Jun 232018
 


René Magritte Le Mal du Pays (Homesickness) 1940

 

The two most viral photographs of the ‘Trump Separation Scandal’ have now been debunked, or at the very least been proven to have been used ‘out of context’. This is a dangerous development, as are the reasons to use them the way they have been. Both pictures are of children who had not been separated from their mothers at all. But both were used to depict just that: a child being taken away from its mother.

What’s dangerous about this is, first, that those who spread the narrative regardless of the truth may next permit themselves to use images from entirely different locations or times to make their point. Yes, children have been taken from parents at US borders. And attention for that is warranted, very much so. But playing loose with the facts turns those facts into a mere narrative in which nobody can tell fact from fiction anymore.

First, a week ago already, I saw this on RT:

 

Debunked: Viral Image Of Crying, Caged Toddler ‘Detained By ICE’ Not What It Seems

A distressing image of a crying toddler locked in a barred cage after purportedly being detained by US immigration officials has gone viral – but despite online claims, it does not actually depict what has been alleged. The image, which shows a little boy crying in a cage as he looks out between its bars, was shared by activist journalist and undocumented migrant Jose Antonio Vargas as a comment on the Trump administration’s immigration crackdown on families.

In the same thread, Vargas admitted that he came across the photo on a friend’s timeline and was still looking for the original source. Nevertheless, the snap quickly went viral with Vargas’ post garnering more than 23,000 retweets and many others sharing the image across their own social media accounts.

 

Vargas explained that he shared the photo because when he was detained by ICE in McAllen, Texas in 2014, he encountered children who were locked up there. “It wasn’t okay then; it’s not okay now,” he wrote, adding that he’s been outraged about the incident for years.

It has since emerged that the picture was in fact not from a detention facility at all, and instead was taken at a protest against Trump’s immigration policies held on June 10 outside Dallas City Hall. The demonstration organized by Brown Berets de Cemanahuac was held to call out the policy of family separation and confining undocumented children.

Ergo: an activist journalist and undocumented immigrant makes it look as if a picture depicts something that in reality it did not. Note also that the article says he wanted to comment on the Trump immigration crackdown, because he has memories of the Obama immigration crackdown, when he saw children locked up. But then, hey, that’s social media, right? Anyone can say anything.

It’s different, though, when TIME Magazine uses such politics. And its editor-in-chief defends the use of the picture by saying it was the most visible symbol of something, even though he knew full well that the photo didn’t depict that something. That’s a mighty slippery scale. If they could have achieved the same effect with a picture of a overripe banana taken in the Pacific in the 1950’s, they probably would have used it. It’s the effect that counts, not the facts.

 

Fact-Check: Was Migrant Girl On US Border Taken From Mother? Unfounded

Two photos that went viral on social media depict scenes that are not directly related to the family separations taking place on the US-Mexico border since early May. The most prominent, of Honduran two-year-old Yanela Varela crying inconsolably, has become a global symbol of the separations – helping to attract more than $18 million in donations for a Texas non-profit called RAICES. The photograph was taken on June 12 in McAllen, Texas by John Moore, a Pulitzer Prize-winning photographer for Getty Images.

 

An online article about the picture, published by Time Magazine, initially reported the girl was taken from her mother, but was subsequently corrected to make clear that: “The girl was not carried away screaming by US Border Patrol agents; her mother picked her up and the two were taken away together.” Time Magazine nonetheless used the image of the sobbing child on its cover, next to an image of President Trump looming over her, with the caption “Welcome to America”. The head of Honduras’ Migrant Protection Office Lisa Medrano confirmed to AFP that the little girl, just two years old, “was not separated” from her family.

The child’s father also said as much. Denis Varela told the Washington Post that his wife Sandra Sanchez, 32, had not been separated from their daughter, and that both were being detained together in an immigration center in McAllen. Under fire for its cover – which was widely decried as misleading including by the White House – the magazine said it was standing by its decision. “The June 12 photograph of the 2-year-old Honduran girl became the most visible symbol of the ongoing immigration debate in America for a reason,” Time’s editor-in-chief Edward Felsenthal said.

 

Nassim Nicolas Taleb, of black swans and Fragility, has found the appropriate term for this ‘phenomenon’, and explains why it works so well that TIME apparently doesn’t care about the damage to its reputation caused by using photographs for such purposes.

 

Pedophrasty, Bigoteering, and Other Modern Scams

Pedophrasty Definition: Argument involving children to prop up a rationalization and make the opponent look like an asshole, as people are defenseless and suspend all skepticism in front of suffering children: nobody has the heart to question the authenticity or source of the reporting. Often done with the aid of pictures. [..] Pedophrasty is effective as it provides arguments to strike before the evidence is formed. People are moved into “doing something” Pedophrasts prey on our maternal (and paternal) instincts.

Pedophrasty has its most effects on actors, journalists and similar types who are intellectually insecure, deprived of critical judgment, and afraid of being classified as violators of some norm of political correctness. For instance, pedophrasty has been commonly used in the Syrian war by such propagandists as Julian Roepke continuously supplying the German public with pictures of dead children. Or the various lobbies hired by Saudi Barbaria (and allies), such as the Middle East Institute in Washington DC, to promote Sunni Islamist policies under the cover of “think tanks”.

The Nayirah testimony: a false congressional testimony by 15-year-old girl who provided only her first name, Nayirah (she turned out to be the daughter of the Kuwaiti ambassador to the U.S.) was a bit responsible into tipping the US into the war. Nayirah claimed that she had witnessed Iraqi soldiers take babies out of incubators a Kuwaiti hospital, and leave the babies to die. Nobody dared to question the veracity of her claims.

That’s what is dangerous: seeing a photo of a child in distress makes people halt their critical thinking. That’s also why such photos are used. They help build a narrative that doesn’t have to be factual to shock people. But at that point TIME becomes a fiction magazine; it’s where it leaves journalism behind.

The narrative also depends to a large extent on the singularity of Trump’s brutality compared to other presidents and nations’ leaders. It seeks to single him out as being extremely cruel. That narrative will fall to pieces going forward, and not only because the stories behind the photos have now been exposed.

First, here’s a look at what happened under earlier US presidents, in this case Obama, published by the ACLU in May 2018:

 

ACLU Obtains Documents Showing Widespread Abuse Of Child Immigrants In US Custody

Documents obtained by the American Civil Liberties Union featured in a new report released today show the pervasive abuse and neglect of unaccompanied immigrant children detained by U.S. Customs and Border Protection. The report was produced in conjunction with the International Human Rights Clinic at the University of Chicago Law School.

“These documents provide a glimpse into a federal immigration enforcement system marked by brutality and lawlessness,” said Mitra Ebadolahi, ACLU Border Litigation Project staff attorney. “All human beings deserve to be treated with dignity and respect regardless of their immigration status — and children, in particular, deserve special protection. The misconduct demonstrated in these records is breathtaking, as is the government’s complete failure to hold officials who abuse their power accountable. The abuse that takes place by government officials is reprehensible and un-American.”

The report is based on over 30,000 pages of documents dated between 2009 and 2014.

Then, what other ‘leaders’, who express their ‘disgust’ and worries at the Trump separation policies do at home. The Guardian yesterday:

 

Theresa May’s Brutal Family Separations Would Make Trump Blush

[..] as a British citizen I cannot, in good faith, reassure myself with that time-old mantra that we are somehow more civilised and less cruel or brutal than our cousins across the pond. Nor do I think that condemnation from our government can carry any real currency. Since long before anybody had heard the words “Make America great again”, splitting up families has been official policy in Theresa May’s Home Office – and it has been carried out with a brutality and on a scale that would make even President Trump blush.

The Children’s Commissioner has found that at least 15,000 children growing up in the UK live without a parent because the right of British citizens to reunite with a foreign spouse is limited by an unreasonable income threshold, an impossible complicated application system fraught with Home Office errors, and no legal aid for families to challenge incorrect decisions.

And the Sydney Morning Herald from December 2017:

 

Australia Is Wilfully Damaging The Health Of Children On Nauru To Make A Point – And It Is Appalling

When we visited Nauru as paediatric specialists three years ago, we were asked to see 30 of the 100 children being detained on the island. Among them was a six-year-old girl who had tried to kill herself and a two-year-old boy with such severe behaviour problems a doctor had prescribed anti-psychotic medicines. Their parents were in despair. They had fled persecution, trying to save their children from harm, but had ended up imprisoned on a remote island, without hope.

We left with the view that these were the most traumatised children we had ever consulted on, far worse than children we had seen in Australia, Africa, Asia or Europe. Three years later, 43 of those children remain on the island. Officially they are now free to move around, but reports of attacks by locals show Nauru is not safe and so they remain in the “Regional Processing Centre”.

In 2014, the Australian Human Rights Commission reported that children at this centre were deeply traumatised psychologically, and had even been abused. Their detention was harming them. When Australia introduced mandatory detention in 1992, it took 10 weeks on average to process an application for refugee status. Now it takes years. As the numbers of children in detention fall, the length of time in detention rises. This is deliberate: wilfully damaging children’s health to deter others from seeking asylum.

See, what TIME Magazine and others do, using pictures of crying children regardless of their actual context, may make for an initially appealing narrative, but in the end their approach only distracts from what really matters. Which is that children need to be with their mothers (and preferably fathers).

Just reporting the facts on this is not only enough, it’s the only way to report on it. Once you start making up stuff, you’re done, and the truth is done.

US immigration laws are clearly not working; so change them. ICE is a terrible organization that has attracted far too many sociopaths. Close it down. Child abuse as a tool to instill fear has been an international political tool for a very long time. Those are the things that should be making headlines. Turning this into yet another anti-Trump narrative, using crying children as shortcuts to people’s emotions, doesn’t work, or not for long.

This is not about Trump. Trying to make it about him is not going to help those children. And that’s what you want, right? Right?

 

 

Apr 152018
 
 April 15, 2018  Posted by at 9:50 am Finance Tagged with: , , , , , , , , , ,  19 Responses »


 

Russia Claims OPCW Manipulated Skripal Findings (AFP)
To Opt Out Of Facebook’s Tracking, I’m Going To Have To Join Facebook (Wired)
Tesla Is The Worst Car Manufacturer In The Developed World (F.)
New Lawsuit Alleges Musk Knowingly Lied About Model 3 Production (ZH)
Subprime Stages Comeback As ‘Non-Prime’ (CNBC)
247,977 Stories In The Vacant City (NYDN)
Judge Rules Exxon Can’t Stop Probe Into Whether They Lied For Decades (Ind.)
World May Hit 2ºC Warming in 10-15 Years Thanks to Fracking (NC)
‘There Is No Such Thing As Past Or Future’ (G.)
Time is Elastic (Rovelli)

 

 

Curiouser. You’d think Russia doesn’t just make up an entire Swiss lab.

Russia Claims OPCW Manipulated Skripal Findings (AFP)

Moscow on Saturday accused the chemical weapons watchdog of manipulating the results of its investigation into the poisoning of a former Russian spy, saying his samples had traces of a nerve agent used by the west. Britain says former double agent Sergei Skripal and his daughter Yulia were last month targeted with a nerve agent of the novichok family, which was developed in the Soviet Union. The attack shredded ties between Russia and Britain and led to a crisis in relations between Moscow and the west including a huge wave of tit-for-tat diplomatic expulsions. The Organisation for the Prohibition of Chemical Weapons has said it confirmed “the findings of the United Kingdom relating to the identity of the toxic chemical” without naming the substance involved.

On Saturday, Russia’s foreign minister, Sergei Lavrov, claimed the UN-linked Organisation for the Prohibition of Chemical Weapons (OPCW) had sent the Skripals’ biomedical samples to Swiss experts who found they contained traces of the nerve agent BZ, used by the west. “According to the results of the examination, the samples had traces of toxic chemical BZ and its precursors,” Lavrov said, citing what he said was “confidential information”. “Russia and the USSR never developed such chemical substances,” he said. “In this regard we are asking the OPCW why the information which reflected the conclusions of specialists from the Spiez laboratory was completely omitted from the final document.”

Read more …

Not a discussion we should leave up to Facebook. Or Congress.

To Opt Out Of Facebook’s Tracking, I’m Going To Have To Join Facebook (Wired)

Now I know what you’re thinking. What kind of person has never been on Facebook? I’d like to tell you it was all about privacy, but the truth is, I just had a bad feeling about it. You see, I went to Cambridge, so I was one of the first to get the chance to join what you insist on calling your “community.” And almost instantly, it was clear that it turned people into wankers. (Bigger wankers. This was Cambridge, after all.) If I remember correctly, in the early days everyone was desperate to have a higher friend count. Then it was obsessive tagging in photos. Yes, even in its earliest days, your system brought out the worst in people.

It’s not easy, not being on Facebook. At first, it was the parties. At a certain point, people stopped sending email invites. They just assumed you were on Facebook – and, if you weren’t, you didn’t find out. I’m 35 now, so I don’t get invited to parties, unless they’re for small children. Instead, I miss out on work, because I can’t contact people or share my articles. When you finally make journalism pivot to Facebook Groups, I’ll be completely screwed. I considered joining many times. But every time I aired the thought, I got the same reaction: “Don’t! It’s the worst!” I wasn’t sure if I remembered this correctly, so I called a few people to check. All agreed: they hate your service, but they have to use it, because everyone else does. (One person objected. She works in your London office.)

Every other social network, even Twitter, has a core of fans that genuinely wish it well. You’re the sole exception. Then I got into tech, and privacy, and data protection, and I learned that you were throttling internet freedoms in developing countries, and letting random strangers see your users’ most intimate details, so I started becoming one of those paranoid people who uses a VPN all the time, and puts a scrap of torn-off Post-It note on their laptop camera. Just like you! But you probably knew all this about me anyway. Which brings me back to my question. In your testimony to Congress, you said: “Anyone can turn off or opt out of any data collection for ads, whether they use our services or not.”

But, as you should know, while that’s possible for someone on Facebook, for me, a non-Facebook user, it’s not. Your illegal trackers follow me across 30 per cent of the internet, building a “shadow profile” you store in a nonanonymised format in your “Hive” analysis database. You claim to do it “for security purposes” (let me tell you, if Facebook’s security requires you to surveil the world’s population, then you have made a desert and called it peace). But reporters – and people who used to work in your advertising team – say the information is collected to improve the friend suggestions you’ll give me in case I do ever sign up. It’s one more growth hack on a whole site of them.

What can I do to stop you? I’ve installed tracker blockers on my browser, but, since you killed the media business, a lot of my favourite sites make me disable them. And your trackers work in the apps on my phone. Unless I go full tin-foil hat (and it’s tempting), you’ve basically left me with one option. To opt out of Facebook’s tracking, I’m going to have to join Facebook. So yeah: fuck you. Because, of course, this is exactly your plan. Forcing people onto Facebook is what you’re all about.

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“..that is a terrible way to produce a consumer product, and a terrible way to generate returns for shareholders.”

Tesla Is The Worst Car Manufacturer In The Developed World (F.)

I visited my first auto plant in 1992, and have been fortunate enough to visit plants in most countries where cars are made. I have seen workers sleeping under half-finished bodies in Brazil, seen employees trying to make doors fit by using rubber hammers at a now-closed Ford facility in New Jersey and, noted, that, yes, they do have beer in the vending machines at many German auto factories. To see a rack of die castings sitting outside exposed to the weather at a facility that is, according to Google Maps, 10.7 miles away from the actual Tesla assembly facility in Fremont is just mind-boggling. Tesla is the worst car manufacturer in the developed world. Bar none. Note that I didn’t write “designer” or “marketer,” but manufacturer.

Musk had zero auto industry experience when founding Tesla and CTO J.T. Straubel—who according to Tesla’s 10-K filing personally holds Tesla’s important patents—developed a love for electric vehicles by rebuilding golf carts. It’s just astounding to me that the markets are affording a $50 billion valuation to a company that can’t perform the most basic task for which it was incorporated. Famed VW purchasing chief José Ignacio López de Arriortúa famously walked into a plant and repeatedly pointed at boxes of yet-to-be-used parts and yelled the word “capital.” When capital is tied up in byzantine manufacturing processes that stunts the development of cash flow. It’s all connected. This is why Tesla has such dire cash flow problems.

This is why I believe—sorry, Elon—Tesla is going to have to issue equity this year. My favorite automotive mantra is “quality is designed in.” That’s the most damning piece of information in the CNBC article, actually, more damning than the pictures of parts racks. Here is the quote: “Current and former employees from the company’s Fremont, Calif. and Sparks, Nevada factories blame Tesla for spending less time to vet suppliers than is typical in auto manufacturing. These people said the company failed to comprehensively test “variance specs” with some vendors before embarking on Model 3 production.”

Tesla has cut corners in building up to current production, and published reports this week indicated Tesla was alerting suppliers of an incredibly fast 19-month design-to-job one timetable on the upcoming Model Y crossover. So, it would seem corner-cutting is continuing, and that is a terrible way to produce a consumer product, and a terrible way to generate returns for shareholders.

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He better hope he wins this one.

New Lawsuit Alleges Musk Knowingly Lied About Model 3 Production (ZH)

A new securities class action lawsuit filed in late March 2018, which names Elon Musk as a defendant, alleges that the Tesla CEO knew that the Model 3 was not going to be able to be produced as the rates he claimed – and that the company was not going to be able to meet production goals due to – get this – the production lines not even being assembled. The lawsuit alleges that this didn’t prevent Elon Musk from going out and telling the investing public otherwise, hence the allegation of securities fraud. First, the allegation that Musk was told by his own employees that the Model 3 couldn’t be mass produced by the end of 2017, which was the company’s stated goal.

Then, after claiming in May 2017 that the company was “on track” to meet its mass production goal, it’s alleged the company hadn’t even finished building its production lines, clearly meaning it wasn’t “on track”. The lawsuit alleges that Musk knew the line was “way behind”. The suit alleges that the company was building Model 3’s by hand at a “pilot shop” at the same time Tesla claimed to be on track for “mass production”; it also claims that it was “evident to anyone who visited the facility” – including Elon Musk – that the line wasn’t built and that “construction workers were spending most of their shifts sitting around with nothing to do”. We also read in the lawsuit that Tesla’s Gigafactory, at the time in question, was allegedly capable of producing only one battery pack per day – and that the production of one battery pack took “two shifts” to complete.

The suit alleges that the company’s former CFO, Jason Wheeler – who is one of more than 50 key executives and VPs to have left the company over the last half decade or so – told Elon Musk personally that they wouldn’t be able to mass produce by the end of 2017. The entire lawsuit is available at this link and some of the most interesting content was first shared by critics of the company on Twitter. The drumbeat of accountability for Elon Musk continues to pound louder and louder as each day progresses, with some analysts calling for the SEC to investigate him if the company doesn’t meet its stated cash flow positive and “no capital raise” guidance for the back end of 2018.

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Got to find the last sucker.

Subprime Stages Comeback As ‘Non-Prime’ (CNBC)

They were blamed for the biggest financial disaster in a century. Subprime mortgages – home loans to borrowers with sketchy credit who put little to no skin in the game. Following the epic housing crash, they disappeared, due to strong, new regulation, and zero demand from investors who were badly burned. Barely a decade later, they’re coming back with a new name — nonprime — and, so far, some new standards. California-based Carrington Mortgage Services, a midsized lender, just announced an expansion into the space, offering loans to borrowers, “with less-than-perfect credit.” Carrington will originate and service the loans, but it will also securitize them for sale to investors.

“We believe there is actually a market today in the secondary market for people who want to buy nonprime loans that have been properly underwritten,” said Rick Sharga, executive vice president of Carrington Mortgage Holdings. “We’re not going back to the bad old days of ninja lending, when people with no jobs, no income, and no assets were getting loans.” Sharga said Carrington will manually underwrite each loan, assessing the individual risks. But it will allow its borrowers to have FICO credit scores as low as 500. The current average for agency-backed mortgages is in the mid-700s. Borrowers can take out loans of up to $1.5 million on single-family homes, townhomes and condominiums.

They can also do cash-out refinances, where borrowers tap extra equity in their homes, up to $500,000. Recent credit events, like a foreclosure, bankruptcy or a history of late payments are acceptable. All loans, however, will not be the same for all borrowers. If a borrower is higher risk, a higher down payment will be required, and the interest rate will likely be higher. “What we’re talking about is underwriting that goes back to common sense sort of practices. If you have risk, you offset risk somewhere else,” added Sharga, while touting, “We probably are going to have the widest range of products for people with challenging credit in the marketplace.”

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It’s not about people, it’s about money. Fundamental flaw.

247,977 Stories In The Vacant City (NYDN)

There’s a hidden city in the five boroughs. Though its permanent population is zero, it is growing faster than any other neighborhood. Early numbers from the Census Bureau’s Housing and Vacancy Survey show the unoccupied city has ballooned by 65,406 apartments since 2014, an astonishing 35% jump in size in the three years since the last survey. Today, 247,977 units — equivalent to more than 11% of all rental apartments in New York City — sit either empty or scarcely occupied, even as many New Yorkers struggle to find an apartment they can afford. The Vacant City — let’s call it that, with a tip of the hat to the 1948 movie and old TV series “Naked City” — has tripled in 30 years.

A generation ago, there were just 72,051 apartments in the Vacant City. Back in 1987, when rents were cheap by today’s standards at a median $395 a month, the Vacant City made up less than 4% of rental apartments. Today, the median rent is $1,450, having risen twice as fast as inflation, even while the Vacant City tripled in size. The numbers just don’t add up the way conventional wisdom said they should. For years, development officials, the real estate industry and think tanks have told us that artificially low rents are holding the city back. Higher rents, the argument went, would free landlords to make a reasonable amount of money and serve as an incentive to increase the housing supply.

The new Census gleanings finally put the lie to that reasoning. We have higher prices for sure — but the only part of the city’s residential real estate that has grown is the Vacant City. More apartments are being held off the market than ever. Some remain vacant for legitimate reasons. Almost 28,000 of those unused units have been rented or sold but not yet occupied, or are awaiting a sale. Almost 80,000 are getting renovated, 9,600 tied up in court, and 12,700 vacant because the owner is ill or elderly or simply can’t be bothered. But that still leaves more than 100,000 units — 74,945 occupied temporarily or seasonally, and 27,009 held off the market for unexplained reasons.

Read more …

Shell, Exxon, they’ve all known all along. But they have lots of power.

Judge Rules Exxon Can’t Stop Probe Into Whether They Lied For Decades (Ind.)

A Massachusetts judge has ruled that ExxonMobil cannot stop a probe into whether the oil giant misled shareholders for decades about the dangers of climate change and its impact on their business. The judge, in a Friday ruling, found that Massachusetts Attorney General Maura Healey has grounds to pursue its civil investigation into the matter even though Exxon is not technically an in-resident corporation. The judgement follows after a federal judge in New York dismissed a similar lawsuit aimed at ending the climate change probe late last month. In that lawsuit, Exxon argued that Ms Healey and her New York counterpart, Eric Schneiderman, were pursuing their climate probes in bad faith. The judge dismissed the argument as “implausible”.

“For the second time this month, Exxon’s scorched earth campaign to block our investigation has been entirely rejected by the courts. In its decision today, our state’s highest court affirmed that Exxon is subject to our laws, and that our office has authority to investigate,” Ms Healey said in a statement following the decision. “Now Exxon must come forward with the truth, what it knew about climate change, when, and what it told the world. The people of Massachusetts — and people everywhere — deserve answers.” New York and Massachusetts first began their climate change probes after news reports in 2015 found that Exxon had known for years that reducing greenhouse gas emissions is necessary to combat climate change impacts, but did not reveal those concerns to shareholders or the public.

Exxon has denied that their public policies were in any way inconsistent with what their scientists’ findings that climate change poses a serious risk to its business and to the environment.

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It’s used to be 2100. Now it’s 2030.

World May Hit 2ºC Warming in 10-15 Years Thanks to Fracking (NC)

In 2011, a Cornell University research team first made the groundbreaking discovery that leaking methane from the shale gas fracking boom could make burning fracked gas worse for the climate than coal. In a sobering lecture released this month, a member of that team, Dr. Anthony Ingraffea, Professor of Engineering Emeritus at Cornell University, outlined more precisely the role U.S. fracking is playing in changing the world’s climate. The most recent climate data suggests that the world is on track to cross the two degrees of warming threshold set in the Paris accord in just 10 to 15 years, says Ingraffea in a 13-minute lecture titled “Shale Gas: The Technological Gamble That Should Not Have Been Taken,” which was posted online on April 4.

That’s if American energy policy follows the track predicted by the U.S. Energy Information Administration, which expects 1 million natural gas wells will be producing gas in the U.S. in 2050, up from roughly 100,000 today. An average global temperature increase of 2° Celsius (3.6° Fahrenheit) will bring catastrophic changes — even as compared against a change of 1.5° C (2.7° F). “Heat waves would last around a third longer, rain storms would be about a third more intense, the increase in sea level would be approximately that much higher and the percentage of tropical coral reefs at risk of severe degradation would be roughly that much greater,” with just that half-degree difference, NASA‘s Jet Propulsion Laboratory explained in a 2016 post about climate change.

A draft report from the Intergovernmental Panel on Climate Change (IPCC), which was leaked this January, concludes that it’s “extremely unlikely” that the world will keep to a 1.5° change, estimating that the world will cross that threshold in roughly 20 years, somewhat slower than Ingraffea’s presentation concludes.

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Hawking’s successor.

‘There Is No Such Thing As Past Or Future’ (G.)

Rovelli’s work as a physicist, in crude terms, occupies the large space left by Einstein on the one hand, and the development of quantum theory on the other. If the theory of general relativity describes a world of curved spacetime where everything is continuous, quantum theory describes a world in which discrete quantities of energy interact. In Rovelli’s words, “quantum mechanics cannot deal with the curvature of spacetime, and general relativity cannot account for quanta”. Both theories are successful; but their apparent incompatibility is an open problem, and one of the current tasks of theoretical physics is to attempt to construct a conceptual framework in which they both work.

Rovelli’s field of loop theory, or loop quantum gravity, offers a possible answer to the problem, in which spacetime itself is understood to be granular, a fine structure woven from loops. String theory offers another, different route towards solving the problem. When I ask him what he thinks about the possibility that his loop quantum gravity work may be wrong, he gently explains that being wrong isn’t the point; being part of the conversation is the point. And anyway, “If you ask who had the longest and most striking list of results it’s Einstein without any doubt. But if you ask who is the scientist who made most mistakes, it’s still Einstein.”

How does time fit in to his work? Time, Einstein long ago showed, is relative – time passes more slowly for an object moving faster than another object, for example. In this relative world, an absolute “now” is more or less meaningless. Time, then, is not some separate quality that impassively flows around us. Time is, in Rovelli’s words, “part of a complicated geometry woven together with the geometry of space”. For Rovelli, there is more: according to his theorising, time itself disappears at the most fundamental level. His theories ask us to accept the notion that time is merely a function of our “blurred” human perception.

We see the world only through a glass, darkly; we are watching Plato’s shadow-play in the cave. According to Rovelli, our undeniable experience of time is inextricably linked to the way heat behaves. In The Order of Time, he asks why can we know only the past, and not the future? The key, he suggests, is the one-directional flow of heat from warmer objects to colder ones. An ice cube dropped into a hot cup of coffee cools the coffee. But the process is not reversible: it is a one-way street, as demonstrated by the second law of thermodynamics. Time is also, as we experience it, a one-way street. He explains it in relation to the concept of entropy – the measure of the disordering of things.

Entropy was lower in the past. Entropy is higher in the future – there is more disorder, there are more possibilities. The pack of cards of the future is shuffled and uncertain, unlike the ordered and neatly arranged pack of cards of the past. But entropy, heat, past and future are qualities that belong not to the fundamental grammar of the world but to our superficial observation of it. “If I observe the microscopic state of things,” writes Rovelli, “then the difference between past and future vanishes … in the elementary grammar of things, there is no distinction between ‘cause’ and ‘effect’.”

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Extract from Carlo Rovelli’s The Order of Time.

Why do things fall? Because “..the movement of things inclines naturally towards where time passes more slowly..”

Time is Elastic (Rovelli)

Reality is often very different from what it seems. The Earth appears to be flat but is in fact spherical. The sun seems to revolve in the sky when it is really we who are spinning. Neither is time what it seems to be. Let’s begin with a simple fact: time passes faster in the mountains than it does at sea level. The difference is small but can be measured with precision timepieces that can be bought today for a few thousand pounds. This slowing down can be detected between levels just a few centimetres apart: a clock placed on the floor runs a little more slowly than one on a table. It is not just the clocks that slow down: lower down, all processes are slower. Two friends separate, with one of them living in the plains and the other going to live in the mountains.

They meet up again years later: the one who has stayed down has lived less, aged less, the mechanism of his cuckoo clock has oscillated fewer times. He has had less time to do things, his plants have grown less, his thoughts have had less time to unfold … Lower down, there is simply less time than at altitude. Einstein understood this slowing down of time a century before we had clocks precise enough to measure it. He imagined that the sun and the Earth each modified the space and time that surrounded them, just as a body immersed in water displaces the water around it. This modification of the structure of time influences in turn the movement of bodies, causing them to “fall” towards each other.

What does it mean, this “modification of the structure of time”? It means precisely the slowing down of time described above: a mass slows down time around itself. The Earth is a large mass and slows down time in its vicinity. It does so more in the plains and less in the mountains, because the plains are closer to it. This is why the friend who stays at sea level ages more slowly. If things fall, it is due to this slowing down of time. Where time passes uniformly, in interplanetary space, things do not fall. They float. Here on the surface of our planet, on the other hand, the movement of things inclines naturally towards where time passes more slowly, as when we run down the beach into the sea and the resistance of the water on our legs makes us fall headfirst into the waves. Things fall downwards because, down there, time is slowed by the Earth.

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Jul 142014
 
 July 14, 2014  Posted by at 7:05 pm Finance Tagged with: , , , ,  7 Responses »


Jack Delano Shopton locomotive shops, Fort Madison, Iowa March 1943

The insanity doesn’t just continue, it intensifies. The overriding idea is still that the more companies and individuals borrow, the better the economy goes. But that is nowhere near true. It may have been at some point in the past, but not now, not with debt levels at historic highs. Today’s problem is not that there is not enough credit or money available, as central banks try to make you believe, but that people are not spending what they have. Individuals are either maxed out or scared to be left with nothing, and companies see no opportunities for investing in productive projects (besides, they may well be maxed out too).

Credit can play a functional and beneficial role in a society if an individual or company borrows at 5% and puts the money to work towards the production of something with an added value of 10%. That works, because the risk is real. At a 5% rate, you know you will need to do actual work to pay back your loan. And a 10% return means there are things to invest in that are productive. A 1% rate only papers over the fact that there are no productive investment opportunities left, and that they need to be created artificially to prevent the public from finding that out. The entire economy seems to take place on paper – or screens – only. But that’s of course an illusion. We need physical food and physical shelter.

Credit is neither beneficial not functional when companies borrow at 1% and only buy back their own shares or purchase/merge with competitors. Companies today don’t borrow because they feel optimistic about the economy, they don’t borrow because they see productive opportunities at the horizon. They do so only because, to paraphrase Obama, they can. And because financial trickery is the only way to make people think they are healthy.

In the present circumstances what this means is that because debt nevertheless increases at a rapid clip, the economy deteriorates just as fast. And you won’t like what you see when we come out at the other end. The economy is completely hollowed out from the inside, while we’re looking only at the facade. That’s why there no longer is a connection between economic performance and stock markets. In fact the stock markets have become the de facto economic performers. But nothing is being produced, or at least not nearly enough. And not nearly enough is being bought to keep the wheels spinning either.

Today it was announced that Eurozone industrial production fell 1.1%, but stocks just keep on rising. And much more of the same is in the pipeline:

Draghi Seen Delivering $1 Trillion Free Lunch to Banks

Mario Draghi’s newest stimulus tool will hand banks more than €700 billion ($950 billion) of cheap funding, economists say. The European Central Bank president’s targeted lending program for banks will boost credit for the real economy as planned, and at the same time help keep the financial system flush with cash, according to the Bloomberg Monthly Survey of 45 economists. Draghi may address the topic today when he testifies at the European Parliament in Strasbourg for the first time since elections in May. The ECB has identified lending to companies and households as a key weakness in the euro area’s fragile recovery.

The so-called TLTRO program, part of a wider package of measures announced in June, offers as much as four years of low-cost funding tied to bank lending that Draghi said this month could ultimately provide as much as €1 trillion. “The take-up should be large – the money is cheap and banks should feel no stigma about accepting a free lunch,” said Alan McQuaid, chief economist at Merrion Capital in Dublin, who predicts banks will take the maximum available. “With any luck, Draghi’s next problem will not come until 2018, when €1 trillion needs refinancing.”

The ECB is blind or borderline criminal. Blind, because lending is not the key weakness, spending is. Borderline criminal, because by treating lending the way it does, it pushes European economies ever further into their separate and shared quagmires. The net effect of its actions is that what it has labeled ‘systemic banks’ get to survive for another day, but with the trillions of debt hidden in these banks, that survival, if you want to call it that, can – of necessity – only be temporary. And that temporary extension of ‘life’ comes at a great price to the rest of the economy, where people such as you and I reside.

The reason the ECB and the Fed are involved in these highly dubious actions, and have been from 7 years running now, can only be this: they know – or at least strongly fear – that the debts in the banks are so enormous they could make the entire economic system wobble if not crumble, and the ‘leaders’ don’t want to touch that with a 10-lightyear pole. In doing what they do, however, they are throwing away a bit more of your children’s futures every day. For 7 years now.

China’s policies are much like those in the west, but the underlying reasoning in somewhat different. China has undertaken its $25+ trillion stimulus not just for its – state-owned – banks, but for its entire economic system. Catching the fall of an economy that grows, or used to grow, at double digit annual rates is not the same as propping up one that used to grow at 2-3%. The difference lies in the expansion. China’s meteoric expansion brought it a lot of seemingly positive things, but much of it was realized through a highly leveraged and increasingly shadow bank financed system (if you can call it a system).

When Lehman and Bear Stearns happened, Beijing decided to open the spigots, and it hasn’t looked back since. And why should it when Europe and the US didn’t either? There are tens of thousands of Xi’s and Li’s who have nightmares of having their heads chopped off by angry mobs when the latter find out that the whole expansion was nothing but a magic trick from the very start. Like Draghi and Yellen and Merkel and Obama, they’re hell bent on keeping up appearances as long as they can, or at least until they’re out of office.

China exports the inflationary expansion of its money supply, and the Chinese use this virtual yuan to buy up real assets in the real economies of America, Europe and Africa. In the rich world, the idea is that this is alright, because it drives up general price levels, and therefore leaves the impression that economies are doing well. But in the meantime, your world, and the homes and companies around you, are being bought up with what amounts to little more than Monopoly money. Then again, that’s what your own money has become too.

Secret Path Revealed for Chinese Billions Overseas

For years, wealthy Chinese have been transferring billions worth of their money overseas, snapping up pricey real estate in markets including New York, Sydney and Vancouver despite their country’s currency restrictions. Now, one way they could be doing it is clearer. Last week, when China Central Television leveled money-laundering allegations against Bank of China Ltd., the state-run broadcaster’s report prompted the revelation of a previously unannounced government program that enables individuals to transfer their yuan and convert it into dollars or other currencies overseas.

Offered by some banks in the southern province of Guangdong, across the border from Hong Kong, the trial program was introduced in 2011 for overseas property purchases and emigration and doesn’t constitute money laundering, Bank of China said in a July 9 statement. The transfers were allowed by regulators and reported to them, the bank said. “What it shows is the government has been trying to internationalize the renminbi for a lot longer than we thought,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Ltd., said by phone, using the official name for China’s currency and referring to policy makers’ long-stated goal of allowing the yuan to become freely convertible with other currencies. “I’m rather encouraged by this news because this is the way they need to go.”

Even the BIS, Bank for International Settlements, which should certainly not,at any time and in any way, be confused with the Salvation Army, starts waving bright red alarm banners about what goes on. And though I do know that they’re much closer to Draghi and Yellen then they are to you and me, it’s still interesting to see some of what they have to say, courtesy of Ambrose Evans-Pritchard:

BIS Chief Fears Fresh Lehman From Worldwide Debt Surge (AEP)

The world economy is just as vulnerable to a financial crisis as it was in 2007, with the added danger that debt ratios are now far higher and emerging markets have been drawn into the fire as well, the Bank for International Settlements has warned. Jaime Caruana, head of the Swiss-based financial watchdog, said investors were ignoring the risk of monetary tightening in their voracious hunt for yield. [..]

Mr Caruana said the international system is in many ways more fragile than it was in the build-up to the Lehman crisis. Debt ratios in the developed economies have risen by 20 percentage points to 275% of GDP since then.

Companies are borrowing heavily to buy back their own shares. The BIS said 40% of syndicated loans are to sub-investment grade borrowers, a higher ratio than in 2007 [..] The disturbing twist in this cycle is that China, Brazil, Turkey and other emerging economies have succumbed to private credit booms of their own, partly as a spill-over from quantitative easing in the West.

Their debt ratios have risen 20 percentage points as well, to 175%. Average borrowing rates for five-years is 1% in real terms. This is extremely low, and could reverse suddenly. “We are watching this closely. If we were concerned by excessive leverage in 2007, we cannot be more relaxed today,” he said.

Volatility has dropped to an historic low. European equities have risen 15% in a year despite near zero growth and a 3% fall in expected earnings. The cyclically-adjusted price earnings ratio of the S&P 500 index in the US reached 25 in May, six points above its half-century average.

Emerging markets have racked up $2 trillion in foreign currency debt since 2008. They are a much larger animal than they were during the East Asia crisis of the late 1990s, so any crisis would do more damage. “The ramifications would be particularly serious if China, home to an outsize financial boom, were to falter,” it said. BIS officials doubt privately whether China can avoid a ‘hard landing’, fearing that the extreme credit growth over the last five years must lead to a financial reckoning.

“Systemic financial crises do not become less frequent or intense, private and public debts continue to grow, the economy fails to climb onto a stronger sustainable path, and monetary and fiscal policies run out of ammunition. Over time, policies lose their effectiveness and may end up fostering the very conditions they seek to prevent,” it said.

Basel’s lonely call for discipline pits it against the Fed, the Bank of Japan, the Bank of England, and even Frankfurt these days. It prompted an unusually piquant riposte from London earlier this month. “Has monetary policy aided and abetted risk-taking? I hope so. That’s why we did it,” said the Bank of England’s chief economist Andy Haldane. “It is good to have the debate,” said Mr Caruana gamely. Yet he refuses to back down. “There is something strange about fighting debt by incentivizing more debt.”

Just as vulnerable to a financial crisis as in 2007, but with far higher debt ratios. In many ways more fragile than in the build-up to the Lehman crisis. 40% of syndicated loans are to sub-investment grade borrowers (i.e. a hair short of subprime). And indeed, “There is something strange about fighting debt by incentivizing more debt.” In fact, not so much strange as it is stupid, blind, or criminal.

It would be good if we all realize one thing: there is no economic growth; the only thing that grows is the debt (aka credit). If time is money, then we are borrowing money to borrow time. But time is not money: it doesn’t grow, you can’t get more of it, and when you waste it, you can’t get more of it; once spent, it’s gone.

In other words, we can’t really borrow time, that’s as much of a delusion – intentional or not – as debt being able to cure or economic ills today. And because we continue to borrow more, and then even more, anyway, our economies must necessarily deteriorate as fast as we borrow. Just not at the same rate for everyone: corporations can borrow at 1%, but you can’t.

So if present policies serve one purpose after all, it’s to increase inequality. Still, when it comes to inequality, you ain’t seen nothing yet; just wait and see what happens when interest rates start to rise and all the debt must be serviced. The too big to fail banks won’t be called upon to do that, it would make them fail; instead, you and yours will have the honor.

BIS Chief Fears Fresh Lehman From Worldwide Debt Surge (AEP)

The world economy is just as vulnerable to a financial crisis as it was in 2007, with the added danger that debt ratios are now far higher and emerging markets have been drawn into the fire as well, the Bank for International Settlements has warned. Jaime Caruana, head of the Swiss-based financial watchdog, said investors were ignoring the risk of monetary tightening in their voracious hunt for yield. “Markets seem to be considering only a very narrow spectrum of potential outcomes. They have become convinced that monetary conditions will remain easy for a very long time, and may be taking more assurance than central banks wish to give,” he told The Telegraph. Mr Caruana said the international system is in many ways more fragile than it was in the build-up to the Lehman crisis. Debt ratios in the developed economies have risen by 20%age points to 275pc of GDP since then.

Credit spreads have fallen to wafer-thin levels. Companies are borrowing heavily to buy back their own shares. The BIS said 40pc of syndicated loans are to sub-investment grade borrowers, a higher ratio than in 2007, with ever fewer protection covenants for creditors. The disturbing twist in this cycle is that China, Brazil, Turkey and other emerging economies have succumbed to private credit booms of their own, partly as a spill-over from quantitative easing in the West. Their debt ratios have risen 20%age points as well, to 175pc. Average borrowing rates for five-years is 1pc in real terms. This is extemely low, and could reverse suddenly. “We are watching this closely. If we were concerned by excessive leverage in 2007, we cannot be more relaxed today,” he said. “It may be the case that the debt is better distributed because some highly-indebted countries have deleveraged, like the private sector in the US or Spain, and banks are better capitalized. But there is also now more sensitivity to interest rate movements.”

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Old Buddhist conundrum: if traders are broke, are they still traders?

Traders Flood US With $3.4 Trillion of Bond-Auction Demand (Bloomberg)

The intensifying debate over when the Federal Reserve raises interest rates is little more than a sideshow when it comes to the ability of the U.S. to borrow. For all the concern fixed-income assets will tumble once the central bank boosts rates, the Treasury Department still managed to get investors to submit $3.4 trillion of bids for the $1.12 trillion of notes and bonds sold this year, according to data compiled by Bloomberg. That represents a bid-to-cover ratio of 3.06, the second-highest on record and up from 2.88 in all of last year. Attracting investors is critical for the U.S. as it finances a debt load that has more than doubled to almost $18 trillion since before the financial crisis. The appeal of Treasuries was on display last week as benchmark 10-year notes rallied the most since March while investors sought a haven amid rising concern over the health of a Portuguese bank.

“There are still plenty of needy buyers,” William O’Donnell, head U.S. government bond strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a July 8 telephone interview. “We’ve seen it from all sources,” said O’Donnell, whose firm one of the 22 primary dealers of U.S. debt obligated to bid at Treasury auctions. Behind the demand is speculation the global economy isn’t growing fast enough to allow central banks to easily withdraw from loose monetary policies that have supported bond markets around the world. Barclays Plc, another primary dealer, cut its forecast for worldwide gross domestic product on July 11 to an increase of 3.1% at an annual rate this quarter from 3.4%. U.S. banks own more than $1.9 trillion of U.S. government and agency securities, up from $1.2 trillion in 2008, Fed data show. Foreign investors hold a record $5.96 trillion, more than double their stake of six years ago.

Read more …

Draghi Seen Delivering $1 Trillion Free Lunch to Banks (Bloomberg)

Mario Draghi’s newest stimulus tool will hand banks more than €700 billion ($950 billion) of cheap funding, economists say. The European Central Bank president’s targeted lending program for banks will boost credit for the real economy as planned, and at the same time help keep the financial system flush with cash, according to the Bloomberg Monthly Survey of 45 economists. Draghi may address the topic today when he testifies at the European Parliament in Strasbourg for the first time since elections in May. The ECB has identified lending to companies and households as a key weakness in the euro area’s fragile recovery. The so-called TLTRO program, part of a wider package of measures announced in June, offers as much as four years of low-cost funding tied to bank lending that Draghi said this month could ultimately provide as much as €1 trillion.

“The take-up should be large – the money is cheap and banks should feel no stigma about accepting a free lunch,” said Alan McQuaid, chief economist at Merrion Capital in Dublin, who predicts banks will take the maximum available. “With any luck, Draghi’s next problem will not come until 2018, when €1 trillion needs refinancing.” Lenders probably won’t take the full amount, the survey shows. They’ll borrow €305 billion in the first TLTRO rounds this year, compared with an ECB cap of about €400 billion, according to the median estimate of economists. That’ll rise to €710 billion after quarterly operations in 2015 and 2016 tied to new loans, the survey shows. Three-quarters of respondents said the measure will increase credit provision to companies and households in the euro-area periphery. The loans are charged just above the ECB’s benchmark interest rate, currently at a record-low 0.15%.

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Yada yada.

Europe Needs $795 Billion Problem Property Loan Solution (Bloomberg)

European banks and asset managers plan to sell or restructure €584 billion ($795 billion) of riskier real estate as they try to clean up their balance sheets, Cushman & Wakefield Inc. said. The region’s lenders, asset managers and bad banks, such as Spain’s Sareb, sold €40.9 billion of loans tied to property in the first six months, 611% more than a year earlier, the New York-based broker said in a report today. Transactions will reach a record €60 billion this year, Cushman & Wakefield estimates. Lenders such as Royal Bank of Scotland Plc are accelerating loan-portfolio sales as borrowing costs fall from a year ago and economic sentiment improves. Lone Star Funds and Cerberus Capital Management LP are among U.S. investors that are taking advantage as sellers opt to offer bigger groups of loans, making it more difficult for smaller firms to make purchases, Cushman & Wakefield said.

“U.S. investors have raised an enormous volume of capital targeting opportunistic real estate,” Frank Nickel, executive chairman of Cushman & Wakefield’s EMEA corporate finance group, said in a statement. “‘Mega-deals’ prove popular to these buyers since they offer a chance to gain large exposures to key assets and markets in one transaction, saving on both costs and time.” The average size of loan-sale transactions in the region increased to €621 million in the first half from €346 million a year earlier, according to the report.

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Done deal.

Gallup Slams Lid On Hopes For US Economy (WolfStreet)

Consumers are “straining against rising prices on daily essentials” and are cutting back on things they want to buy. “If there was any doubt that the US economy is still struggling to get back on its feet, the results of this poll reinforce that reality.” Consumers are “straining against rising prices on daily essentials to afford summer travel, dining out, and discretionary household purchases – the kinds of purchases that ordinarily keep an economy humming.” That’s what Gallup found when it used a new survey to dive deeper into consumer spending.

Its regular monthly survey has been mixed. The average dollar amount consumers spent in June swooned to $91 per day from $98 in May, after a crummy January-April period ranging from $78 to $88 per day. The May spurt seems to have been an outlier that had given rise to a lot of speculation consumers would finally hit “escape velocity,” now obviated by events. But from 2012 until late last year, the averages had been rising. So Gallup dove deeper into the issue with its new survey conducted in mid-June to sort through what consumers are spending more or less money on. And what it found was that they’re buying a little more – “just not the things they want.” They’re spending more on things they have to buy, and in many instances they’re spending more in these categories because prices have jumped. At the top of the list: groceries.

Groceries: 59% spent more, 10% spent less.
Gasoline: 58% spent more, 12% spent less
Utilities: 45% spent more, 10% spent less
Healthcare: 42% spent, 8% spent less
Toilet paper and other household goods: 32% spent more, 5% spent less
Rent, the biggie: 32% spent more, 9% spent less.

These categories are household essentials. They’re on top of the priority list. And in order to meet the requirements of these items, consumers are cutting back where they can. Gallup found that “the increasing cost of essential items is further constraining family budgets already hit hard by the Great Recession and still reeling from a stagnant economy.” Hence, the less essential the expense, the more it got cut. Here is the bottom of the list, which explains part of the recent retail woes:

Retirement savings: 18% spent more, 17% spent less.
Leisure activities: 28% spent more, 31% spent less
Clothing: 25% spent more, 30% spent less
Consumer electronics: 20% spent more, 31% spent less
Travel: 26% spent more, 38% spent less
Dining out: 26% spent more, 38% spent less

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That’s one way to put it.

Americans Are Living The Dream, But Not Loving It (CNBC)

A new survey shows most Americans feel they aren’t living the American dream, despite being wealthier and more educated than ever. The study, conducted by the marketing firm DDB, found that only 40% of American adults believed they were living the dream. However, 66% of Americans owned a home, 78% received a good education, and 74% said they’ve found a decent job—all widely believed to be part of the American dream. The disconnect may be because achieving and maintaining the American dream have become so difficult that people are not enjoying it, said Mosche Cohen, former professor at Columbia Business School. People are trying to “shoehorn themselves into this concept of the American dream, and they are losing the freedoms it’s supposed to provide,” he said in an interview with CNBC’s “Power Lunch.”

Americans may work hard in school, get a good job, marry, and buy a home, but fast-forward a few years and they may find themselves with children, living in a home that is now too small, clinging to a job they don’t love anymore, and living paycheck to paycheck. “They’re living the dream, but they’re not loving it anymore,” Cohen said. According to Diana Elliott from Pew Charitable Trusts, which conducts similar studies, achieving the American Dream comes down to financial security and wealth. “Americans are not feeling as [financially] secure as perhaps they were before the Great Recession,” she said. “The American dream is really about having a little bit extra at the end of the month and being able to springboard … your children into the future.”

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Sign of the end?!

Individuals Pile Into Stocks as Pros Say Bull Is Spent (Bloomberg)

Main Street and Wall Street are moving in opposite directions. Individual investors are plowing money back into the U.S. stock market just as professional strategists say gains for this year are over. About $100 billion has been added to equity mutual funds and exchange-traded funds in the past year, 10 times more than the previous 12 months, according to data compiled by Bloomberg and the Investment Company Institute. The growing optimism contrasts with forecasters from UBS AG to HSBC Holdings Plc, who say the stock market will be stagnant with valuations at a four-year high. While the strategists have a mixed record of being right, history shows the bull market has already lasted longer than average and individuals tend to pile in at the end of the rally.

“If Wall Street, after poring over all known data, comes up with a target and we’re already there, and you still see individual investors buying and they’re typically the ones that are late to the party, it would seem there is limited upside,” Terry Morris, a senior equity manager who helps oversee about $2.8 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said in a July 8 phone interview. U.S. stocks slid from record highs last week, sending the Standard & Poor’s 500 Index to the biggest drop since April, amid concern over financial stress in Europe and the timing of higher U.S. interest rates. The Chicago Board Options Exchange Volatility Index jumped 17% from a seven-year low.

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But they’re broke.

Economy Needs Consumers To Chip In (MarketWatch)

The U.S. economy is revved up and ready to go by most measures except for, perhaps, the most critical one: The consumer. And that’s a problem. Consumer spending is the fuel that runs a modern economy. Oh sure, businesses have to invest and hire to get the party going, but consumer spending generates more than two-thirds of the nation’s economic activity. When they spend more, businesses hire and invest more. Yet since the recession ended in mid-2009, consumers have been unusually shy. Americans are only spending about two-thirds as much as they used to and that’s kept U.S. growth well below its historical norm. Meager wage gains, a devastated labor market and deep scars from the Great Recession clearly played a part in suppressing the urge or ability to spend.

As of May consumer spending is climbing at just a 2.9% annual pace, the slowest rate in five years. And a key bellwether of whether Americans are spending more, retail sales, hasn’t show much pop. “For the economy to really kick into the next gear, we need the consumer to do more of the heavy lifting,” said Ryan Sweet, senior economist at Moody’s Analytics. “For many consumers it still feels like a recession.” The retail sales report for June, released Tuesday, could offer further clues on whether consumers are starting to feel more optimistic. Economists predict sales will rise by a healthy 0.6%, but more important is whether other sectors aside from fast-growing auto and Internet retailers show renewed strength. Many of them have lagged behind in 2014.

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Very interesting.

How Capital Captured Politics (Guardian)

In May, an international trade agreement was signed that effectively serves as a kind of legal backbone for the restructuring of world markets. While the Trade in Services Agreement (Tisa) negotiations were not censored outright, they were barely mentioned in our media. This marginalisation and secrecy was in stark contrast to the global historical importance of what was agreed upon. In June, WikiLeaks made public the secret draft text of the agreement. It covers 50 countries and most of the world’s trade in services. It sets rules that would assist the expansion of financial multinationals into other nations by preventing regulatory barriers. It prohibits more regulation of financial services, despite the fact that the 2007-08 financial meltdown is generally perceived as resulting from a lack of regulation. Furthermore, the US is particularly keen on boosting cross-border data flow, including traffic of personal and financial data. Despite all this, we heard little about it. [..]

The main culprits of the 2008 financial meltdown now impose themselves on us as experts leading us on the painful path to financial recovery. Their advice should trump parliamentary politics. Or, as Mario Monti put it: “Those who govern must not allow themselves to be completely bound by parliamentarians.” What, then, is the higher force whose authority can suspend the decisions of the democratically elected representatives of the people? As far back as 1998, the answer was provided by Hans Tietmeyer, the then governor of the Deutsche Bundesbank, who praised national governments for preferring “the permanent plebiscite of global markets” to the “plebiscite of the ballot box”. Note the democratic rhetoric of this obscene statement: global markets are more democratic than parliamentary elections, since the process of voting goes on in them permanently (and is permanently reflected in market fluctuations) and at a global level, not only within the limits of a nation state.

This, then, is where we stand with regard to democracy, and the Tisa agreement is a perfect example. The key decisions concerning our economy are negotiated and enforced in secret, and set the coordinates for the unencumbered rule of capital. In this way, the space for decision-making by the democratically elected politicians is severely limited, and the political process deals predominantly with issues towards which capital is indifferent (like culture wars). This is why the release of the Tisa draft marks a new stage in the WikiLeaks strategy: until now its activity has been focused on making public how our lives are monitored and regulated by the intelligence agencies – the standard liberal topic of individuals threatened by oppressive state apparatuses. Now another controlling force appears – capital – which threatens our freedom in a much more twisted way: by perverting our very sense of what the word means.

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Interesting.

‘Politics and Mafia Are Same Thing’ (Quijones)

Recent years have not exactly been kind to Luís Bárcenas Gutiérrez. For decades he served as treasurer of the governing People’s Party, a position which afforded him de facto control over the party’s accounts and money movements. In 2009, however, a money laundering investigation by Swiss authorities discovered more than €30 million spread across an assortment of Swiss bank accounts, all under his name. It soon came to light that for almost 20 years Bárcenas had “allegedly” been paying under-the-table bonuses to senior figures in the Popular Party (PP), including, allegedly, the former and current prime-ministers José Maria Aznar and Mariano Rajoy. During that time large construction companies gave the party millions of euros in undeclared donations, which were promptly redirected by Bárcenas into the deep pockets of senior party members and the bank accounts of the party’s regional offices.

Although these illegal practices appear to have been common knowledge to the party leadership since 1990, Bárcenas has been made the solitary fall guy in the affair. In January 2013 he was sentenced to jail without bail. As he awaits his sentence in the rather austere surroundings of Madrid’s El Soto prison, Bárcenas’s once-fine name, now synonymous with political corruption in Spain, is once again being dragged through the press-grinder. The reason? According to Spain’s finance website El Confidencial, a taped phone conversation between two members of the Neapolitan mafia, la Camorra. It reads like a scene out of a Scorcese movie: On March 25th Ciro Rovai, the leader of the “Rovai clan,” who was arrested by Spanish police this Tuesday, was caught on tape telling a fellow Camorra member that he had been in contact with the former PP treasurer about the possibilities of “investing” in Madrid’s now-doomed Eurovegas project. “He (Barcenas) told me that the mafia and politics are one and the same”, Ravai recounted.

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Secret Path Revealed for Chinese Billions Overseas (Bloomberg)

For years, wealthy Chinese have been transferring billions worth of their money overseas, snapping up pricey real estate in markets including New York, Sydney and Vancouver despite their country’s currency restrictions. Now, one way they could be doing it is clearer. Last week, when China Central Television leveled money-laundering allegations against Bank of China Ltd., the state-run broadcaster’s report prompted the revelation of a previously unannounced government program that enables individuals to transfer their yuan and convert it into dollars or other currencies overseas.

Offered by some banks in the southern province of Guangdong, across the border from Hong Kong, the trial program was introduced in 2011 for overseas property purchases and emigration and doesn’t constitute money laundering, Bank of China said in a July 9 statement. The transfers were allowed by regulators and reported to them, the bank said. “What it shows is the government has been trying to internationalize the renminbi for a lot longer than we thought,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Ltd., said by phone, using the official name for China’s currency and referring to policy makers’ long-stated goal of allowing the yuan to become freely convertible with other currencies. “I’m rather encouraged by this news because this is the way they need to go.”

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Abenomics

What Happened To Japan’s Yen-Driven Export Boom? (CNBC)

When Japan’s Prime Minister Shinzo Abe came to power in late 2012, he hoped a weaker yen would give exporters a much-needed boost as well as spur the inflation needed to revive the world’s third biggest economy. Eighteen months on and after an almost 30% decline in the yen’s value driven by massive monetary stimulus from the Bank of Japan, the currency has failed to lead to the export boom the government had hoped for. Japan’s annual exports declined in May for the first time in 15 months, latest data show. More disturbingly, say economists, is that the yen’s decline has failed to boost export volumes, which peaked in 2007 and fell for a third year running in 2013.

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Certain to screw up.

Fed Has Little Uncertainty, Despite Forecasting Misses (WSJ)

Federal Reserve policy makers have been consistently too optimistic about economic growth and too pessimistic about the falling unemployment rate. But ask them if they’re uncertain about their forecasts and this is their answer: no more than usual. In 2012, Fed officials said they were more uncertain than usual about their forecasts for growth, unemployment and inflation. But over the course of 2013 their uncertainty has declined, and now almost all Fed officials are confident in their forecasts, according to the Fed’s self-assessment of uncertainty which was released Wednesday as part of Fed’s June meeting minutes. Fed officials have recently been concerned that markets have grown too complacent. Yet even at the Fed, only three officials rank their uncertainty about growth as high, and only two are more certain than usual about their unemployment forecasts. (The minutes do not identify by name which Fed official makes which forecast.)

For the record, most Fed officials see growth of 2.1% to 2.3% this year and unemployment at the end of 2014 between 6% and 6.1%. Those forecasts were made in advance of their June 17-18 policy meeting, and already they’re beginning to look a little suspect. The economy contracted at an annualized rate of 2.9% in the first quarter of 2014, according to a Commerce Department report released the week after the Fed meeting. That’s going to make 2.3% growth over all of 2014 a difficult target to reach. (As we noted earlier, downward growth revisions at the Fed have been inexorable.) And the unemployment rate dropped to 6.1% in June from 6.3% in May according to the Labor Department‘s July 3 report. Another month or two with an unemployment rate decline and the Fed will have blown its unemployment forecast as well.

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Huh? I thought they make the curve?!

Are The Fed And The ECB Falling Behind The Curve? (CNBC)

If you believe some of the U.S. Federal Reserve (Fed) governors’ forecasts, the answer for the Fed’s case is a resounding “yes.”Speaking at the Sixth Annual Rocky Mountain Economic Summit in Jackson Hole, Wyoming, last Friday these Fed officers confidently predicted that the U.S. economy would be growing at a rate of more than 3% over (an unspecified number of) next quarters. At the same time, they announced that an increase in interest rates was likely to begin in late 2015 or sometime in 2016. Here is why these forecasts clearly imply that the Fed is already behind the curve. With an estimate of U.S. economic growth potential somewhere in the range of 2 to 2.25%, an actual growth rate of more than 3%, sustained over several quarters, would create labor and product market pressures that would lead to accelerating inflation. Obviously, if such a scenario were to pass, interest rates would begin rising much before the second half of 2015.

And, as always in similar situations, the prospect of an open-ended credit tightening would create serious problems in asset markets, without any guarantees of promptly reestablishing market stability and inflation control. That is what is meant by the monetary policy falling behind the curve. This also clarifies that the furious debate we are now witnessing about the policies conducted by the American and European monetary authorities must be based on thoughtful forecasts about the economic conditions likely to prevail over the next twelve months rather than on what we see at the moment. That is tough. And to make things even more difficult, this particular forecasting exercise has to contend with additional uncertainties, which are technically called “lags in the effect of monetary policy.” In other words, we don’t know exactly how long it takes for a change in monetary policy to affect demand, output, employment and inflation. That, too, has to be estimated.

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Update Befuzzle.

America’s Six Largest Banks Prepare To Update Investors (Guardian)

America’s biggest banks will update investors this week amid expectations that the financial services sector has been hit once more by lacklustre lending, poor trading and the soaring cost of legal expenses tied to a series of fines and investigations. The six largest US banks – Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo – are expected to show quarterly revenue declined by 5.6% from the previous year, according to the analyst estimates. Profits are expected to drop as banks face a tough comparison with a strong second quarter last year. The results come as regulators are negotiating settlements with some of the banks and continue to investigate others over a variety of issues. Citigroup, which reports on Friday, is believed to be close to a $7bn (£4.1bn) settlement over the sale of risky mortgages in the runup to the financial crisis. The justice department reached a similar agreement with JP Morgan, reporting Tuesday, last year.

The justice department is also in talks with Bank of America about alleged wrongdoing in its mortgage business ahead of the crisis. The talks with the bank, which reports on Wednesday, have apparently stalled. Reuters reported earlier this month that the attorney general, Eric Holder, had refused to meet Bank of America chief executive Brian Moynihan because the two sides remain too far apart. Alongside legal woes the banks are also experiencing continued problems on their trading desks, once the main driver of growth, now held back by new regulations aimed at tamping down excessive risk taking and lack of appetite among investors. Foreign exchange and fixed income trading revenues have fallen at the investment banks this year. Bond trading income declined by 11% at Goldman Sachs in the first quarter and investors will be watching closely for signs of improvement when the bank reports on Tuesday.

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Don’t count out Vlad.

US, EU Sanctions Aid Putin’s Master Plan (WolfStreet)

London is, according to Bloomberg, “the undisputed foreign hub for Russian business.” That’s where Russian companies hire law firms and investment bankers to handle takeovers. That’s where rich Russians like to live with their families or just hang out and have fun. That’s where they like to spend lots of money. But the sanction spiral has already – and very inadvertently – accomplished one of the big goals, not of President Barak Obama or Chancellor Angela Merkel, but of President Vladimir Putin: keep Russian money in Russia, and perhaps even bring back some of the money that has wandered astray over the years to seek greener pastures elsewhere. Capital flight, particularly from the vast underground economy, is one of Russia’s most pressing economic problems. And Putin’s angle of attack has been, well, brutal in its own way:

The spectacular collapse of the Cypriot banks last year took down much of the “black money” Russians and their mailbox companies – there were over 40,000 of these outfits in Cyprus – had on deposit there. Instead of bailing out the cesspool of corruption that these banks were, or even the nation with another emergency loan, as Russia had already done before, he just smiled and let it happen. And much of the money of his compatriots was allowed to evaporate. Perhaps he’d read Global Financial Integrity’s report – designed to advise the Russian government on these issues – that called Cyprus “a Money Laundering Machine for Russian criminals.” And so the sanction spiral against Russian oligarchs and their companies fits neatly into his overall long-term design. It includes the de-dollarization of world trade – an endeavor where he found new friends even in France, after French megabank BNP-Paribas agreed to pay a $8.9 billion penalty to the US Government.

China has been working furiously to elevate its own currency to a world-trade currency to rival the dollar and the euro, though it still has a long ways to go. Putin has been eager to switch the oil and gas trade with China away from the dollar, and progress is being made on a daily basis. And it includes getting Russian companies and rich individuals, by hook or crook, to leave at least some of their money in Russia and perhaps even repatriate some of the money now invested elsewhere so that it can do its magic for the economic development of Russia, and propel the country forward. Once in Russia, the money would presumably remain more accessible to the Russian government, which these very oligarchs have seen is not a great situation to be in, if they end up on the wrong site of Putin. Russia’s legal system can be a hazard to their health and wealth, and banks can be iffy. Hence the prevailing wisdom to send overseas every ruble, dollar, or euro that isn’t totally nailed down.

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An ancient Buddhist conundrum: if there is no recovery, how can it falter?

Eurozone Recovery Falters As Industrial Production Shrinks 1.1% (CAM)

Further evidence that the fragile Eurozone recovery could be beginning to splutter emerged today. Industrial production in the 18-member euro area fell sharply by 1.1% in May, the largest monthly drop since September 2012, according to figures released by the EU’s statistics agency Eurostat this morning. The data confirmed analyst fears that a significant shrink in industrial output had been coming, especially as the economic powerhouses of Germany, France and Italy had already reported some surprisingly large contractions in May. Economists had actually predicted a slightly bigger dip of 1.2%. May’s figures were up 0.5% from the same month last year. EU industrial production has been volatile in 2014 and analysts acknowledge that these figures can be erratic from month to month. April numbers had shown a 0.7% increase, rebounding from a 0.4 dip in March. However the marked fall in industrial output is stoking fears that the Eurozone recovery is stalling before it has even begun to really gain steam.

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Oh, bugger!

Draghi Faces Age-Old Problem in Trying to Spur Europe Inflation (Bloomberg)

Mario Draghi faces an age-old problem as he tries to revive euro-area inflation. A rapid rise in the importance of older workers in the currency bloc’s labor market over the next five years is set to prove a drag on inflation already about a quarter of the European Central Bank’s target of just below 2%, according to Marchel Alexandrovich, an economist at Jefferies International Ltd. in London. Since 2008 the number of workers aged between 50 and 64 has gained in the main euro-area nations and now account for 26% to 31% of total employment, up from 20% to 25% previously. Employees aged more than 65 have also increased, yet the amount still lags the U.S. and U.K., suggesting to Alexandrovich that the “euro-area economics may only be at the start of what is a long-term structural shift toward increased importance of older workers.”

If so, then ECB President Draghi has another structural factor to worry about as he tries to prevent deflation with easy monetary policy. That’s because older workers tend to defer consumption and save for the future, while youngsters entering the labor market are more likely to consume today. While data are hard to find for the euro area, an Institute for Fiscal Studies analysis of the U.K. suggests that from 2000 and 2005, British workers aged 55 to 59 had an average annual saving rate of about 5.5%, while those less than 34 ran up no savings. “So a recovery where jobs are going predominantly to older workers, which is what is happening today, will look very different than that where younger workers are getting jobs for the first time,” said Alexandrovich in a report to clients. “All things being equal, it would imply weaker consumption and a softer profile for inflation.” The higher propensity to save also implies downward pressure on interest rates, which Draghi cut to record lows last month to encourage economic growth, Alexandrovich said.

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The US saved GM with many billions; can’t let it collapse now.

Prosecutors’ Case Against GM Focuses On Misleading Statements (Reuters)

Federal prosecutors are developing a criminal fraud case hinged on whether General Motors made misleading statements about a deadly ignition switch flaw, and are examining activity dating back a decade, before GM’s 2009 bankruptcy, according to multiple sources familiar with the investigation. At the same time, at least a dozen states are investigating the automaker. Two state officials said that effort is likely to focus on whether GM broke consumer protection laws. Both federal and state investigations into the switch, which is linked to at least 13 deaths and 54 crashes, are at early stages, and it is possible that cases may not be brought. Sources said federal criminal prosecutors are working on a set of mail and wire fraud charges, similar to the criminal case Toyota Motor Corp settled earlier this year over misleading statements it made to American consumers and regulators about two different problems that caused cars to accelerate even as drivers tried to slow down.

Delphi Automotive, the maker of the GM switch, is not a target of criminal charges, the people said, because it did not make substantial public statements about the safety of the vehicles or the part. That would make it difficult to build a case under the main federal fraud laws, the wire and mail fraud statutes. Greg Martin, a spokesman for GM, said his company continued to work with investigators, declining to comment further, and a spokeswoman for Delphi said the company had been told it was not a target of investigations and was working cooperatively with all government officials. A spokesman for Manhattan U.S. Attorney Preet Bharara, who is leading the criminal probe, declined to comment. Prosecutors are not limiting their inquiries to events that occurred after GM emerged from bankruptcy in 2009, sources said. Legal experts said bankruptcy does not release GM from criminal liability in a fraud case.

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It’s strange how strong the pressure is to deny even this most obvious fact.

Study of Organic Crops Finds Fewer Pesticides, More Antioxidants (NY Times)

Adding fuel to the debates over the merits of organic food, a comprehensive review of earlier studies found substantially higher levels of antioxidants and lower levels of pesticides in organic fruits, vegetables and grains compared with conventionally grown produce. “It shows very clearly how you grow your food has an impact,” said Carlo Leifert, a professor of ecological agriculture at Newcastle University in England, who led the research. “If you buy organic fruits and vegetables, you can be sure you have, on average, a higher amount of antioxidants at the same calorie level.” However, the full findings, to be published next week in the British Journal of Nutrition, stop short of claiming that eating organic produce will lead to better health. “We are not making health claims based on this study, because we can’t,” Dr. Leifert said.

The study, he said, is insufficient “to say organic food is definitely healthier for you, and it doesn’t tell you anything about how much of a health impact switching to organic food could have.” Still, the authors note that other studies have suggested some of the antioxidants have been linked to a lower risk of cancer and other diseases. The conclusions in the new report run counter to those of a similar analysis published two years ago by Stanford scientists, who found few differences in the nutritional content of organic and conventionally grown foods. Those scientists said the small differences that did exist were unlikely to influence the health of the people who chose to buy organic foods, which are usually more expensive. The Stanford study, like the new study, did find pesticide residues were several times higher on conventionally grown fruits and vegetables, but played down the significance, because even the higher levels were largely below safety limits.

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