Birmingham, May and the Brexit secretary, David Davis, will announce the government’s plan to repeal the 1972 European Communities Act, the law that binds EU law to the British statute book, and new legislation to transpose EU legislation into British law, in its entirety, That law will only come into force on the day Britain leaves the EU, with future governments then able to unpick those laws as desired. The bill is set to be brought forward in the next parliamentary session, but will not take effect until after the formal two-year process of leaving the EU, which begins when the government triggers article 50.

In an interview in which the prime minister repeated her decision not to hold a general election before 2020, May told the Sunday Times: “We will introduce, in the next Queen’s speech, a ‘great repeal’ bill that will remove the European Communities Act from the statute book. “This marks the first stage in the UK becoming a sovereign and independent country once again. It will return power and authority to the elected institutions of our country. It means that the authority of EU law in Britain will end.” The prime minister has rejected calls from some Eurosceptic quarters to immediately repeal the 1972 act, saying the country needed “maximum security, stability and certainty for workers, consumers, and businesses, as well as for our international allies”.

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A nice read, but it misses out entirely on the fact that stupefication starts in universities -if not before-, not afterwards.

Stupefied: How Organisations Enshrine Collective Stupidity (Aeon)

Each summer, thousands of the best and brightest graduates join the workforce. Their well-above-average raw intelligence will have been carefully crafted through years at the world’s best universities. After emerging from their selective undergraduate programmes and competitive graduate schools, these new recruits hope that their jobs will give them ample opportunity to put their intellectual gifts to work. But they are in for an unpleasant surprise. Smart young things joining the workforce soon discover that, although they have been selected for their intelligence, they are not expected to use it. They will be assigned routine tasks that they will consider stupid. If they happen to make the mistake of actually using their intelligence, they will be met with pained groans from colleagues and polite warnings from their bosses.

After a few years of experience, they will find that the people who get ahead are the stellar practitioners of corporate mindlessness. One well-known firm that Mats Alvesson and I studied for our book The Stupidity Paradox (2016) said it employed only the best and the brightest. When these smart new recruits arrived in the office, they expected great intellectual challenges. However, they quickly found themselves working long hours on ‘boring’ and ‘pointless’ routine work. After a few years of dull tasks, they hoped that they’d move on to more interesting things. But this did not happen. As they rose through the ranks, these ambitious young consultants realised that what was most important was not coming up with a well-thought-through solution. It was keeping clients happy with impressive PowerPoint shows.

Those who did insist on carefully thinking through their client’s problems often found their ideas unwelcome. If they persisted in using their brains, they were often politely told that the office might not be the place for them. [..] For more than a decade, we’ve been studying dozens of organisations such as this management consultancy, employing people with high IQs and impressive educations. We have spoken with hundreds of people working for engineering firms, government departments, universities, banks, the media and pharmaceutical companies. We started out thinking it is likely to be the smartest who got ahead. But we discovered this wasn’t the case.

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To repeat once again: the EU is a criminal organization.

How Brussels Is Obstructing The Prosecution Of Corruption Cases In Greece (IE)

For a good eight years now, politicians, pundits and ordinary citizens have been quarreling over the merits (or lack thereof) of economic policies imposed on Greece by its lenders, notably the EU Commission. Was austerity beneficial or catastrophic? Did “reforms” help or hamper employment and growth? But while such issues are inherently contentious, the third and latest bailout agreement also provides for far less controversial policies. “Upgrade the fight against corruption”! “Strengthen the independence of institutions”! “De-politicise” the state! Insulate “financial crime and corruption investigations from political intervention”! All these are straight quotes from the third bailout agreement. Who would object to any of that?

Well, the EU, via its main institutions, does. Even the author of the bailout agreement, the EU Commission, seems to be quite allergic to all of the above, at least when it involves its own people. From the Commission’s spokespersons to the president of Eurogroup himself, a crowd of EU officials have been, at least twice in the recent months, actively and proactively doing their best to stop Greek judges from delivering on their job description: prosecuting corruption cases and financial crime. In August 2016, EU Commission spokesman Margaritis Schinas reiterated the need for Greece “to depoliticise” its administration. Schinas was referring to the controversial prosecution of the former head of the Greek statistics authority Andreas Georgiou.

In a yet new twist in the “Greek Statistics” saga, Greece’s Supreme Court had reopened a criminal case against Georgiou for allegedly inflating the government’s budget data between 2010 and 2015 and thus overstretching the need for additional austerity measures. Mr. Georgiou had been appointed head of ELSTAT, the statistical authority, in 2010 in an attempt by the government and the country’s lenders to restore credibility to Greek statistics. The revelation in late 2009 that the fiscal deficit had been grossly underestimated had largely triggered the start of the euro crisis. Since Georgiou took over, the quality of Greece’s reported data was hailed by the country’s lenders and Eurostat as “reliable” and “accurately reported”, but contested by other ELSTAT board members, including academics and statisticians.

This led to a nasty and lengthy spat between the two sides and to the eventual prosecution of Mr. Georgiou despite huge political pressure (by Greek and international political actors) to dismiss the case. The case’s reopening provoked the immediate and angry reaction of Brussels. In an interview with Bloomberg TV, Jeroen Dijsselbloem said that the prosecution of Mr. Georgiou was “a big mistake”. Head of Eurostat, Marianne Thyssen, told reporters that Georgiou effectively had no case to answer. Brussels retaliated by threatening Greece to postpone the reimbursement of the next installment

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Turley will never be an EU member. And if Merkel tries to push through visa-free travel, she’ll blow up the EU AND her own country.

Erdogan Says Turkey In ‘Endgame’ Over EU Membership (AFP)

President Recep Tayyip Erdogan on Saturday warned that Turkey had reached the “end of the game” over its decades-long EU membership bid, saying it was time for Brussels once and for all to make clear if it wanted Ankara as a member. In a hard-hitting speech marking the opening session of parliament, Erdogan also told Brussels it needed to allow Turks visa-free travel to the bloc by October, as per a previous agreement to decrease migrant flows. Relations between the EU and Turkey have strained in the wake of the July 15 failed coup, with EU officials among the most vocal critics of the relentless crackdown against the alleged plotters and supporters “If the EU is going to make Turkey a full member, we are ready. But they should know that we have came to the end of the game,” Erdogan said in a televised speech in Ankara.

“There is no need to beat around the bush or engage in diplomatic acrobatics. “It’s their (the EU’s) choice to continue the path with or without Turkey. They should not hold us responsible,” he added. Erdogan said that October would be an important month in Turkey’s relations with the European Union and that “it is necessary” that visa-free travel for Turks to the Schengen Area comes into force this month. Under a March deal, Turks were to gain visa-free travel in exchange for Ankara helping reduce the flow of migrants to Europe. However the visa plan as stumbled over Turkey’s anti-terror laws. Turkey’s bid to join the EU dates back to the 1960s with formal talks starting in 2005. So far, only 16 chapters of the 35 chapter accession process have been opened for Turkey.

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Afraid he himself will be sued. But then, so are many Americans.

Erdogan Slams US Congress Over Saudi 9/11 Law (AFP)

Turkish President Recep Tayyip Erdogan condemned Saturday a US Congress vote to override Barack Obama’s veto of a bill allowing 9/11 victims to sue Saudi Arabia, saying he expected the move to be reversed as soon as possible. Relations between Ankara and Riyadh have tightened considerably in the past months as they pursue joint interests in Syria. Erdogan had just the day earlier hosted Saudi Crown Prince Mohammed bin Nayef for talks at his palace. “The allowing by the US Congress of lawsuits to be opened against Saudi Arabia over the 9/11 attacks is unfortunate,” Erdogan said in a speech for the opening of parliament.

“It’s against the principle of individual criminal responsibility for crimes. We expect this false step to be reversed as soon as possible,” he added. Families of 9/11 victims have campaigned for the law, convinced the Saudi government had a hand in the attacks that killed almost 3,000 people. Fifteen of the 19 hijackers were Saudi citizens, but no link to the government has been proven. The Saudi government denies any ties to the plotters. Obama called the vote a “dangerous precedent” while Saudi Arabia warned it risked having “disastrous consequences”.

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Western Europe has utterly failed to see how different eastern European, formerly Soviet-block, nations are from them.

Hungary Votes On Government’s Rejection Of EU Refugee Quotas (AP)

Hungarians were voting Sunday in a referendum called by Prime Minister Viktor Orban’s government to seek support for its opposition to any future, mandatory EU quotas for accepting relocated asylum seekers. The government’s position is expected to find wide support among voters, though there was uncertainty whether turnout would exceed the 50% plus-one-vote threshold needed for the referendum to be valid. The referendum asks: “Do you want the European Union to be able to prescribe the mandatory settlement of non-Hungarian citizens in Hungary even without the consent of Parliament?” Orban has argued that “No” votes favor Hungary’s sovereignty and independence. If that position secures a majority of ballots, Hungary’s parliament would pass legislation to bolster the referendum’s goal whether or not turnout was sufficient for a valid election, he said.

Orban also said he would resign if the “Yes” votes won, but the vow was seen mostly as a ploy to boost turnout by drawing his critics to the polls. “The most important issue next week is for me to go to Brussels, hold negotiations and try with the help of this result — if the result if appropriate— achieve for it not to be mandatory to take in the kind of people in Hungary we don’t want to,” Orban said after casting his vote in an elementary school in the Buda hills. Orban, who wants individual EU member nations to have more power in the bloc’s decision-making process, said he hopes the anti-quota referendums would be held in other countries. “We are proud that we are the first” he said. “Unfortunately, we are the only ones in the European Union who managed to have a (referendum) on the migrant issue. I would be happy to see other countries to follow.”

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“..Greece has plenty of uninhabited islands, and big foreign debt. So if you have ‘hotspots’ in Greek islands, this would be a sort of payment of foreign debt..”

Czech President Calls For Deportation Of Economic Migrants (Pol.)

Czech President Milos Zeman has called for economic migrants arriving in Europe to be deported to “empty places” in North Africa or “uninhabited Greek islands.” “I am for deportation of all economic migrants,” Zeman said. “Of course I respect the cruelty of civil war in Syria, Iraq, and so on. But we do not speak about those people, we speak about economic migrants.” “We are in Greece, and Greece has plenty of uninhabited islands, and big foreign debt. So if you have ‘hotspots’ in Greek islands, this would be a sort of payment of foreign debt,” Zeman told the FT in an interview published on Sunday. He added that he is “sure there is a strong connection between the wave of migrants and the wave of jihadis … And those people who deny this connection are wrong.” The Czech president has been condemned for making Islamophobic remarks in the past.

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It was Germany that last year declared Dublin null and void. They will say that was only temporaray, but regulations like this are not light switches that selected parties can flick on and off when it suits them.

Greece is already little more than a greatly impoverished holding pen for the unwanted, and it threatens to fall much deeper into the trap. That’s why the Automatic Earth effort to support the poorest people is not just still needed, but more now than ever. We will soon start a new campaign to that end. In the meantime, please do continue to donate through our Paypal widget in amounts ending in $.99 or $.37.

Germany Interior Minister Urges Athens To Implement Dublin Rules (Kath.)

Germany Interior Minister Thomas de Maiziere has repeated his call for Greece to implement the so-called Dublin regulations, which state that migrants must seek asylum in the EU member-state they first arrived in. Due to deficiencies in Greece’s asylum processing system and the large number of migrants and refugees arriving in the country, Berlin has suspended deportations back to Greece since 2011. “The EU has since then provided financial and other support for Greek efforts, and given a lot of money to improve these conditions,” de Maiziere told Kathimerini. “That is why I would like to see the Dublin Convention implemented again,” he said. The German minister said Berlin recognized the burden shouldered by Greece in recent years. “But we still need a strategy to restore the legal situation,” he said, adding that the issue would be discussed at a meeting of interior ministers in October.

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Sep 272016
 
 September 27, 2016  Posted by at 8:32 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Arnold Genthe “Chinatown, San Francisco. The street of the gamblers at night” 1900

Why I Switched My Endorsement from Clinton to Trump (Scott Adams)
When America Was Great, Taxes Were High, Unions Strong, and Government Big (A.)
Global Debt Reaches Fresh High As Companies And Countries Keep Borrowing (Tel.)
When Small Is Evil (DQ)
Structural Growth and Dope Dealers on Speed-Dial (Hussman)
Treasury Market’s Biggest Buyers Are Selling as Never Before (BBG)
Deutsche Bank Crisis Could Take Angela Merkel Down – And The Euro (Tel.)
China’s Runaway Housing Market Poses Latest Challenge for Yuan (BBG)
Sydney Home Prices Need To Drop 25% To Help First Time Buyers (Abc)
Don’t Blame “Baby Boomers” For Not Retiring – They Can’t Afford To (Roberts)
Saudi Lobbyists Plot New Push Against 9/11 Bill As Veto Override Looms (Pol.)
Over 90% Of World Breathing Bad Air-WHO (AFP)
Canadians Are Embracing Syrian Refugees. Why Can’t We? (G.)

 

 

The most interesting and thought-provoking thing I’ve read about the election amidst a river of blubber.

Why I Switched My Endorsement from Clinton to Trump (Scott Adams)

5. Pacing and Leading: Trump always takes the extreme position on matters of safety and security for the country, even if those positions are unconstitutional, impractical, evil, or something that the military would refuse to do. Normal people see this as a dangerous situation. Trained persuaders like me see this as something called pacing and leading. Trump “paces” the public – meaning he matches them in their emotional state, and then some. He does that with his extreme responses on immigration, fighting ISIS, stop-and-frisk, etc. Once Trump has established himself as the biggest bad-ass on the topic, he is free to “lead,” which we see him do by softening his deportation stand, limiting his stop-and-frisk comment to Chicago, reversing his first answer on penalties for abortion, and so on.

If you are not trained in persuasion, Trump looks scary. If you understand pacing and leading, you might see him as the safest candidate who has ever gotten this close to the presidency. That’s how I see him. So when Clinton supporters ask me how I could support a “fascist,” the answer is that he isn’t one. Clinton’s team, with the help of Godzilla, have effectively persuaded the public to see Trump as scary. The persuasion works because Trump’s “pacing” system is not obvious to the public. They see his “first offers” as evidence of evil. They are not. They are technique. And being chummy with Putin is more likely to keep us safe, whether you find that distasteful or not. Clinton wants to insult Putin into doing what we want. That approach seems dangerous as hell to me.

6. Persuasion: Economies are driven by psychology. If you expect things to go well tomorrow, you invest today, which causes things to go well tomorrow, as long as others are doing the same. The best kind of president for managing the psychology of citizens – and therefore the economy – is a trained persuader. You can call that persuader a con man, a snake oil salesman, a carnival barker, or full of shit. It’s all persuasion. And Trump simply does it better than I have ever seen anyone do it. The battle with ISIS is also a persuasion problem. The entire purpose of military action against ISIS is to persuade them to stop, not to kill every single one of them. We need military-grade persuasion to get at the root of the problem. Trump understands persuasion, so he is likely to put more emphasis in that area.

Most of the job of president is persuasion. Presidents don’t need to understand policy minutia. They need to listen to experts and then help sell the best expert solutions to the public. Trump sells better than anyone you have ever seen, even if you haven’t personally bought into him yet. You can’t deny his persuasion talents that have gotten him this far. In summary, I don’t understand the policy details and implications of most of either Trump’s or Clinton’s proposed ideas. Neither do you. But I do understand persuasion. I also understand when the government is planning to confiscate the majority of my assets. And I can also distinguish between a deeply unhealthy person and a healthy person, even though I have no medical training. (So can you.)

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The Dream ended decades ago, it’s just a matter of picking which decade.

When America Was Great, Taxes Were High, Unions Strong, and Government Big (A.)

There is plenty about GOP hopeful Donald Trump to which potential primary voters respond. He’s successful. He’s plainspoken. At a time when politicians are historically unpopular, he’s not a politician. And he has a great slogan. That slogan resonates with his supporters, according to Republican pollster Frank Luntz, who ran a recent focus group, the results of which were written about in Time. “I used to sleep on my front porch with the door wide open, and now everyone has deadbolts,” one man told Luntz. “I believe the best days of the country are behind us.” Luntz concluded that people see Trump as a “real-deal fixer-upper,” able to make repairs that others have bungled. “We know his goal is to make America great again,” one woman astutely observed. “It’s on his hat.”

It could be on your hat too—Trump has begun selling “Make America Great Again” merchandise—if you can find one, that is. They have a tendency to sell out. As Russell Berman pointed out in The Atlantic earlier this month, many white Americans these days are pessimistic to the point of despair: “White Americans—and in particular those under 30 or nearing retirement age—have all but given up on the American Dream. More than four out of five younger whites, and more than four out of five respondents between the ages of 51 and 64 said The Dream is suffering.” No wonder Trump’s message is so powerful—it’s a sugar pill coated with nostalgia. He is not promising to make America great, he’s promising to make it great again. But to what era does he intend to take the nation back?

And what would that look like, practically speaking? The boundaries of America’s “golden age” are clear on one end and fuzzy on the other. Everyone agrees that the midcentury boom times began after Allied soldiers returned in triumph from World War II. But when did they wane? The economist Joe Stiglitz, in an article in Politico Magazine titled “The Myth Of The American Golden Age,” sets the endpoint at 1980, a year until which “the fortunes of the wealthy and the middle class rose together.” Others put the cut-off earlier, at the economic collapse of 1971 and the ensuring malaise. Regardless of when it ended, it would not be unfair to use the ’50s as shorthand for this now glamorized period of plenty, peace, and the kind of optimism only plenty and peace can produce.

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Ever more debt is the only way to keep the facade upright enough that people believe in it.

Global Debt Reaches Fresh High As Companies And Countries Keep Borrowing (Tel.)

Global debt issuance is on course to hit a record high in 2016 as figures showed sales this year topped $5 trillion (£3.9 trillion) at the end of September. Debt issuance rose to $5.02 trillion in the nine months to September 22, according to Dealogic, putting 2016 on course to beat the all-time high of $6.6 trillion recorded in 2006. Record low interest rates have encouraged countries and companies to issue debt as central banks around the world try to stimulate growth. The data also showed corporate issuance of investment-grade debt reached a record high of $1.54 trillion since the start of the year, up from $1.41 trillion in the same period a year earlier. Dealogic’s figures also highlighted the impact of the Brexit vote.

Sterling-denominated investment grade debt rose to $21.3bn in the first nine months of the year, up slightly from $20.9bn raised in the same period of 2015. Volumes in July fell to their lowest since 2000 as the referendum result slowed issuance, with just $564m issued, according to Dealogic. However, issuance is expected to pick up later this year following the Bank of England’s decision to buy £10bn of corporate debt as part of its revamped bond-buying programme. Sterling issuance in August jumped to six times the average following the Bank’s announcement. Green bonds – which raise money for environmentally friendly projects and often carry tax exemptions – are also rising in popularity.

Activity surpassed full-year 2015 levels in September as volumes reached a record high, worth $48.2bn. Mark Carney, the Governor of the Bank of England, has spoken out in favour of green finance, describing it as a “major opportunity” for investors. In a speech last week, he said long-term financing of green projects in emerging markets could help to promote financial stability. “By ensuring that capital flows finance long-term projects in countries where growth is most carbon intensive, financial stability can be promoted,” he said. More than $13 trillion of global sovereign and corporate debt trades at negative yields, highlighting the influence of central banks.

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Draghi’s comments on small banks remind me of Ken Rogoff’s war on cash.

When Small Is Evil (DQ)

There are plenty of reasons to be worried about the state of Europe these days, but if one had to choose one thing above all others, it would be the gaping disconnect between reality and senior European policy makers’ willful misperception of reality. A perfect case in point was a speech given in Frankfurt by ECB president Mario Draghi. He was addressing a conference of the European Systemic Risk Board (ERSB), an organization created in 2010 by the European Commission to warn about and mitigate systemic financial risks in Europe. During his address Draghi discussed what he saw as the biggest threats to Europe’s financial system.

Just as you’d expect from any senior central banker worth his or her salt, he did not point to the most obvious risk: the zombifying banks at the very top of the financial food chain — the same banks that coincidentally constitute the ECB’s number-one constituency and whose balance sheets are still filled to the rafters with toxic assets dating back to even before the last major crisis, in 2008. By now, virtually all of these banks are fully dependent on the never-ending and ever-growing welfare assistance provided by the ECB. Nor did Draghi mention the excessive complexity and interconnectedness of the banking system, routinely fingered as potential causes of the next global financial crisis.

Nor for that matter did he mention the destructive side effects of the ECB’s negative interest rate policy (NIRP), which – besides sacrificing millions of savers and retirees via their pension funds on the altar of rampant debt creation and completely undermining the crucial micro-economic role played by capital formation – is making it difficult for Europe’s largest banks to turn a meaningful profit. No, for Draghi, the biggest financial problem in Europe these days is that it is over-banked. “Over-capacity in some national banking sectors, and the ensuing intensity of competition, exacerbates this squeeze on margins,” he said. Put simply, there’s just too much competition from the thousands of smaller banks that are crowding out the profits for the big banks.

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“The weakness in real GDP growth is of greatest concern, because it’s largely the consequence of policies that encourage repeated cycles of bubbles and collapses..”

Structural Growth and Dope Dealers on Speed-Dial (Hussman)

In recent years, the U.S. equity market has scaled the third steepest cliff in history, eclipsed only by the 1929 and 2000 peaks, as investors rest their full confidence and weight on the protrusions of a structurally deteriorating economy, imagining that they are instead the footholds of a robust investment environment. The first of these is the current environment of low interest rates. While investors take this as quite a positive factor, it’s largely a reflection of a steep downturn in U.S. structural economic growth, magnified by reckless monetary policy. Over the past decade, the average annual nominal growth rate of GDP has dropped to just 2.9%, while real GDP growth has plunged to just 1.3%; both the lowest growth rates in history, outside of the Depression (see the chart below).

Indeed, probably the most interesting piece of information from last week’s FOMC meeting was that the Federal Reserve downgraded its estimate for the central tendency of long-run GDP growth to less than 2% annually. The weakness in real GDP growth is of greatest concern, because it’s largely the consequence of policies that encourage repeated cycles of bubbles and collapses, and chase debt-financed consumption instead of encouraging productive real investment. Indeed, growth in real U.S. gross domestic investment has collapsed since 2000 to just one-fifth of the rate it enjoyed in the preceding half-century, and has averaged zero growth over the past decade. While labor force growth has slowed, it’s really the self-inflicted collapse of U.S. productivity growth, enabled by misguided policy, that’s at the root of the problem.

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This is some investing tactic anymore. It’s about parties needing cash.

Treasury Market’s Biggest Buyers Are Selling as Never Before (BBG)

They’ve long been one of the most reliable sources of demand for U.S. government debt. But these days, foreign central banks have become yet another worry for investors in the world’s most important bond market. Holders like China and Japan have culled their stakes in Treasuries for three consecutive quarters, the most sustained pullback on record, based on the Federal Reserve’s official custodial holdings. The decline has accelerated in the past three months, coinciding with the recent backup in U.S. bond yields. For Jim Leaviss at M&G Investments in London, that’s cause for concern. A continued retreat could lead to painful losses in a market that some say is already too expensive.

But perhaps more important are the consequences for America’s finances. With the U.S. facing deficits that are poised to swell the public debt burden by $10 trillion over the next decade, foreign demand will be crucial in keeping a lid on borrowing costs, especially as the Fed continues to suggest higher interest rates are on the horizon. The selling pressure from central banks is “something you have to bear in mind,” said Leaviss, whose firm oversees about $374 billion. “This, as well as the Fed, all means we are nearer to the end of the low-yield environment.” Overseas creditors have played a key role in financing America’s debt as the U.S. borrowed heavily in the aftermath of the financial crisis to revive the economy.

Since 2008, foreigners have more than doubled their investments in Treasuries and now own about $6.25 trillion. Central banks have led the way. China, the biggest foreign holder of Treasuries, funneled hundreds of billions of dollars back into the U.S. as its export-based economy boomed. Now, that’s all starting to change. The amount of U.S. government debt held in custody at the Fed has decreased by $78 billion this quarter, following a decline of almost $100 billion over the first six months of the year. The drop is the biggest on a year-to-date basis since at least 2002 and quadruple the amount of any full year on record, Fed data show.

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“No one really knows where the losses would end up, or what the knock-on impact would be. It would almost certainly land a fatal blow to the Italian banking system, and the French and Spanish banks would be next.”

Deutsche Bank Crisis Could Take Angela Merkel Down – And The Euro (Tel.)

True, Merkel’s position is understandable. The politics of a Deutsche rescue are terrible. Germany, with is Chancellor taking the lead, has set itself up as the guardian of financial responsibility within the euro-zone. Two years ago, it casually let the Greek bank system go to the wall, allowing the cash machines to be closed down as a way of whipping the rebellious Syriza government back into line. This year, there has been an unfolding Italian crisis, as bad debts mount, and yet Germany has insisted on enforcing euro-zone rules that say depositors – that is, ordinary people – have to shoulder some of the losses when a bank is in trouble. For Germany to then turn around and say, actually we are bailing out our own bank, while letting everyone else’s fail, looks, to put it mildly, just a little inconsistent.

Heck, a few people might even start to wonder if there was one rule for Germany, and another one for the rest. In truth, it would become impossible to maintain a hard-line in Italy, and probably in Greece as well. And yet, if Deutsche Bank went down, and the German Government didn’t step in with a rescue, that would be a huge blow to Europe’s largest economy – and the global financial system. No one really knows where the losses would end up, or what the knock-on impact would be. It would almost certainly land a fatal blow to the Italian banking system, and the French and Spanish banks would be next. Even worse, the euro-zone economy, with France and Italy already back at zero growth, and still struggling with the impact of Brexit, is hardly in any shape to withstand a shock of that magnitude.

A rock and a hard place are hardly adequate to describe the options Merkel may soon find herself facing. The politics of a rescue are terrible, but the economics of a collapse are even worse. By ruling out a rescue, she may well have solved the immediate political problem. Yet when the crisis gets worse, as it may do at any moment, it is impossible to believe she will stick to that line. A bailout of some sort will be cobbled together – even if the damage to Merkel’s already fraying reputation for competence will be catastrophic. In fact, Merkel is playing a very dangerous game with Deutsche – and one that could easily go badly wrong. If her refusal to sanction a bail-out is responsible for a Deutsche collapse that could easily end her Chancellorship. But if she rescues it, the euro might start to unravel.

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Beijing purposely blows a giant bubble with money people don’t have.

China’s Runaway Housing Market Poses Latest Challenge for Yuan (BBG)

Here’s the latest uncertainty facing China’s currency: sky high house prices. A runaway boom in the largest cities will push investors to look for cheaper alternatives overseas, draining money out of China and putting downward pressure on the yuan in the process, according to analysis by Harrison Hu at Royal Bank of Scotland in Singapore. An “enlarged differential between domestic and foreign asset prices will lead to capital outflows and depreciation, until parity is restored,” Hu wrote in a note. He said that the 30% year-on-year price gain in Tier 1 and leading Tier 2 cities implies a 25% rise in dollar terms, which far outpaces the 5% gain in major U.S. cities. That ratio is here in red:

“It’s commonly believed that China’s policymakers will sacrifice the yuan exchange rate to avoid a sharp correction in domestic property prices, as the latter will more significantly derail China’s economy and the financial system,” Hu wrote. That’s because the importance of the property market in the world’s second largest economy far outweighs many sectors, including the stock market. Hu compares property as a percentage of economic output to the far lighter footprint of stocks. A real estate crash in China could have far reaching consequences and it would be a long time before investors regained their confidence, according to Hu.

That will put policy makers in a very difficult position. While the government has some cards in its hand, such as an ability to control land supply and enforce curbs on new home-buying, history shows that some tightening measures risk backfiring and only stoking speculative behavior such as “panic buying” like that seen in Shanghai earlier this year. Besides, the regulator’s handling of last year’s stock market turmoil did little to inspire confidence in the government’s ability to oversee the bubbly housing market. “No bubble has a happy ending,” Hu wrote.

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Someone should calculate the losses at a 25% price drop. And do 50% too. Losses for ‘owners’ and for lenders.

Sydney Home Prices Need To Drop 25% To Help First Time Buyers (Abc)

First home buyers are facing the biggest barrier in recent history to entering the housing market, with deposits at record high levels relative to incomes in the Sydney market. Research by Deutsche Bank’s chief Australian economist Adam Boyton shows it would take a 25% drop in Sydney home prices to bring the size of deposit required back to average levels over the past 20 years. Mr Boyton studied the Sydney market because it is the biggest, has seen rapid recent price growth and has the highest housing costs in the nation. In contrast to the record deposit needed – now estimated to be almost twice the typical annual earnings of a Sydney household – rising incomes over the early 2000s and falling interest rates since the global financial crisis have seen the burden of mortgage repayments remain comparatively stable relative to income.

Mr Boyton expresses this as “borrowing power”, which has broadly increased in line with Sydney home prices, albeit with prices jumping ahead somewhat during the most recent boom. At the low point in 2003, a Sydney household with a typical income could only borrow half what a typical house cost if their repayments were to be 30% of their gross incomes. At the best points for affordability, households could comfortably afford to borrow between 60-68% of the typical Sydney house price. Currently that figure is just over 50%.

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An epic clash unfolds before our eyes.

Don’t Blame “Baby Boomers” For Not Retiring – They Can’t Afford To (Roberts)

In business, the 80/20 rule states that 80% of your business will come from 20% of your customers. In an economy where more than 2/3rds of the growth rate is driven by consumption, an even bigger imbalance of the “have” and “have not’s” presents a major headwind. I have often written about the disconnect between Wall Street and Main Street. As shown in the chart below, while asset prices were inflated by continued interventions of monetary policy from the Federal Reserve, it only benefited the small portion of the population with assets invested in the market.

Cheap debt, excess liquidity and a buyback spree, led to soaring Wall Street and corporate profits, surging executive compensation and rising incomes for those in the top 10%. Unfortunately, the other 90% known as “Main Street” did not receive many benefits. This divide is clearly seen in various data and survey statistics such as the recent survey from National Institute On Retirement Security which showed the typical working-age household has only $2500 in retirement account assets. Importantly, “baby boomers” who are nearing retirement had an average of just $14,500 saved for their “golden years.”

[..] The gap between the young and elderly population has shrunk dramatically in recent years as the demographic trends have shifted. Old people are living longer and young people are delaying marriage and children. This means fewer people paying into a social welfare system, while more or taking out. Of course, the burden on the social safety net remains the 800-lb gorilla in the room no one wants to talk about. But with the insolvency of the welfare system looming in less than a decade, I am sure it will become a priority soon enough.

Of course, as we will discuss in a moment, the problem is that while the “baby boom” generation may be heading towards retirement years, there is little indication a large majority of them will be actually retiring. With a large majority of individuals being dependent on the welfare system in retirement, the burden will fall on those next in line. Welcome to the “sandwich generation” when more individuals will be “sandwiched” between supporting both parents and children in the same household. It should be no surprise multi-generational households in the U.S. are at their highest levels since the “Great Depression.”

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Obama’s fist veto override?

Saudi Lobbyists Plot New Push Against 9/11 Bill As Veto Override Looms (Pol.)

Saudi Arabia is mounting a last-ditch campaign to scuttle legislation allowing families of victims of the Sept. 11, 2001 attacks to sue the kingdom — and they’re enlisting major American companies to make an economic case against the bill. General Electric, Dow Chemical, Boeing and Chevron are among the corporate titans that have weighed in against the Justice Against Sponsors of Terrorism Act, or JASTA, which passed both chambers unanimously and was vetoed on Friday, according to people familiar with the effort. The companies are acting quietly to avoid the perception of opposing victims of terrorism, but they’re responding to Saudi arguments that their own corporate assets in the kingdom could be at risk if the law takes effect.

Meanwhile, Trent Lott, the former Senate majority leader who now co-leads Squire Patton Boggs’ lobbying group, e-mailed Senate legislative directors on Monday warning that the bill could lead other countries to withdraw their assets from the United States and retaliate with laws allowing claims against American government actions. “Many foreign entities have long-standing, intimate relations with U.S. financial institutions that they would undoubtedly unwind, to the further detriment of the U.S. economy,” reads one of the attachments, obtained by POLITICO. “American corporations with interests abroad may be at risk of retaliation, a possibility recently expressed by GE and Dow.” Still, the Saudis and their agents face a significant uphill battle, with lawmakers loath to take a vote against victims of the 9/11 attacks right before an election.

There was little public opposition to the bill as it made its way through the Capitol, and even now, efforts to tweak the bill haven’t caught much traction. Senate Majority Leader Mitch McConnell (R-Ky.) announced Monday that the Senate will vote Wednesday on a motion to override President Barack Obama’s veto, and if override advocates are successful there, the House will take the same vote Thursday or Friday, a House Republican leadership aide said. But even if Obama receives the first veto override of his presidency, the story won’t end there: the Saudis will seek a new bill to scale back the law in the lame-duck session or in the next session, after lawmakers are relieved from the heat of the campaign, people familiar with the plans said. “It’s Washington at its finest,” one of the people said.

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How to kill off your own species.

Over 90% Of World Breathing Bad Air-WHO (AFP)

Nine out of 10 people globally are breathing poor quality air, the World Health Organization said Tuesday, calling for dramatic action against pollution that is blamed for more than six million deaths a year. New data in a report from the UN’s global health body “is enough to make all of us extremely concerned,” Maria Neira, the head of the WHO’s department of public health and environment, told reporters. The problem is most acute in cities, but air in rural areas is worse than many think, WHO experts said. Poorer countries have much dirtier air than the developed world, according to the report, but pollution “affects practically all countries in the world and all parts of society”, Neira said in a statement. “It is a public health emergency,” she said.

“Fast action to tackle air pollution can’t come soon enough,” she added, urging governments to cut the number of vehicles on the road, improve waste management and promote clean cooking fuel. Tuesday’s report was based on data collected from more than 3,000 sites across the globe. It found that “92% of the world’s population lives in places where air quality levels exceed WHO limits”. The data focuses on dangerous particulate matter with a diameter of less than 2.5 micrometres, or PM2.5. PM2.5 includes toxins like sulfate and black carbon, which can penetrate deep into the lungs or cardiovascular system. Air with more than 10 microgrammes per cubic metre of PM2.5 on an annual average basis is considered substandard.

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Funny little story against a very serious backdrop.

Canadians Are Embracing Syrian Refugees. Why Can’t We? (G.)

Nobody warned the Hendawis about Canadian girls. Wadah and Raghdaa Hendawi survived the civil war in Syria, fleeing the devastation of Aleppo with their children for the relative safety of Lebanon. For three years their teenage sons missed out on an education while they worked to support the family. Then they hit the immigration jackpot – Canada. They were greeted at Halifax airport not by immigration officials or social workers, but by their sponsors – a bunch of well-meaning locals whose fundraising efforts would support the family for the next 12 months. And so the Hendawis arrived in the small fishing town of Shelburne, Nova Scotia, swaddled in new ski jackets, blinded by the winter sunshine bouncing off fresh February snow.

They were the only Syrians in the village, and had no idea what was in store for them. The Rev. Joanne McFadden knew the names and ages of the family she was helping to sponsor, but apart from that she too didn’t know what to expect. She certainly wasn’t prepared for the phone call that came three days after Saed (18), Mohamad (16) and Ahmed (15) started attending Shelburne Regional High School. I get a phone call from the principal. ‘Uhhh, Joanne, we have a problem.’ ‘What’s the problem, Mary?’ ‘Well, all the girls in the school are chasing the boys.’ This hadn’t even crossed our mind, right, that this was even a possibility. It was like, pardon me, we’ve got some things to figure out.

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Sep 042016
 
 September 4, 2016  Posted by at 9:58 am Finance Tagged with: , , , , , , , , , , ,  Comments Off on Debt Rattle September 4 2016
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NPC “Georgetown-Marines game” 1923

Dollar Hegemony Endures As Share Of Global Transactions Keeps Rising (AEP)
US Has 9.93 Million More Government Workers Than Manufacturing Workers (CI)
German Budget Surpluses Are Bad For The Global Economy (Economist)
ECB’s Mersch: Central Banking Based On “Mathematical Models”, Not Reality (ZH)
Europe’s Broken Banks Need the Urge to Merge (BBG)
Economic Czars Warn G-20 of Risk From Populist Backlash on Trade (BBG)
Chinese Consumers Take Credit For Boom In Car Loans (R.)
6 Steps To Avoiding All EU (Incl. Irish) And US Taxes Via Ireland (PP)
Rural France Pledges To Vote For Marine Le Pen As Next President (G.)
Shops Set For Christmas Price Hikes As Millions Of Shipments Stranded (Ind.)
Row On Tarmac An Awkward G20 Start For US, China (R.)
Barack Obama ‘Deliberately Snubbed’ By Chinese In Chaotic Arrival At G20 (G.)
Half The Forms Of Life On Earth Will Be Gone By 2050 (ZH)

 

 

It’s nice to be able to agree with Ambrose once in a while.

Dollar Hegemony Endures As Share Of Global Transactions Keeps Rising (AEP)

The US dollar is tightening its grip on the global financial system at the expense of the euro, entrenching American hegemony and rendering the US Federal Reserve more powerful than at any time in history. Newly-released data from the Bank for International Settlements (BIS) show that the dollar’s share of the $5.1 trillion in foreign exchange trades each day has continued rising to 87.6pc of all transactions. It is the latest evidence confirming the extraordinary resilience of the dollar-based international order, confounding expectations of US financial decline a decade ago. Roughly 60pc of the global economy is either in the dollar zone or closely tied to it through currency pegs or ‘dirty floats’, and the level of debt issued in dollars outside US jurisdiction has soared to $9 trillion.

This has profound implications for monetary policy. The Fed has become the world’s central bank whether it likes it or not, setting borrowing costs for much of the global system. The BIS data shows that the volume of transactions in which the euro was on one side of the trade has slipped to 31.3pc from 37pc in 2007. The dollar share has ratcheted up to 87.6pc over the same period. It is much the same picture for the foreign exchange reserves of central banks, a good barometer of global trust. The dollar share has recovered to 63.6pc, roughly where it was a decade ago. The euro share has tumbled over the last eight years from 28pc to 20.4pc, and is barely above Deutsche Mark share in the early 1990s.

“There are no foreseeable rivals to the dollar as a viable reserve currency,” said Eswar Prasad from Cornell University, author of “The Dollar Trap: How the US Dollar Tightened Its Grip on Global Finance”. “The US is hard to beat. The US has deep financial markets, a powerful central bank and legal framework the rest of the world has a great deal of trust in,” he said. The eurozone is crippled by the lack of a unified EU treasury, joint bond issuance, and a genuine banking union to back up the currency. It would require a change in the German constitution to open the way for fiscal union, an unthinkable prospect in the current political climate.

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Many years ago I dubbed it the ‘Bulgaria Model’.

US Has 9.93 Million More Government Workers Than Manufacturing Workers (CI)

The August jobs report was filled with some interest factoids, like there are now 9.93 million government workers than there are manufacturing workers. That is a ratio of 1.81 government workers for every manufacturing worker. Such was not always the case. But a variety of factors such as labor cost differentials, EPA regulations and taxes had led to manufacturing jobs to be sent overseas. Now a 1.81 government to manufacturing employment ratio is called OVERHEAD. And you wonder why high paying manufacturing jobs are fleeing to other countries?

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“German saving and Greek suffering are two sides of the same coin..”

German Budget Surpluses Are Bad For The Global Economy (Economist)

On August 24th Germans received news to warm any Teutonic heart. Figures revealed a larger-than-expected budget surplus in the first half of 2016, and put Germany on track for its third year in a row in the black. To many such excess seems harmless enough—admirable even. Were Greece half as fiscally responsible as Germany, it might not be facing its eighth year of economic contraction in a decade. Yet German saving and Greek suffering are two sides of the same coin. Seemingly prudent budgeting in economies like Germany’s produce dangerous strains globally. The pressure may yet be the undoing of the euro area. German frugality and economic woes elsewhere are linked through global trade and capital flows.

In recent years, as Germany’s budget balance flipped from red to black, its current-account surplus—which reflects net cross-border flows of goods, services and investment—has soared, to nearly 9% of German GDP this year. The connection between budgets and current accounts might not be immediately obvious. But in a series of papers published in 2011 IMF economists found evidence that cutting budget deficits is associated with reduced investment, greater saving and a shift in the current account from deficit toward surplus. Two IMF economists, John Bluedorn and Daniel Leigh, reckoned that a fiscal consolidation of one percentage point of GDP led to an improvement in the ratio of the current-account balance to GDP of 0.6 percentage points.

On that reckoning, the German government’s thriftiness accounts for a small but meaningful share of its growing current-account surplus; perhaps as much as three percentage points of GDP over the past five years.

That has helped to resurrect an old problem. Global imbalances were a scourge of the world economy before the financial crisis of 2007-08. Back then, China and oil-exporting economies accounted for the surplus side of the world’s trade ledger, which reached nearly 3% of the world’s GDP on the eve of the crisis. Other countries, notably America, ran correspondingly large current-account deficits, financed in part by flows of investment from surplus countries that flooded into the country’s overheating housing market. A similar dynamic played out in miniature within the euro area, as core economies like Germany ran current-account surpluses and peripheral countries like Spain ran deficits.

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Taking away their powers is the only solution. But … that’s not going to happen.

ECB’s Mersch: Central Banking Based On “Mathematical Models”, Not Reality (ZH)

At first (literally the day the Fed announced QE1) it was just “tinfoil fringe blogs” who predicted the failure of the central bank’s attempt to boost the economy by printing money, instead warning that all the Fed would do is unleash an unprecedented income and wealth divide that may culminate in civil war and hyperinflation. Then, gradually, analysts, pundits and even the mainstream press admitted the truth, i.e., that tin-foilers were right all along, until recently even the Fed’s own mouthpiece, Jon Hilsenrath, one day before the Jackson Hole meeting wrote that “Years of Fed Missteps Fueled Disillusion With the Economy and Washington”, an article which set the stage for the pivot to the US issuance of much more debt, because apparently $9 trillion in new debt under Obama is not considered enough “fiscal stimulus.”

However, with virtually everyone else now slamming central banks for fooling the world for the past 7 years that they knew what they were doing, now that even Yellen admitted she has no idea what will happen in just the next 3 years projecting a 70% confidence interval of the Fed Funds rate of between 0% and 5% by the end of 2018 (we wonder what a 100% confidence would look like)…

.. overnight central bankers themselves attacked central bank policies, when ECB board member Yves Mersch warned on Saturday against using “extreme [policy] measures [with] unacceptable side effects” to shore up the eurozone’s weak economy, which he said could undermine trust in the single currency, a warning aimed squarely at Mario Draghi. Mersch’s comments come amid a growing debate over whether central banks in Europe and Japan should bolster economic growth by turning to even more tools such as “helicopter money.” Even more ludicrous, as we reported yesterday, Reuters already lobbed a tentative trial balloon, hinting that the ECB may be “forced” to buy ETFs and equities having virtually run out of bonds to monetize. Still, despite all ongoing ECB deflationary counter-measures, eurozone inflation was just 0.2% in August, far below the ECB’s near-2% target. Investors are increasingly concerned that the central bank is running out of tools.

Surprisingly, at this point Mersch joined the Weidmann bandwagon, and cautioned against “academic proposals [that] seem to prefer sophisticated models to social psychology.” Or in other words, for the first time, a central banker has suggested that broken (which is a far more accurate definition that sophisticated) financial models should be ignored when dealing with reality. “We cannot fulfill our mandate with mathematical equations, but only with instruments that maintain trust in the currency,” Mersch said at an annual economic forum on the shores of Lake Como, Italy. Expanding his tongue in cheek criticism of Mario Draghi’s relentless crusade to hurt the euro and reflate asset prices at all costs, Mersch then said that “extreme measures or legal violations of our mandate aren’t among those instruments.”

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Restructure. Only way. And again, not going to happen.

Europe’s Broken Banks Need the Urge to Merge (BBG)

The recent flurry of excitement at the idea that Germany’s Deutsche Bank and Commerzbank contemplated a merger reinforces the view that the European finance industry is ripe for consolidation. Banking leaders themselves talk about the need for mergers in an overbanked market, but no one among the bigger banks seems to want to go first. If something doesn’t change soon, Europe won’t have a banking industry worthy of the name. The relentless collapse in bank share prices this year may speak to difficult market conditions, but they also suggest that Europe’s banking model is broken, amid a deadly combination of negative interest rates, anemic economic growth and a lack of clarity about the future regulatory outlook (albeit in large part because European banks have fought every line of every proposed rule change).

The region’s banks have lost almost a quarter of their value this year, according to the Stoxx 600 Banks index. As Germany has by far the least consolidated banking sector in the euro zone, it’s no surprise that both Commerzbank and Deutsche Bank have done even worse. Merger talk sparked a bit of a rally in the two German banks in recent days, even though the discussions, reported to have taken place over two weeks this summer, have been abandoned. With both banks embarking on major cost-cutting and restructuring projects, it may have been too early to talk of a merger.

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It’s all in the choice of terminology: populism, protectionism, they sound very negative, so they are what you read. But it makes no difference: without growth, centralization withers away all by itself.

Economic Czars Warn G-20 of Risk From Populist Backlash on Trade (BBG)

The heads of three world economic bodies warned of the risk to trade from the protectionist headwinds sweeping many developed nations as global leaders met in Hangzhou, China. In a panel session Saturday ahead of the Group of 20 summit, Christine Lagarde, Managing Director of the IMF, urged business chiefs to lobby governments to help keep trade flows up as she issued a warning about the outlook for growth into 2017. Her views were echoed by Roberto Azevedo, Director-General of the WTO. “Trade is way too low and has been way too low for a long time,” Lagarde said. “There is at the moment an undercurrent of anti-trade movement. It’s at the political level. It’s at the public opinion level” and also being reflected in policy, she added.

“If there is no international trade, if there is no cross-border investment, if services, capital, people and goods do not cross borders, then it’s less activity for you, it’s less jobs in whichever country you are headquartered,” she said. Lagarde’s comments come as momentum for ratifying the U.S.-led Trans-Pacific Partnership, which would link 12 nations making up about 40% of the world economy, falters in the final months of U.S. President Barack Obama’s term. Both presidential candidates have spoken against the deal, which does not include China, while progress on a U.S.-EU trade and investment deal, known as TTIP, has also stalled.

France’s trade minister Matthias Fekl said late last month that the U.S. hasn’t offered anything substantial in negotiations with the EU on the free-trade deal and that talks should come to an end. His comments followed those of German Economy Minister Sigmar Gabriel, who said discussions on the TTIP “have de-facto broken down, even if no one wants to say so.” Many Western nations are grappling with a mood of protectionism that is leading to calls for caution on free trade, and on foreign investment in things like property and utilities. Chinese companies recently were dealt a blow on prospective projects in both the U.K. and Australia.

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Let’s see: more debt AND more cars. It’s a win-win! Happy days!

Chinese Consumers Take Credit For Boom In Car Loans (R.)

Chinese households, traditional savers with an aversion to debt, are rapidly warming to the idea of borrowing to buy a car, as automakers push financing deals to boost sales and margins in an increasingly competitive market. Nearly 30% of Chinese car buyers bought on credit last year, up from 18% in 2013, according to analysts from Sanford C. Bernstein and Deloitte, helping a rebound in the car market after a sticky 2015. That is welcome news to China’s government, which wants consumers to borrow and spend more to shift its slowing economy away from heavy industry and investment-led growth. Beijing resident Wang Danian said he planned to buy his first car on credit, saying it was the smart move.

“I can use my cash to do other things,” the 28-year-old said. “If I use all my savings at once to buy a car, and then something happens, I can’t manage the risk.” Six consumers interviewed by Reuters said they would all consider loans, lured by low-fee and interest-free deals, with half saying they’d prefer to buy on credit and save cash for other items. “I’d estimate after the manufacturer came out with the low-interest deal that about 30% of potential cash buyers switched to buying on credit,” said a salesman at a Volkswagen dealership in eastern China’s Jiangsu province who gave his name as Mr. Zhao. That is still a far cry from the more than 80% of cars bought on loans in the United States, but Deloitte predicts China will reach 50% by 2020.

[..] China’s auto market struggled last year thanks to the slowest economic growth in 25 years and a stock market rout, but rebounded in October when the government cut sales tax on smaller cars. By July, vehicle sales were rising at their fastest monthly rate in three and a half years. “While the government’s tax reduction was the most obvious explanation for the rebound in Chinese car sales at the end of 2015, soaring auto financing penetration represented another, lesser noticed, driver of the boom,” Bernstein said in April.

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Excellent thread from The Property Pin. A lot more under the link.

6 Steps To Avoiding All EU (Incl. Irish) And US Taxes Via Ireland (PP)

1. Making the Intellectual Property (IP). Let’s say that Apple US spent $200m (validly) developing iOS (it’s iPhone operating system). What Apple does next is to “sell” a non-US version of iOS to an Apple Ireland entity (generic name), for c $500m. Apple US will then pay full US taxes on this gain of $300m. Easy so far. The US IRS is already starting to probe these “internal” sales.

2. Stepping up the IP value (when the “magic” happens). Specialist IP corporate finances (why Dublin accountancy firms have big corporate finance practices) make two discoveries. First, if the Apple device has no iOS software, it can’t function. iOS is the “secret sauce” (like a drug patent). They then show Apple Ireland that it has done an amazing deal at the expense of its parent, Apple US. They show that if the non-US version of iOS is converted in to 200 different languages (and local network formats), then Apple Ireland can sell devices all over the world (fancy that). The global commercial value is over €50bn (why many MNC jobs in Ireland are “localisation”, or language translation, jobs). Apple has the tax equivalent of “Alchemy”.

3. Avoiding tax on the IP step-up. A €50bn gain in Apple Ireland is going to incur tax (both Irish and US), and would distort Ireland’s National Accounts (our 2014 GDP was only €200bn). Apple, and the Irish State, worked a scheme to have Apple Ireland both resident in Ireland (essential so Apple Ireland can avail of EU TP (Transfer Pricing) rules; you can’t do EU TP from Cayman, or worse, “Stateless” locations), and non-resident in Ireland (to avoid Irish tax). The EU’s Apple report, proves the recent 26% increase in Irish GDP (“leprechaun economics”) was all Apple, forced to unwind it’s “dual” status (as EU report drew near). Apple paid a once-off tax on the transfer (€500m vs. €50bn gain), which increased our EU GDP levies by 380m. Per Annum.

4. Executing the TP of this IP into Europe. Before step 3., if Apple Ireland sold an iPhone in Germany for €500, Apple Germany would offset valid incurred cash costs (Apple China/Foxconn manufacturing costs of about €150, and Apple Germany marketing costs of about €50) giving a German profit of €300 on that iPhone. German Revenue would take €100 of this in German taxes, and €200 can go back to Ireland. EU TP rules allow EU resident companies, like Apple Ireland, to charge Apple Germany a share of their €50bn IP value, expressed as a royalty charge. Charging this royalty to Apple Germany wipes out all Apple’s German profits. Apple Germany pays no German taxes, and the full €300 goes back to Apple Ireland tax-free.

5. The Cherry on Top. EU challenged step 4. in 2011 (we will get to CCCTB), but the UK Veto stopped it (Osborne was turning Britain into an even bigger EU tax-haven than Ireland). Despite Ireland having the “golden ticket” of being INSIDE the EU’s TP system (why Apple Ireland had to be legally resident in Ireland), AND having the lowest EU corporate tax rate, that was not enough. In 2010, Apple Ireland’s tax rate collapsed from a tiny 0.5% to effectively 0%. Apple Ireland’s profits quadrupled (and doubled every year after). The Irish State had perfected a “straw” for Apple, stuck into the EU, allowing Apple to suck all its EU profits (Germany, France, Italy etc.), via Ireland, to offshore locations, free of EU, Irish and US taxes.

6. Locking it in. US tax law requires US MNCs to remit non-US profits back to the US for final taxing. US tax rate is high at 35% (even by EU standards). The Double Tax Treaty system allows the MNCs to get a credit for taxes paid in the countries in which the profits were made. If Apple pays 35% on German profits, no further US taxes apply. The US IRS allows MNCs to leave non-US profits outside of the US if these non-US profits are going to be re-invested in the non-US location. Apple claimed this right in their US 10K Returns (Margrethe showed how Apple violate this). That is how Apple built the largest offshore cash hoard of modern economic history. Profits from the EU, on which they have never paid EU, Irish or US taxes. Period.

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In France, as in UK and US and many other places, voters vote against someone, not for.

Rural France Pledges To Vote For Marine Le Pen As Next President (G.)

In the picturesque hamlet of Brachay, in scorching late summer heat, Marine Le Pen was preaching to the politically converted. “Marine, président”, they chanted. “On va gagner” (we’re going to win). A banner stretching the length of one of the stone buildings overlooking the village square read: “Marine: Save France.” Le Pen’s stump speech was the most closely watched and significant campaign launch of la rentrée, the national return to work after the long summer holidays, and the leader of France’s far-right Front National was welcomed like a conquering hero. Le Pen has been largely absent from the political scene for several weeks and has refrained from adding her 10 cents’ worth to the raging polemic over the burkini and rows about security following deadly attacks by Islamic fundamentalists, both fertile ground for her party.

In the meantime, the country’s governing Socialists and centre-right opposition Les Républicains have engaged in what one FN heavyweight described with schadenfreude as a “bloodbath, left and right”. The Parti Socialiste is bitterly split and in turmoil over whether François Hollande, with his calamitous popularity ratings will, or indeed should, stand for a second term. The alternative, to stand down, would be unprecedented for a serving leader. Emmanuel Macron, the finance minister who resigned last week, might be the rabbit that the party pulls out of the hat, but he is disliked by the PS’s leftwing, which is fielding its own candidates. In any case, Macron has not said whether he will even throw his hat into the presidential ring.

On the right, things are scarcely more harmonious. The deadline for Les Républicains candidates is Friday, and already former president Nicolas Sarkozy, mayor of Bordeaux Alain Juppé and former prime minister François Fillon have either announced they are standing or are expected to do so. Amid this political free-for-all, Le Pen is trying to throw off the party’s divisive reputation and market herself as a politician above and beyond the fray of the same-old-same-old French elite: a new, unifying, patriotic force who will break the shackles of Europe, end “mass immigration” and give France back to the French. Her slogan is La France apaisée – a soothed France.

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So if people have to spend more to buy the same stuff, that’s good for the economy, right?

Shops Set For Christmas Price Hikes As Millions Of Shipments Stranded (Ind.)

Summer is not yet over but Christmas could be about to get more expensive as millions of gifts including TVs and electrical gadgets could be stranded at sea for months. Retailers have been thrown into turmoil after one of the world’s largest shipping companies collapsed into bankruptcy. South Korean company Hanjin’s vessels have been seized at Chinese ports, while others have been banned from docking until unpaid fees are received. As a result, the cost of transporting goods from Asia to the US and Europe has jumped by more than half, threatening margins as retailers begin stocking up for Christmas. September marks the start of the busiest period of the year for transporting goods.

The US National Retail Federation, the world’s largest retail trade association, wrote to Penny Pritzker, secretary of commerce, on Thursday, urging them to work with the South Korean government, ports and others to prevent disruptions. The bankruptcy is having “a ripple effect throughout the global supply chain” that could cause significant harm to both consumers and the economy, the association wrote. “Retailers’ main concern is that there (are) millions of dollars’ worth of merchandise that needs to be on store shelves that could be impacted by this,” said Jonathan Gold, the group’s vice president for supply chain and customs policy.

“Some of it is sitting in Asia waiting to be loaded on ships, some is already aboard ships out on the ocean and some is sitting on US docks waiting to be picked up. It is understandable that port terminal operators, railroads, trucking companies and others don’t want to do work for Hanjin if they are concerned they won’t get paid.” With an estimated half a million 40-foot containers full of goods stuck at sea or in ports there appears to be little hope of a quick resolution to the issue. September marks the start of the busiest time of the year for transporting goods, but a Korean court on Thursday set a deadline of 25 November to submit a plan to resolve the dispute.

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Hilarious!

Row On Tarmac An Awkward G20 Start For US, China (R.)

A Chinese official confronted U.S. President Barack Obama’s national security adviser on the tarmac on Saturday prompting the Secret Service to intervene, an unusual altercation as China implements strict controls ahead of a big summit. The stakes are high for China to pull off a trouble-free G20 summit of the world’s top economies, its highest profile event of the year, as it looks to cement its global standing and avoid acrimony over a long list of tensions with Washington. Shortly after Obama’s plane landed in the eastern city of Hangzhou, a Chinese official attempted to prevent his national security adviser Susan Rice from walking to the motorcade as she crossed a media rope line, speaking angrily to her before a Secret Service agent stepped between the two.

Rice responded but her comments were inaudible to reporters standing underneath the wing of Air Force One. It was unclear if the official, whose name was not immediately clear, knew that Rice was a senior official and not a reporter. The same official shouted at a White House press aide who was instructing foreign reporters on where to stand as they recorded Obama disembarking from the plane. “This is our country. This is our airport,” the official said in English, pointing and speaking angrily with the aide. The U.S. aide insisted that the journalists be allowed to stand behind a rope line, and they were able to record the interaction and Obama’s arrival uninterrupted, typical practice for U.S. press traveling with the president.

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“.. the leader of the world’s largest economy, who is on his final tour of Asia, was forced to disembark from Air Force One through a little-used exit in the plane’s belly..”

Barack Obama ‘Deliberately Snubbed’ By Chinese In Chaotic Arrival At G20 (G.)

China’s leaders have been accused of delivering a calculated diplomatic snub to Barack Obama after the US president was not provided with a staircase to leave his plane during his chaotic arrival in Hangzhou ahead of the start of the G20. Chinese authorities have rolled out the red carpet for leaders including India’s prime pinister Narendra Modi, Russian president Vladimir Putin, South Korean president Park Geun-hye, Brazil’s president Michel Temer and British prime minister Theresa May, who touched down on Sunday morning. But the leader of the world’s largest economy, who is on his final tour of Asia, was forced to disembark from Air Force One through a little-used exit in the plane’s belly after no rolling staircase was provided when he landed in the eastern Chinese city on Saturday afternoon.

When Obama did find his way onto a red carpet on the tarmac below there were heated altercations between US and Chinese officials, with one Chinese official caught on video shouting: “This is our country! This is our airport!” “The reception that President Obama and his staff got when they arrived here Saturday afternoon was bruising, even by Chinese standards,” the New York Times reported. Jorge Guajardo, Mexico’s former ambassador to China, said he was convinced Obama’s treatment was part of a calculated snub. “These things do not happen by mistake. Not with the Chinese,” Guajardo, who hosted presidents Enrique Peña Nieto and Felipe Calderón during his time in Beijing, told the Guardian.

“I’ve dealt with the Chinese for six years. I’ve done these visits. I took Xi Jinping to Mexico. I received two Mexican presidents in China. I know exactly how these things get worked out. It’s down to the last detail in everything. It’s not a mistake. It’s not.” Guajardo added: “It’s a snub. It’s a way of saying: ‘You know, you’re not that special to us.’ It’s part of the new Chinese arrogance. It’s part of stirring up Chinese nationalism. It’s part of saying: ‘China stands up to the superpower.’ It’s part of saying: ‘And by the way, you’re just someone else to us.’ It works very well with the local audience. “Why [did it happen]?” the former diplomat, who was ambassador from 2007 until 2013, added. “I guess it is part of Xi Jinping playing the nationalist card. That’s my guess.”

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I am not optimistic.

Half The Forms Of Life On Earth Will Be Gone By 2050 (ZH)

Humanity should start saving nature and switch to 80% renewables by 2030, otherwise the Earth will keep losing species, and within 33 years around 800,000 forms of life will be gone, conservation biologist Reese Halter told RT’s News with Ed. Humans have changed the Earth so much that some scientists think we have entered a new geological age. According to a report in the Science Magazine, the Earth is now in the anthropocene epoch. Millions of years from now our impact on Earth will be found in rocks just like we see fossils of plants and animals which lived years ago – except this time scientists of the future will find radioactive elements from nuclear bombs and fossilized plastic.

RT: Tell us about this new age.
Reese Halter: Yes. There are three things that come to mind. First of all, imagine you’re back on the football field. Each year in America – America alone – we throw away the equivalent of one football field, a 100 miles deep. That is the first thing. The second thing, we’ve entered the age of climate instability. That means from burning subsidized climate altering fossil fuels our food security is in jeopardy. The third thing that is striking is we’re losing species a thousand times faster than in the last 65 million years. At this rate within 33 years, by midcentury – that means 800,000 forms of life, or half of everything we know will be gone. The only way we can reverse this is to two things: save nature now, our life support system, and we do this by switching to 80% renewables by 2030. It is a WWIII mentality. In America we have the technology; we have the blueprint. We lack the political will just right now. But in the next short while we will, because it is a matter of survival.

RT: We’ve just gone through the hottest month on record. There is plenty of data out there to suggest that we truly are entering something our world has never seen in our lifetime. To brand it as a new geological age, what impact is that going to have? RH: It’s got the impact that humans are here. As I said earlier, we’re talking a 160% more than mother Earth can sustain 7.4 billion people. The way to do it is to pull it back to 90%. If we were a big bathtub the ring will read: toxicity, toxicity, toxicity. We’ve got to peal that back, because what we do to the Earth, we do to ourselves.

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Jul 282016
 
 July 28, 2016  Posted by at 8:11 am Finance Tagged with: , , , , , , , , , ,  6 Responses »
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Marion Post Wolcott Main Street. Sheridan, Wyoming 1941

Beijing’s Property Sales Surge 65% In 2015 (R.)
How a Chinese Highway Became a Boulevard of Broken Dreams (WSJ)
China Shadow Banking Assets Grew 30% In 2015 (R.)
An Auction House Learns the Art of Shadow Banking (BBG)
Japan’s Real Problem Is Too Much Debt (720G)
Can the World Deal With a New Bank Crisis? (Satyajit Das)
Wolfgang Schäuble Bails Out Spain, Portugal (Pol.)
Households on the Hook for Italy’s Next Bailout (BBG)
Buying Longer Bonds Holds Danger (WSJ)
Trump Draws Ire After Urging Russia To Find ‘Missing’ Clinton Emails (R.)
In Clash Of Billionaires, Bloomberg Calls Trump White House Race ‘A Con’ (R.)
IRS Launches Investigation Of Clinton Foundation (DC)
Turkey Shuts Down 45 Newspapers, 16 TV Stations (AP)
Taxes On Apple’s Offshore Assets Would Cover Most Of US Education Budget (MW)
The Slot Machine in Your Pocket (Spiegel)

 

 

Government blows bubble. Rinse and repeat.

Beijing’s Property Sales Surge 65% In 2015 (R.)

Property sales in Beijing rose 64.8% in 2015, boosted by more favorable housing policies, according to a real estate white paper released by the city’s government. Increased government stimulus sparked a sharp reversal in the market after sales volumes fell 30% in 2014, the white paper said. The benchmark interest rate for housing loans also dropped to its lower level in almost a decade, after several interest rate cuts, the paper noted. “The country’s housing credit and tax policies have been at their most favorable levels in recent years,” the paper said.

The number of newly-built commercial homes and existing stock sold in Beijing increased 26% and 90.7% respectively year-on-year in 2015, according to the paper published by Beijing Municipal Commission of Housing and Urban-Rural Development. China reported slightly stronger-than-expected economic growth in the second quarter as the housing boom and a government infrastructure building spree boosted demand for materials from cement to steel. But recent data has also indicated that property investment growth is cooling. Some of the country’s biggest cities have had to impose curbs on property purchases as sharp price rises raise fears of possible asset bubbles.

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This bubble is popping, though.

How a Chinese Highway Became a Boulevard of Broken Dreams (WSJ)

A highway project here that is four years behind schedule and hundreds of millions of dollars over budget helps explain why Beijing s effort to raise infrastructure spending is an increasingly ineffective way to boost the economy. When construction on the Chang An Expressway began in 2008 it seemed a sure bet. Its private partners stood to collect decades of lucrative toll revenue. The economy and the environment would benefit by slashing three hours off a four-hour trip. But the project, in central Hunan province, has been beset by financial problems, resident protests and a corruption probe, issues that also have hindered hundreds of other projects in China.

Such setbacks are hurting Beijing s efforts to halt a decline in economic growth that is rippling across the globe and threatening political stability at home. China also is drawing less benefit from the infrastructure projects it completes. After a 15-year period in which the country built thousands of roads, airports, bridges and buildings, the economic benefit of adding even more is decidedly less valuable. Local governments’ heavy debt loads from prior stimulus efforts are further obstructing China’s efforts to stimulate the economy with infrastructure spending. More of their borrowed money is going to pay back previous loans. Many of these projects lose money, adding still more debt.

The upshot: China needed twice as much investment per unit of growth in 2015 as it did in 2010, official data show. This hasn’t stopped Beijing from doubling down on infrastructure spending as exports, manufacturing and other growth engines sputter. The government plans to spend $749 billion on transport projects over the next three years, compared with $171 billion worth built last year.

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Crackdown? Only in name. China is addicted to the shadows.

China Shadow Banking Assets Grew 30% In 2015 (R.)

Shadow banking activity in China has expanded further and now accounts for nearly a third of the total banking sector assets, raising financial risks in the world’s second-largest economy, rating agency Moody’s Investor Service said on Wednesday. Shadow banking assets in China increased by 30% last year, reaching almost 54 trillion yuan (6.17 trillion pounds), according to Moody’s estimates. That is equivalent to about 78% of China’s total economic output and 27.6% of its banking assets. In 2011, shadow banking products accounted for 17.2% of total banking assets, and the share grew to 24.3% in 2014. China’s crackdown on risky practices in the thinly regulated shadow banking system has taken on fresh urgency amid a growing number of corporate defaults, and as policymakers appear worried about the risks of relying on too much debt-fuelled stimulus.

Despite this, shadow banking’s share in bank loans and total bank assets has expanded rapidly, as sectors and firms reeling from overcapacity and poor credit profiles turn to other sources of funding, and investors hunt for higher yields. “The rise in overall leverage and further expansion of shadow banking activity are pushing up financial risks,” said the Moody’s report, adding the growth highlights “spillover risks” to the financial system due to its interconnectedness. Years of breakneck growth for China’s top insurers have been partly fuelled by a splurge on shadow banking-linked products that could punch multi-billion-dollar holes in their balance sheets, a Reuters analysis showed.

Mid-tier Chinese banks are also increasingly using complex instruments to make new loans and restructure existing loans that are then shown as low-risk investments on balance sheets, masking the scale and risks of the slowing economy. The takeover tussle embroiling top Chinese developer China Vanke has also showed how local banks are increasingly exposed to highly volatile domestic stock markets through shadow lending products. “The increasing size of the shadow banking system means that during a disorderly contraction, banks could have difficulty replacing shadow banking credit, leaving borrowers who rely on such financing at risk of a credit crunch,” Moody’s said.

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Shadow banking comes in many different guises.

An Auction House Learns the Art of Shadow Banking (BBG)

A year before he got caught up in a U.S. money-laundering investigation, Malaysian financier Jho Low was looking to borrow more than $100 million without having to answer all the nosy know-your-customer questions required by U.S. banks such as JPMorgan Chase. “Prefer the boutique banks that can move fast vs the large ones like JPM,” Low wrote on March 13, 2014, to an employee of a private art dealership that had sold him a painting by Claude Monet for $35 million a few months earlier. The lender “can take all the art no problems,” he wrote the next day. “All in Geneva free port. Speed is the most important and one with a fairly quick and relaxed kyc process.”

Low got his money a month later, not from a bank but from Sotheby’s, an auction house that isn’t subject to the same money-laundering scrutiny by regulators. He pledged 17 works of art, valued between $191.6 million and $258.3 million, to secure a $107 million loan, according to a U.S. Justice Department complaint filed July 20 in an effort to seize more than $1 billion of assets allegedly siphoned from a Malaysian state fund. As prices for art skyrocketed, Sotheby’s and other firms have become shadow banks, making millions of dollars of legal loans outside the regulated financial system and raising concerns that such financing could facilitate money laundering. Sotheby’s tripled lending to $682 million over the four years ended in 2015.

Last year it almost doubled, to $1 billion, a revolving credit facility provided by banks including JPMorgan and HSBC that it can use to make loans. “One way to launder is to use art as a security for a loan,” said David Hall, who spent 10 years as a special prosecutor for the Federal Bureau of Investigation’s Art Crime Team and is now a partner at law firm Wiggin & Dana. Hall, who wouldn’t comment about Sotheby’s or the Low case, said the aim is to use ill-gotten funds to purchase assets that can be used as collateral for a loan. “The level of scrutiny you’ll receive from a bank is much higher than you will receive from an auction house.”

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It’s everybody’s real problem, but even more so for Japan.

Japan’s Real Problem Is Too Much Debt (720G)

The Japanese economy has been the poster child for economic malaise and bad fortune for so long that even the most radical policy responses no longer garner much attention. In fact, recent policy actions intended to weaken the Yen have resulted in significant appreciation of the yen against the currencies of Japan’s major trade partners, further crippling economic activity. The frustration of an appreciating currency coupled with deflation and zero economic growth has produced signs that what Japan has in store for the world falls squarely in to the category of “you ain’t seen nothin’ yet.” Assuming new fiscal and monetary policies will be similar to those enacted in the past is a big risk that should be contemplated by investors.

The Japanese economy has been fighting weak growth and deflationary forces for over 25 years. Japan’s equity market and real estate bubbles burst in the first week of 1990, presaging deflation and stagnant economic growth ever since. Despite countless monetary and fiscal efforts to combat these economic ailments, nothing seems to work. Any economist worth his salt has multiple reasons for the depth and breadth of these issues but very few get to the heart of the problem. The typical analysis suggests that weak growth in Japan is primarily being caused by weak demand. Over the last 25 years, insufficient demand, or a lack of consumption, has been addressed by increasingly incentivizing the population and the government to consume more by taking on additional debt.

That incentive is produced via lower interest rates. If demand really is the problem, however, then some version of these policies should have worked, but to date they have not. If the real problem, however, is too much debt, which at 255% of Japan’s GDP seems a reasonable assumption to us, then the misdiagnoses and resulting ill-designed policy response leads to even slower growth, more persistent deflationary pressures and exacerbates the original problem.

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Not much choice.

Can the World Deal With a New Bank Crisis? (Satyajit Das)

As Europe braces for the release of its bank stress tests on Friday, the world could be on the verge of another banking crisis. The signs are obvious to all. The World Bank estimates the ratio of non-performing loans to total gross loans in 2015 reached 4.3%. Before the 2009 global financial crisis, they stood at 4.2%. If anything, the problem is starker now than then: There are more than $3 trillion in stressed loan assets worldwide, compared to the roughly $1 trillion of U.S. subprime loans that triggered the 2009 crisis. European banks are saddled with $1.3 trillion in non-performing loans, nearly $400 billion of them in Italy. The IMF estimates that risky loans in China also total $1.3 trillion, although private forecasts are higher. India’s stressed loans top $150 billion.

Once again, banks in the US, Canada, UK, several European countries, Asia, Australia and New Zealand are heavily exposed to property markets, which are overvalued by historical measures. In addition, banks have significant exposure to the troubled resource sector: Lending to the energy sector alone totals around $3 trillion globally. Borrowers are struggling to service that debt in an environment of falling commodity prices, weak growth, overcapacity, rising borrowing costs and (in some cases) a weaker currency. To make matters worse, the world’s limp recovery since 2009 is intensifying loan stresses. In advanced economies, low growth and disinflation or deflation is making it harder for companies to pay off what they owe. Many European firms are suffering from a lack of global competitiveness, exacerbated by the effects of the single currency.

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Greece should sue him over this.

Wolfgang Schäuble Bails Out Spain, Portugal (Pol.)

Ahead of Wednesday’s meeting of the EU’s 27 commissioners, Spain and Portugal looked to be headed for the eurozone’s version of politically embarrassing fiscal purgatory. There was no question that the Iberian duo’s budget deficits were in blatant breach of the single currency zone’s rules. Momentum was growing for the Commission to impose, for the first time ever, a fine totaling in the millions of euros. Even Jean-Claude Juncker, the Commission chief, had seemingly changed his previously skeptical views on sanctions, pushing his colleagues in recent weeks to enforce the rules and shore up Brussels’ credibility on eurozone governance. Then salvation arrived from an unlikely source: Wolfgang Schäuble.

The German finance minister, curmudgeonly fiscal hawk and scourge of spendthrift southern Europeans, broke with public type in a concerted, last-minute campaign to stop the sanctions, according to people familiar with his actions. Over the past weeks and days, Schäuble worked the phones and used personal encounters, pressing commissioners on the fence, mostly from his own center-right political block, to cancel the threatened fine. The behind-the-scenes intervention was driven by political considerations particular to this moment that trumped Schäuble’s long-standing demands for the eurozone nations to keep their budgets in order and abide by commonly agreed rules.

[..] As the consensus grew against a fine, Juncker urged the participants to make clear to the outside world why Brussels ducked, once again, imposing sanctions on rule breakers. “We must not be more Catholic than the Pope, but please make it known that the Pope wanted a fine of zero,” Juncker said, speaking in French at the closed-door meeting, according to a source in the room.

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And now Schäuble can save Italy too.

Households on the Hook for Italy’s Next Bailout (BBG)

While the stability of Italy’s banks has been a front-burner issue for policy makers since the first tremors of the global financial crisis, the result of stress tests on Friday could usher in the final stage of solving their predicament. Retail investors own almost half of the most vulnerable securities, a legacy of banks using their customers as a piggy bank for cheap funding. UniCredit declined to comment on Imperatore’s recollection. The bank’s subordinated bonds available to retail investors trade close to par, indicating investors don’t expect to suffer losses. The bank is considering raising as much as €5 billion from shareholders and selling its entire stake in Poland’s Bank Pekao to raise capital, people familiar with the matter said on Wednesday.

At the zenith of the financial crisis, between July 2007 and June 2009, 80% of Italian banks’ bonds were sold to retail investors, according to regulator Consob. Through savers, banks funded themselves at a similar cost to the Italian government, whereas they gave professional money managers an extra%age point in debt interest, the 2010 report found. The channel of selling junior bonds to savers has virtually shut this year. So far in 2016, only one Italian bank, Mediobanca, has sold subordinated debt with an initial investment designed to attract small-scale investors – selling €200 million of junior bonds with a minimum denomination of €1,000. In the same period last year 10 banks sold €1.4 billion of notes with the same minimum subscription size.

Still, Italian savers held €31 billion of subordinated bank bonds as of October, more than double the €13 billion in the hands of foreign investors, according to the Bank of Italy. That translates to about €1,260 of the junior bank debt for every household in Italy. Banca Monte dei Paschi di Siena, which has more than €27 billion of toxic loans on its books and needs to be recapitalized, has about €5 billion of junior debt.

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“..if yields merely rise back to where they started the year, it would be catastrophic for those who have chased longer duration. The 30-year Treasury would lose 14% of its value, while Japan’s 40-year would lose a quarter of its value..”

Buying Longer Bonds Holds Danger (WSJ)

Investors in Japan’s 40-year bond have lost 24 years of coupon income in just three weeks as the rush into long-dated safe government paper went into sharp reverse. At one level, the 10% fall in the price of the longest-dated Japanese government bond is just a correction after this year’s extraordinary rally, which delivered returns of more than 50% before the pullback. At another, it highlights something dangerous at work in today’s markets: the scale of the risks investors are willing to take as they try to avoid anything that depends on economic growth. Japan’s bond selloff was worse than other markets’, as investors prepared for next week’s ¥28 trillion ($268 billion) spending and tax-cut package and a possible further Bank of Japan stimulus this Friday.

U.S., U.K. and German bond prices have also dropped since early July, though by less, as global demand weakened for long-duration assets. The demand for safe assets with a long duration—a proxy for how long it takes an investor to get his money back—was mirrored in stocks and corporate bonds. Rather than search out the highest-yielding assets, investors looked for those with secure yield, even if it was lower. So this year, triple-A-rated corporate bonds have outperformed double-A or single-A bonds, according to Barclays data. The same applied for junk bonds, with the higher ratings outperforming lower ones. (An exception was bonds close to or already in default, which were mainly energy companies and so were boosted by the rising oil price.)

[..] if yields merely rise back to where they started the year, it would be catastrophic for those who have chased longer duration. The 30-year Treasury would lose 14% of its value, while Japan’s 40-year would lose a quarter of its value, equal to 63 years of coupons. Has the long-run economic outlook really changed so much since January?

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Excuse me? That post is already taken: “..The Clinton campaign shot back that Trump was posing a possible national security threat..”

Trump Draws Ire After Urging Russia To Find ‘Missing’ Clinton Emails (R.)

Republican Donald Trump on Wednesday invited Russia to dig up tens of thousands of “missing” emails from Hillary Clinton’s time at the U.S. State Department, vexing intelligence experts and prompting Democrats to accuse him of urging foreigners to spy on Americans. “Russia, if you’re listening, I hope you’re able to find the 30,000 emails that are missing,” Trump, the Republican presidential nominee, told reporters. Trump made the remark at a testy news conference at his Doral golf resort in Florida that allowed him to steal some of the limelight from the Philadelphia convention where Clinton on Thursday will accept the Democratic presidential nomination for the Nov. 8 election.

The Clinton campaign shot back that Trump was posing a possible national security threat by encouraging a foreign power to conduct espionage in the United States. Some intelligence experts said the comments raised questions about Trump’s judgment. A spokesman for Trump, Jason Miller, tried to tamp down the storm of protest, saying Trump did not urge Russia to hack Clinton’s emails. Trump said on Twitter that if anyone had Clinton’s emails, “perhaps they should share them with the FBI!” The criticism of Trump’s comments reverberated at the Democratic National Convention where speakers brought up the episode to try to intensify Democratic support for Clinton, who is running neck and neck with Trump in the polls.

“Donald Trump today once again took Russia’s side. He asked the Russians to interfere in American politics,” longtime Clinton supporter and former CIA Director Leon Panetta said. “Donald Trump … is asking one of our adversaries to engage in hacking or intelligence efforts against the United States of America to affect the election.” Another speaker, retired U.S. Rear Admiral John Hutson, said of Trump: “This morning, he personally invited Russia to hack us. That’s not law and order, that’s criminal intent.”

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You ain’t helping, Mikey…

In Clash Of Billionaires, Bloomberg Calls Trump White House Race ‘A Con’ (R.)

New York media mogul Michael Bloomberg assailed fellow billionaire Donald Trump on Wednesday, calling his U.S. presidential race a “con” and ripping into his history of bankruptcies and lawsuits. “Trump says he wants to run the nation like he’s running his business? God help us,” Bloomberg told the Democratic National Convention in Philadelphia to roaring applause. “I’m a New Yorker and I know a con when I see one.” Formerly a Republican and now an independent, Bloomberg was for the most part greeted warmly by the audience in the Wells Fargo Center arena where he threw his support behind the Democrats’ presidential nominee, Hillary Clinton.

The owner of the Bloomberg media empire and a former New York City mayor, Bloomberg was an odd choice for a speaker at the Democratic conclave, where many party progressives have railed against the influence of billionaires in politics. “Let me thank all of you for welcoming an outsider here, to deliver what will be an unconventional convention speech,” he said when he took the stage, eliciting cheers. “I am not here as a member of any party. I am here for one reason: to explain why I believe it is imperative that we elect Hillary Clinton as the next president of the United States.” Bloomberg had considered running for the White House as an independent this year but dropped the idea in March, saying it could increase the chances Trump would win.

Bloomberg has known Trump casually for years and twice appeared on Trump’s reality TV show “The Apprentice.” But since Trump entered the race for president in June 2015, Bloomberg has taken issue with him, lashing out at his policies and fiery rhetoric, especially his call to ban Muslims from entering the country and his promise to wall off the Mexican border and deport millions of undocumented foreigners.

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If they can get the FBI to stop, what good would the IRS be?

IRS Launches Investigation Of Clinton Foundation (DC)

IRS Commissioner John Koskinen referred congressional charges of corrupt Clinton Foundation “pay-to-play” activities to his tax agency’s exempt operations office for investigation, The Daily Caller News Foundation has learned. The request to investigate the Bill, Hillary and Chelsea Clinton Foundation on charges of “public corruption” was made in a July 15 letter by 64 House Republicans to the IRS, FBI and Federal Trade Commission (FTC). They charged the foundation is “lawless.” The initiative is being led by Rep. Marsha Blackburn, a Tennessee Republican who serves as the vice chairwoman of the House Committee on Energy and Commerce, which oversees FTC. The FTC regulates public charities alongside the IRS.

The lawmakers charged the Clinton Foundation is a “lawless ‘pay-to-play’ enterprise that has been operating under a cloak of philanthropy for years and should be investigated.” Koskinen’s July 22 reply came only a week after the House Republicans contacted the tax agency. It arrived to their offices Monday, the first opening day of the Democratic National Convention in Philadelphia. “We have forwarded the information you have submitted to our Exempt Organizations Program in Dallas,” Koskinen told the Republicans. The Exempt Organization Program is the division of the IRS that regulates the operations of public foundations and charities.

It’s the same division that was led by former IRS official Lois Lerner when hundreds of conservative, evangelical and tea party non-profit applicants were illegally targeted and harassed by tax officials. Blackburn told TheDCNF she believes the IRS has a double standard because, “they would go after conservative groups and religious groups and organizations, but they wouldn’t be looking at the Clinton Foundation for years. It was as if they choose who they are going to audit and question. It’s not right.” Blackburn said she and her colleagues will “continue to push” for answers on the Clinton Foundation’s governing policies, including its insular board of directors. She said they also will examine conflicts of interest and “follow the money trail.”

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No schools, no papers, no TV. How does that country run?

Turkey Shuts Down 45 Newspapers, 16 TV Stations (AP)

Turkey’s state run news agency says close to 1,700 officers have been formally discharged from the military following the country’s failed coup. Anadolu Agency also says the government has decided to close down dozens of media organizations, including 45 newspapers and 16 television stations. The government says a U.S.-based Muslim cleric is behind the failed uprising by a faction within the military that led to some 290 deaths on July 15. Thousands have been detained for suspected links to the coup, including Calgary’s Davud Hanci, an imam for the Correctional Service Canada and the Alberta correctional services who went to Turkey with his family on July 7 to visit his ailing father.

Hanci was detained and accused of working for U.S.-based cleric Fethullah Gulen, who Turkey alleges orchestrated the failed July 15 military coup. Gulen has repeatedly denied the claims. Hanci’s friends and family say he is innocent and they fear for his safety. Tens of thousands in Turkey have also been purged from state institutions. Earlier, authorities issued warrants for the detention of 47 former executives or senior journalists of Turkey’s Zaman newspaper for alleged links to Gulen. Such detentions have raised concerns that people could be targeted simply for criticizing the government. The media watchdog Reporters Without Borders condemned Turkey’s purges of journalists, saying they have assumed “increasingly alarming proportions.”

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“Apple and its massive $181.1 billion overseas stash, a $70 billion increase from the prior year.”

Taxes On Apple’s Offshore Assets Would Cover Most Of US Education Budget (MW)

The amount of money stashed overseas by U.S. multinationals has exploded in recent years, doubling between 2008 and 2014 to more than $2 trillion. For some perspective on the numbers, cost-estimating website HowMuch.net crunched the most recent data and created a telling interactive chart. Topping the list: Apple and its massive $181.1 billion overseas stash, a $70 billion increase from the prior year.

That total corresponds to $59.2 billion in deferred taxes, which is enough to cover more than two-thirds of the federal budget for education, training and employment, according to the 2014 numbers compiled by Citizens for Tax Justice last October. Elsewhere, General Electric’s taxes could take care of almost 5% of our Social Security costs, while taxes from Microsoft had it kept its money in the U.S., could have covered a fifth of all federal spending on veteran’s benefits. According to estimates, the prevalence of offshore tax havens causes the U.S. to lose out on $90 billion in federal income taxes each year. That’s no small chunk.

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“The average person checks their phone 150 times a day. Why do we do this? Are we making 150 conscious choices?”

The Slot Machine in Your Pocket (Spiegel)

When we get sucked into our smartphones or distracted, we think it’s just an accident and our responsibility. But it’s not. It’s also because smartphones and apps hijack our innate psychological biases and vulnerabilities. I learned about our minds’ vulnerabilities when I was a magician. Magicians start by looking for blind spots, vulnerabilities and biases of people’s minds, so they can influence what people do without them even realizing it. Once you know how to push people’s buttons, you can play them like a piano. And this is exactly what technology does to your mind. App designers play your psychological vulnerabilities in the race to grab your attention. I want to show you how they do it, and offer hope that we have an opportunity to demand a different future from technology companies.

If you’re an app, how do you keep people hooked? Turn yourself into a slot machine. The average person checks their phone 150 times a day. Why do we do this? Are we making 150 conscious choices? One major reason why is the number one psychological ingredient in slot machines: intermittent variable rewards. If you want to maximize addictiveness, all tech designers need to do is link a user’s action (like pulling a lever) with a variable reward. You pull a lever and immediately receive either an enticing reward (a match, a prize!) or nothing. Addictiveness is maximized when the rate of reward is most variable.

Does this effect really work on people? Yes. Slot machines make more money in the United States than baseball, movies, and theme parks combined. Relative to other kinds of gambling, people get “problematically involved” with slot machines three to four times faster according to New York University professor Natasha Dow Schüll, author of “Addiction by Design.”

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