May 012021
 


Pieter Bruegel the Elder The Fall of the Rebel Angels 1562

 

Why Are The Covid Vaccines So Toxic? (AchGut)
Covid Lies Cost 100,000 US Lives – Mark Skidmore (USAW)
Perspectives on the Pandemic: “Blood Clots and Beyond” (JP)
Biden Mulls Vax Mandate For All US Military After Huge Numbers Refused (ZH)
It’s Time To Start Shunning The ‘Vaccine Hesitant’ (Stern)
Supreme Court: Pfizer, Moderna et al. May Own Your Genes Once Injected (CB)
Record 34% Of US Household Income Now Comes From The Government (ZH)
US Household Income Soared 21% In March, Largely Due To Stimulus Checks (JTN)
Election Panic Coming in 2022 – Martin Armstrong (USAW)
Rudderless, Leaderless, and Drifting (Kunstler)
The Myth of “Efficient Markets” (Rickards)
EU Charges Apple With Breach Of Competition Law (DW)
First 100 Days: 300,000 Deportations (CD)

 

 

 

 

Google translate from German. Long and good. Do read.

Why Are The Covid Vaccines So Toxic? (AchGut)

In calendar week 16/2021, more than 3,700 people in the USA had died in close connection with the vaccination with (biochemically very similar) SARS-CoV-2 mRNA vaccines from Pfizer / BioNTech or Moderna, with around 210 million inoculated doses. That’s 17 deaths for every million people vaccinated. AstraZeneca’s vaccine, which is based on an adenovirus, has 24 deaths per million vaccine doses in the UK and 18 in France, and 6 in Germany. On average, the mRNA vaccines bring about 20 deaths per million vaccinated, the AZ Vaccine on 10. The figures were compiled by the Rossiya Segodnya agency from Moscow, but we checked them on a random basis: they are correct. Of course, a causal relationship has not been proven in many cases, but such an accumulation of medical reports of deaths in connection with vaccinations has never occurred in the last few decades.

With conventional vaccines, one or two people vaccinated die for every 10 million people vaccinated. Even if you subtract half of the reported deaths in order to price in the spontaneous mortality rate of the sometimes very old vaccinated people, you still have to ask yourself: Why do the SARS-CoV-2 vaccines have such a high lethality? Two major causes of death stand out: anaphylactic shock and bleeding disorders. It has long been known that free mRNA in the extracellular space can trigger acute allergic reactions up to anaphylactic shock. In this syndrome, the immune system overreacts and there is massive release of vasodilating and bronchoconstricting substances. This leads to a general dilation of blood vessels (vasodilation) and bronchospasm with severe restriction of gas exchange in the lungs.

The blood fluid seeps into the periphery of the blood circulation, resulting in a lack of volume, as not enough blood fluid can be pumped back to the lungs and heart. At the same time, the little blood that is still available is no longer adequately supplied with oxygen. The heart begins to race, but the blood pressure drops: shock. The patient dies of cerebral hypoxia (insufficient oxygen supply to the brain) or heart failure. In many cases, the mRNA-carrying lipid particles that make up the vaccines from Pfizer/BioNTech and Moderna burst when passing through the logistics chain or are already defective from production. As a result, the naked mRNA is brought into the extracellular space (the space between the cells of the muscle into which the injection is made) during the injection. They cause anaphylactic shock in susceptible patients. The risk of anaphylactic reactions with mRNA vaccines is many times higher than with conventional vaccines. That explains some of the dead, probably just under half.

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“..the question, from a pure cost benefit, is how many lives are saved as opposed to how many lives are damaged from the treatment..”

Covid Lies Cost 100,000 US Lives – Mark Skidmore (USAW)

Michigan State Economics Professor Mark Skidmore revealed more than three years ago, there was $21 trillion in what he called “Missing Money” from government books. He’s doing some new number crunching surrounding public policy and the effects on the Covid 19 (CV19) pandemic. It’s all laid out in a brand new report. What he found is appalling. One big fact his research revealed is up to 100,000 lives could have been saved by using Hydroxychloroquine (HCQ). Instead, the medical community and the mainstream media trashed it and told people it was “dangerous” and it “did not work.” That was a total lie. Dr. Skidmore explains, “So, we have all these countries that used it, and a number of countries, such as the United States, that for some reason did not use it and actually prevented it . . . claiming it was unsafe.

“So, our estimate is if the U.S. just allowed it and made it widely available from the beginning, we could have saved 80,000 to 100,000 lives.” Dr. Skidmore said medical officials such as Dr. Fauci, who serves as the director of the U.S. National Institute of Allergy and Infectious Diseases, knew HCQ worked well against Corona Virus. In fact, Dr. Skidmore goes on to point out, “There was a paper published in the Virology Journal in 2005 . . . this is the outfit that Dr. Fauci oversees . . . . So, their journal published this paper that said HCQ was effective in treating the Corona Virus. The people who authored this study had been a part of the CDC at the time. So, we have known this for a long time. . . .We also now know there are as many as 200 peer reviewed studies that say it is effective if taken early on when somebody gets sick. It’s pretty overwhelming evidence if you take it early on, it’s extremely effective.”

That’s not all that works, and this too was suppressed and trashed by most of the medical community. Ivermectin, Vitamin D, Vitamin C and Zinc are a few that are also proven scientifically effective to reduce or obliterate CV19. Dr. Skidmore says, “These are inexpensive ways to help protect yourself and your family. . . . It’s overwhelming evidence that these different types of treatments are very effective.” Another revelation of Dr. Skidmore’s study was the CDC changed the definition on how to count CV19 deaths. Skidmore says, “In the middle of the crisis last year, the CDC changed the definition on how you count fatalities, but they only did it for Covid. It amounts to this, basically, the way we counted how somebody died, was you ‘died of’ some disease of some condition. They changed the definition so that it was more characterized that you ‘died with.’ And, if the CDC would not have changed the definition for Covid deaths? Skidmore says, “I think we would have had far fewer deaths. The data suggests that. . . . If they used the old number, there would have been less (CV19 deaths).”

Dr. Skidmore’s study also points out that the vaccines were never approved by the FDA. Dr. Skidmore explains, “You can look it up. The vaccines are only authorized for emergency use, which means it’s experimental, and it’s still experimental. They are tracking it all. . . . The (vaccine) fatalities are now up to 3,000, and there are many strange and unusual side effects that have occurred. It’s the same thing in Europe and other places. There are many reports of neurological problems, blood clots and a range of related issues. . . . There are all kinds of negative reactions and the question, from a pure cost benefit, is how many lives are saved as opposed to how many lives are damaged from the treatment (vaccines), and we don’t really know what the injuries are, and we don’t know what the long run effects will be.”

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“..we may be creating dangerously overactive immune systems in billions of unwitting subjects.”

Perspectives on the Pandemic: “Blood Clots and Beyond” (JP)

In February, 2021, Professor Sucharit Bhakdi, M.D. and a number of his colleagues warned the European Medicines Agency about the potential danger of blood clots and cerebral vein thrombosis in millions of people receiving experimental gene-based injections. Since then, two of the four injections have been suspended or recalled in Europe and the United States for just that reason. In this episode of Perspectives, Professor Bhakdi explains the science behind the problem, why it is not just limited to the products already suspended, and why in the long term we may be creating dangerously overactive immune systems in billions of unwitting subjects.

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Illegal as hell, but who cares anymore?

Biden Mulls Vax Mandate For All US Military After Huge Numbers Refused (ZH)

President Biden told NBC News in an interview which broadcast Friday that he’s mulling ordering all US military personnel to get a COVID-19 vaccine as commander-in-chief. “I’m not saying I won’t” rule it out, he emphasized in the new interview. This would also mean that anyone wanting to enter military service would have to receive the jab as a requirement to get in, which would likely cause a blow to military recruitment in the near-term. However, he didn’t outright say he’s ready to pull the trigger on the policy, which if enacted would constitute the largest federal government-ordered mandate in terms of forcing the vaccine on some 1.3 million active duty service members, not to mention over one million more reserve personnel.

Describing the decision as a “tough call” he suggested it was being hotly debated. “I don’t know. I’m going to leave that to the military,” Biden told NBC News’s Craig Melvin. “I’m not saying I won’t. I think you’re going to see more and more of them getting it. And I think it’s going to be a tough call as to whether or not they should be required to have to get it in the military, because you’re in such close proximity with other military personnel.” In follow-up to Biden’s comments, national security advisor Jake Sullivan confirmed that a DoD-wide vaccine mandate is “something the Department of Defense is looking at in consultation with the interagency process and [I] don’t have anything to add on that subject today.”

The whole debate was sparked in earnest when multiple headlines earlier this month took note of the large numbers of military members who were rejecting the vaccine. For example, one recent USA Today report noted that nearly 40% of US Marines who have been offered a COVID-19 vaccine have refused to recieve it, according to Pentagon figures. And an earlier report in The Guardian described that “Reluctance to be vaccinated for Covid-19 is now rife in the US military, with about a third of troops on active duty or in the national guard refusing to be administered the vaccine.”

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The new religion.

It’s Time To Start Shunning The ‘Vaccine Hesitant’ (Stern)

For the better part of a year, as the coronavirus racked up hundreds of thousands of American deaths, the flickering light at the end of the tunnel was herd immunity — the antibody force-shield that comes when enough people have survived the illness or have been vaccinated against it. “Go get vaccinated, America,” President Biden said in his speech to Congress this week, referring to the shot as “a dose of hope.” Anthony Fauci, the nation’s top infectious disease doctor, suggested in December that if 75% to 85% of the population got vaccinated, we could reach herd immunity by June. And with herd immunity, we’d return to a measure of “normalcy,” meaning indoor dining, movie theaters and hugs.

But herd immunity is slipping away because a quarter of Americans are refusing to get the COVID-19 vaccine. Dr. Gregory Poland, director of the Mayo Clinic’s Vaccine Research Group recently said: “There is no eradication at this point, it’s off the table. …We as a society have rejected” herd immunity. Hmm, no! “We” have not rejected anything. A quarter of the country is ruining it for all of us. It’s not just wacky former rockers who have put herd immunity out of reach. It is white evangelicals (45% say they won’t get vaccinated). And it is Republicans (almost 50% are refusing the vaccine). In Texas, 59% of white Republicans have said “no” to the vaccine. You can slap the euphemism “vaccine hesitancy” on the problem, but in the end the G.O.P., and the children of G.O.D., are perpetuating a virus that is sickening and killing people in droves.

A big part of the problem stems from the cultish relationship many evangelicals and Republicans have with former President Donald Trump. They absorbed his endless efforts to downplay the danger of the virus and turn public health precautions into a political freedom movement. But the time for analyzing why these human petri dishes have chosen to ignore the medical science that could save them, and us, is over. We need a different strategy. I propose shunning. Biden’s wildly successful vaccine rollout means that soon everyone who wants a vaccine will have one. When that happens, restaurants, movie theaters, gyms, barbers, airlines and Ubers should require proof of vaccination before providing their services.

And it shouldn’t stop there. Businesses should make vaccination a requirement for employment. A COVID outbreak can shut down a business and be financially devastating. And failure to enforce basic health and safety measures is not fair to employees who have to work in offices, factories, and stores where close contact is required. Things should get personal, too: People should require friends to be vaccinated to attend the barbeques and birthday parties they host. Friends don’t let friends spread COVID.

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“hacking the software of life.”

Good overview of history of legal implications of gene tech.

Supreme Court: Pfizer, Moderna et al. May Own Your Genes Once Injected (CB)

Yes, this article contains a lot of scientific and legal mumbo-jumbo. But in a nutshell, biotechnology companies can own living things if said things are genetically-modified and not naturally-occurring. No mouse is born in nature like the OncoMouse. It is thus patentable. Oil-eating bacteria come from genetic manipulation, thus patentable. Notice how all these so-called doctors and scientists avoid pointing fingers at Pfizer, Moderna, Johnson & Johnson et al. when someone dies within hours, days or weeks of receiving their shots. It’s almost as if said doctors and scientists are carefully navigating the trademark and patent landscape. They don’t want to trespass on someone else’s property, if you will. Moderna owns several mRNA patents. Doctors and hospitals wanting a piece of the mRNA pie cannot bite the hand that feeds them.


The synthetic mRNA of Pfizer and Moderna, along with the viral vector DNA delivery systems of Johnson & Johnson and AstraZeneca, change your genetic code, making you “genetically-modified.” Granted mainstream media say the foregoing is “conspiracy theory.” But Moderna Chief Medical Officer Tal Zaks tells you straight up that 1) the shots change your genetic code and 2) the shots do not stop the spread of COVID-19. He says the Moderna shot is “hacking the software of life.” Viral vectors do the same thing. So do these companies “own you” once you get the shots? Well, they own mice and bacteria created with their inventions. Once you get these shots, you are no longer a “naturally-occurring” human being. Prosthetic limbs, breast implants, etc. are not “natural” per se. But they are removable and not part of what fundamentally makes you human. Gene therapy is irreversible. Do the math yourself.

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“And that’s how creeping banana republic socialism comes at you: first slowly, then fast.”

Record 34% Of US Household Income Now Comes From The Government (ZH)

Following today’s release of the latest Personal Income and Spending data, Wall Street was predictably focused on the changes in these two key series, which showed a modest jump in personal spending, which however was dwarfed by a record surge in personal income, to be expected in the month when Biden’s latest $1.9 trillion stimmy hit. But while the change in the headline data was notable, what was far more remarkable was data showing just how increasingly more reliant on the US government the population has become. We are referring, of course, to Personal Current Transfer payments which are essentially government sourced income such as unemployment benefits, welfare checks, and so on. In March, this number exploded to a mind-blowing $8.1 trillion annualized, which was not only double the $4.1 trillion from February, but was also $5 trillion above the pre-Covid trend where transfer receipts were approximately $3.2 trillion.

This means that excluding the $8.1 trillion surge in govt transfers, personal income excluding government handouts would be virtually unchanged from a year ago level at $16TN. [..] government stimulus checks hitting personal accounts [..] in turn helped double the savings rate to a whopping 27.6% from 13.6% in February.

Stated simply, what all this means is that the government remains responsible for a third of all income, or 33.8 to be precise! Putting that number in perspective, in the 1950s and 1960s, transfer payment were around 7%. This number rose in the low teens starting in the mid-1970s (right after the Nixon Shock ended Bretton-Woods and closed the gold window). The number then jumped again after the financial crisis, spiking to the high teens. And now, the coronavirus has officially sent this number to a record 34%! And that’s how creeping banana republic socialism comes at you: first slowly, then fast.

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And then prices start soaring.

US Household Income Soared 21% In March, Largely Due To Stimulus Checks (JTN)

U.S. household income spiked an astronomical 21% in March, due in large part to the $1,400 coronavirus stimulus checks that went out that month, the government said on Friday. A press release from the Bureau of Economic Analysis said that, in the U.S., “personal income increased $4.21 trillion (21.1 percent) in March,” while disposable personal income increased by an even higher 23.6%. The spike “largely reflected an increase in government social benefits,” the BEA said, noting that the American Rescue Plan Act “established an additional round of direct economic impact payments to households.” The BEA also noted a rise in personal consumption expenditures, one that appears to be tied to the ongoing reopening of major swaths of the U.S. economy, particularly restaurants. “Within services, the largest contributor to the increase was spending for food services and accommodations,” the press release said.

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“One of the number one selling objects in Europe is a safe. People are storing cash. Biden was the straw that broke the camel’s back.”

Election Panic Coming in 2022 – Martin Armstrong (USAW)

According to a recent poll, 51% of Americans think Joe Biden cheated to get into the White House. The breakdown is 74% Republicans and an astounding 30% Democrats think cheating played at least a part of the 2020 Election outcome. In Arizona, the 2020 Election ballots are finally being audited as court battles to stop it continue. Legendary financial and geopolitical cycle analyst Martin Armstrong is predicting an election “panic in 2022.” Armstrong explains, “It means extremely high volatility. Despite whatever they want to say, there is a large proportion of the population that do not believe the election. Polls are saying it’s at 51%, but it’s probably close to 60% or 70%. You are also seeing that 60% of Americans want a third party, and you are talking about Democrats and Republicans. . . .

I think because we have such a high number of people who do not trust the election results, I don’t think they are going to be able to get away with rigging the elections again. It’s going to turn into violence. There is no question about that.” Armstrong also sees Biden Administration tax plans on things like capital gains causing problems in the not-too-distant future. Armstrong says, “If they eliminate capital gains, I don’t care if you are Republican or Democrat, you are going to have to sell. Your accountant is going to say if you don’t sell, you going to pay twice or three times as much in taxes next year. So, they can create a serious, serious collapse in the world economy. This is in addition to all this Covid nonsense that they have created.”

Armstrong has been saying for months that deflation would be the overarching theme in the economy. Is that going to continue or has there been a change? Armstrong says, “Deflation is now over. People have to understand. It has nothing to do with the supply of money. . . . If you don’t see a bright rosy future, what do you do? You save your money. . . . One of the number one selling objects in Europe is a safe. People are storing cash. Biden was the straw that broke the camel’s back. People are now seeing that things are going to cost more in the future than they do today. They have also created shortages because of these lockdowns. The inflation is just beginning to start now. It’s based on shortages, and it will continue going into about 2024.”

The bottom line on the cause of inflation, according to Armstrong, is “a loss of confidence in government.” Armstrong also predicts, “We are looking at the prospect of a serious war between 2025 and 2027. All this is completely because of this great reset nonsense. They have been using the Corona Virus as an excuse to try and shut down the economy. If you look at rents in New York City, they are in a freefall. Real estate is going crazy outside of the urban centers. In Florida, what was a $500,000 house last year is now more than $1 million.” On Trump, Armstrong says, “I don’t see him returning to office before 2024.” But, if massive ballot fraud is proven with the Arizona audit going on right now, Armstrong predicts, “The state legislature can recall a Senator” who won by election rigging.

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“There’s no Heimlich maneuver for a nation choking on debt.”

Rudderless, Leaderless, and Drifting (Kunstler)

The numbers are already pretty grim: 70 percent of Republicans and 30 percent of Democrats say they doubt the veracity of the 2020 election. Will the discovery that massive, widespread election fraud actually occurred lead to a constitutional crisis? How will Joe Biden survive in office if a growing percentage of the public sees him as illegitimate? And what might happen if the establishment attempts to blow the whole matter off? Can they still say “nothing to see” when the public has seen so much that they can’t unsee? None of that will happen in a vacuum. Plenty of other events are roiling in the background with the potential to go critical.


Joe Biden’s proposals to jack the US economy by $5-plus-trillion won’t be very good for the credibility of the US dollar, with other countries already eager to dissociate themselves from dollar-based global trade payment arrangements. But that’s just financial esoterica compared to what’s happening on-the-ground across America, with households running on debt and back payments for rent and mortgages piling up, and landlords and banks taking the hit in the meantime. There’s no Heimlich maneuver for a nation choking on debt. And that plan to become the Big Rock Candy Mountain, where they hung the jerk who invented work, is liable to disappoint even the mesmerists in the Bureau of Labor Statistics.

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If you don’t allow markets to function, they cannot be efficient, either.

The Myth of “Efficient Markets” (Rickards)

Mainstream economists have insisted for decades that markets are highly efficient, and they do a nearly perfect job of digesting available information and correctly pricing assets today to take account of future events based on that information. In fact, nothing could be further from the truth. Markets do offer valuable information to analysts, but they are far from efficient. Markets can be rational or irrational. Markets can be volatile, irrationally exuberant, or in a complete state of panic depending upon the emotions of investors, herd behavior, and the specific array of preferences when a new shock emerges. If markets were so efficient, why was Wall Street surprised when it was obvious to anyone paying attention that Biden was going to raise the capital gains tax?

The capital gains tax increase information had been there for all to see for six months, but it took a press release to get Wall Street to sit up and take notice. It should have been priced in long before, and the announcement just would have confirmed market expectations. So the next time you hear about efficient markets, take it with a large grain of salt. But my forecast from six months ago was wrong in one respect. I said the tax rate on capital gains would almost double from 20% to 39.6%. It turns out the rate will actually be 43.4% once a 3.8% investment income surtax is added on top. That surtax is a holdover from Obamacare.

If one were to add state and local income taxes, the combined rate on capital gains could exceed 50%, depending on the jurisdiction. Of course, capital gains taxes are imposed on investments you make from after-tax dollars, so even the initial investment has already been taxed. And the corporations whose stock you buy pay corporate income tax too. When those burdens are included, you’re lucky to get even 25% of your gains back net of taxes. This will be a headwind to stock markets for the foreseeable future.

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“The US company could be slapped with fines of as much as 10% of its global turnover.”

EU Charges Apple With Breach Of Competition Law (DW)

EU antitrust regulators on Friday charged Apple with illegally distorting competition in the music-streaming market through restrictive App Store rules. It is one of the biggest-ever competition cases against the US tech giant and could lead to hefty fines. An Apple spokesperson rejected the accusations, saying the EU’s case was “the opposite of fair competition.” The charges follow an EU investigation stemming from a complaint by the popular music-streaming service Spotify. “Our preliminary conclusion: Apple is in breach of EU competition law,” EU Competition Commissioner Margrethe Vestager said in a statement.

The European Commission, the EU’s executive arm, said Apple’s App Store rules force rival developers to use its in-app payment system — which charges up to 30% commission — and prevent them from informing users of cheaper payment methods. Vestager said this ultimately raised the cost for consumers and limited their choice. “By setting strict rules on the App Store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition,” the commissioner’s statement said. “This is done by charging high commission fees on each transaction in the App Store for rivals and by forbidding them from informing their customers of alternative subscription options.”

This is the first EU antitrust charge targeting Apple. It follows an investigation by the bloc, launched in June, which found that the App Store commission fees are passed on to consumers. The probe was launched after Swedish music streaming app Spotify, which competes with Apple Music, lodged a complaint about the company’s rules two years ago. The European Commission said Apple now has the chance to respond to the allegations and present its case in a hearing before a final ruling is handed down. The US company could be slapped with fines of as much as 10% of its global turnover.

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Biden’s Promise: Moratorium on deportations for the first 100 days of his administration.

Biden’s Reality: Over 300,000 deported in 3 months.

First 100 Days: 300,000 Deportations (CD)

Rights group United We Dream warned Tuesday that unless he takes immediate steps to improve his administration’s treatment of immigrants, President Joe Biden is at serious risk of repeating the destructive failures of former President Barack Obama, who deported roughly three million people during his eight years in office. Despite Biden’s characterization of Obama’s mass deportations as a “mistake” and pledge to usher in a more humane immigration system, United We Dream estimates that the administration has deported just over 300,000 people since January—largely using a Trump-era policy called Title 42.

The policy was first issued by the Centers for Disease Control and Prevention (CDC) last March—at the start of the coronavirus pandemic—and has been kept in place by the Biden administration. As Human Rights Watch (HRW) explained earlier this month, “The Title 42 expulsion policy has effectively closed the U.S. border to nearly all asylum seekers based on the misapplication of an obscure, 75-year-old public health law.” “That law, the Public Health Service Act of 1944, was designed to confer quarantine authority to health authorities that would apply to everyone, including U.S. citizens, arriving from a foreign country,” HRW noted. “Quarantine authority was never meant to be used to determine which noncitizens could or couldn’t be expelled or removed from the U.S.”

In a statement on Monday, Cynthia Garcia of United We Dream stressed that “Title 42 was designed under one of the most anti-immigrant administrations in modern history.” “President Biden and the Department of Homeland Security must be reminded that their inaction to protect vulnerable immigrant communities seeking refuge in the U.S. is not only putting lives on the line; it upholds a white nationalist immigration system that seeks to expel and keep Black and brown immigrants out at any cost,” said Garcia, who voiced dismay at the Biden administration’s deportation of vulnerable Haitians and others.

Read more …

 

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Jul 052018
 
 July 5, 2018  Posted by at 8:15 am Finance Tagged with: , , , , , , , , , , ,  3 Responses »


Vincent van Gogh Ravine 1889

 

China Warns US ‘Opening Fire’ On World With Tariff Threats (R.)
China Denies It Will Be First To Impose Tariffs On $34bn Of US Goods (G.)
Europe Turns Down Chinese Offer For Grand Alliance Against The US (ZH)
EU Reportedly Considering International Talks To Cut Car Tariffs (CNBC)
Germany’s Massive Trade Surplus ‘Is Becoming Toxic,’ Ifo Director Says (CNBC)
Tories ‘Toast’ If They Don’t Deliver On Brexit, Theresa May Warned (Sky)
There Is Only Option On The Table: Soft Brexit (G.)
UK Home Office Separating Scores Of Children From Parents (Ind.)
Bank of Japan Takes Away Punch Bowl, Balance Sheet Declines (WS)
India Is Emerging As Ground Zero Of The World’s Biggest NPL Crisis (ZH)
Kim Dotcom Loses New Zealand Extradition Appeal (AFP)
Babies (CJ)

 

 

Negotiate!

China Warns US ‘Opening Fire’ On World With Tariff Threats (R.)

The United States is “opening fire” on the world with its threatened tariffs, the Chinese government warned on Thursday, saying Beijing will respond the instant U.S. measures go into effect as the two locked horns in a bitter trade war. The Trump administration’s tariffs on $34 billion of Chinese imports are due to go into effect at 12.01 am eastern time on Friday (0401 GMT Friday), which is just after midday on Friday Beijing time. U.S. President Donald Trump has threatened to escalate the trade conflict with tariffs on as much as a total of $450 billion in Chinese goods if Beijing retaliates, with the row roiling financial markets including stocks, currencies and global trade of commodities from soy beans to coal.

China has said it will not “fire the first shot”, but its customs agency said on Thursday in a short statement that Chinese tariffs on U.S. goods will take effect immediately after Washington’s tariffs on Chinese goods kick in. Speaking at a weekly news conference, Chinese Commerce Ministry spokesman Gao Feng warned the proposed U.S. tariffs would hit international supply chains, including foreign companies in the world’s second-largest economy. “If the U.S. implements tariffs, they will actually be adding tariffs on companies from all countries, including Chinese and U.S. companies,” Gao said. “U.S. measures are essentially attacking global supply and value chains. To put it simply, the U.S. is opening fire on the entire world, including itself,” he said.

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Well, obviously.

China Denies It Will Be First To Impose Tariffs On $34bn Of US Goods (G.)

China has denied it will fire the opening salvo in an escalating trade dispute with the US, insisting that it would not bring in 25% tariffs on $34bn (£26bn) of American goods before a move from Washington. Both sides have threatened to impose similarly sized tariffs on 6 July, but because of the 12-hour time difference, it was thought the Chinese tariffs on US imports ranging from soybean to stainless steel pipes could take effect earlier. However, China’s finance ministry issued a statement on Wednesday saying that it would not be the first to levy tariffs.

“The Chinese government’s position has been stated many times. We absolutely will not fire the first shot, and will not implement tariff measures ahead of the United States doing so.” The US will implement a 25% tariff on $34bn of Chinese imports – 818 product lines ranging from cars to vaporisers and “smart home” devices – on Friday. There had been hopes the US and China might step away from the measures, but neither side has backed down. Economists have warned that the tariffs will damage economic growth and cost jobs, and could escalate into a full-blown trade war between the world’s two largest economies.

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Nonstarter.

Europe Turns Down Chinese Offer For Grand Alliance Against The US (ZH)

Publicizing its growing exasperation in dealing with president Donald Trump who refuses to halt the tit-for-tat retaliation in the growing trade war with China – which is set to officially begin on Friday when the US slaps $34 billion in Chinese exports with 25% tariffs – but has a habit of doubling down the threatened US reaction to every Chinese trade counteroffer (after all the US imports far more Chinese goods than vice versa)…China has proposed a novel idea: to form an alliance with the EU – the world’s largest trading block – against the US, while promising to open up more of China’s economy to European corporations.

The idea was reportedly floated in meetings in Brussels, Berlin and Beijing, between senior Chinese officials, including Vice Premier Liu He and the Chinese government’s top diplomat, State Councillor Wang Yi, according to Reuters. Willing to use either a carrot or a stick to achieve its goals, in these meetings China has been putting pressure on the European Union to issue a strong joint statement against President Donald Trump’s trade policies at a summit later this month. However, perhaps because China’s veneer of the leader of the free trade world is so laughably shallow – China was and remains a pure mercantilist power, whose grand total of protectionist policies put both the US and Europe to shame – the European Union has outright rejected any idea of allying with Beijing against Washington ahead of a Sino-European summit in Beijing on July 16-17.

Instead, in the tradition of every grand, if ultimately worthless meeting of the G-X nations, the summit is expected to produce a “modest communique”, which affirms the commitment of both sides to the multilateral trading system and promises to set up a working group on modernizing the WTO. Incidentally, the past two summits, in 2016 and 2017, ended without a statement due to disagreements over the South China Sea and trade. Then there is China’s “free-trade” reputation: a recent Rhodium Group report showed that Chinese restrictions on foreign investment are higher in every single sector save real estate, compared to the European Union, while many of the big Chinese takeovers in the bloc would not have been possible for EU companies in China. And while China has promised to open up, EU officials expect any moves to be more symbolic than substantive.

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Caving.

EU Reportedly Considering International Talks To Cut Car Tariffs (CNBC)

European officials are considering holding talks on a tariff-cutting deal between the world’s largest car exporters to prevent an all-out trade war with the U.S., according to the Financial Times who cited diplomats briefed on the matter. The proposal is being looked at by officials in Brussels, the administrative heartland of the European Union, ahead of a meeting between Jean-Claude Juncker, the president of the European Commission, and President Donald Trump in Washington later in July, the report published Wednesday said.

The FT reported that three diplomats, which it did not name, said the European Commission “is studying whether it would be feasible to negotiate a deal with other big car exporters such as the U.S., South Korea and Japan.” Such a move could address Trump’s complaint that the U.S. sector is unfairly treated, while reducing export costs for other participating countries’ auto sectors. “Under such a deal, participants would reduce tariffs to agreed levels for a specified set of products — a concept in international trade known as a ‘plurilateral agreement’ that lets countries strike deals on tariffs without including the entire membership of the WTO,” the FT said.

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Even Italy has a big surplus.

Germany’s Massive Trade Surplus ‘Is Becoming Toxic,’ Ifo Director Says (CNBC)

Germany exporting more than it imports is becoming a big problem for its economy, a director from the country’s closely-watched Ifo Institute said Wednesday. “(The trade surplus) is turning out to be an increasing issue, not just with the U.S. but with other trade partners as well, and also within the European Union,” Gabriel Felbermayr, the director of the Ifo Center for International Economics at the Munich-based institute, told CNBC’s “Squawk Box Europe. “The surplus is becoming toxic, and also within Germany many argue now that we need to do something about it with the purpose of lowering it. It turns out to be a liability rather than an asset.”

Germany’s export-orientated, manufacturing economy and its resulting trade surplus — the value of its exports exceeding that of its imports — has long been a subject of criticism and Berlin has been pressured to encourage more domestic spending and boost imports. Trade surpluses are viewed as encouraging trade protectionism and worsening the economic problems of other countries. Germany’s trade surplus fell in 2017 for the first time since 2009, shrinking to $300.9 billion, data published in February by the country’s Federal Statistics Office showed. Still, its trade surplus with the U.S. was $64 billion.

[..] Eric Lonergan, macro fund manager at M&G, told CNBC on Wednesday that Trump might be mollified by European countries promising to address their current account surpluses. A current account surplus is a broader measure of the trade surplus, plus earnings from foreign investments and transfer payments. “(Regarding the trade surplus) the truth is it’s not just Germany anymore — central and eastern Europe, if you look at Hungary, Poland, the Czech Republic and take them as an aggregate, were running a big current account deficit before, now they’re running a big current account surplus,” he said. “Italy’s running a big current account surplus, the periphery is — so it’s the ‘Germanification’ of the whole of greater Europe.”

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Rumor has it that Boris Johnson will resign. Maybe he’ll wait until after England lose to Sweden in the World Cup.

Tories ‘Toast’ If They Don’t Deliver On Brexit, Theresa May Warned (Sky)

Theresa May has been warned the Tories will be “toast” if they fail to deliver on their Brexit promises, as eurosceptic MPs maintain the pressure on the prime minister ahead of a crunch meeting of her top team. As the PM prepares to gather ministers at her country retreat of Chequers on Friday, she has been put on notice by the European Research Group (ERG) of Conservative backbenchers. Around 40 members of the ERG met with chief whip Julian Smith on Wednesday, reports Sky’s senior political correspondent Beth Rigby. Our correspondent said that they told Mr Smith the party will be “toast” if it “welches” on its previous Brexit promises, adding that the roughly £40bn “divorce bill” should only be paid to Brussels on condition of getting a deal.

After the meeting, Jacob Rees-Mogg, who chairs the ERG, told Sky News that Mr Smith “doesn’t determine policies” and so backbench Brexiteers remain in the dark over the government’s plans beyond media reports. Asked about suggestions the PM could propose a UK-EU deal that keeps regulatory alignment with Brussels for goods, as well as keeping the same level of tariffs as the EU, Mr Rees-Mogg warned such an agreement is “not Brexit”. He insisted continued regulatory alignment would mean the UK “cannot do trade deals with the rest of the world” and would mean “we haven’t really left the EU”. “Indeed, worse than that, we’re a vassal state because we take the EU’s rules and have no say over them,” the Leave supporter added.

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Not for the diehards.

There Is Only Option On The Table: Soft Brexit (G.)

The proverbial can has been kicked down the proverbial road ever since Britain voted to leave the European Union in 2016. Don’t get me wrong. Can-kicking has a necessary place in politics. Theresa May has often had little choice but to resort to it. But the road and the can-kicking must end at Chequers on Friday. That’s when the prime minister and her divided cabinet must finally decide what kind of relationship they seek with the EU after Brexit. In the end, May’s government faces the same two choices at Chequers that it has faced throughout all the twists and turns of the Brexit negotiations.

Either the government must embrace a form of soft Brexit that it can then persuade the rest of Europe to accept as a proper basis for good future relations – the option that May herself and the chancellor, Philip Hammond, both prefer and will put forward – or it must reject that option and prepare for a no-deal Brexit, in which all of Britain’s economic and political relations with Europe and the rest of the world become matters of pure conjecture. There are no other choices on the table. If Brexit is to go ahead, it is simply one or the other. This means, therefore, that only the first of the two choices is in fact a serious option.

If the cabinet rejects May’s and Hammond’s approach and adopts a no-deal option as government policy, there would be both a parliamentary and an extra-parliamentary revolt against it. Large businesses such as British Airways might relocate to Europe. Labour might even find an explicit anti-Brexit voice. One way or another, the no-deal approach would therefore explode on the launch pad. And Brexit might even not take place. Most ministers are neither idiots nor wreckers, so the no-deal option is not going to happen. It is even questionable as to whether any of the no-dealers will resign. The much more serious question, though, is whether the soft Brexit package that May wants to sell to the cabinet is much of a runner either.

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If they’re capable of Windrush, they can do this too.

UK Home Office Separating Scores Of Children From Parents (Ind.)

The Home Office is separating scores of children from their parents as part of its immigration detention regime – in some cases forcing them into care in breach of government policy. Schools, the NHS and social services have written letters to the department begging them to release parents from detention because of the damaging impact it is having on their children. Bail for Immigration Detainees (Bid), a charity that supports people in detention, said they have seen 170 children separated from their parents by the Home Office in the past year – and believes there are likely to be many more.While usually the youngsters remain in the care of their other parent, the charity has seen a number of cases where children are taken into local authority care as a result of the detention.

Case workers highlight that this is in breach of Home Office guidelines, which state that a child “must not be separated from both adults if the consequence of that decision is that the child is taken into care”. In one case, three young children were taken into care for several days after their dad was detained earlier this year – an experience that left them traumatised and fearful that he will be “taken away” again. Kenneth Oranyendu, 46, was detained in March while his wife was abroad for her father’s funeral. Despite the Home Office being aware of this, they kept him in detention and his four young children were forced to go into care.

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Japan’s toast without the punch bowl.

Bank of Japan Takes Away Punch Bowl, Balance Sheet Declines (WS)

In June, total assets on the Bank of Japan’s balance sheet dropped by ¥3.79 trillion yen ($34 billion) from May, to ¥537 trillion ($4.87 trillion). It was the third month-over-month drop in seven months, and the first such drops since late 2012, when the Abenomics-designed blistering “QQE” (Qualitative and Quantitative Easing) kicked off. So has the “QQE Unwind” commenced? This chart shows the month-to-month changes of the total balance sheet. Note the trend over the past 16 months and the three “QQE unwind” episodes (red):

But this sporadic balance sheet reduction and the overall “tapering” of its growth contradict the official rhetoric. Bank of Japan Governor Haruhiko Kuroda along with most of his colleagues keep insisting that the BOJ would “patiently” maintain its ultra-easy monetary policy and that it would “keep expanding the monetary base until inflation is above 2%.” The blistering asset purchases would add about ¥80 trillion ($725 billion) to the balance sheet every year. And the BOJ has repeatedly affirmed its short-term interest-rate target of a negative -0.1%.

[..][ Under QQE, the BOJ has been buying mostly Japanese government securities (JGBs and short-term bills); it also purchased corporate bonds, Japanese REITs, and equity ETFs. But now, the party appears to be ending, despite the speeches to the contrary. From the distance, however, the flattening out (tapering) of the BOJ’s assets is barely noticeable, given the magnitude of the whole pile that amounts to about 96% of Japan’s GDP (the Fed’s balance sheet amounted to about 23% of US GDP at the peak):

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I’d say China is much worse than the graph indicates.

India Is Emerging As Ground Zero Of The World’s Biggest NPL Crisis (ZH)

While bad loans in the Italian banking system have received a ton of attention from investors who fear that the Italians could inadvertently blow up the European banking union, it’s not the only financial landmine lurking among the world’s ten largest economies. To wit, while Italy has the largest percentage of non-performing loans among the world’s largest economies, India isn’t far behind and India’s economic recovery is built on an even shakier foundation. According to Bloomberg, India’s $1.7 trillion formal banking sector is presently struggling with $210 billion in bad loans, most of which are concentrated within its state-owned banks. During the 2018 fiscal year, growth slowed to 6.7%, down from the previous year’s 7.1%, back to its levels from 2014, before Modi came to power.

The state banks have been so badly mismanaged that some analysts say the country’s banking crisis is an opportunity for private sector banks, as CNBC reported. “If you take a 10-year view, currently the private sector banks’ market share is 30 percent. Probably it will become 60 percent,” Sukumar Rajah, senior managing director at Franklin Templeton Emerging Markets Equity, told CNBC. As a result, he said, “the overall health of the banking system will improve because the better banks will be a bigger portion of the market and the weaker banks will become a smaller portion of the market.”

Some also see opportunities for investment bankers looking to underwrite corporate bond issuance in the country.. “My view is that, incrementally, a lot of long-term financing of corporate India can also be met by the corporate bond market, which has developed reasonably well,” he said. “Between the corporate bond market and the private banks, I think most of the requirements can be met as far as corporate India is concerned.” When it comes to lending directly to individuals, Prasad said that is mostly done by the private banks and non-banking financial companies.

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Can’t extradite someone who has broken none of your laws.

Kim Dotcom Loses New Zealand Extradition Appeal (AFP)

Megaupload founder Kim Dotcom suffered a major setback in his epic legal battle against online piracy charges Thursday when New Zealand’s Court of Appeal ruled he was eligible for extradition to the United States. The German national, who is accused of netting millions from his file sharing Megaupload empire, faces charges of racketeering, fraud and money laundering in the US, carrying jail terms of up to 20 years. Dotcom had asked the court to overturn two previous rulings that the Internet mogul and his three co-accused be sent to America to face charges. Instead, a panel of three judges backed the FBI-led case, which began with a raid on Dotcom’s Auckland mansion in January 2012 and has dragged on for more than six years.

The court said US authorities had “a clear prima facie case to support the allegations that the appellants conspired to, and did, breach copyright wilfully and on a massive scale for commercial gain”. Dotcom is accused of industrial-scale online piracy via Megaupload, which US authorities shut down when the raid took place. They allege Megaupload netted more than US$175 million in criminal proceeds and cost copyright owners US$500 million-plus by offering pirated content including films and music. “We are disappointed with today’s judgment by the NZ Court of Appeal in the Kim Dotcom case,” his lawyer Ira Rothken tweeted, indicating there would be an appeal to the Supreme Court.

“We have now been to three courts each with a different legal analysis – one of which thought that there was no copyright infringement at all.” Dotcom and his co-accused – Finn Batato, Mathias Ortmann, Bram van der Kolk – have denied any wrongdoing and say Megaupload was simply a case of established interests being threatened by online innovation. The website was an early example of cloud computing, allowing users to upload large files onto a server so others could easily download them without clogging up their email systems. At its height in 2011, Megaupload claimed to have 50 million daily users and account for 4% of the world’s internet traffic.

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How people are made.

Babies (CJ)

When a baby is born, its parents teach it how to eat solid foods and walk and talk, which generally works out fine. Then they start teaching the baby all the lies their parents taught them, and things start to get messy. When the baby is old enough, they send it to school, where it spends twelve years being taught lies about how the world works so that one day it will be able to watch CNN and say “Yes, this makes perfect sense” instead of “This is ridiculous” or “Why does this whole entire thing seem completely fake?” or “I want to punch Chris Cuomo in the throat.” The baby is taught history, which is the study of the ancient, leftover propaganda from whichever civilization happened to win the wars in a given place at a given time.

The baby is taught geography, so that later on when its country begins bombing another country, the baby’s country won’t be embarrassed if its citizens cannot find that country on a globe. The baby is taught obedience, and the importance of performing meaningless tasks in a timely manner. This prepares the baby for the half century of pointless gear-turning it will be expected to undertake after graduation. The baby is taught that it lives in a free country, with a legitimate electoral system which facilitates meaningful elections of actual representatives in a real government. It is never taught that those elections, representatives and government are all owned and operated by the very rich, who use them to ensure policies which make them even richer while keeping everyone else as poor as possible so that they won’t have to share political power.

It is never taught that highly secretive intelligence and defense agencies form alliances with those rich people to advance murderous and exploitative agendas for profit and power. It is never taught that the things it sees on television are mostly lies. The baby is smoothly, seamlessly funneled from uterus to full-time employment through this system, often with a little religion mixed in to really drive home the importance of obedience and meekness and the nobility of poverty.

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Waiting for my man

May 072017
 
 May 7, 2017  Posted by at 6:46 pm Finance Tagged with: , , , , , , , , ,  5 Responses »


J.M.W. Turner Old London Bridge 1794

 

The French election, won just now by Emmanuel Macron, put several segments of the French population opposite one another in a pretty fierce contest. And that contest will continue. Because Macron won’t be able to lift the French economy out of its doldrums any more than Le Pen could have, or than Trump can life the US, and the new president will have the honor of presiding over a further and deepening downturn. The French political dividing line was aptly described by Simon Kuper recently:

The ultra-nationalist writer Charles Maurras believed there were “two Frances”. The one he loved was the “pays réel”, the real country: a rural France of church clocks, traditions and native people fused with their ancestral soil. Maurras loathed the “pays légal”, the legal country: the secular republic, which he thought was run by functionaries conspiring for alien interests.

Maurras was born in 1868 and died in 1952. But if he returned on Sunday to witness the French presidential run-off, he would instantly recognise both candidates. He would cast Emmanuel Macron as the incarnation of the “legal France” and Marine Le Pen as embodying the “real” one.

Maurras may have been a questionable character, but that description is not half bad. Once enough people in the country understand the failure of ‘legal’ France, they will want ‘real’ France back. That will be true in countries all over Europe; to a large extent it already is. Marine Le Pen summed up the key issue really well a few days ago when she said of the country post election: “France will be led by a woman, me or Mrs. Merkel.”

There is only one reason the French people would ever tolerate Germany having an outsized influence in their politics and economics: that they feel they benefit from it financially. And yes, if you put it that way, it’s already quite something that they haven’t revolted more and earlier.

The generous unemployment benefits are undoubtedly part of that. But those can’t last. And since the Germans owe their influence in Paris to the EU, it’s obvious how the French will feel they can stop that influence. And then the EU will turn out to be not a peacemaker, but the opposite.

 

Still, as much as France is divided, and as serious as that division is, the country is a shining beacon of unity compared to the UK, where the dividing lines are as manifold as they are laced with toxins. The snap election PM Theresa May called, in just over a month, can do nothing to resolve any of it. That means the EU can do what they want in the Brexit negotiations. Which will therefore be an unparalleled disaster for May and the UK.

The EU can and will ‘have its way’ with the UK for one simple reason: the United Kingdom is anything but United. It makes no difference what the EU does to the UK, the British won’t blame them for it. They will blame each other instead. No matter what happens these days, the British always know in advance who’s to blame, and it’s never themselves; it’s always another group of Brits.

The Tories are deeply divided between pro- and anti-Brexit forces. Labour is divided along those same lines, and adds pro- and anti-Corbyn sentiments for good measure. Other parties don’t really matter much, but they have similar dividing lines as well.

Anti-Corbyn Labour MPs have convinced themselves they know better than pro-Corbyn party members. They’ve kept claiming for so long that Corbyn is unelectable it’s become a self-fulfilling prophecy. They’ll be lucky not to face the fate of their former brethren in François Hollande’s Parti Socialiste, who ended up with just 6% of the vote in the 1st round of the French elections.

PM Theresa May called the snap election for June 8 to hide some of the divisions behind, to make them appear less relevant, or even to profit from them and grab more power. But the very fact that Brexit was voted in, already makes the election nigh irrelevant.

Whoever wins, and it looks certain to be May herself. will open themselves to being scapegoated in a big way. Which won’t keep them from seeking victory, because the loser can expect the same fate. The trenches have been dug, and deeply. Governable? Don’t count on it. It feels more like 40 years later we’re back to Johnny Rotten ‘singing’ Anarchy in the UK.

 

If May threatens to leave the EU ‘cold’ and trigger a ‘Hard Brexit’, she will simultaneously trigger a whole lot more, and much wider, divisions in the country (or is that countries?!), and that’s even without mentioning an entire minefield of legal, and potentially constitutional, issues. The latter especially because Britain doesn’t have an actual -written- constitution.

For Brussels, it’s easy pickings, and pick they will. This week, they casually raised the UK’s cost of leaving the EU to €100 billion, from estimates varying from €40 billion to €60 billion before. Paddy Power and its equally powerful bookie ilk soon won’t be taking any bets below, say, €150 billion. In that regard, and many others, the EU will do to the UK what it is doing to Greece.

The only way to stand up against that is to show a common front. But there will be no such thing in the Divided Kingdom, not for a long time. Everyone has their favorite scapegoat, for some it’s Nigel Farage, for others David Cameron, George Osborne, Tony Blair, Jeremy Corbyn or Theresa May. And nobody is going to leave their blame trenches. They’re the only places they feel somewhat comfortable, less scared, in.

 

Theresa May, if the polls are to be believed -and given the divisions we might for once-, will have to sit down and negotiate with the multi-headed Hydra that is the EU, ‘strengthened’ by a major election victory, but she will find it the ultimate Pyrrhic victory, because Brussels will have a ball playing her divided ‘nation’.

Scotland can probably easily be seduced with the carrot of EU membership, but more importantly, Juncker and his people can cast doubt on the entire Brexit vote, and they will have many interested takers.

The Brexit negotiations will take at least 2 years. But it could be 3 or 4 years, who knows? May has no power over that duration, unless she walks. She won’t. And as things are drawn out, Juncker et al have all the time and opportunities they want to tell both May and the British public that Brussels has no intention of punishing them, but will have to do so anyway.

After all, Brexit is a threat to the entire European project, and all the leaders of the 27 remaining nations, as well as the vast majority of their domestic opposition parties, are behind that project, no questions asked. And the many thousands of people working their very well-paid jobs in Brussels and Strasbourg are not too critical either.

All in all, the British need to wake up and smell the roses as long as there are any left, and before they have been replaced with less savory odors. Or they will have to seriously wonder whether the Kingdom, united or not, can outlive the Queen, aka the London Bridge.

 

 

“London Bridge is Down” was recently revealed as the secret UK government code for the moment the Queen dies.

 

 

 

 

Mar 312017
 
 March 31, 2017  Posted by at 7:23 pm Finance Tagged with: , , , , , , , ,  7 Responses »


Ray K. Metzker Europe 1961

 

The true face of the EU is presently on display in Greece, not in Germany or Holland or France. Brussels must first fix what’s going wrong in Athens and the Aegean, and there’s a lot going wrong, before it can move on towards the future, indeed towards any future at all. It has a very tough job in Italy as well, which it’s trying hard to ignore.

You can’t say ‘things are fine in Germany’ or ‘Finland is recovering’ and leave it at that. Not when you’re part of a political -and to a large degree also economic- Union, let alone when you’re preaching tightening -and deepening- that Union. Not when parts of that Union are not only doing much worse than others, but are being thoroughly gutted. Then again, they’re being gutted by the very Union itself, so Brussels -and Berlin, The Hague, Paris- can’t very well feign surprise or deny responsibility.

Of course the European continent needs a ‘body’, some form of organization -and it needs it badly- that will allow its nations to cooperate, in 1000 different ways and fields, but the EU is not it. The EU is toxic. It is turning nations against each other as we speak. So much so that it’s crucial for these nations to leave the union and dismantle the entire operation before that happens, because there will be no opportunity left to do it once the toxicity takes over. The UK should count itself lucky for getting out while it did.

 

In its present setting, the EU has no future. And, more importantly, there is no mechanism available to change that setting. It should have been insisted on when the Union was founded, or in one of its various treaties after. This never happened, though, and that’s no coincidence, it was always about power. It’s therefore very hard -if not impossible- to see how the EU could be altered in such a way that it has a chance of survival.

Changing or tweaking a few rules is not going to do it. It’s the very Brussels power structure that is inherently faulty, and those parties that under this structure have the power, are the same ones who would have to change it (against their own interests). There is not a single decision concerning important -for instance economic- EU policies that can be taken against the wishes of Berlin. And Berlin demands what’s good for Germany, even if that is bad for other member states.

In order to save the EU, German representatives would have to vote against their own national interests. But they were elected specifically to protect those interests. There is no better way to illustrate the fatal flaw in the -construction of- the EU. Politicians are elected to protect the interests of their member states, and no member state can possibly prevail but Germany, because it’s the biggest. You can put any label you want on that, but democratic it’s not.

 

Germany and Holland are doing great, according to the most recent economic data. But how is that a reason to celebrate when Greece and Italy, among others, are not doing great at all? Why the difference? It’s not because they spend their money on “Schnaps und Frauen” as Eurogroup president and Dutch demissionary FinMin Dijsselbloem so poetically suggested.

It’s because the Eurogroup has not acted in their best interests. Because when their interests differed from the Dutch and German ones, the latter won out. Easily. And they always will under the present terms. As head of the Eurogroup, Dijsselbloem should represent the best interests of all member nations, not just Holland and Germany.

So should Angela Merkel as the de facto head of the EU. And it’s a very simple fact, easy to explain as well, that these interests can conflict. Obviously, that Merkel can call all the important shots in the EU should be a red, flashing, blinding and deafening alarm sign to start with. Germany should have taken a step back, back in 1960 or so, or even 1999, but for obvious reasons didn’t, and got away with that. It’s about power, it was never about Union other than to increase Power.

European politicians have not been able to make the ‘shift’ from nation to Union. Once they are faced with decisions that may harm their national interests, but benefit those of the EU as a whole, they must revert back, by default, to their own respective nationalistic priorities. Even if they are the ones who complain loudest about rising nationalism and protectionism.

And they’re -kind of- right, or justifiable. German, French, Dutch politicians are not accountable to Slovakian or Slovenian interests. That’s just extra, nice if it happens to coincide with what Berlin or Paris want, but not a priority in any sense of the word. Understandable, but lethal to the idea of a Union.

 

 

There is your fatal EU flaw. The whole common interest idea is just a sales pitch, always was. Which worked fine in times of growth. But take a look now. There’s nothing left. The rich north has used the poorer south to transfer its losses to. It’s not a union, it’s old-fashioned colonialism.

Europe’s political problem can perhaps best be expressed by comparing it to the US. Germany, plus to a lesser extent Holland, and France, have so much power that it would be like California and New York could call all important shots in America. But they can’t. Trump’s election shows that they cannot. Europe doesn’t even have that escape valve.

Delving a bit deeper, Kansas and California may be different cultures, but their people speak the same language, they watch the same TV shows, read the same news. Different cultures, but also part of the same culture. In Europe, most people have no idea who EU head Juncker is, or care, or how he got where he’s at.

Most likely know who Angela Merkel is, but they don’t know that she takes all the important decisions about their lives now. If they did, the pitchforks would be out in minutes. Luckily for Merkel, the EU is as opaque as can be,

90% of Europeans need subtitles to understand Juncker and Merkel. Or for some journalist to translate for them. Everyone in Kansas and California understands what Trump says, no matter how confused he may sound or what they may think of him. He’s American, and so are they. He’s one of them.

Needing subtitles to understand Juncker and Merkel may work in times of plenty. But in lean years, people don’t take kindly to that kind of thing, that someone you can’t even understand, and that you can’t hold to account, makes important decisions that impact you directly, as you see your jobs and savings and homes vanish and the future of your kids disappear.

That is asking for trouble. The EU has that trouble, and it will have much more of it. The only way out of that trouble is for the Union to dismantle itself. But as we can see in the whole Brexit story, that would involve so many interested parties giving up on so many perks that feed them, politicians, businesses, what have you, that none of it would ever happen voluntarily.

The EU has become a farcically intricate web of policies and laws and regulations, all built on fatally flawed foundations, that no citizen of sound mind feels connected with. The only way out of that is to literally get out. The UK got it right, whether they meant it or not.

The EU cannot be reformed because the only people -and the countries they represent- who could do the reforming, profit hugely from the present state of affairs, from not reforming. Fatal. Flaw.

As any builder can tell you who’s ever seen a structure on the verge of collapse: some can be saved and some of them you just have to let go. Raze ’em and start from scratch. Which in many cases, as builders know, is simply the best choice.

Please don’t get me wrong: of course there are tons of things the EU has done that are great, and right, and all that. But it’s the power structure that will inevitably kill it no matter what else it does that actually works. And that structure is beyond redemption.

 

 

Jul 172016
 
 July 17, 2016  Posted by at 4:08 pm Finance Tagged with: , , , , , , , , , ,  7 Responses »


Ben Shahn Daughter of Virgil Thaxton, farmer, near Mechanicsburg, Ohio 1938

Recently, I posted a two-tear old article on facebook.com/TheAutomaticEarth that was shared so many times it seems to make sense to use it for an Automatic Earth article as well. The article asks how toxic the wheat we eat is – or Americans, more specifically-, and why that is.

But first I would like to touch on a closely connected issue, which is Nassim Nicholas Taleb’s ‘war’ on GMOs. Taleb, of Black Swans fame, has been at it for a while, but he’s stepped up his efforts off late.

In 2014, with co-authors Rupert Read, Raphael Douady, Joseph Norman and Yaneer Bar-Yam, he published The Precautionary Principle (with Application to the Genetic Modification of Organisms), an attempt to look at GMOs through a ‘solidly scientific’ prism of probability and complex systems. From the abstract:

The precautionary principle (PP) states that if an action or policy has a suspected risk of causing severe harm to the public domain (affecting general health or the environment globally), the action should not be taken in the absence of scientific near-certainty about its safety. Under these conditions, the burden of proof about absence of harm falls on those proposing an action, not those opposing it. PP is intended to deal with uncertainty and risk in cases where the absence of evidence and the incompleteness of scientific knowledge carries profound implications and in the presence of risks of “black swans”, unforeseen and unforeseable events of extreme consequence.

[..] We believe that the PP should be evoked only in extreme situations: when the potential harm is systemic (rather than localized) and the consequences can involve total irreversible ruin, such as the extinction of human beings or all life on the planet. The aim of this paper is to place the concept of precaution within a formal statistical and risk-analysis structure, grounding it in probability theory and the properties of complex systems. Our aim is to allow decision makers to discern which circumstances require the use of the PP and in which cases evoking the PP is inappropriate.

This puts into perspective the claims made by Monsanto et al that since no harm has ever been proven to arise from the use of GMOs, they should therefore be considered safe. Which is the approach largely taken over by American politics, and increasingly also in Europe and other parts of the world. In their paper, Taleb et al say the approach does not meet proper scientific standards.

This is very close to my personal opinion, expressed in many articles in the past, that GMOs pose such risks on such a wide scale to the food supply of every human being on earth -as well as a much wider selection of organisms- that they should not be legalized before perhaps 100 years of tests have been done by large and independent teams of specialists.

Note that if you, as an individual farmer, as a community or even as a nation, want to ban GMOs but your neighbors do not, you will in the case of many crops not stand a chance of keeping your plants GMO free. For which you can subsequently be sued by the ‘owner’ of the genetically altered plants and seeds.

Also, I think it is irresponsibly dangerous to give a handful of companies (Monsanto, Bayer, DuPont, Syngenta), who all happen to be chemical giants dating back to the 20th century interbellum, and all with questionable pasts, a quasi-monopoly over the -future of- world’s food. Because that is where things will go unless proper principles are applied, both scientific and legal.

One of the main arguments proponents of GMOs use is that through thousand of years mankind has altered crops through selection ‘anyway’, so talking about anything ‘pure’ or ‘natural’ in this regard is not relevant. Taleb put the difference between altering a staple through this ‘generational’ selection on the one hand and the modifying of genes in a lab into a sketch:

The sketch was later annotated by Rahul Goswami, approved and shared by Taleb:

I think it is obvious that ‘generational’ selection through breeding is localized, can be rejected by nature. Genetic modification is something completely different, it takes a much bigger step (a giant leap) and forces itself -as a more or less alien body- onto a much larger eco-system.

It’s not about trying to figure out what works, but about forcing itself upon the world and its inhabitants regardless of the consequences. The precautionary principle is missing where it is most needed.

A few examples of Taleb’s tweets on the topic in the past few days make his stance abundantly clear.

“GMO issue is ignorance of the properties of complex systems/fattails (Monsanto’s 107 Nobels, 80 y.o. are 50 y behind)”

“Anyone pro-GMOs on “scientific” grounds is 50 years behind, ignorant of complexity, or just stupid”

“Monsanto pulled no stop trying to discredit me: 1000 mails to Univ (!),>1000 shill posts. Nada. F***you money works.”

Then, on to the article I started talking about above. As I said, it was written some two years ago by Sarah at the Healthy Home Economist. From the reactions to my posting it on Facebook -a huge number of shares- I surmise that many people A) had no idea that what Sarah describes is common practice, and B) have a profound interest in the topic.

Note: while a fair number of people said they had never heard of this, and/or doubted it was true at all, quite a few confirmed it as common where they live, and not just stateside, but in Scotland, Argentina etc.

Let’s see how we get through this. I don’t want to just post the whole thing, but I’ll need large portions of it.

The Real Reason Wheat is Toxic

The stories became far too frequent to ignore. Emails from folks with allergic or digestive issues to wheat in the United States experienced no symptoms whatsoever when they tried eating pasta on vacation in Italy. Confused parents wondering why wheat consumption sometimes triggered autoimmune reactions in their children but not at other times.

In my own home, I’ve long pondered why my husband can eat the wheat I prepare at home, but he experiences negative digestive effects eating even a single roll in a restaurant. There is clearly something going on with wheat that is not well known by the general public. It goes far and beyond organic versus nonorganic, gluten or hybridization because even conventional wheat triggers no symptoms for some who eat wheat in other parts of the world.

What indeed is going on with wheat? For quite some time, I secretly harbored the notion that wheat in the United States must, in fact, be genetically modified. GMO wheat secretly invading the North American food supply seemed the only thing that made sense and could account for the varied experiences I was hearing about. I reasoned that it couldn’t be the gluten or wheat hybridization. Gluten and wheat hybrids have been consumed for thousands of years.

It just didn’t make sense that this could be the reason for so many people suddenly having problems with wheat and gluten in general in the past 5-10 years.

Finally, the answer came over dinner a couple of months ago with a friend who was well versed in the wheat production process. I started researching the issue for myself, and was, quite frankly, horrified at what I discovered. The good news is that the reason wheat has become so toxic in the United States is not because it is secretly GMO as I had feared (thank goodness!).

The bad news is that the problem lies with the manner in which wheat is grown and harvested by conventional wheat farmers. You’re going to want to sit down for this one. I’ve had some folks burst into tears in horror when I passed along this information before.

Common wheat harvest protocol in the United States is to drench the wheat fields with Roundup several days before the combine harvesters work through the fields as the practice allows for an earlier, easier and bigger harvest

Pre-harvest application of the herbicide Roundup or other herbicides containing the deadly active ingredient glyphosate to wheat and barley as a desiccant was suggested as early as 1980. It has since become routine over the past 15 years and is used as a drying agent 7-10 days before harvest within the conventional farming community.USDA pesticides applied to wheat.

According to Dr. Stephanie Seneff of MIT who has studied the issue in depth and who I recently saw present on the subject at a nutritional Conference in Indianapolis, desiccating non-organic wheat crops with glyphosate just before harvest came into vogue late in the 1990’s with the result that most of the non-organic wheat in the United States is now contaminated with it.

Seneff explains that when you expose wheat to a toxic chemical like glyphosate, it actually releases more seeds resulting in a slightly greater yield: “It ‘goes to seed’ as it dies. At its last gasp, it releases the seed” says Dr. Seneff. According to the US Department of Agriculture, as of 2012, 99% of durum wheat, 97% of spring wheat, and 61% of winter wheat has been treated with herbicides. This is an increase from 88% for durum wheat, 91% for spring wheat and 47% for winter wheat since 1998.

Wheat farmer Keith Lewis: “I have been a wheat farmer for 50 yrs and one wheat production practice that is very common is applying the herbicide Roundup (glyphosate) just prior to harvest. Roundup is licensed for preharvest weed control. Monsanto, the manufacturer of Roundup claims that application to plants at over 30% kernel moisture result in roundup uptake by the plant into the kernels. Farmers like this practice because Roundup kills the wheat plant allowing an earlier harvest.

A wheat field often ripens unevenly, thus applying Roundup preharvest evens up the greener parts of the field with the more mature. The result is on the less mature areas Roundup is translocated into the kernels and eventually harvested as such. This practice is not licensed. Farmers mistakenly call it “dessication.”

Consumers eating products made from wheat flour are undoubtedly consuming minute amounts of Roundup. An interesting aside, malt barley which is made into beer is not acceptable in the marketplace if it has been sprayed with preharvest Roundup. Lentils and peas are not accepted in the market place if it was sprayed with preharvest roundup….. but wheat is ok.. This farming practice greatly concerns me and it should further concern consumers of wheat products.”

This practice is not just widespread in the United States either. The Food Standards Agency in the United Kingdom reports that use of Roundup as a wheat desiccant results in glyphosate residues regularly showing up in bread samples. Other European countries are waking up to to the danger, however. In the Netherlands, use of Roundup is completely banned with France likely soon to follow.

Using Roundup on wheat crops throughout the entire growing season and even as a desiccant just prior to harvest may save the farmer money and increase profits, but it is devastating to the health of the consumer who ultimately consumes the glyphosate residue laden wheat kernels.

The chart below of skyrocketing applications of glyphosate to US wheat crops since 1990 and the incidence of celiac disease is from a December 2013 study published in the Journal Interdisciplinary Toxicology examining glyphosate pathways to autoimmune disease. Remember that wheat is not currently GMO or “Roundup Ready” meaning it is not resistant to its withering effects like GMO corn or GMO soy, so application of glyphosate to wheat would actually kill it.

While the herbicide industry maintains that glyphosate is minimally toxic to humans, research published in the Journal Entropy strongly argues otherwise by shedding light on exactly how glyphosate disrupts mammalian physiology. Authored by Anthony Samsel and Stephanie Seneff of MIT, the paper investigates glyphosate’s inhibition of cytochrome P450 (CYP) enzymes, an overlooked component of lethal toxicity to mammals.

The currently accepted view is that glyphosate is not harmful to humans or any mammals. This flawed view is so pervasive in the conventional farming community that Roundup salesmen have been known to foolishly drink it during presentations! However, just because Roundup doesn’t kill you immediately doesn’t make it nontoxic. In fact, the active ingredient in Roundup lethally disrupts the all important shikimate pathway found in beneficial gut microbes which is responsible for synthesis of critical amino acids.

Friendly gut bacteria, also called probiotics, play a critical role in human health. Gut bacteria aid digestion, prevent permeability of the gastrointestinal tract (which discourages the development of autoimmune disease), synthesize vitamins and provide the foundation for robust immunity. In essence:

Roundup significantly disrupts the functioning of beneficial bacteria in the gut and contributes to permeability of the intestinal wall and consequent expression of autoimmune disease symptoms

In synergy with disruption of the biosynthesis of important amino acids via the shikimate pathway, glyphosate inhibits the cytochrome P450 (CYP) enzymes produced by the gut microbiome. CYP enzymes are critical to human biology because they detoxify the multitude of foreign chemical compounds, xenobiotics, that we are exposed to in our modern environment today.

As a result, humans exposed to glyphosate through use of Roundup in their community or through ingestion of its residues on industrialized food products become even more vulnerable to the damaging effects of other chemicals and environmental toxins they encounter! What’s worse is that the negative impact of glyphosate exposure is slow and insidious over months and years as inflammation gradually gains a foothold in the cellular systems of the body.

The consequences of this systemic inflammation are most of the diseases and conditions associated with the Western lifestyle: Gastrointestinal disorders, Obesity ,Diabetes, Heart Disease, Depression, Autism, Infertility, Cancer, Multiple Sclerosis, Alzheimer’s, etc.

In a nutshell, Dr. Seneff’s study of Roundup’s ghastly glyphosate which the wheat crop in the United States is doused with uncovers the manner in which this lethal toxin harms the human body by decimating beneficial gut microbes with the tragic end result of disease, degeneration, and widespread suffering

[..] The bottom line is that avoidance of conventional wheat in the United States is absolutely imperative even if you don’t currently have a gluten allergy or wheat sensitivity. The increase in the amount of glyphosate applied to wheat closely correlates with the rise of celiac disease and gluten intolerance.

Dr. Seneff points out that the increases in these diseases are not just genetic in nature, but also have an environmental cause as not all patient symptoms are alleviated by eliminating gluten from the diet. The effects of deadly glyphosate on your biology are so insidious that lack of symptoms today means literally nothing. If you don’t have problems with wheat now, you will in the future if you keep eating conventionally produced, toxic wheat!

I guess we can leave it at that for now. Do go to the original article for more. Whether you look at it from a scientific viewpoint, as Taleb et al do, or from a common sense one, as Sarah does, the common thread seems obvious: Monsanto and other rich chemical giants seek to be the sole providers -even owners- of the world’s food, handed to us for free by nature and generations of our ancestors.

And to achieve that magnitude of power -and riches- they are more than willing to literally drive over sick and dead bodies. Once again, Taleb:

The precautionary principle (PP) states that if an action or policy has a suspected risk of causing severe harm to the public domain (affecting general health or the environment globally), the action should not be taken in the absence of scientific near-certainty about its safety. Under these conditions, the burden of proof about absence of harm falls on those proposing an action, not those opposing it.

That is not what’s happening, and there’s not much time left to start applying it before it’s too late. Because GMOs, once they’ve been introduced in a large enough environment, are near impossible to get rid of.

To end on a somewhat happier note, Taleb thinks that Monsanto is doing quite poorly these days, financially. Then again, that’s why Bayer wants to buy them, and that would only mean a continuation or even increase of the present practices.

What we need is decision makers who understand the science of complex systems, probability and the precautionary principle. And I don’t know about you, but when I look at who’s vying to be the leaders of the US, UK and many other nations, I think we’re a long way away from that.

Only Putin seems to get it. His stated goal is to make Russia the largest producer of organic food in the world. So maybe there is still hope.

Nov 262014
 
 November 26, 2014  Posted by at 11:11 am Finance Tagged with: , , , , , , , , , , ,  8 Responses »


Arthur Rothstein Oregon or Bust, family fleeing South Dakota drought Jul 1936

Banking’s Toxic Culture ‘Will Take A Generation To Clean Up’ (Guardian)
Consumer Confidence in US Unexpectedly Dropped in November (Bloomberg)
Case Shiller Reports “Broad-Based Slowdown For Home Prices” (Zero Hedge)
BEA Revises 3rd Quarter 2014 US GDP Growth Upwards to 3.89% (CMI)
Refinancing Boom Exposing Risks in US Property Bonds (Bloomberg)
Abe Sales Tax Backfiring With More Debt Not Less (Bloomberg)
Japan Is Running Out of Options (Bloomberg)
Eurozone ‘Major Risk To World Growth’: OECD (CNBC)
Do German Bonds Face Japanification? (CNBC)
UK Housing Market Cools Rapidly (Guardian)
Commodity Exporters Like Cheaper Currencies (A. Gary Shilling)
On This Day, 138 Years Ago, The Idea Of QE Was Born (Art Cashin)
A Bearish Hedge Fund Bets Against the Bulls and Still Profits (NY Times)
Saudi Arabia Says No One Should Cut Output, Oil Will Stabilize
Pre-OPEC Producer Meeting Fails to Deliver Oil Output Cut (Bloomberg)
The Unbearable Over-Determination Of Oil (Ben Hunt)
Who Will Wind Up Holding the Bag in the Shale Gas Bubble? (Naked Capitalism)
US Oil Producers Can’t Kick Drilling Habit (FT)
The Environmental Downside of the Shale Boom (NY Times)
Obama Climate Envoy: Fossil Fuels Will Have To Stay In The Ground (Guardian)
Cracks Form in Berlin Over Russia Stance (Spiegel)
Europe Looks ‘Aged And Weary’: Pope Francis (CNBC)

Why should it? Just regulate the heebees out of them or close them down.

Banking’s Toxic Culture ‘Will Take A Generation To Clean Up’ (Guardian)

Overhauling the broken culture of high street banking will take a generation to achieve, according to a report that found UK banks have received 20m customer complaints since the financial crisis. The report, by the thinktank New City Agenda, calculated that in the last 15 years the retail operations of banks had incurred £38.5m in fines and redress for mistreatment of customers. Andre Spicer, a professor at Cass Business School and the report’s lead author, said: “Most people we spoke to told us that real change will take at least five years. “There was some uncertainty as to how these changes were being translated into good practice at the customer coalface. Many culture change initiatives are fragile, and their success is not ensured. It’s clear to us that much work still needs to be done.”

The report concluded that it will take a generation to end a sales culture exposed by the 2008 crisis. It said UK banks did not address cultural change until the eruption of the Libor scandal in 2012, having failed to act after the emergence of mis-selling debacles such as the payment protection insurance scandal. “A toxic culture, decades in the making, will take a generation to clean up,” said the founders of New City Agenda, who are Labour peer Lord McFall, Conservative MP David Davis, and Liberal Democrat peer Lord Sharkey. They added: “Some frontline staff told us they still feel under significant pressure to sell. Complaints continue to rise and trust remains extremely low. Most of the people we talked to believed that real change, and as a consequence the better treatment of customers, will take some time to achieve.”

Read more …

Will they ever stop using the word ‘unexpectedly’? It’s certainly a favorite over at Bloomberg, and not just there.

Consumer Confidence in US Unexpectedly Dropped in November (Bloomberg)

Consumer confidence unexpectedly declined in November to a five-month low as Americans became less upbeat about the economy and labor market. The Conference Board’s index fell to 88.7 this month from an October reading of 94.1 that was the strongest since October 2007, the New York-based private research group said today. The figure last month was weaker than the most pessimistic estimate in a Bloomberg survey of economists. The decline this month interrupts a steady pickup in sentiment since the middle of the year and shows attitudes about the economy would benefit from bigger wage gains. While confidence slipped, buying plans picked up, indicating spending will be sustained on the heels of stronger job growth and lower fuel costs.

The drop this month “doesn’t change our view that the trend in consumer confidence is moving upwards,” said David Kelly, chief global strategist at JPMorgan Funds in New York. “Gasoline prices are down, the unemployment rate is down, home prices are gradually rising, and stock prices are certainly rising.” The median forecast of 75 economists in the Bloomberg survey called for a reading of 96, with estimates ranging from 93.5 to 99 after a previously reported October index of 94.5. The Conference Board’s measure averaged 96.8 during the last expansion and 53.7 during the recession that ended in June 2009.

Read more …

I’m wondering how this squares with that GDP revision.

Case Shiller Reports “Broad-Based Slowdown For Home Prices” (Zero Hedge)

While the just revised Q3 GDP surprised everyone to the upside, the Case Shiller index for September which was also reported moments ago, showed yet another month of what it called a “Broad-based Slowdown for Home Prices.” The bad news: the 20-City Composite gained 4.9% year-over-year, compared to 5.6% in August. However, this was modestly above the 4.6% expected. However, what was more troubling is that on a sequential basis, the Top 20 Composite MSA posted a modest -0.03% decline, the first sequential drop since February. And from the report itself: “The National Index reported a month-over-month decrease for the first time since November 2013. The Northeast region reported its first negative monthly returns since December 2013 and its worst annual returns since December 2012 due to weaknesses in Washington D.C. and Boston.”

Read more …

Some useful details.

BEA Revises 3rd Quarter 2014 US GDP Growth Upwards to 3.89% (CMI)

In their second estimate of the US GDP for the third quarter of 2014, the Bureau of Economic Analysis (BEA) reported that the economy was growing at a +3.89% annualized rate, up +0.35% from their first estimate for the 3rd quarter but still down some -0.70% from the 4.59% annualized growth rate registered during the second quarter. The modest improvement in the headline number masks substantial changes in the reported sources of the annualized growth. The previously reported significant inventory draw-down almost vanished completely (dropping to a mere -0.12% impact on the headline number). Improving fixed investments added +0.23% to the headline, with nearly all of that improvement from spending for commercial equipment. Consumer spending for goods was also reported to be growing 0.27% in this report, while consumer spending for services was essentially unchanged (+0.02%).

Offsetting those upside revisions was a significant erosion in the previously reported export growth, which subtracted -0.38% from the headline. The contribution from imports in the headline number also weakened, taking the annualized growth down another -0.17%. Governmental spending was also revised down slightly, knocking another -0.07% from the headline. Nearly all of that downward revision to governmental spending was from reduced state and local investment in infrastructure. Despite the increased consumer spending, households actually took a disposable income hit in this revision – losing $146 in annualized per capita disposable income (now reported to be $37,525 per annum). This is down $344 per year from the 4th quarter of 2012. The spending growth reported above came exclusively from reduced household savings, which dropped a full 0.5% in this report.

As mentioned last month, softening energy prices play a major role in this report, since during the 3rd quarter dollar-based energy prices were plunging (and have continued their dive since). US “at the pump” gasoline prices fell from $3.68 per gallon to $3.32 during the quarter, a 9.8% quarter-to-quarter decline and a -33.8% annualized rate – pushing most consumer oriented inflation indexes into negative territory. During the third quarter (i.e., from July through September) the seasonally adjusted CPI-U index published by the Bureau of Labor Statistics (BLS) was actually mildly dis-inflationary at a -0.10% (annualized) rate, and the price index reported by the Billion Prices Project (BPP — which arguably reflected the real experiences of American households) was slightly more dis-inflationary at -0.18% (annualized).

Yet for this report the BEA effectively assumed a positive annualized quarterly inflation of 1.40%. Over reported inflation will result in a more pessimistic growth data, and if the BEA’s numbers were corrected for inflation using the appropriate BLS CPI-U and PPI indexes the economy would be reported to be growing at a spectacular 5.42% annualized rate. If we were to use just the BPP data to adjust for inflation, the quarter’s growth rate would have been an astounding 5.52% annualized rate.

Read more …

The smell of volatility on the morning.

Refinancing Boom Exposing Risks in US Property Bonds (Bloomberg)

A $40 million penalty wasn’t enough to keep the owner of San Francisco’s Parkmerced apartment complex from the chance to lock in record-low interest rates and take advantage of the property’s $1.5 billion value. While a landlord willing to pay almost 63 times the average fee to refinance early is a bullish sign for commercial real estate, it’s less so for bond investors facing $295 billion of mortgages that come due during the next three years. That’s because the securities are increasingly tied to the market’s weakest properties, many of them financed during the peak of the real-estate boom in 2007, as the strongest are paid off. More property owners are jumping on a drop in financing costs and loosening terms to pay off their mortgages. That helped shrink the amount of debt maturing before the end of 2017 from $332 billion at the start of 2014, according to Bank of America data.

“If you’re a well-capitalized entity, you’re going to do it,” Richard Hill, a debt analyst at Morgan Stanley, said. That could leave commercial-mortgage bond investors “holding the bag on a bunch of lower-quality loans.” Properties such as skyscrapers, shopping malls, hotels and apartment complexes are attracting investors from sovereign wealth funds to insurance companies as they seek higher-yielding assets amid six years of Federal Reserve policies to hold short-term interest rates near zero. Wall Street banks are on pace to issue $100 billion of securities backed by commercial real estate this year after issuance doubled to $80 billion in 2013, according to data compiled by Bloomberg. Sales, which peaked at $232 billion in 2007, are poised to climb to $140 billion in 2015, Credit Suisse Group AG analysts led by Roger Lehman forecast in a Nov. 21 report.

Sales of the securities also are being fueled by rules that will require banks to retain some portion of loans that are sold to investors as securities, according to Morgan Stanley’s Hill. That may increase financing costs when they take effect in 2016. Ray Potter, founder of R3 Funding, a New York-based firm that arranges financing for landlords and investors, said he’s advising clients not to wait to refinance as economists forecast the Fed will raise rates next year for the first time since 2006. There has been a surge in borrowers looking to refinance in the past couple of months, Potter said. “If you like that coupon, lock it in for 10 years,” he said. While the interest rate could dip even lower, it’s not worth the risk because “when it moves higher it moves fast,” he said.

Read more …

“Japan remains doomed by its demographics and, of course, by its horrible debt.”

Abe Sales Tax Backfiring With More Debt Not Less (Bloomberg)

What started as a plan to reduce Japan’s debt is turning into a reason to issue more bonds. Prime Minister Shinzo Abe’s administration implemented a higher sales tax in April to boost revenue as government liabilities ballooned to 1 quadrillion yen ($8.5 trillion), more than double the nation’s yearly economic output. Consumption plunged and the economy fell into a recession, prompting companies including Mirae Asset Global Investments Co. and High Frequency Economics to predict even more sovereign debt sales to revive growth. “The government’s policies have failed,” Will Tseng, a money manager in Taipei at Mirae Asset, which manages about $62 billion, said in an e-mail Nov. 20. “They’re still issuing more debt and printing more money to try to help the economy. They’re in a really bad cycle.” He said he’s staying away from Japanese bonds.

The cost of protecting Japan’s debt from default surged for eight straight days and the yen tumbled to a seven-year low as Abe called a snap election and delayed plans to further increase the sales tax by 18 months. Bank of Japan Governor Haruhiko Kuroda on Oct. 31 boosted the amount of government bonds he plans to buy to as much as 12 trillion yen a month, a record. Japan will go back to its routine of borrowing more to fund plans to spur growth, said Carl Weinberg, the chief economist at High Frequency Economics in Valhalla, New York. What it needs to do is allow immigration to keep the population from shrinking, he said Nov. 18 on the “Bloomberg Surveillance” radio program. “The population and the economy are contracting, and the debt is growing, and that’s an unsustainable trend,” Weinberg said. “Japan remains doomed by its demographics and, of course, by its horrible debt.”

Read more …

” .. Kuroda now has a budding mutiny on his hands. Many of his staffers think the central bank has already gone too far to weaken the yen and buy virtually every bond in sight.”

Japan Is Running Out of Options (Bloomberg)

The New York Times recently lit up the Japanese Twittersphere with a cartoon that was a little too accurate for comfort. In it, a stretcher marked “economy” is loaded into an ambulance with “Abenomics” painted on the side; the vehicle lacks tires and sits atop cinder blocks. Prime Minister Shinzo Abe looks on nervously, holding an IV bag. The image aptly sums up Japan’s failure to gain traction in its push to end deflation. The Bank of Japan’s unprecedented stimulus and Abe’s pro-growth reforms have yet to spur a recovery in inflation and gross domestic product growth, and the country is yet again in recession. Worse, BOJ Governor Haruhiko Kuroda is rapidly running out of weapons in his battle to eradicate Japan’s “deflationary mindset.”

Minutes from the central bank’s Oct. 31 board meeting, at which officials surprised the world by expanding an already massive quantitative-easing program, show that Kuroda now has a budding mutiny on his hands. Many of his staffers think the central bank has already gone too far to weaken the yen and buy virtually every bond in sight. That’s a problem for Kuroda and Abe in two ways.

First, board members warned that the costs of further monetary stimulus outweigh the benefits. We already knew that Kuroda had only won approval for his shock-and-awe announcement by a paper-thin 5-4 margin, and that Takahide Kiuchi dissented when the BOJ boosted bond sales to about $700 billion annually. But the minutes suggest Kuroda came as close to any modern BOJ leader ever has to defeat on a policy move. Cautionary voices like Kiuchi’s worry that the BOJ could be “perceived as effectively financing fiscal deficits.” I’d say it’s too late for that. Of course the BOJ is acting as the Ministry of Finance’s ATM, just as Abe intended when he hired Kuroda. Still, the fact is that Kuroda’s odds of getting away with yet another Friday surprise are nil at best.

Second, maintaining stability in the bond market just got harder. The only way Kuroda can stop 10-year yields – currently 0.44% – from spiking as he tries to generate 2% inflation is by making ever bigger bond purchases. But fellow BOJ board members will be giving Kuroda less latitude to cap market rates. Japan is lucky in one way: Given that more than 90% of public debt is held domestically, Tokyo can the avoid wrath of the “bond vigilantes.” Kuroda further neutralized these activist traders by saying there’s “no limit” to what he can do to make Abenomics work. The fact that so many of his colleagues are skeptical of the policy, however, undermines Kuroda’s credibility. If markets begin to doubt his staying power, yields are sure to rise.

Read more …

The entire world is a risk to world growth.

Eurozone ‘Major Risk To World Growth’: OECD (CNBC)

The eurozone poses a serious danger for global growth, with the world’s economy already “in low gear”, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday. “The euro area is grinding to a standstill and poses a major risk to world growth, as unemployment remains high and inflation persistently far from target,” the OECD said in the 96th edition of its Economic Outlook. The euro zone’s fledgling recovery—which started at the end of 2013—has been a cause for concern over recent months, with gross domestic product (GDP) rising only 0.2% quarter-on-quarter between July and September. Policymakers are also battling with very low inflation and high unemployment—around one-quarter of Spaniards and Greek remain without jobs.

The OECD sees euro zone economic growth at 0.8% this year. This is better than the economic contraction the currency union suffered in 2012 and 2013, but below average growth of 1.1% between 2002 and 2011. By comparison, the OECD expects the world’s economy to expand by 3.3% this year. As with the euro zone, this is an improvement on 2012 and 2013, but below the 2002-2011 average of 3.8%.”A moderate improvement in global growth is expected over the next two years, but with marked divergence across the major economies and large risks and vulnerabilities,” the OECD said.

A euro zone analyst at the Economist Intelligence Unit said the risks to the world economy posed by the euro zone were even larger than the OECD forecast.”The euro zone’s fundamental institutional deficiencies are now exacting a damaging price, by hampering the formulation and implementation of policy responses to the ongoing slump,” said Aengus Collins in a research note emailed after the OECD report.”In addition, the OECD overlooks political risk, which is rising sharply in line with voter disaffection.” Major countries expected to post solid growth include the U.S., which the OECD predicts will expand by 2.2% this year and 3.1% next. China, meanwhile, is seen growing by an impressive 7.3% in 2014, before slowing to 7.1% in 2015.

Read more …

More interestingly, where will that leave Spanish and Italian bonds?

Do German Bonds Face Japanification? (CNBC)

The euro zone’s long disinflation has spurred fears it will tumble all the way to Japan-style deflation, with some concerned yields on the continent’s safe-haven bond, the German bund, could remain depressed for the long haul. “While we are still not convinced that the euro zone is the new Japan, despite the many similarities in their economic predicaments, we are increasingly of the view that the 10-year Bund yield will remain exceptionally low for at least the next couple of years,” John Higgins, chief markets economist at Capital Economics, said in a note Wednesday. The 10-year bund is yielding around 0.75%, around all-time lows, compared with the 10-year Japanese government bond (JGB) at around 0.45% after a decades-long downtrend.

Japan’s central bank cut its benchmark interest rate to 0.5% in 1995, a move that pushed the 10-year JGB yield below 1% after three years, Higgins noted. “Investors did not know in 1998 that Japan’s key policy rate would remain near zero for the next 16 years (and counting). But the prospect of it remaining there for the foreseeable future was enough to keep the 10-year yield quite firmly anchored,” he said. “We see no reason why a similar outcome couldn’t happen in Germany,” as the bund yield fell below 1% after the ECB cut its main rate to 0.5% in mid-2013.

Read more …

” .. new mortgage approvals hit a 17-month low of 37,076 in October. That total was down nearly a quarter from January’s 76-month high of 48,649. It was also down 16% year on year ..”

UK Housing Market Cools Rapidly (Guardian)

Britain’s housing market is cooling rapidly as a result of tougher Bank of England mortgage market requirements, high prices and the uncertainty caused by the coming general election. The prospect of higher interest rates at some point in 2015 is also dampening demand. Figures from the British Bankers’ Association showed a sharp slowdown in mortgage approvals, while Nationwide building society has reported a drop in lending volumes. The BBA said that new mortgage approvals hit a 17-month low of 37,076 in October. That total was down nearly a quarter from January’s 76-month high of 48,649. It was also down 16% year on year. However, a house price crash is unlikely, according to new forecasts. Halifax’s forecasts for 2015 point to a further rise in values of 3% to 5% next year, despite uncertainty about the general election. Earlier this month Halifax reported that house prices fell during October and recorded their smallest quarterly increase in nearly two years.

The October survey by the Royal Institution of Chartered Surveyors found that buyer inquires shrank for the fourth month running. Half-year results from Nationwide building society added to the gathering evidence of a weakening market, with net lending down by £2bn to £3.6bn in the six months to 30 September – although lending to landlords rose slightly. The society, which reported a doubling in pre-tax profits and higher savings inflows, said part of the reason net lending was down was tougher competition from other major mortgage providers, such as Halifax and Santander. “The BBA data add to now pretty widespread and compelling evidence that the housing market has come well off the boil,” said Howard Archer, an economist at IHS Insight. “The fact that mortgage approvals are substantially below their January peak levels – and falling – after lenders have got to grips with the new mortgage regulations points to an underlying moderation in housing market activity.”

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“The Canadian, Australian and New Zealand dollars as well as the Brazilian real, Russian ruble and other emerging economies are all playing this game. Those countries want weaker currencies to offset declining commodity exports ..”

Commodity Exporters Like Cheaper Currencies (A. Gary Shilling)

The U.S. dollar is strengthening for reasons that go beyond deliberate devaluations of the euro and yen. Major commodity exporters are also purposely pushing down their currencies as commodity prices drop. The Canadian, Australian and New Zealand dollars as well as the Brazilian real, Russian ruble and other emerging economies are all playing this game. Those countries want weaker currencies to offset declining commodity exports. In the past year, the head of the Reserve Bank of Australia has expressed sympathy for a weaker Aussie in view of soft mineral exports and a moderately growing economy.

Recently, the head of the Reserve Bank of New Zealand said that, even with the drop in the New Zealand dollar, the kiwi is at “unjustifiable” levels and isn’t reflecting the weakness in the global commodity market. Earlier, the kiwi was propelled by strong meat and dairy exports to China and robust prices for milk, which have plunged. New Zealand’s economic growth is in jeopardy. The Bank of Canada recently left its benchmark interest rate unchanged at 1% and expects inflation to be near its 2% target. But a decline in energy and other commodity prices has hurt the Canadian economy, which is growing at the same slow 2% rate as the U.S. The commodity bubble in the early 2000s prompted producers of industrial commodities, such as copper, zinc, iron ore and coal, to increase production. New output resulted just in time for the price collapse in the 2007 to 2009 recession.

The subsequent rebound didn’t hold and commodity prices have been falling since early 2011, no doubt due to excess supply of industrial commodities and slower growth in China, the world’s biggest commodity user. The price decreases are also due to sluggish expansions in developed countries and, in the case of agricultural products, good weather and more acreage being planted. So far this year, grain prices are falling, as are industrial commodity prices. Crude oil prices rose until mid-June, but have since dropped 25% and now are the lowest in six years. Spurred by fracking, U.S. oil output is exploding as economic softness in Europe and China and increased conservation have curtailed consumption. Copper, which is used in everything from plumbing fixtures to computers, is dropping in price as supply leaps and demand lags.

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“Several months earlier, the stock market had begun to plunge violently. Soon there were layoffs and business closings and the economy was having a tough time getting back in gear.”

On This Day, 138 Years Ago, The Idea Of QE Was Born (Art Cashin)

On this day in 1876, a group of influential, yet irate, Americans met in Indianapolis. Their primary purpose was to send a message to Washington on how to get the economy moving again. America at the time was going through a difficult and unusual period. Several months earlier, the stock market had begun to plunge violently. Soon there were layoffs and business closings and the economy was having a tough time getting back in gear. And for months now, strange things were happening, the money supply seemed not to be growing, real estate values were stagnant to slipping, and commodity prices were heading lower. (How unusual.)

So this group decided that what was needed was re-inflation (put more money in everyone’s hands, you see). The method they proposed was to issue more and more money. Cynics called them “The Greenback Party”. And on this day, the Greenbacks challenged Washington by running an independent for President of the United States. His name was Peter Cooper. He lost but several associate whackos were elected to Congress. To celebrate stop by the “Printing Press Lounge”. (It’s down the block from the Fed.) Tell the bartender to open the tap and just keep pouring it out till you say stop. Reassure the guy next to you (while you can still talk) that now we have more enlightened people in Washington. Try not to spill your drink if he falls off the stool laughing. There wasn’t much raucous laughter on Wall Street Monday, but the bulls were beaming with smiles as they managed to continue their string of bull runs.

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” .. the stimulus policies of the Federal Reserve and other central banks have the power to drive stocks higher. But they will ultimately be self-defeating ..”

A Bearish Hedge Fund Bets Against the Bulls and Still Profits (NY Times)

The stock market has been rising for years, hitting new highs almost every week. So how is it that one of Wall Street’s most bearish investors can claim to have profited strongly over this period? Universa Investments, a hedge fund founded by Mark Spitznagel, is one of the few firms that is set up with the aim of making money in an economic and financial collapse. In the market turmoil of 2008, Mr. Spitznagel earned large returns. Large pessimistic bets usually lose a lot of money when stocks are rising, as they have ever since 2009. But Universa is saying that its investment strategy has been able to produce consistent gains since then, including a 30% return last year, according to firm materials that were reviewed by The New York Times.

In comparison, the benchmark Standard & Poor’s 500-stock index in 2013 had a return of 32% with dividends reinvested. Insurance policies that pay out after disasters do not produce big returns when the catastrophe fails to occur. But since 2008, some investors have been looking for ways to ride the market higher while having bets in place that will notch up huge gains if the system teeters on the brink once again. At Universa, Mr. Spitznagel’s strategy stems from his skepticism toward government efforts to revive the economy. He acknowledges that the stimulus policies of the Federal Reserve and other central banks have the power to drive stocks higher. But they will ultimately be self-defeating, he contends.

This theory holds that another crash will occur when the Fed stops being able to stoke the economy. Universa’s strategy seeks to profit when confidence in the central banks is strong — and when it evaporates. “The Fed has created a trap in this yield-chasing environment,” Mr. Spitznagel said in an interview, during which he gave an overview of Universa’s approach. “It allows you to be long, but it gets you in position to be short when it’s all over,” he said.

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Beggar thy neighbor, oil edition.

Saudi Arabia Says No One Should Cut Output, Oil Will Stabilize

Saudi Arabia’s oil minister said tumbling crude prices will stabilize and there’s no need for producing nations to cut output. “No one should cut and market will stabilize itself,” Ali Al-Naimi told reporters a day before OPEC meets in Vienna. “Why Saudi Arabia should cut?The U.S. is a big producer too now. Should they cut?” Oil ministers from the 12 nations in the Organization of Petroleum Exporting Countries meet tomorrow in Vienna to discuss their combined production at a time when prices have fallen 30 percent since June. Crude fell in part on speculation that Saudi Arabia and other OPEC states wouldn’t take the necessary measures to curb a surplus. Venezuela’s Foreign Minister Rafael Ramirez met with officials from Saudi Arabia, Mexico and Russia yesterday. While they agreed to monitor prices, they made no joint commitment to lower their supplies.

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It’s not going to happen. They are in too much distress.

Pre-OPEC Producer Meeting Fails to Deliver Oil Output Cut (Bloomberg)

Nations supplying a third of the world’s oil failed to pledge output cuts after meeting in Vienna today. Russia can withstand prices even lower than they are now, the country’s biggest producer said. Officials from Venezuela, Saudi Arabia, Mexico and Russia said only that they would monitor prices. Crude futures sank to a four-year low in New York. OPEC meets in two days, with analysts split evenly over whether the group will lower output in response to the crash in prices. Crude fell into a bear market this year amid the highest U.S. production in 31 years and speculation that Saudi Arabia and other members of OPEC won’t do enough to curb a surplus. Prices are below what nine of group’s 12 members need to balance their national budgets, data compiled by Bloomberg show.

“All these countries are significantly affected by lower prices and want to see cuts, but it is a big step between having these talks and taking actual coordinated action to achieve this,” Richard Mallinson, geopolitical analyst at Energy Aspects, said by phone today. “The key is going to be what happens amongst OPEC members.” Brent, the global benchmark, fell as much as 2.1% in London, having gained 1% before the four-way meeting concluded. It settled at $78.33 a barrel. West Texas Intermediate sank 2.2% to $74.09, the lowest since Sept. 21, 2010. The discussions didn’t result in any joint commitment to reduce supplies, Rafael Ramirez, Venezuela’s Foreign Minister and representative to OPEC, told reporters after the meeting. All parties said they were worried about the oil price, he said.

“There is an overproduction of oil,” Igor Sechin, Chief Executive of OAO Rosneft, Russia’s largest oil company, said after the meeting. “Supply is exceeding demand, but not critically” and Russia wouldn’t need to cut production immediately even if oil fell below $60 a barrel, he said. Russia, Saudi Arabia, Mexico and Venezuela between them produced 27.8 million barrels a day of oil last year, according to data from BP Plc. Total global output was 86.8 million barrels daily, the oil company’s figures show. OPEC, which meets to discuss output in Vienna on Nov. 27, pumped 30.97 million barrels a day last month, according to data compiled by Bloomberg.

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Too many opinions, too many variables.

The Unbearable Over-Determination Of Oil (Ben Hunt)

You know you’re in trouble when the Fed’s Narrative dominance of all things market-related shows up in the New York Times crossword puzzle, the Saturday uber-hard edition no less. It’s kinda funny, but then again it’s more sad than funny. Not a sign of a market top necessarily, but definitely a sign of a top in the overwhelming belief that central banks and their monetary policies determine market outcomes, what I call the Narrative of Central Bank Omnipotence. There is a real world connected to markets, of course, a world of actual companies selling actual goods and services to actual people. And these real world attributes of good old fashioned economic supply and demand – the fundamentals, let’s call them – matter a great deal. Always have, always will. I don’t think they matter nearly as much during periods of global deleveraging and profound political fragmentation – an observation that holds true whether you’re talking about the 2010’s, the 1930’s, the 1870’s, or the 1470’s – but they do matter.

Unfortunately it’s not as simple as looking at some market outcome – the price of oil declining from $100/bbl to $70/bbl, say – and dividing up the outcome into some percentage of monetary policy-driven causes and some percentage of fundamental-driven causes. These market outcomes are always over-determined, which is a $10 word that means if you added up all of the likely causes and their likely percentage contribution to the outcome you would get a number way above 100%. Are recent oil price declines driven by the rising dollar (a monetary policy-driven cause) or by over-supply and global growth concerns (two fundamental-driven causes)? Answer: yes. I can make a case that either one of these “explanations” on its own can account for the entire $30 move. Put them together and I’ve “explained” the $30 move twice over. That’s not very satisfying or useful, of course, because it doesn’t help me anticipate what’s next.

Should I be basing my risk assessment of global oil prices on an evaluation of monetary policy divergence and what this means for the US dollar? Or should I be basing my assessment on an evaluation of global supply and demand fundamentals? If both, how do I weight these competing explanations so that I don’t end up overweighting both, which (not to get too technical with this stuff) will have the effect of sharply increasing the volatility of my forward projections, even if I’m exactly right in the ratio of the relative contribution of the potential explanatory factors. Here’s the short answer. I can’t.

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Note: this is shale gas, not oil. That’s another bubble, and just as big.

Who Will Wind Up Holding the Bag in the Shale Gas Bubble? (Naked Capitalism)

We’ve been writing off and on about how the sudden fall in gas prices has been expected to put a lot of shale gas development on hold. In fact, quite a few analysts believe that one of the big Saudi aims in refusing to support oil prices was to dent the prospects for competitive energy sources, not just renewables like wind and hydro power, but shale gas. Even though OilPrice reported that US rig count had indeed fallen as oil prices plunged, John Dizard at the Financial Times (hat tip Scott) gives a more intriguing piece of the puzzle: the degree to which production is still chugging along despite it being uneconomical. The oil majors have been criticized for levering up to continue developing when it is cash-flow negative; they are presumably betting that prices will be much higher in short order. But the same thing is happening further down the food chain, among players that don’t begin to have the deep pockets of the industry behemoths: many of them are still in “drill baby, drill” mode. Per Dizard:

Even long-time energy industry people cannot remember an overinvestment cycle lasting as long as the one in unconventional US resources. It is not just the hydrocarbon engineers who have created this bubble; there are the financial engineers who came up with new ways to pay for it.

And while the financial engineers will as always do just fine, lenders are another matter:

By now, though, there is an astonishing amount of debt that continues to build up on the smaller E&P companies’ balance sheets. According to Gavekal, the research group, even before the oil price plunge, aggregate debt-to-equity ratios in the smaller publicly traded energy companies are now at 93%, up from around 70% in 2012 and 2013, and around 50% between 2005 and 2011. This in a highly cyclical industry that used to go through periodic banker-driven shakeouts and even bankruptcies.

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John Dizard from last Friday: the debt boom can’t stop without wreaking havoc across the industry.

US Oil Producers Can’t Kick Drilling Habit (FT)

You would think, what with the recent oil price crash, the people who finance US oil and gas producers would have learnt their lesson. But not yet. For the past several years, and despite the once again widening gap between capital spending and cash flow, Wall Streeters have stepped in like an overindulgent parent to pay for the producers’ drilling habit. “Isn’t he cute!” they exclaim, as an exploration and production boy crashes another budget. “So talented! Did you see how many frac stages he can do now, and how tight his well spacing is?” Of course the exploration and production companies and their lenders have been to expensive accounting therapy sessions, where the concerned Wall Street family, accompanied by the sullen E&P operators, are told that they have to make a really sincere effort to match finding, drilling and completion expenditures to internally generated cash flow.

Everyone promises the accountant that that irresponsible land purchase or midstream commitment was the last mistake. From now on, cash flow break-even. Right. By now, though, there is an astonishing amount of debt that continues to build up on the smaller E&P companies’ balance sheets. According to Gavekal, the research group, even before the oil price plunge, aggregate debt-to-equity ratios in the smaller publicly traded energy companies are now at 93%, up from around 70% in 2012 and 2013, and around 50% between 2005 and 2011. This in a highly cyclical industry that used to go through periodic banker-driven shakeouts and even bankruptcies.

Particularly in the gas and natural gas liquids drilling directed sector, every operator (and their financier) is waiting for every other operator to stop or slow their drilling programmes, so there can be some recovery in the supply-demand balance. I have been hearing a lot of buzz about cutbacks in drilling budgets for 2015, but we will not really know until the companies begin to report in January and February. Then we will find out if they really are cutting back, using their profits on in-the-money hedge programmes to keep their debt under control, and taking impairment charges on properties that did not really pay off.

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Nasty report.

The Environmental Downside of the Shale Boom (NY Times)

Since 2006, when advances in hydraulic fracturing — fracking — and horizontal drilling began unlocking a trove of sweet crude oil in the Bakken shale formation, North Dakota has shed its identity as an agricultural state in decline to become an oil powerhouse second only to Texas. A small state that believes in small government, it took on the oversight of a multibillion-dollar industry with a slender regulatory system built on neighborly trust, verbal warnings and second chances. In recent years, as the boom really exploded, the number of reported spills, leaks, fires and blowouts has soared, with an increase in spillage that outpaces the increase in oil production, an investigation by The New York Times found. Yet, even as the state has hired more oil field inspectors and imposed new regulations, forgiveness remains embedded in the Industrial Commission’s approach to an industry that has given North Dakota the fastest-growing economy and lowest jobless rate in the country. [..]

Continental Resources hardly seems likely to walk away from its 1.2 million leased acres in the Bakken. It has reaped substantial profit from the boom, with $2.8 billion in net income from 2006 through 2013. But the company, which has a former North Dakota governor on its board, has been treated with leniency by the Industrial Commission. From 2006 through August, it reported more spills and environmental incidents (937) and a greater volume of spillage (1.6 million gallons) than any other operator. It spilled more per barrel of oil produced than any of the state’s other major producers. Since 2006, however, the company has paid the Industrial Commission $20,000 out of $222,000 in assessed fines.

Continental said in a written response to questions that it was misleading to compare its spill record with that of other operators because “we are not aware other operators report spills as transparently and proactively as we do.” It said that it had recovered the majority of what it spilled, and that penalty reductions came from providing the Industrial Commission “with precisely the information it needs to enforce its regulations fairly.” What Continental paid Mr. Rohr, the injured driller, is guarded by a confidentiality agreement negotiated after a jury was impaneled for a trial this September. His wife, Winnie, said she wished the trial had gone forward “so the truth could come out, but we just didn’t have enough power to fight them.”

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You wish.

Obama Climate Envoy: Fossil Fuels Will Have To Stay In The Ground (Guardian)

The world’s fossil fuels will “obviously” have to stay in the ground in order to solve global warming, Barack Obama’s climate change envoy said on Monday. In the clearest sign to date the administration sees no long-range future for fossil fuel, the state department climate change envoy, Todd Stern, said the world would have no choice but to forgo developing reserves of oil, coal and gas. The assertion, a week ahead of United Nations climate negotiations in Lima, will be seen as a further indication of Obama’s commitment to climate action, following an historic US-Chinese deal to curb emissions earlier this month. A global deal to fight climate change would necessarily require countries to abandon known reserves of oil, coal and gas, Stern told a forum at the Center for American Progress in Washington.

“It is going to have to be a solution that leaves a lot of fossil fuel assets in the ground,” he said. “We are not going to get rid of fossil fuel overnight but we are not going to solve climate change on the basis of all the fossil fuels that are in the ground are going to have to come out. That’s pretty obvious.” Last week’s historic climate deal between the US and China, and a successful outcome to climate negotiations in Paris next year, would make it increasingly clear to world and business leaders that there would eventually be an expiry date on oil and coal. “Companies and investors all over are going to be starting at some point to be factoring in what the future is longer range for fossil fuel,” Stern said.

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Merkel has problems keeping her stance.

Cracks Form in Berlin Over Russia Stance (Spiegel)

Within the European Union, the interests of the 28 member states are diverging in what are becoming increasingly clear ways. Taking a tough stance against Russia is generally less important to southern Europeans than it is to eastern Europeans. In the past, the German government had sought to serve as a bridge between the two camps. But in Berlin itself these days, significant differences in the assessment of the situation are starting to emerge within the coalition government pairing Merkel’s conservative Christian Democrats and the center-left Social Democrats (SPD). It’s one that pits Christian Democrat leaders like Merkel and Horst Seehofer, who heads the CDU’s Bavarian sister party, the Christian Social Union (CSU), against Foreign Minister Frank-Walter Steinmeier of the SPD and Social Democratic Party boss Sigmar Gabriel, who is the economics minister.

“The greatest danger is that we allow division to be sown between us,” the chancellor said last Monday in Sydney. And it’s certainly true to say that this threat is greater at present than at any other time since the crisis began. Is that what the Russian president has been waiting for? Last week, German Foreign Minister Steinmeier traveled to Moscow to visit with his Russian counterpart Sergey Lavrov. With Steinmeier standing at his side, the Russian foreign minister praised close relations between Germany and Russia. “It’s good my dear Frank-Walter that, despite the numerous rumors of recent days, you hold on to our personal contact.” Steinmeier reciprocated by not publically criticizing contentious issues like Russian weapons deliveries to Ukrainian separatists. Afterwards, Vladimir Putin received him, a rare honor. It was a prime example of just how the Russian strategy works.

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Don’t want to be a prick, and I like the man, but so does he a bit.

Europe Looks ‘Aged And Weary’: Pope Francis (CNBC)

Pope Francis has warned European politicians and policymakers that Europe is becoming less of a protagonist in the world as it looks “aged and weary.” Addressing the European Parliament in Strasbourg on Tuesday, Pope Francis, the spiritual leader of one billion Catholics worldwide, suggested that Europe risks becoming irrelevant. “Europe gives the impression of being aged and weary,feeling less and less a protagonist in a world which frequently looks on itwith aloofness, distrust and even, at times, suspicion…As a grandmother, no longer fertile and lively,” he said. “The great ideas that once inspired Europe…seem to have been replaced by the bureaucratic technicalities of Europe’s institutions.” Speaking at the plenary session of the parliament, he told lawmakers that they had the task of protecting and nurturing Europe’s identity “so that its citizens can experience renewed confidence in the institutions of the (European) Union and its project of peace and friendship that underlies it.”

Pope Francis’ visit to the European Parliament is the first by a pontiff since Pope John Paul II’s visit in 1988. He is also visiting the Council of Europe – the region’s human rights body – later on Tuesday. “I encourage you to work so that Europe rediscovers the best of its health,” he added. The pope also spoke about the importance of education and work. On the question of migration, a hot topic in Europe, Pope Francis said there needed to be a “united response.” “We cannot allow the Mediterranean to become a large graveyard,” he said, referring to the number of migrants who die during their attempts to cross the sea and reach Europe. “Rather than adopting policies that focus on self-interest which increase and feed conflicts, we need to act on the causes (for migration) and not only on the effects,” he added.

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