Jun 162018
 
 June 16, 2018  Posted by at 9:08 am Finance Tagged with: , , , , , , , , , ,  


Paul Gauguin Nevermore 1897

 

Trump Sets Tariffs On $50 Billion In Chinese Goods; Beijing Strikes Back (R.)
Why The U.S.-China Trade Deficit Is So Huge (MW)
Wall Street Builds Immunity To Trade War Rhetoric (R.)
Nomi Prins: The Central Banking Heist Has Put The World At Risk (UH)
Some Of The ‘Most Systemically Important Banks’ In The World Are Tumbling (ZH)
Merger Mania (Lebowitz)
The Key Word In The Trump-Kim Show (Escobar)
Merkel’s Position As German Leader Under Threat Over Immigration Split (CNBC)
US Government Says 2,000 Child Separations At Mexico Border In 6 Weeks (R.)
French Police Cut Soles Off Migrant Children’s Shoes – Oxfam (G.)
In ‘Calais of Italy’ Tension Soars Over Migrant Crisis (AFP)
Greek Police Hunt Golden Dawn Lawmaker Faced with Charges of Treason (GR)

 

 

Negotiating.

Trump Sets Tariffs On $50 Billion In Chinese Goods; Beijing Strikes Back (R.)

U.S. President Donald Trump said he was pushing ahead with hefty tariffs on $50 billion of Chinese imports on Friday, and the smoldering trade war between the world’s two largest economies showed signs of igniting as Beijing immediately vowed to respond in kind. Trump laid out a list of more than 800 strategically important imports from China that would be subject to a 25 percent tariff starting on July 6, including cars, the latest hardline stance on trade by a U.S. president who has already been wrangling with allies.

China’s Commerce Ministry said it would respond with tariffs “of the same scale and strength” and that any previous trade deals with Trump were “invalid.” The official Xinhua news agency said China would impose 25 percent tariffs on 659 U.S. products, ranging from soybeans and autos to seafood. China’s retaliation list was increased more than six-fold from a version released in April, but the value was kept at $50 billion, as some high-value items such as commercial aircraft were deleted.

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Soybeans R Us.

Why The U.S.-China Trade Deficit Is So Huge (MW)

President Donald Trump will let tariffs on Chinese goods worth up to $50 billion take effect after talks between the two countries failed to appease White House demands on reducing huge U.S. trade deficits. The U.S. has run large deficits with China for years and in some cases no longer produces certain goods such as consumer electronics that are popular with Americans. It won’t be easy, and it might even be impossible, to reduce the gap much any time soon. In 2017, the U.S. posted a $375.6 billion deficit in goods with China.

Most glaring is the huge deficit in computers and electronics, but the U.S. is a net importer from China in most market segments except for agriculture. The U.S. is excluding Chinese-made cellphones and televisions from its tariffs. China has been a big buyer of American-grown soybeans and other crops. Planes made by Boeing also are a product in demand in China. What happens next? Trump has vowed to increase tariffs if China retaliates, but the Chinese promised to return the favor. A trade dispute between the two largest economies in the world could result in lasting damage to the global economy if it metastasizes.

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What happens when there is no price discovery.

Wall Street Builds Immunity To Trade War Rhetoric (R.)

Fears of tariffs and a potential global trade war have jostled U.S. stocks over the past few months, but there is a sense among investors that the market is taking the drum beat of rhetoric and statements more in stride. In the latest salvo, U.S. President Donald Trump announced hefty tariffs on $50 billion of Chinese imports on Friday, and Beijing threatened to respond in kind. But even as the developments threatened to ignite a trade war between the world’s two largest economies, the equity market largely shrugged it off. The benchmark S&P 500 index ended down only 0.1 percent on Friday.

That paled compared to losses earlier in the year that were sparked by fears of a U.S.-China trade war that would be detrimental to economic growth. “The market has gotten reasonably comfortably numb to this tariff stuff,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “They are becoming more accustomed to this being a first foray and negotiating tool.” The U.S. Customs and Border Protection is to begin collecting tariffs on an initial tranche of 818 Chinese product categories on July 6. “It’s kind of the cry-wolf syndrome,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “I think people fear the tariffs and the uncertainty about it, but think, ‘OK, this is just another negotiating point.’”

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“..a de facto heist that has enabled the most dominant banks and central bankers to run the world”.

Nomi Prins: The Central Banking Heist Has Put The World At Risk (UH)

Over the last decade, she tells me when we meet in London, “under the guise of QE, central bankers have massively overstepped their traditional mandates, directing the flow of epic sums of fabricated money, without any checks or balances, towards the private banking sector”. Since QE began, in the aftermath of the financial crisis, “the US Federal Reserve has produced a massive $4.5 trillion of conjured money, out of a worldwide QE total of around $21 trillion”, says Prins. The combination of ultra-low interest rates and vast monetary expansion, she explains, has caused “speculation to rage … much as a global casino would be abuzz if everyone gambled using everyone else’s money”.

Much of this new spending power, though, has remained “inside the system”, with banks shoring up their balance sheets. “So lending to ordinary firms and households has barely grown as a result of QE,” says Prins, “nor have wages or prosperity for most of the world’s population”. Instead, “the banks have gone on an asset-buying spree”, she explains, getting into her stride, “with the vast flow of QE cash from central banks to private banks ensuring endless opportunities for market manipulation and asset bubbles – driven by government support”. Prins describes “the power grab we’ve seen by the US Federal Reserve, the European Central Bank, the Bank of Japan and other central banks”.

Using QE, she argues, “these illusionists have altered the nature of the financial system and orchestrated a de facto heist that has enabled the most dominant banks and central bankers to run the world”.

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They run the world and they’re still failing. Follow the money.

Some Of The ‘Most Systemically Important Banks’ In The World Are Tumbling (ZH)

Since the Federal Reserve hiked rates, “big” US banks have dramatically underperformed “small” US banks, continuing a trend that has been going on since February… But it’s broader than that; this “big” bank blow-up is global. The stock prices of 16 of the most ‘Systemically Important Financial Institutions’ (SIFIs) in the world are now in bear market territory (down by 20% or more from their recent highs in dollar terms); and as the FT reports, this has caused Ian Hartnett, chief investment strategist at London-based Absolute Strategy Research, to issue his first “Black Swan” alert since 2009.

Of the 39 SIFIs, these are the 16 in bear market territory: Deutsche Bank, Nordea, ICBC, UniCredit, Crédit Agricole, ING, Santander, Société Générale, BNP Paribas, UBS, Agricultural Bank of China, AXA, Mitsubishi UFJ Financial Group, Bank of China, Credit Suisse and Prudential Financial. At some point, says Hartnett, central bankers will have to respond to bearish signals from almost half the global SIFIs, rather than continuing to tighten monetary policy: “The clue is in the name,” he said. “If these banks are supposed to be systemically important then policymakers ought to be watching them to see what is happening.” “The synchronised dips were a sign of global financial stress.”

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“..there has been $2 trillion in mergers in 2018, and its only June.”

Merger Mania (Lebowitz)

We have written numerous articles describing how cheap money and poorly designed executive compensation packages encourage corporate actions that may not be in the best interest of longer-term shareholders or the economy. The bottom line in the series of articles is that corporations, in particular shareholders and executives, are willing to forego longer term investment for future growth opportunities in exchange for the personal benefits of short-term share price appreciation. Buybacks and mergers, both of which are fueled by the Federal Reserve’s ultra-low interest rate policy have made these actions much easier to accomplish.

On the other hand, corporate apologists argue that buybacks are simply a return of capital to shareholders, just like dividends. There is nothing more to them. Instead of elaborating about the longer term ill-effects associated with buybacks or the true short-term motivations behind many mergers, the powerful simplicity of the following two graphs stands on their own. The first graph, courtesy Meritocracy, shows how mergers tend to run in cycles. Like clockwork, merger activity tends to peak before recessions. Not surprisingly, the peaks tend to occur after the Federal Reserve (Fed) has initiated a rate hike cycle. The graph only goes through 2015, but consider there has been $2 trillion in mergers in 2018, and its only June.

The following graph shows how corporate borrowing has accelerated over the last eight years on the back of lower interest rates. Currently, corporate debt to GDP stands at levels that accompanied the prior three recessions. There is a pattern here among corporate activities which seems similar to that which we see in investors. At the point in time when investors should be getting cautious and defensive as markets become stretched, they carelessly reach for more return. Based on the charts above, corporate executives do the same thing. The difference is that when an investor is careless, his or her net worth is at risk. A corporate executive on the other hand, loses nothing and simply walks away and frequently with a golden parachute.

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The statement does have substance.

The Key Word In The Trump-Kim Show (Escobar)

The Singapore joint statement is not a deal; it’s a statement. The absolutely key item is number 3: “Reaffirming the April 27, 2018, Panmunjom Declaration, the DPRK commits to work toward the complete denuclearization of the Korean Peninsula.” This means that the US and North Korea will work towards denuclearization not only in what concerns the DPRK but the whole Korean Peninsula. Much more than “…the DPRK commits to work toward the complete denuclearization of the Korean Peninsula”, the keywords are in fact “reaffirming the April 27, 2018, Panmunjom Declaration…” Even before Singapore, everyone knew the DPRK would not “de-nuke” (Trump terminology) for nothing, especially when promised just some vague US “guarantees”.

Predictably, both US neocon and humanitarian imperialist factions are unanimous in their fury, blasting the absence of “meat” in the joint statement. In fact there’s plenty of meat. Singapore reaffirms the Panmunjom Declaration, which is a deal between North Korea and South Korea. By signing the Singapore joint statement, Washington has been put on notice of the Panmunjom Declaration. In law, when you take notice of a fact, you can’t ignore it later. The DPRK’s commitment to denuclearize in the Singapore statement is a reaffirmation of its commitment to denuclearize in the Panmunjom Declaration, with all of the conditions attached to it. And Trump acknowledged that by signing the Singapore statement.

The Panmunjom Declaration stresses that: “South and North Korea confirmed the common goal of realizing, through complete denuclearization, a nuclear-free Korean Peninsula. South and North Korea shared the view that the measures being initiated by North Korea are very meaningful and crucial for the denuclearization of the Korean peninsula and agreed to carry out their respective roles and responsibilities in this regard. South and North Korea agreed to actively seek the support and cooperation of the international community for the denuclearization of the Korean Peninsula.”

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The risk is real.

Merkel’s Position As German Leader Under Threat Over Immigration Split (CNBC)

A split over immigration between Angela Merkel’s Christian Democratic Union (CDU) and its sister Christian Social Union (CSU) party is threatening to end her 12-year spell as Germany’s leader. Germany’s grand coalition government was formed in March after five months of political deadlock since an election the previous September. It resulted in Merkel’s fourth term as German chancellor. That vote saw a big upswing in support for the right-wing Alternative for Germany (AfD) party, who campaigned against Merkel’s open-door policy to refugees and migrants arriving from the Middle East and Africa.

Now the CSU, fearful of losing further support from its conservative base, is threatening to withdraw from the country’s grand coalition unless Merkel hardens her immigration stance. “My sources in Berlin say the situation is on a knife-edge right now, some are even giving it an 80 percent probability that Merkel will step down in the next two weeks,” said Nina Schick, director at political consultancy Rasmussen Global, in a telephone call to CNBC Friday. Schick, however, warned that writing Merkel off has long been a dangerous game. “The fundamental rule in German politics since 2006 is don’t underestimate Merkel,” she added.

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CUT IT OUT! Bunch of crazies.

US Government Says 2,000 Child Separations At Mexico Border In 6 Weeks (R.)

The government said on Friday that 1,995 children were separated from 1,940 adults at the U.S.-Mexico border between April 19 and May 31, as the Trump administration implements stricter border enforcement policies. The number represents a dramatic uptick from the nearly 1,800 family separations that Reuters reported had happened from October 2016 through February of this year. The official tally of separations is now nearly 4,000 children, not including March and the beginning of April 2018. In May, U.S. Attorney General Jeff Sessions announced a ‘zero tolerance’ policy in which all those apprehended entering the United States illegally would be criminally charged, which generally leads to children being separated from their parents.

The families were all separated so the parents could be criminally prosecuted, said a spokesman for the Department of Homeland Security, who declined to be named, on a call with reporters. “Advocates want us to ignore the law and give people with families a free pass,” said the official. “We no longer exempt entire classes of people.” The Department of Homeland Security did not immediately respond to a request to provide a breakdown of the age of children separated from their parents and held in custody, but the official said they do not separate babies from adults.

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I said: CUT IT OUT!

French Police Cut Soles Off Migrant Children’s Shoes – Oxfam (G.)

French border police have been accused of detaining migrant children as young as 12 in cells without food or water, cutting the soles off their shoes and stealing sim cards from their mobile phones, before illegally sending them back to Italy. A report released on Friday by the charity Oxfam also cites the case of a “very young” Eritrean girl, who was forced to walk back to the Italian border town of Ventimiglia along a road with no pavement while carrying her 40-day-old baby. The allegations, which come from testimony gathered by Oxfam workers and partner organisations, come two months after French border police were accused of falsifying the birth dates of unaccompanied migrant children in an attempt to pass them off as adults and send them back to Italy.

“We don’t have evidence of violent physical abuse, but many [children] have recounted being pushed and shoved or shouted at in a language they don’t understand,” Giulia Capitani, the report’s author, told the Guardian. “And in other ways the border police intimidate them – for example, cutting the soles off their shoes is a way of saying, ‘Don’t try to come back’.” Daniela Zitarosa, from the Italian humanitarian agency Intersos, said: “Police [officers] yell at them, laugh at them and tell them, ‘You will never cross here’. “Some children have their mobile phone seized and sim card removed. They lose their data and phonebook. They cannot even call their parents afterwards.”

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France’s role is not pretty. Macron’s criticism of Italy unveils it.

In ‘Calais of Italy’ Tension Soars Over Migrant Crisis (AFP)

Emmanuel Macron is not a welcome guest in the Italian border town of Ventimiglia, a flashpoint in Europe’s migration crisis. Residents are furious at the French president for charging Rome with “cynicism and irresponsibility” this week after it turned away a rescue boat carrying more than 600 asylum-seekers. “It’s bad what happened to the Aquarius (ship) but how dare Macron criticise Italy!” vented retired teacher Fulvia Semeria who volunteers for the Secours Catholique charity, a key aid group for migrants. “It’s unacceptable from a country that does nothing for migrants and even rejects them,” she said, calling his remarks “insulting and totally unfair”.

The pretty northern town at the gates of the French Riviera has received tens of thousands of asylum seekers pushed back by France since the eruption of Europe’s worst migration crisis three years ago. This is in addition to scores of desperate African refugees landing on its shores after undertaking the perilous journey across the Mediterranean. The influx has seen Ventimiglia dubbed the “Calais of Italy”, in reference to the French coastal town notorious for its sprawling migrant camps. [..] At least 16 migrants have died trying to cross from France into Italy since September 2016, falling off mountains, being hit by cars or electrocuted while hiding under train carriages.

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Pretty crazy. All over a name change.

Greek Police Hunt Golden Dawn Lawmaker Faced with Charges of Treason (GR)

A Golden Dawn lawmaker is on the run after Greece’s authorities issued an arrest warrant following his call in the parliament on Friday for the arrest of the country’s prime minister and president over the provisional ‘Macedonia’ name deal. According to reports, Konstantinos Barbarousis, who could face charges of high treason, escaped a police blockade late on Friday in the western region of Aetoloakarnania where he sought refuge. A huge police operation is under way to locate him and bring him to justice. Judicial authorities do not need Parliament’s approval to lift an MP’s immunity in the case of treason-related charges.

Speaking in Parliament, Barbarousis accused the government of “not legislating in the nation’s interests but in its own.” He called for a coup d’etat and asked on the Greek armed forces to “abide by their oath” and arrest Prime Minister Alexis Tsipras, Defense Minister Panos Kammenos and President Prokopis Pavlopoulos. His outburst led to his expulsion form the extremist party, as the speaker of the house barred any members of Golden Dawn speaking during the debate on a no-confidence motion against the government tabled after the Greece, FYROM agreement.

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Jun 032018
 
 June 3, 2018  Posted by at 9:00 am Finance Tagged with: , , , , , , , , , , , ,  


Andrew Wyeth Christina’s world 1948

 

Why Italy Had To Say Goodbye To The Dolce Vita (David McWilliams)
An Italian Exit May Be Rome’s Best Option – JPMorgan (ZH)
Angela Merkel Rules Out Debt Relief For Italy (CNBC)
New Italy PM Starts Off In Shadow Of His Powerful Deputies (AFP)
Juncker: EU Won’t ‘Meddle’ In Italy’s Affairs (O.)
Political Bruiser Sánchez Stuns Spain To Become PM (Spain Report)
Europe: Confront Trump or Avoid a Costly Trade War (NYT)
US Wants Structural Changes To China’s Economy: Mnuchin
Uber’s ‘Business Is Finished’ In Turkey, Erdogan Says (R.)
Britain’s Low-Paid Face Decade Of Wage Squeeze (O.)
UK Universal Credit Change To Bar 2.6m Children From Free School Meals (Ind.)
Whale Dies From Eating More Than 80 Plastic Bags (AFP)

 

 

Excellent from David McWilliams on what the euro has done to Italy.

Why Italy Had To Say Goodbye To The Dolce Vita (David McWilliams)

Sometimes it is not appreciated quite how industrial Italy is. It has long been Europe’s second-biggest manufacturing power, beaten only by Germany. Italy is far more industrial than France or the UK. In some areas of design and high-quality manufacturing, Italy is still without peer. However, since it gave up the lira and adopted the euro – in effect Germany’s currency – things have gone pear-shaped. This economic calamity is driving Italian politics, leading many to question the euro and Italy’s membership of it. From 1945 to 1995 there was an understanding that Italy would devalue the lira. This is what Italy did. Traditionally, it devalued the lira every few years. This kept Italian industry competitive.

For example, when Italy joined the European Monetary System, in 1979, the exchange rate was 443 lire per Deutschmark. By 1990, the year of German reunification, the rate was 750 lire to the Deutschmark. By 1995 it was 1,000 lire to the Deutschmark. In the 1992 currency crisis the lira fell to a low of 1,250 against the Deutschmark before recovering a bit. The gradual fall in the value of the lira was a price that the Italians were prepared to pay for industrial success. Contrary to the dogma spouted by Europe’s central bankers, Italian devaluations worked particularly well. From 1979 to 1998, Italian industrial production outpaced that of Germany by more than 10%. Italian equities outperformed German equivalents by 16% – after having taken into account the devaluations.

So not only was Italian industry growing faster than German industry, aided by lira devaluations, but also the return on capital in Italy was higher than in Germany. This is because if the stock market of a country is outperforming another country’s, it implies that the capital that is deployed in the faster-growing country is being deployed more efficiently. Therefore, not only was Italy growing more quickly than Germany, but it was more efficient too. Then came the euro. Since Italy joined the single currency, almost to the day, its industry has gone backwards. Having outperformed German stocks during the period of the lira, Italian stocks have underperformed German stocks by a whopping, bankruptcy-inducing 65%.

During the half-century when Fellini was writing the story of postwar Italian success, the Italian stock market almost always returned more than the German stock market. Once Italy joined the euro that stopped almost overnight. Deep in the economy, the strictures imposed by the euro have destroyed much of Italian industry. For example, having outgrown Germany’s industrial output in the 1980s and 1990s by 10%, Italian factory output since Italy joined the euro has lagged Germany’s by 40%.

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Hard to summarize this long Zero Hedge piece. Depending on where you look, Italy may not be all that weak.

“If you owe the ECB €10 billion, you have no leverage. If you owe the ECB €426 billion, you have all the leverage.”

An Italian Exit May Be Rome’s Best Option – JPMorgan (ZH)

[..] with €426BN, Italy has the highest Target2 deficit with the Eurosystem (Spain is a close second with €377BN) any discussion about an Italian euro exit raises concerns about costs. [..] due to QE induced cross border flows since 2015, Target2 balances have exploded since the launch of the ECB’s QE (and third Greek bailout in 2015), and surpassed the previous extremes from the depths of the euro debt crisis in the summer of 2012.

[..] a euro exit by a debtor country would represent more of a cost to creditor countries such as Germany rather than to the exiting country itself. And, as shown in the chart above, Germany sure has a lot of implicit accumulated costs, roughly €1 trillion to be precise, as a result of preserving a currency union that allowed German exporters to benefit from a euro dragged lower by the periphery, relative to where the Deutsche Mark would be trading today. But here the analysis gets slightly more complex, as Target2 does not provide the full picture of potential costs (or benefits, assuming a scorched earth approach). As JPMorgan writes, the Target2 liabilities of a debtor country give only a partial picture of the cost to creditor nations from that debtor country exiting.

This is because Target2 balances represent only one component of the Net International Investment Position of a country, i.e. the difference between a country’s total external financial assets vs. liabilities. The broader metric that one must use, is of the Net International Investment Position for euro area countries and is shown in the chart below. It shows that contrary to the Target2 imbalance, Italy leaving the euro would inflict a lot less damage to creditor nations than Spain leaving the euro. This is because Spain’s net international investment liabilities stood at close to €1tr as of the end of last year, almost three times as large as its Target2 liabilities. In contrast Italy’s net international investment liabilities were much smaller and stood at only €115bn at the end of last year, around a quarter of its €426bn Target2 liabilities. This, as JPM explains, is because Italy has accumulated over the years more external assets than Spain and should thus be overall more able to repay its external liabilities.

[..] Ironically, the surprisingly low net international investment liabilities of Italy are the result of the persistent current account surpluses the country has been running since the euro debt crisis of 2012, and smaller current account deficits compared to Spain before the crisis. The flipside is that the current account surplus – in theory – also makes it easier for a country like Italy to exit the euro relative to a current account deficit country. This is because the higher the current account deficit of a debtor country, the higher the cost of an exit for this country as the current account deficit would have to be closed abruptly following an exit. Most importantly, this means that as a result of Italy’s decent current account surplus, from a narrow current account adjustment point of view, its own cost of a euro exit should be relatively small.

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Merkel has weakened a lot. Italy knows it.

Angela Merkel Rules Out Debt Relief For Italy (CNBC)

German Chancellor Angela Merkel appeared on Saturday to rule out debt relief for Italy, saying in a newspaper interview that the principle of solidarity among members of the euro zone should not turn the single currency bloc into a debt-sharing union. “I will approach the new Italian government openly and work with it instead of speculating about it intentions,” Merkel told the Frankfurter Allgemeine Sonntagszeitung in an interview to be published on Sunday.

On Friday, Italy swore a populist coalition into power, ending months of political uncertainty that hit global markets in the last week. Newly designated Prime Minister Giuseppe Conte will lead Western Europe’s first anti-establishment government with the aim of cutting taxes, boosting spending on welfare and overhauling EU rules on budgets and immigration. Italy accounts for 23.4 percent of the euro zone’s public debt and 15.4 percent of the bloc’s GDP, according to Eurostat.

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Conte has a full agenda.

New Italy PM Starts Off In Shadow Of His Powerful Deputies (AFP)

Italy’s new prime minister Giuseppe Conte mostly kept quiet on his full first day in office Saturday, while his two powerful deputies took centre stage in setting the tone of the populist government’s policy. Conte, a political novice, was finally sworn in on Friday as the head of a government of ministers from the anti-establishment Five Star Movement and the far-right League, ending months of uncertainty since elections in March. But Conte was a compromise candidate between Five Star leader Luigi Di Maio and the League’s Matteo Salvini – both of whom are now his deputy prime ministers – and he will have to walk a delicate line to push through the anti-austerity and pro-security promises their populist parties campaigned on.

The 53-year-old academic also inherited a daunting list of issues from his predecessor Paolo Gentiloni, including the financial travails of companies such as Ilva and Alitalia, a Group of Seven summit in Canada and a key EU summit at the end of the month, as well as the thorny question of immigration. Immigration is the bugbear of Conte’s interior minister, Salvini, the 45-year-old leader of the anti-immigrant, anti-Islam League. Salvini announced Friday that he would visit Sicily to see the situation for himself at one of the main landing points for refugees fleeing war, persecution and famine across North Africa and the Middle East. “The good times for illegals is over – get ready to pack your bags,” Salvini said at a rally in Italy’s north on Saturday, adding however that he wants to economically assist migrants’ countries of origin.

His comments come after more than 150 migrants, including nine children, disembarked from a rescue ship late Friday in Sicily. Conte attended a military parade alongside President Sergio Mattarella on Saturday, marking Republic Day for the foundation of the Italian Republic in 1946. However the new prime minister has issued few public statements since being appointed. On Saturday he did post on Facebook that he had spoken with German Chancellor Angela Merkel and French President Emmanuel Macron and would meet the two leaders at the G7 summit, where he will be a “spokesman for the interests of Italian citizens”. Conte has also opted to keep the country’s intelligence services under his personal control.

Deputy premier Di Maio, who is serving as economic development minister, also took to Facebook, calling for “entrepreneurs to be left alone”. “Employers and employees in Italy must not be enemies,” he said, promising “I will not disappoint you”. On Saturday evening Five Star held a rally in the centre of Rome with thousands of supporters and all its ministers to celebrate “the government of change”. Di Maio told the crowd that “from today, the state is us”. Five Star’s founder, former comic Beppe Grillo, rang a bell in front of the crowd, saying the sound “marks the fracture between a world that is going away and a new one that is arriving”.

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Right. Sure.

Juncker: EU Won’t ‘Meddle’ In Italy’s Affairs (O.)

Italy, the third-largest economy in the eurozone, has a public debt second only to Greece’s and there was a negative reaction from the financial markets to the League-M5S coalition, which plans to significantly raise public spending. Juncker offered a more placatory tone, suggesting that Brussels and Berlin had learned the lessons of the Greek crisis. He also denied that the eurozone was set on a course for another economic downturn: “The Italians cannot really complain about austerity measures from Brussels. However, I do not now want to lecture Rome. We must treat Italy with respect. Too many lectures were given to Greece in the past, in particular from German-speaking countries. This dealt a blow to the dignity of the Greek people. The same thing must not be allowed to happen to Italy.”

Juncker said that the financial markets’ reaction was “irrational”: “People should not draw political conclusions from every fluctuation in the stock market. Investors have been wrong on so many occasions.” Neither of the coalition parties in the new Italian government campaigned on leaving the euro or the EU, but both have backed such calls in the past and are scathing about the rules that underpin the eurozone. Mujtaba Rahman, a former European commission and UK Treasury official who now works for consultancy the Eurasia Group, warned that as the cornerstone of the coalition government’s platform was fiscal expansion, it was liable to clash with the commission this autumn.

“Though no official estimates have been produced, independent estimates suggest the proposed measures would cost, combined, upwards of €100bn per annum, around 6% of GDP.“If the government were to propose a very expansionary budget, the commission – which provides its opinions and recommendations on member states’ draft budgetary plans – would have to reject it in September. This would be a first, and would set the stage for a real confrontation with Rome,” he said. “A significant deviation from EU-mandated fiscal targets may prompt the commission to open a new Excessive Deficit Procedure, a process designed to give the EU more power to enforce austerity on Rome. Yet the symbolism of this move would only strengthen the Italian government’s domestic standing.”

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Poker player?!

Political Bruiser Sánchez Stuns Spain To Become PM (Spain Report)

Forget about what the new socialist government’s policies are going to be, because no one really knows yet. Forget about who the new ministers are going to be, because no one really knows yet. And forget about how long this government is going to last. No one has a clue right now. What is worthy of note is how Pedro Sánchez has just crushed all of his political opponents in a week. Last Friday, the PSOE had slowly slumped to less than 20% in the polls and he was being written off by columnists and commentators. This Saturday, he will be driven to Zarzuela Palace to be sworn in as the new socialist Prime Minister of Spain [..]

Mr. Rajoy is likely not the only political leader who needs a stiff drink this weekend. Pedro Sánchez has just left Pablo Iglesias—who nine days ago thought his biggest problem was an absurd internal ballot about his new luxury home—sitting in the dust in the fight for the Spanish left. Two years ago, with the sudden appearance and meteoric rise of Podemos, Mr. Iglesias’s stated strategic goal was not to win the election but to dominate the Spanish left. He just lost that race. Pedro Sánchez has just left Ciudadanos leader Albert Rivera rabbiting on incessantly about wanting a new general election instead of the socialists “unfairly” grabbing power, because Mr. Rivera is—or was—doing rather better in the polls than the rest.

But rabbit on is all he can do for now because, just like nine days ago, in the real world Ciudadanos still only has 32 seats in Congress. And Pedro Sánchez has just left the powerful leader of the Socialist Party in Andalusia, Susana Diaz, well, in Andalusia. This might be the sweetest victory of all for the new Prime Minister, because it was she who wielded her considerable internal and establishment influence in October 2016 to oust Mr. Sánchez as leader of the PSOE, allowing Mariano Rajoy to be reappointed Prime Minister after a year of national stalemate unbroken by two general elections.

Again: Pedro Sánchez, written off by some as being too handsome to have any interesting ideas, has, somewhere along the way, learnt to execute political hit jobs that have left all of his major political opponents staggering, and sent what was a confident conservative party that had only just passed a new budget—two days previously—scurrying into opposition, wounded. In a week. Whatever happens next in Spanish politics, do not underestimate Pedro Sánchez.

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More division.

Europe: Confront Trump or Avoid a Costly Trade War (NYT)

Despite its name, the European Union is not generally a model of unity. If Mr. Trump was banking on internal division stymieing the European response, he picked an opportune moment. Britain is consumed with domestic sniping over its pending departure from the European Union, making it a bit player in these proceedings. Italy has been immersed in the operatic political drama at which it excels, only Friday swearing in a new government after inconclusive elections in March. The incoming government presents a coalition of two populist parties that have expressed disdain for the European Union and the shared euro currency, stoking fears that the bloc will be presented with a new challenge to its cohesion.

Spain just swapped governments. Germany is headed by a chastened chancellor Angela Merkel following her own lengthy struggles to form a government after elections last fall. The French president has been frustrated in his attempts to forge greater political unity within the bloc. “Europe is in disarray,” said Nicola Borri, a finance professor at Luiss, a university in Rome. “It’s even difficult to understand who is in power in Europe.” In deliberating how to respond to Mr. Trump’s tariffs, the key schism appears to run between Germany and the rest of the bloc. “I don’t think there is a unified consensus for how to deal with the Americans,” said Meredith Crowley, an expert on international trade at the University of Cambridge in England. “The Germans benefit from open markets globally, so they don’t want to throw up more barriers to free trade.”

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That’s quite the statement. What if Beijing said the same about the US?

US Wants Structural Changes To China’s Economy: Mnuchin

The United States wants trade talks in Beijing this weekend to result in structural changes to China’s economy, in addition to increased Chinese purchases of American goods, U.S. Treasury Secretary Steven Mnuchin said on Saturday. U.S. Commerce Secretary Wilbur Ross arrived in Beijing on Saturday with an interagency team of U.S. officials for talks on long-term purchases of U.S. farm and energy commodities, just days after Washington renewed its threats to impose tariffs on Chinese goods.

The purchases are partly aimed at shrinking the $375 billion U.S. goods trade deficit with China. Mnuchin, speaking at a G7 finance leaders meeting in Canada where he was the target of U.S. allies’ anger over steel and aluminum tariffs, said the China talks would cover other issues, including the Trump administration’s desire to eliminate Chinese joint venture requirements and other policies that effectively force technology transfers.

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It’s election time.

Uber’s ‘Business Is Finished’ In Turkey, Erdogan Says (R.)

Turkey’s President Tayyip Erdogan has said ride hailing app Uber is finished in Turkey, following pressure from Istanbul taxi drivers who said it was providing an illegal service and called for it to be banned. About 17,400 taxis operate in Istanbul, home to about a fifth of Turkey’s population of 81 million people, and since Uber entered the country in 2014 tensions have risen sharply. Erdogan’s statement came after new regulations were announced in recent weeks tightening transport licensing requirements, making it more difficult for drivers to register with Uber and threatening a two-year ban for violations.

“This thing called Uber emerged. That business is finished. That does not exist anymore,” he said in a speech in Istanbul late on Friday. “We have our taxi system. Where does this (Uber) come from? It is used in Europe, I do not care about that. We will decide by ourselves,” added Erdogan, who is running for re-election in three weeks. [..] Uber said that about 2,000 yellow cab drivers use its app to find customers, while another 5,000 work for UberXL, using large vans to transport groups to parties, or take people with bulky luggage to Istanbul’s airports.

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The Tories can’t wait to return to Dickens.

Britain’s Low-Paid Face Decade Of Wage Squeeze (O.)

The wages of 10 million low-paid workers have stalled for two decades and face pressure for a decade to come, according to a bleak assessment of Britain’s future jobs market. Global economic competition, automation, the shift to the gig economy and a widening regional divide will see further pressure placed on the incomes of those earning between £10,000 and £15,000, it warns. The analysis by the Centre for Social Justice (CSJ) thinktank, which is on the political right and chaired by the former Tory leader Iain Duncan Smith, also blamed a chronic national failure to boost skills and education. It will be seen as another warning to Theresa May from Conservative figures to kickstart her domestic agenda.

There have been concerns within the party that the focus on Brexit has led to inaction in other crucial areas that could hold Britain back after its exit from the European Union. The analysis, co-written by Boris Johnson’s former economic adviser and Brexit supporter Gerard Lyons, concludes that wages of those on the lowest salaries stalled long before the 2008 financial crash. It warns that the current evidence shows that most never escape a life on low pay. The centre’s support for action on low pay shows that it is now an issue of concern across the political spectrum, with automation expected to place further pressure on jobs in some low-paid sectors unless new skills and opportunities are developed.

The CSJ report states that 20% of Britain’s 33 million workers earn £15,000 a year or less, and that 50% earn no more than £23,200. Only 10% of employees, or about 3 million people, earn above £53,000 a year. Britain does not compare well with other developed nations when it comes to low pay, it states. Taking data from manufacturing, and giving the US a score of 100, Switzerland topped the table with a pay rate of 155, followed by Norway on 126, Germany on 111 and France on 97. However, the UK was much further behind, on 73.

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These people would be better off moving to Poland.

UK Universal Credit Change To Bar 2.6m Children From Free School Meals (Ind.)

Up to 2.6 million children whose parents are on benefits could be missing out on free school meals by 2022, the shadow education minister will warn. Angela Rayner will tell a GMB union conference on Sunday that the Government’s claims on school meals are “falling apart” after changes to eligibility under Universal Credit (UC). When the system was first introduced in 2013, all children of recipients – who were all unemployed – were eligible for free school meals (FSM), as they would have been under the old system. But in April the criteria was tightened based on income. In England, the net earnings threshold will be £7,400 whereas in Northern Ireland it will be £14,000.

A government technical note published in May said that if the change had not been made, “around half of all (state school) children would become eligible for FSM and the meals would no longer be targeted at those who need them the most”. It said that in 2017 around 1.1 million disadvantaged children were eligible and received a free school meal, some 14 per cent of all state-school pupils. But if the change had not been made the number of additional children who would have been eligible was between 2,300,000 and 2,600,000 by 2022.

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And that’s just one animal that we could see.

Whale Dies From Eating More Than 80 Plastic Bags (AFP)

A whale has died in southern Thailand after swallowing more than 80 plastic bags, with rescuers failing to nurse the mammal back to health. The small male pilot whale was found barely alive in a canal near the border with Malaysia, the country’s department of marine and coastal resources said. A veterinary team tried “to help stabilise its illness but finally the whale died” on Friday afternoon. An autopsy revealed 80 plastic bags weighing up to 8kg (18lb) in the creature’s stomach, the department added. People used buoys to keep the whale afloat after it was first spotted on Monday and an umbrella to shield it from the sun. The whale vomited up five bags during the rescue attempt.

Thon Thamrongnawasawat, a marine biologist and lecturer at Kasetsart University, said the bags had made it impossible for the whale to eat any nutritional food. “If you have 80 plastic bags in your stomach, you die,” he said. Thailand is one of the world’s largest users of plastic bags. Thon said at least 300 marine animals including pilot whales, sea turtles and dolphins, perished each year in Thai waters after ingesting plastic. “It’s a huge problem,” he said. “We use a lot of plastic.” The pilot whale’s plight generated sympathy and anger among Thai netizens. “I feel sorry for the animal that didn’t do anything wrong, but has to bear the brunt of human actions,” wrote one Twitter user.

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Jun 012018
 
 June 1, 2018  Posted by at 8:33 am Finance Tagged with: , , , , , , , , , , ,  


Edward Hopper Rooms by the sea 1951

 

Deutsche Bank Downgraded By S&P Over Restructuring Plans (MW)
ANZ, Deutsche Bank and Citigroup Face ‘Criminal Cartel’ Charges (BBC)
Deutsche Bank’s US Ops Deemed “Troubled” By Fed A Year Ago (R.)
Why Turkey And Argentina Are Doomed (ZH)
US On Brink Of Trade War With EU, Canada and Mexico (G.)
China To Slash Import Tariffs On Many Consumer Products By 60% From July 1 (R.)
Populist Government To Be Sworn In As Italy’s Political Deadlock Ends (G.)
Italians Back Euro But Rail Against EU’s Rules (G.)
Juncker: Italians Need To Work Harder And Be Less Corrupt (G.)
Spain’s Government Poised To Fall As Socialists Prepare For Power (Ind.)
UK’s “Bank of Mum & Dad” is Running Out of Liquidity (DQ)
Ecuador’s President Says Assange Can Stay In Embassy ‘With Conditions’ (G.)

 

 

Deutsche is enormous. Its derivatives portfolio is gigantic. This is a big story.

Deutsche Bank Downgraded By S&P Over Restructuring Plans (MW)

Deutsche Bank was downgraded Friday by S&P Global Ratings, which cited concerns over the German lender’s restructuring plans. The ratings agency cut the long-term issuer credit rating to ‘BBB+’ from ‘A-‘on the bank and its core operating subsidiaries. The troubled bank last week announced plans to cut thousands of jobs in a bid to overhaul its operations and cut costs, but S&P said they see “significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop, and we think that, relative to peers, Deutsche Bank will remain a negative outlier for some time,” in a statement. Investors also demanded the resignation of the bank’s chairman, Paul Achleitner, at the Annual General Meeting last week.

Shares have tumbled 42% so far this year. The agency kept a stable rating on the bank’s outlook, saying that management will execute the plan over time and achieve longer-term objectives. Meanwhile, Australia’s consumer watchdog on Friday announced that it would be bringing criminal cartel charges against Deutsche Bank, Citigroup and Australia & New Zealand Banking. Shares of Deutsche Bank opened up 1.5%, bouncing off a 7% drop Thursday, which came after the Federal Reserve designated the German lender’s U.S. business in “troubled condition,” people familiar with the matter told The Wall Street Journal.

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Deutsche again. Insult and injury.

ANZ, Deutsche Bank and Citigroup Face ‘Criminal Cartel’ Charges (BBC)

Financial institutions ANZ, Deutsche Bank and Citigroup will be prosecuted on criminal cartel charges, Australia’s consumer watchdog says. The allegations concern arrangements for the sale of A$2.5bn (£1.4bn; $1.9bn) worth of ANZ shares in 2015. The three banks said they would fight the charges. ANZ said it would also defend allegations against an employee. Australia’s scandal-plagued financial sector is at the centre of a national inquiry into misconduct. Several “other individuals” are also expected to be charged by prosecutors, the Australian Competition and Consumer Commission (ACCC) said.

“The charges will involve alleged cartel arrangements relating to trading in ANZ shares following an ANZ institutional share placement in August 2015,” chairman Rod Sims said in a statement. “It will be alleged that ANZ and the individuals were knowingly concerned in some or all of the conduct.” ANZ, one of Australia’s so-called “big four” banks, said the charges related to a placement of 80.8 million shares. The deal was underwritten by global giants Deutsche Bank, Citigroup and JP Morgan, as part of a bid by ANZ to raise capital to meet regulatory requirements. ANZ said regulators were now investigating whether it should have stated that 25.5 million shares of the placement had been taken up by “joint lead managers”.

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And it’s OK to keep that from -potential- shareholders, bondholders for over a year?!

Deutsche Bank’s US Ops Deemed “Troubled” By Fed A Year Ago (R.)

The United States Federal Reserve last year designated Deutsche Bank U.S. operations to be in “troubled condition”, The Wall Street Journal reported on Thursday, citing people familiar with the matter. The Fed’s assessment has not previously been made public, it said, sending shares in the German lender down 7.2% to 9.16 euros, their lowest level in more than a year and a half. The “troubled condition” status is one of the lowest designations employed by the Fed, The WSJ said. The report comes a month after Deutsche Bank’s new Chief Executive Christian Sewing announced plans to cut back bond and equities trading, where it has been unable to compete with U.S. powerhouses such as Goldman Sachs and JP Morgan.

Deutsche Bank’s attempts to break into the U.S. markets, which are seen as an essential plank for delivering a global investment banking platform, proved to be costly as it ended up paying out billions of dollars to settle regulatory breaches, prompting speculation at one point of a bailout by Berlin. The WSJ said that the Fed downgrade of Deutsche Bank’s U.S. operations caused the U.S. Federal Deposit Insurance Corporation (FDIC) to put Deutsche Bank Trust Company Americas on its list of “Problem Banks”.

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Clear enough.

Why Turkey And Argentina Are Doomed (ZH)

It was all the rage in 2017. Not long after contrarians like Jeff Gundlach and Russell Clark said to go long Emerging Markets, suddenly everyone was doing it, either as a standalone trade or as part of a pair trade shorting one or more DMs. Of course, maybe all they were doing was indirectly shorting the USD, which was arguably the biggest driver behind EM outperformance. But, in no small part due to the recent surge in the dollar, after outperforming developed equity markets by 20% in 2016-2017, EM is underperforming by 2.5% so far this year. Of course, it’s not just the dollar, but also interest rates, which until the recent Italian fiasco, were at 4 year, or greater, highs.

And, as JPM’s Michael Cembalest writes in his latest “Eye on the market” note, investor fears are predictably focused on the impact of rising US interest rates and the rising US dollar on EM external debt, and on rising oil prices. And yet, despite the occasional scream of terror from EM longs who refuse to throw in the towel, a closer look shows that the market reaction has been orderly so far, with two exceptions: Argentina and Turkey, which are leading the way down. However, as the JPM Asset Management CIO shows below, the collapse in these two countries has been largely a function of state-specific/idiosyncratic reasons.

The chart below, courtesy of Cembalest, shows each country’s current account (x-axis), the recent change in its external borrowing (y-axis) and the return on a blended portfolio of its equity and fixed income markets (the larger the red bubble, the worse the returns have been). This outcome looks sensible given weaker Argentine and Turkish fundamentals. And while Cembalest admits that the rising dollar and rising US rates will be a challenge for the broader EM space, most will probably not face balance of payments crises similar to what is taking place in Turkey and Argentina, of which the latter is already getting an IMF bailout and the former, well… it’s only a matter of time.

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1: look if present conditions are fair. 2: adapt them.

US On Brink Of Trade War With EU, Canada and Mexico (G.)

The United States and its traditional allies are on the brink of a full-scale trade war after European and Canadian leaders reacted swiftly and angrily to Donald Trump’s decision to impose tariffs on steel and aluminium producers. The president of the European commission, Jean-Claude Juncker, promised immediate retaliation after the US commerce secretary, Wilbur Ross, said EU companies would face a 25% duty on steel and a 10% duty on aluminium from midnight on Thursday. Europe, along with Canada and Mexico, had been granted a temporary reprieve from the tariffs after they were unveiled by Donald Trump two months ago.

However, Ross sent shudders through global financial markets when he said insufficient progress had been made in talks with three of the US’s traditional allies to reduce America’s trade deficit and that the waiver was being lifted. Wall Street slumped as the Dow Jones Industrial Average closed down more than 250 points as investors sold off shares in manufacturers and corporations with global reach. Shares across Europe also declined. The move from Washington – which comes at a time when Trump is also threatening protectionist action against China – triggered an immediate and angry response from Canada, Brussels and from individual European capitals.

Juncker called the US move “unjustified” and said the EU had no choice but to hit back with tariffs on US goods and a case at the World Trade Organisation in Geneva. “We will defend the Union’s interests, in full compliance with international trade law,” he added. Brussels has already announced that it would target Levi’s jeans, Harley-Davidson motorbikes and bourbon whiskey.

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Something’s working.

China To Slash Import Tariffs On Many Consumer Products By 60% From July 1 (R.)

China will cut import tariffs on nearly 1,500 consumer products ranging from cosmetics to home appliances from July 1, in a bid to boost imports as part of efforts to open up the economy. The move would be in step with Beijing’s pledge to its trade partners – including the United States – that China will take steps to increase imports, and offers a boon to global brands looking to deepen their presence in China. The finance ministry published a detailed list of products affected and their new reduced tax rates on Thursday, following early announcements of the broader plan. Starting next month, the average tariff rate on 1,449 products imported from most favored nations will be reduced to 6.9% from 15.7%, which is equivalent to a cut of about 60%, the finance ministry said in a statement on its website.

That followed an announcement from the State Council, or the country’s Cabinet, on Wednesday that China will cut import tariffs on consumer items including apparel, cosmetics, home appliances, and drugs. The tariff cuts this time are more broad-ranging than previous reductions. Import tariffs for apparel, footwear and headgear, kitchen supplies and fitness products will be more than halved to an average of 7.1% from 15.9%, with those on washing machines and refrigerators slashed to just 8%, from 20.5%. Tariffs will also be cut on processed foods such as aquaculture and fishing products and mineral water, from 15.2% to 6.9%.

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Savona comes out strong. His replacement as finance minister is no fan of the euro, and he himself is EU minister.

Populist Government To Be Sworn In As Italy’s Political Deadlock Ends (G.)

A populist government will be sworn into power in Italy on Friday after president Sergio Mattarella agreed to a revised slate of ministers – just days after a bitter row over the incoming leaders’ stance on the euro ended their initial bid to assume power. A joint statement by the anti-establishment Five Star Movement (M5S) and the far-right League announced that political newcomer Giuseppe Conte, who had been seen as a controversial choice, would serve as prime minister. The relatively unknown law professor met Mattarella late on Thursday night to put forward a list of ministers, which the president has accepted.

“All the conditions have been fulfilled for a political, Five Star and League government,” said Luigi Di Maio, the Five Star chief, and Matteo Salvini, the League leader, in a joint statement after a day of talks in Rome. The deal will bring at least temporary calm to a political crisis that has embroiled Italy for weeks. The tumult raised questions – in Brussels and among investors around the world – about whether the rise in Italian populism and the collapse of traditional parties posed a fundamental threat to the country’s future in the eurozone.

The formation of the new government will at least temporarily allay those concerns, because it will remove for now the threat that snap elections will be called later this summer, a prospect which worried investors because it could have bolstered support for anti-EU parties. The populist leaders stepped back from their insistence that Paolo Savona, an 81-year-old Eurosceptic, should serve as finance minister. The choice had been vetoed by Mattarella, prompting the M5S and the League to call off their deal. Savona will now serve as EU minister instead. But there are still many unknowns about how the new administration – an uneasy alliance between two former political opponents, both jockeying for power – will govern Italy.

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If the EU doesn’t adapt to its new reality, it’s doomed.

Italians Back Euro But Rail Against EU’s Rules (G.)

Ever since the inception of the EU, Italians have been among the staunchest defenders of the European project. But the political crisis that engulfed the bloc’s third largest economy this week, centring on a debate over Italy’s commitment to the eurozone, has spooked investors and worried Brussels. It has raised a question that just a few years ago would have seemed unfathomable: are Italians ready to ditch the euro? The answer, like most aspects of Italian politics, is complicated. Opinion polls show that a majority of Italians – 59%, according to Eurobarometer – support the country’s continued inclusion in the eurozone. But that does not mean they want to continue to abide by the rules set by Brussels, which Italy agreed to when it adopted the currency.

Instead, more Italians are seeking a tougher and more antagonistic approach towards Brussels, after years of frustration over fiscal constraints set by the EU coupled with a feeling that Europe has abandoned Italy to cope on its own with the migration crisis. The latest Eurobarometer survey found that only 3 in 10 Italians believed their voices counted within the EU. While a full break from the EU – an “Italexit” – is not a matter of public debate (such a move is considered implausible even among the most hardline Eurosceptics), surveys show Italians generally have a dim view of the bloc. Eurobarometer found that 39% believed Italy’s inclusion in the EU was a “good thing” and 44% believed Italy benefited from being in the EU.

In March, stagnant economic growth and concerns about immigration drove voters across Italy to vote in large numbers for two populist parties – the Five Star Movement and the League, formerly the Northern League – while the most pro-EU party, the Democratic party (PD), suffered a humiliating defeat. Josef Janning, a senior policy fellow at the European Council on Foreign Relations, said: “There is no desire to exit. But there is a willingness to follow the League and the Five Star Movement and to say ‘we don’t want to follow the rules’. That seems to be the new consensus.”

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It’s like he’s talking about himself.

Juncker: Italians Need To Work Harder And Be Less Corrupt (G.)

Jean-Claude Juncker has said Italians need to work harder, be less corrupt and stop looking to the EU to rescue the country’s poor regions, in comments unlikely to ease the fraught political battle over Italy’s future relationship with Brussels. Days after the Italian president, Sergio Mattarella, defended Italy’s place in the eurozone against the country’s populist leaders, the president of the European commission said he was in “deep love” with “bella Italia”, but could not accept that all the country’s problems should be blamed on the EU or the commission. “Italians have to take care of the poor regions of Italy. That means more work; less corruption; seriousness,” Juncker said.

“We will help them as we always did. But don’t play this game of loading with responsibility the EU. A country is a country, a nation is a nation. Countries first, Europe second.” Officials in Brussels and markets around the world are awaiting the outcome of ongoing talks between Italy’s two populist leaders, Luigi Di Maio of the Five Star Movement (M5S) and Matteo Salvini of the far-right League, on forming a new government. After making the remarks during a question and answer session in Brussels, Juncker added it would be best to be “silent and prudent and cautious” this week, whenever he was asked about Italy. “I have full confidence in the genius of the Italian people,” he said.

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“..the PP’s former treasurer, as well as 28 others previously linked to the party, sentenced to jail for 33 years for fraud and money-laundering..”

Spain’s Government Poised To Fall As Socialists Prepare For Power (Ind.)

Mariano Rajoy’s chances of remaining Spanish Premier evaporated almost completely after the moderate Basque Nationalist Party (PNV) confirmed that its MPs would vote in favour of a parliamentary no-confidence motion against him if he did not resign. Despite its tiny number of MPs – five deputies in a 350 seater parliament – it is widely believed that the PNV’s decision will tip the balance against Mr Rajoy in a no-confidence motion, by a mere four votes. If successful, the Socialist party leader Pedro Sánchez, who tabled the no-confidence motion last week, would be automatically elected as Spanish PM, ending seven years of centre-right rule by the Partido Popular (PP) in Spain.

However, given that those voting in favour of the motion – ranging from Catalan Republican Nationalists, currently at daggers drawn with almost all Spain’s mainstream political parties, through to the left-wing Podemos coalition – have little in common beyond a desire to depose Mr Rajoy so a new government could prove highly unstable. Should Mr Rajoy lose the vote, he will be Spain’s first PM to leave office as a result of a no-confidence motion since democracy was restored to the country more than four decades ago.

[..] the impact of a court verdict last week in the so called Gurtel case, a cash-for-kickback scandal that saw the PP’s former treasurer, as well as 28 others previously linked to the party, sentenced to jail for 33 years for fraud and money-laundering, coupled with a €240,000 (£210,000) fine for the PP itself, left Mr Rajoy looking unexpectedly vulnerable.

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“Mum & dad are lending money to their kids so their kids can afford to pay the prices demanded by mum & dad & their friends..” “It’s like a giant Ponzi scheme but where the victims are your children.”

UK’s “Bank of Mum & Dad” is Running Out of Liquidity (DQ)

Mortgages for 100% (or above) of the purchase price not only help fuel high-octane housing bubbles, they also make them a lot riskier when home prices decline, and when more and more borrowers end up with negative equity – where someone’s home is worth less than their debt. That, in turn, significantly raises the likelihood of borrowers defaulting on their loans. And that’s why these 100% mortgages are risky for banks. Today’s new breed of 100% mortgages has a twist in its tail: to provide the banks extra security, they are insisting on family members acting as guarantors for parts of the loans. In other words, if a borrower falls behind on repayments, a parent’s home can also be put at risk.

This kind of deal is becoming increasingly common in the UK, where property prices still remain close to their all-time high despite fears prompted by Brexit and the recent cooling of London’s property market. Underpaid and over-indebted, many young people cannot afford to put down even a 5% deposit on houses whose prices, after they’re adjusted for inflation, have almost doubled in the last 20 years. And a 10% or 15% down-payment is totally out of reach. Their only hope of getting onto the “property ladder” is to get a financial leg up from their parents.

So widespread is this phenomenon that in 2017 the so-called “Bank of Mum and Dad” became the ninth biggest mortgage lender in the UK shelling out some £6.5 billion in loans. Parents helped provide deposits for more than 298,000 mortgages last year — the equivalent of 26% of all transactions. “The Bank of Mum and Dad continues to grow in importance in helping young people take their early steps onto the housing ladder,” said Nigel Wilson, chief executive of the financial service company Legal & General.

It is not driven purely by altruism. The UK’s multi-decade property boom, propelled by artificially low interest rates and supportive government policies, has provided a huge source of wealth for baby boomers. If the Bank of Mum and Dad didn’t lend this money to the new generation, demand for new mortgages would dry up and the UK’s multi-decade housing bubble would have begun to deflate some time ago. As a result, the houses that mum and dad own would lose much of their “value” and their respective net worth would plummet. “Mum & dad are lending money to their kids so their kids can afford to pay the prices demanded by mum & dad & their friends,” explained buyers agent Henry Pryor. “It’s like a giant Ponzi scheme but where the victims are your children.”

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A glimmer of hope.

Ecuador’s President Says Assange Can Stay In Embassy ‘With Conditions’ (G.)

Lenín Moreno, the president of Ecuador, has said Julian Assange’s asylum status in the country’s London embassy is not under threat – provided he complies with the conditions of his stay and avoids voicing his political opinions on Twitter. However, in an interview with Deutsche Welle on Wednesday, Moreno said his government would “take a decision” if Assange didn’t comply with the restrictions. “Let’s not forget the conditions of his asylum prevent him from speaking about politics or intervening in the politics of other countries. That’s why we cut his communication,” he said. Ecuador suspended Assange’s communication’s system in March.

Moreno’s statements come two weeks after an investigation by the Guardian and Focus Ecuador revealed the country had bankrolled a multimillion-dollar spy operation to protect and support Assange, employing an international security company and undercover agents to monitor his visitors, embassy staff and even the British police. Over more than five years, Ecuador put at least $5m (£3.7m) into a secret intelligence budget that protected him while he had visits from Nigel Farage, members of European nationalist groups and individuals linked to the Kremlin. Earlier this month, Moreno withdrew additional security assigned to the Ecuadorian embassy in London, where the WikiLeaks founder has remained for almost six years.

Moreno has previously described Assange’s situation as “a stone in his shoe” and repeatedly hinted that he wants to remove the Australian from the country’s London embassy. In an interview in Quito, the president said granting Assange Ecuadorian citizenship in December last year had not been his idea but that of the foreign minister, María Fernanda Espinosa. He had delegated all decisions related to the case to her, Moreno told Deutsche Welle.

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Apr 252018
 
 April 25, 2018  Posted by at 8:27 am Finance Tagged with: , , , , , , , , , ,  


Amedeo Modigliani Nu allongé 1917

 

Why All Companies Fear ‘Death By Amazon’ (G.)
Richmond Fed Manufacturing Survey Crashes By Most In 25 Years (ZH)
Markets Better Prepare for Stagflation (DDMB)
Trade War With US And China’s $14 Trillion Debt-Ridden Economy (CNBC)
Big Farms Set To Pay The Price As EU Eyes Subsidy Cuts (Pol.)
In Japan, New Rules May Leave Home-Sharing Industry Out In The Cold (R.)
Palma de Mallorca To Ban Holiday Rentals After Residents’ Complaints (BBC)
Greece Uncovers Tax Evading Airbnb Owners By Posing as Customers (KTG)
World Wine Output Falls To 60-Year Low (R.)
Homelessness In UK ’10 Times Worse’ Than Official Figures Suggest (Ind.)
Over One In Five Greeks Can’t Make Ends Meet (K.)
Greek Minister Drafts Action Plans Amid Fears Over Refugee Influx (K.)
Greek Government Defies Court on Asylum Seekers (HRW)
Arctic Sea Ice Contains Huge Quantity Of Microplastics (Ind.)

 

 

Do we want monopolies? We’re letting them grow in front of our eyes.

Why All Companies Fear ‘Death By Amazon’ (G.)

Although its retail site is the most visible of its business strands, the $740bn company has quietly stretched its tentacles into an astonishing range of unrelated industries. Google and Facebook might have cornered the online advertising market, but Amazon’s business successes now include groceries, TV, robotics, cloud services and consumer electronics. “If you try to measure power by how many executives are up at night because of X company, I think Amazon would win,” said Lina Khan, legal fellow with the Open Markets Program at the thinktank New America. Amazon has a restaurant delivery service, a music streaming service and an Etsy clone called Amazon Homemade. It makes hugely successful hardware and software; it makes movies, television shows and video games.

It runs a labour brokerage for computer-based work and another for manual labour. It publishes books, sells books, and owns the popular social network site for book readers GoodReads.com. It sells diapers, baby food, snacks, clothing, furniture and batteries. It sells ads, processes payments, and makes small loans. It is the unexpected owner of a huge number of websites – everything from the gaming livestream site Twitch to the movie database IMDb. Of the top 10 US industries by GDP (information, manufacturing non-durable goods, retail trade, wholesale trade, manufacturing durable goods, healthcare, finance and insurance, state and local government, professional and business services, and real estate), Amazon has a finger in all but real estate.

And how confident can the real estate industry be right now that Amazon won’t at some point decide to allow people to buy and sell homes on its platform? “I see them as kind of a great white shark,” said Greer. “You don’t really want to mess with them.” “It’s basically become a railroad for the 21st century,” added Khan. “It’s existential for so many businesses but also competing with all those businesses.” What makes Amazon so frightening for rival businesses is that it can use its expertise in data analytics to move into almost any sector. “Amazon has all this data available. They track what people are searching for, what they click, what they don’t,” said Greer. “Every time you’re searching for something and don’t click, you’re telling Amazon that there’s a gap.”

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Recovery.

Richmond Fed Manufacturing Survey Crashes By Most In 25 Years (ZH)

When hope dies… against expectations of a small rise from March to a 16 print, April came in at a disastrous -3 (the worst data since Sept 2016). From record highs just a couple months ago, Richmond Fed manufacturing has crashed by the most in the survey’s 25 year history into contraction…

It was a bloodbath below the surface too. New orders collapsed to -9 from +17, order backlogs plunged to -4 from +10 and while wages and employees rose, workweek dropped notably. Finally, prices paid rose once again even as new orders crashed… Must be the weather, right?

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No, inflation is not “heating up by all metrics”. But we get the point.

Markets Better Prepare for Stagflation (DDMB)

Investors better wake up to the growing risk of stagflation. The coming weeks promise to deliver the verdict on how they should be positioned. By all metrics, inflation is heating up. But it’s not clear the same can said for underlying economic activity. According to producers, input costs have risen for six of the past eight months. And it’s not just big companies that are feeling pressure. One in four small businesses say they plan to raise prices, a 10-year high, according to the National Federation of Independent Business. Inflation’s persistence will finally begin to trickle through to consumers.

David Rosenberg, chief economist at the wealth management company Gluskin Sheff, recently quipped that investors “better say a prayer for Jay Powell,” the Federal Reserve chair. The deniers will dismiss the suggestion. But Rosenberg is serious, citing the core consumer price index’s March leap to 2.1%, a level that breaches the Fed’s 2% inflation target. “There is going to be a price to be paid for last year’s string of wireless-induced 0.1% prints which are falling out of the year-over-year math,” Rosenberg explained, referring to the collapse in wireless services that skewed inflation lower in 2017. “I see 50/50 odds of a 3% core inflation by year end.”

[..] The New York Fed’s regional survey also raised red flags. Delivery Times remained near their highest levels in seven years while New Orders, Backlogs and Employment all declined. The survey showed an even gloomier outlook for the future. The six-month business activity outlook dove to 18.8 from 44.1, the weakest since February 2016. Though one month can never make a trend, the depth of the plunge is bound to have raised eyebrows given that prior moves of its magnitude tend to coincide with recession.

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China’s so bloated with debt it is very vulnerable.

Trade War With US And China’s $14 Trillion Debt-Ridden Economy (CNBC)

While some of the rhetoric around trade tariffs on China has died down over the last couple of weeks, the prospect of a trade war has not. On April 18, China imposed preliminary antidumping tariffs of 178.6% on sorghum, a crop used to make alcohol and biofuels, while President Donald Trump’s threat to impose tariffs on $150 billion worth of goods on everything from solar panels to aircraft to cars remains on the table. If an actual U.S. trade war ensues, then China’s economic growth prospects could be negatively impacted in a significant way. While the country’s economy has shifted inward over the last few years, relying on its own citizens to fuel growth, it still exports billions of dollars in goods and services every year.

Last year it sold $506 billion in exports to the United States — nearly 20% of its exports go to America — while the United States sold just $130 billion to the Chinese. In January the IMF said China’s economic growth would top 6.6% in 2018, but it could now drop by as much as 0.5% if these tariffs are imposed — and it could slow even further if a global trade war truly heats up. China’s economy can likely weather a small decline in growth, in part because of its increased reliance on domestic spending, but this isn’t the only potentially GDP-destroying situation it’s dealing with.

Over the last few years, China’s debt-to-GDP has ballooned to more than 300% from 160% a decade ago, causing many people, including Chinese officials, to warn of a financial-sector debt bubble that’s waiting to burst. [..] How did it get so bad? After the recession, the country spent trillions on infrastructure projects, with many banks, including unregulated or “shadow” banks, loaning money to companies that have been unable to pay back their debts. According to a Chinese news outlet, Lai Xiaoming, chairman of China Huarong Asset Management, one of the country’s biggest asset management firms, said that total volume of nonperforming loans could hit a record $476 billion by 2020.

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Why the insects are dying. Europe should cut subsidies for anyone using chemicals.

Big Farms Set To Pay The Price As EU Eyes Subsidy Cuts (Pol.)

EU Budget Commissioner Günther Oettinger said Monday that Brussels plans to cut its payments to Europe’s biggest farms in the next budget cycle in order to reduce the bloc’s lavish agricultural subsidies by 6%. Brussels is due to make a proposal for the EU’s 2021-2027 budget framework on May 2, and cutbacks are seen as inevitable because Britain will no longer be contributing funds. Agricultural spending is one of the most obvious targets for cost cutting because the Common Agricultural Policy represents almost 40% of the EU budget, or some €59 billion each year.

When asked by POLITICO about CAP cuts on the sidelines of a trade conference in Hannover, Oettinger said: “We cannot fully exempt the existing programs from cutbacks. And in comparison to 2020, as the last year of the existing financial framework, my proposal will focus on approximately 6%, a moderate 6%, reductions.” One of the biggest criticisms of the CAP is that it has prioritized big landowners with direct payments based on acreage. Some 80% of CAP funds go to 20% of farms, owned by the likes of British royalty and major multinational companies. Oettinger said the new budget model would aim to balance that slightly.

“What we have in mind is degressive funding: That means a very big business receives for its hectares a little bit less money than a small enterprise. And that’s exactly what we still have to discuss within the next next days. On Wednesday, we will have a discussion between [Agriculture Commissioner Phil] Hogan and me on this.” Hogan has already told farmers to prepare for belt-tightening. “We need to be realistic: In the absence of more money from member states, there will be a cut to the CAP budget. My job as I see it is to build the strongest possible coalition to resist the worst of these cuts, and achieve the best outcome in a difficult scenario,” he said last week.

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Governments are starting to tackle Airbnb.

In Japan, New Rules May Leave Home-Sharing Industry Out In The Cold (R.)

Japan’s new home-sharing law was meant to ease a shortage of hotel rooms, bring order to an unregulated market and offer more lodging options for foreign visitors ahead of next year’s Rugby World Cup and the 2020 Tokyo Olympics. Instead, the law is likely to stifle Airbnb Inc and other home-sharing businesses when it is enacted in June and force many homeowners to stop offering their services, renters and experts say. The “minpaku,” or private temporary lodging law, the first national legal framework for short-term home rental in Asia, limits home-sharing to 180 days a year, a cap some hosts say makes it difficult to turn a profit.

More important, local governments, which have final authority to regulate services in their areas, are imposing even more severe restrictions, citing security or noise concerns. For example, Tokyo’s Chuo ward, home to the tony Ginza shopping district, has banned weekday rentals on grounds that allowing strangers into apartment buildings during the week could be unsafe. That’s a huge disappointment for Airbnb “superhost” Mika, who asked that her last name not be used because home-renting is now officially allowed only in certain zones. She has enjoyed hosting international visitors in her spare two-bedroom apartment but will stop because her building management has decided to ban the service ahead of the law’s enactment.

“I was able to meet many different people I would have not met otherwise,” said Mika, 53, who started renting out her apartment after she used a home-sharing service overseas. “I may sell my condo.” Mika added that if she were to rent the apartment out on a monthly basis, she would only make one-third of what she does from short-term rentals. The ancient capital of Kyoto, which draws more than 50 million tourists a year, will allow private lodging in residential areas only between Jan. 15 and March 16, avoiding the popular spring and fall tourist seasons.

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“..only 645 of 11,000 holiday rentals being offered to tourists on Palma have the licence required to do so.”

Palma de Mallorca To Ban Holiday Rentals After Residents’ Complaints (BBC)

The Spanish resort city of Palma, on the island of Majorca, is to ban flat owners from renting their apartments to travellers, becoming the first place in Spain to introduce such a measure. The restrictions follow complaints from residents of rising rents due to short holiday lets through websites and apps. Palma’s mayor says the ban, to be introduced in July, will be a model for cities suffering with mass tourism. But business associations say many families will be financially impacted. It was not immediately clear if the ban was restricted only to private flats advertised by their owners on apps or websites.

Houses and chalets will be exempt from the restrictions unless they are located inside protected areas, next to the airport or in industrial zones. Palma, like many other cities around the world, has seen an increase in visitor numbers driven, in part, by private rental accommodation offered through websites and apps. Officials from the local left-wing governing coalition cited a study suggesting that the number of non-licensed apartments on offer to tourists increased by 50% between 2015 and 2017. According to Spanish newspaper El País, only 645 of 11,000 holiday rentals being offered to tourists on Palma have the licence required to do so.

Locally, there is resentment over tourism pushing up prices – rents in Palma have reportedly increased 40% since 2013 – but also about deteriorating conditions in neighbourhoods popular with travellers due to noise and bad behaviour. “Palma is a determined and courageous city,” Mayor Antoni Noguera said. “We agreed on this [ban] based on the general interest [of the city] and we believe it will set the trend for other cities when they see that finding a balance is key.”

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They’re all doing it all wrong. Simply force Airbnb to supply numbers on all rentals.

Greece Uncovers Tax Evading Airbnb Owners By Posing as Customers (KTG)

Tax inspectors uncover tax evading Airbnb owners by pretending to be customers. According to Greece’s Independent Authority for Public Revenue (AADE), the trap has revealed a total of 55 Airbnbn tax evaders, so far. In some cases, the ‘fake customers’ even proceeded to booking an Airbnb flat. The first Airbnb owners who failed to declare their earnings from home-sharing practices were uncovered by Greece’s Independent Authority for Public Revenue (AADE) this week. Under a pilot program aiming to weed out violators, AADE inspectors posed as customers seeking to rent out short-term accommodation via the Airbnb platform. The undercover inspections focused on central points in the Greek capital as well as on luxury options available on popular Greek islands. In some cases, AADE authorities even proceeded to book.

According to AADE, 55 proprietors who had not proceeded with the mandatory declaration of earnings from home-sharing services were notified of the violation. A total of 39 came forward and proceeded with corrections to their income tax declarations indicating additional property income of approximately 921,163 euros resulting in over 200,000 euros going into state coffers. It should be noted that all owners renting out their properties on home-sharing platforms are required by Greek law to declare earned incomes from short-term lease in 2017 on their E2 Forms (column 7).

For income up to 12,000 euros, tax is imposed at a rate of 15%. Takings between 12,001 and 35,000 euros will be taxed at a 35% rate; annual gains over 35,000 euros at a 45% rate. For those offering additional services on the side, the earnings are assessed as income from business activity and taxed at 22% for earnings up to 20,000 euros, 29% for yields between 20,001 and 30,000 euros, 37% for takings between 30,001 and 40,000 euros, and 45% for profits exceeding 40,000 euros.

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Looked it up: World population 60 years ago was less than 3 billion (it hit that in 1960). It is now 7.5 billion. Ergo: people used to drink over 2x as much wine back then.

World Wine Output Falls To 60-Year Low (R.)

Wine production totaled 250 million hectoliters last year, down 8.6% from 2016, data from the Paris-based International Organisation of Vine and Wine (OIV) released on Tuesday showed. It is the lowest level since 1957, when it had fallen to 173.8 million hectoliters, the OIV told Reuters. A hectoliter represents 100 liters, or the equivalent of just over 133 standard 75 cl wine bottles. All top wine producers in the EU have been hit by harsh weather last year, which lead to an overall fall in the bloc of 14.6% to 141 million hectoliters.

The OIV’s projections, which exclude juice and must (new wine), put Italian wine production down 17% at 42.5 million hectoliters, French output down 19% at 36.7 million and Spanish production down 20% at 32.1 million. The French government said last year production had hit a record low due to a series of poor weather conditions including spring frosts, drought and storms that affected most of the main growing regions including Bordeaux and Champagne. In contrast, production remained nearly stable in the United States, the world’s fourth largest producer, and China, which has become the world’s seventh largest wine producer behind Australia and Argentina.

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Failed state.

Homelessness In UK ’10 Times Worse’ Than Official Figures Suggest (Ind.)

The true scale of homelessness in the UK is almost 10 times worse than official figures suggest, according to a new report. Homeless charity Justlife warns thousands of people are being “forgotten in statistics” after it estimated that at least 51,500 people were living in B&Bs in the year to April 2016 – compared with 5,870 official B&B placements recorded by the government. It comes after a separate investigation found that 78 homeless people died last winter – an average of at least two a week. The report by the Bureau of Investigative Journalism revealed the fatalities included rough sleepers, people recognised as “statutory homeless” and people staying in temporary accommodation.

Justlife reached its estimate on the homeless B&B population using data gathered from Freedom of Information requests to local authorities, along with other information from the government’s Rural and Urban Classification for Local Authority Districts data. Christa Maciver, author of the report, said: “We can no longer ignore the tens of thousands of people stuck homeless, hidden and ignored in our cities. This report shows there is so much we don’t know and that we really need to be calculating homelessness more accurately.

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And another failed state.

Over One In Five Greeks Can’t Make Ends Meet (K.)

Last year 21.1% of Greeks – or more than one in five – were unable to cover their basic needs, such as the timely payment of utility bills and regular consumption of meat, according to Eurostat. That 21.1% in 2017 may constitute a minor improvement from the 22.4% rate in 2016, but is still a particularly high level. This rate was also the second highest in the European Union and translates to a large share of the population, or 2.24 million people.

The people or households in that category are by definition those unable to meet the costs of at least four of the following: payment of utility bills in time, sufficient heating at home, tackling extraordinary expenses, consumption of meat (or fish or the equivalent in vegetables) on a regular basis, a one-week vacation away from home, and capacity to purchase a TV set, a washing machine, a car or a telephone. The age group with the highest rate of material deprivation in Greece includes those between 20 and 24 years, amounting to 32.6% – or one in three – though this is according to 2016 data. Notably, the year with the highest material deprivation rate in Greece from 2003 to 2017 (for which Eurostat has data), was 2009.

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Arrivals on Lesbos are 4 times what they were last year this time.

Greek Minister Drafts Action Plans Amid Fears Over Refugee Influx (K.)

Migration Minister Dimitris Vitsas conceded on Tuesday that he is “worried” about the significant increase in the flow of migrants and refugees to Greece observed recently. Vitsas said that arrivals on Lesvos had increased almost fourfold since last year, noting that daily arrivals were 54 on average last year compared to the 206 migrants who arrived on the island on Tuesday. Between January and April, more than 7,000 migrants and refugees arrived on the islands of the eastern Aegean, he said, noting that just 112 people were returned to Turkey during that same period. However, Vitsas appeared far more concerned with the increase in arrivals over the Greek-Turkish land border, noting that 340 people crossed the border on Tuesday.

“I’m not scared about the islands because we know what we have to do. What is really worrisome is the huge increase through Evros,” he said. Under pressure from the opposition over mistakes and omissions in the government’s current migration policy, Vitsas said that his ministry has prepared two plans to deal with the situation and pledged to outline their content to political party leaders in private. According to Bulgarian government statistics, 356 migrants have crossed into that country from Turkey since the beginning of the year. In the same period, more than 2,700 crossed Turkey’s land border with Greece, Vitsas said.

There are fears that the difference in flows is due to deteriorating ties between Greece and Turkey while relations between Sofia and Ankara are good, particularly since Bulgarian authorities returned alleged supporters of the US-exiled Turkish cleric Fethullah Gulen to Turkey in 2016. Security along Turkey’s border with Bulgaria has intensified since then. The opposite has been happening along the Greek border since the detention of two Greek soldiers who strayed across the border in early March. Greek border guards are now more cautious, and less inclined to crack down on migrants.

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Curious. Athens should be open about EU pressure on the topic.

Greek Government Defies Court on Asylum Seekers (HRW)

The Greek government’s move on April 20, 2018, overturning a binding court ruling ordering it to end its abusive policy of trapping asylum seekers on Greece’s islands raises rule of law concerns, 21 human rights and humanitarian organizations said today. Rather than carrying out the April 17 ruling by the Council of State, the country’s highest administrative court, the government issued an administrative decision reinstating the policy, known as the “containment policy.” It also introduced a bill on April 19 to clear the way to restore the policy in Greek law. Parliament members should oppose such changes and press the government to respect the ruling.

Parliament began discussing the draft law on April 24. But the government has preempted the debate on the bill, including the issue of the containment policy by reinstating it. On April 20, the new director of the asylum service reissued an administrative order setting down the reasons for the containment policy. Among grounds given to justify the restrictions imposed by the policy are the need to implement an EU-Turkey deal on migration and a broader public interest claim. But the decision goes against the Council of State ruling and Greece’s responsibilities under international, EU and Greek law, as it offers insufficient justification for the restrictions, the groups said.

The Council of State’s April 17 ruling said that Greece’s containment policy had no legal basis and that there were no imperative reasons under EU and Greek law justifying the restrictions to the freedom of movement of asylum seekers. It ordered the annulment of the administrative decision imposing the restrictions and permitted the free movement of asylum seekers arriving on the islands following the ruling’s publication. The ruling also highlighted that the disproportionate distribution of asylum seekers has overburdened the islands. The ruling is limited, however, applying only to new arrivals.

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“Each litre of sea ice contained around 12,000 particles of plastic..”

Arctic Sea Ice Contains Huge Quantity Of Microplastics (Ind.)

Scientists have found an unprecedented number of microplastics frozen in Arctic sea ice, demonstrating the alarming extent to which they are pervading marine environments. Analysis of ice cores from across the region found levels of the pollution were up to three times higher than previously thought. Each litre of sea ice contained around 12,000 particles of plastic, which scientists are now concerned are being ingested by native animals. Based on their analysis, the researchers were even able to trace the tiny fragments’ paths from their places of origin, from fishing vessels in Siberia to everyday detritus that had accumulated in the infamous Great Pacific Garbage Patch.

“We are seeing a clear human imprint in the Arctic,” the study’s first author, Dr Ilka Peeken, told The Independent. “It suggests that microplastics are now ubiquitous within the surface waters of the world’s ocean,” said Dr Jeremy Wilkinson, a sea ice physicist at the British Antarctic Survey who was not involved with the study. “Nowhere is immune.”

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Mar 272018
 


Paul Klee Cat 1939

 

Dow Surges 670 Points But Stock Market Is On The Brink Of A Breakdown (MW)
Trump Sends To-Do List to China on Trade (WS)
America’s State Wreck Gathers Steam Part 2 (Stockman)
Integrity Has Vanished From The West (Paul Craig Roberts)
Western Allies Expel Scores Of Russian Diplomats Over Skripal Attack (G.)
New Zealand Says It Would Expel Russian Spies … But It Can’t Find Any (G.)
Whistleblower Questions Brexit Result, Says Campaigners Broke Election Law (R.)
Brexit Referendum Campaign Accused of Breaking Spending Rules (BBG)
Theresa May Stands By Adviser Who Outed Brexit Whistleblower (G.)
Underfunded Public Pensions To Persist (R.)
Hood Ornament Buffer (Jim Kunstler)
Meeting Paris Agreement Targets Will Take Massive Cuts in Emissions (BBG)
Ultra-Thin Sun Shield Could Protect Great Barrier Reef (AFP)
Brazil Senate Considers Lifting Ban On Sugarcane Production In Amazon (G.)

 

 

What you’re watching is not real.

Dow Surges 670 Points But Stock Market Is On The Brink Of A Breakdown (MW)

The stock market surged on Monday—and it really needed to. U.S. stocks are coming off the biggest weekly decline in more than two years, and the aftermath of that drop has market technicians warning that major indexes are on the verge of a full-fledged, technical breakdown. “The extent of the deterioration in equities is very much a concern given the combination of near-term technical damage, along with the decline in longer-term momentum after having reached record overbought conditions into late January,” wrote Mark Newton at Newton Advisors, in a Monday research note. Here are some levels that the market is trying to defend or retake after last week’s withering action:

A Dow Theory sell signal was close to forming. According to MarketWatch columnist Mark Hulbert there are a number of steps, but as of Friday, the market had just to see the Dow Jones Transportation Average close below its Feb. 9 low of 10,136.61 to trigger that sell signal after the Dow Jones Industrial Average DJIA, on Friday closed below its February low. On Monday, the transports closed up 2.1% at 10,373.21.

According to data from Michael O’Rourke, chief market strategist at JonesTrading, a little more than half of Dow components were trading below their 200-day moving averages, which hadn’t happened since 2015. Meanwhile, about 50% of the S&P 500 components were trading above their 200-day moving averages, with a break below indicating “notable technical damage has been done to this market,” O’Rourke wrote.

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All obvious.

Trump Sends To-Do List to China on Trade (WS)

Negotiations – led on the US side by Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, and on the Chinese side by Liu He, a newly anointed vice premier and President Xi Jinping’s top economic adviser – about how to address the gigantic China-US trade imbalance have quietly begun, the infamous “people with knowledge of the matter” told the Wall Street Journal. On Saturday, Mnuchin called Liu, which was confirmed by the Treasury Department. A spokesman said that they “also discussed the trade deficit between our two countries and committed to continuing the dialogue to find a mutually agreeable way to reduce it.” Now Mnuchin is considering a trip to Beijing to pursue the negotiations, one of these people told the Wall Street Journal.

And last week, according to these people, Mnuchin and Lighthizer sent Liu a to-do list on trade with specific items the White House wants China to undertake, including:
• A reduction of the 25% tariffs that China imposes on US-made cars
• Increased purchases by China of US-made semiconductors. China would need to shift these purchases from Japanese and South Korean manufacturers, which aren’t going to be happy
• Reduce subsidies to state-owned enterprises
• Provide more regulatory transparency
• Ease restrictions on US companies in China, particularly requirements that they operate as joint ventures in which the US company’s ownership may be limited to 51%
• Giving US financial firms greater access to the Chinese market.

Clearly, in leaking these negotiations and the existence of this to-do list to the financial press, the White House is hoping to calm the markets, because the last thing it wants is to preside over a stock market plunge, though the stock market has all the best reasons to swoon, and the US-China trade situation isn’t needed to accomplish that.

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“Trump’s new War Cabinet of John Bolton, Mike Pompeo, Gina Haspel and Mad Dog Mattis is arguably the most interventionist, militarist, confrontationist and bellicose national security team ever..”

America’s State Wreck Gathers Steam Part 2 (Stockman)

Last week the Donald’s incipient trade war got Wall Street’s nerves jangling, but that wasn’t the half of what’s coming. To wit, Trump has now essentially formed a War Cabinet and signed a Horribus spending bill that is a warrant for fiscal meltdown. Indeed, the two essentially comprise a self-fueling doom loop which means Washington’s descent into fiscal catastrophe is well-nigh unstoppable; it’s all over except for the screaming in the bond pits. That is, Trump’s new War Cabinet of John Bolton, Mike Pompeo, Gina Haspel and Mad Dog Mattis is arguably the most interventionist, militarist, confrontationist and bellicose national security team ever assembled by a sitting President.

We cannot think of a single country that has even looked cross-eyed at Washington in recent years where one or all four of them has not threatened to drone, bomb, invade or decapitate its current ruling regime. That means Imperial Washington’s rampant War Fever owing to the Dem-left declaration of war on Russia and Putin is now about to be drastically intensified by the complete victory of the neocon-right in the Trump Administration. The result will be sharpened confrontation, if not actual outbreak of hostilities, across the full spectrum of adversaries – Iran, Russia, China, Syria and North Korea – and an escalating tempo of military operations and procurement to implement the policy.

At the same time, the Donald’s pathetic Fake Veto maneuver on Friday cemented the special interest lobbies’ absolute control over domestic appropriations. Of course, Chuckles Schumer and Nancy Pelosi crowed loudly about the $63 billion annual domestic spending increase they got in return for the Donald’s $80 billion defense add-on, but the victory was not partisan; it belonged to the Swamp creatures who suckle the politicians of both parties and own the appropriations committees lock, stock and barrel.

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TV was just a first step in creating opinions from scratch. We can do much more than that now. Will we still curtail Facebook, Google?

Integrity Has Vanished From The West (Paul Craig Roberts)

Among Western political leaders there is not an ounce of integrity or morality. The Western print and TV media is dishonest and corrupt beyond repair. Yet the Russian government persists in its fantasy of “working with Russia’s Western partners.” The only way Russia can work with crooks is to become a crook. Is that what the Russian government wants? Finian Cunningham notes the absurdity in the political and media uproar over Trump (belatedly) telephoning Putin to congratulate him on his reelection with 77% of the vote, a show of public approval that no Western political leader could possibly attain. The crazed US senator from Arizona called the person with the largest majority vote of our time “a dictator.” Yet a real blood-soaked dictator from Saudi Arabia is feted at the White House and fawned over by the president of the United States.

The Western politicians and presstitutes are morally outraged over an alleged poisoning, unsupported by any evidence, of a former spy of no consequence on orders by the president of Russia himself. These kind of insane insults thrown at the leader of the world’s most powerful military nation—and Russia is a nation, unlike the mongrel Western countries—raise the chances of nuclear Armageddon beyond the risks during the 20th century’s Cold War. The insane fools making these unsupported accusations show total disregard for all life on earth. Yet they regard themselves as the salt of the earth and as “exceptional, indispensable” people.

Think about the alleged poisoning of Skirpal by Russia. What can this be other than an orchestrated effort to demonize the president of Russia? How can the West be so outraged over the death of a former double-agent, that is, a deceptive person, and completely indifferent to the millions of peoples destroyed by the West in the 21st century alone. Where is the outrage among Western peoples over the massive deaths for which the West, acting through its Saudi agent, is responsible in Yemen? Where is the Western outrage among Western peoples over the deaths in Syria? The deaths in Libya, in Somalia, Pakistan, Ukraine, Afghanistan? Where is the outrage in the West over the constant Western interference in the internal affairs of other countries? How many times has Washington overthrown a democratically-elected government in Honduras and reinstalled a Washington puppet?

The corruption in the West extends beyond politicians, presstitutes, and an insouciant public to experts. When the ridiculous Condi Rice, national security adviser to president George W. Bush, spoke of Saddam Hussein’s non-existent weapons of mass destruction sending up a nuclear cloud over an American city, experts did not laugh her out of court. The chance of any such event was precisely zero and every expert knew it, but the corrupt experts held their tongues. If they spoke the truth, they knew that they would not get on TV, would not get a government grant, would be out of the running for a government appointment. So they accepted the absurd lie designed to justify an American invasion that destroyed a country.

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Diplomats are stationed abroad to make communication possible. This does not help.

Western Allies Expel Scores Of Russian Diplomats Over Skripal Attack (G.)

The US has ordered the expulsion of 60 Russian officials who Washington says are spies, including a dozen based at the United Nations, and told Moscow to shut down its consulate in Seattle, which would end Russian diplomatic representation on the west coast. The EU members Germany, France and Poland are each to expel four Russian diplomats with intelligence agency backgrounds. Lithuania and the Czech Republic said they would expel three, and Denmark, Italy and the Netherlands two each. Estonia, Latvia, Croatia, Finland, Hungary, Sweden and Romania each expelled one Russian. Iceland announced it would not be sending officials to the World Cup in Russia.

Ukraine, which is not an EU member, is to expel 13 Russian diplomats, while Albania, an EU candidate member, ordered the departure of two Russians from the embassy in Tirana. Macedonia, another EU candidate, expelled one Russian official. Canada announced it was expelling four diplomatic staff serving in Ottawa and Montreal who the Canadian government said were spies. A pending application from Moscow for three more diplomatic posts in Canada is being denied. Australia confirmed that it too would expel two Russian diplomats who were in the country as undeclared intelligence officers, giving them seven days to leave.

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Someone will find some for them.

New Zealand Says It Would Expel Russian Spies … But It Can’t Find Any (G.)

New Zealand’s prime minister, Jacinda Ardern, and foreign affairs minister, Winston Peters, say they would expel Russian spies from the country, if there were any. More than 100 Russian diplomats alleged to be spies in western countries have been told to return to Moscow, in response to the use of a chemical weapon in the attempted murder of Sergei Skripal, a former Russia/UK double agent, and his daughter, Yulia, in Salisbury, England on 4 March. The New Zealand government has condemned the attack and supports the international action, but says there are no such “Russian intelligence agents” in the country.

The Russian ambassador to New Zealand was summoned to a meeting “to reiterate our serious concern” over the Salisbury attack. “While other countries have announced they are expelling undeclared Russian intelligence agents, officials have advised there are no individuals here in New Zealand who fit this profile. If there were, we would have already taken action,” said Ardern. She said New Zealand will review what further action it can take to support the international community over the attack. “We remain steadfast with our international partners in our shared concern about the Salisbury nerve agent attack,” Ardern said.

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There are tw0 such whistleblowers now. Here’s no. 1:

Whistleblower Questions Brexit Result, Says Campaigners Broke Election Law (R.)

A whistleblower at the heart of a Facebook data scandal on Monday questioned the result of Britain’s 2016 Brexit referendum as his lawyers presented evidence that they said showed the main campaign for leaving the EU had broken the law. With just a year until Britain is due to leave the European Union, two whistleblowers – one from the British political consultancy Cambridge Analytica and one from the Vote Leave group – have alleged that Brexit campaigners funded their campaign illegally. By doing so, they have pulled Brexit into a scandal that has forced Mark Zuckerberg to apologise for how Facebook handled users’ data, and raised questions about how Donald Trump’s 2016 campaign employed data.

Vote Leave officials on Monday denied breaking election rules and said they were facing an attempt to undermine Brexit by smearing their reputations. The whistleblowers’ law firm, London-based Bindmans, released 53 pages of selected evidence on Monday. In a legal opinion, Bindmans said there was a prima facie case that Vote Leave broke election spending limits by donating to an allied group known as BeLeave, with which it was working closely.

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And this is no. 2:

Brexit Referendum Campaign Accused of Breaking Spending Rules (BBG)

Campaigners for Brexit may have conspired to break spending limits in the U.K.’s 2016 referendum on European Union membership, according to allegations by a whistle-blower who worked for one of the Leave groups. Vote Leave, the main pro-Brexit campaign, gave money to a smaller campaign group, BeLeave, and then helped direct how it was spent, according to a 50-page legal opinion by attorneys from London’s Matrix Chambers. The lawyer are acting on behalf of people who flagged potential violations in the campaign.

If that 625,000-pound ($889,000) donation had been included in Vote Leave’s accounts, it would have taken the group over its 7 million-pound spending limit. “It’s important that it’s the will of the people and not the bought will of the people that is expressed at the ballot box,” Tamsin Allen told reporters at a briefing Monday afternoon in London. Allen is a lawyer for Shahmir Sanni, a BeLeave campaigner who argues the rules were broken.

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No. 2 was outed as gay by his own government as revenge for being a whistleblower. His family in Pakistan has hired security.

Theresa May Stands By Adviser Who Outed Brexit Whistleblower (G.)

Theresa May has insisted her political secretary, Stephen Parkinson, “does a very good job”, as he faces mounting pressure over the outing of the Brexit whistleblower Shahmir Sanni. Sanni said he had endured one of the “most awful weekends” of his life after telling the Observer how Vote Leave channelled money through BeLeave, a group linked to Cambridge Analytica, to get around electoral law. On Friday Sanni was outed as gay by Parkinson, one of May’s closest advisers and a former Vote Leave official, with whom Sanni had a relationship during the campaign. Privately, some Conservative MPs believe Parkinson should stand down. “He’ll have to go,” said one backbencher.

The Labour MP Ben Bradshaw challenged the prime minister in the House of Commons on Monday about what Downing Street said was a “personal statement” by Parkinson. “How is it remotely acceptable that when a young whistleblower exposes compelling evidence of law-breaking by the leave campaign, implicating staff at No 10, one of those named instead of addressing the allegations issues an officially sanctioned statement outing the whistleblower as gay and thereby putting his family in Pakistan in danger?” he said. “It’s a disgrace, prime minister, you need to do something about it.”

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As sure as death and taxes.

Underfunded Public Pensions To Persist (R.)

Investment returns have been uneven and funding levels have yet to recover. Many pension funds have meanwhile attempted to boost returns by loading up on alternative investments to levels unheard of a decade earlier. “Some just cannot grow their way out of it. We have had several years of stellar (stock market) returns and it barely improved the underfunding situation,” said Mikhail Foux, municipal credit analyst at Barclays in New York. The benchmark S&P 500 U.S. stock index has tripled in the past nine years, driven in part by unprecedented zero interest rate policies and massive monetary stimulus from central banks around the globe aimed at combating the deepest recession in a generation.

But pension returns struggled to match the broad market, and recent wobbles in U.S. equities have fed fears of another downturn. “Now what happens when markets are falling 10 to 15%?” Foux asked. In 2007, a year before the crisis began, the median funded level was 92% for state retirement and 97% for local plans, according to Wilshire Funding Studies. That fell to 68% for states and 72% for local governments by 2016, the most recent data. A lower funded ratio indicates the overall soundness of a pension fund is weaker and more money is required to meet future obligations.

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Best description yet of Stormy. Big announcements and an empty interview. Presidents showing their virility makes them more popular, not less. Ask France.

Hood Ornament Buffer (Jim Kunstler)

Newsflash: President Donald J. Trump had sex with a whore twelve years ago. Let that sink into your limbic lobes, you poor, opiated, Facebook-addled, morbidly-obese, fly-over nation of lumbering, deplorable, gun-gripping, Jesus-haunted voters. A hoor! Do you hear? Wait a minute, you say. Stormy Daniels is no such thing, She’s an actress in, and director of, adult films, an auteur, if you like, at least a sex worker, toiling in the rolling mills of eros, sweating and grunting as much as any Mahoning Valley steel worker, or hood ornament buffer on the Tesla assembly line. And anyway, three times over the years she denied having sex with that man, at least once in writing, though last night on CBS’s Sixty Minutes she stated that she actually did have sex with the Golden Golem of Greatness.

In which case, she may be some kind of a lyin’ hoor… or savior of a nation yearning to cast off the loathsome rule of this odious president-by-mistake. The Sixty Minutes make-up and costume crew knocked themselves out coming up with her on-camera look Sunday night: WalMart Shopper. That reddish blouse, for instance, which did not display Stormy’s… er… assets in the usual way (i.e., an enticing fleshy slot descending into deep milky realms of mystery), but just innocently swimming around in there like a couple of frolicking dolphins confined in an above-the-ground backyard pool. Who wouldn’t want to jump in and swim with them? Maybe not the undistractible Anderson Cooper, who did ferret out many interesting particulars of that one romantic encounter: Stormy accepted Trump’s invitation for dinner… in his hotel suite. Just the two of them, ahem.

They watched a TV show about sharks. It apparently lacked aphrodisiac punch. So he showed her a magazine with his picture on the cover, perhaps to get the point across that he was a really important person in case she didn’t already know. She said she ought to take it and spank him with it. He concurred, dropped trou, and presented the rear of his tighty-whitey small-clothes to facilitate that proposal. After that ice-breaker, he said, “I really like you!” and “You remind me of my daughter” — instantly be-sliming the proceedings with overtones of incest. Stormy went to the bathroom and emerged to find Trump perched on the bed. “Here we go,” the thought popped into her head, she says. But she didn’t say “no.”

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Not going to happen. Paris was just meant to make you feel good.

Meeting Paris Agreement Targets Will Take Massive Cuts in Emissions (BBG)

Meeting the Paris accord’s temperature targets will take massive cuts to greenhouse gas emissions within 15 years, but won’t require them to be reduced to zero, according to a new study published Monday in the journal Nature Climate Change. If those targets—between 1.5 to 2ºC (2.7 to 3.6ºF)—are overshot, the consequences would likely require both drastic cuts to emissions and geoengineering efforts to remove carbon from the atmosphere, according to the paper by Katsumasa Tanaka at the National Institute for Environmental Studies in Japan and Brian O’Neill at the U.S. National Center for Atmospheric Research. “If we overshoot the temperature target, we do have to reduce emissions to zero. But that won’t be enough,” Tanaka said in a statement.

“We’ll have to go further and make emissions significantly negative to bring temperatures back down to the target by the end of the century.” Tanaka’s team began looking at both the accord’s temperature goals and requirement that countries “achieve net-zero greenhouse gas emissions in the second half of this century,” according to the statement. The scientists created scenarios that would achieve both the temperature goals and emissions guidelines. The group concluded to do so would necessitate cutting emissions 80% by 2033 to meet the 1.5 degree target or about 66% by 2060 to meet the 2 degree mark. “In both these cases, emissions could then flatten out without ever falling to zero,” according to the statement.

[..] The United Nation’s Intergovernmental Panel on Climate Change is working on a report which is expected to conclude that geoengineering will be needed to meet the 1.5 degree goal. Recognizing this difficulty, Tanaka and O’Neill looked at the possibility the targets would be missed. If the 1.5-degree mark is missed, emissions would have to fall to zero by 2070 and then be negative for the rest of the century. In the 2-degree scenario emissions would have to drop to zero by 2085 and then stay negative for a shorter period of time to get back below 2 degrees. Both scenarios would require removing carbon from that atmosphere. The researchers also looked at scenarios reducing emissions to zero by 2060 and 2100. In the first case, the temperature rose 2 degrees before declining. In the second instance, it rose above that mark by 2043 and stayed there for 100 years or more.

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Yes, of course. We’ll cover the ocean in plastic, just as we do our food. And then ourselves.

Ultra-Thin Sun Shield Could Protect Great Barrier Reef (AFP)

An ultra-fine biodegradable film some 50,000 times thinner than a human hair could be enlisted to protect the Great Barrier Reef from environmental degradation, researchers said Tuesday. The World Heritage-listed site, which attracts millions of tourists each year, is reeling from significant bouts of coral bleaching due to warming sea temperatures linked to climate change. Scientists from the Australian Institute of Marine Biology have been buoyed by test results of a floating “sun shield” made of calcium carbonate that has been shown to protect the reef from the effects of bleaching. “It’s designed to sit on the surface of the water above the corals, rather than directly on the corals, to provide an effective barrier against the sun,” Great Barrier Reef Foundation managing director Anna Marsden said.

The trials on seven different coral types found that the protective layer decreased bleaching of most species, cutting off sunlight by up to 30 percent. “It (the project) created an opportunity to test the idea that by reducing the amount of sunlight from reaching the corals in the first place, we can prevent them from becoming stressed which leads to bleaching,” Marsden said. Researchers from a breadth of disciplines contributed to the project, which was headed by the scientist who developed the country’s polymer bank notes. “In this case, we had chemical engineers and experts in polymer science working with marine ecologists and coral experts to bring this innovation to life,” Marsden said.

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Yeah, just great. The entire deterioration process of teh planet is fast accelerating.

Brazil Senate Considers Lifting Ban On Sugarcane Production In Amazon (G.)

A bill being rushed through Brazil’s senate would lift a ban on the cultivation of sugarcane for ethanol fuel in the Amazon, driving more deforestation and making it harder for the country to meet its commitments under the Paris Climate Deal. The bill, which has been roundly condemned by environmentalists, companies and even Brazil’s union of sugarcane producers (UNICA), marks the latest move by a conservative congress to unravel Amazon protections. Five former environment ministers have also criticised it. “This is another setback that should not thrive,” said one, José Carvalho. Under a 2009 decree, sugar cane production is not allowed in the Amazon biome.

Allowing the highly-profitable crop to be raised on deforested land in the region would push out other crops and encourage more deforestation, said Marcio Astrini, public policy coordinator for Greenpeace in Brazil. It could be “one of the biggest disasters for the forest,” he said. The bill was first introduced in 2011 by Flexa Ribeiro, a senator for the centre-right Brazilian Social Democratic party in the Amazon state of Pará, and suddenly put up for a vote on Tuesday afternoon. It would allow ethanol production on vaguely-defined areas of Amazon land, including “altered areas” and “general land”. If approved on Tuesday and given presidential sanction, it could become law. Brazil’s ethanol fuel is seen as a clean fuel alternative to gasoline by millions of motorists. According to UNICA, 27m cars in Brazil, 73% of the total can use either gasoline or ethanol, as can 4m motorbikes.

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 March 23, 2018  Posted by at 9:48 am Finance Tagged with: , , , , , , , , , ,  


Edvard Munch Spring 1889

 

China Hits Back on Trump Tariffs as Europe Off the Hook for Now (BBG)
Asian Stocks Plunge As Trump’s Trade War Heats Up (MW)
Dow Jones Closes Down More Than 700 Points (Ind.)
UK Politicians To Be Exempt From Data Crackdown (Ind.)
Steve Bannon: ‘Facebook Data Is For Sale All Over The World’ (G.)
Facebook Gave Data About 57 Billion Friendships To Academic (G.)
The Digital Military Industrial Complex (NYBooks)
EU Countries Prepare To Follow May And Expel Russian Diplomats (G.)
Number Of British Children In Poverty Surges By 100,000 In A Year (Ind.)
UK Rebel Bank Prints Its Own Notes And Buys Back People’s Debts (G.)
Shaking the Superflux (Varoufakis)
‘Great Pacific Garbage Patch’ 16 Times Larger Than Previously Estimated (G.)
Great Pacific Garbage Patch Is Rapidly Accumulating Plastic (Nature)
‘Collapse Of Civilisation Is A Near Certainty Within Decades’ – Ehrlich (G.)
Mammoth Survey Of Nature’s Vital Signs Released (AFP)

 

 

All involved know a realignment was inevitable. This is simply the art of the deal.

China Hits Back on Trump Tariffs as Europe Off the Hook for Now (BBG)

The trade conflict between China and the U.S. escalated, with Beijing announcing its first retaliation against metals levies hours after President Donald Trump outlined fresh tariffs on $50 billion of Chinese imports and pledged there’s more on the way. On Friday, China unveiled tariffs on $3 billion of U.S. imports in response to steel and aluminum duties ordered by Trump earlier this month. The White House then declared a temporary exemption for the European Union and other nations on those levies, making the focus on China clear. Though Beijing’s actions so far are seen by analysts as measured, there may be more to come.

Equity indexes from Tokyo to Shanghai tumbled more than 3% and U.S. stock futures fell, signaling a further retreat for the S&P 500 Index after it fell 2.5%, on risks a further escalation in trade tensions will undermine an unusual phase of synchronized global economic growth. Suppliers to Apple were among the hardest hit in Hong Kong and mainland markets on Friday, as investors focused on potential losers from the trade spat. “China’s response is surprisingly modest in light of the U.S. actions, suggesting there could be a good deal more to come,” said Stephen Roach, a former non-executive chairman for Morgan Stanley in Asia and now a senior fellow at Yale University. “As America’s third largest and most rapidly growing export market and as the largest foreign owner of Treasuries, China has considerably more leverage over the U.S. than Washington politicians care to admit.”

[..] The White House gave the European Union, Argentina, Australia, Brazil, Canada, Mexico, and South Korea, until May 1 to negotiate levies on steel and aluminum. The administration said the suspensions can be renewed or revoked then, “pending discussions of satisfactory long-term alternative means to address the threatened impairment to U.S. national security.” “This has been long in the making,” Trump said signing the intellectual-property order, adding that the tariffs could affect as much as $60 billion in goods. He told reporters, “This is the first of many.”

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There’ll be a bit of to and fro, with big words and big numbers and big threats, and then everyone will get back to business.

Asian Stocks Plunge As Trump’s Trade War Heats Up (MW)

The global equities swoon rolled over to Asia on Friday, where markets reacted negatively to the Trump administration’s trade broadside against China. Although the import tariffs had been telegraphed for weeks, Thursday’s package, covering about $60 billion in goods, sent investors running for havens. Bonds and gold prices rose and the Japanese yen hit its highest point against the U.S. dollar since Donald Trump won the presidential election. “Yes, the news was out for a while, but the actual action was a bit of a surprise to the market,” said Shinchiro Kadota, a senior forex and rates strategist at Barclays. “Maybe they thought it would be smaller, maybe later.”

China’s commerce ministry responded Friday morning and announced it would levy tariffs against $3 billion worth of U.S. goods including pork and recycled aluminum. Japan’s Nikkei Stock Average closed down 4.5% as the yen’s sharp gains on Thursday also pressured stocks lower. The yen rose further on Friday, hitting 16-month highs as the dollar went below ¥105. The WSJ Dollar Index fell 0.2% in Asia, extending the afternoon pullback seen during U.S. trading. Stocks in China also fell with the Shanghai Composite Index down 4%, the Shenzhen Composite Index down 5.3% and the small-cap-heavy Chinext Index down 5.1%.

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Realignment.

Dow Jones Closes Down More Than 700 Points (Ind.)

The Dow Jones Industrial Average closed down more than 700 points, with investors fearing that trade tensions will spike between the US and China after President Donald Trump unveiled new tariffs against Beijing. Industrial and technology companies, which depend heavily on foreign trade, took some of the worst losses with Boeing, Caterpillar and Microsoft all falling sharply. The Dow sank 724 points, or 2.9%, to 23,957. The Nasdaq lost 178 points, or 2.4%, to 7,166. The S&P 500 index dropped 68 points, or 2.5%, to 2,643, erasing its gain for the year. It is the fifth-worst daily point drop ever for the Dow and the worst since the beginning of February.

Earlier on Thursday, Mr Trump unveiled a plan to impose up to $60bn in new tariffs on Chinese goods, as well as limiting the country’s investment in the US as payback for what his administration alleges is years of intellectual property theft. The president’s order – which report from the White House had previously suggested would be nearer $50bn – is likely to trigger retaliation by Beijing and could further stoke fears of a global trade war. Just before signing the trade action, Mr Trump said it was “the first of many” as he looks to correct what has repeatedly called “unfair” trade deals with nations around the world.

“Markets are saying that these tariffs are going to cut into the global growth story that looked pretty strong just a few weeks ago. The prospect of more tariffs is making markets very unsettled and you’re going to see choppy trading until we see the effect they are having on earnings,” Jamie Cox, a managing partner for Harris Financial Group told Reuters.

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All you need to know about the Cambridge Analytica outrage. It’s theater.

UK Politicians To Be Exempt From Data Crackdown (Ind.)

Britain’s political parties are poised to grant themselves special powers to use personal data to find out how people are likely to vote, despite the Cambridge Analytica scandal, The Independent can reveal. Legislation set to clear Parliament within weeks will allow the profiling of voters to help infer their political opinions, privacy campaigners have warned. The move comes as controversy has engulfed Cambridge Analytica over its collection of Facebook data, with the aim of using it to profile and target people during election campaigns. Even before the scandal erupted, political parties had faced questions about their use of social media to carry out online campaigning.

All the major parties have agreed to the exemption from new data protection laws, arguing it clarifies their widely recognised right to canvas voters in order to target possible supporters. But critics say technological advances now enable such data to be mined to discover people’s opinions without their active consent. Organisations outside of the main political parties will be barred from collating voting data in this way. Ailidh Callander, a lawyer at the group Privacy International, told The Independent that “no meaningful justification” had been given for the powers in the Data Protection Bill. “This exemption is open to abuse by political parties and those working for them and can be used to facilitate targeted and exploitative political advertising,” she warned.

[..] “As we can see from the work of Cambridge Analytica, personal data that might not have previously revealed political opinions can now be used to infer information about the political opinions of an individual,” Ms Callander added. It would allow private firms, under contract to political parties, to “process personal data revealing political opinions for a wide range of purposes” without the explicit consent of the person concerned, Ms Callander said. Mr Bernal said data that could reveal voting preferences should be given “more protection”, warning: “Almost anything can be used to at least have a guess at your political leanings.”

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Business model. And if anyone can buy this stuff, you wonder what the NSA keeps for itself.

Steve Bannon: ‘Facebook Data Is For Sale All Over The World’ (G.)

Steve Bannon tried to distance himself from the Cambridge Analytica scandal on Thursday, claiming: “I didn’t even know anything about the Facebook mining.” Bannon is a former vice-president and board member of the political consultancy, which he agreed he “put together.” He claimed to a conference in New York that neither he nor Cambridge Analytica had anything to do with “dirty tricks” in the use of information harvested from Facebook to make computer models to sway elections. Besides, he said, “Facebook data is for sale all over the world”.

Bannon – Donald Trump’s former chief strategist – later said outside the conference room that he “did not remember” being part of any scheme to buy data that came from Facebook and divert it to use for election propaganda, as the Observer revealed last weekend. He blamed any “dirty tricks” on Cambridge Analytica’s parent company, SCL, which he described as “the British guys, old Etonians and guys from Oxford and Cambridge” [..] Bannon denied there was any scandal involving companies acquiring people’s personal information from Facebook and using it for other purposes.

“It’s just about the cost of it. It’s bought and sold every day, it’s just a marketplace,” he said, adding: “I didn’t even know about the Facebook mining, that’s Facebook’s business … They went to Barack Obama’s campaign in 2008 and told him all about the power of personal data.” Bannon turned to the conference audience and said: “You’re all serfs. Well paid serfs, but still serfs … The data is all out there, they [Facebook] take your stuff for free and monetize it for huge margins, they take over your life.”

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About that claim that Facebook was cheated, it wasn’t. It was always part of the whole thing. This is not something Kogan ‘harvested’, Facebook had already done that.

Facebook Gave Data About 57 Billion Friendships To Academic (G.)

Before Facebook suspended Aleksandr Kogan from its platform for the data harvesting “scam” at the centre of the unfolding Cambridge Analytica scandal, the social media company enjoyed a close enough relationship with the researcher that it provided him with an anonymised, aggregate dataset of 57bn Facebook friendships. Facebook provided the dataset of “every friendship formed in 2011 in every country in the world at the national aggregate level” to Kogan’s University of Cambridge laboratory for a study on international friendships published in Personality and Individual Differences in 2015. Two Facebook employees were named as co-authors of the study, alongside researchers from Cambridge, Harvard and the University of California, Berkeley. Kogan was publishing under the name Aleksandr Spectre at the time.

A University of Cambridge press release on the study’s publication noted that the paper was “the first output of ongoing research collaborations between Spectre’s lab in Cambridge and Facebook”. Facebook did not respond to queries about whether any other collaborations occurred. “The sheer volume of the 57bn friend pairs implies a pre-existing relationship,” said Jonathan Albright, research director at the Tow Center for Digital Journalism at Columbia University. “It’s not common for Facebook to share that kind of data. It suggests a trusted partnership between Aleksandr Kogan/Spectre and Facebook.”

Facebook downplayed the significance of the dataset, which it said was shared with Kogan in 2013. “The data that was shared was literally numbers – numbers of how many friendships were made between pairs of countries – ie x number of friendships made between the US and UK,” Facebook spokeswoman Christine Chen said by email. “There was no personally identifiable information included in this data.”

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Excellent long background by Tamsin Shaw for the Facebook story. It’s a who’s who.

The Digital Military Industrial Complex (NYBooks)

In a 2014 interview, Lt. Gen. Michael Flynn, speaking then as head of the Defense Intelligence Agency, said that such open-source data initiatives, and in particular the study of social media such as Facebook, had entirely transformed intelligence-gathering. He reported that traditional signals intelligence and human intelligence were increasingly being replaced by this open-source work and that the way in which intelligence agents are trained had been modified to accommodate the shift. A growing portion of the military’s $50 billion budget would be spent on this data analytics work, he claimed, creating a “gold rush” for contractors. A few weeks after this interview, Flynn left the DIA to establish the Flynn Intel Group Inc. He later acted as a consultant to the SCL Group.”

Carole Cadwalladr reported in The Observer last year that it was Sophie Schmidt, daughter of Alphabet founder Eric Schmidt, who made SCL aware of this gold rush, telling Alexander Nix, then head of SCL Elections, that the company should emulate Palantir, the company set up by Peter Thiel and funded with CIA venture capital that has now won important national security contracts. Schmidt threatened to sue Cadwalladr for reporting this information. But Nix recently admitted before a parliamentary select committee in London that Schmidt had interned for Cambridge Analytica, though he denied that she had introduced him to Peter Thiel. Aleksandr Kogan and Christopher Wylie allowed Cambridge Analytica to evolve into an extremely competitive operator in this arena.

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Proof is overrated.

EU Countries Prepare To Follow May And Expel Russian Diplomats (G.)

EU leaders have thrown their weight behind Theresa May’s stance on Russia, with several countries poised to announce expulsions of diplomats, in a bid to dismantle Vladimir Putin’s spy network. Following a summit in Brussels to discuss the response to the Salisbury nerve agent attack, EU leaders gave their full-throated backing to the prime minister by adopting a statement declaring it was “highly likely Russia is responsible” for poisoning Sergei Skripal and his daughter, Yulia. Donald Tusk, the president of the European council, tweeted that all leaders agreed Russia’s responsibility for the attack was highly likely. In a significant point for May, the statement goes further than a declaration by foreign ministers earlier this week, which avoided pinning the blame on Russia.

British diplomats believe that a strong message of solidarity with the UK, from Russia’s closest European neighbours, will hit home with President Putin. France, Poland, Estonia, Latvia and Lithuania are understood to be considering expelling Russian diplomats, as requested by the UK government, in a coordinated strike against Moscow. The Lithuanian president, Dalia Grybauskaite, said: “All of us, we are considering such measures.” She added that she had not congratulated Putin on his election victory. EU leaders discussed their response to the Salisbury poisoning over a European council summit dinner in Brussels. The UK prime minister told her fellow leaders the attack formed part of a long-term pattern of behaviour by Russia, and urged them to present a united front.

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What all the talk about Russia serves to hide…

Number Of British Children In Poverty Surges By 100,000 In A Year (Ind.)

The number of children in poverty across the UK has surged by 100,000 in a year, new figures show, prompting calls for ministers to urgently review cuts to child welfare. Government statistics published on Thursday show 4.1 million children are now living in relative poverty after household costs, compared with four million the previous year, accounting for more than 30% of children in the country. Compared to the overall population, children remained the most likely to be in relative poverty, at almost one in three compared with 21% of working age adults and 16% of pensioners.

The figures will fuel concerns that benefit cuts and tax credits under the Tory Government are seeing children hardest hit, with around one and a half million more under-18s forecasted to live in households below the relative poverty line by 2022. Relative child poverty is measured as children living in homes where the income is 60% of the median household income in the UK, adjusted for family size and after housing costs. Separate government statistics published on Thursday show the number of households in temporary accommodation has surged 64% since the Tories came to power in 2010, of which more than 2,000 had children.

Responding to the rise in child poverty levels, Labour MP Margaret Greenwood, the Shadow Work and Pensions Secretary, said: “These figures show that after eight years of Conservative austerity, Labour’s progress in tackling child poverty has been reversed with a shocking increase in the numbers of children living in poverty.

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Don’t get too successful, or else…

UK Rebel Bank Prints Its Own Notes And Buys Back People’s Debts (G.)

First there were the banks. Sending credit cards through the post, offering easy loans. They overstretched, teetered. Then came the billion-dollar bailouts, recession, austerity, poverty and payday loans. Then, slowly, came the movement: a piecemeal, sporadic effort to buy back the debt of ordinary people. Now in north-east London, an enterprise that is part art installation, part stunt and part charitable endeavour, has brought all the threads together: a bank that prints its own money, sells it for real tender and uses the proceeds to buy back the debt.

Hilary Powell and Dan Edelstyn have taken over an old Co-op Bank on a high street in Walthamstow and are printing money featuring the faces of people behind four local services – a primary school, a foodbank, a youth project and a soup kitchen. As well as raising money for those projects, Hoe Street Central Bank aims to raise enough money to buy out £1m of debt owned by people within the E17 postcode, in a London borough ranked 35th most deprived in the country.

“We see it as a community heist taking on the economic discourse,” says Powell. One of the delightful ironies of the undertaking is that the ‘bank’ could only have to raise as little as £20,000 to buy out £1m of local debt, because bad loans are often written down to a fraction of their face value in the secondary market. “The system forces people into debt for basic needs,” says Powell. “We are the forerunners of what we hope will be a bigger movement for debt abolition.” As the bank did its unusual trade this week, schoolchildren were invited in to watch a batch of £5, £10 and £20 notes, all designed by artists, roll off the presses. After all, it’s not every day that you see your headteacher’s face on a fiver.

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Varoufakis’ Shakespeare lecture. The recent Facebook and Novichok stories would fit right in.

Shaking the Superflux (Varoufakis)

As is, alas, well known, my country went bankrupt in 2010. And the oligarchies, Greek and European, in power decided to cover it up by means of largest loan in History to the most bankrupt European state – money that was, always, meant to flow on to France’s and Germany’s bankrupt bankers while the Greeks were thrown indefinitely into debtor’s prison and treated to the harshest austerity this planet has ever seen. Yes, there was method to the madness of the powers-that-be, just as in any Shakespearean play. Watching them stumble from one idiotic decision to the next, making things up as they were going along, and intensifying the crisis that they were trying to quell, was like watching a version of Othello, wondering how smart people could be so foolish, or of a Macbeth scheming in the land of Oedipus.

Like King Laius of Thebes unwittingly brought about his own murder by his son Oedipus because he believed the prophecy that Oedipus would kill him once he grew up, so too did Europe’s Deep Establishment, in a bid to save their bankers while safeguarding their legitimacy, undermined their legitimacy by committing successive, Macbeth-like, crimes against logic – so much so that, today, the so-called political centre traditionally in the service of the Establishment lays in ruins everywhere in Europe: Think France, Austria, Germany, recently Italy, where political monsters are rising up across Europe bringing to mind Brutus’ line in Julius Caesar about the hatchling of the serpent’s egg that must be “killed in the shell” before it emerges. Except that, instead of crushing the shell before the new serpents hatched, the Establishment kept it warm, facilitated its hatching, and is now repeatedly bitten by them.

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Global plastic production is increasing exponentially.

‘Great Pacific Garbage Patch’ 16 Times Larger Than Previously Estimated (G.)

An enormous area of rubbish floating in the Pacific Ocean is teeming with far more debris than previously thought, heightening alarm that the world’s oceans are being increasingly choked by trillions of pieces of plastic. The sprawling patch of detritus – spanning 1.6m sq km, (617,763 sq miles) more than twice the size of France – contains at least 79,000 tons of plastic, new research published in Nature has found. This mass of waste is up to 16 times larger than previous estimates and provides a sobering challenge to a team that will start an ambitious attempt to clean up the vast swath of the Pacific this summer.

The analysis, conducted by boat and air surveys taken over two years, found that pollution in the so-called Great Pacific garbage patch is almost exclusively plastic and is “increasing exponentially”. Microplastics, measuring less than 0.5cm (0.2in), make up the bulk of the estimated 1.8tn pieces floating in the garbage patch, which is kept in rough formation by a swirling ocean gyre. While tiny fragments of plastic are the most numerous, nearly half of the weight of rubbish is composed of discarded fishing nets. Other items spotted in the stew of plastic include bottles, plates, buoys, ropes and even a toilet seat.

“I’ve been doing this research for a while, but it was depressing to see,” said Laurent Lebreton, an oceanographer and lead author of the study. Lebreton works for the Ocean Cleanup, a Dutch-based non-profit that is aiming to tackle the garbage patch. [..] The organization is developing a system of large floating barriers with underwater screens that capture and concentrate plastics into one area ready to be scooped out of the ocean. A prototype, to be launched from San Francisco this summer with the aim of spawning a clutch of devices each of which can collect five tons of waste a month, will, if successful, be followed by dozens of other boom-like systems measuring up to 2km (1.2 miles) long.

The project comes with caveats, however – its system will not catch the proliferation of microplastics measuring under 10 millimeters (0.39in) and the whole operation will require further funding from next year. Any successful clean-up may also be overwhelmed by a global surge in plastic production – a recent UK government report warned the amount of plastic in the ocean could treble within the next decade. “There is a big mine of microplastics there coming from larger stuff that’s crumbling down, so we need to get in there quickly to clean it up,” said Joost Dubois, a spokesman for the Ocean Cleanup.

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The official report. Half of the garbage is fishing nets. A recent report estimated 70% of all visible plastic is discarded nets.

Great Pacific Garbage Patch Is Rapidly Accumulating Plastic (Nature)

Ocean plastic can persist in sea surface waters, eventually accumulating in remote areas of the world s oceans. Here we characterise and quantify a major ocean plastic accumulation zone formed in subtropical waters between California and Hawaii: The Great Pacific Garbage Patch (GPGP). Our model, calibrated with data from multi-vessel and aircraft surveys, predicted at least 79 (45-129) thousand tonnes of ocean plastic are floating inside an area of 1.6 million km2; a figure four to sixteen times higher than previously reported.

We explain this difference through the use of more robust methods to quantify larger debris. Over three-quarters of the GPGP mass was carried by debris larger than 5 cm and at least 46% was comprised of fishing nets. Microplastics accounted for 8% of the total mass but 94% of the estimated 1.8 (1.1-3.6) trillion pieces floating in the area. Plastic collected during our study has specific characteristics such as small surface-to-volume ratio, indicating that only certain types of debris have the capacity to persist and accumulate at the surface of the GPGP. Finally, our results suggest that ocean plastic pollution within the GPGP is increasing exponentially and at a faster rate than in surrounding waters.

Global annual plastic consumption has now reached over 320 million tonnes with more plastic produced in the last decade than ever before. A significant amount of the produced material serves an ephemeral purpose and is rapidly converted into waste. A small portion may be recycled or incinerated while the majority will either be discarded into landfill or littered into natural environments, including the world’s oceans. While the introduction of synthetic fibres in fishing and aquaculture gear represented an important technological advance specifically for its persistence in the marine environment, accidental and deliberate gear losses became a major source of ocean plastic pollution. Lost or discarded fishing nets known as ghostnets are of particular concern as they yield direct negative impacts on the economy and marine habitats worldwide.

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Ehrlich still claims it’s preventable. Why?

‘Collapse Of Civilisation Is A Near Certainty Within Decades’ – Ehrlich (G.)

A shattering collapse of civilisation is a “near certainty” in the next few decades due to humanity’s continuing destruction of the natural world that sustains all life on Earth, according to biologist Prof Paul Ehrlich. In May, it will be 50 years since the eminent biologist published his most famous and controversial book, the Population Bomb. But Ehrlich remains as outspoken as ever. The world’s optimum population is less than two billion people – 5.6 billion fewer than on the planet today, he argues, and there is an increasing toxification of the entire planet by synthetic chemicals that may be more dangerous to people and wildlife than climate change.

Ehrlich also says an unprecedented redistribution of wealth is needed to end the over-consumption of resources, but “the rich who now run the global system – that hold the annual ‘world destroyer’ meetings in Davos – are unlikely to let it happen”. The Population Bomb, written with his wife Anne Ehrlich in 1968, predicted “hundreds of millions of people are going to starve to death” in the 1970s – a fate that was avoided by the green revolution in intensive agriculture. Many details and timings of events were wrong, Paul Ehrlich acknowledges today, but he says the book was correct overall. “Population growth, along with over-consumption per capita, is driving civilisation over the edge: billions of people are now hungry or micronutrient malnourished, and climate disruption is killing people.”

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I doubt that “it’s not too late”.

Mammoth Survey Of Nature’s Vital Signs Released (AFP)

Scientists will deliver a comprehensive assessment Friday of the state of biodiversity — the animals and plants that humankind depends on to survive but has driven into a mass species extinction. The labor of some 600 scientists over three years, four reports will be unveiled in Medellin, Colombia, under the umbrella of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). The diagnosis is expected to be dire. “If we continue the way we are, yes the… sixth mass extinction, the first one ever caused by humans, will continue,” IPBES chairman Robert Watson told AFP ahead of the much-anticipated release. But the good news, he said, “It’s not too late” to slow the rate of loss.

Scientists say mankind’s voracious consumption and wanton destruction of Nature has unleashed the first mass species die-off since the demise of the dinosaurs – only the sixth on our planet in half-a-billion years. The first major biodiversity assessment in 13 years comes in the same week that Sudan, the world’s last male northern white rhino, died in Kenya – a stark reminder of the stakes. “The IPBES conference is going to tell us that the situation is continuing to deteriorate, they are going to tell us some ecosystems are being brought to the brink of collapse,” WWF director general Marco Lambertini told AFP on Thursday. “The IPBES is going to make a strong case for the importance of protecting Nature for our own wellbeing.”

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Mar 072018
 
 March 7, 2018  Posted by at 10:46 am Finance Tagged with: , , , , , , , , , , ,  


Lewis Wickes Hine Italian family in the baggage room, Ellis Island, New York 1905

 

Currency Investors Are Bracing for a Full-Blown Trade War (BBG)
Trump Sticks With Tariff Plan, Warns EU On Trade (R.)
Europe Renews Tariffs On Chinese Steel Pipes As High As 72% (ZH)
US Considers Broad Curbs on Chinese Imports, Takeovers (BBG)
With Cohn Gone, Peter Navarro Is Unleashed At White House (CNBC)
It’s Not Bad Trade Deals, It’s Bad Money – Part 2 (Stockman)
China Dramatically Boosts Spending On Internal Security (WSJ)
Greater Toronto Home Sales Down 35% From February 2017 (CBC)
Italy’s Populists Split The Country in Half (BBG)
In The Alps, Traffickers Prey On Migrants And Rescuers Alike (AFP)
Europe’s Recurring Financial Crisis Has Not, Repeat, Not Ended (F.)
New Eurogroup Chief Warns Of Greek Vulnerability (K.)
Why Turkey Wants to Invade the Greek Islands (Bulut)
Arctic Has Warmest Winter On Record (AP)

 

 

For now, I doubt it.

Currency Investors Are Bracing for a Full-Blown Trade War (BBG)

In foreign-exchange markets, investors aren’t waiting to find out if all the tariff threats being thrown around lead to a full-blown trade war. Some money managers have begun piling into traditional havens like the yen; others are trimming currency exposure altogether; and even those who’re betting not much will come from the row are hedging just in case. The concern is that Trump’s plan to impose steel and aluminum tariffs will trigger a wave of retaliatory levies that derail the worldwide economic expansion. The EU has already responded, preparing punitive steps on iconic U.S. goods should Trump go through with his threats.

Gary Cohn’s resignation Tuesday drove home investors’ skittishness: the yen surged, while the peso and Canadian dollar sank. “Currencies can be very small but sharp objects, where a little exposure can have a large impact,” said Gene Tannuzzo, a portfolio manager at Columbia Threadneedle Investments. “So you could see more and more managers just not really stick their neck out as it relates to FX exposure.”

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There will have to be negotiations.

Trump Sticks With Tariff Plan, Warns EU On Trade (R.)

U.S. President Donald Trump reiterated on Tuesday his plan to slap big tariffs on imports of steel and aluminum, warning the EU it would get hit with a “big tax” for not treating the United States well when it comes to trade. “They make it almost impossible for us to do business with them and yet they send their cars and everything else back into the United States,” Trump said of the EU at a news conference with Swedish PM Stefan Lofven, whose country is an EU member. Trump said the EU was taking advantage of the United States on trade, adding: “They can do whatever they’d like, but if they do that, then we put a big tax of 25% on their cars – and believe me they won’t be doing it very long.”

Trump said on Friday he would impose a duty of 25% on imported steel and 10% on aluminum, a plan that sparked cries of foul from U.S. trading partners and warnings from U.S. lawmakers and businesses of the potential for a tit-for-tat trade war that could hurt the U.S. economy. Trump repeated his belief that the United States could win such a war, since it was running such a large trade deficit. “When we’re behind on every single country, trade wars aren’t so bad,” he told reporters at the White House. Lofven offered a warning of sorts to the U.S. president, saying: “I am convinced that increased tariffs hurt us all in the long run.”

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What’s the phrase? Do as they do, not as they say?

Europe Renews Tariffs On Chinese Steel Pipes As High As 72% (ZH)

As the world watches breathlessly if Trump will follow through with his threat to slap steel and aluminum import tariffs, Europe continues to quietly ratchet up its own trade war with China and nobody seems to mind. On Tuesday, as China was trying to define its future trade relations with the US, it was delivered a broadside from the European Commission after Brussels announced it had renewed tariffs on Chinese steel imports, some as high as 71.9%, saying producers in France, Spain and Sweden face a continued risk of imports from China at unfairly low prices. Ironically, that’s the same thing that Trump is saying. The original measures, imposed last April, saw Europe setting anti-dumping duties on imports of hot-rolled flat steel products from China at a higher rate than the preliminary tariffs already in place.

The European Commission explained it had set final duties of between 18.1% and 35.9% for five years for producers including Bengang Steel Plates, Handan Iron & Steel and Hesteel. This compared with lower provisional rates in place of 13.2 to 22.6%, following a complaint by EU producers ArcelorMittal, Tata Steel and ThyssenKrupp. Fast forward to today when Bloomberg reported that the European Commission reimposed for another five years the duties, which punish Chinese exporters including Huadi Steel for allegedly dumping pipes and tubes in Europe; the levies range from 48.3% to 71.9%, depending on the Chinese exporter.

“The repeal of the measures would in all likelihood result in a significant increase of Chinese dumped imports at prices undercutting the union industry prices,” the commission – the 28-nation EU’s executive arm in Brussels – said in the Official Journal; the five-year renewal will take effect on Wednesday. And even though China’s share of the EU market for stainless steel seamless pipes and tubes has been negligible, and hovering at around 2% since 2013, Brussels had no problem with pursuing what it thought was fair remedies, oblivious of the blowback. And now we turn our attention back to Washington, and whether Trump will do the same.

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Perhaps most interesting: Cohn’s resignation weakens Wall Street’s voice.

US Considers Broad Curbs on Chinese Imports, Takeovers (BBG)

The Trump administration is considering clamping down on Chinese investments in the U.S. and imposing tariffs on a broad range of its imports to punish Beijing for its alleged theft of intellectual property, according to people familiar with the matter. An announcement following an investigation by the U.S. Trade Representative’s office into China’s IP practices is expected in the coming weeks, potentially handing President Donald Trump further cause to impose trade restrictions. His announcement last week of tariffs on steel and aluminum imports has already ratcheted up global trade tensions – and led to the resignation Tuesday of his chief economic adviser Gary Cohn, who opposes such measures. Trump tweeted he’ll be making a decision on a replacement soon and that there are “many people wanting the job.”

The dollar fell and the yen – often a haven in turmoil – jumped as much as 0.6% to 105.46 per dollar, approaching a 16-month high set last week. Asian equities declined. The president is now fighting trade offensives on multiple fronts, from targeting strategic rival China to angering allies like Canada and the EU with threats to erect fresh barriers. While his counterparts have threatened retaliation, concrete action that would herald the start of an all-out trade war has yet to come. Liu He, President Xi Jinping’s top economic adviser who met with Cohn in Washington last week, told delegates at the National People’s Congress in Beijing that both sides had expressed a desire to avoid a trade war. Chinese officials – who have been studying curbs on U.S. products such as soybeans according to past reports – were otherwise largely quiet on the tariff question Wednesday.

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Depends on who succeeds Cohn.

With Cohn Gone, Peter Navarro Is Unleashed At White House (CNBC)

Peter Navarro suffered any number of humiliations in his first year in the White House, where the trade advisor was out of favor with President Donald Trump and his superiors for months. But nothing was more degrading than an order handed down by White House Chief of Staff John Kelly: Navarro had to copy his boss, Gary Cohn, on every single email he sent at the White House. “The chief wanted him under control,” a senior administration official told CNBC on Tuesday, referring to Kelly. But now the free-trading Cohn is stepping down as National Economic Council director, and Navarro’s brand of protectionist nationalism is in the ascendency. Presumably, there will be no one else at the White House looking over Navarro’s email now.

“Peter was quietly effective for nine months,” said an administration official. “He helped his reputation by keeping a low profile and being a model prisoner during his period of captivity. And when his opportunity came, he took it and he won.” Another administration official told CNBC that Cohn’s resignation is “a huge victory for the nationalists.” “Peter Navarro won the trade battle and now Gary’s given up,” that administration official said. “It literally reestablishes the intellectual framework and the personnel who were originally envisioned after Trump won the election. We can let Trump be Trump.” Navarro and Larry Kudlow, a prominent conservative and CNBC contributor, will likely be candidates for Cohn’s job. The second administration official played down the likelihood of Kudlow assuming the economic advisor role, however. Kudlow has been vocal in his opposition to the president’s planned tariffs on steel and aluminum.

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Add China’s Monopoly money to that mix.

It’s Not Bad Trade Deals, It’s Bad Money – Part 2 (Stockman)

In Part 1 we made it clear that the Donald is right about the horrific results of US trade since the 1970s, and that the Keynesian “free traders” of both the saltwater (Harvard) and freshwater (Chicago) schools of monetary central planning have their heads buried far deeper in the sand than does even the orange comb-over with his bombastic affection for 17th century mercantilism. The fact is, you do not get an $810 billion trade deficit and a 66% ratio of exports ($1.55 trillion) to imports ($2.36 trillion), as the US did in 2017, on a level playing field. And most especially, an honest free market would never generate an unbroken and deepening string of trade deficits over the last 43 years running, which cumulate to the staggering sum of $15 trillion.

Better than anything else, those baleful trade numbers explain why industrial America has been hollowed-out and off-shored, and why vast stretches of Flyover America have been left to flounder in economic malaise and decline. But two things are absolutely clear about the “why” of this $15 trillion calamity. To wit, it was not caused by some mysterious loss of capitalist enterprise and energy on America’s main street economy since 1975. Nor was it caused – contrary to the Donald’s simple-minded blather – by bad trade deals and stupid people at the USTR and Commerce Department. After all, American capitalism produced modest trade surpluses every year between 1895 and 1975. Yet it has not lost its mojo during the 43 years of massive trade deficits since then. In fact, the explosion of technological advance in Silicon Valley and on-line business enterprise from coast-to-coast suggests more nearly the opposite.

[..] What changed dramatically after 1975, however, is the monetary regime, and with it the regulator of both central bank policy and the resulting expansion rate of global credit. In a word, Tricky Dick’s ash-canning of the Bretton Woods gold exchange standard removed the essential flywheel that kept global trade balanced and sustainable. Thus, without a disciplinary mechanism independent of and external to the central banks, trade and current account imbalances among countries never needed to be “settled” via gains and losses in the reserve asset (gold or gold-linked dollars).

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China’s behind a few decades, just in time for 1984.

China Dramatically Boosts Spending On Internal Security (WSJ)

China has substantially increased spending on domestic security, official figures show, reflecting mounting concern about threats inside its borders as President Xi Jinping moves to acquire more power and reassert the authority of the Communist Party. Beijing’s budgets for internal and external security have grown faster than the economy as a whole for several years, but domestic security spending has grown far faster — to where it exceeds the national defense budget by roughly 20%. Across China, domestic security accounted for 6.1% of government spending in 2017, the Ministry of Finance said. That translates into 1.24 trillion yuan ($196 billion) and compares with 1.02 trillion yuan in central-government funding for the military.

The numbers, revealed in an annual budget report released this week, help illustrate the scale of a recent intensification of security and surveillance across China, particularly in Xinjiang and Tibet, minority-heavy areas on the country’s periphery. In Xinjiang the government has woven a web of surveillance, with checkpoints, high-definition cameras, facial scanners and street patrols; the region spent $9.1 billion on domestic security in 2017, a 92% increase from 2016, according to local government budget data.

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Any questions?

Greater Toronto Home Sales Down 35% From February 2017 (CBC)

The number of Toronto-area homes sold last month fell nearly 35% and the average selling price dropped more than 12% from historically high levels set last year, the Toronto Real Estate Board reported Tuesday. There was a total of 5,175 residential transactions through the board’s MLS system last month, down 34.9% compared to the 7,955 sales in February 2017. The region’s average selling price, covering all types of residential resales, was down 12.4% to $767,818 — still one of the most expensive in Canada. Detached houses — the most expensive of the major categories tracked by TREB — showed the biggest declines in both the number sold and sales price compared with last year.

The detached category had also been the driving force behind a spike in prices in the early months of 2017 that prompted the Liberal provincial government to introduce a package of measures last April to cool the market. That was followed by a financial stress test for buyers, which officially came into effect on Jan. 1 for federally regulated lenders, following an October announcement by the Office of the Superintendent of Financial Institutions. “When TREB released its outlook for 2018, the forecast anticipated a slow start to the year compared to the historically high sales count reported in the winter and early spring of 2017,” TREB president Tim Syrianos said Tuesday. “Prospective home buyers are still coming to terms with the psychological impact of the Fair Housing Plan, and some have also had to re-evaluate their plans due to the new OSFI-mandated mortgage stress test guidelines and generally higher borrowing costs.”

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It really is north and south now, Italy’s age-old dividing line between rich and poor.

Italy’s Populists Split The Country in Half (BBG)

Italy’s political map is a lot less colorful than it used to be. Whereas in previous elections the main parties had pockets of support across the peninsula, the March 4 vote resulted in a wave of anti-establishment Five Star yellow south of Rome and in the islands, and a sea of blue for the center-right coalition in the north, led by a strong showing on the part of the anti-immigrant League. “The South voted for the Five Star Movement and the North voted for the Lega, but both sides of the country expressed a vote of protest,” Luigi Zingales, professor at the University of Chicago’s Booth School, told Bloomberg TV.

The center-left, which used to dominate the central part of the country, was reduced to a few pockets in its former strongholds and to a handful of prosperous districts in the north. Big cities like Rome and Milan were small red dots isolated from the rest of their regions. The 2013 vote wasn’t so clear cut. It was Five Star’s first ever national election and it did well in Sicily and parts of the center and south, but the traditional parties still held on to some of their fiefdoms. Things went differently this time around. Five Star won every district in Sicily, Sardinia, Puglia, and Molise, and all but one in Campania. Large swathes of Tuscany and Emilia-Romagna and all of Umbria, which had voted left for generations, were won by the center-right.

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What a sad world we live in. Or rather, what sad completely different worlds. Universes even.

In The Alps, Traffickers Prey On Migrants And Rescuers Alike (AFP)

Five African migrants stumble through the snow, exhausted and numb, abandoned hours earlier by a smuggler who left them to make their own way down the mountain from Italy into France. They are among dozens who have been tricked in recent weeks into paying hundreds of euros to people traffickers who promised them a comfortable car ride across the border. The Montgenevre Pass isn’t steep, but the snow is deep, and the young men’s trainers and jeans do nothing to protect them against the biting minus 10ºC (14ºF) chill. If they get lost, it might take hours to cross – long enough to freeze to death. By the time members of the French volunteer group Tous Migrants (We Are All Migrants) come to their rescue in the black of night, the youths are broken.

[..] Thousands of young men from francophone west Africa have trudged across these mountains over the past two years, dreaming of jobs in France. In recent months, as news about the route filters back to Africa, the arrivals have gained pace. Since July, nearly 3,000 have passed through a modest shelter run by Tous Migrants [..] The smugglers, who are also French-speaking west Africans, charge up to €350 euros ($430) to sneak people into France. But once the group reaches the Italian border village of Claviere by train and bus, the car that is supposed to carry them on the last leg of their journey to Paris never materialises. The smugglers instead call the French volunteers to notify them that a group of Africans is heading their way – and then turn on their heels.

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One more piece arguing Greece needs to ‘reform’ to recover. BS.

Europe’s Recurring Financial Crisis Has Not, Repeat, Not Ended (F.)

It will happen again. Europe will go through another financial crisis, probably centered in Greece but not necessarily. It has had several already, because from the start few of the troubled countries have made the fundamental reforms needed to meet their obligations. Instead, the richer parts of the currency union, Germany in particular, have advanced funds on conditions of austerity that not only ignore the fundamentals but are otherwise counterproductive. The recipients pretend that they will abide by German conditions, and Berlin, to duck the disruption of a prolonged financial crisis, pretends to believe them. Rescue loans flow, and then, when another failure looms, the show repeats according to the same script. It will happen again.

The most resent run of this show was performed in spring of 2015. Greece, which had starred in the original pilot back in 2010, could not meet the payments due on its debt. German Finance Minister Wolfgang Schaeuble first lectured Greece on its spendthrift ways and then, according to script, said that Berlin would block any aid until Athens increases taxes and cuts spending sufficiently for its budget to run what is called a “primary surplus” (revenues less costs excluding the expense of debt service) equal to 3.5% of GDP. Greek Prime Minister Alexis Tsipras, also according to script, refused, pointing out, correctly too, that past such efforts have imposed unsupportable hardships on the Greek people. At the last moment, again according to script, he caved into Schaeuble’s demands. Berlin allowed Europe to extend the loan, and the crisis quieted as past crises have at this point of the show.

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New lapdog.

New Eurogroup Chief Warns Of Greek Vulnerability (K.)

Greece remains vulnerable to domestic and external shocks, the head of the Eurogroup, Mario Centeno, warned on Tuesday. The Portuguese finance minister also told the Athens-Macedonian News Agency that restoring its credibility in the credit market will be a gradual and not automatic process for this country. Centeno called on Athens to continue implementing the reforms of the bailout program even after its completion, adding that the eurozone will examine its strategy regarding the post-program framework later, along with the easing of Greece’s debt. The Portuguese official stopped short of making any pledges about the debt lightening, sticking to the letter of the Eurogroup decision.

Referring to the country’s access to the markets, Centeno stated that “if the conditions are fulfilled for the further easing of the debt at the end of the program, the Eurogroup – as has unequivocally been agreed – is ready to assist in this process.” He added that “all additional measures on the debt will have to be analyzed at a technical level. They will only be adopted if the two conditions are fulfilled: The program has to be completed successfully and the debt easing will have to be necessary for the Greek debt to be considered sustainable. This is why we need an integrated analysis by the institutional bodies; at the moment that has not come.”

Centeno said Greece is a “unique case in the eurozone,” implying that it is in this context that its exit from the bailout program will be examined. He added that “the end of the program will constitute a new political reality for Greece. Whatever the framework of monitoring agreed, Greece will regain control of its policies. Yet just as with every other European [Union] country, such policies will have to be compatible with the European framework.” He said he is not interested in Greek election results, but revealed that the EU is concerned about the political agenda in Greece: “I would just recommend to Greece to continue on its own reform agenda,” Centeno stated.

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Erdogan plays to cheap nationalist sentiments. Which can be fired up much higher by shooting at something. Where’s NATO, US, Germany?

Why Turkey Wants to Invade the Greek Islands (Bulut)

There is one issue on which Turkey’s ruling Justice and Development Party (AKP) and its main opposition, the Republican People’s Party (CHP), are in complete agreement: The conviction that the Greek islands are occupied Turkish territory and must be reconquered. So strong is this determination that the leaders of both parties have openly threatened to invade the Aegean. The only conflict on this issue between the two parties is in competing to prove which is more powerful and patriotic, and which possesses the courage to carry out the threat against Greece. While the CHP is accusing President Recep Tayyip Erdogan’s AKP party of enabling Greece to occupy Turkish lands, the AKP is attacking the CHP, Turkey’s founding party, for allowing Greece to take the islands through the 1924 Treaty of Lausanne, the 1932 Turkish-Italian Agreements, and the 1947 Paris Treaty, which recognized the islands of the Aegean as Greek territory.

In 2016, Erdogan said that Turkey “gave away” the islands that “used to be ours” and are “within shouting distance.” “There are still our mosques, our shrines there,” he said, referring to the Ottoman occupation of the islands. Two months earlier, at the “Conference on Turkey’s New Security Concept,” Erdogan declared: “Lausanne… has never been a sacred text. Of course, we will discuss it and struggle to have a better one.” Subsequently, pro-government media outlets published maps and photos of the islands in the Aegean, calling them the territory that “Erdogan says we gave away at Lausanne.”


Borders between Greece and Turkey after 1923 Lausanne Treaty

Ilargi: This may seem extreme, but original plans proposed by the -rejected- 1920 Sèvres Treaty went even further, giving Greece large parts of mainland Turkey as well. This was negotiated after the Ottoman empire lost WWI. The discussions also included claims to the likes of Palestine, Syria and Lebanon. Both treaties were negotiated -and signed- by the Ottoman Empire and the Allied French Republic, British Empire, Kingdom of Italy, Empire of Japan and the Kingdom of Romania. Somewhat ironially, the Kingdom of Greece was the only party not to sign Sèvres. Which was also heavily contested by Kemal Atatürk in Turkey. Wiki: ‘Atatürk led Turkish nationalists to defeat the combined armies of the signatories of the Treaty’ in the Turkish Independence War (1919-1923)


Borders between Greece and Turkey proposed by -rejected- 1920 Sèvres Treaty

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We read this. And then we all get in our cars.

Arctic Has Warmest Winter On Record (AP)

The Arctic [..] experienced its warmest winter on record. Sea ice hit record lows for the time of year, new US weather data revealed on Tuesday. “It’s just crazy, crazy stuff,” said Mark Serreze, director of the National Snow and Ice Data Center in Boulder, Colorado, who has been studying the Arctic since 1982. “These heat waves – I’ve never seen anything like this.” Experts say what’s happening is unprecedented, part of a global warming-driven cycle that probably played a role in the recent strong, icy storms in Europe and the north-eastern US. The land weather station closest to the North Pole, at the tip of Greenland, spent more than 60 hours above freezing in February.

Before this year, scientists had seen the temperature there rise above freezing in February only twice before, and then extremely briefly. Last month’s record-high temperatures have been more like those typical of May, said Ruth Mottram, a climate scientist at the Danish Meteorological Institute. Of nearly three dozen different Arctic weather stations, 15 of them were at least 10F (5.6C) above normal for the winter. “The extended warmth really has staggered all of us,” Mottram said. In February, Arctic sea ice covered 5.4m square miles, about 62,000 square miles smaller than last year’s record low, the ice data center reported, and it was 521,000 square miles below the 30-year normal.

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Mar 052018
 
 March 5, 2018  Posted by at 11:04 am Finance Tagged with: , , , , , , , , , , , ,  


Astor Theater, Times Square NYC 1945

 

Monetary Policy In The Grip Of A Pincer Movement (BIS)
The Arithmetic of Risk (John Hussman)
BOJ’s Kuroda Joins Queue of Central Banks Looking Toward Exit (BBG)
Trump’s Trade War Is For The Forgotten People (Eric Peters)
Italy Faces Political Gridlock After 5-Star Surges (R.)
China Sets 2018 GDP Target at About 6.5%, Turns Fiscal Screws (BBG)
Tax the Wealth of Older Britons to Help the Young, Report Argues (BBG)
Eliminate The Deficit? Eliminate Economic Hope, More Like (McDuff)
15,000 New Manchester Homes And Not A Single One ‘Affordable’ (G.)
The Tyranny of Algorithms (G.)
US Embassy In Turkey Closed Due To Security Threat (R.)
Erdogan Advisor Says Ankara Ready To ‘Strike’ In Eastern Med (K.)
Australia: Global Deforestation Hotspot (G.)
Europe Tree Loss Pushes Beetles To The Brink (BBC)

 

 

Financial cycles appear to have grown in amplitude and length. Next move could be really wild.

Monetary Policy In The Grip Of A Pincer Movement (BIS)

The emergence of disruptive financial cycles and the limited sensitivity of inflation to domestic slack may at first sight seem to be unrelated. In fact, there may be a common thread: the behaviour of monetary policy. Consider each in turn. The first major development is that, since around the early 1980s, financial cycles appear to have grown in amplitude and length. There is no unique definition of the financial cycle. A useful one refers to the self-reinforcing processes between funding conditions, asset prices and risk-taking that generate expansions followed by contractions. These processes operate at different frequencies. But if one is especially interested in those that cause major macroeconomic costs and banking crises, probably the most parsimonious description is in terms of credit and property prices.

Graph 1 illustrates the phenomenon for the United States using some simple statistical filters, although the picture would not be that different for many other countries or using other techniques (eg peak-trough analysis). The graph shows that the amplitude and length of the fluctuations has been increasing, that the length of the financial cycle is considerably longer than that of the traditional business cycle (blue versus red line) and that banking crises, or serious banking strains, tend to occur close to the peak of financial cycle. Another key feature of financial cycles is that the bust phase tends to generate deeper recessions. Indeed, if the bust coincides with a banking crisis, it causes very long-lasting damage to the economy.

There is evidence of permanent output losses, so that output may regain its pre-crisis long-term growth trend while evolving along a lower path. There is also evidence that recoveries are slower and more protracted. And in some cases, growth itself may also be seriously damaged for a long time. Some recent work with colleagues sheds further light on some of the possible mechanisms at work. Drawing on a sample of over 40 countries spanning over 40 years, we find that credit booms misallocate resources towards lower-productivity growth sectors, notably construction, and that the impact of the misallocations that occur during the boom is twice as large in the wake of a subsequent banking crisis.

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“.. I continue to expect the S&P 500 to lose about two-thirds of its value over the completion of the current market cycle…”

The Arithmetic of Risk (John Hussman)

At present, I view the market as a “broken parabola” – much the same as we observed for the Nikkei in 1990, the Nasdaq in 2000, or for those wishing a more recent example, Bitcoin since January. Two features of the initial break from speculative bubbles are worth noting. First, the collapse of major bubbles is often preceded by the collapse of smaller bubbles representing “fringe” speculations. Those early wipeouts are canaries in the coalmine. In July 2007, two Bear Stearns hedge funds heavily invested in sub-prime loans suddenly became nearly worthless. Yet that was nearly three months before the S&P 500 peaked in October, followed by a collapse that would take it down by more than 55%.

Observing the sudden collapses of fringe bubbles today, including inverse volatility funds and Bitcoin, my impression is that we’re actually seeing the early signs of risk-aversion and selectivity among investors. The speculation in Bitcoin, despite issues of scalability and breathtaking inefficiency, was striking enough. But the willingness of investors to short market volatility even at 9% was mathematically disturbing. See, volatility is measured by the “standard deviation” of returns, which describes the spread of a bell curve, and can never become negative. Moreover, standard deviation is annualized by multiplying by the square root of time. An annual volatility of 9% implies a daily volatilty of about 0.6%, which is like saying that a 2% market decline should occur in fewer than 1 in 2000 trading sessions, when in fact they’ve historically occurred about 1 in 50.

The spectacle of investors eagerly shorting a volatility index (VIX) of 9, in expectation that it would go lower, wasn’t just a sideshow in some esoteric security. It was the sign of a market that had come to believe that stock prices could do nothing but advance, and could be expected to do so in an uncorrected diagonal line. I continue to expect the S&P 500 to lose about two-thirds of its value over the completion of the current market cycle. With market internals now unfavorable, following the most offensive “overvalued, overbought, overbullish” combination of market conditions on record, our market outlook has shifted to hard-negative. Rather than forecasting how long present conditions may persist, I believe it’s enough to align ourselves with prevailing market conditions, and shift our outlook as those conditions shift.


Annotation in blue by Mish

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Perhaps this is truly a coordinated effort. The BIS could be doing the coordination.

BOJ’s Kuroda Joins Queue of Central Banks Looking Toward Exit (BBG)

The end of the easy money era which spanned the global economy for the last decade came into even sharper focus as the Bank of Japan gave fresh insight into when it might slow its stimulus program. Governor Haruhiko Kuroda’s remarks on Friday that the central bank will start thinking about how to complete its unprecedented easing around the fiscal year starting April 2019 was the clearest signal yet that a conclusion might be in sight to emergency support for the Japanese economy. While Kuroda’s statement in response to questions from lawmakers was in some ways stating the obvious – the BOJ forecasts inflation to reach its 2% target in fiscal 2019 – the significance is that he’s put down a marker in public that he can be held to.

“It’s notable how over the past few weeks Kuroda has been forced into talking more specifically about the exit,” said Izumi Devalier, head of Japan economics at BofAML. “A year and a half ago he would have shut down the discussion altogether with the blanket ‘it’s too early to talk about it’ statement.” That means the last of the big central banks is finally thinking out loud about policy normalization or how to begin the process of unwinding years of asset purchases and ultra-low interest rates that were used to stoke growth after the 2008 financial crisis sparked the worst global recession in decades. The Fed, Bank of Canada and Bank of England have already raised interest rates and may do so again soon, while the ECB is debating how soon to end its own bond-buying. China’s central bank is sticking to what it describes as neutral policy settings and is ratcheting up money market rates to cool the pace of borrowing.

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Peters is never boring.

Trump’s Trade War Is For The Forgotten People (Eric Peters)

“The import restrictions announced by the US President are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminum and steel,” warned the IMF, their army of nerds in full sweat. Panic. Just 200k Americans work in steel, aluminum and iron. 5.5mm of our 154mm workers are employed by businesses that use steel. “How could the Americans make such an idiotic mistake?” howled the nerds. But of course, they entirely miss the point. “If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US. They make it impossible for our cars (and more) to sell there. Big trade imbalance!” tweeted Trump.

The US currently imposes a 2.5% tariff on EU auto imports. The EU imposes a 10% tariff on US auto imports. Germany exports $25bln of autos to America annually. “US auto prices will rise,” warned the Washington Post. But of course, they entirely miss the point. “Trade wars are good, easy to win,” tweeted Trump, knowing the statement would trigger every nerd with a college degree. Some worried about their jobs. But not terribly. Because their unemployment rate is just 2%, their labor force participation is 74%. They’re as well off as they’ve ever been. Particularly when set against those who never went to college, 5% of whom are unemployed, and 50% don’t even participate in the labor force. They’ve given up. These trade policies are for these forgotten people. To hell with the consequences. That’s the point.

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More for forgotten people. Beppe got them where he wanted; largest party by a huge margin. Merkel and Macron’s “More Europe” plans can be shelved. But first, expect more tricks to keep the old guard in power.

Italy Faces Political Gridlock After 5-Star Surges (R.)

Italy faces a prolonged period of political instability after voters delivered a hung parliament on Sunday, spurning traditional parties and flocking to anti-establishment and far-right groups in record numbers. With votes counted from more than 75% of polling stations, it looked almost certain that none of the three main factions would be able to govern alone and there was little prospect of a return to mainstream government, creating a dilemma for the EU. A rightist alliance including former prime minister Silvio Berlusconi’s Forza Italia (Go Italy!) held the biggest bloc of votes. In a bitter personal defeat that appeared unlikely last week, the billionaire media magnate’s party looked almost certain to be overtaken by its ally, the far-right League, which campaigned on a fiercely anti-migrant ticket.

But the anti-establishment 5-Star Movement saw its support soar to become Italy’s largest single party by far, and one of its senior officials said on Monday that forming a coalition without it would be impossible. The League’s economics chief on Monday raised the possibility of an alliance with 5-Star. Any government based on that combination would be euro-skeptic, likely to challenge EU budget restrictions and be little interested in further European integration. The full result is not due until later on Monday and, with the centre-right coalition on course for 37% of the vote and 5-Star for 31%, swift new elections to try to break the deadlock are another plausible scenario.

Despite overseeing a modest economic recovery, the ruling centre-left coalition trailed a distant third on 22%, hit by widespread anger over persistent poverty, high unemployment and an influx of more than 600,000 migrants over the past four years.

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Plus huge cuts to steel production. China is hurting.

China Sets 2018 GDP Target at About 6.5%, Turns Fiscal Screws (BBG)

China stepped up its push to curb financial risk, cutting its budget deficit target for the first time since 2012 and setting a growth goal of around 6.5% that omitted last year’s aim for a faster pace if possible. The deficit target – released Monday as Premier Li Keqiang delivered his annual report to the National People’s Congress in Beijing – was lowered to 2.6% of GDP from 3% in the past two years. The 6.5% goal is consistent with President Xi Jinping’s promise to deliver a “moderately prosperous” society by 2020. Policy makers dropped a target for M2 money supply growth, saying it’s expected to expand at similar pace to last year. Authorities reiterated prior language saying prudent monetary policy will remain neutral this year and that they’ll ensure liquidity at a reasonable and stable level.

Xi has ratcheted up his drive to curb debt risk, pollution and poverty at a time when the world’s second-largest economy is on a long-term growth slowdown. His efforts to rein in spending contrast with an historic expansion of U.S. borrowing under Donald Trump during a period of economic expansion. The 2018 targets “suggest slower growth and a fiscal drag,” said Callum Henderson, a managing director for Asia-Pacific at Eurasia Group in Singapore. “This makes sense for China in the context of the new focus on financial de-risking, poverty alleviation and environmental clean-up, but is less good news at the margin for those economies that have high export exposure to China.”

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Is it too late to close the gap in a peaceful manner?

Tax the Wealth of Older Britons to Help the Young, Report Argues (BBG)

Britain should impose higher wealth taxes on the older generation to ease the growing burden on young people, according to the Resolution Foundation. In a speech Monday, Executive Chair David Willetts will warn that welfare spending is set to rise by the equivalent today of 60 billion pounds ($83 billion) by 2040 as aging “baby boomers” drive up the cost of health care. “The time has come when we Boomers are going to have reach into our own pockets,” he will say. “The alternative could be an extra 15 pence on the basic rate of tax, paid largely by our kids. Is that kind of tax really the legacy we – a generation who own half the nation’s wealth – want to bequeath our children and grandchildren?”

Willetts, a former minister in the ruling Conservative Party, will make the case for reform of council tax – a property-based levy that helps fund local services – and of inheritance tax. Failure to act could fuel a sense of grievance among young people who are already struggling to match to the living standards enjoyed by older generations, he will say.

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“..deficits aren’t only not bad, they’re necessary…”

Eliminate The Deficit? Eliminate Economic Hope, More Like (McDuff)

Congratulations, everyone! We did it! The deficit has been eliminated! George Osborne, the architect of austerity, emerged from one of his non-jobs as the editor of the London Evening Standard to tell us all it was a “remarkable national effort” on Twitter, as if he’d ever broken a sweat over it. David Cameron, who will go down as arguably the worst prime minister in history thanks to the gigantic power move of doing a Brexit and running away, simply added: “It was the right thing to do” – safe in the knowledge that he was now out of the line of fire from tough questions.

That will all be cold comfort to the thousands of homeless people struggling to cope with sub-zero temperatures, or those having to choose between keeping the heating on, or risk going into rent arrears and losing their home entirely; to public sector workers in the NHS or local government, trying to keep the wheels from falling off as they deliver vital services in the face of budget cuts; and to disabled and unemployed people, bearing the brunt of the government’s spending cuts and facing harassment from the authorities. Forget all that. We’ve eliminated the deficit, and all we had to do was attack the poor and vulnerable with a relentless fury, create a new generation of young people for whom the concept of pensions or even steady wages is a fantasy, and undermine public services to such a grotesque extent that it will take years to rebuild what we’ve lost. Hooray!

[..] As Richard Murphy of Tax Research UK points out: “A growing economy requires general price increases, or inflation. Except under unusual circumstances, a general increase in prices requires an increasing money supply. A fiscal deficit is the only way in which money can be injected into an economy continuously. It follows that governments must run a near perpetual deficit or face the risk of creating a liquidity crisis due to a shortage in the money supply, which would then create a risk of deflation.” In other words, deficits aren’t only not bad, they’re necessary. Without them we get deflation, an over-indebted household sector, and an explosion in inequality.

The government is not like your household. It does not “run out of money,” because its job is to match the quantity of money to the desired economic activity. Its “debts” are not like your debts – they’re your savings and your pension funds. Osborne’s “remarkable national effort” was always and only to ensure that the government sector took more money out of the economy than it put into it. His great legacy is that we’re now at the stage where for every pound the government spends in day-to-day services, it taxes, and therefore destroys, more than a pound somewhere else. And we put people on the streets to freeze to achieve it. Go us.

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Thatcher-inflicted pain continues.

15,000 New Manchester Homes And Not A Single One ‘Affordable’ (G.)

Some of the UK’s biggest cities are allowing developers to plan huge new residential developments containing little or no affordable housing. In Manchester, none of the 14,667 homes in big developments granted planning permission in the last two years are set to be “affordable”, planning documents show – in direct contravention of its own rules, and leading to worries that London’s affordable housing crisis is spreading. In Sheffield – where house prices grew faster last year than in any other UK city, according to property portal Zoopla – just 97 homes out of 6,943 (1.4%) approved by planners in 2016 and 2017 met the government’s affordable definition. That says homes must either be offered for social rent (often known as council housing), or rented at no more than 80% of the local market rate.

In Nottingham, where the council aims for 20% of new housing to be affordable, just 3.8% of units given the green light by council planners meet the definition, Guardian research found. In Manchester, named by Deloitte earlier this month as one of Europe’s fastest growing cities and where property now sells three times as quickly as in London, planners have routinely waved through huge new developments – some containing swimming pools, tennis courts and more than 1,000 flats. Not one of the swanky apartments meets the national definition of “affordable” – leading critics to accuse the council of social cleansing. Others worry the city could become like London, where people on average salaries can no longer afford to live anywhere central.

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Aka the terror of social media.

The Tyranny of Algorithms (G.)

For the past couple of years a big story about the future of China has been the focus of both fascination and horror. It is all about what the authorities in Beijing call “social credit”, and the kind of surveillance that is now within governments’ grasp. The official rhetoric is poetic. According to the documents, what is being developed will “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step”. As China moves into the newly solidified President Xi Jinping era, the basic plan is intended to be in place by 2020. Some of it will apply to businesses and officials, so as to address corruption and tackle such high-profile issues as poor food hygiene.

But other elements will be focused on ordinary individuals, so that transgressions such as dodging transport fares and not caring sufficiently for your parents will mean penalties, while living the life of a good citizen will bring benefits and opportunities. Online behaviour will inevitably be a big part of what is monitored, and algorithms will be key to everything, though there remain doubts about whether something so ambitious will ever come to full fruition. One of the scheme’s basic aims is to use a vast amount of data to create individual ratings, which will decide people’s access – or lack of it – to everything from travel to jobs. The Chinese notion of credit – or xinyong – has a cultural meaning that relates to moral ideas of honesty and trust.

There are up to 30 local social credit pilots run by local authorities, in huge cities such as Shanghai and Hangzhou and much smaller towns. Meanwhile, eight ostensibly private companies have been trialling a different set of rating systems, which seem to chime with the government’s controlling objectives. The most high-profile system is Sesame Credit – created by Ant Financial, an offshoot of the Chinese online retail giant Alibaba. Superficially, it reflects the western definition of credit, and looks like a version of the credit scores used all over the world, invented to belatedly allow Chinese consumers the pleasures of buying things on tick, and manage the transition to an economy in which huge numbers of people pay via smartphones. But its reach runs wider.

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What does Washington have to say?

US Embassy In Turkey Closed Due To Security Threat (R.)

The U.S. embassy in Turkey’s capital Ankara will be closed to the public on Monday due to a security threat and only emergency services will be provided, it said in a statement on Sunday. The embassy advised U.S. citizens in Turkey to avoid large crowds and the embassy building and to be aware of their own security when visiting popular tourist sites and crowded places. It did not specify what the security threat was that prompted the closure. Additional security measures were taken after intelligence from U.S. sources suggested there might be an attack targeting the U.S. embassy or places U.S. citizens were staying, the Ankara governor’s office said in a statement. Visa interviews and other routine services would be canceled on Monday, the embassy said, adding that it would make an announcement when it was ready to reopen.

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Same guy said if Greeks set foot on -their own- Imia islets, it will basically mean war.

Erdogan Advisor Says Ankara Ready To ‘Strike’ In Eastern Med (K.)

A close advisor of Turkish President Recep Tayyip Erdogan has warned of a “strike” in the eastern Mediterranean if any attempt to explore or drill for hydrocarbons goes ahead without Ankara’s approval. Yigit Bulut, who is known for his incendiary remarks, was quoted by the Cyprus News Agency as telling Turkish state broadcaster TRT that Erdogan is prepared to call a “strike” at any “attempt at provocation.” “Have no doubt about it,” he said. Ankara has vowed to prevent any exploration for oil or gas around Cyprus and last month was accused to threatening to use force against a drillship chartered by Italy’s Eni to explore Block 3 of Cyprus’s exclusive economic zone.

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3 million hectares to be lost over 15 years.

Australia: Global Deforestation Hotspot (G.)

Australia is in the midst of a full-blown land-clearing crisis. Projections suggest that in the two decades to 2030, 3m hectares of untouched forest will have been bulldozed in eastern Australia. The crisis is driven primarily by a booming livestock industry but is ushered in by governments that fail to introduce restrictions and refuse to apply existing restrictions. And more than just trees are at stake. Australia has a rich biodiversity, with nearly 8% of all Earth’s plant and animal species finding a home on the continent. About 85% of the country’s plants, 84% of its mammals and 45% of its birds are found nowhere else. But land clearing is putting that at risk. About three-quarters of Australia’s 1,640 plants and animals listed by the government as threatened have habitat loss listed as one of their main threats.

Much of the land clearing in Queensland – which accounts for the majority in Australia – drives pollution into rivers that drain on to the Great Barrier Reef, adding to the pressures on it. And of course land clearing is exacerbating climate change. In 1990, before short-lived land-clearing controls came into place, a quarter of Australia’s total greenhouse gas emissions were caused by deforestation. Emissions from land clearing dropped after 2010 but are rising sharply again. “It has gotten so bad that WWF International put it on the list of global deforestation fronts, the only one in the developed world on that list,” says Martin Taylor, the protected areas and conservation science manager at WWF Australia. In Queensland, where there is both the most clearing and the best data on clearing, trees are being bulldozed at a phenomenal rate.

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And more deforestation. Sometimes you wonder what will be left of Europe in 100 years. Or 50.

Europe Tree Loss Pushes Beetles To The Brink (BBC)

The loss of trees across Europe is pushing beetles to the brink of extinction, according to a new report. The International Union for the Conservation of Nature assessed the status of 700 European beetles that live in old and hollowed wood. Almost a fifth (18%) are at risk of extinction due to the decline of ancient trees, the European Red List of Saproxylic Beetles report found. This puts them among the most threatened insect groups in Europe. Saproxylic beetles play a role in natural processes, such as decomposition and the recycling of nutrients. They also provide an important food source for birds and mammals and some are involved in pollination.

“Some beetle species require old trees that need hundreds of years to grow, so conservation efforts need to focus on long-term strategies to protect old trees across different landscapes in Europe, to ensure that the vital ecosystem services provided by these beetles continue,” said Jane Smart, director of the IUCN Global Species Programme. Logging, tree loss and wood harvesting all contribute to the loss of habitat for the beetles, said the IUCN. Other major threats include urbanisation and tourism development, and an increase in wildfires in the Mediterranean region. Conservation efforts need to focus on long-term strategies to protect old trees and deadwood across forests, pastureland, orchards and urban areas, the report recommended.

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Jan 172018
 


Eugene de Salignac Painters suspended on cables of the Brooklyn Bridge Oct 7 1914

 

If Bull Market For Stocks Ends In 2018, Blame The Credit Market Bubble (MW)
Dramatic Stock Market Reversal Signals More Volatility Ahead (CNBC)
Bitcoin, Ethereum Suffer Massive Drops, Many Crypto’s Fare Even Worse (CNBC)
South Koreans Sign Petition To Stop Crackdown On Bitcoin ‘Happy Dream’ (CNBC)
‘Black Swan’ Event Could Threaten China’s Financial Stability (R.)
US and China Brace For Trade War That Could Rattle Global Economy (ZH/WSJ)
The New Cold War In 2018 (Stephen Cohen)
The One Fact Which Disproves Russiagate (CJ)
Carillion’s Failure: The Many Questions That Need Answers (Coppola)
After Carillion How Many Firms Can UK Pensions Lifeboat Rescue? (G.)
No Way Around Sorry Shape Social Security Is In (Newsmax)
Britain Is Being Stalked By A Zombie Elite (G.)
Dutch Say Nations Hit By Brexit Shouldn’t Plug EU Budget Hole (BBG)
Nomi Prins’ New Book: Central Banks Have Become the Markets (Martens)
New Zealand Fisheries Want Images Of Dead Penguins Caught In Nets Censored (G.)

 

 

Blame the Everything Bubble.

If Bull Market For Stocks Ends In 2018, Blame The Credit Market Bubble (MW)

Will 2018 be the year the stock market rally screeches to a halt? It may be, if those analysts who are cautioning that a bubble is forming in credit markets are right and companies are overextending themselves to a degree that could spell trouble ahead. Most analysts agree that the credit market has been speeding ahead at a bubble-like pace. Companies have been piling on debt in recent years to take advantage of low interest rates, or more recently, to get ahead of a series of well-telegraphed interest-rate hikes. If their borrowing is simply to refinance existing debt at lower interest rates, it’s a positive for balance sheets. But many companies have borrowed to raise funds for shareholder rewards, and that may come back to bite them if rates were to spike.

For example, Apple debt may be highly rated, just two notches below triple-A at AA+ at S&P Global Ratings, but the technology giant continues to ride the borrowing bandwagon as it looks to fund its massive share buyback program. Apple issued $7 billion of debt in November, two months after selling $5 billion worth of corporate bonds and several months after adding more debt. The U.S. primary corporate bond market is currently at record levels. The investment-grade market saw $1.44 trillion of issuance in 2,127 deals through December 26, topping the record $1.34 trillion recorded in 2016, according to data analytics company Dealogic. The high-yield market has chalked up $266.3 billion of debt in 469 deals, making it the fourth-biggest year for issuance, according to Dealogic. The high-yield record goes to 2012 when issuers sold $321 billion of debt in 604 deals.

Combined investment-grade, high-yield and FIG issuance—FIG is financial institutions group—is a record $1.71 trillion, topping the previous record of $1.57 billion set in 2015. What’s starting to worry some analysts is that despite the fact that the Federal Reserve and other central banks are draining liquidity from the marketplace and the yield curve is flattening, near-record credit market valuations suggest investors haven’t prepared for any potential speed bumps. One sign of this complacency, is how narrow the spread is between yields on speculative grade, or “junk” bonds, and corresponding risk-free Treasury notes. S&P Global Ratings said Tuesday its speculative-grade composite spread tightened by three basis points (0.03 percentage points) to 399 basis points, well below the five-year moving average of a 528 basis-point spread.

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How much longer can volatility remain ultra low?

Dramatic Stock Market Reversal Signals More Volatility Ahead (CNBC)

After a mostly one-way trade higher for weeks, Tuesdays’ dramatic stock market reversal signals the potential for more choppy trading ahead. The Dow rocketed 283 points Tuesday, before erasing those gains and heading down 100 points. It later recovered and closed just 10 points lower at 25,792 after its most volatile day since Dec. 1 and on the first day it traded above 26,000. Traders blamed Washington for some of the selling as lawmakers appeared to be having difficulty agreeing to a spending resolution and on reports that former White House advisor Steve Bannon will testify in the Russia investigation. But while the focus was on Washington, traders also looked at the morning market surge Tuesday as another sign that the market was getting too frothy and overbought.

“The healthiest thing would be some downward action for the next two or three sessions. Today you did have a somewhat bearish, outside reversal,” said Scott Redler, partner with T3Live.com, who follows the market’s short-term technicals. A reversal is when the market opens above a prior high and then closes below a prior low. “That happened in some sectors like small-caps. … You can’t get too bearish if you’re still above the 8- and 21-day moving average,” Redler said. Strategist Laszlo Birinyi on Tuesday said he expects a possible six weeks of consolidation and sideways trade, but he is not bearish on stocks. “Right now, the market is at the upper end of the trading range. It’s 5% over its 50-day moving average, and those are areas where the market tends to digest, consolidate, take a breather but not go down,” he said, as the market gyrated Tuesday.

Steve Massocca, managing director at Wedbush Securities, said the market has clearly become fatigued after its sharp move higher. The S&P 500 is up 4% since the beginning of the year and crossed above 2,800 for the first time Tuesday before closing down 9 at 2,776. “We’ve had a pretty significant move. It’s quite natural that this would be exhausted at some point. … A potential government shutdown is a handy excuse,” he said. But a government shutdown Friday is not likely, said Dan Clifton, head of policy research for Strategas. “My overall view on this is they’re preparing a temporary stop-gap measure. I just don’t think we’re going to shut down, but we’re trying to buy time until there could be a larger spending package. It was very much companies that were influenced by government spending that were selling off. The market is saying there is some risk of a government shutdown,” Clifton said.

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Closing in on $10,000 as we speak. Is that a psychological barrier?

Bitcoin, Ethereum Suffer Massive Drops, Many Crypto’s Fare Even Worse (CNBC)

Most major digital currencies sold off sharply on Tuesday, but the declines in bitcoin, ethereum and litecoin prices weren’t as bad as much of the rest of the market. All of the top 20 digital currencies — by market value — suffered double digit losses over the last 24 hours, according to data from industry website CoinMarketCap. For example, ripple was down 26%, bitcoin cash was down 24%, iota was down 27% and monero was down 22% as of 8:51 a.m. HK/SIN. In fact, at their low point on the day, many cryptocurrencies with large market caps saw their prices essentially halved. On the other hand, bitcoin was down 17% at that time, ethereum was down 19% and litecoin was down 19%, according to the same site.

The declines followed speculation in the market about what regulators in Asia may be planning for digital tokens. On Monday, a report from Bloomberg, citing unnamed sources, said Beijing plans to block domestic access to Chinese and offshore cryptocurrency platforms that allow centralized trading. Last week, South Korean Justice Minister Park Sang-ki said his ministry was preparing a bill that, if passed, could ban trading via cryptocurrency exchanges. His comments roiled the market and subsequently the justice ministry and other sections of South Korea’s government have softened their stance.

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Just perfect.

South Koreans Sign Petition To Stop Crackdown On Bitcoin ‘Happy Dream’ (CNBC)

A petition in South Korea against cryptocurrency regulation has reached the number of signatures that would induce a government response. As of Tuesday morning, ET, more than 212,700 had signed a petition launched Dec. 28 on the website of the South Korean presidential office. A Google translation of the website states that if more than 200,000 people support a petition within 30 days, officials will respond. “Our people have been able to make a happy dream that they have never had in Korea because of virtual money,” the anonymous author of the petition wrote, according to a Google translation. “People are not stupid. … virtual money is invested because it is judged to be the fourth revolution.” The petition did support South Korea’s recent actions on cryptocurrencies, such as banning anonymous trading accounts.

“However, I wish that the economy will not decline due to unjustifiable regulations in the present situation,” the Google translation of the petition said. Unemployment among South Korean youth, or those ages 15 to 29, is around 9%, nearly three times the national average, according to Statistics Korea. Young people are generally more interested in buying and selling digital currencies than their elders. In the last several months, South Korea has accounted for a significant portion of the trading volume in digital currencies such as bitcoin, ethereum and ripple. Earlier this month, ripple prices appeared to plunge in U.S. dollar terms after CoinMarketCap said it was excluding price information from some Korean exchanges due to “extreme divergences in price from the rest of the world.”

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No kidding.

‘Black Swan’ Event Could Threaten China’s Financial Stability (R.)

China’s banking regulator chief warned that a “black swan,” or an unforeseen event could threaten the country’s financial stability, official People’s Daily reported on Wednesday. In an interview with the paper, Guo Shuqing said that while risks in the financial system are manageable, they are still “complex and serious.” Since his appointment as the head of the China Banking Regulatory Commission early last year, Guo has introduced a flurry of new rules to reign in lender risks including from curbs on shadow banking activities to the crackdown on loan fraud. Guo said the dangers stem from the pressure of rising bad debt, imperfect internal risk systems at financial institutions, the relatively high levels of shadow banking activities and rule violations.

All of these risks could upend financial stability through a “black swan” event, Guo told the People’s Daily, referring to major, unexpected occurrences. “We need to focus on reducing the debt ratio of companies, restrict household leverage, strictly control cross-financial sector products, continue to dismantle shadow banking,” said Guo. China will step up oversight of the banking sector this year to reduce financial risks, the CBRC said on Monday, stressing that long-term efforts would be needed to control banking sector chaos.

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A trade war wouldn’t qualify as a black swan.

US and China Brace For Trade War That Could Rattle Global Economy (ZH/WSJ)

Once under way, the repercussions of a trade war would be felt well beyond the combatants themselves. US friends and allies along Asian supply chains would be early collateral damage. China is still to a large extent the final assembly point for imported high-tech components from Japan, South Korea and Taiwan. Navigating increasingly complex global supply chains in a constant state of disruption would be hugely problematic for businesses across industries. Furthermore, if it escalated far enough, a trade war could take down the entire global trading architecture. That could be Trump’s goal. Many in his administration, including trade representative Robert Lightizer, believe the biggest mistake the US ever made was to usher China into the World Trade Organization in 2001. Aides say Trump regularly threatens to pull out of the rules-setting body.

Trump has in the past suggested that Chinese help on North Korea could head off US trade action. In a phone call with the US president on Tuesday, Xi suggested that trade issues should be resolved by “making the cake of cooperation bigger.” Meanwhile, Trump expressed disappointment that the US trade deficit with China has continued to grow” and made clear that “the situation is not sustainable.” In private, however, senior Chinese officials believe Beijing has many tactical advantages: Some are cultural – the Chinese people, one says, are more prepared to endure economic hardship. [..] Many US trade experts don’t mince words: They believe China would prevail in a trade war with the US, and that the US economy would suffer lasting damage.

Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, thinks China would win. Among his reasons: China’s ability to concentrate pain, and the outcry from affected businesses in America’s more open political system. He argues that “the political costs to the Trump administration of maintaining new protectionist measures will be much higher than the costs of retaliation to the Xi regime.” Derek Scissors, a trade expert at the American Enterprise Institute argues that the major US advantage is that China is far more dependent on trade for its financial health. “A shorter, smaller-scale trade conflict favors China due to its comparative agility,” he says. “The more serious it gets, the worse China would fare because it’s badly outmatched monetarily.”

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Part of a podcast with America’s no.1 Russia scholar Stephen Cohen at TFMetalsReport.com.

The New Cold War In 2018 (Stephen Cohen)

I’m not a Trump supporter and I didn’t vote for him. However, we can actually support Donald Trump’s campaign promise which I think he’s tried to act on since he’s been president that it’s necessary to cooperate with Russia. This is what was called detente in the 20th century. I don’t know why Trump doesn’t make this point. I don’t think he has very good advisors in regard to Russia either in terms of what’s going on in Russia or in terms of his own policy making but Trump might say in his own defense because they’re indicting him for simply saying I want to cooperate with Russia and with Putin in particular. He could say look, every Republican president of consequence in the 20th century pursued detente with Russia.

First Eisenhower, the first detente the spirit of Camp David with Khrushchev, then the Nixon Kissinger attempt at a grand detente with Brezhnev and finally above all Ronald Reagan a detente with Gorbachev the last Soviet leader Soviet Russian leader so great that Reagan and Gorbachev ended the cold war. Trump could put himself in that tradition and say “I’m the traditional Republican. This is what Eisenhower, Nixon and Reagan did. They did it wisely. They avoided nuclear war with Russia. We’re in a new Cold War. The dangers are grave. It’s not only my duty as the American president to pursue cooperation to ward off a catastrophe but I commend the honorable tradition of the Republican Party”. He doesn’t say that. I don’t know why as I say it because he doesn’t know what or because he wants to be the one and only I have no idea what he needs to say.

And if he said it it would compel a conversation in Washington that we’re not having. What’s happened to detente and what’s happened is we have if we ignore his own idiom and put it in again I speak as a story in the historical language of 20th century diplomacy. We have a pro-detente President who for the first time in history is not permitted to at least try because every time he has a sensible conversation with Putin, no matter whether it’s face to face or on the telephone, he’s accused not only by the traditionally crazies in American politics but by the New York Times of treason. So what we could do and it will be hard for a lot of people because of the loathing for Trump. Is so pervasive just and I didn’t vote for Trump is the fifth amendment I didn’t vote for Trump and I didn’t support President Trump. But about this he is not only right. He’s our only hope at the moment.

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Caitlin Johnstone is a delight to read. Summary here: Putin is supposed to have paid out many billions when no-one believed Trump was a viable candidate. Was he psychic?

The One Fact Which Disproves Russiagate (CJ)

Just a few days ago Russiagaters were having yet another “BOOM! We got him!” social media parade about an article from the Clinton-directed Daily Beast, claiming that a senior national security aide within the Trump administration had suggested scaling down the US troop presence along Russia’s border, a dangerous escalation which all peace advocates support eliminating. In the first sentence of the article’s second paragraph, the author Spencer Ackerman acknowledges that “the proposal was ultimately not adopted.” Huh? So President Trump, alleged to have been groomed early and at great expense by the Kremlin in anticipation of a presidential victory nobody else imagined possible at that time, was pitched a recommendation to scale down new cold war escalations with Russia… and he refused? That’s how you’re starting your article about the “return on Russia’s election-time investment in President Trump”?

Russiagate is so weird. You need to plug yourself into Louise Mensch and Rachel Maddow ramblings so extensively that you can contort your sense of reason to the point where it looks perfectly rational to believe that Putin was omniscient enough to know that Trump could defeat all primary opponents and take the fight to the heir apparent Hillary Clinton back when virtually no one else imagined such a thing was possible, recruited his team reportedly at the cost of billions of dollars, poured all kinds of intel and resources into ensuring Trump’s election using hackers and bots to influence American opinion, only to get a US president who is, when it comes to facts in evidence, already just a year into his administration demonstrably more hawkish towards Russia than his predecessor was. Again: huh?

Nobody wants to think about this because it doesn’t fit in with America’s stale partisan models; Democrats would have to admit that their best shot at getting a rival president impeached is pure gibberish, and Trump supporters would have to acknowledge that their swamp-draining populist hero is actually just one more corrupt globalist neocon like his predecessors.

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The next Carillion is already in sight: Interserve. The British privatization model is failing spectacularly. That will cost a lot of jobs.

Carillion’s Failure: The Many Questions That Need Answers (Coppola)

Britain is reeling from the shock collapse of one of its largest corporations, the giant construction and services company Carillion Group plc. In talks over the weekend, Carillion’s management was unable to persuade its lenders to provide any more funds, and the U.K. government refused to help. Carillion was left with no options. On Monday morning, Carillion filed for compulsory liquidation. This was a completely unexpected move. Discussions about Carillion’s fate over the previous week had centered around restructuring, bail-in of creditors and perhaps placing the company into administration, the U.K.’s equivalent of Chapter 11 bankruptcy protection. No one expected the company to be wound up. But that is what will now happen to it.

As Carillion has extensive U.K. Government construction and services contracts, the U.K.’s High Court appointed the Government’s Official Receiver to manage the liquidation. Among other things, the Official Receiver will be responsible for ensuring that public sector services currently provided by Carillion continue to run, and the staff providing them continue to be paid. Without this assurance, meals to hospital patients and schoolchildren might not be delivered, and prisons might not be staffed. But the future of Carillion’s 19,000 employees in the U.K. (43,000 worldwide) is still highly uncertain. Staff working on U.K. public sector service contracts are protected for the moment, but those working on other projects could lose their jobs within days.

The Official Receiver will be supported by six insolvency specialists from the accountancy firm PWC, who will act as “special managers”. PWC’s message to Carillion’s shareholders was blunt and immediate: Unfortunately, as a result of the liquidation appointments, there is no prospect of any return to shareholders. At least shareholders know where they stand. They have been wiped. Trading in Carillion’s shares has been suspended, of course.

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I see trouble in your future.

After Carillion How Many Firms Can UK Pensions Lifeboat Rescue? (G.)

The pensions lifeboat that comes to the rescue when firms go bust is about to get a lot more crowded following the collapse of Carillion. The sprawling construction and outsourcing firm had a pension deficit of £580m but is now likely to rise to at least £800m because it no longer has a solvent business standing alongside it. The company’s crash into liquidation has thrown the spotlight on other firms with huge pension scheme deficits such as IAG, BT and BAE. It has also raised questions about how many more big company failures the Pension Protection Fund (PPF) can absorb, and why companies with big deficits are allowed to pump out bumper dividend payouts to shareholders.

It is almost certain that the fund will now have to step in and bail out workers at Carillion, which has more than 28,000 defined-benefit – in this case, final salary – pension scheme members. Those already taking pensions will be protected, but those members below retirement age will face cuts of 10-20% because there is a cap on payouts to higher earners. It’s been a busy time for the PPF: in the spring, roughly 20,000 members of the British Steel pension scheme will start moving into the fund. They will eventually be joined by about 2,000 former BHS workers (the vast majority of the retailer’s staff chose to move their retirement funds into a new pension scheme).

Carillion’s liquidation has fuelled concern about the financial stability of other big companies. Last year a report by JLT Employee Benefits put the total deficit in FTSE 100 pension schemes at the end of 2016 at £87bn – £17bn worse than a year earlier, even though firms paid in around £11bn. 66 companies had deficits – ie their liabilities to pension scheme members were greater than their assets. Booming stock markets in 2017 helped narrow the gap. Mercer, the leading pensions consultancy, said deficits at the biggest 350 firms fell to £76bn from £84bn the year before. But even with the FTSE at a new peak, the deficits remain alarmingly high.

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Pensions, Social Security, it’s all stupidly overpromised. And that will remain so until it’s too late.

No Way Around Sorry Shape Social Security Is In (Newsmax)

If you want to know what makes people worry, here are four facts to make you lose your sleep whatever your age:

1. The Social Security Shortfall Is Growing Three Times Faster Than the US Economy. The imbalance of Social Security is measured by its shortfall, or the amount of money, that with interest earned, would enable the program to pay benefits over the next 75 years. That hole in the program’s finances is growing at three times the rate of our ability to fill it. Here are the numbers. Over the past 15 years, the system’s liabilities have grown at 9.6% compounded annually, while the trustees expect that even in a robust year real economic growth will not break 3%. Moreover, the trustees believe that the long-term growth rate of the economy is 2.1%. At the end of 2001, the Social Security shortfall was $3.157 trillion. At the end of 2016, it was $12.5 trillion. With the passage of yet another year of inaction on the program’s finances, the figure is more than $13 trillion.

2. People Turning 70 Today expect to Be Alive When Benefits are Reduced. If you think the problems of Social Security are limited to people under the age of 40 —think again. That assessment has not been a realistic concern in nearly two decades. The Social Security Administration believes that more than half of the people turning 70 today will be alive and well when the trust fund is exhausted. The exhaustion of the trust fund means that benefits will be reduced to the level of revenue collected. At this point, the trustees of the Social Security Trust Funds believe that benefits will fall by 23% in 2034, with cuts rising over time. The CBO believes that the reductions will rise to 30% over time.

3. In 2016, the Program Lost More Money than It Collected. Over the course of 2016, the program’s unfunded liabilities rose by nearly $1.2 trillion. That is a breathtaking jump considering that the program only collected about $950 billion in revenue. Mechanically, Social Security takes in money in exchange for the promise of future benefits. In the case of 2016, for every $1 that the program took in, the system generated more than $1.20 of promises that no one expects it to keep. In English, we could have reduced benefits to zero for the entire year of 2016, and the program would have finished the year in worse shape than it started.

4. Dependency on Social Security Rises with Age. Typically, worriers about Social Security say that Social Security accounts for 90% of the income of more than one-third of seniors. Politifact has largely confirmed this statistic.

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It’s a zombie nation.

Britain Is Being Stalked By A Zombie Elite (G.)

Britain in 2018 is stalked by zombie ideas, zombie politicians, zombie institutions – stripped of credibility and authority, yet somehow still presiding over our lives. Nowhere is this more true than in the way we run our economy. This September marks the 10th anniversary of the death of Lehman Brothers. In autumn 2008, the banks broke, the governments stepped in – and the cast-iron premises that underpin our economic system were exposed as fiction for all to see on the Ten O’Clock News. Yet a decade later, those dead ideas still walk among us. They form what John Quiggin at the University of Queensland terms zombie economics – dogmas now cracked beyond repair, but which continue to shape British society.

Austerity – the policy that more than any other will define this decade – was lifted by George Osborne straight out of Margaret Thatcher’s handbag. He justified it with zombie rhetoric about how business was being “crowded out” by childcare centres and the rest of the public sector, and how 21st-century sovereign countries could be run just like household budgets. Tax cuts for “wealth creators” and privatisations of the few remaining national assets: all utter zombie-ism. And this was no one-party game. Labour frontbenchers from Andy Burnham to Chuka Umunna spent the first half of this decade pleading guilty to the trumped-up charge of creating a debt crisis.

Labour councils are among those pursuing outrageous privatisations. And over the past four decades both sides have adopted as an article of faith the idea that politics is about What Works – and that What Works is a mix of Potemkin markets and crude managerialism. From Tony Blair to David Cameron and Nick Clegg, politics was no longer about left battling right – but technocrats and open-necked Oxford philosophy, politics and economics graduate special advisers who “got it” versus the dinosaurs and well-meaning naifs. In this way, a broken economy has been force-fed more of the same ideas that helped to break it. The outcome has been almost predictably dire.

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Yeah, let’s get Greece to pay up for that. Show us some solidarity!

Dutch Say Nations Hit By Brexit Shouldn’t Plug EU Budget Hole (BBG)

Dutch Finance Minister Wopke Hoekstra said European Union countries that are set to suffer the most from Brexit shouldn’t also have to help plug the hole it will tear in the bloc’s budget. “A small group of countries on the west coast of Europe is hit very hard in the economy by Brexit, which applies primarily to Ireland, but also to the Netherlands, Denmark, Spain and a number of other countries,” Hoekstra said in interview with Dutch TV station RTL Z. “It cannot be the intention that those who already experience the damage of Brexit will also pay the bill.” While the remaining 27 EU countries are maintaining a united front in Brexit talks, national interests diverge when it comes to the future trading relationship and splits are starting to emerge.

The Netherlands is one of the EU countries keenest on securing a trade deal with the U.K. that doesn’t harm crucial commercial trade ties between the two countries, whose ports face each other across the North Sea. Hoekstra met his Spanish counterpart Luis de Guindos last week and the pair agreed they both wanted a Brexit deal that keeps the U.K. as close to the EU as possible, according to a person familiar with the situation. A Spanish economy ministry official said last week the two finance chiefs had underlined the importance of U.K. ties for both countries, and agreed to keep track of their common interests. The U.K. will continue to pay into the current budget until the end of 2020; after that a new seven-year budget cycle comes into effect. The U.K. is a net contributor to the current budget, which redistributes funds across the bloc.

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The real collusion.

Nomi Prins’ New Book: Central Banks Have Become the Markets (Martens)

Nomi Prins’ latest book, Collusion: How Central Bankers Rigged the World, ensures her place as one of this century’s most informed Wall Street historians. It’s the perfect segue from Prins’ earlier “It Takes a Pillage,” and her 2014 book All the Presidents’ Bankers. If you are serious about understanding the corrupting influences that have left the U.S. vulnerable to another epic financial crash, buy all three books and read them as one. Prins is a veteran of Wall Street who has now written six books and dozens of articles to help Americans navigate the snake pit that has replaced the financial system of the United States. It all started with her first book in 2004, Other People’s Money: The Corporate Mugging of America, where she explained her motivation as follows:

“When I left Wall Street, at the height of a wave of scandals uncovering scores of massively destructive deceptions, my choice was based on a very personal sense of right and wrong…So, when people who didn’t know me very well asked me why I left the banking industry after a fifteen-year climb up the corporate ladder, I answered, ‘Goldman Sachs.’ “For it was not until I reached the inner sanctum of this autocratic and hypocritical organization – one too conceited to have its name or logo visible from the sidewalk of its 85 Broad Street headquarters [now relocated to 200 West Street] that I realized I had to get out…The fact that my decision coincided with corporate malfeasance of epic proportions made me realize that it was far more important to use my knowledge to be part of the solution than to continue being part of the problem.”

In Collusion, Prins walks us through the critically-important events occurring during the 2007-2009 financial crash, many of which would have been relegated to the dust bin of history if not for this book. Prins makes the case that the U.S. is headed toward another epic financial crash as a result of the unchecked powers of the U.S. central bank (the Federal Reserve) and its global counterparts who are creating dangerous new asset bubbles in an effort to paper over the last ones. Prins convincingly shows that colluding central bankers have effectively become the markets through a never-ending flow of cheap money to the mega banks which have deployed that cheap money to buy back and inflate their own stock – with a green light from their own regulator and money pimp (our term, not hers) – the U.S. Federal Reserve.

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The new PM should jump on this. She cannot afford to let this stand.

New Zealand Fisheries Want Images Of Dead Penguins Caught In Nets Censored (G.)

The seafood industry in New Zealand has asked the government to withhold graphic video of dead sea life caught in trawler nets as they are potentially damaging to fisheries and to brand New Zealand. A letter from five seafood industry leaders to the Ministry of Primary Industries highlights the fisheries’ growing unease with the government’s proposal to install video cameras on all commercial fishing vessels to monitor bycatch of other species and illegal fish dumping. The letter requests an amendment to the Fisheries Act, so video captured onboard cannot be released to the general public through a freedom of information request, frequently used by the media, campaign groups and opposition parties.

“They [the proposed videos] also raise significant risks for MPI and for ‘New Zealand Inc'”, the letter reads, also citing concerns about invading the privacy of employees onboard, and protecting commercial and trade secrets. There are no reliable figures on the numbers of penguins, sea lions, dolphins and seals that die in fishing nets or longlines in New Zealand, but according to some researchers and environmental groups the commercial fishing industry is the main culprit for declining populations of endangered sea lions and yellow-eyed penguins. Only 25% of deepwater trawlers in New Zealand have government observers onboard to record bycatch and discards, according to the National Institute of Water and Atmospheric Research [Niwa], which relies on statistical modelling techniques to generate bycatch estimates for the 75% of boats that work unobserved.

Niwa estimates for every kilogram of reported target catch (what the fishing boat aims to catch ) there is 0.2 kg of bycatch. “These are the images the fishing industry doesn’t want you to see”, said Forest & Bird’s chief executive Kevin Hague. “What they [the seafood industry] are saying is catching endangered penguins, dumping entire hauls of fish overboard and killing Hector s dolphins looks really bad on TV. Well, the solution is to stop doing it, not to hide the evidence. It’s hard to think of a more credibility damaging activity than trying to change the law so the rest of us can’t see what’s really happening out there.” Deepwater fishing vessels account for 80% of New Zealand’s annual catch and earn NZ$650m per annum in export dollars.

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Sep 172017
 
 September 17, 2017  Posted by at 9:11 am Finance Tagged with: , , , , , , , , ,  


Edward Hopper House tops 1921

 

Trade War With China Will End US Global Finance Monopoly – Jim Rogers (RT)
Pension Storm Warning (Mauldin)
S&P On The Verge Of History (ZH)
How Austerity Works (Steve Keen)
Why Bitcoin May Be Worth Only A Third Of Its Value (MW)
How Common is the Seneca Curve? (Ugo Bardi)
Greek Debt Write-Offs To Be Based On Properties (K.)
The Eurozone May Be Back On Its Feet. But Is Greece? (G.)
Chinese Capital Bans Winter Construction To Improve Air Quality (R.)
White House Denies EU Claim That It’s Shifting on Climate Deal (BBG)

 

 

“It will force the rest of the world to find an alternative to the US financial system.” They haven’t found one yet.

Trade War With China Will End US Global Finance Monopoly – Jim Rogers (RT)

RT : What is the likelihood that the US will go through with and actually impose economic sanctions on China if it does not implement the new sanctions regime against North Korea? Jim Rogers : Sanctions are sanctions. They could do sanctions which are not very important or don’t do much damage. And then they will have good public relations which says they have sanctions, but it is meaningless. I would suspect if anything, that is what they will start with. If they put sanctions on China in a big way, it brings the whole world economy down. And in the end, it hurts America more than it hurts China because it just forces China and Russia and other countries closer together. Russia and China and other countries are already trying to come up with a new financial system. If America puts sanctions on them, they would have to do it that much faster and in the end America will lose its monopoly on the financial system, which will hurt America more than anybody.

RT : What do you think, is it an empty rhetoric and saber-rattling from Donald Trump because he said “those [UN] sanctions are nothing compared to what ultimately will have to happen” without specifying what he meant by that. Do you think this is just mere bluff on the part of the US, or would it really use the ‘nuclear option’? JR : If it uses a nuclear option for sanctions, it will hurt America much more than will hurt North Korea, it will hurt America much more than it will hurt China, Russia and everybody else. It will force the rest of the world to find an alternative to the US financial system. If he does that, it is going to cause a lot of turmoil in the world financial economy and in the end it is going to hurt America more than it is going to hurt anybody else. I would give you an example, if you look at Russian agriculture right now – America put sanctions on Russian agriculture trying to hurt Russia, but it has helped Russian agriculture. Russian agriculture is booming now. In the end, America has hurt itself more than it has hurt anybody else.

RT : If that happens, what would the consequences be for the global economy? Could this end up becoming a global economic crisis? JR : We are probably going to have a global economic problem, maybe even crisis, in the next couple of years. This may be one of the things that start it. There is always something which starts a crisis. If America does something like this, this could be the thing that did it. In 1929, it started when America started a huge trade war with the rest of the world and the economists said, “please, this is a mistake,” but America did that anyway. And then we had a great collapse and The Great Depression of the 1930s.

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Pensions and hurricanes: lies and bad preparation.

Pension Storm Warning (Mauldin)

Total unfunded liabilities in state and local pensions have roughly quintupled in the last decade. You read that right – not doubled, tripled or quadrupled: quintupled. That’s nice when it happens on a slot machine, not so nice when it’s money you owe. The graph [shows] that unfunded pension liabilities for state and local governments was $2 trillion. But that assumes an average 7% compound return. What if we assume 4% compound returns? Now the admitted unfunded pension liability is $4 trillion. But what if we have a recession and the stock market goes down by the past average of more than 40%? Now you have an unfunded liability in the range of $7–8 trillion.We throw the words a trillion dollars around, not realizing how much that actually is. Combined state and local revenues for the US total around $2.6 trillion.

Following the next recession (whenever that is), the unfunded pension liabilities for state and local governments will be roughly three times the revenue they are collecting today, and that’s before a recession reduces their revenues. Can you see the taxpayer stuck between a rock and a hard place? Two immovable objects meeting? The math just doesn’t work. Pension trustees don’t face personal liability. They’re literally playing with someone else’s money. Some try very hard to be realistic and cautious. Others don’t. But even the most diligent can’t control when the next recession comes, or when the stock market will crash, leaving a gaping hole in their assets while liabilities keep right on rising. I have had meetings with trustees of various government pensions.

Many of them want to assume a more realistic discount rate, but the politicians in their state literally refuse to allow them to assume a reasonable discount rate, because owning up to reality would require them to increase their current pension funding dramatically. So they kick the can down the road. Intentionally or not, state and local officials all over the US made pension promises that future officials can’t possibly keep. Many will be out of office when the bill comes due, protected from liability by sovereign immunity. We are starting to see cities filing for bankruptcy. That small ripple will be a tsunami within 7–10 years.

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“..a market rally that goes deep into 2019..”

S&P On The Verge Of History (ZH)

U.S. stocks have risen more in the past eight years than in almost any other post-World War II time of economic growth, as defined by the National Bureau of Economic Research. The logic here is that economic expansions fuel bull markets and so it’s reasonable to measure market recoveries after a period of macro contraction ends. Using that definition, let’s review how the S&P 500 has performed during the last ten economic recoveries. To be precise, the birth of the stock market’s bull market is dated as the first day after an NBER-defined recession has ended. The market run continues through the peak. The S&P 500 Index jumped 172% from July 2009, when the current expansion started, through Wednesday. The biggest advance was about 300% and occurred from April 1991 to March 2001, when Internet-related stocks soared.

As Capital Speculator blog’s James Picerno notes, the question before the house: Will the momentum of late endure long enough to overtake the 1991-2001 record in duration and/or magnitude? If so, the bull market in the here and now has to last another 463 trading days, which translates into a market rally that goes deep into 2019. There’s just one thing wrong… Remember – the ‘market’ is not the ‘economy’… or maybe it is in the new normal?

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It really is this simple.

How Austerity Works (Steve Keen)

I provide a simple numerical explanation of how austerity works at the micro (individual person, industrial sector, or country) and the macro level (country, or group of countries in a currency union).

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A thousand different views. At least this one took some homework.

Why Bitcoin May Be Worth Only A Third Of Its Value (MW)

Dan Davies, senior research adviser at Frontline Analysts, argued there’s no point in attempting to value bitcoin as if it were just another type of security. “It’s not a security with some intrinsic value, rather it’s a currency that in the long term is governed by an exchange rate driven by trade or volume of transactions,” Davies said. The fact that a significant proportion of bitcoins is hoarded or held for investment doesn’t disqualify it from being a currency, according to Davies. But the BTC/USD BTCUSD, -3.37% exchange rate is entirely determined by speculative portfolio capital flows right now, he said, leaving it difficult to assign fair value. Viewing bitcoin as a currency makes it possible, at least in theory, to come up with a long-term exchange rate by using the quantity theory of money.

The formula is: MV = PT, where money supply multiplied by its velocity equals the price level multiplied by the transaction volume. Since both price and transaction volume is expressed in U.S. dollars, the price of bitcoin would be 1/BTCUSD, Davies said. In this case, bitcoin’s supply is fixed at 21 million and money velocity for normal currencies is usually at around 10, according to Davies. So, the long-term fundamental value of bitcoin equals the long-term value of transactions that will be carried out in bitcoin divided by 210 million (21 million bitcoins multiplied by velocity). The hardest value to plug into this formula is the transaction volume. If, for example, bitcoin was used primarily for global trade in illicit drugs, the figure would be around $120 billion, which is an estimate the U.N. used in 2014.

“I used that number a few years ago, but we would have to come up with a different estimate, as bitcoin is clearly used for things other than illicit drugs now,” Davies said. Davies declined to offer an updated number, saying he needed to do more research. But doubling that transaction volume number to $240 billion, for example, and dividing by 210 million produces a value of $1,142, around a third of the current exchange rate of $3,569. That isn’t far from an estimate that Mohamed El-Erian, chief economic adviser at Allianz Global Investors, recently suggested as a fair value for bitcoin. In an interview with CNBC, El-Erian said the fair price should be about half or a third of what it is now. El-Erian argued the currency will only survive as a peer-to-peer means of payment and governments won’t allow mass adoption.

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It’s universal.

How Common is the Seneca Curve? (Ugo Bardi)

My talk at the Summer Academy of the Club of Rome was mainly a presentation of my latest book, “The Seneca Effect” (Springer 2017). In practice, of course, a book contains many more things than you can say in a 40 minute speech. So, I tried to concentrate on the idea that the behavior I call “the Seneca Curve” is very common, even universal. Below, you can see the Seneca Curve: things go up slowly but collapse rapidly, as the Roman philosopher Seneca said first some two thousand years ago. You may have heard the old Latin motto, “Natura non facit saltus” (Nature doesn’t make jumps) meaning that things change gradually, not abruptly. It may be true in many circumstances but, in practice, it is wholly normal that Nature accumulates energy potentials (as when you inflate a balloon) and then releases them all of a sudden (as when you puncture a balloon).

There are reasons why Nature behaves in this way, but the point I made at the school was not so much about why the curve is so common but how human beings are not normally aware of it. In fact, our thought is often shaped by the idea that things will continue evolving the way they have been evolving up to a certain point. Just think about economic growth, and you’ll notice how economists expect it to continue forever. It goes without saying that the economy is one of those complex systems which are most vulnerable to the Seneca collapse. So, I tried to stress that the understanding that the Seneca Curve exists and it is common is a recent discovery. Even though Seneca had understood it by intuition already almost 2000 years ago, in its modern form it is less than a century old. It was proposed for the first time by Jay Forrester in the 1960s and it was enshrined in “The Limits to Growth” study of 1972, even though the term “Seneca Effect” was not used.

During my talk, I showed this image to evidence how our ideas on the path that complex systems follow evolved over time. You see how modern the idea of “overshoot” (and the subsequent collapse) is. Malthus just didn’t have it. Despite being often accused of catastrophism, he couldn’t envisage societal collapse; he lacked the necessary intellectual tools. He was an optimist! Today, we have this concept. We know that complex systems tend not just to decline, they tend to collapse. But this perception is totally missing in the general debate. When you mention societal collapse, there are two possible reactions. The most common one is that such a thing will never happen.

Then, if you manage to convince people that it is possible, they endeavor to do everything they can to keep the system going; whatever it takes. They don’t realize that when you exceed the carrying capacity of the system, you have to come back, one way or another. And the more you try to stay above the limit, the faster and the harsher the return will be. What you have to do is to ease the collapse, follow it, not try to stop it. Otherwise, it will be worse.

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Is that corruption I smell?

Greek Debt Write-Offs To Be Based On Properties (K.)

Only business owners with no real estate properties will qualify for a partial write-off of corporate debts in the context of the extrajudicial settlement mechanism. This criterion excludes the owner’s main residence and the production properties, i.e. the professional properties used for the entrepreneurial activity. That was the decision that the technical experts of the country’s creditors are said to have reached with representatives of Greek banks and the Independent Authority for Public Revenue, while there was also convergence on setting the criteria for debt settlement for companies owing between €20,000 and €50,000. In this latter category of debtors, which mostly comprise small enterprises, a standardized procedure will be adopted for assessing repayment capacity and the determination of the amount that the debtor will have to pay on a regular basis.

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The Greece firesale will never come anywhere near the €60 billion, but everyone keeps mentioning the number. Their entire railway system went for €45 million. Selling off an entire country is a very bad idea. Europe will find out, but too late.

The Eurozone May Be Back On Its Feet. But Is Greece? (G.)

“It is obvious. Our policies have changed radically, ” says Stergios Pitsiorlas, the deputy economy and development minister, whose airy office is visited daily by bankers, hedge-fund managers and industrialists jockeying for bargains. “Being leftwing doesn’t mean you are also a fool. It doesn’t mean, in the words of Lenin, that we are useful idiots. Let’s speak seriously. Those who complain that Greece is being sold off, that Greece will lose out, don’t know what they are talking about.” Tall, bearded and bespectacled, Pitsiorlas is the point man in Athens’s attempt to raise €60bn (£53bn) through privatisations – sales that, increasingly, have become the focus of international creditors keeping the debt-stricken country afloat. In what has been called the most ambitious sell-off in modern European history, assets ranging from public utilities and transport companies to marinas and hotels are up for grabs.

[..] Privatisations are central to completion of a new round of bailout negotiations with the EU and IMF. Greece’s third, €86bn, rescue programme is due to end next summer and Tsipras has made a clean exit from it, which would herald Athens’s return to the markets, an overarching goal. But hurdles lie ahead. On Friday, eurozone finance ministers warned that continued persecution of the country’s former statistics chief, Andreas Georgiou, could dent international confidence and derail chances of recovery. Officials also raised the prospect of fresh austerity should Greece fail to hit the primary surplus target of 3.5% – a prospect made likely by a huge shortfall in tax revenues. But in a week when the Italians finally took control of Greece’s state-owned train network (acquired by Italy’s own state operator for a paltry €45m) Pitsiorlas is optimistic.

He cites the takeover of Piraeus port by the Chinese shipping conglomerate Cosco as an example of what privatisations can bring: “They will make it the biggest port in Europe and that will boost other professions, create thousands of jobs, revitalise shipyards, which they are also looking at, pave the way to better trains, roads and logistic centres, and trigger development and growth.” In five years, he enthuses, Greece will be a very different place, cosmopolitan and vibrant. “There are rules which need to be observed but ultimately everything will be solved,” he insisted, referring to the obstacles Eldorado and others have encountered. “A miracle will happen. There will be huge change … but the state can’t do it alone, the private sector has to be involved.”

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What happens to the bricklayers et al?

Chinese Capital Bans Winter Construction To Improve Air Quality (R.)

Beijing will suspend construction of major public projects in the city this winter in an effort to improve the capital’s notorious air quality, official media said on Sunday, citing the municipal commission of housing and urban-rural development. All construction of road and water projects, as well as demolition of housing, will be banned from Nov. 15 to March 15 within the city’s six major districts and surrounding suburbs, said the Xinhua report. The period spans the four months when heating is supplied to the city’s housing and other buildings. China is in the fourth year of a “war on pollution” designed to reverse the damage done by decades of untrammelled economic growth and allay concerns that hazardous smog and widespread water and soil contamination are causing hundreds of thousands of early deaths every year.

Beijing has promised to impose tough industrial and traffic curbs across the north of the country this winter in a bid to meet key smog targets. In the capital, it is aiming to reduce airborne particles known as PM2.5 by more than a quarter from their 2012 levels and bring average concentrations down to 60 micrograms per cubic metre. Last year the city experienced near record-high smog in January and February, which the government blamed on “unfavourable weather conditions” Some ‘major livelihood projects’ such as railways, airports and affordable housing may be continued however, providing they are approved by the commission, said the report.

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Paris is an empty deal.

White House Denies EU Claim That It’s Shifting on Climate Deal (BBG)

The European Union said President Donald Trump’s administration is shifting its approach to a landmark global agreement on climate change, an assertion which was quickly denied by the White House. The U.S. signaled that it’s no longer seeking to withdraw from the pact and then renegotiate it, but rather wants to re-engage with the Paris Agreement from within, said EU’s climate chief Miguel Arias Canete. He spoke in an interview from Montreal, where the U.S., China, Canada and almost 30 other countries gathered to discuss the most-sweeping accord to date to protect the environment. “Our position on the Paris agreement has not changed. @POTUS has been clear, US withdrawing unless we get pro-America terms,” White House Press Secretary Sarah Huckabee Sanders said on Twitter.

Announcing plans to quit the pact, Trump said in June that the agreement favored other countries at the expense of U.S. workers and amounted to a “massive redistribution” of U.S. wealth. Trump’s administration last month began the formal process of exiting from the climate accord, drawing fire from allies and foes alike. EU climate commissioner Canete made the comments about a change of stance after meeting with Everett Eissenstat, deputy director of the National Economic Council and deputy assistant to the president for international economic affairs. “Now we don’t see the messages that they are withdrawing from the Paris agreement radically,” Canete said, adding that the countries at Saturday’s meeting agreed not to seek a re-negotiation of the Paris deal.

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