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The recent stampede by investors has erased about $5 trillion in value from global stock and bond markets in October alone. But that shouldn’t be severe enough to affect the economy, for now, according to economists at Deutsche Bank. Still, unless the markets regain their footing soon, the pressure for the Federal Reserve to reassess their monetary policy will continue to mount, they said. “Academic studies of the wealth effect find that households and companies don’t react to short-term fluctuations in their wealth but instead react to a moving average of where their wealth levels are,” said Torsten Slok, chief international economist at Deutsche Bank Securities, said in a note to clients.

As the chart below illustrates, global markets shed roughly $5 trillion in market cap just this month, but the total value of equity and debt markets has increased $15 trillion from 2017. “The bottom line is that we need a more significant correction before it will begin to have a meaningful impact on the economic outlook,” he said. The Fed said wages and prices are rising in its 12 districts and overall economic activity expanded at a “modest to moderate” pace, according to the Beige Book released on Wednesday. The report, which compiles anecdotal observations about the economy, by and large suggests that the Fed is likely to stay on course to execute its fourth rate rise of 2018 in December and deliver additional increases next year unless there is a more dramatic unwind in the financial markets.

[..] The sharp selloff this month has prompted at least one market expert to suggest that stocks are in the midst of a sustained downward spiral. “With the S&P 500 only five weeks removed from its all-time high, we’ve not been definitive about labeling this move a new cyclical bear market. But it’s very likely we are experiencing one,” said Doug Ramsey, chief investment officer at Leuthold Group, in a report.

At some point, the word ‘momentum’ will come into play.

• Dow Down 300 Points, S&P 500 1.7% In Another Wild Day On Wall Street (CNBC)

Stocks fell sharply on Friday as investors slogged through another volatile session on Wall Street. The Dow Jones Industrial Average closed 296.24 points lower at 24,688.31 after dropping 539 points at its lows of the day. The Nasdaq Composite dropped 2.1 percent to 7,167.21. At its lows, the tech-heavy Nasdaq had fallen more than 3 percent. The S&P 500 fell 1.7 percent to 2,658.69 and briefly entered into correction territory, trading more than 10 percent below its record high reached in September. The average stock market correction, since WWII, results in a 13 percent drop and lasts for four months if it does not turn into a full-fledged bear market. Larry Benedict, CEO of The Opportunistic Trader, said traders “don’t want to be long heading into the weekend.”

He added, “S&P now down on the year and people are more afraid to be long today than they were when market was 10 percent higher.” Seven of the 11 S&P 500 sectors are down at least 10 percent from their 52-week highs, including energy, materials and financials. Around three quarters of the index’s stocks are also in a correction. “The 19.7 percent correction in 2011 is as close to a bear market as we’ve had in recent years. I don’t think we’ll get close to that, but I think we’re heading for a deeper correction than the one we had in January and early February,” said Sam Stovall, chief investment strategist at CFRA Research. He noted investors are realizing that earnings growth will slow down moving forward, thus they are pricing this in.

How much of Bezos’s wealth comes directly from cheap and easy money?

• Jeff Bezos Loses $11 Billion In One Day After Amazon Sales Disappoint (F.)

Easy come, easy go: Jeff Bezos’ fortune dropped by $11 billion on Friday, a day after Amazon came out with quarterly results that fell short of the mark. Shares of the e-commerce behemoth fell almost 8% on Friday, swiftly knocking some $70 billion off the company’s market capitalization. The selloff also dragged down the broader market, which has been flirting with correction territory this week. Bezos’ net worth fell in lockstep, dropping by $11 billion to $135.8 billion. That is down from the $160 billion he was worth as of mid-September. Bezos, who owns 16% of Amazon, is still by far the richest man on the planet. He is trailed by Microsoft cofounder Bill Gates, whose fortune clocks in at $94.8 billion.

Amazon, which briefly became the second U.S. company to fetch a $1 trillion valuation in September, shared third quarter results on Thursday that failed to live up to the high expectations that investors and Wall Street have come to adopt. Sales rose by 29% to $56.6 billion in the third quarter. However, that was a far cry from the $73.9 billion that analysts had projected. Amazon also told investors to brace for a slower holiday season. It expects revenue to grow just 10% to 20% in the fourth quarter, reaching $72.5 billion at most. That would make for Amazon’s worst holiday season since 2014. For the last three straight years it has boasted sales increases of more than 20% during the fourth quarter.

Makes sense: “Trump proposed having Medicare base what it pays for some expensive drugs on the average prices in other industrialized countries, such as France and Germany..”

• Trump Adds A Global Pricing Plan To Wide Attack On Drug Prices (Tribble)

President Donald Trump’s new pledge to crack down on “the global freeloading” in prescription drugs had a sense of déjà vu. Five months ago, Trump unveiled a blueprin to address prohibitive drug prices, and his administration has been feverishly rolling out ideas ranging from posting drug prices on television ads to changing the rebates that flow between drugmakers and industry middlemen. Thursday, Trump proposed having Medicare base what it pays for some expensive drugs on the average prices in other industrialized countries, such as France and Germany, where prices are much lower. The proposal is in the early stages of rule-making and awaiting public comments. The U.S., Trump said, will “confront one of the most unfair practices, almost unimaginable that it hasn’t been taken care of long before this.”

The proposal was met with hope and skepticism, with several experts saying they were happy the administration was taking on Medicare Part B’s rising drug prices but questioning its approach. Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, said in an online post that the administration’s proposed solutions were unclear. And, he said, they would “face insurmountable challenges.” While some industry watchers pointed to the announcement as a political move, Wells Fargo pharmaceutical analyst David Maris said that this is a broader effort by the president and his administration to attack the root causes of high drug prices. “The reality is he could very easily not take this on and do what other administrations have done and let the prices keep rising.”

Defeat. Good.

• Swedish Central Bank Makes U-Turn on Cash as NIRP is Ending (DQ)

Sweden’s Riksbank has become the first central bank in the 21st century to take concrete measures to ensure that cash does not disappear as a means of payment from the financial system. To that end, the Riksbank proposes, in a document published on its website, to make it mandatory for all banks and financial institutions to offer cash services. The pronouncement comes in response to a recent policy suggestion by the Riksbank Committee that only the country’s six major banks should be obligated to continue offering cash services. That prompted a backlash from Sweden’s competition watchdog, which argued that the plan would distort competition as it would affect only a few of the nation’s banks. In response, the Riksbank has opted to apply the rule to “all banks and other credit institutions that offer payment accounts.”

[..] For years, the government and the Riksbank have been pushing for a “cashless society.” The Riksbank has over 1,000 articles posted on its website on the “cashless society“. The emphasis worked: between 2013 and 2017, the amount of cash in circulation dropped by 35%, earning Sweden a reputation as the world’s “most cashless nation”:

Many of Sweden’s bank branches had stopped handling cash altogether. Now, they will have to begin doing so all over again. Many of them are not happy about it. Nor indeed are Sweden’s competition and financial watchdogs, which both oppose the proposal, arguing that access to cash should be the sole responsibility of the state and not private banks. “To secure access to cash is a collective good that the state should reasonably be responsible for,” the Swedish Financial Supervisory Authority said. It’s an opinion that’s shared by ATM provider Bankomat, which argued that it should be the state’s responsibility to ensure that citizens have access to cash since the handing of notes and coins is such an important — and expensive — part of a country’s infrastructure. Bankomat is jointly owned by the five largest banks in Sweden.

To be continued. Forever.

• FBI Reviews Tesla Model 3 Production Numbers As Part Of Criminal Probe (CNBC)

The FBI is reviewing Tesla’s Model 3 production numbers as part of an ongoing criminal probe into whether the company misled investors, according to a Wall Street Journal report published Friday. Federal agents are reviewing Tesla’s stated Model 3 numbers dating back to early 2017, the Journal reports, citing unnamed sources. Tesla had previously said it provided documents to the Department of Justice regarding CEO Elon Musk’s controversial take-private tweet — a blunder that ultimately cost Tesla and Musk a combined $40 million in fraud settlement fees. Now Tesla says it also provided information to the Department of Justice regarding Musk’s public statements regarding production numbers of its Model 3 sedan.

Tesla says the company has not received “a subpoena, a request for testimony, or any other formal process,” but the Journal reported Friday that former Tesla employees have received subpoenas and requests for testimony. Tesla struggled to ramp up Model 3 production as promised, plagued by factory issues and reports of unfit working conditions. Musk set lofty goals and insisted on sticking to them, according to countless media reports. Federal agents are probing whether the company knowingly made public statements of impossible production goals, the Journal reported.

Godspeed.

• Varoufakis, Bernie Sanders To Launch Progressives International Movement (RT)

Former Greek Finance Minister Yanis Varoufakis said he and US Senator Bernie Sanders will in a month formally launch a left-wing counterpart to the nationalist movement being forged by Steve Bannon. A Sanders-Varoufakis team-up was suggested in an recent op-ed by the Greek economist published by the Guardian. The formal creation of Progressives International is to happen in Sanders’ home state of Vemont on November 30, Varoufakis announced during a press conference in Rome on Friday. Varoufakis, who led tough negotiation with European lenders in 2015 before resigning after Athens agreed to EU’s austerity terms, says the world today is facing a crisis of leadership similar to what Europe saw in the 1930s.

With the establishment failing the common people, populist nationalist forces are rising to power, offering quick and simple solutions to problems like social inequality, loss of jobs to countries with cheaper labor and mass migration. Steven Bannon, the former strategist for the Donald Trump 2016 campaign, is currently trying to unite such right-wing forces in various nations into a global movement. For Varoufakis figures like Bannon, Italian Interior Minister Matteo Salvini, Hungarian President Viktor Orban and others pose a threat similar to the fascist movements of the 1930s, according to his Guardian op-ed. He and potential allies like Sanders or UK’s Labour leader Jeremy Corbyn can offer an alternative way out of the crisis, he believes.

But if they are to succeed in a struggle for power against both the globalist establishment and the nationalists, they need to unite across borders. “The financiers are internationalists. The fascists, the nationalists, the racists – like Trump, Bannon, [German Interior Minister Horst] Seehofer, Salvini — they are internationalists,” Varoufakis told BuzzFeed News. “They bind together. The only people who are failing are progressives.”

Could be part of a solution.

• Mexico Offers Caravan Migrants Temporary Work Permits, Housing (BBC)

Mexico has offered temporary work permits to migrants who register for asylum, as a big caravan of Central American migrants makes its way through the country toward the US. The plan also envisages temporary ID cards, medical care and schooling. But to qualify, migrants must remain in Mexico’s southern Chiapas and Oaxaca states. The US has warned that about 800 troops may be sent to the US-Mexico border to stop the migrant caravan. “I am bringing out the military for this National Emergency,” US President Donald Trump said earlier this week. “They [migrants] will be stopped!” The president also threatened cutting aid to Guatemala, El Salvador and Honduras. The caravan set off from Honduras several weeks ago.

The scheme, announced by President Peña Nieto, covers Central Americans who have officially asked for a refugee status in Mexico or are planning to do so in the nearest future. It is called Estas en Tu Casa (“This is Your Home” in Spanish). “Today, Mexico extends you its hand,” President Nieto said. But he added: “This plan is only for those who comply with Mexican laws, and it’s a first step towards a permanent solution for those who are granted refugee status in Mexico.” The plan envisages: • Temporary ID cards and work permits • Medical care • Schooling for migrants’ children • Housing in local hostels. But President Nieto failed to explain what would happen to the migrants if they chose to carry on regardless.

But they confuse climate crisis and species extiction. Not the same thing at all.

• Hundreds Ready To Go To Jail Over Climate Crisis (G.)

A new group of “concerned citizens” is planning a campaign of mass civil disobedience starting next month and promises it has hundreds of people – from teenagers to pensioners – ready to get arrested in an effort to draw attention to the unfolding climate emergency. The group, called Extinction Rebellion, is today backed by almost 100 senior academics from across the UK, including the former archbishop of Canterbury Rowan Williams. In a letter published in the Guardian they say the failure of politicians to tackle climate breakdown and the growing extinction crisis means “the ‘social contract’ has been broken … [and] it is therefore not only our right, but our moral duty to bypass the government’s inaction and flagrant dereliction of duty, and to rebel to defend life itself.”

Those behind Extinction Rebellion say almost 500 people have signed up to be arrested and that they plan to bring large sections of London to a standstill next month in a campaign of peaceful mass civil disobedience – culminating with a sit-in protest in Parliament Square on 17 November. Roger Hallam, one of the founders of the campaign, said it was calling on the government to reduce carbon emissions to zero by 2025 and establish a “citizens assembly” to devise an emergency plan of action similar to that seen during the second world war. On top of the specific demands, Hallam said he hoped the campaign of “respectful disruption” would change the debate around climate breakdown and signal to those in power that the present course of action will lead to disaster.

“The planet is in ecological crisis – we are in the midst of the sixth mass extinction event this planet has experienced,” he said. “Children alive today in the UK will face the terrible consequences of inaction, from floods to wildfires, extreme weather to crop failures and the inevitable breakdown of society. We have a duty to act.”

Make America Great Again MUST start with American nature, with protecting species. Major flaw.

• US Withdrawal Of Gillnet Protections For Whales, Turtles Ruled Illegal (R.)

The Trump administration unlawfully withdrew a plan to limit the number of whales, turtles and other marine creatures permitted to be inadvertently killed or harmed by drift gillnets used to catch swordfish off California, a federal judge has ruled. The decision requires U.S. fisheries managers to take steps to implement the plan, which calls for placing numerical limits on the “bycatch” of bottlenose dolphins, four whale species and four sea turtle species snared in swordfish gillnets. As currently written, the regulation in question also would mandate suspension of swordfish gillnet operations altogether off Southern California if any one of the bycatch limits were exceeded.

The Pacific Fishery Management Council endorsed the plan in 2015, and it was formally proposed for implementation by the U.S. Commerce Department’s National Marine Fisheries Service the following year. The rule was expected to gain final approval but was abruptly withdrawn instead in June 2017 under President Donald Trump, whose Commerce Department determined the cost to the commercial fishing industry outweighed conservation benefits. The environmental group Oceana sued, accusing the Commerce Department of violating U.S. fisheries laws and the federal Administrative Procedures Act. Oceana also asked the courts to order the agency to put the bycatch limits into effect.

U.S. District Judge R. Gary Klausner declined to force the National Marine Fisheries Service to immediately implement the restrictions in a decision handed down Wednesday in Los Angeles. But he sided with environmentalists in finding the agency’s reversal exceeded its authority and was “arbitrary, capricious or an abuse of its discretion.”

Debt Rattle October 25 2018

Oct 252018

October 25, 2018 Posted by Raúl Ilargi Meijer at 9:22 am Finance Tagged with: Airbnb, bombs, Brexit, civility, CNN, explosives, hostility, pesticides, plastics, poverty, Tesla, Trump, whales 9 Responses »

Pablo Picasso Circus 1918

• Donald Trump Attacks Media ‘Hostility’ After Attempted Pipe Bombings (G.)

• CNN President Jeff Zucker Blasts Trump White House After Bomb Threat (THR)

• Dow Falls 600 Points And Wipes Out 2018 Gains (MW)

• Asia Pacific Shares In Freefall Amid Fears Over Global Economy (G.)

• Value of Euro Zone Banks Drops by a Third From 2018 Peak (R.)

• Spain’s Mortgage Market Seizes Up, Bank Stocks Sink, Legal Uncertainty Reigns

• It’s Not Just Italy – France’s 2019 Budget Also A Concern For Brussels (CNBC)

• Tesla Shares Soar On Surprise Third-Quarter Profit (CNBC)

• Airbnb Can’t Go On Unregulated – It Does Too Much Damage To Cities (G.)

• Brexit Deal ‘Progress Is At 0%’ Until Irish Border Solved – Verhofstadt (Ind.)

• May Sets November Date To Trigger No-Deal Brexit Preparations (G.)

• Disadvantaged Groups Trapped In Poverty And Excluded From UK Society (Ind.)

• Ban Entire Pesticide Class To Protect Children’s Health – Experts (G.)

• European Parliament Votes To Ban Single-Use Plastics (Ind.)

• Humpback Whales Stop Singing When Ships Are Near (AFP)

Another crazy story. less than 2 weeks before the midterms some loonie allegedly sent crude explosive devices to Democrats and CNN. Obviously, doesn’t appear to help Trump. Who they all fall over each other to blame, absolving themselves from all responsibility in the process. Some details:

Bombs had ISIS-like logo’s on them
At least some contained shards of glass
They were sent to people who don’t open their own mail
None of the bombs went off
Powder in package to CNN was harmless

Seen a lot more like that on Twitter, many people saying the ‘bombs’ are a joke.

• Donald Trump Attacks Media ‘Hostility’ After Attempted Pipe Bombings (G.)

Donald Trump has attacked what he called media “hostility” in a speech to a campaign rally following a wave of pipe bombs sent to senior Democrats, prominent critics and the broadcaster CNN. The US president, who earlier said at the White House he condemned the attempted bombings and that a “major federal investigation” was under way, followed this with a plea for unity during a midterms campaign rally in Mosinee, Wisconsin, later on Wednesday. “Any acts or threats of political violence are an attack on our democracy itself,” he told the crowd. “We want all sides to come together in peace and harmony. We can do it … Those engaged in the political arena must stop treating political opponents as morally defective.” But he soon reverted to a familiar scapegoat. The media, he said, has “a responsibility to set a civil tone and to stop the endless hostility and constant negative and oftentimes false attacks and stories”.

[..] Trump, who still assails Clinton at rallies while supporters chant “lock her up” two years after he defeated her, took a softer tone in Wisconsin. “Let’s get along,” he told supporters. “By the way, do you see how nice I’m behaving tonight? Have you ever seen this? We’re all behaving very well and hopefully we can keep it that way, right?” He did not mention the intended recipients of the devices by name but spoke more generally, including in language which could be taken to refer to protests against himself and allies. “No one should carelessly compare political opponents to historical villains, which is done often, it’s done all the time, got to stop. We should not mob people in public places or destroy public property. There is one way to settle our disagreements. It’s called peacefully, at the ballot box.”

Zucker doesn’t take any responsibility for the political climate. Nor do any of the others. 24/7 blasting Trump for two years has had no influence, apparently. Someone should make a database with all Trump articles at MSM that contain positive things about Trump vs those that are negative.

• CNN President Jeff Zucker Blasts Trump White House After Bomb Threat (THR)

CNN president Jeff Zucker, who has long sparred with President Donald Trump throughout their decades of knowing each other, lashed out at him in a statement on Wednesday, hours after his network’s New York office was forced to evacuate due to a bomb threat. “There is a total and complete lack of understanding at the White House about the seriousness of their continued attacks on the media,” Zucker said. “The president, and especially the White House press secretary, should understand their words matter. Thus far, they have shown no comprehension of that.”

The president has been criticized for his slow response to the bomb threat on Wednesday, initially responding only by echoing Vice President Mike Pence’s tweet condemning it. On Wednesday afternoon, Trump spoke directly at a White House event, pledging to take action. “The full weight of our government is being deployed to conduct this investigation and bring those responsible for these despicable acts to justice,” he said. “We will spare no resources or expense in this effort. In these times, we have to unify. We have to come together, and send one clear, strong unmistakable message that acts or threats of political violence of any kind have no place in the United States of America.”

All over the world.

• Dow Falls 600 Points And Wipes Out 2018 Gains (MW)

Stocks ended sharply lower Wednesday, as losses accelerated into the close and put both the Dow and the S&P 500 into the red for the year, and the Nasdaq into correction territory. Upbeat results from Boeing were credited with briefly pushing the Dow higher in early morning trading, before investors took an increasingly defensive stance, fleeing for the relative safety of utilities and consumer nondurable shares. The Dow Jones Industrial Average fell 606.11 points, or 2.4%, to 24,583.42, while The S&P 500 dropped 84.59 points, or 3.1%, to 2,656.10, it’s sixth straight losing session.

Meanwhile, the Nasdaq shed 329.14 points, or 4.4%, to 7108.4, a performance that put the index more than 10% below its Aug. 29 all-time high, meeting the widely used definition of a market correction. The loss also marked the worst day for the Nasdaq since Aug. 18, 2011. October is shaping up to be a brutal month for equities, as expected, with the S&P falling 8.9% month-to-date, the Dow down 7.1%, and the Nasdaq falling 11.7% since the start of the month. Wednesday’s session also sent the Dow into losing territory for the year, with the index down 0.6% in 2018. The blue-chip index is also down for five straight weeks, it’s longest string of weekly losses since July, 11 2008, when the market fell for six straight weeks. The S&P 500 also ended the trading day in the red, down 0.7% year-to-date.

Broad pessimism.

• Asia Pacific Shares In Freefall Amid Fears Over Global Economy (G.)

Shares in Asia Pacific have plunged into bear market territory and wiped billions off the values of companies as one analyst warned that the losses could be a harbinger of a wholesale “capitulation”. After the worst day for tech stocks on Wall Street for seven years, markets were in retreat from Sydney to Shanghai as concerns about the global economy and rising borrowing costs were compounded by local factors. In Australia the benchmark ASX200 closed down 164 points or 2.8% as it suffered its fifth straight day of losses. In Japan the Nikkei was off 3.2% and has now dropped around 13% from a 27-year peak of 24,448.07 touched in early October.

A broad indicator of shares in the region – the MSCI Asia Pacific index – has now fallen 20.3% from the year-to-date high set on 29 January, representing an official bear market. The Vix “fear” index, which measures volatility across the market, has spiked sharply this week and was up 21% overnight. “We haven’t thought that selling would be this steep. This sell-off makes us think the market may be set for capitulation,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Center. The contagion looked set to continue into the European trading session with the FTSE100 expected to fall 0.65% at the open.

Italians, Deutsche. Draghi doing a speech soon.

• Value of Euro Zone Banks Drops by a Third From 2018 Peak (R.)

The value of euro zone banks have collapsed by a third since markets touched their peak at the end of January, data showed on Wednesday, as another quarter of disappointing profits at Deutsche Bank dragged the region’s sector down. European banks shares, which have never reclaimed their pre-financial crisis prices, have been the worst performing sector so far in the monetary block this year, down 26.5 percent as investors shed assets seen as most vulnerable to political upheaval. “The fall is not justified by a similar drop in earnings,” commented Farhad Moshiri, an analyst covering European banks at Alphavalue, arguing that political risk had a stronger negative impact than sector results.

Still, Deutsche’s bleak results and revenue forecast on Wednesday, which sent shares down 5 percent for their worst day since end-May, deepened the sector-wide rout. The Spring political crisis in Italy and the following on-going row with the European Commission about the country’s populist government’s budget took a heavy toll, particularly on Italian banks. The latters are heavily exposed to Italian sovereign debt, which has shed value since the country decided to raise spending and put an end to years of fiscal prudence. Slowing economic growth on the continent and elusive monetary normalization, with a first interest rate hike by the European Central Bank (ECB) still far away, also weighed on stock prices.

A legal issue about taxes on mortgages only makes things worse.

• Spain’s Mortgage Market Seizes Up, Bank Stocks Sink, Legal Uncertainty Reigns

In the last five trading days, the shares of Spain’s five largest listed banks have re-energized their plunge that had started at the end of January and now amounts to 40%. The cause for the recent drop? A shock ruling by Spain’s Supreme Court that lenders, rather than mortgage borrowers, should pay the contractual tax on mortgage loans, on the grounds that the lender is the only party with an interest in getting the loan certified by a notary, since this is what enables the bank to begin foreclosure proceedings if the borrower defaults on payments. Even the Supreme Court’s desperate decision last Friday to suspend its own ruling a day after it had announced the ruling, a historic flip-flop that left everything in limbo and its reputation in tatters, failed to stop the rout (data via YCharts):

On Monday, the Supreme Court announced that it won’t decide who has to pay the tax on mortgages — the banks or the borrowers — until November 5. In other words, there will be two more weeks of acute legal uncertainty. This has plunged Spain’s mortgage market into chaos. For years Spanish banks and builders have been desperately trying to breath new life into the market — including, in some cases, by resurrecting 100% mortgages, a high-risk instrument that helped fuel Spain’s madcap property boom. But now, thanks to the pervading legal uncertainty, the market has all but seized up. On Tuesday, sources from a number of large banks told the financial daily Cinco Dias that the only mortgages being signed are with clients who had already arranged to sign the contract before last week’s furor and who don’t mind paying the mortgage tax. “We’re not signing any new ones,” the sources said.

Italy must insist France gets the same treatment.

• It’s Not Just Italy – France’s 2019 Budget Also A Concern For Brussels (CNBC)

Markets have been on the edge regarding Italy’s future spending, but there are other countries challenging European fiscal rules. France, the second-largest economy in Europe, received a letter from Brussels last week, warning that its planned debt reduction in 2019 does not respect the proposals that Paris had agreed previously with the EU. Spain, Belgium, Portugal and Slovenia were also effectively told off by the EU. In the case of France, the 2019 budget plan sees its structural deficit (the difference between spending and revenues, excluding one-off items) falling 0.1 percent this year and 0.3 percent in 2019. Paris had agreed in April to an annual reduction of 0.6 percent of GDP for its structural deficit.

Though the tone of the warning from Brussels to Paris was softer than the tone towards Rome, the two countries have perhaps more similarities than differences. The French 2019 budget “shows that the government relies heavily on very optimistic revenues to achieve fiscal consolidation and that spending is out of control again,” Daniel Lacalle, chief economist and investment officer at Tressis Gestion, told CNBC via email. “In the case of France, it is a very difficult budget to accept by the European Commission because France has not had a balanced budget since 1974 and has missed its own deficit targets more than eleven times,” Lacalle added.

A curious turnaround. To be continued.

• Tesla Shares Soar On Surprise Third-Quarter Profit (CNBC)

Tesla shares soared by more than 12 percent after the company reported a surprise profit for the third quarter as CEO Elon Musk made good on his promise to start turning regular profits in the last half of the year. The company’s earnings report, released after the markets closed Wednesday, also showed better-than expected car sales and a faster timeline on its Model 3 production. The electric car maker said its midsize Model 3 sedan, which it hopes to produce on mass scale, was the best-selling car in the U.S. when measured by revenue and the fifth best-selling car in terms of volume. Musk told analysts on a call it was an “incredibly historic quarter” for the young car company. It was welcome news for investors following an otherwise a tumultuous few months.

It does. Somone better get serious about this.

• Airbnb Can’t Go On Unregulated – It Does Too Much Damage To Cities (G.)

Remember the “sharing economy”? That rhetoric looks more comically disingenuous than ever in light of the news that a single Airbnb user in Barcelona is managing a portfolio of properties that brings in an eye-watering £33,000 a day in high season. Old neighbourhoods are being overrun with short-term tourists and shops selling souvenir tat. Rents for residents are being driven up, in Barcelona as well as Berlin, New York and elsewhere. Airbnb is a parasitic monster that squats over cities and hoovers up vast sums of money through its slimy proboscis. So what can be done?

Airbnb, short for “airbed and breakfast”, originally sold itself as a way for travellers to stay in people’s spare rooms and get an authentic feel of a foreign culture. This friendly idea is still present in the company’s vocabulary – “hosts”, not landlords, and “hospitality” in place of “business” – even though the vast majority of its listings are now for self-contained apartments or houses. In Barcelona, it used to cost €250 (£221) for a short-term rental permit. Now that such permits are no longer being issued, they change hands for up to €80,000. It’s “sharing” for the rich, maybe, but not for the rest of us.

During their early rapid growth, sharing economy companies started operations around the world without regard to local laws on the basis that existing regulations had not envisaged the radical and disruptive new ideas they embodied. But the tide slowly turned as the whizzy tech rhetoric wore off and it became clear that Uber was in fact a taxi company and Airbnb was in effect a hotel business.

Don’t like Verhofstadt, but it’s time for honesty.

• Brexit Deal ‘Progress Is At 0%’ Until Irish Border Solved – Verhofstadt (Ind.)

The European Parliament’s Brexit coordinator has rejected Theresa May’s suggestion that a deal is “95 per cent done”, as Brussels warned it will not be bounced into an agreement. Guy Verhofstadt said the withdrawal agreement needed to prevent no deal was “0 per cent done” as far as MEPs were concerned, because of the lack of a solution to the Irish border issue. “Progress on the Brexit negotiations can be 90 per cent, 95 per cent or even 99 per cent,” Mr Verhofstadt said. “But as long as there is no solution for the Irish border, as long as the Good Friday agreement is not fully secured, for us in our parliament progress is 0 per cent.”

The European Parliament has a veto on the final Brexit deal and has said it would kill any agreement that does not prevent a hard border between Ireland and Northern Ireland. Speaking in a debate at the parliament’s Strasbourg seat on Wednesday morning, the second in command of the European Commission Frans Timmermans also warned that the block would not “rush a deal through at the expense of our principles”. “As was clear after the European Council the bottom line is that we do not have the decisive progress that we need,” Jean-Claude Juncker’s deputy said. “The good will and the determination to find a deal as soon as possible are there. But it is also clear that we will not rush a deal through at the expense of our principles or our agreed commitments, most notably on the Irish border question.

Watch the pound when she makes it official.

• May Sets November Date To Trigger No-Deal Brexit Preparations (G.)

Theresa May has set a date for Whitehall to trigger a series of no-deal Brexit preparations as her government faces up to the possibility that there will be no agreement with the EU about Britain’s departure. With less than six months to go before the UK leaves the bloc, the cabinet has agreed that a flurry of activity will be triggered in the second week of November as the government prepares to crash out of the EU, informed sources said. Civil servants have also accelerated plans to lay down new laws and secondary legislation so that UK businesses and both British and EU citizens can prepare. The move follows concerns across government that preparations for how the UK might cope with crashing out the EU are still uncertain.

The Brexit secretary, Dominic Raab, told cabinet colleagues on Tuesday that Whitehall departments needed to step up their efforts next month and move “from warning businesses to telling them to act”. Whitehall has until now concentrated on the publication of more than 100 technical notices detailing the potential impact on particular industries but not on individual businesses and people. A source said that there would be an acceleration of preparations after MPs return from a short break on 12 November. “We have to get on with no-deal legislation. At the moment, we’re looking at the same legislation for a deal as no deal. In the case of no deal it would need royal assent before we leave. “There will be an awful lot to discuss. It will concentrate minds. Obviously we don’t want to upset the negotiations, but the clock is ticking and it will get harder and harder the later we leave it,” the source said.

This is Theresa May’s country, her accomplishment.

• Disadvantaged Groups Trapped In Poverty And Excluded From UK Society (Ind.)

Britain is a divided nation as the poor are increasingly trapped in poverty and excluded from mainstream society because of their social status, the human rights watchdog has warned. A major report from the Equality and Human Rights Commission (EHRC) found a continued decline in prospects for disadvantaged groups has cemented a “two-speed society” in the UK which leaves many behind. The watchdog found that in just three years “alarming backward steps” have left disabled people, ethnic minorities and children from poorer backgrounds struggling to make headway in a society where “significant barriers still remain”.

Charities accused Theresa May of breaking the promise she made in her first speech as prime minister to tackle “burning injustices” in British society. It comes just days before Philip Hammond, the chancellor, is to set out a budget with critics waiting for spending commitments that will deliver on the prime minister’s conference promise that austerity is finally coming to an end. In a speech on Thursday, shadow chancellor John McDonnell will say that schools, councils and the UK’s social care system are “crying out for investment” and called on the government to “stump up the cash”. David Isaac, chair of the EHRC, said Britain was facing a “defining moment in the pursuit of equality”.

Stop using pesticides altogether.

• Ban Entire Pesticide Class To Protect Children’s Health – Experts (G.)

Evidence that an entire class of pesticides threatens the health of children and pregnant women is now so arresting that the substances should be banned, an expert panel of toxicologists has said. Exposure to organophosphates (OPs) increases the risk of reduced IQs, memory and attention deficits, and autism for prenatal children, according to the paper, published in Plos Medicine. More than 10,000 tonnes of OP pesticides are sprayed in 24 European countries each year and usage is higher in the US, where the Trump administration is appealing against a federal court ban on chlorpyrifos, one of the most popular agricultural insecticides.

Irva Hertz-Picciotto, the paper’s lead author and director of the UC Davis environmental health sciences centre, said: “We have compelling evidence from dozens of human studies that exposures of pregnant women to very low levels of organophosphate pesticides put children and foetuses at risk for developmental problems that may last a lifetime. By law, the EPA cannot ignore such clear findings: It’s time for a ban not just on chlorpyrifos, but all organophosphate pesticides.” The meta-review of data and literature on OPs analysed and cross-referenced scores of reviews and epidemiological studies with a UN database that covers 71 countries, and other research material.

In the process, the scientists discovered that US regulators had already quietly banned 26 out of 40 OP pesticides considered hazardous to human health. In Europe, the figure was 33 out of 39. However, 200,000 people still die each year from pesticide poisonings, according to UN estimates, about 99% of them in the developing world. A further 110,000 suicides using pesticides take place each year.

Not bad, but too late.

• European Parliament Votes To Ban Single-Use Plastics (Ind.)

Fragments of plastic have been found everywhere from Arctic sea ice to fertilisers being applied to farmland. Animals as small as plankton and as large as whales are known to eat plastic, and as tiny shards enter the human food chain they seem to be ending up inside humans as well. While much still remains unknown about the impact plastic is having on the environment and human health, environmentalists have called for urgent measures from industry and governments to curb the flow of plastic. “We have adopted the most ambitious legislation against single-use plastics. It is up to us now to stay the course in the upcoming negotiations with the council, due to start as early as November,” said Belgian liberal Frederique Ries, who was responsible for the bill.

Under the new rules, member states would have to ensure that tobacco companies cover the cost of cigarette butt collection and processing in a bid to reduce the number entering the environment by 80 per cent in the next 12 years. Similar measures would apply to producers of fishing gear, who would have to help ensure at least 50 per cent of lost or abandoned fishing gear containing plastic is collected per year. Fishing gear accounts for over a quarter of waste found on Europe’s beaches, and “ghost fishing” is thought to be responsible for thousands of whales, seals and birds dying every year. EU states would also be obliged to recycle 90 per cent of plastic bottles by 2025, and producers would have to help cover costs of waste management.

But they don’t mean sailing ships.

• Humpback Whales Stop Singing When Ships Are Near (AFP)

Humpback whales are famous for their eerie, underwater songs. But researchers in Japan said Wednesday these massive marine creatures stop singing, at least temporarily, when human-driven ships are nearby. Researchers focused on the remote Ogasawara Islands in Japan, some 620 miles (1,000 kilometers) south of Tokyo, where a single passenger-cargo liner passed through the area once per day. Male humpback whales sing as a way to communicate and attract mates. But by plunging a pair of hydrophones into the water to listen to the whales’ reaction — about 26 of whom were detected in the study area — researchers found that the approach of a ship silenced them.

“The main reaction of humpback whales was to stop singing either when the ship approached or after it passed by,” said the study in the journal PLOS ONE, led by Koki Tsujii from Ogasawara Whale Watching Association and Hokkaido University. Fewer male humpbacks sang in the area within 500 yards (meters) of the shipping lane than elsewhere. “After the ship passed by, whales within around 1,200 meters tended to temporarily reduce singing or stop singing altogether,” said the study. Many whales did not start to sing again until a half hour after the ship was gone from the area. Since ocean noise has been on the rise in recent decades, some experts said the findings raise new questions about what other whale behaviors might be changing due to mounting human presence on the high seas.

Debt Rattle October 1 2018

Oct 012018

October 1, 2018 Posted by Raúl Ilargi Meijer at 9:15 am Finance Tagged with: Brexit, Danske Bank, decentralize, FBI, Fukushima, FYROM, Kavanaugh, NAFTA, Tesla, Trump 6 Responses »

Paul Gauguin Bathing, Dieppe 1885

• White House Questioned Over Scope Of FBI Investigation Into Kavanaugh (WSJ)

• Trump Helps Publishers Sell Millions Of Books – Both Pro And Con (AFP)

• Canada, US Deal Saves NAFTA As Trilateral Pact (R.)

• May Fights To Assert Authority At Tory Conference (G.)

• Six Months Before Brexit, The UK Government Is Attacking The EU (CNBC)

• China Manufacturing Activity Slows As Trade War Rages (AFP)

• Tesla’s SEC Deal Provides Ammunition For US Probe, Investor Lawsuits (R.)

• The Banks That Helped Danske Bank Estonia Launder Russian Money (Coppola)

• The Distribution Of Wealth Has More To Do With Power Than Productivity (OD)

• Tim Berners-Lees Aims To Radically Decentralize The Internet (ZH)

• FYROM Leader Vows To Press On With Name Change Despite Referendum Failure (R.)

• Treated Water At Fukushima Nuclear Plant Still Radioactive (AP)

• Which Cities Will Sink Into The Sea First? (G.)

It is essential that they keep sighting each other. People love that.

• White House Questioned Over Scope Of FBI Investigation Into Kavanaugh (WSJ)

A political cease-fire achieved by a further FBI investigation into allegations of sexual misconduct against Judge Brett Kavanaugh evaporated over the weekend, as the White House fended off accusations it had placed overly restrictive limitations on the probe of its Supreme Court nominee. The one-week-at-most inquiry by the Federal Bureau of Investigation, brokered as a last-minute deal Friday between Republican Sen. Jeff Flake and Democrats on the Senate Judiciary Committee, was intended to satisfy concerns that allegations against Kavanaugh weren’t being fully vetted before the full Senate took up his nomination.

But early signs that the FBI probe would be on a short leash inflamed Democratic criticism that President Donald Trump and fellow Republicans weren’t out to explore fully the allegations, while the White House, Senate and FBI all appeared to shift responsibility for the scope of the probe elsewhere. “The FBI’s hands must not be tied in this investigation,” Sen. Dianne Feinstein of California, the top Democrat on the Judiciary panel, wrote on Twitter. Later Sunday, Feinstein asked White House counsel Don McGahn and the director of the FBI to release a copy of the directive sent by the White House to the bureau outlining the scope of the investigation.

The contours of the FBI investigation weren’t clear and appeared at times to shift, as Trump and senior administration officials pushed back against reports that the White House directed who would be interviewed as part of a reopening of Kavanaugh’s background investigation. Administration officials said they were taking cues from the Senate. Leading the process for the West Wing is McGahn, who helped prepare Kavanaugh for the questions he would face in Judiciary Committee hearings. The lack of clarity extended to what investigators could ask witnesses, such as whether they would examine the accuracy of Kavanaugh’s testimony last week on his drinking habits as a teen.

Most important article about US politics in a long time. The title says Pro and Con, but really, it’s all con. Because that sells. More books are coming. Because they will sell.

• Trump Helps Publishers Sell Millions Of Books – Both Pro And Con (AFP)

“Fire and Fury,” “A Higher Loyalty,” “Fear”: three books about Donald Trump have each sold more than a million copies in the United States, a first that reflects Americans’ fascination with their ever-surprising president. The great majority of successful books on politics have been written by politicians themselves — or by ghostwriters working with them. Barack Obama set the standard in the genre, selling a combined 4.6 million copies of his autobiographical books “Dreams From My Father” and “The Audacity of Hope.” In their time, Bill Clinton, George W. Bush, Jimmy Carter, Hillary Clinton and even Sarah Palin all topped the best-seller lists at least for a few weeks, while not reaching Obama’s lofty level.

And in 1976, Washington Post journalist Bob Woodward sold 630,000 copies of his “The Final Days,” chronicling the dramatic unwinding of the Nixon presidency. After that, however, there have been no chart-toppers about a president. But in just nine months, “Fire and Fury” by journalist and author Michael Wolff, “A Higher Loyalty” by former FBI chief James Comey, and Woodward’s “Fear” have sold a combined total of more than five million copies, according to numbers reviewed by AFP. “I’m not surprised,” said David Corn, co-author of “Russian Roulette,” a book about Russian interference in the American presidential campaign. “There is deep desire on the part of many Americans for an understanding of what happened in this country” during the 2016 presidential campaign, he said, and also of “what’s going on now within the Trump White House.”

In the past, books about a presidency were generally published only after it was over, leaving sources freer to talk and allowing greater historical perspective. But, “as ever, Trump has sped everything up,” Jon Meacham, the author of several best-selling political and historical books, told MSNBC. “It’s almost as if we had a webcam” providing live coverage of events inside the White House. [..] “The Fifth Risk” by Michael Lewis (author of “Liar’s Poker” and “The Big Short”), “The Apprentice” by Washington Post journalist Greg Miller, and the Stormy Daniels book “Full Disclosure,” about the adult film star’s alleged sexual liaison with Trump, are all set to reach bookstores on Tuesday. “One potential problem is that people get too accustomed to the outrages of the Trump administration,” Corn said, “and therefore become less interested in books like these. “But I don’t see that happening any time soon.”

Mere days after declaring the talks near dead, everybody’s happy again.

• Canada, US Deal Saves NAFTA As Trilateral Pact (R.)

The United States and Canada forged a last-gasp deal on Sunday to salvage NAFTA as a trilateral pact with Mexico, rescuing a three-country, $1.2 trillion open-trade zone that had been about to collapse after nearly a quarter century. In a big victory for his agenda to shake-up an era of global free trade that many associate with the signing of NAFTA in 1994, President Donald Trump coerced Canada and Mexico to accept more restrictive commerce with their main export partner. Trump’s primary objective in reworking NAFTA was to bring down U.S. trade deficits, a goal he has also pursued with China, by imposing hundreds of billions of dollars in tariffs on imported goods from the Asian giant.

While the new United States-Mexico-Canada Agreement (USMCA) avoids tariffs, it will make it harder for global auto makers to build cars cheaply in Mexico and is aimed at bringing more jobs into the United States. Since talks began more than a year ago, it was clear Canada and Mexico would have to make concessions in the face of Trump’s threats to tear up NAFTA and relief was palpable in both countries on Sunday that the deal was largely intact and had not fractured supply chains between weaker bilateral agreements. “It’s a good day for Canada,” Prime Minister Justin Trudeau told reporters after a late-night cabinet meeting to discuss the deal, which triggered a jump in global financial markets.

“Rees-Mogg said the plan was the “deadest of dying ducks”..”

• May Fights To Assert Authority At Tory Conference (G.)

Deep divisions over Brexit overshadowed the opening day of the Conservative party conference on Sunday as Theresa May attempted to wrestle back the focus on to her domestic agenda. The bitter infighting that has crippled the Conservative party was laid bare as Boris Johnson and Jacob Rees-Mogg laid into the prime minister’s Brexit plans as thousands of delegates gathered in Birmingham. The chancellor, Philip Hammond, launched a scathing attack on Johnson, suggesting the former foreign secretary could not do “grown-up politics” and saying he did not expect him to become prime minister. May appealed to Tory MPs and the party’s grassroots to back her Chequers proposal as she was forced to hit back at Johnson, her former foreign secretary, who questioned her belief in leaving the European Union.

“I do believe in Brexit, but crucially I believe in delivering Brexit in a way that respects the vote and delivers on behalf of the British people, while also protecting our union, protecting jobs and ensuring we make a success of it,” she told the BBC’s Andrew Marr. However, May risked infuriating the party’s pro-Brexit grassroots by appearing to refuse to rule out further compromises to her Chequers plan in order to broker a final deal. It came after Johnson used a newspaper interview to launch a renewed attack on May’s entire Brexit plan, dismissing it as “deranged” while suggesting the proposal for Britain and the EU to collect each other’s tariffs was “entirely preposterous”. Rees-Mogg, the leader of the hard Brexiter European Research Group, said the plan was the “deadest of dying ducks” at a packed fringe meeting with hundreds of delegates..

2 years of doing nothing, what else is there to do?

• Six Months Before Brexit, The UK Government Is Attacking The EU (CNBC)

The U.K. government is demanding action from the European Union (EU) amid strong frustration over the lack of proposals from Brussels on a post-Brexit relationship. The U.K. is set to leave the EU in March 2019 and negotiators are working against the clock, trying to hammer a deal that will allow businesses to continue trading under relatively low tariffs. However, key differences, including the future of the Irish border with Northern Ireland, remain – leading many to believe that a no-deal is the more likely outcome. Speaking to CNBC over the weekend, several members of the U.K. government appeared frustrated about the lack of help coming from the European Union.

“At the moment, it is very much a question of the European Union responding with its proposals. At the moment, there is nothing on the table,” Chris Grayling, transport secretary told CNBC’s Steve Sedgwick at the Conservative Party conference currently taking place in Birmingham. Liam Fox, Trade secretary and an outspoken Brexit supporter, told CNBC on Sunday that it is the EU’s “duty” to help the U.K. and put forward their proposals. “They said they were not very happy with what the U.K. offered, in which case let them bring forward their own proposals,” he said. “Under Article 50 (the legislation that allows a EU country to leave the Union), we have the right to leave the European Union and they have a duty to help us in that future relationship. Let’s see them now deliver what they promised to do in that treaty,” Fox said.

The trade war isn’t raging. Yet.

• China Manufacturing Activity Slows As Trade War Rages (AFP)

Chinese factory activity slowed in September, official data showed Sunday, as the Asian giant’s trade war with the United States showed no sign of abating. The Purchasing Managers’ Index (PMI), a key gauge of factory conditions, came in at 50.8 for the month, down from 51.3 in August, the National Bureau of Statistics said. The figure was below the 51.2 reading tipped in a Bloomberg News survey of economists. Although the numbers indicated a slowdown, they remained above the 50-point mark that separates expansion from contraction. A separate manufacturing index, calculated independently by the Caixin media group, also showed a deceleration.

“Exports increasingly dragged down performance and continued softening demand began to have an impact on companies’ production,” said Caixin analyst Zhengsheng Zhong. “In addition, the employment situation worsened further. Downward pressure on China’s economy was significant.”

Musk can pay big fines.

• Tesla’s SEC Deal Provides Ammunition For US Probe, Investor Lawsuits (R.)

Tesla Inc’s settlement with U.S. regulators will help soothe investors calling for more oversight of Chief Executive Elon Musk, experts said, even as it gives ammunition to short-sellers pursing separate cases and to a probe by the Justice Department. Musk and Tesla will pay $20 million each, bring in two independent directors and have the billionaire step down as board chairman to settle U.S. Securities and Exchange Commission charges that Musk misled investors by tweeting he had financing for a go-private deal. That settlement must still be approved by a court, and does not end the Justice Department probe disclosed by Tesla into Musk’s tweets or lawsuits by short-sellers and other investors alleging losses and securities law violations.

“The real worry for the company is not the SEC but private actions that follow a settlement like this,” said Charles M. Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “By paying that size fine, it bolsters investors’” claims over stock market losses, he said. [..] Musk settled with the SEC after advisers persuaded him the terms were favorable and a lengthy court fight would not be in the best interest of the company, a person familiar with the deal said. Musk had wanted to personally pay the fine for money-losing Tesla but the SEC rejected that proposal, the person said.

That would be all of them. And all claim innocence.

• The Banks That Helped Danske Bank Estonia Launder Russian Money (Coppola)

Money laundering is a multi-bank phenomenon. Danske Bank Estonia has been revealed as the hub of a $234bn money laundering scheme involving Russian and Eastern European customers. But Danske Bank Estonia couldn’t do this by itself. Much of the money was paid in U.S. dollars, and for that, it needed help from other banks. Banks that had access to Fedwire, the Federal Reserve’s electronic settlement system. Big banks, in other words. It appears that four big banks helped Danske Bank Estonia make its dodgy transactions. J.P. Morgan, Bank of America and Deutsche Bank AG all made dollar transfers on behalf of the Estonian branch’s non-resident customers. And according to the Wall Street Journal, Citigroup’s Moscow branch may have been involved in some financial transfers in and out of Danske Bank Estonia.

But how much responsibility do these banks bear for these transfers? Could they reasonably have been expected to know – or suspect – that the money was dirty? Banks that make transactions on behalf of customers of other banks are known as “correspondent banks”. In the past, correspondent banks often had little information about the originator or final recipient of the money they were transmitting. They simply trusted that their customer bank was acting legally and that its customers were above board. Old habits die very hard: in 2016, the correspondent banks involved in the FIFA corruption case, which include Citigroup, HSBC, Wells Fargo and Barclays, all claimed that they could not have known that the transfers were corrupt.

But these days, banks are expected to “know their customers’ customers”. They are supposed to conduct their own checks to make sure that they are not unwittingly being used to launder dirty money. In the case of Danske Bank Estonia, one of the correspondent banks did suspect something was wrong. In 2013, J.P. Morgan terminated its correspondent banking relationship with Danske Bank Estonia because it was concerned that it was being used as a conduit for dodgy funds. Deutsche Bank, however, blithely continued to make U.S. dollar wire transfers on behalf of the Estonia branch’s non-resident customers after J.P. Morgan’s departure. So did Bank of America, which replaced J.P. Morgan.

The housing bubble has made Britian ‘rich’ while productivity falls behind.

• The Distribution Of Wealth Has More To Do With Power Than Productivity (OD)

According to a new OECD working paper, Britain is one of the wealthiest countries in the world. Net wealth is estimated to stand at around $500,000 per household – more than double the equivalent figure in Germany, and triple that in the Netherlands. Only Luxembourg and the USA are wealthier among OECD countries. On one level, this isn’t too surprising – Britain has long been a wealthy country. But in recent decades Britain’s economic performance has been poor. Decades of economic mismanagement have left the UK lagging far behind other advanced economies. British workers are now 29% less productive than workers in France, and 35% less than in Germany. How can this discrepancy between high levels of wealth and low levels of productivity be explained?

[..] Let’s start with land: Germany has among the strongest tenant protection laws in Europe, and many German cities also impose rent controls. This, along with a banking sector that favours real economy lending over property lending, means that Germany has not experienced the rampant house price inflation that the UK has. Remarkably, the house price-to-income ratio is lower in Germany today than it was in 1995, while in the UK it has nearly tripled over the same time period. The fact that houses are not lucrative financial assets, and renting is more secure and affordable, means that the majority of people choose to rent rather than own a home in Germany – and therefore do not own any property wealth.

In Britain, the story couldn’t be more different. Over the past five decades Britain has become a property owners’ paradise, as successive governments have sought to encourage people onto the property ladder. Taxes on land and property have been removed, and subsidies for homeownership introduced. The deregulation of the mortgage credit market in the 1980s meant that banks quickly became hooked on mortgage lending – unleashing a flood of new credit into the housing market. Rent controls were abolished, and the private rental market was deregulated. Today tenant protection is weaker than almost anywhere else in Europe. Meanwhile, the London property market has served as a laundromat for the world’s dirty money. As Donald Toon, head of the National Crime Agency, has described: “Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK”.

If one man can do it…

• Tim Berners-Lees Aims To Radically Decentralize The Internet (ZH)

The man who created the world wide web by implementing the first ever successful communication between a Hypertext Transfer Protocol (HTTP) client and server via the internet in 1989 lamented that his creation has been abused by powerful entities for everything mass surveillance to fake news to psychological manipulation to corporations commodifying individuals’ information. But he’s long been at work on a new project to take the web back, described in depth by the business technology magazine Fast Company: This week, Berners-Lee will launch, Inrupt, a startup that he has been building, in stealth mode, for the past nine months.

Backed by Glasswing Ventures, its mission is to turbocharge a broader movement afoot, among developers around the world, to decentralize the web and take back power from the forces that have profited from centralizing it. In other words, it’s game on for Facebook, Google, Amazon. “We have to do it now,” Berners-Lee said of the newly launched project. “It’s a historical moment.” He identified the main impetus behind his recent announcement that he’ll be going on sabbatical from his research professor post at MIT to work full-time on the project as the recent revelation that Facebook allowed political operatives to gain access to some 50 million users’ private data.

At MIT Berners-Lee has for years led a team on designing and building a decentralized web platform called ‘Solid’ — which will underlie the Inrupt platform. The Inrupt venture will serve as users’ first access to the new Solid decentralized web: If all goes as planned, Inrupt will be to Solid what Netscape once was for many first-time users of the web: an easy way in. And like with Netscape, Berners-Lee hopes Inrupt will be just the first of many companies to emerge from Solid. “I have been imagining this for a very long time,” says Berners-Lee.

Even the president told people not to vote.

• FYROM Leader Vows To Press On With Name Change Despite Referendum Failure (R.)

Macedonia’s prime minister pledged on Sunday to press on with a vote in parliament to change the country’s name to resolve a decades-old dispute with Greece, despite failing to secure the 50 percent turnout at a referendum required to make it valid. The proposed name change is part of an agreement reached in June by pro-Western Prime Minister Zoran Zaev with Greece to resolve the dispute over the country’s name, which had prevented Macedonia from joining NATO or the EU. With 85 percent of votes counted, official turnout was just 36 percent, and election officials made clear there was no chance the threshold would be cleared. “On this referendum, it is clear that the decision has not been made,” election commission head Oliver Derkoski told reporters.

The people who did vote overwhelmingly backed the name change — more than 90 percent voted yes with 63 percent of polling stations reporting. But that had never been in doubt, since opponents of the change had urged followers not to vote, rather than vote no. “It is clear that the agreement with Greece has not received the green light from the people,” main nationalist opposition VMRO-DPMNE party leader Hristiajn Mickoski told journalists. The referendum was itself not legally binding, but lawmakers had pledged to abide by it, and the failure to reach the turnout threshold means opponents can now freely vote against the deal. The nationalist opposition holds 49 seats in the 120-seat parliament, enough to block the two-thirds majority required to change the constitution.

Letting TEPCO police itself is a bad idea.

• Treated Water At Fukushima Nuclear Plant Still Radioactive (AP)

The operator of the Fukushima No. 1 nuclear plant has said that much of the radioactive water stored at the plant isn’t clean enough and needs further treatment if it is to be released into the ocean. Tokyo Electric Power Company Holdings Inc. and the government had said that treatment of the water had removed all radioactive elements except tritium, which experts say is safe in small amounts. They called it “tritium water,” but it actually wasn’t. Tepco said Friday that studies found the water still contains other elements, including radioactive iodine, cesium and strontium. It said more than 80 percent of the 900,000 tons of water stored in large, densely packed tanks contains radioactivity exceeding limits for release into the environment.

Tepco general manager Junichi Matsumoto said radioactive elements remained, especially earlier in the crisis when plant workers had to deal with large amounts of contaminated water leaking from the wrecked reactors and could not afford time to stop the treatment machines to change filters frequently. “We had to prioritize processing large amounts of water as quickly as possible to reduce the overall risk,” Matsumoto said. About 161,000 tons of the treated water has 10 to 100 times the limit for release into the environment, and another 65,200 tons has up to nearly 20,000 times the limit, Tepco said.

The earth as a complex system.

• Which Cities Will Sink Into The Sea First? (G.)

[..] are sea levels going up or down? The answer seems clear when you consider that Antarctica has lost 3 trillion tonnes of ice in the last 25 years. Yet to understand what is going on we first have to recognise that the Earth isn’t solid. It started life as a ball of hot liquid about 4.5bn years ago and our planet has been cooling ever since. Right at the centre of the Earth is a solid core of metal made of iron and nickel at a temperature of approximately 5,000C. But this core is surrounded by an approximately 2,000km-thick ocean of molten metal, again mostly iron and nickel.

Surrounding this is a layer of rock called the mantle that is between 500C to 900C, and at these red-hot temperatures the rock behaves like a solid over short periods of time (seconds, hours, and days) but like a liquid over longer time periods (months to years) – so the rock flows, even though it is not molten. On top of the fluid mantle floats the crust, which is like the skin of the Earth. It is a relatively thin layer of cool rock that is between 30 to 100km thick and contains all the mountains, forests, rivers, seas, continents – our world.

Since the crust is floating on the fluid mantle, if you increase its weight by, for instance, building up kilometres of ice on top of it, then it sinks further into the mantle. This is what has happened to the landmasses of Antarctica and Greenland, which are both covered in 2km to 3km of thick ice. If global warming were to cause all that ice to melt, then the sea level of the oceans would rise by more than 50 metres, submerging all the coastal cities of the world and making hundreds of millions of people homeless. This seems obvious. What is less obvious is how it might unfold.

Debt Rattle September 30 2018

Sep 302018

September 30, 2018 Posted by Raúl Ilargi Meijer at 9:30 am Finance Tagged with: Bannon, Facebook, FBI, Kavanaugh, Macedonia, Musk, property tax, Silk Road, Sulawesi, Tesla, Vancouver, Wikileaks 2 Responses »

M. C. Escher Bond of union 1956

• White House Directs FBI to Interview Two Kavanaugh Accusers, Not Third (WSJ)

• Where Does Our Attention Belong: Kavanaugh or Yemen? (PCR)

• “Dirty Money” Crackdown As Vancouver Housing Market Grinds To A Halt (ZH)

• May Acts To Tackle Housing Crisis By Imposing Levy On Foreign Buyers (O.)

• Brexit Costing Britain £500m A Week And Rising (O.)

• Steve Bannon Thinks Michael Avenatti Has A Serious Shot In 2020 (ZH)

• New WikiLeaks Release: Corruption in UAE Arms Deal Fueling War on Yemen (MPN)

• Musk Out As Tesla Chair, Remains CEO in $40M SEC Settlement (AP)

• How Facebook Was Hacked And Why It’s A Disaster For Internet Security (F.)

• Fearing Debt Trap, Pakistan Rethinks Chinese ‘Silk Road’ Projects (R.)

• FYROM Citizens Go to the Polls to Decide on Name Change (GR)

• Indonesia Earthquake: Huge Surge In Death Toll (BBC)

Swetnick’s gang rape story looks far-fetched. And not one person corroborates it.

• White House Directs FBI to Interview Two Kavanaugh Accusers, Not Third (WSJ)

The Federal Bureau of Investigation has been instructed by the White House to interview two of the women who have alleged sexual misconduct by Brett Kavanaugh, according to people familiar with the matter. The parameters of the FBI probe don’t include interviewing Julie Swetnick, who said this week the Supreme Court nominee attended a party decades ago where she was gang-raped, according to one of the people. The focus on the first two accusations suggests that the White House doesn’t consider Ms. Swetnick’s accusations credible, people familiar with the instructions said, a decision that drew criticism from Ms. Swetnick’s attorney, Michael Avenatti.

The Wall Street Journal has attempted to corroborate Ms. Swetnick’s account, contacting dozens of former classmates and colleagues, but couldn’t reach anyone with knowledge of her allegations. No friends have come forward to publicly support her claims. She has recorded a TV interview to be aired Sunday, the first woman making accusations against the Supreme Court nominee to do so. NBC’s “Morning Joe” on Thursday aired a clip of her interview with John Heilemann of Showtime’s “The Circus,” in which Ms. Swetnick called for an investigation into the allegations against Judge Kavanaugh.

Paul Craig Roberts is right, but undermines himself by saying women should have more responsible sex.

• Where Does Our Attention Belong: Kavanaugh or Yemen? (PCR)

There are reports that the Washington-initiated and militarily- supported Saudi Arabian war against Yemen have a starving Yemeni population eating leaves. The Saudis, with Washington’s GPS support, continue to target school busses, massacring children as an element of the terror assault against the population, trying to break Yemeni resistance by murdering children on school busses. Washington continues to supply the Saudis with the weapons to target school buses and the diplomatic support to protect the criminal Saudi regime from war crimes charges. The European cowards turn their heads. Even Russia is silent. Putin’s “partnership” with the criminal state of Saudi Arabia is more important.

Isn’t this a far greater offense, an offense that most definitely does not lack evidence, than the accusation that Kavanaugh, a nominee to the US Supreme Court attempted to rape a women 30 or 40 years ago, for which there is no evidence, only accusation, an accusation that the female defense atttorney who questioned for the Senate committee the woman claiming abuse found insufficient for an indictment.

Signs the housing bubbles are nearing their end. This article and the next.

• “Dirty Money” Crackdown As Vancouver Housing Market Grinds To A Halt (ZH)

Thanks to an influx of demand from Chinese nationals and other foreigners, Vancouver’s housing market soared in the post-crisis years, with prices more than doubling to levels that were clearly unsustainable, cementing the Pacific Northwest metropolis’ status as the most unaffordable housing market in North America. But the torrid growth ground to a halt earlier this year as home sales plummeted, along with construction of new homes and apartments. The typical single-family home in Vancouver costs more than C$1.5 million ($1.15 million) – roughly 20x the median household income. In an effort to let some air out of one of the continent’s most egregious property bubbles, British Columbia’s government has announced an unprecedented crackdown on money laundering in Vancouver’s property market in an attempt to stop a housing-market collapse from taking the city’s GDP with it.

The initiative, launched by Attorney General Daid Eby, seeks to create more transparency to expose all the “numbered corporations” (often used as fronts for foreign investors) buying property in Vancouver. The probe will also examine horse-racing and luxury car sales. Attorney General David Eby said that his office is launching an independent review into potential money laundering in real estate, horse-racing and luxury car sales. The review comes in response to recommendations from a previous review into money laundering in the province’s casinos. In addition, Finance Minister Carole James has appointed an expert panel to look directly at money laundering in the housing sector. Both probes will be done by March.

“There is good reason to believe the bulk of the cash we saw in casinos is a fraction of the cash generated through illicit activities that may be circulating in British Columbia’s economy,” Eby told reporters Thursday in the capital of Victoria. “We cannot ignore red flags that came out of the casino reviews of connections between individuals bringing bulk cash to casinos, and our real estate market.” […] “Our goal is simple, as you’ve heard: Get dirty money out of our housing market,” James said. “When the real estate market is vulnerable to illicit activity and unethical behavior, people, our communities and our economies suffer. This is something we have to tackle.”

Foreign buyers have carried the boom for years. And now you act?

• May Acts To Tackle Housing Crisis By Imposing Levy On Foreign Buyers (O.)

Foreign buyers of properties in the UK will have to pay a new levy, in a renewed attempt by Theresa May to tackle the housing crisis. With concern growing among senior Tories that the party has allowed Brexit to drown out a compelling domestic agenda, plans unveiled on Saturday night will see foreign buyers pay extra stamp duty to fund a drive to tackle rough sleeping. The announcement marks the start of the party’s conference in Birmingham, where the prime minister is desperate to avoid another row over her Brexit plans that might threaten to engulf her premiership. Ministers are also concerned that the party has been failing to respond to the radicalism of some of Labour’s economic programme, set out at its own conference in Liverpool last week.

On Sunday the prime minister will attempt to return to her vow to tackle social injustices and champion what she describes as the “British dream” – the idea that the next generation should do better than the last. Fixing the housing market is a major part of the programme. It comes as the latest Opinium poll for the Observer suggest the Conservatives take a three-point lead into their conference. Despite being carried out during the Labour conference week, which can often provide a poll bounce, the poll puts the Tories on 39% support, with Labour on 36%. According to Opinium, Labour had entered its conference with a two-point lead.

Just the start.

• Brexit Costing Britain £500m A Week And Rising (O.)

Brexit is already costing the public purse £500m a week, new research has found – a stark contrast to the £350m “dividend” promised by the Leave campaign. The Centre for European Reform’s analysis also suggests that the government’s austerity drive would be on the way to completion had Britain voted to stay in the European Union. It shows that the UK economy is already 2.5% smaller than it would have been had Remain won the referendum. Public finances have been dented by £26bn a year, more than half of the defence budget. This translates to a penalty of £500m a week, a figure that is growing. The stark finding comes as the Tory conference begins in Birmingham, with Theresa May’s premiership under severe strain.

The prime minister faces competing proposals from cabinet ministers over how she should resolve the Brexit impasse with the EU. The febrile conference coincides with explosive claims that the boss of one UK-based carmaker has been flown by private jet to meet President Emmanuel Macron, in an attempt to persuade the company to move manufacturing to France after Brexit. Carolyn Fairbairn, director general of the Confederation of British Industry, told the Observer this development was a sign of the economic damage Britain faces from the wrong Brexit deal. While some cabinet ministers are pushing for a loose, Canada-style trade deal, support is growing in May’s ministerial team and on her backbenches for a deal under which Britain would stay closely tied to the EU for a limited period.

A three way race.

• Steve Bannon Thinks Michael Avenatti Has A Serious Shot In 2020 (ZH)

Former Trump strategist Steve Bannon said on Friday that attorney Michael Avenatti could become the Democratic nominee for president in 2020. Speaking with Bill Maher about the state of the Democratic party, Bannon agreed with the HBO host that Avenatti – lawyer to porn star Stormy Daniels and Judge Brett Kavanaugh’s “gang rape” accuser – can capture the left with his bravado and plain spoken language. “The guy who’s the outsider, who like blows through the regular politician because he looks different and he’s got balls,” said Maher – to which Bannon replied: “If Bernie Sanders had an ounce of Avenatti’s fearlessness, he would have been the Democratic nominee and we would have had a much tougher time beating him.”

“Bernie doesn’t have fearlessness?” asked Maher. “Not like Avenatti,” Bannon replied. “I’ve not done any due diligence on this guy, but I tell you he’s got a fearlessness and he’s a fighter. I think he’ll go through a lot of this field if he decides to stick with it.” “I don’t happen to think a professional politician is going to be there at the end of the day. I’ve always said it’s going to be an Oprah or an Avenatti — somebody who’s more media savvy,” said Bannon. “You’re gonna have Trump on the right, a politician, maybe a Kamala Harris or somebody on the left, and I think you’ll have a Bloomberg or a Romney or somebody in the center,” Bannon concluded. “I think it will be a three-way race.”

Assange is no longer in charge, which makes room for more releases. This is about Germany and France.

• New WikiLeaks Release Exposes Corruption in UAE Arms Deal Fueling War on Yemen

The transparency organization WikiLeaks just released a new document that sheds light on the corruption behind a lucrative French-German arms deal with the United Arab Emirates (UAE), weapons that are currently being used to wage a disastrous and genocidal war against the people of Yemen. The document details a court case from the International Chamber of Commerce (ICC) International Court of Arbitration regarding a dispute over a “commission payment” made to Abbas Ibrahim Yousef Al-Yousef, an Emirati businessman, as part of a $3.6 billion arms deal between France’s state-owned weapons company Nexter Systems (then GIAT Industries SA) and the UAE.

Per the deal, which was signed in 1993 and set to conclude in 2008, the UAE purchased 388 Leclerc combat tanks, 46 armored vehicles, 2 training tanks, and spare parts, as well as ammunition. Those weapons have been an important part of the UAE and Saudi coalition’s war in Yemen since it began in 2015. The war has killed over ten thousand civilians, largely the result of the Saudi/UAE bombing campaign, which has targeted and crippled the country’s civilian infrastructure. The result of those bombings, as well as of the UAE/Saudi blockade of Yemen, has been over 17 million people near starvation – including 5.2 million children – and preventable disease epidemics that have claimed tens of thousands of additional lives.

Big surge in share prices Monday, from whish Musk will profit?

• Musk Out As Tesla Chair, Remains CEO in $40M SEC Settlement (AP)

Tesla and its CEO Elon Musk have agreed to pay a total of $40 million and make a series of concessions to settle a government lawsuit alleging Musk duped investors with misleading statements about a proposed buyout of the company. The settlement with the Securities and Exchange Commission allows Musk to remain CEO of the electric car company but requires him to relinquish his role as chairman for at least three years. Tesla must hire an independent chairman to oversee the company, something that should please a number of shareholders who have criticized Tesla’s board for being too beholden to Musk. The deal was announced Saturday, just two days after SEC filed its case seeking to oust Musk as CEO.

Musk, who has an estimated $20 billion fortune, and Tesla, a company that ended June with $2.2 billion in cash, each are paying $20 million to resolve the case, which stemmed from a tweet Musk sent on Aug. 7 indicating he had the financing in place to take Tesla private at a price of $420 per share. “A reckless tweet cost a lot of money — the $20-million tweet,” said Michelle Krebs, executive analyst at Autotrader. [..] Tesla’s stock plummeted 14 percent Friday after the SEC filed its lawsuit, erasing more than $7 billion in shareholder wealth. Many analysts predicted the shares were bound to fall even further if Musk had been forced to step down. Tesla’s stock has dropped 30 percent since Aug. 7, closing Friday at $264.77.

The steep downturn in Tesla’s market value may have influenced Musk to have an apparent change of heart and negotiate a settlement. Musk had rejected a similar settlement offer before the SEC sued Thursday, maintaining he had done nothing wrong when he posted a tweet declaring that he had secured the financing to lead a buyout of Tesla.

Serious. Incompetent.

• How Facebook Was Hacked And Why It’s A Disaster For Internet Security (F.)

Facebook dropped a bombshell on Friday when it revealed an unknown hacker had breached the site, compromising the accounts of 50 million users. The company’s security team found three bugs were used in the attacks, saying they were used in combination to successfully break into Facebook accounts. Forbes spoke with professional web app hacker and cybersecurity researcher Thomas Shadwell, who pieced together a likely hypothesis on how the mystery hacker or hackers carried out what’s believed to be the most significant ever attack to have hit the social media beast. The perpetrator’s ultimate aim was to steal what are known as “OAuth bearer tokens.” Essentially, these tokens prove the Facebook user is the rightful owner of an account and denote what they have access to.

As Shadwell describes them: “OAuth tokens are like car keys, if you’re holding them you can use them, there’s no discrimination of the holder.” And in the context of this attack, those keys unlocked not just Facebook accounts, but any site that affected users accessed with a Facebook login. That might include Instagram or news websites. To get those keys, the hackers abused a feature in Facebook called “View As.” It allows any user to see what another can access on their profile. For instance, if you’ve blocked your dad from looking at your photos, you can check it’s working by effectively impersonating your father and viewing your profile. “It looks like when Facebook built the View As feature, they did this by making it a modification of how Facebook would work if actually viewed by that other user,” said Shadwell.

“Which of course means if there’s a mistake they might end up sending the impersonated user’s credentials to the user of the ‘View As’ feature.” This is where things get a bit weirder. If a user, via View As, impersonated a friend who themselves had a friend who had a birthday, the feature would also show a box prompting them to post a “happy birthday” video. Thanks to an error made by Facebook in July 2017, the video provided the user with one of those precious tokens, Shadwell said. More specifically, the video player generated and sent the user a token, one that would log them into the Facebook mobile app as if they were the person they were impersonating via View As. From there the user (in this case a malicious hacker) would have total access over that other person’s account.

Increasingly, the reality of the model shines through.

• Fearing Debt Trap, Pakistan Rethinks Chinese ‘Silk Road’ Projects (R.)

After lengthy delays, an $8.2 billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush has become a test of Pakistan’s ability to rethink signature Chinese “Silk Road” projects due to debt concerns. The rail megaproject linking the coastal metropolis of Karachi to the northwestern city of Peshawar is China’s biggest Belt and Road Initiative (BRI) project in Pakistan, but Islamabad has balked at the cost and financing terms. Resistance has stiffened under the new government of populist Prime Minister Imran Khan, who has voiced alarm about rising debt levels and says the country must wean itself off foreign loans.

“We are seeing how to develop a model so the government of Pakistan wouldn’t have all the risk,” Khusro Bakhtyar, minister in Pakistan’s planning ministry, told reporters recently. The cooling of enthusiasm for China’s investments mirrors the unease of incoming governments in Sri Lanka, Malaysia and Maldives, where new administrations have come to power wary of Chinese deals struck by their predecessors. Pakistan’s new government had wanted to review all BRI contracts. Officials say there are concerns the deals were badly negotiated, too expensive or overly favored China. But to Islamabad’s frustration, Beijing is only willing to review projects that have not yet begun, three senior government officials have told Reuters.

Pushed through by EU and US so Balkan can join NATO. Still very contested in Greece.

• FYROM Citizens Go to the Polls to Decide on Name Change (GR)

FYROM citizens are going to the polls today (Sunday) to vote on the referendum on the name change to “Republic of North Macedonia”, as agreed between their government and Greece on June 17. The question of the referendum to which Macedonian voters are asked to answer is: “Are you in favor of membership in NATO and the European Union by accepting the deal between (the) Republic of Macedonia and Republic of Greece?” Opinion polls so far show that a “Yes” in the referendum is most likely, as the majority of the Former Yugoslav Republic of Macedonia citizens are in favor of NATO and EU membership.

However, the question of the Zoran Zaev government is whether the participation is satisfactory. Specifically, 50 percent plus one of registered voters are needed to cast a ballot for the referendum results to be valid. In his referendum campaign, Prime Minister Zoran Zaev stressed the NATO and EU membership prospects for the Balkan country. Meanwhile, opponents, including the country’s president, Gjorge Ivanov, have called for a boycott of the referendum, describing the Prespa agreement with Greece a “flagrant violation of sovereignty.”

A lot of people live there.

• Indonesia Earthquake: Huge Surge In Death Toll (BBC)

At least 832 people were killed in the devastating earthquake and tsunami that hit the Indonesian island of Sulawesi, the national disaster agency says. It added that the affected area was bigger than initially thought. Many people were reported trapped in the rubble of buildings that collapsed in Friday’s 7.5-magnitude earthquake, agency spokesman Sutopo Purwo Nugroho told a news conference. The quake triggered tsunami waves as high as 6m (20ft), he added. Rescuers have been digging by hand in the frantic search for survivors in the city of Palu.

“What we now desperately need is heavy machinery to clear the rubble. I have my staff on the ground, but it’s impossible just to rely on their strength alone to clear this,” Muhammad Syaugi, head of the national search-and-rescue agency, told AFP news agency. There have also been concerns about the town of Donggala, where the impact is still unclear. The Red Cross estimates that more than 1.6 million people have been affected by the earthquake and tsunami which it described as a tragedy that “could get much worse”. Indonesia’s Vice-President Jusuf Kalla said the final death toll could be in the thousands.

Debt Rattle September 29 2018

Sep 292018

September 29, 2018 Posted by Raúl Ilargi Meijer at 9:20 am Finance Tagged with: arctic, Boris, Brexit, Facebook, FBI, inquisition, junk bonds, Kavanaugh, Musk, Tesla, Trump 15 Responses »

M. C. Escher Corte, Corsica 1928

• Trump Orders New FBI Probe Into Kavanaugh Following Senate Request (Ind.)

• The Return Of The Inquisition (Simon Black)

• Fiscal Irresponsibility (Roberts)

• Junk Bonds Set For Record Winning Streak, High Grade Worst Since 2008 (ZH)

• Elon Musk Believed He Had Verbal Deal With Saudis To Take Tesla Private (WSJ)

• Labour Claims Theresa May’s Government ‘The Most Divided Ever’ (Ind.)

• Boris Johnson’s ‘Super Canada’ Alternative Brexit Plan Rubbished (G.)

• Democratizing Brexit (Varoufakis)

• Facebook Says Nearly 50m Users Compromised In Huge Security Breach (G.)

• Melting Arctic Ice Opens New Route From Europe To East Asia (AP)

“This country is being ripped apart here,” Mr Flake told the committee…

• Trump Orders New FBI Probe Into Kavanaugh Following Senate Request (Ind.)

Donald Trump has ordered the FBI to carry out a fresh investigation into his nominee for the Supreme Court, after Republicans were obliged to delay a full confirmation vote after being blind-sided by one of their own senators. During a day of blurred and frequently confusing drama on Capitol Hill, the Senate Judiciary Committee on Friday voted 11-10 to approve Brett Kavanaugh for a confirmation vote in the full senate. But it did so, only after an 11th hour intervention from Jeff Flake, a senator from Arizona, who said his support in the later confirmation vote was dependent on the FBI being given a week to carry out an investigation into Mr Kavanaugh, the subject of sexual assault allegations from several women, all of which he denies.

“This country is being ripped apart here,” Mr Flake told the committee, after a vote scheduled for 1.30pm was delayed. “We ought to do what we can to make sure that we do all due diligence with a nomination this important.” Mr Flake’s deeds sent senior Republicans scrambling to decide how best to proceed. The senate’s Republican chairman, Chuck Grassley, who has long said he did not see the need for an additional investigation into Mr Kavanaugh, said it was the decision of Senate majority leader Mitch McConnell on when to hold the confirmation vote.

Within a matter of hours, Mr Grassley issued a statement saying he would ask the White House to request the FBI carry out an additional background check. Shortly afterwards, White House press secretary Sarah Huckabee Sanders released a statement from the president, which read: “I’ve ordered the FBI to conduct a supplemental investigation to update Judge Kavanaugh’s file. As the senate has requested, this update must be limited in scope and completed in less than one week.”

[..] Mr Flake may have been motivated to act by the words of two protesters who confronted him in a senate elevator after it was initially announced he would back Mr Kavanaugh. “What you are doing is allowing someone who actually violated a woman to sit on the Supreme Court. This is not tolerable. You have children in your family. Think about them. I have two children,” shouted one of the women, Ana Maria Archila. “I cannot imagine that for the next 50 years they will have to have someone in the Supreme Court who has been accused of violating a young girl. What are you doing, sir?”

Plenty angles: … trial by social media…

• The Return Of The Inquisition (Simon Black)

Senator Maize Hirono of Hawaii recently stated, “Not only do women like [Kavanaugh’s accuser], who bravely come forward, need to be heard, but they need to be believed.” By definition this is neither fair nor impartial, and turns the entire process into a Kangaroo Court… which is what the Senate has become. At a certain point yesterday, one Senator introduced multiple pieces of evidence on behalf of the accuser, including ‘expert reports’ that justify her inability to remember details from the assault. This is truly bizarre. These Senators are playing the role of judge in this matter. It seems impossible to do this while simultaneously acting as advocate for the accuser.

Another Senator sat smugly and sanctimoniously, leering down at Brett Kavanaugh and demanding explanations about code words for beer and flatulence that date back to Kavanaugh’s high school days. The fact that a United States Senator would actually consider this important evidence is an utter embarrassment. Another disgusting perversion of justice is that the United States Senate actually felt compelled to negotiate with the accuser about when/how she would testify. For example, the accuser wanted to prohibit certain questions, control who could/could not ask questions, determine the order of witness testimony, etc. This is simply NOT how the justice system is supposed to work.

[..] the saddest part – this manner of Inquisition… trial by social media… has now been condoned and advanced by the United States Senate, an institution whose members have ALL taken a solemn oath to support and defend the Constitution which they are now violating in the worst way. Clearly the Senate is no longer an assembly of kings… but a brood of bickering, immature weaklings. (The only resilience displayed has been from the accused and accuser, both of whom have had to endure insane public scrutiny.) There’s obviously an agenda here.

Perhaps some Senators are trying to win points with the #metoo movement for the upcoming elections. Or they’re intentionally blocking Kavanaugh simply because he is a Trump nominee. Whatever their reasons, they may be victorious in achieving their desired outcome. But it will be a Pyrrhic victory… for it will come at the expense of establishing a dangerous new standard that destroys the most important principles of Justice.

As deficits grow, liquidity is shrinking.

• Fiscal Irresponsibility (Roberts)

Without much fanfare or public discussion, Congress has decided to push the U.S. into deeper fiscal responsibility. Earlier this week, the House passed another Continuing Resolution (CR) to keep the government from “shutting down” prior to the mid-term elections. “The House on Wednesday passed an $854 billion spending bill to avert an October shutdown, funding large swaths of the government while pushing the funding deadline for others until Dec. 7. The bill passed by 361-61, a week after the Senate passed an identical measure by a vote of 93-7.” For almost a decade, Congress has failed to pass, and operate, underneath a budget.

Of course, without any repercussions from voters in demanding that Congress “does their job,” the path to fiscal insolvency continues to grow. The Committee For A Responsible Federal Budget made the following statement: “We’re pleased policymakers have likely avoided a shutdown and actually appropriated most of this year’s discretionary budget on time. But let’s not forgot that Congress did so without a budget and had to grease the wheels with $153 billion to pass these bills. That isn’t function; it’s a fiscal free-for-all.” Of course, with trillion-dollar deficits just around the corner, the negative impact from unbridled spending and debt increases will begin to reverse the positive effects from deregulation and tax reform.

The bigger problem with the $854 billion CR just passed by the House, and awaiting the President’s signature, is that it only covers spending from now until December. Such means that by the time we get the full 2019 budget funded, with the annual automatic increases still in place, we will be looking at more than $2 Trillion in annual spending. Such will require further increases in debt issuance at a time when there are potentially fewer buys of Treasuries readily available. As shown in the chart below, with the major Central Banks reducing their balance sheets simultaneously, some of the more major buyers are being removed from the market. “Central bank balance sheets have shrunk by over half-a-trillion dollars since March. This decrease in global liquidity – in the face of a global slowdown – raises the risk of policy mistakes much higher than is commonly assumed.” – ECRI

Courtesy of your friendly neighborhood central bank.

• Junk Bonds Set For Record Winning Streak, High Grade Worst Since 2008 (ZH)

For the latest confirmation of the upside down market, look no further than corporate bonds where the riskiest, CCC-rated junk bonds are set to make a positive return for the 3rd consecutive year, the longest winning streak since records began in 1997. Not only have the lowest quality junk bonds, those rated CCC or lower, generating respectable absolute returns of 5.8% YTD, they have also outperformed higher quality debt with a 1% total return so far this month, according to Bloomberg and ICE data. Additionally, the lowest rated junk bonds have also outperformed the broader junk bond index, which has returned 1.9% YTD.

And while the key contributor to the outperformance of lowest-rated bonds is demand for, well, higher yielding paper as investors continue to chase returns, a key structural issue has been the lack of HY supply, which at $150 billion YTD is the lowest since 2009. Meanwhile, as investors scramble for any paper that promises a material yield, regardless of underlying fundamentals, investment grade corporate bond returns have, in the worlds of Bloomberg’s James Crombie “fallen from darling to deadbeat.”

Perhaps the biggest risk is that Tesla shares fall and loans have to be rolled over.

• Elon Musk Believed He Had Verbal Deal With Saudis To Take Tesla Private (WSJ)

Tesla Inc. CEO Elon Musk believes he had a verbal agreement in place with Saudi Arabia’s sovereign-wealth fund to help finance a plan to take the auto maker private, according to a person familiar with the matter, a contention that could preview how he will fight regulators’ accusation that he misled shareholders. Musk was sued Thursday by the Securities and Exchange Commission, which alleged that he misled investors when he tweeted last month that he had funding secured to lead a Tesla buyout. The agency, which is seeking to oust Musk from Tesla, said in its complaint that he “knew that he had never discussed a going-private transaction at $420 per share with any potential funding source.”

Musk believes the SEC’s effort is flawed in assuming that a written agreement and fixed price were necessary for a deal, the person said. Musk also thinks regulators aren’t taking into account that Middle Eastern businesses routinely operate using verbal agreements in principle, the person said. In addition, Musk has told people that he could have led a go-private transaction using his own stake in SpaceX, if major Tesla investors were on board. SpaceX is the privately held aerospace firm that Mr. Musk controls and is valued at tens of billions of dollars.

Tory conference soon. Spectacle.

• Labour Claims Theresa May’s Government ‘The Most Divided Ever’ (Ind.)

Labour has accused Theresa May of leading “the most divided government ever” as it released a dossier claiming a third of Conservative MPs have publicly criticised either the government or a Tory colleague within the last year. On the eve of the Conservatives’ annual conference, Labour said more than 100 Tory MPs have recently turned their fire on a colleague or on government policy. The report said 80 per cent of the attacks were directed at Ms May or her government, with 83 MPs having criticised one of the two. The dossier was released as a number of senior Conservatives spoke out against Ms May’s leadership and voiced fears about the prospects of the party.

Much of the criticism outlined in the Labour document relates to Ms May’s Chequers plan for Brexit, which has been widely condemned by both Eurosceptics and Remain supporters on the Tory benches. It has been called “unworkable” by Justine Greening, the pro-European former education secretary, while former Brexit minister Steve Baker said it could lead to a “catastrophic split” in the Conservative Party. Mike Penning, previously seen as an ally of Ms May, described the plan as “dead as a dodo”, and former cabinet minister Priti Patel said it would be “a disaster for our country”. Ms May is facing mounting pressure to ditch the proposals, which are also highly unpopular with Tory members and have been rejected by EU leaders.

EU has already thrown out Chequers.

• Boris Johnson’s ‘Super Canada’ Alternative Brexit Plan Rubbished (G.)

Furious ministers rounded on Boris Johnson for suggesting the UK could renege on its Brexit agreements over the Irish border, calling it unworkable and criticising the former foreign secretary for denouncing agreements made while he was a cabinet minister. The Department for Exiting the European Union issued a defiant statement rejecting Johnson’s alternative, laid out in a 4,000-word Telegraph article, saying it was “not a workable or negotiable plan,” less that two days before the start of the Conservative party conference in Birmingham. Government sources mocked Johnson’s disavowal of the December withdrawal agreement, when he had been part of the cabinet that approved it, dismissing his intervention as “another very lengthy article which doesn’t offer any answers”.

Speaking ahead of the conference, May said the government was on the verge of a Brexit deal, despite admitting after the EU summit in Salzburg that the two sides remained some distance apart on customs and the Northern Irish border. “The right deal is close – and with it the opportunity to make life better for ordinary working people,” she said. But Johnson continued his public intervention with a series of television interviews – his first since quitting over Chequers – criticising the prime minister, warning May that she risked betraying the wishes of leave voters if she persisted with the Chequers deal but stopping short of calling her to go. Johnson told the BBC: “If you stick with Chequers, the electorate of this country will look at what we have produced and think how on Earth was that the outcome of voting leave.”

If people want a second vote, isn’t that democratic?

• Democratizing Brexit (Varoufakis)

As deadlines approach and red lines are redrawn in the United Kingdom’s impending withdrawal from the European Union, it is imperative for the people of Britain to regain democratic control over a process that is opaque and ludicrously irrational. The question is: How? Democracy can never aspire to being more than a work in progress. Decisions made collectively must constantly be reappraised collectively in the light of new evidence. Yet, in the UK’s current circumstances, nothing would be more poisonous to democracy than revisiting Brexit by means of a second referendum.

Both sides, Leavers and Remainers, feel betrayed. Even though Brexit was meant to restore its sovereignty, Parliament has no real say in a process that will mark Britain for decades to come. The Scots and the people of Northern Ireland are hostages to a distinctly English feud that could do them serious damage. The young feel the old have hijacked their future, while the old feel that their accumulated wisdom and legitimate concerns are being ignored by insiders striking bad deals behind closed doors on behalf of vested interests. In short, British democracy is failing its latest and most stringent test.

But a fresh referendum cannot be the answer to the unfolding disaster triggered by the original referendum. In June 2016, a stark choice was available to the people of Britain: leave the EU or stay in. While one can question the wisdom of making such a collective choice via a referendum, the logical coherence of the enterprise was beyond dispute. Once the verdict came in, and the process stipulated by the Treaty of Lisbon’s Article 50 was triggered, no binary yes-or-no choice to steer Britain out of its mess became available. In fact, there are now at least five options that must be collectively appraised.

Oh, yeah, that has them worried. They want their friends spying on you, and nobody else.

• Facebook Says Nearly 50m Users Compromised In Huge Security Breach (G.)

Nearly 50m Facebook accounts were compromised by an attack that gave hackers the ability to take over users’ accounts, Facebook revealed on Friday. The breach was discovered by Facebook engineers on Tuesday 25 September, the company said, and patched on Thursday. Users whose accounts were affected will be notified by Facebook. Those users will be logged out of their accounts and required to log back in. “I’m glad we found this and fixed the vulnerability,” Mark Zuckerberg said on a conference call with reporters on Friday morning. “But it definitely is an issue that this happened in the first place. I think this underscores the attacks that our community and our services face.”

The security breach is believed to be the largest in Facebook’s history and is particularly severe because the attackers stole “access tokens”, a kind of security key that allows users to stay logged into Facebook over multiple browsing sessions without entering their password every time. Possessing a token allows an attacker to take full control of the victim’s account, including logging into third-party applications that use Facebook Login. The security breach comes at a time of significant strife for the social media company, which has faced mounting criticism over issues including foreign election interference, the flow of misinformation, hate speech, and data privacy.

I kid you not: there will be many voices labeling this as ‘opportunity’.

• Melting Arctic Ice Opens New Route From Europe To East Asia (AP)

A Danish-flagged cargo ship has successfully passed through the Russian Arctic, in a trial voyage showing that melting sea ice could potentially open a new trade route from Europe to east Asia. The Venta Maersk made the journey as a one-off trial, said Palle Laursen, the chief technical officer of A.P. Moller-Maersk, the world’s biggest shipping group. The ship, carrying a cargo of frozen fish, arrived in St Petersburg on Friday, after leaving Russia’s Pacific port city of Vladivostok on 22 August. “The trial allowed us to gain exceptional operational experience,” said Laursen, adding the ship had performed well in the unfamiliar environment.

The Northern Sea route could be a shorter journey for ships travelling from east Asia to Europe than the Northwest Passage over Canada because it will likely be free of ice sooner due to climate change. Experts say it could reduce the travel distance from east Asia to Europe from the 21,000 kilometres (13,000 miles) it takes to go via the Suez Canal, to 12,800 kilometres (8,000 miles). This would cut transit time by 10 to 15 days. It’s not the first time a cargo vessel has completed the Russian Arctic route, and Maersk underlined that the journey was “to gain operational experience in a new area and to test vessel systems”. “Currently, we do not see the Northern Sea route as a viable commercial alternative to existing east-west routes,” Laursen said.

Debt Rattle September 28 2018

Sep 282018

September 28, 2018 Posted by Raúl Ilargi Meijer at 9:29 am Finance Tagged with: Assange, austerity, bees, BIS, Borio, Brexit, Corbyn, cycles, Italy, Kavanaugh, Musk, orcas, pot, Senate, Tesla, UBI 5 Responses »

Pablo Picasso Carnival Bistro [Study] 1908

• Well, I Think We Found Our Supreme Court Justice Today… (F.)

• BIS’s Claudio Borio Says the World Economy Is About to Get Very Sick (Auerback)

• Italy Agrees High Public Spending Reforms In Potential Clash With EU (G.)

• Irish Banks’ Loan Losses Hit €140 Billion In 10 Years After Crash (IT)

• Janet Yellen Says It’s Time For “Alarm” As Loan Bubble Runs Amok (ZH)

• Why Do Debt Crises Come in Cycles? (Dalio)

• Elon Musk Tore Up Last Minute SEC Settlement, Decided To Fight Instead (ZH)

• Corbyn Talks With EU Officials Spark Fresh No-Deal Brexit Fears (G.)

• Britain, Ecuador Seeking An End To The Assange Standoff (AP)

• Seattle Judges Throw Out 15 Years Of Marijuana Convictions (BBC)

• Austrian Fruit Grower Sentenced To Prison Over Bee Deaths (AFP)

• Orca ‘Apocalypse’: Half Of Killer Whales Doomed To Die From Pollution (G.)

No, not what I would write. But might as well take an odd approach. One thing that hearing made clear: “..we as a nation are losing our way”.

• Well, I Think We Found Our Supreme Court Justice Today… (F.)

Well, I think we found our Supreme Court Justice today. This should be very good news for Republicans, who seem to be in an awful hurry to get this done quickly. It doesn’t look like we have to wait any longer. Let’s all take a deep breath and step back for a moment. All crazy partisan politics aside, let’s consider the qualities a good justice should have. A good justice should be objective and fair-minded, not guided by strong preconceived opinions. A good justice should be empathetic, not focused on oneself. A good justice should be calm, not angry. A good justice should show grace under pressure, not be easily rattled. A good justice should be even-tempered, not short-tempered. A good justice should be thoughtful, not strident. A good justice should in the face of adversity show courage, not petulance.

There are classic lines from Shakespeare’s The Merchant of Venice about mercy and justice: The quality of mercy is not strained. It droppeth as the gentle rain from heaven Upon the place beneath. At the end of the day good leadership is about temperament. Having the kind of calm demeanor and even temperament that enables one to make sound thoughtful decisions under pressure. Not decisions that are reflexive, impulsive, angry or politically driven. When one thinks of the sea of strident bitter recriminations that have engulfed this whole Supreme Court nomination process, and the partisan political football the Supreme Court has become, it feels like we’ve completely lost sight of what a Supreme Court ought to be. It feels, sadly, like we as a nation are losing our way.

Well, cheer up, the good news at least is I think we found someone today with the right temperament to make a fine Supreme Court Justice. Her name is Christine Blasey Ford.

And it’s the exact same disease.

• BIS’s Claudio Borio Says the World Economy Is About to Get Very Sick (Auerback)

When Claudio Borio speaks, the big bankers and investors, the economics profession, and senior policymakers listen quite carefully—even if his sentiments don’t reach the shores of the popular media. Borio, the chief economist for the Bank for International Settlements (BIS), the central bankers’ central bank, recently remarked on the fragility of the global economy, and suggested that we were on the verge of a significant relapsesimilar to the global crash experienced 10 years ago. Among the parallels he perceives: the proliferation of “collateralized loan obligations (CLOs), which are ‘close cousins’ of the infamous instruments known as collateralized debt obligations, or CDOs, and securities backed by residential mortgages,” the prevalence of which helped to crater the credit system in 2008.

Mindful as central bankers have been about the ready availability of liquidity, they have (as I have written before) omitted to “proactively… [charging] private market participants variable risk premiums commensurate with the risk of the underlying activity they are undertaking when providing credit.” Furthermore, Borio implies that the monetary and fiscal authorities expended excessive efforts toward restoring the status quo ante, instead of directing policy toward broader job creation and income generation, which would place the economy on sounder footing when the next downturn inevitably comes. Finally, the BIS’s chief economist also publicly mooted whether additional “medicine” of the kind that we used last time will be in sufficient supply to respond adequately when the next crisis emerges.

So is Dr. Borio correct in both his diagnosis and concomitant concern about the lack of readily available cures for the prevailing illness? And are there any key omissions in his analysis that could help to mitigate the inevitable relapse that he forecasts?

UBI vs austerity.

• Italy Agrees High Public Spending Reforms In Potential Clash With EU (G.)

The Italian government agreed to a 2019 budget deficit target at 2.4% of GDP on Thursday night in a move that was celebrated by leaders but could bring the heavily indebted country into conflict with the European Union. The economy minister Giovanni Tria succumbed to pressure from the government’s two deputy prime ministers – Luigi Di Maio, the leader of the anti-establishment Five Star Movement (M5S), and Matteo Salvini, who heads up the far-right League – to increase the target in order to pay for election campaign promises such as a universal basic income, flat tax and pension reforms. Tria, an academic who is not affiliated to either party, had been seeking a more conservative 1.9% in order to avoid adding to Italy’s debt pile, which currently stands at around 131% of GDP, the second highest in the eurozone after Greece.

Speculation that Tria would resign has been denied. “There is an accord within the whole government for 2.4%, we are satisfied, this is a budget for change,” Di Maio and Salvini said in a joint statement. Di Maio wrote on Facebook that the agreement marked a historic day and was a victory for Italian citizens, not the government. The means-tested basic income, which will cost €10bn, was a key feature of his party’s election campaign. “For the first time in the history of this country we will erase poverty thanks to the basic income,” he said. “We will finally give a future to the 6.5 million people, who until now have lived in poverty and been completely ignored.”

“..three-quarters of the size of the Irish economy in 2008.”

• Irish Banks’ Loan Losses Hit €140 Billion In 10 Years After Crash (IT)

The State’s main 11 banks and building societies racked up a total of €140 billion in loan losses in the decade since western Europe’s worst property crash, according to data compiled by The Irish Times. That equates to about three-quarters of the size of the Irish economy in 2008. The figures include bad-loan charges that lenders took between 2008 and 2017, as well as losses on the sale of batches of loans to overseas investment firms and the National Asset Management Agency (Nama). As Saturday marks the 10th anniversary of the snap guarantee of the Republic’s banking system, property developer Sean Mulryan and former Central Bank governor Patrick Honohan have warned in interviews with The Irish Times of risks facing the recovering housing market and State finances.

The guarantee of six Dublin-based lenders would cost taxpayers €64 billion in bailouts and tip the State into an international bailout. Foreign-owned Bank of Scotland (Ireland), Ulster Bank and KBC Bank Ireland also required multibillion-euro capital injections from their parents during the financial crisis. The 11 banks’ net loan losses over the past decade amount to €134.2 billion – or 25 per cent of their total 2008 loans – according to the data, compiled from banks’ annual reports and regulatory filings. [..] Only five of the original lenders remain as standalone companies, as the State continues to grapple with the legacy of the crash. Housebuilding is running at half of estimated annual demand for 35,000 homes and banks are still dealing with high levels of distressed loans.

These people only warn when they’ve left the job. While in the job, they do exactly what they later warn against.

“Powell said that “overall vulnerabilities” were “moderate”. He also stated that banks today “take much less risk than they used to”.”

• Janet Yellen Says It’s Time For “Alarm” As Loan Bubble Runs Amok (ZH)

As rates move higher like they are now, the loans – whose interest rates reference such floating instruments as LIBOR or Prime – pay out more. As a result, as the Fed tightens the money supply, defaults tend to increase as the interest expenses rise and as the overall cost of capital increases. And because an increasing amount of the financing for these loans is done outside of the traditional banking sector, regulators and agencies like the Federal Reserve aren’t able to do much to rein it in. The market for leveraged loans and junk bonds is now over $2 trillion. Escalating the risk of the unbridled loan explosion, none other than Janet Yellen – who is directly responsible for the current loan bubble – recently told Bloomberg that “regulators should sound the alarm. They should make it clear to the public and the Congress there are things they are concerned about and they don’t have the tools to fix it.”

As we noted recently, the risks of such loans defaulting are obvious, including loss of jobs and risk to companies on both the borrowing and the lending side. Tobias Adrian, a former senior vice president at the New York Fed who’s now the IMF’s financial markets chief, told Bloomberg: “…supporting growth is important, but future downside risks also need to be considered.” He also stated that regulators had “limited tools to rein in nonbank credit”. But you’d never know this by listening to the Federal Reserve. According to Fed chairman Jerome Powell, during his press conference Wednesday, the Fed doesn’t see any risks right now. Powell said that “overall vulnerabilities” were “moderate”. He also stated that banks today “take much less risk than they used to”.

h/t Tyler. Monopoly on steroids.

• Why Do Debt Crises Come in Cycles? (Dalio)

If you understand the game of Monopoly®, you can pretty well understand how credit cycles work on the level of a whole economy. Early in the game, people have a lot of cash and only a few properties, so it pays to convert your cash into property. As the game progresses and players acquire more and more houses and hotels, more and more cash is needed to pay the rents that are charged when you land on a property that has a lot of them. Some players are forced to sell their property at discounted prices to raise that cash. So early in the game, “property is king” and later in the game, “cash is king.” Those who play the game best understand how to hold the right mix of property and cash as the game progresses.

Now, let’s imagine how this Monopoly® game would work if we allowed the bank to make loans and take deposits. Players would be able to borrow money to buy property, and, rather than holding their cash idly, they would deposit it at the bank to earn interest, which in turn would provide the bank with more money to lend. Let’s also imagine that players in this game could buy and sell properties from each other on credit (i.e., by promising to pay back the money with interest at a later date). If Monopoly® were played this way, it would provide an almost perfect model for the way our economy operates. The amount of debt-financed spending on hotels would quickly grow to multiples of the amount of money in existence.

Down the road, the debtors who hold those hotels will become short on the cash they need to pay their rents and service their debt. The bank will also get into trouble as their depositors’ rising need for cash will cause them to withdraw it, even as more and more debtors are falling behind on their payments. If nothing is done to intervene, both banks and debtors will go broke and the economy will contract. Over time, as these cycles of expansion and contraction occur repeatedly, the conditions are created for a big, long-term debt crisis.

The board is behing Musk. But is that enough? It’s not just the SEC, the DOJ is on the case too.

• Elon Musk Tore Up Last Minute SEC Settlement, Decided To Fight Instead (ZH)

To many it was clear from the beginning: “It’s an easy case,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “He said in the tweet he had financing, and apparently he didn’t. … It’s about as straightforward as you can get.” And on Thursday afternoon, the SEC confirmed that indeed just those two words blasted to the entire world and contained in Elon Musk’s infamous “funding secured” tweet – it would emerge just days later that funding was not, in fact, secured- would serve as the basis for a securities fraud litigation against Elon Musk; and while Tesla wasn’t named in the suit as a defendant, the SEC is seeking to bar Musk, Tesla’s largest shareholder and its top executive, from serving as an officer or director of any U.S. public company.

It almost didn’t happen that way: according to the WSJ, the SEC complaint only came after a last-minute decision by Musk and his lawyers to fight the case rather than settle the charges. The SEC had crafted a settlement with Mr. Musk—approved by the agency’s commissioners—that it was preparing to file Thursday morning when Mr. Musk’s lawyers called to tell the SEC lawyers in San Francisco that they were no longer interested in proceeding with the agreement, according to people familiar with the matter. After the phone call, the SEC rushed to pull together the complaint that it subsequently filed, the people said. Considering that this is an open and shut case, one wonders if Musk was once again on drugs when he decided that instead of settling, he would fight the charges. Or he simply saw the “playbook” and decided to roll the dice…

In any case, a fighting Elon is just what the SEC – its reputation in tatters after years of not pursuing “big name” stock manipulators – needs to restore its image. The case ranks as one of the highest-profile civil securities-fraud cases in years. Its filing less than two months after the Aug. 7 tweets by Mr. Musk also marks an unusually rapid turnaround by an agency that has been under fire for its perceived failure to promptly bring significant cases in the financial crisis and other episodes. “It means there was not that much investigation they needed to do to get comfortable that it was a case they should bring, but also a case they can win,” said Michael Liftik, a former SEC enforcement lawyer now at Quinn, Emanuel, Urquhart & Sullivan LLP.

“.. he will vote down anything that fails to deliver the same benefits as membership of the single market and customs union.”

• Corbyn Talks With EU Officials Spark Fresh No-Deal Brexit Fears (G.)

Jeremy Corbyn has sparked fresh fears in Brussels of a no-deal Brexit after saying during talks with senior EU Brexit officials that he will vote down anything that fails to deliver the same benefits as membership of the single market and customs union. The Labour leader spent two hours with Michel Barnier, the EU’s chief negotiator, and Martin Selmayr, the most senior official in charge of planning for a cliff-edge Brexit. Emerging from the European commission headquarters, Corbyn said Barnier “was interested to know what our views are in the six tests”, referring to the criteria Labour has said must be met to ensure its MPs back a deal. The EU is increasingly concerned that the UK parliament will vote down any deal put forward by Theresa May.

One of Labour’s tests is that an agreement must offer the “exact same benefits” as membership of the single market and customs union. The Labour leader had initially planned a low-key visit to Brussels to attend the naming of a square in the Belgian capital in honour of the murdered Labour MP Jo Cox. It is understood, however, that the EU’s most senior officials were anxious to hear directly from Corbyn about his party’s plans, and invited him for a session of talks. After meeting Barnier and Selmayr, who is the secretary general of the European commission and in charge of no-deal planning, Corbyn insisted he was “not negotiating” but that there was an informal agreement that both sides would continue to talk.

AP makes an ‘error’ and corrects: “The Associated Press reported erroneously that Assange over the past two years had continued to hack the accounts of politicians around the world. It should’ve said Assange had published material from hacked politicians’ accounts.”

• Britain, Ecuador Seeking An End To The Assange Standoff (AP)

Ecuador’s president said Wednesday that his country and Britain are working on a legal solution for Julian Assange to allow the Wikileaks founder to leave the Ecuadorian Embassy in London in “the medium term.” President Lenin Moreno told The Associated Press that Assange’s lawyers were aware of the negotiations. He declined to provide more details because of the sensitivity of the case. [..] Moreno said his country will work for Assange’s safety and the preservation of his human rights as it seeks a way for him to leave the embassy. “Being five or six years in an embassy already violates his human rights,” Moreno said on the sidelines of the UN General Assembly. “But his presence in the embassy is also a problem.”

Now the rest of the nation. How about New York State?

• Seattle Judges Throw Out 15 Years Of Marijuana Convictions (BBC)

Judges in Seattle have decided to quash convictions for marijuana possession for anyone prosecuted in the city between 1996 and 2010. City Attorney Pete Homes asked the court to take the step “to right the injustices of a drug war that has primarily targeted people of colour.” Possession of marijuana became legal in the state of Washington in 2012. Officials estimate that more than 542 people could have their convictions dismissed by mid-November. Mr Holmes said the city should “take a moment to recognise the significance” of the court’s ruling. “We’ve come a long way, and I hope this action inspires other jurisdictions to follow suit,” he said. Mayor Jenny Durkan also welcomed the ruling, which she said would offer residents a “clean slate.” “For too many who call Seattle home, a misdemeanour marijuana conviction or charge has created barriers to opportunity – good jobs, housing, loans and education,” she said.

Here’s what it will take.

• Austrian Fruit Grower Sentenced To Prison Over Bee Deaths (AFP)

An Austrian fruit grower was handed a rare prison sentence Wednesday for having illegally spread an insecticide which led to the deaths of dozens of neighbouring bee colonies. The 47-year-old man had spread a powerful insecticide called chlorpyrifos over his trees in the Lavanttal area of Carinthia province, at a time when their blossoms were still attracting bees. More than 50 colonies belonging to two neighbouring apiarists perished. The court in the city of Klagenfurt found the fruit grower guilty of “deliberately damaging the environment”, pointing to his experience and role in training others in his field as evidence that he knew the consequences of his actions.

He was sentenced to a year in prison, of which four months will be without probation. Ordered to pay more than 20,000 euros ($23,500) in compensation, he said he will appeal. The court said it hoped the sentence would serve as a deterrent and to remind others that the “use of pesticides needs to strike a balance between the environment and economics”. The widespread use of pesticides has been blamed for a steep rise in deaths among bees and other pollinating insects. In April the EU voted to outlaw the use of certain pesticides from the neonicotinoid family blamed for killing off bee populations.

And we’re still allowing glyphosate? We must insists on precautionary principle.

• Orca ‘Apocalypse’: Half Of Killer Whales Doomed To Die From Pollution (G.)

At least half of the world’s killer whale populations are doomed to extinction due to toxic and persistent pollution of the oceans, according to a major new study. Although the poisonous chemicals, PCBs, have been banned for decades, they are still leaking into the seas. They become concentrated up the food chain; as a result, killer whales, the top predators, are the most contaminated animals on the planet. Worse, their fat-rich milk passes on very high doses to their newborn calves. PCB concentrations found in killer whales can be 100 times safe levels and severely damage reproductive organs, cause cancer and damage the immune system. The new research analysed the prospects for killer whale populations over the next century and found those offshore from industrialised nations could vanish as soon as 30-50 years.

Among those most at risk are the UK’s last pod, where a recent death revealed one of the highest PCB levels ever recorded. Others off Gibraltar, Japan and Brazil and in the north-east Pacific are also in great danger. Killer whales are one of the most widespread mammals on earth but have already been lost in the North Sea, around Spain and many other places. “It is like a killer whale apocalypse,” said Paul Jepson at the Zoological Society of London, part of the international research team behind the new study. “Even in a pristine condition they are very slow to reproduce.” Healthy killer whales take 20 years to reach peak sexual maturity and 18 months to gestate a calf.

PCBs were used around the world since the 1930s in electrical components, plastics and paints but their toxicity has been known for 50 years. They were banned by nations in the 1970s and 1980s but 80% of the 1m tonnes produced have yet to be destroyed and are still leaking into the seas from landfills and other sources.

Photograph: Audun Rikardsen/Science

Debt Rattle September 19 2018

Sep 192018

September 19, 2018 Posted by Raúl Ilargi Meijer at 8:55 am Finance Tagged with: Amazon, Bernie Sanders, Brexit, Corbyn, FBI, junk, Korea, Monsanto, Syria, tariffs, Tesla, Trump, Walmart 7 Responses »

Salvador Dali Landscape with butterflies 1956

• Trump: Exposing ‘Corrupt’ FBI Probe Could Be Crowning Achievement (Hill)

• Trump: Expect Decision On US Role In Syria Soon (ZH)

• China Hits Back At US With $60 Billion Of New Tariffs (G.)

• Just How Wildly Exuberant is the Junk-Credit Market?” (WS)

• Bernie Sanders’ Anti-Amazon Bill Is an Indictment of the Media, Too (Taibbi)

• North And South Korea Sign Joint Agreement In ‘Leap Forward’ For Peace (Ind.)

• Michel Barnier Rebuffs UK Calls For Flexibility On Irish Border (G.)

• Keir Starmer Clashed With Corbyn On Brexit ‘To Brink Of Resignation’ (G.)

• Rightwing Thinktanks Unveil Radical Plan For US-UK Brexit Trade Deal (G.)

• Tesla To Be Investigated By US DOJ Over Elon Musk Tweets (Ind.)

• Monsanto Asks US Court To Toss $289 Million Glyphosate Verdict (R.)

Let’s see what the declassified files have to say.

• Trump: Exposing ‘Corrupt’ FBI Probe Could Be Crowning Achievement (Hill)

President Trump in an exclusive interview with Hill.TV said Tuesday he ordered the release of classified documents in the Russia collusion case to show the public the FBI probe started as a “hoax,” and that exposing it could become one of the “crowning achievements” of his presidency. “What we’ve done is a great service to the country, really,” Trump said in a 45-minute, wide-ranging interview in the Oval Office. “I hope to be able to call this, along with tax cuts and regulation and all the things I’ve done… in its own way this might be the most important thing because this was corrupt,” he said. Trump also said he regretted not firing former FBI Director James Comey immediately instead of waiting until May 2017 [..]

“If I did one mistake with Comey, I should have fired him before I got here. I should have fired him the day I won the primaries,” Trump said. “I should have fired him right after the convention, say I don’t want that guy. Or at least fired him the first day on the job. … I would have been better off firing him or putting out a statement that I don’t want him there when I get there.” [..] He criticizing the Foreign Intelligence Surveillance Act (FISA) court’s approval of the warrant that authorized surveillance of Carter Page, a low-level Trump campaign aide, toward the end of the 2016 election, suggesting the FBI misled the court.

“They know this is one of the great scandals in the history of our country because basically what they did is, they used Carter Page, who nobody even knew, who I feel very badly for, I think he’s been treated very badly. They used Carter Page as a foil in order to surveil a candidate for the presidency of the United States.” [..] The president spared no words in criticizing Comey, former FBI deputy director Andrew McCabe, counterintelligence agent Peter Strzok, lawyer Lisa Page and other FBI officials who started the probe. He recited specific text messages Page and Strzok traded while having an affair and investigating his campaign, arguing the texts showed they condoned leaks and conducted a bogus probe. Those texts are to be released as a result of Trump’s announcement on Monday. “It’s a hoax, beyond a witch hunt,” he said.

If only that could be true:“Is it possible that Trump will take the window of opportunity to get out of Syria, and walk back from prior US threats?”

Putin’s deal with Turkey has made US threats empty: civilians and terrorists will be separated. Israel has no reason to bomb anything either.

• Trump: Expect Decision On US Role In Syria Soon (ZH)

President Trump indicated that a decision on the future of US policy in Syria is coming soon in remarks made at a press conference with his Polish counterpart. Speaking alongside President Andrzej Duda, Trump said the Monday night downing of a Russian maritime surveillance plane by accidental Syrian friendly fire was “a very sad thing”. Trump’s remarks did not include criticism of Putin, and seemed to signal regret over Monday night’s dramatic escalation over Syria after a massive Israeli attack. Earlier in the day Tuesday, Russia had pointed the finger at Israel for purposefully provoking the mishap, something Israel has since denied in a military statement that ultimately put blame on Assad, Iran, and Hezbollah.

Trump also said that the US fight against ISIS in Syria could end soon: “We’re very close to being finished with that job,” he said of the Pentagon mission against ISIS. He followed with: “And then we’re going to make a determination as to what we’re going to do.” [..] Only months ago the president expressed a desire “to get out” and pull the over 2,000 publicly acknowledged American military personnel from the country; but the new report said that Trump has approved “an indefinite military and diplomatic effort in Syria”. The report revealed that “the administration has redefined its goals to include the exit of all Iranian military and proxy forces from Syria, and establishment of a stable, nonthreatening government acceptable to all Syrians and the international community.”

But is it possible that Monday’s attack involving missiles flying over the Mediterranean and an “accidental” downing of a Russian plane and 15 dead Russian crew members might have jolted Trump back to his prior position of wanting to withdraw from the Syrian quagmire? [..] Monday’s events also came just after Russian President Putin and his Turkish counterpart Recep Tayyip Erdogan announced that a demilitarized zone in Idlib will be formed by October 15. [..] The Russia-Turkey deal over Idlib has at least temporarily deflated US threats that it could intervene should Syria launch a brutal assault on the province —something the US promised to do especially if chemical weapons are used. Is it possible that Trump will take the window of opportunity to get out of Syria, and walk back from prior US threats?

Go sit around a table, all of you, including EU and japan.

• China Hits Back At US With $60 Billion Of New Tariffs (G.)

China is to slap tariffs on an additional $60bn of imports from the US in retaliation against $200bn of new trade sanctions on Chinese goods announced by Donald Trump. The latest moves represent a new step towards a full-scale trade war between the world’s two biggest economies. Further escalation is deemed likely because Trump is facing low approval ratings ahead of the US midterm elections in November, while China will not want to be seen to back down. Trump announced his latest escalation of the bitter trade standoff late on Monday, promising to introduce the additional border taxes of 10% on Chinese goods from next week.

The tariffs – designed to make US domestic products more competitive against foreign imports – apply to almost 6,000 items, including consumer goods such as luggage and electronics, housewares and food. The US president threatened further tariffs on an additional $276bn of goods if Beijing unveils retaliatory measures – a step that would mean tariffs on all Chinese imports to the US and equate to 4% of world trade. Early on Tuesday he tweeted to accuse China of “actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me”. The US president added: “What China does not understand is that these people are great patriots and fully understand that China has been taking advantage of the United States on trade for many years.

‘Buying’ a company and loading it up with lousy debt. Business 101.

• Just How Wildly Exuberant is the Junk-Credit Market?” (WS)

This is considered a door-opener Leveraged Buyout (LBO): If it flies and investors buy this $13.5 billion pile of deeply junk-rated debt today, even riskier and bigger LBOs may fly. It’s the fourth largest LBO since the Financial Crisis and the ninth largest of all times in the US and Europe: Thomson Reuters Corporation is separating its largest division, the financial information, analysis, and risk businesses, now called “Refinitiv,” to sell a 55% stake to a group of investors led by private equity firm Blackstone Group. This being a “leveraged” buyout, the Blackstone consortium is making the target company, Refinitiv, borrow in total $13.5 billion to fund most of its own buyout. This consist of $9.25 billion in “leveraged loans” and $4.25 billion in secured and unsecured bonds.

Some pieces are denominated in dollars, others in euros. This debt sale is being completed today. The Blackstone Consortium will infuse $3.025 billion in cash equity. Thomson Reuters will retain a 45% stake and will receive a special dividend from Refinitiv of approximately $17 billion, according to Moody’s. And there are some other details involved. Alas, Moody’s gives Refinitiv a corporate credit rating of B3, six steps into junk, considered “highly speculative.” [..] This deal is “reminiscent of the kind of deal I would have seen in 2006 and 2007,” Scott Roberts, head of high-yield investments at Invesco, told the Wall Street Journal. In addition to the large amount of debt being issued, “you have a covenant package that’s extremely weak.”

OK, but weak covenants have become a pandemic. Companies issuing leveraged loans love weak covenants, and creditors will rue the day, but for now everything flies. The share of these so-called “covenant-lite” (“cov-lite”) loans compared to all leveraged loans outstanding keeps setting new records. LCD of S&P Global Market Intelligence reported today that cov-lite loans in August accounted for 78.6% of outstanding leveraged loans, and up from 55% in mid-2014:

Globalism hollows out economies. And societies.

• Bernie Sanders’ Anti-Amazon Bill Is an Indictment of the Media, Too (Taibbi)

[..] it’s become increasingly clear that [Bernie Sanders] lost patience waiting for the news media to pay attention to this particularly loathsome problem of CEOs using public subsidies to pad their bottom lines. The issue in his campaigns against companies like Disney, Walmart, Burger King and Amazon is simple: our biggest and most successful companies use a business model that involves giant workforces earning beneath-subsistence wages, if not worse (particularly abroad). This business model would not work without the active cooperation of governments around the world.

Amazon and Walmart are particular villains on this score. On the supply end, they gobble up super-cheap products assembled in unfree labor zones like China, where workers are treated so badly that some have threatened mass suicides to improve conditions. Then, on the distribution end, in wealthy consumer countries like the U.S., these same companies pay many workers such low wages that they end up on public assistance. One study showed that in Arizona, for instance, 1 in 3 Amazon workers are on food stamps. Meanwhile, Jeff Bezos is worth $160 billion, and, according to one infuriating study, earns the median salary of an Amazon employee every nine seconds.

If you go by net worth in stock holdings, Bezos earns about $277 million a day. This set of circumstances is a profound comment on how the modern global economy functions. Misguided policies like the establishment of Permanent Normal Trade Relations (PNTR) with China long ago committed us to a world in which the industrial democracies of the West would be increasingly reliant upon human rights abusers in places like China to serve as mercantile suppliers. As manufacturing headed to the third world, domestic distributors became concentrated and de-unionized.

They really want peace. Don’t stand in their way.

• North And South Korea Sign Joint Agreement In ‘Leap Forward’ For Peace (Ind.)

The North and South Korean leaders presented a joint agreement during their summit in Pyongyang on Wednesday that Kim Jong-un said represented a “leap forward” for peace on the peninsula. At a joint press conference after the signing, South Korea’s Moon Jae-in said North Korea had agreed to “permanently” shut down all of its nuclear and missile testing facilities, in the presence of international experts, as long as the US takes reciprocal measures. The two sides agreed that Mr Kim would visit Seoul, in what would be a first for a North Korean leader. And the two leaders agreed a number of wide-ranging measures designed to increase cooperation and reduce the risk of armed clashes on the border.

Mr Kim said the pair had agreed to turn the Korean peninsula into a “land of peace without nuclear weapons and nuclear threats”. The US had called for concrete developments regarding denuclearisation during Mr Moon’s three-day visit to Pyongyang, and Donald Trump suggested the joint agreement did not disappoint. “Very exciting!” was his response to the news on Twitter. “Kim Jong-un has agreed to allow nuclear inspections, subject to final negotiations, and to permanently dismantle a test site and launch pad in the presence of international experts. In the meantime there will be no Rocket or Nuclear testing,” Mr Trump said.

Trying to paint the picture that if only the EU wanted to, it could give the UK whatever it desires.

• Michel Barnier Rebuffs UK Calls For Flexibility On Irish Border (G.)

Michel Barnier has rebuffed British calls for the EU to change its stance on the contested issue of the Irish border, and said a “moment of truth” was fast approaching on a Brexit deal. The EU’s chief negotiator said the bloc was ready “to improve” its proposal on avoiding a hard border on the island of Ireland, but stopped short of accepting British ideas for compromise, after the Brexit secretary, Dominic Raab, called on the EU to show flexibility. “The European Council in October will be the moment of truth, it is the moment when we shall see if we have an agreement,” Barnier said. The Irish border has emerged as the biggest stumbling block to the Brexit deal that Theresa May hopes to strike with the EU this autumn.

While the EU and UK have agreed there should be no hard border to prevent any return to violence, they are deadlocked over how to manage what will become a 310-mile frontier between the UK and EU. Both sides have proposed fallback plans, known as backstops, that would kick into place if trade talks fail to settle the question. The EU’s involves Northern Ireland following EU law on customs and goods, a plan May has said no British prime minister could ever accept. Barnier said the EU was working to improve its proposal, adding that the problem had been caused by “the UK’s decision to leave the EU, its single market and the customs union”. Seeking to counter British criticism that the EU plan eroded UK sovereignty, he said: “What we talking about here is not a land border, not a sea border, it is a set of technical checks and controls. We respect the territorial integrity of the UK and we respect the constitutional order of the UK.”

I include this to show how the Guardian shapes the discussion. After running over 100 headlines aimed at connecting Corbyn and anti-semitism in less than a year, they seamlessly move into internal divisions in Labour. All of this stuff comes from the Blairite neo-liberal side of the party.

• Keir Starmer Clashed With Corbyn On Brexit ‘To Brink Of Resignation’ (G.)

Keir Starmer, the shadow Brexit secretary, was pushed to the brink of resignation early this year after Jeremy Corbyn and his allies tried to kick his customs union plan into the long grass, senior Labour sources have told the Guardian. Labour’s Brexit policy has evolved over the past 18 months through a series of painstaking negotiations between key players at the top of the party, the most fraught of which came at a stormy meeting of the “Brexit subcommittee” early this year. Corbyn’s close allies ambushed Starmer with a paper which shelved the decision on joining a customs union, a policy he had been pushing privately for weeks.

Several people present at the meeting told the Guardian the general feeling in the room was that Starmer was willing to resign rather than accept the proposals, numbered copies of which were handed out at the start of the meeting and retrieved at the end. “He looked close to telling them to shove it – and I think that did count for something,” said one MP present. “I think Jeremy was slightly surprised at how angry Keir was, and how pissed off he was.” Another witness to the confrontation said: “Jeremy started speaking, and Keir just said, enough, this was just completely outrageous. He did lose his temper. I think they were genuinely shocked at his reaction. They tried to bounce him and it completely backfired.”

The ultimate plan all along in some circles.

• Rightwing Thinktanks Unveil Radical Plan For US-UK Brexit Trade Deal (G.)

A radical blueprint for a free trade deal between the UK and the US that would see the NHS opened to foreign competition, a bonfire of consumer and environmental regulations and freedom of movement between the two countries for workers, is to be launched by prominent Brexiters. The blueprint will be seen as significant because of the close links between the organisations behind it and the UK secretary for international trade, Liam Fox, and the US president, Donald Trump. Its publication follows a week of policy launches by the European Research Group of Conservative MPs designed to pressurise the prime minister into “chucking Chequers”, her softer Brexit proposal, in favour of a harder, clean break from the European Union.

The text of the new trade deal has been prepared by the Initiative for Free Trade (IFT) – a thinktank founded by the longtime Eurosceptic MEP Daniel Hannan, one of the leaders of Vote Leave – and the Cato Institute, a rightwing libertarian thinktank in the US founded and funded by the fossil fuel magnates and major political donors the Koch family. The “ideal UK-US free trade deal” was due to be launched later on Tuesday in both London and Washington but the Cato Institute appears to have accidentally posted it online early. The policy initiative was shaped in consultation with a group of other conservative libertarian thinktanks on both sides of the Atlantic, the blueprint explains. These include UK organisations whose funding is opaque, such as the Institute for Economic Affairs (IEA) and the Adam Smith Institute among others in the UK, and others in the US including the Heritage Foundation, the American Enterprise Institute (AEI), and the Competitive Enterprise Institute.

“In the US, the number 420 is associated with April 20, when annual marijuana celebrations take place.”

• Tesla To Be Investigated By US DOJ Over Elon Musk Tweets (Ind.)

The Department of Justice has launched an investigation looking at whether Tesla CEO Elon Musk broke the law by musing on Twitter about taking the company private. The firm was contacted by the Department of Justice after Mr Musk made the comments on Twitter last month in a tweet that spurred theories the tech CEO was trying to communicate he was smoking marijuana because he suggested he would take his company private once shares had reached $420 a share. In the US, the number 420 is associated with April 20, when annual marijuana celebrations take place.

“Last month, following Elon’s announcement that he was considering taking the company private, Tesla received a voluntary request for documents from the DOJ and has been cooperative in responding to it,” a Tesla spokesperson told The Independent in an emailed statement. The spokesperson continued: “We have not received a subpoena, a request for testimony, or any other formal process. We respect the DOJ’s desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received.”

They have limitless legal budgets.

• Monsanto Asks US Court To Toss $289 Million Glyphosate Verdict (R.)

Bayer unit Monsanto on Tuesday asked a California judge to throw out a $289 million jury verdict awarded to a man who alleged the company’s glyphosate-based weed-killers, including Roundup, gave him cancer. The company said in motions filed in San Francisco’s Superior Court of California that the jury’s decision was insufficiently supported by the evidence presented at trial by school groundskeeper Dewayne Johnson. Johnson’s case, filed in 2016, was fast-tracked for trial due to the severity of his non-Hodgkin’s lymphoma, a cancer of the lymph system, that he alleged was caused by years of exposure to Roundup and Ranger Pro, another Monsanto herbicide that contains glyphosate.

Monsanto asked Superior Court Judge Suzanne Bolanos, who oversaw the trial, to set aside the verdict or, in the alternative, reduce the award or grant a new trial. A hearing on the motions is set for Oct. 10. The company, which denies the allegations, has previously said it would appeal the verdict if necessary. Johnson’s case was the first to go to trial over allegations that glyphosate causes cancer. Monsanto is facing some 8,000 similar lawsuits across the United States. Shares in Bayer, which bought Monsanto this year for $63 billion, slid following the Aug. 10 jury decision and the stock was still trading some 20 percent below its pre-verdict value of 73.30 euros ($85.45) on Tuesday.

“The jury’s decision is wholly at odds with over 40 years of real-world use, an extensive body of scientific data and analysis … which support the conclusion that glyphosate-based herbicides are safe for use and do not cause cancer in humans,” Bayer said in a statement on Tuesday. Bayer said Johnson failed to prove glyphosate caused his cancer and the scientific evidence he presented at trial “fell well below the causation standard required under California law.”

Debt Rattle September 17 2018

Sep 172018

September 17, 2018 Posted by Raúl Ilargi Meijer at 9:32 am Finance Tagged with: Brexit, corruption, Dick Fuld, Everything Bubble, extinction, Fraud, Growth, Lehman, multiculturalism, risk assets, Shell, Tesla 10 Responses »

René Magritte Companions of fear 1942

• Repo 105 (Ben Hunt)

• The Everything Bubble” Threatens $400 Trillion In Assets (ZH)

• What Can Cause the Next Mortgage Crisis in the US? (WS)

• Dollar Dominant & Dangerous, System Not Stable – Catherine Austin Fitts (USAW)

• Shell Faces One Of The Biggest Corruption Cases In Corporate History (Ind.)

• Only Alternative To Chequers Is No Brexit Deal, Says Theresa May (G.)

• Brussels Nearing Impasse With May Over Irish Border Proposal (G.)

• Four In 10 Think British Culture Is Undermined By Multiculturalism (G.)

• Musk Says Tesla Now In ‘Delivery Logistics Hell’ (R.)

• The EU Needs A Stability And Wellbeing Pact, Not More Growth (G.)

• 7 Endangered Species That Could (Almost) Fit In A Single Train Carriage (G.)

Lehman sold bad loans to banks for a fee so it could look better, only to buy them back days later. It was very basic fraud. And Dick Fuld walked away.

• Repo 105 (Ben Hunt)

Every time Dick Fuld’s publicists succeed in getting a “redemption story” published in the Wall Street Journal or New York Times, I’m going to write an Epsilon Theory brief about Repo 105, the fraudulent scheme that Lehman Brothers ran for years to hide its deteriorating financial condition from investors and regulators alike.

[..] Repo 105 was a multiyear scheme by Lehman to defraud the government and its own investors by falsifying the actual amount of loans it had on the books, making Lehman look safer than it actually was. It worked like this. A few days before the end of the calendar quarter, Lehman would “sell” billions of dollars worth of loans to another bank. I put “sell” in quotation marks, because Lehman ALSO had an agreement with these other banks to buy the loans back a few days after the quarter ended for the same price as they were sold, plus enough money to cover whatever the going interest rate was on that cash for the few days it was in Lehman’s hands. This is what’s called a repurchase agreement, or repo, hence the name Repo 105 (the 105 refers to the 5% overcollateralization that counterparty banks required to lend the cash to Lehman even for a few days – THEY knew Lehman was in trouble).

Since financial reporting happens at the end of the quarter, Lehman’s books would look like they had more cash and fewer loans than they actually did. Surely, you say, no law firm would bless this blatant attempt to cook the books? And I say, don’t call me Shirley. I say, well … no US law firm would bless this, so naturally Lehman found a UK firm, Linklaters, to say that this was, in fact, technically a “true sale”. Even then, to pull this off Lehman had to run Repo 105 through their offshore subsidiaries, not through their US-chartered entities. It was really expensive for Lehman to run Repo 105. But also entirely necessary, or else the entire house of cards that WAS Lehman would have collapsed well before September, 2008.

Risk. It’s back.

• The Everything Bubble” Threatens $400 Trillion In Assets (ZH)

By now, it’s a very familiar question: how high can the Fed hike rates before it causes a major market “event.” Two weeks ago, Stifel analyst Barry Banister became the latest to issue a timeline on how many more rate hikes the Fed can push through before the market is finally impacted. According to his calculations, just two more rate hikes would put the central bank above the neutral rate – the interest rate that neither stimulates nor holds back the economy. The Fed’s long-term projection of its policy rate has risen from 2.8% at the end of 2017 to 2.9% in June. As the following chart, every time this has happened, a bear market has inevitably followed.

A similar argument was made recently by both Deutsche Bank and Bank of America, which in two parallel analyses observed last year that every Fed tightening cycle tends to end in a crisis. In a report issued on Friday, BCA’s strategists make the key point that the performance of bonds – and stocks – in an inflation scare would depend on the relative size of the inflationary impulse compared with the disinflationary impulse that resulted from sharply lower risk-asset prices. They make the point that if central banks were more concerned about the inflationary impulse, which at least for Fed chair Powell appears to be the case for now – Janet Yellen’s “lower for longer revised forward guidance” notwithstanding – they would have to keep tightening – in which case, bond yields would be liberated to reach elevated territory.

Conversely, if the bigger worry was the disinflationary impulse, which arguably is the case from a legacy standpoint, central banks would quickly reverse course, and bond yields would return to the lowlands. Thus, the disinflationary impulse from lower risk-asset prices would end up as the bigger issue. [..] BCA estimates that the total value of global risk-assets is $400 trillion, equal to about five times the size of the global economy. The takeaway is that any inflationary impulse would – through higher bond yields – undermine the valuation support of global risk-assets that are worth several times the size of the global economy.

“In a rising housing market, delinquencies will always be low but are not an indicator of future default risks. But home prices are an indicator of default risk.”

• What Can Cause the Next Mortgage Crisis in the US? (WS)

Mortgage delinquencies at all commercial banks in the US inched down to 3.14% in the second quarter, the lowest since Q2 2007, according to the Federal Reserve. But after those soothingly low delinquency rates in 2007, something happened. By Q3 2008, the delinquency rate hit 5.2%, and in Q4 2009, it went over 10%, and stayed in the double-digits until Q1 2013. This was the mortgage crisis. And we’re a million miles away from it, thank God. Or are we? This chart compares home prices in the US (green, left scale) to delinquency rates (red, right scale). Delinquency rates started surging after home prices started falling. The inflection point is marked by the vertical purple line, labeled “it starts”:

Home prices began falling in 2006. By 2008, some homeowners were seriously “underwater” – they owed more on their house than the house was worth. When they ran into financial trouble because they were in over their heads, or because one of the breadwinners in the household lost their jobs, or because they’d lied on their mortgage application and never had enough income to begin with, or because they were investors who couldn’t make the math work out anymore, or whatever, they were stuck. In a rising housing market, they would just sell the home and pay off the mortgage. But they couldn’t sell their home because it was worth less than the mortgage, and default was the only option. The chart above shows the relationship between home prices and delinquencies. In a rising housing market, delinquencies will always be low but are not an indicator of future default risks. But home prices are an indicator of default risk.

“The U.S. government is “missing” $21 trillion between the DOD and HUD.”

• Dollar Dominant & Dangerous, System Not Stable – Catherine Austin Fitts (USAW)

Investment advisor and former Assistant Secretary of Housing, Catherine Austin Fitts, predicts the global financial system “will take some big hits before the end of the year.” Fitts explains, “Right now, economists say the dollar is ‘dangerous and dominant.’ It’s still, if you look at the market shares around the world, it’s still very, very significant portion of total reserves. So, it’s still very important. At the same time, the U.S. dollar hegemony is probably not going to last forever . . . So, I think the long term dollar looks very weak. Short term, it doesn’t look like it’s coming apart anytime soon, as far as I can see. What that means is when you have something that is dangerous and dominant, you have the possibility of extreme volatility events.

That’s the new code word for the ‘you know what’ hits the, you know what. Whether it’s different countries exploding economically, or we whether are pressuring people that makes them very uncomfortable, these kinds of fights over shrinking pies are very dangerous because they mean covert wars. They mean overt wars, and the more we steal pies from each other instead of make new pies, the worse the situation gets. That’s what you are seeing. The system is not stable.” [..] There is good reason people are going to real assets. The U.S. government is “missing” $21 trillion between the DOD and HUD. This fact was uncovered by Fitts and economist Dr. Mark Skidmore last year.

What was the government’s answer to this gigantic accounting fraud that is the size of the federal deficit? Give the government’s budgets basically classified national security status. Fitts says, “Apparently, the people leading the audit have come to them and said if we do this audit, we will disclose classified projects. So, the board (Federal Accounting Standards Advisory Board – FASAB) came out with a new policy. I say it is illegal. You cannot do it under the financial management laws, and you certainly cannot do it under the Constitution, and it said you can keep classified off the books, which means you can cook the books and you can basically do whatever you want.

What was that about reality and fiction?

• Shell Faces One Of The Biggest Corruption Cases In Corporate History (Ind.)

Giant oil companies, offshore accounts, ex-MI6 agents, champagne lunches, a former Nigerian president and allegations of one of the biggest bribes ever paid – the corruption case against Shell and Italy’s Eni filed by prosecutors in Milan over a shady $1.3bn deal for a vast African oil field has all the elements of an espionage thriller. The latest twists thicken the plot further with a cache of documents seized in a raid on a Swiss financier’s apartment that could be crucial to the case, leaving prosecutors in a race against time to get them to Milan as trial hearings get underway this week. The Geneva raid uncovered a briefcase belonging to Emeka Obi, a middleman who received millions of dollars from the deal and is in the dock along with several senior Shell and Eni executives.

Inside the briefcase, Swiss prosecutors found a laptop, two Nigerian passports, five sim cards and a hard drive containing 41,000 documents that prosecutors believe could be crucial to the trial playing out on the other side of the Alps. The stakes are high. Italian prosecutors allege that, of the total $1.3bn fee paid by Shell and Eni for the oil field, $1.1bn went not into the coffers of the Nigerian state but the accounts of former oil minister Dan Etete who then distributed hundreds of millions to well-connected individuals, including former president Goodluck Jonathan. The amount distributed as bribes is more than the entire Nigerian healthcare budget for 2018, in a country where 87 million people live in extreme poverty – more than any other country on earth.

She’s stuck. Dangerous position.

• Only Alternative To Chequers Is No Brexit Deal, Says Theresa May (G.)

May said: “I believe we will get a good deal. We will bring that back from the EU negotiations and put that to parliament. I think that the alternative to that will be not having a deal.” The Chequers plan prompted the resignations of David Davis and Boris Johnson. May tried again to remake the case for it by claiming the other options put forward by the EU were unacceptable. “The European Union had basically put two offers on the table. Either the UK stays in the single market and the customs union – effectively in the EU – that would have betrayed the vote of the British people,” she said.

“Or, on the other side, a basic free trade agreement but carving Northern Ireland out and effectively keeping Northern Ireland in the European Union and Great Britain out. That would have broken up the United Kingdom, or could have broken up the United Kingdom. Both of those were unacceptable to the UK. “We said ‘no’ … we’re going to put our own proposal forward and that’s what Chequers is about … It unblocked the negotiations.”

Preparing to blame the EU for failing.

• Brussels Nearing Impasse With May Over Irish Border Proposal (G.)

The EU is proving unable to convince Theresa May that by using “trusted trader schemes” and technology its proposal to in effect keep Northern Ireland in the customs union and single market will not draw a border in the Irish sea. The Brexit negotiations have reached an impasse over the failure to find an acceptable solution to avoiding a hard border on the island of Ireland after the UK leaves the EU. The solution proposed by Brussels in which Northern Ireland has a different status from the rest of the UK has been rejected by the prime minister as involving the economic and constitutional “dislocation” of the country. The EU’s chief negotiator, Michel Barnier, has nevertheless repeatedly insisted that the issue can be “de-dramatised”.

Barnier has sought to show that the level of trade between Belfast and the rest of the UK is minimal, and that the checks that would be required do not pose a constitutional threat to the British government. But according to what is described as a diplomatic note seen by the Times, the EU is struggling to convince the UK that it is significant that checks at a border could be avoided entirely for many companies through trusted trade schemes. The diplomatic note, said to have been drafted following a meeting of EU ambassadors last Wednesday with Barnier’s deputy, Sabine Weyand, reports that the UK has not been “helpful” over the issue. The note says: “The biggest unsolved problem is Northern Ireland. There is a political mobilisation in the UK in this regard. Therefore, we are trying to clarify the EU position. The controls or checks only have to be organised in a way that would not endanger the EU single market.”

How about you start by picking your own strawberries?

• Four In 10 Think British Culture Is Undermined By Multiculturalism (G.)

A large minority of people in the UK believe multiculturalism has undermined British culture and that migrants do not properly integrate, according to some of the broadest research into the population’s attitudes to immigration. The study, conducted over the last two years, also reflects widespread frustration at the government’s handling of immigration, with only 15% of respondents feeling ministers have managed it competently and fairly. On balance, the UK population appears to be slightly more positive than negative about the impact of immigration; however, 40% of respondents agreed that having a wide variety of backgrounds has undermined British culture. More than a quarter of people believe MPs never tell the truth about immigration and half the population wants to see a reduction in the numbers of low-skilled workers coming into Britain from the EU.

The study was based on a survey of 3,667 adults carried out in June by ICM, as well as 60 citizens’ panels carried out on behalf of the thinktank British Future and the anti-racism group Hope Not Hate. “The lack of trust we found in the government to manage immigration is quite shocking,” said Jill Rutter, the director of strategy for British Future. “People want to have their voices heard on the choices we make, and to hold their leaders to account on their promises. While people do want the UK government to have more control over who can come to the UK, most of them are ‘balancers’ – they recognise the benefits of migration to Britain, both economically and culturally, but also voice concerns about pressures on public services and housing.”

“Should be solved shortly..”

• Musk Says Tesla Now In ‘Delivery Logistics Hell’ (R.)

Tesla Inc’s Chief Executive Officer Elon Musk on Sunday acknowledged that the electric carmaker’s problems have now shifted to delivery logistics from production delays, the latest speed bump in its efforts to achieve profitability. “Sorry, we’ve gone from production hell to delivery logistics hell, but this problem is far more tractable. We’re making rapid progress. Should be solved shortly,” Musk said in a tweet here in response to a customer complaint on delivery delay. The 47-year-old billionaire who earlier this month faced investor ire over smoking marijuana on a live web show, has indicated in the past that Tesla’s customers may face a longer response time because of a significant increase in vehicle delivery volume in North America.

238 academics signed. But it’s not the conversation we’ll have.

• The EU Needs A Stability And Wellbeing Pact, Not More Growth (G.)

This week, scientists, politicians, and policymakers are gathering in Brussels for a landmark conference. The aim of this event, organised by members of the European parliament from five different political groups, alongside trade unions and NGOs, is to explore possibilities for a “post-growth economy” in Europe. For the past seven decades, GDP growth has stood as the primary economic objective of European nations. But as our economies have grown, so has our negative impact on the environment. We are now exceeding the safe operating space for humanity on this planet, and there is no sign that economic activity is being decoupled from resource use or pollution at anything like the scale required. Today, solving social problems within European nations does not require more growth. It requires a fairer distribution of the income and wealth that we already have.

Growth is also becoming harder to achieve due to declining productivity gains, market saturation, and ecological degradation. If current trends continue, there may be no growth at all in Europe within a decade. Right now the response is to try to fuel growth by issuing more debt, shredding environmental regulations, extending working hours, and cutting social protections. This aggressive pursuit of growth at all costs divides society, creates economic instability, and undermines democracy. Those in power have not been willing to engage with these issues, at least not until now. The European commission’s Beyond GDP project became GDP and Beyond. The official mantra remains growth — redressed as “sustainable”, “green”, or “inclusive” – but first and foremost, growth. Even the new UN sustainable development goals include the pursuit of economic growth as a policy goal for all countries, despite the fundamental contradiction between growth and sustainability.

Another way to put it. You could easily do this for 70 species, or 700, 7000.

• 7 Endangered Species That Could (Almost) Fit In A Single Train Carriage (G.)

Some species are so close to extinction, that every remaining member can fit on a New York subway carriage (if they squeeze). All estimates come from the IUCN Red List, 2018.

Debt Rattle August 31 2018

Aug 312018

August 31, 2018 Posted by Raúl Ilargi Meijer at 7:29 am Finance Tagged with: austerity, Big Tech, China, flipping, IMF, lira, moles, Mueller, peso, pesticides, sand, tariffs, Tesla, Trump 4 Responses »

Vincent van Gogh Starry night 1889

• Argentine Peso And Turkish Lira Crash, Put Pressure On Emerging Markets (CNBC)

• US, China To Regulate Big Tech Firms ‘Like National Security Companies’ (CNBC)

• Trumps Legal Team Preparing Counter Report To Delegitimize Mueller (ZH)

• ‘Vital’ US Moles in the Kremlin Go Missing! (Stephen Cohen)

• Trump Is Right About “Flipping” (FFF)

• France Says EU Needs Strategic Relationship With Russia On Defense (R.)

• EU Says It Is Willing To Scrap Car Tariffs In US Trade Deal (Pol.eu)

• China-Africa Summit To Target Investment Despite Debt Worries (AFP)

• As Tesla Shares Fall, Amazon Takes Over As Most Shorted US Stock (R.)

• IMF Unwavering On Greek Pension Cuts (K.)

• The Three Tribes of Austerity (Varoufakis)

• Trade Of Coastal Sand Is Damaging Wildlife, Coastlines Of Poorer Nations (G.)

• France’s Ban On Bee-Killing Pesticides Begins Saturday (AFP)

• The Ocean Cleanup Is Starting, Aims To Cut Garbage Patch By 90% By 2040 (F.)

At some point, these things start feeding upon themselves.

• Argentine Peso And Turkish Lira Crash, Put Pressure On Emerging Markets (CNBC)

Emerging markets were rattled again, with the Argentine peso, Turkish lira and Indonesian rupiah tumbling overnight. The negative sentiment is set to weigh on other Asian currencies, although they will remain fairly resilient to the impact, analysts say. The peso crashed nearly 12 percent, following a domestic crisis which saw its central bank hike rates to 60 percent in an attempt to shore up its currency. Extending its steep losses this year, the lira fell 2.94 percent to a fourth straight day of declines. In Asia, India’s rupee fell to a new record low against the dollar on Friday — a more than 11 percent fall since the start of the year, and the Indonesian rupiah hit a near three-year low.

“Emerging markets will remain pressured by the Argentine peso and Turkish lira crises,” DBS analysts said in a note Friday morning. The peso is down more than 45% against the greenback this year. “Argentina has hiked rates to a record 60% to address double-digit inflation, but this would exacerbate the recession, and coupled with budget/current account deficits of around 5% of GDP, have increased the risk of for the government to default on its debt,” they added.

Likely to be pushed hard ahead of mid terms.

• US, China To Regulate Big Tech Firms ‘Like National Security Companies’ (CNBC)

The U.S. and China may be at odds on trade, but both are lining up to crack down on big tech, according to an analyst. “I think this is actually wrapped up in the trade issue, which is around national security and tech companies,” Michael Hessel, political economy analyst at Absolute Strategy Research, told CNBC’s “Squawk Box Europe” on Thursday. “There’s a growing push both within China and the U.S. to regulate some of these companies increasingly like national security companies, which could have huge implications for their business model.” President Donald Trump on Tuesday made Google his latest target in a tirade against big tech, saying the firm’s search service is “rigged” against conservatives in favor of left-leaning media.

The president subsequently took another shot at the tech giant on Wednesday, claiming it snubbed twice his State of the Union speeches, while promoting Barack Obama’s during each year of the latter’s presidency. Google later responded to this claim, saying it did promote Trump’s State of the Union address this year, but not in 2017. [..] Absolute Strategy Research’s Hessel did not expand on how he expected either country to clamp down on their respective tech industries. He said that a lack of regulation in the U.S. on tech — while the media industry is more heavily regulated — meant it could be a long-term concern for lawmakers in Washington. “I think the regulation of the tech industry is going to be a huge issue on a three-to-five year view,” Hessel said.

2nd Special Counsel preparations.

• Trumps Legal Team Preparing Counter Report To Delegitimize Mueller (ZH)

President Trump’s lawyers are preparing a rebuttal to any negative report issued by special counsel Robert Mueller following the DOJ’s probe into Russian collusion with the Trump campaign, reports the Daily Beast following an interview with Trump attorney Rudy Giuliani. Part of the rebuttal, says Giuliani, would focus on whether the “initiation of the investigation was…legitimate or not.” “According to Giuliani, the bulk of the report will be divided into two sections. One section will seek to question the legitimacy of the Mueller probe generally by alleging “possible conflicts” of interest by federal law enforcement authorities. The other section will respond to more substantive allegations of Trump campaign collusion with Russian government agents to sway the 2016 election, and obstruction of justice allegations stemming from, among other things, the president’s firing of former FBI director James Comey.” -Daily Beast

The latter section of the rebuttal will focus on Deputy Director Rod Rosenstein’s mandate when he ordered the Mueller’s investigation – though Giuliani admits he has no idea what the final report will consist of. “Since we have to guess what it is, [our report so far] is quite voluminous,” Giuliani said, claiming that he would spend much of this weekend “paring it down” and that he was editing the document created by the “whole team.” “The first half of it is 58 pages, and second half isn’t done yet…It needs an executive summary if it goes over a hundred” -Daily Beast In other words, Mueller has fair warning that the Trump administration intends to fight this tooth and nail.

The Weekly Standard’s Eric Felton offered this last month: “Appellate and constitutional lawyers David B. Rivkin, Jr. and Elizabeth Price Foley recently made a compelling case that the political bias among the FBI agents working on “Crossfire Hurricane” renders illegitimate everything flowing from that investigation. If “Crossfire was politically motivated then its culmination, the appointment of a special counsel, inherited the taint,” Rivkin and Foley wrote in the Wall Street Journal. “All special-counsel activities—investigations, plea deals, subpoenas, reports, indictments and convictions—are fruit of a poisonous tree, byproducts of a violation of due process.” Rivkin and Foley add: “That Mr. Mueller and his staff had nothing to do with Crossfire’s origin offers no cure.” -Weekly Standard

Another fully crazy story. And yes, if such moles existed, nobody would tell the media.

• ‘Vital’ US Moles in the Kremlin Go Missing! (Stephen Cohen)

on August 25, the ever-eager New York Times published yet another front-page Russiagate story—one that if true would be sensational, though hardly anyone seemed to notice. According to the Times’ regular Intel leakers, US intelligence agencies, presumably the CIA, has had multiple “informants close to…Putin and in the Kremlin who provided crucial details” about Russiagate for two years. Now, however, “the vital Kremlin informants have largely gone silent.” The Times laces the story with misdeeds questionably attributed to Putin and equally untrustworthy commentators, as well as a mistranslated Putin statement that incorrectly has him saying all “traitors” should be killed. Standard US media fare these days when fact-checkers seem not to be required for Russia coverage. But the sensation of the article is that the US had moles in Putin’s office.

The real novelty of Russiagate is the allegation that a Kremlin leader, Putin, personally gave orders to affect the outcome of an American presidential election. In this regard, Russiagaters have produced even less evidence, only suppositions without facts or much logic. With the Russiagate narrative being frayed by time and fruitless investigations, the “mole in the Kremlin” may have seemed a ploy needed to keep the conspiracy theory moving forward, presumably toward Trump’s removal from office by whatever means. And hence the temptation to play the mole card again, now, as yet more investigations generate smoke but no smoking gun.

The pretext of the Times story is that Putin is preparing an attack on the upcoming November elections, but the once-“vital,” now-silent moles are not providing the “crucial details.” Even if the story is entirely bogus, consider the damage it is doing. Russiagate allegations have already delegitimized a presidential election, and a presidency, in the minds of many Americans. The Times’ updated, expanded version may do the same to congressional elections and the next Congress. If so, there is an “attack on American democracy”—not by Putin or Trump but by whoever godfathered and repeatedly inflated Russiagate.

Common practice, but in this case questionable.

• Trump Is Right About “Flipping” (FFF)

Suppose a federal criminal defendant contacts a prospective witness in a case and offers him $50,000 in return for his “cooperation” in his upcoming trial. The money will be paid as soon as the trial is over. The defendant makes it clear that he wants the witness to “tell the truth” but that his “cooperation” when he testifies at trial would be greatly appreciated. What would happen if federal officials learned about that communication and offer? They would go ballistic. They would immediately secure an indictment for bribery and witness tampering. What if the defendant says, “Oh, no, I wasn’t tampering with the witness. I specifically told him that I wanted him to tell the truth when he took the witness stand. I was just seeking his friendly ‘cooperation’ with my $50,000 offer to him.”?

It wouldn’t make a difference. Federal prosecutors would go after him with a vengeance on bribery and witness-tampering charges. And it is a virtual certainty that they would get a conviction. There is good reason for that. The law recognizes that the money could serve as an inducement for the witness to lie. Even though the defendant tells him to “tell the truth,” the witness knows that the fifty grand is being paid to him to help the defendant get acquitted, especially since it is payable after the trial is over. The temptation to lie, in return for the money, becomes strong, which is why the law prohibits criminal defendants from engaging in this type of practice.

Suppose a federal prosecutor says to a witness, “You are facing life in prison on the charges we have brought against you. But if you ‘cooperate’ with us to get John Doe, we will adjust the charges so that the most the judge can do is send you to jail for only 5 years at most. If you are really ‘cooperative,’ we will recommend that the judge give you the lowest possible sentence, perhaps even probation. Oh, one more thing, we want to make it clear that we do want you to tell the truth.” Do you see the problem? The temptation to please the prosecutor with “cooperation” becomes tremendous. If the witness can help secure a conviction of Doe, he stands to get a much lighter sentence for his successful “cooperation.” The inducement to commit perjury oftentimes takes over, notwithstanding the prosecutor’s admonition to the witness to “tell the truth.”

Are the UK going to use this to justify Brexit?

• France Says EU Needs Strategic Relationship With Russia On Defense (R.)

The European Union needs a strategic relationship with Turkey, including in defense matters, and should modernize its post-Cold War relations with Russia, French President Emmanuel Macron said on Thursday. Macron is a strong advocate for a Europe that is able to defend its strategic interests and financial independence and respond to new global economic and defense situation brought on by Donald Trump’s presidency in the United States. He has sought to improve relations with Russia’s President Vladimir Putin, although his efforts have been complicated by allegations of Russian meddling in elections from the United States to France and a nerve agent attack in Britain.

“It is in our interest for the EU to have a strategic relationship with Turkey as well as with Russia that brings stability, that will in the long term and bring more strength and coherency,” Macron said in a news conference in Helsinki alongside Finnish President Sauli Niinisto. He said the EU’s relations with Russia needed to be “brought up to date”, using the Italian word “aggiornamento”. “I think that on matters like cybersecurity, defense, strategic relationships, we could envisage the outlines of a new relationship between Russia and the EU which is coherent with the direction Europe is headed in,” Macron said.

Not enough, says Trump.

• EU Says It Is Willing To Scrap Car Tariffs In US Trade Deal (Pol.eu)

Brussels is willing to scrap tariffs on all industrial products, including cars, in its trade talks with the United States, EU trade chief Cecilia Malmström said Thursday. “We said that we are ready from the EU side to go to zero tariffs on all industrial goods, of course if the U.S. does the same, so it would be on a reciprocal basis,” Malmström told the European Parliament’s trade committee. “We are willing to bring down even our car tariffs down to zero … if the U.S. does the same,” she said, adding that “it would be good for us economically, and for them.”

Malmström’s comment went beyond what was agreed in July in the joint statement between European Commission President Jean-Claude Juncker and U.S. President Donald Trump, which only mentioned eliminating tariffs, non-tariff barriers and subsidies for “non-auto industrial goods.” [..] The EU’s car tariff of 10 percent is higher than the general U.S. auto tariff of 2.5 percent, but America imposes a 25 percent duty on light trucks and pick-ups. Malmström insisted that the discussions were not about “restarting TTIP” but aiming for “a more limited trade agreement.” “Agriculture would not be in the agreement, nor public procurement as it looks to today,” she said.

Same as Silk Road: loading countries up with debt. Then take their assets.

• China-Africa Summit To Target Investment Despite Debt Worries (AFP)

African leaders will gather in Beijing Monday for a summit focused on economic ties, granting China a feel-good photo opportunity as it comes under increasing fire for its debt-laden approach to aid in the developing world. President Xi Jinping will host leaders from across the continent for the two-day Forum on China-Africa Cooperation, which will include talks on his cherished “Belt and Road” infrastructure programme. The massive scheme, aimed at improving Chinese access to foreign markets and resources, and boosting its influence abroad, has already seen Beijing loan billions of dollars to countries in Asia and Africa for roads, railways, ports and other major building projects.

“The initiative will probably be expanded to include the whole of Africa,” said Cobus van Staden, senior researcher on Africa-China relations at the South African Institute of International Affairs. While some critics have branded the strategy a debt-trap, African leaders have long embraced Chinese investment, helping make Beijing the continent’s largest trading partner for the past decade. At the last three-yearly gathering in Johannesburg in 2015, Xi announced $60 billion of assistance and loans for Africa. This year, China will want to add more African countries to “its ever-expanding list of ‘friendly’ nations”, especially from the north and francophone west, said Adebusuyi Isaac Adeniran, an expert on the relationship at Nigeria’s Obafemi Awolowo University.

Starting to short all of Big Tech. Buffett calling iPhones underpriced may be seen in that light.

• As Tesla Shares Fall, Amazon Takes Over As Most Shorted US Stock (R.)

With Tesla’s shares briefly dipping below the $300 level on Thursday, the electric carmaker ceded its seat as the most shorted U.S. stock to Amazon.com, according to data from financial technology and analytics firm S3 Partners. Tesla short interest in dollars, calculated using the number of shares sold short and the share price, stood at $9.93 billion, on Thursday, just shy of $9.95 billion for Amazon, S3 Partners data showed. Analysts said investors were still shorting Tesla shares, or taking positions that amounted to bets the stock would keep declining. Short-sellers aim to profit by selling borrowed shares, hoping to buy them back later at a lower price.

“While there was some short covering the week after the tweet, there has still not been any significant net Tesla short covering on the Street,” said Ihor Dusaniwsky, head of research at S3 in New York. “Any traders who have closed down their positions to realize some profits have been replaced by new ones looking for continued price weakness,” he said. Tesla shares whipsawed this month after Chief Executive Elon Musk on Aug. 7 tweeted he planned to take the company private, only to abandon the idea by Aug. 24.

Sovereign nation.

• IMF Unwavering On Greek Pension Cuts (K.)

The government’s aim to suspend pension cuts due to come into effect in January is likely to fuel friction in the coming weeks, Kathimerini understands, as the IMF is adamant that the reductions should be made even if they are not required for Greece to meet budget targets. The IMF’s stance is at odds with that of European officials who are more flexible on the issue, as European Economic and Monetary Affairs Commissioner Pierre Moscovici has suggested in a series of recent comments. Indeed, according to sources, the EC’s envoy to Greece, Declan Costello, is working on a compromise that would be acceptable to the government.

The IMF has not publicly declared its position on the Greek pensions issue yet but sources say the Fund has not shifted from its stance in favor of pension cuts despite the more favorable than expected fiscal forecasts, due to fears about the Greek pension system, which remains unsustainable partially due to the country’s aging population. The IMF’s unofficial position, it seems, is that fiscal savings worth 1 percent of GDP – the value of the planned pension cuts – are not required for Greece to achieve a primary surplus of 3.5 percent of GDP but it is preferable that they be carried out and offset by countermeasures than not carried out.

US Republicans and German social democrats have the same agenda. But the latter have all but vanished.

• The Three Tribes of Austerity (Varoufakis)

The first, and best known, “austerian” tribe is motivated by the tendency to view the state as no different from a business or a household that must tighten its belt during bad times. Overlooking the crucial interdependence between a government’s expenditure and (tax) income (from which businesses and households are blissfully free), they make the erroneous intellectual leap from private parsimony to public austerity. Of course, this is no arbitrary error; it is powerfully motivated by an ideological commitment to small government, which in turn veils a more sinister class interest in redistributing risks and losses to the poor.

A second, less recognized, austerian tribe can be found within European social democracy. To take one towering example, when the 2008 crisis erupted, Germany’s finance ministry was in the hands of Peer Steinbrück, a leading member of the Social Democratic Party. Almost immediately, Steinbrück prescribed a dose of austerity as Germany’s optimal response to the Great Recession. Moreover, Steinbrück championed a constitutional amendment that would ban all future German governments from deviating from austerity, no matter how deep the economic downturn. [..] Against a background of failing banks and a mighty recession, he opined that fiscal deficits deny elected politicians “room for maneuver” and rob the electorate of meaningful choices.

The third austerian tribe is American and perhaps the most fascinating of the three. Whereas British Thatcherites and German social democrats practiced austerity in an ill-conceived attempt to eliminate the government’s budget deficit, US Republicans neither genuinely care to limit the federal government’s budget deficit nor believe that they will succeed in doing so. After winning office on a platform proclaiming their loathing of large government and pledging to “cut it down to size,” they proceed to boost the federal budget deficit by enacting large tax cuts for their rich donors. Even though they seem entirely free of the other two tribes’ deficit phobia, their aim – to “starve the beast” (the US social welfare system) – is quintessentially austerian.

Mindless and braindead.

• Trade Of Coastal Sand Is Damaging Wildlife, Coastlines Of Poorer Nations (G.)

The secretive trade of coastal sand to wealthy countries such as China is seriously damaging the wildlife of poorer nations whose resources are being plundered, according to a new study. Sand and gravel are the most extracted groups of materials worldwide after water, with sand used in the concrete and asphalt of global cities. China consumed more sand between 2011 and 2013 than the US did during the entire 20th century. India has more than tripled its annual use of construction sand since 2000. But coastal sand is also being used to make wealthy countries larger via land reclamation projects, and the cost to poorer nations is revealed in a presentation to the Royal Geographical Society’s annual conference.

Research by Melissa Marschke and Laura Schoenberger of the University of Ottawa highlights that the dredging of coastal sand from Cambodia is causing the loss of mangrove swamps, coastal erosion, and damaging local fishing. They also allege that the sheer scale of the multimillion dollar trade of sand must be illegal, given that the volumes permitted for import are being exceeded. Singapore is built on sand: its land area has grown by more than a fifth since its independence in 1965 from 581 sq km to 719 sq km in 2015, according to the researchers. Between 2007 and 2017, Singapore imported more sand from Cambodia than any other country. Sand worth US$752m was imported by Singapore from Cambodia between 2007 and 2016, according to UN data.

Cambodia is not the only place experiencing vast sand extraction. A study recently estimated that 236m cubic metres of sand were extracted from Poyang Lake in China, causing its water levels to drop dramatically. Sand miners have destroyed at least two dozen islands in Indonesia since 2005. The UK obtains about one fifth of its sand from the seabed.

But the minister who made it possible resigned last week. Watch out.

• France’s Ban On Bee-Killing Pesticides Begins Saturday (AFP)

A ban on five neonicotinoid pesticides enters into force in France on Saturday, placing the country at the forefront of a campaign against chemicals blamed for decimating critical populations of crop-pollinating bees. The move has been hailed by beekeepers and environmental activists, but lamented by cereal and sugar beet farmers who claim there are no effective alternatives for protecting their valuable crops against insects. With its ban, France has gone further than the European Union, which voted to outlaw the use of three neonicotinoids — clothianidin, imidacloprid and thiamethoxam — in crop fields. Heavily agriculture-reliant France banned these three neonicotinoids plus thiacloprid and acetamiprid, not only outdoors but in greenhouses too.

These are the only five neonicotinoid pesticides hitherto authorised for use in Europe. Introduced in the mid-1990s, lab-synthesised neonicotinoids are based on the chemical structure of nicotine, and attack the central nervous system of insects. They were meant to be a less harmful substitute to older pesticides, and are now the most widely-used to treat flowering crops, including fruit trees, beets, wheat, canola, and vineyards. In recent years, bees started dying off from “colony collapse disorder,” a mysterious scourge blamed partly on pesticides along with mites, viruses, and fungi, or some combination of these. Scientific studies have since shown that neonicotinoids harm bee reproduction and foraging by diminishing sperm quality and scrambling the insects’ memory and navigation functions.

Watching with great interest.

• The Ocean Cleanup Is Starting, Aims To Cut Garbage Patch By 90% By 2040 (F.)

A massive cleanup of plastic in the seas will begin in the Pacific Ocean, by way of Alameda, California. The Ocean Cleanup, an effort that’s been five years in the making, plans to launch its beta cleanup system, a 600-meter (almost 2,000-foot) long floater that can collect about five tons of ocean plastic per month. It’s a start. The launch date is September 8, and the Great Pacific Garbage Patch being targeted is more than 1,000 nautical miles from the launch point and on the move. The Ocean Cleanup plans to monitor the performance of the beta, called System 001, and have an improved fleet of 60 more units skimming the ocean for plastics in about a year a half. The ultimate goal of the project, founded by Dutch inventor Boyan Slat when he was 18, is to clean up 50% of the patch in five years, with a 90% reduction by 2040.

The organization will take time to learn lessons from System 001, but “we are in a big hurry,” said Lonneke Holierhoek, chief operating officer at The Ocean Cleanup. “We really see the urgency in starting the cleanup because there’s so much harm that could happen with this plastic that’s floating out there.” The total cost of System 001 is about 21 million euros ($24.6 million U.S.), according to a rep for startup. That includes design, development, production, assembly and monitoring during the first year of operation. The company will welcome corporations and philanthropists to sponsor their own cleanup system in coming years, the rep says. These systems will sport a sponsor logo and related app that follows the unit’s course through the gyre and shows how much plastic has been collected.

Debt Rattle August 25 2018

Aug 252018

August 25, 2018 Posted by Raúl Ilargi Meijer at 8:45 am Finance Tagged with: car finance, chlorine, hunger, Instagram, Nauru, Paul Singer, refugees, Tesla, Trump, Twitter, Venezuela, water, welfare 6 Responses »

Henry Bacon Étretat 1890

• The Dogs of Vengeance (Jim Kunstler)

• Chemical Attack Being Staged To Frame Damascus – Russia MoD (RT)

• Half Of Millennials Take Out Car Finance To Match Social Media Dreams (Ind.)

• Majority Of Young Americans Live In A Household Receiving Welfare (ZH)

• Twitter CEO Jack Dorsey To Testify On Conservative “Shadowbans” (ZH)

• UK Immigration Minister Blocks Britons Who Sought Help On Twitter (G.)

• Paul Singer, Doomsday Investor (New Yorker)

• Tesla To Remain A Public Company, CEO Musk Says (AFP)

• The Great Chinese Art Heist (GQ)

• Drought In Central Europe Reveals Cautionary ‘Hunger Stones’ (NPR)

• The Water Crises Aren’t Coming – They’re Here (Esq.)

• Venezuela Heads For Refugee Crisis Moment Comparable To Mediterranean (R.)

• Ecuador Opens “Humanitarian Corridor” For Venezuelan Migrants (AFP)

• ‘Begging To Die’: Succession Of Critically Ill Children Moved Off Nauru (G.)

The only thing today that mentions Trump.

• The Dogs of Vengeance (Jim Kunstler)

History has a velocity of its own, and its implacable forces will drag the good, the bad, the clueless, the clever, the guilty, the innocent, the avid, and the unwilling to a certain fate. One can easily see a convergence of vectors shoving the nation toward political criticality this autumn. Mr. Trump is like some unfortunate dumb brute of the ancient Teutonic forests with a bulldog clamped to his nose, the rest of the pack close behind snapping at his hamstrings and soft, swaying underbelly. His desperate bellowing goes unanswered by the indifference of the trees in forest, the cold moon above, and all the other furnishings of his tragic reality.

As these things tend to happen, it looks like the exertions of Robert Mueller have turned from the alleged grave offenses of a foreign enemy to the sequela of consort with a floozie. Down goes Mr. Trump’s private attorney, Michael Cohen, in his personal swamp of incriminating files and audio recordings. Enter, stage left, one David Pecker, publisher of the venerable National Enquirer — the newspaper of wreckage — on his slime-trail of induced testimony. And there is your impeachable offense: an illegal campaign contribution. One way or another, as Blondie used to sing, I’m gonna getcha, getcha, getcha.

Some in this greatest of all possible republics may be asking themselves if this is quite fair play, given the hundreds of millions of dollars washed-and-rinsed through the laundromat known as the Clinton Foundation, and related suspicious doings in that camp of darkness. But remember, another president, Jimmy Carter, once declared to the shock of official Washington that “life is unfair.” What I wonder is what these dogs of vengeance reckon will happen when they achieve their goal of bringing down the bellowing bull and pulling his guts out. Perhaps a few moments of tribal satisfaction, one last war dance around the fire, and when the fire dies out, they will find themselves under the same cold indifferent moon with blood on their snouts and an ill wind blowing in the tree tops.

Why there’s still support for the White Helmets.

• Chemical Attack Being Staged To Frame Damascus – Russia MoD (RT)

The US and its allies are preparing new airstrikes on Syria, the Russian Defense Ministry said, adding that militants are poised to stage a chemical weapons attack in order to frame Damascus and provide a pretext for the strikes. The attack would be used as a pretext for US, UK and French airstrikes on Syrian targets, Russian Defense Ministry spokesman, Major General Igor Konashenkov said. USS ‘The Sullivans,’ an Arleigh Burke-class Aegis guided missile destroyer, was already deployed to the Persian Gulf a couple of days ago, he added. The destroyer has 56 cruise missiles on board, according to data from the Russian Defence Ministry.

A US Rockwell B-1 Lancer, a supersonic bomber equipped with 24 cruise missiles, has also been deployed at the Qatari Al Udeid Airbase. The provocations are being prepared by militants from Al-Nusra Front (now known as Tahrir al-Sham) in Idlib province, northwestern Syria, In order to stage the attack, some eight canisters of chlorine were delivered in to village near Jisr al-Shughur city for the terrorists’ use, he added. A separate group of militants, prepped by private British security company Olive, have also arrived in the area. The group will be disguised as volunteers from the White Helmets group and will simulate a rescue operation involving locals purportedly injured in the attack, according to the military official.

Instagram shapes the world.

• Half Of Millennials Take Out Car Finance To Match Social Media Dreams (Ind.)

Forget fashion, music or gadgets. The desire to live up to social media aspirations has pushed more than half of millennials to buy a car for its status value, new figures suggest, and almost 40 per cent said Instagram or Facebook played a part in deciding which motor they went for. With two thirds of younger drivers reliant on credit to fund the purchase – twice the number of 37- to 54-year-old generation Xers – research from Admiral has revealed the new, expensive face of social media influencing. Younger drivers were found to be more reliant on credit, with 64 per cent taking car finance to fund a purchase compared with 38 per cent of 37- to 54-year-olds.

The consequences have financial implications on younger generations too, as more than half of drivers aged 19 to 36 admit feeling pressure to buy a specific car for status or prestige. More than one in 10 millennials said famous faces played a part in their choice of car, compared with just 4 per cent of gen-X drivers. They may currently own a Ford Fiesta, Vauxhall Corsa, VW Golf or Polo, but millennials dream of BMW i8s, Audi R8s, Ford GTs and Aston Martin Vantages.

Car finance and food stamps?

• Majority Of Young Americans Live In A Household Receiving Welfare (ZH)

New analysis from CNS News finds that the majority of Americans under 18 live in households that take “means-tested assistance” from the US government. The study, based on the most recently available data from the Census Bureau, leads with the question: Will they be called The Welfare Generation? The data presented by CNS editor Terrence Jeffrey shockingly reveals that in 2016 “there were approximately 73,586,000 people under 18 in the United States, and 38,365,000 of them — or 52.1 percent — resided in households in which one or more persons received benefits from a means-tested government program.”

It’s a slim majority, but a majority which nonetheless presents an extremely worrisome trend regarding the number of young Americans and possibly young families who’ve experienced some level of government dependency. To put it in another, perhaps more alarming way, if you’re under 18 the data shows you are more likely that not to be living in a home that receives some form of taxpayer-financed largesse. In terms of the country’s total population of 319.9 million Americans, the data finds that 114.8 million, or about 36 percent, lived as part of a household in which someone collected welfare. Jeffrey continued, “When examined by age bracket persons under 18 were the most likely to live in a household receiving means-tested government assistance (52.1 percent), while those 75 and older were least likely (18.8 percent).”

You can’t have banning and shadowbanning on social media decided by opaque terms overseen by geeks. Just like you can’t ban people from having a phone, radio, TV just because you don’t like them.

• Twitter CEO Jack Dorsey To Testify On Conservative “Shadowbans” (ZH)

Twitter CEO Jack Dorsey is scheduled to appear before the House Energy & Commerce committee on September 5th, after several GOP lawmakers demanded action in response to reports of conservatives being “shadow banned” by the San Francisco-based social media giant. “Twitter is an incredibly powerful platform that can change the national conversation in the time it takes a tweet to go viral,” wrote committee Chair Greg Walden (R-OR) in a Friday statement. “When decisions about data and content are made using opaque processes, the American people are right to raise concerns. This committee intends to ask tough questions about how Twitter monitors and polices content, and we look forward to Mr. Dorsey being forthright and transparent regarding the complex processes behind the company’s algorithms and content judgement calls,” the statement continues.

Earlier this month, House Majority Leader Kevin McCarthy sent a letter to Walden, requesting that he be allowed to publicly grill Jack Dorsey over recent allegations that the platform limits the reach of some conservative accounts. “Any solution to this problem must start with accountability from companies like Twitter, whose platforms have enormous potential to impact the national conversation — and unfortunately, enormous potential for abuse,” McCarthy said in the letter to House Energy and Commerce Committee Chairman Greg Walden. “In particular, I would like to request a hearing with Twitter CEO Jack Dorsey so that the American people can learn more about the filtering and censorship practices on his platform.” -Kevin McCarthy

McCarthy, who has worked on tech issues for years, has been investigating reports of Silicon Valley tech giants injecting their admittedly liberal bias into the way they enforce speech on their platforms. McCarthy and other Republican leaders met with Facebook staffers in June over their concerns, and as recently as last month McCarthy was running ads on Facebook inviting supporters to join him “and President Trump in defending our conservative voice against social media censoring,” according to the platform’s public database of political ads. This action follows Rep. Matt Gaetz (R-FL) complaint filed with the Federal Election Commission (FEC) against Twitter after he discovered that his account was being ‘shadowbanned’ – the practice of excluding or reducing the visibility of one’s tweets from normal circulation on the platform.

Didn’t we already have this with Trump? This lady needs some educating.

• UK Immigration Minister Blocks Britons Who Sought Help On Twitter (G.)

The immigration minister blocked at least two British citizens on Twitter when they asked for her assistance after the Home Office failed to respond to their complaints or appeals from their MPs. Caroline Nokes’ action, which means the people concerned are unable to read her tweets or contact her, were described by a leading immigration lawyer as suggesting “complete indifference”. Stephen Buck was blocked from following Nokes or seeing her tweets on 11 August after he sent her three tweets in four months, asking for help to prevent his long-term partner, Rusty Goodall, from being deported to Australia. It took the Home Office 13 months to refuse Goodall’s application to extend his visa, during which time the couple received no update on his case.

“I was nothing but polite in my approaches, but having tried all other avenues available to us (ie contacting the Home Office directly, asking our MP for help) and still feeling as though we were in a position where nobody was doing anything and nobody cared about us, contacting Nokes on Twitter felt like the only option left to try and get somebody in power to listen,” Buck said. “The fact that the only response to these pleas to one of the few people who could make a difference in our case was to block me, was truly upsetting, frustrating and insulting.” John Holden, a British citizen who lives in the UK with his Filipino wife, son and three adopted children, was blocked by Nokes on the same day as Buck after also asking for help.

“The Home Office have refused to issue my British children with British passports: they say we need to change the children’s Philippine passports to their new adopted surnames first,” he said. “The problem is that the Philippine authorities won’t do that unless we take the children out of school and return to the Philippines for a process that could take up to 18 months, during which I would have to readopt children who are already mine and are already British.

Singer bankrupts countries.

• Paul Singer, Doomsday Investor (New Yorker)

In 1995, Singer started working with a trader named Jay Newman, who specialized in the government—or sovereign—debt of developing countries. The collaboration led to the legal battle that would publicly define Singer: his fourteen-year fight with the government of Argentina. Like Singer, Newman was a lawyer by training, and, also like Singer, he had no problem making money using methods that others might find distasteful. For many years, sovereign loans were treated by banks and other lenders much the way that subprime mortgages were prior to 2008—as highly desirable, relatively low-risk investments.

But many countries, particularly poorer ones with fragile economies or corrupt governments, borrowed far more than they could realistically repay, and, during the nineteen-eighties, approximately fifty countries defaulted or had to restructure their debt, including Mexico, most of Latin America, Poland, the Philippines, Vietnam, and South Africa. In most cases, the International Monetary Fund would come in, impose budget cuts and other austerity measures, and help the governments renegotiate what they owed. The countries’ debt holders generally traded their old bonds for new ones under reduced terms, which allowed the country to exit default.

Newman saw an opportunity in these financial crises: purchase the defaulted debt at a very low price and then try to negotiate for, or sue the country for, full repayment on the original terms. An investor who pursued this strategy came to be known as a “rogue creditor.” The tactic could prove extremely profitable—as long as you had the stomach for it. Newman said that he never sued a country that couldn’t afford to pay, but critics argue that rogue creditors interfere with a country’s ability to return to the financial markets, exacerbating the poverty and suffering of its citizens. Singer hired Newman, initially offering him thirty thousand dollars a month and 20% of the profits on investments he recommended.

The Republic of Peru had defaulted on its debt in 1984; in 1996, the government initiated a debt exchange, and more than ninety per cent of Peruvian debt holders traded in their old bonds for new ones, taking a fifty-per-cent discount on the original value. Singer purchased eleven million dollars of defaulted Peruvian bonds, and then began a protracted legal battle to force the government to pay back the full value. In 1998, after a trial, a federal court found Elliott to be in violation of the Dickensian-sounding Champerty laws, which prohibit buying debt with the sole purpose of bringing legal action. Elliott appealed the case and won. The company later engaged in an intense lobbying campaign to change the Champerty laws in New York State.

It also filed a lawsuit in Brussels, attempting to prevent Peru from paying interest on any of its new bonds until it had paid Elliott. Peru was left with an unpalatable choice: default, again, on its new bonds, or pay what it viewed as a ransom to a New York hedge fund.

What say ye, SEC?

• Tesla To Remain A Public Company, CEO Musk Says (AFP)

Tesla CEO Elon Musk said Friday that the company would continue to be publicly traded, weeks after suggesting that he would take the electric carmaker private. Musk met with Tesla’s board of directors on Thursday “and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree,” he wrote on the company blog. Musk surprised markets on August 7 by announcing on Twitter he wanted to take Tesla private at $420 a share. But shares fell more than 20 percent since the announcement. After the announcement the controversial entrepreneur came under extensive scrutiny over his Twitter statements related to the proposal, especially a claim that Tesla had “secured” funding for the move.

However, Musk said Friday that based on talks with current shareholders, as well as an assessment by financial advisers Silver Lake, Goldman Sachs and Morgan Stanley, “it’s apparent that most of Tesla’s existing shareholders believe we are better off as a public company.” Even though the majority of shareholders “said they would remain with Tesla if we went private, the sentiment, in a nutshell, was ‘please don’t do this,'” he wrote. “I knew the process of going private would be challenging, but it’s clear that it would be even more time-consuming and distracting than initially anticipated.”

Insane story. Hollywood must have already bought the rights.

• The Great Chinese Art Heist (GQ)

The patterns of the heists were evident only later, but their audacity was clear from the start. The spree began in Stockholm in 2010, with cars burning in the streets on a foggy summer evening. The fires had been lit as a distraction, a ploy to lure the attention of the police. As the vehicles blazed, a band of thieves raced toward the Swedish royal residence and smashed their way into the Chinese Pavilion on the grounds of Drottningholm Palace. There they grabbed what they wanted from the permanent state collection of art and antiquities. Police told the press the thieves had fled by moped to a nearby lake, ditched their bikes into the water, and escaped by speedboat. The heist took less than six minutes.

A month later, in Bergen, Norway, intruders descended from a glass ceiling and plucked 56 objects from the China Collection at the KODE Museum. Next, robbers in England hit the Oriental Museum at Durham University, followed by a museum at Cambridge University. Then, in 2013, the KODE was visited once more; crooks snatched 22 additional relics that had been missed during the first break-in. Had they known exactly what was happening, perhaps the security officials at the Château de Fontainebleau, the sprawling former royal estate just outside Paris, could have predicted that they might be next. With more than 1,500 rooms, the palace is a maze of opulence. But when bandits arrived before dawn on March 1, 2015, their target was unmistakable: the palace’s grand Chinese Museum.

Created by the last empress of France, the wife of Napoleon III, the gallery was stocked with works so rare that their value was considered incalculable. In recent years, however, the provenance of those treasures had become an increasingly sensitive subject: The bulk of the museum’s collection had been pilfered from China by French soldiers in 1860 during the sack of Beijing’s Old Summer Palace. In the low light before daybreak, the robbers raced to the southwest wing and shattered a window. They climbed inside, stepping over broken glass, and swiftly went to work dismantling the empress’s trove. Within seven minutes, they were gone, along with 22 of the museum’s most valuable items: porcelain vases; a mandala made of coral, gold, and turquoise; a Chimera in cloisonné enamel; and more.

History lessons: “If you see me, weep.”

• Drought In Central Europe Reveals Cautionary ‘Hunger Stones’ (NPR)

A lengthy drought in Europe has exposed carved boulders, known as “hunger stones,” that have been used for centuries to commemorate historic droughts — and warn of their consequences. The Associated Press reports that hunger stones are newly visible in the Elbe River, which begins in the Czech Republic and flows through Germany. “Over a dozen of the hunger stones, chosen to record low water levels, can now be seen in and near the northern Czech town of Decin near the German border,” the AP writes. One of the stones on the banks of the Elbe is carved with the words “Wenn du mich siehst, dann weine”: “If you see me, weep.” A team of Czech researchers described that stone in detail in a 2013 paper about the history of droughts in Czech lands.

The stone is also chiseled with “the years of hardship and the initials of authors lost to history,” the researchers wrote: “It expressed that drought had brought a bad harvest, lack of food, high prices and hunger for poor people. Before 1900, the following droughts are commemorated on the stone: 1417, 1616, 1707, 1746, 1790, 1800, 1811, 1830, 1842, 1868, 1892, and 1893.” That particular stone is now a bit of a tourist attraction; it’s one of the oldest hydrological landmarks in central Europe. Also, because of a dam on a tributary of the Elbe, it’s seen more often now than it used to be, according to a Decin tourist site — although the current river levels are still exceptional.

We have 1% of all earth’s water. So of course we’re rapidly poisoning it.

• The Water Crises Aren’t Coming – They’re Here (Esq.)

Water cannot be created or destroyed; it can only be damaged. When Gleick says we’ll never run out, he means that at some point, millions of years ago, there was all the water there is, a result of the law of the conservation of matter. Having evaporated from lakes and rivers and oceans and returned as snow and rain, the water we consume has been through innumerable uses. Dinosaurs drank it. The Caesars did, too. It’s been places, and consorted with things, that you might not care to think about. In theory, there’s enough freshwater in the world for everyone, but like oil or diamonds or any other valuable resource, it is not dispersed democratically. Brazil, Canada, Colombia, Peru, Indonesia, and Russia have an abundance—about 40 percent of all there is.

America has a decent amount. India and China, meanwhile, have a third of the world’s people and less than a tenth of its freshwater. It is predicted that in twelve years the demand for water in India will be twice the amount on hand. Beijing draws water from an aquifer beneath the city. From being used faster than rain can replenish it, the aquifer has dropped several hundreds of feet in the last forty years, and in places the city is sinking four inches every year. As for the world’s stock, however, nearly all of the water on earth is salty; less than 3% is fresh. Some of that is in rivers, lakes, aquifers, and reservoirs—the Great Lakes contain one fifth of the freshwater on the earth’s surface—and we have stored so much water behind dams that we have subtly affected the earth’s rotation; but two thirds of all the freshwater we have is frozen in the earth’s cold places as ice or permafrost, leaving less than 1% of the world’s total water for all living things.

Much of that gets a rough ride. American ponds and streams and lakes and rivers contain fungicides, defoliants, solvents, insecticides, herbicides, preservatives, biological toxins, manufacturing compounds, blood thinners, heart medications, perfumes, skin lotions, antidepressants, antipsychotics, antibiotics, beta blockers, anticonvulsants, germs, oils, viruses, hormones, and several heavy metals. Not all of these are cleansed from water before we drink it.

It’s already there.

• Venezuela Heads For Refugee Crisis Moment Comparable To Mediterranean (R.)

The exodus of migrants from Venezuela is building toward a “crisis moment” comparable to events involving refugees in the Mediterranean, the United Nations migration agency said on Friday. Growing numbers are fleeing economic meltdown and political turmoil in Venezuela, where people scrounge for food and other necessities of daily life, threatening to overwhelm neighbouring countries. Officials from Colombia, Ecuador and Peru will meet in Bogota next week to seek a way forward. In Brazil, rioters this month drove hundreds back over the border. Peru tightened entry rules for Venezuelans, requiring them to carry passports instead of just national ID cards, though a judge in Ecuador on Friday rolled back a similar rule enacted there.

Describing those events as early warning signs, a spokesman for the International Organization for Migration, Joel Millman, said funding and means of managing the outflow must be mobilised. “This is building to a crisis moment that we’ve seen in other parts of the world, particularly in the Mediterranean,” he said. On Thursday, the IOM and UN refugee agency UNHCR called on Latin American countries to ease entry for Venezuelans, more than 1.6 million of whom have left since 2015.

Millions of people moving to Peru and Chile? Maybe helping them at home is a better idea. Get the CIA out of Caracas first.

• Ecuador Opens “Humanitarian Corridor” For Venezuelan Migrants (AFP)

Desperate Venezuelan migrants who made it across the border in time were breathing a sigh of relief hours before Peru’s tightened controls came into effect Saturday, preventing those not carrying passports from entering. “We have been on the road for five days. We traveled by bus and saw people, Venezuelans, walking along the road,” Jonathan Zambrano, 18, told AFP. Thousands of migrants fleeing the crippling economic crisis in their homeland had faced a race against time to cross into Peru from either Ecuador or Colombia after last week’s announcement from Lima that they had one week to enter before a passport would be required.

Until Saturday, a simple identity card was enough for Venezuelans heading south to escape food and medicine shortages, hyperinflation and failing public services back home. At one border crossing, Peruvian officers handed out balloons to exhausted children, but many Venezuelans feared it would be a different story once the new rules come into force. “People arrive with very few resources and after having traveled, five or six days being the shortest. There are people who’ve been traveling for months,” Regine de la Portilla of the United Nations refugee agency UNHCR told AFP.

Ecuador opened a “humanitarian corridor” on Friday and lifted its own entry restrictions to facilitate the Venzuelans’ travels to Peru, one of the region’s fastest growing economies with 4.7 percent growth projected for next year. Ecuadoran Interior Minister Mauro Toscanini said Friday that 35 busloads of migrants were on the move along the route authorities had opened to Peru.

This is Australia. Forget about housing bubbles and yokel PM’s. This is Australia.

• ‘Begging To Die’: Succession Of Critically Ill Children Moved Off Nauru (G.)

A girl suffering “resignation syndrome” and who is refusing all food and water has been ordered off Nauru by an Australian court, as a succession of critically ill children are brought from the island. At least three children have left the island since Thursday, and reports from island sources say at least three more children, as young as 12, are “on FFR” – food and fluid refusal. The current crisis on the island is overwhelming medical staff, who are referring dozens of children for transfer off the island, only to have their decisions rebuffed by Australian Border Force officials on the island or department of home affairs bureaucrats in Canberra. Two children were moved off the island with their families on Thursday.

Early on Friday morning, a 14-year-old refugee boy suffering a major depressive disorder and severe muscle wastage after not getting out of bed for four months, was flown directly from Nauru to Brisbane with his family. There are concerns, doctors say, he may never be able to walk normally again. Later on Friday, in the federal court, Justice Tom Thawley ordered another girl – given the designation EIV18 by the court – to be moved to Australia for urgent medical treatment. Court orders prevent publication of the girl’s age – other than the fact she is a child – her name or country of origin. [..] The girl has been inside the supported accommodation area of the regional processing centre for three weeks, and has been refusing food and water for much of that time.

Before she, too, fell into acute depression and “resignation syndrome”, and refused to eat or drink anything, she had been one of the brightest and most articulate of the refugee children on Nauru. “Before she got sick, she was the best-performing student,” a source familiar with the girl and her condition told the Guardian. “She had a dream to be a doctor in Australia and to help others. Now, she is on food-and-fluid refusal and begging to die as death is better than Nauru.”

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