Sep 062018
 
 September 6, 2018  Posted by at 9:22 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh Night Cafe (Place Lamartine in Arles) 1888

 

I Am Part of the Resistance Inside the Trump Administration (NYT)
Who Wrote The Anti-Trump Op-Ed? (MW)
Trump May Declassify the 20 FISA Docs Congress Wants (Sara Carter)
Trump Accuses Social Media Firms Of Interfering In 2016, 2018 Elections (CNBC)
Jack Dorsey Tops Sheryl Sandberg As Tech’s DC Rep (R.)
Sheryl Sandberg Misled Congress About Facebook’s Conscience (IC)
Only 17% Expect A Good Brexit Deal For Britain, Just 40% Back Leave (ES)
Chequers Plan Is Dead,’ Says MP, Who Reported Rejection By Barnier (G.)
Kim Jong Un Wants To Denuclearize During Trump’s First Term (R.)
BOJ Board Member Urges More Stimulus, ‘No Room For Complacency’ (R.)
Huge Surplus Draws Germany Back Into Trump’s Trade War Line Of Fire (R.)
Here’s Another Headache For Beaten-Up Auto Stocks (MW)
Tunisian Fishermen Await Trial In Italy After ‘Saving 100s Of Migrants’ (G.)
The Impossible Photo (Craig Murray)

 

 

Whatever it is, it has nothing to do with democracy. Trump was elected, not some faceless group around him.

I Am Part of the Resistance Inside the Trump Administration (NYT)

President Trump is facing a test to his presidency unlike any faced by a modern American leader. It’s not just that the special counsel looms large. Or that the country is bitterly divided over Mr. Trump’s leadership. Or even that his party might well lose the House to an opposition hellbent on his downfall. The dilemma — which he does not fully grasp — is that many of the senior officials in his own administration are working diligently from within to frustrate parts of his agenda and his worst inclinations. I would know. I am one of them. To be clear, ours is not the popular “resistance” of the left. We want the administration to succeed and think that many of its policies have already made America safer and more prosperous.

But we believe our first duty is to this country, and the president continues to act in a manner that is detrimental to the health of our republic. That is why many Trump appointees have vowed to do what we can to preserve our democratic institutions while thwarting Mr. Trump’s more misguided impulses until he is out of office. The root of the problem is the president’s amorality. Anyone who works with him knows he is not moored to any discernible first principles that guide his decision making. Although he was elected as a Republican, the president shows little affinity for ideals long espoused by conservatives: free minds, free markets and free people.

At best, he has invoked these ideals in scripted settings. At worst, he has attacked them outright. In addition to his mass-marketing of the notion that the press is the “enemy of the people,” President Trump’s impulses are generally anti-trade and anti-democratic. Don’t get me wrong. There are bright spots that the near-ceaseless negative coverage of the administration fails to capture: effective deregulation, historic tax reform, a more robust military and more. But these successes have come despite — not because of — the president’s leadership style, which is impetuous, adversarial, petty and ineffective.

Read more …

“Our job is to publish op-eds that further the public’s understanding of what the hell is going on, and I think this piece makes a significant contribution.”
Jim Bennett, New York Times editorial page editor

Who Wrote The Anti-Trump Op-Ed? (MW)

So who wrote it? From newsrooms to coffee-house chatter to the White House itself, that was the big question on everyone’s mind Wednesday night after the New York Times published an anonymous, bombshell anti-Trump op-ed written by a “senior administration official.” The article, which described an “amoral” and “reckless” President Donald Trump being covertly held in check by the “adults in the room” to preserve the country’s democratic principles, sent Trump into a rage, the Washington Post reported. Trump said the author was gutless, and tweeted “TREASON?” White House press secretary Sarah Sanders said the author was “pathetic” and should resign. But the author remained a mystery.

The White House was in “total meltdown” Wednesday night, a source told Politico. “It’s like the horror movies when everyone realizes the call is coming from inside the house,” another source told the Post. Some criticized the Times for running an anonymous opinion piece, but editorial page editor Jim Bennett told Vanity Fair that the newspaper had a responsibility to run it. “The question for us was, does making this unusual grant, is it merited by the significance of the piece? We feel that it was,” Bennett said. So who was it? That’s the million-dollar question. Literally, since the author could very well receive a book deal once his or her identity is revealed.

The Times, at least, isn’t telling. In an interview with CNN’s Brian Stelter, Times op-ed editor Jim Dao said the official reached out through an intermediary several days ago. He said the Times did speak to the author directly. “We were simply trying to abide by the standard that the Times in general would use when referring to someone who’s not named,” Dao told CNN. Only a “very small number of people within the Times who know this person’s identity,” Dao said, and the Times used “special precautions” to protect their identity.

Read more …

As I said in The Shape of Trump to Come, declassifying is the way to go. But some will resist it, for sure.

Trump May Declassify the 20 FISA Docs Congress Wants (Sara Carter)

President Trump is expected to declassify the redacted 20 pages of documents from the controversial Foreign Intelligence Surveillance Act (FISA) warrant that have still not been made public, which allowed the FBI to spy on short-term campaign volunteer Carter Page, numerous sources told SaraACarter.com. This comes after nearly a year of stonewalling by the Department of Justice at the demand of lawmakers, who claim that the 20 redacted pages will reveal explosive information about the FBI’s handling of the Trump-Russia investigation, according to sources.

However, President Trump, who has been under pressure from some DOJ officials not to release the classified documents, “could always change his mind and it’s not a guarantee that it will happen, but the indications are that it more than likely will possibly be before the end of this week,” said a U.S. official, who spoke on condition of anonymity due to the sensitive nature of the subject.

In July, the Justice Department released over 400 previously top-secret documents connected to the Page warrant. However, more than 20 pages of the FISA document remained highly classified and have only been viewed by a select group of Congressional members and investigators. The lawmakers are now asking that those documents be made public. Behind the scenes, the battle between Justice Department officials and senior members of Congress intensified over the past year, leading lawmakers to call on President Trump to intervene and declassify the documents.

In a 38 minute interview with the Daily Caller Tuesday, President Trump said the White House is “looking at it very seriously right now because the things that have gone on are so bad, so bad. I mean they were surveilling my campaign. If that happened on the other foot, they would’ve considered that treasonous. They would’ve considered that spying at the highest level. Can you imagine if we were doing that to Obama instead of Obama and his people doing that to us? Everybody would’ve been in jail for the next 500 years. OK? Can you believe it, where they paid this guy millions of dollars, it turned out? If you look at all of the things that are happening.”

Read more …

Only one way out: make it impossible. But that means giving them a different status.

Trump Accuses Social Media Firms Of Interfering In 2016, 2018 Elections (CNBC)

President Donald Trump accused social networks of interfering in the 2016 presidential election and November’s midterm elections. Trump told online conservative publication The Daily Caller he thinks big tech firms “already have” intervened in the midterms, and said Facebook and Google intervened in the 2016 presidential election on behalf of Democratic presidential candidate Hillary Clinton. “I mean the true interference in the last election was that — if you look at all, virtually all of those companies are super liberal companies in favor of Hillary Clinton,” Trump said, according to the outlet.

“Maybe I did a better job because I’m good with the Twitter and I’m good at social media, but the truth is they were all on Hillary Clinton’s side, and if you look at what was going on with Facebook and with Google and all of it, they were very much on her side.” The president also warned tech firms not to continue with alleged bias against conservatives. Trump accused Google last week of rigging search results to prioritize negative coverage and left-leaning news outlets. He warned the issue “will be addressed,” suggesting regulatory consequences for social media companies. Trump then mentioned rivals Facebook and Twitter by name, saying all three companies were “treading on very, very troubled territory and they have to be careful.” Google, Twitter and Facebook have denied political bias in the algorithmic tailoring of news content.

Read more …

“In an afternoon House hearing, Dorsey said if you sat down with a cup of coffee and read Twitter’s rules, you would not be able to understand them.”

Jack Dorsey Tops Sheryl Sandberg As Tech’s DC Rep (R.)

Jack Dorsey surprisingly topped Sheryl Sandberg as Big Tech’s best Washington representative. Twitter’s usually dry chief executive seemed more genuine than the polished Facebook No. 2 in his first congressional hearing. In Wednesday’s Senate Intelligence Committee hearing, Dorsey said he is a man of “few words.” It was a stark contrast to Sandberg, who is more at ease speaking in public; her Washington experience as Larry Summers’ chief of staff at Treasury two decades ago also showed through. But she sounded more like a politician, repeatedly saying “we can do better” and using jargon like “inauthentic accounts.”

Dorsey gave a more honest analysis of the existential dilemma facing his $25 billion micro-blogging site and other social-media platforms – from toxic interactions between users, to promulgation of actual fake news to election meddling. Yet inflammatory content often produces more user engagement, leading to growth and advertising revenue. Nonetheless, Dorsey told lawmakers he is taking a fundamental look at Twitter’s business model and user incentives. For example, the company is examining whether it’s right to entice a user to gather more followers by putting that figure in a noticeable font. The same goes for retweets. Dorsey said those metrics should not be a proxy for how much a user contributes to healthy dialogue on Twitter, one of the goals of the platform.

[..] The companies brought the scrutiny on themselves, partly by acting too slowly. But Dorsey sounded humbled and acknowledged reality while Sandberg seemed to think Facebook can manage lawmakers by outtalking them. In an afternoon House hearing, Dorsey said if you sat down with a cup of coffee and read Twitter’s rules, you would not be able to understand them. In the Senate, Sandberg sounded defensive when asked about Facebook’s terms of service.

Read more …

That’s some pretty brazen lies.

Sheryl Sandberg Misled Congress About Facebook’s Conscience (IC)

Facebook chief operating officer Sheryl Sandberg draped herself in the star-spangled banner of American principles before today’s Senate Select Intelligence Committee hearing on social media. Sandberg proclaimed that democratic values of free expression were integral to the company’s conscience. “We would only operate in a country where we could do so in keeping with our values,” she went on. Either this was a lie told under oath, or Facebook has some pretty lousy values. Sen. Marco Rubio, R-Fla., questioned Sandberg and Twitter CEO Jack Dorsey about the fact that they are both ostensibly American companies, but also firms with users around the world — including in countries with legal systems and values that differ drastically from the United States.

Rubio cited various governments that crack down on, say, pro-democracy activism and that criminalize such speech. How can a company like Facebook claim that it’s committed to free expression as a global value while maintaining its adherence to rule of law on a local level? When it comes to democratic values, Rubio asked, “Do you support them only in the United States or are these principles that you feel obligated to support around the world?” Sandberg, as always, didn’t miss a beat: “We support these principles around the world.” Shortly thereafter she made the claim that Facebook simply would not do business in a country where these values couldn’t be maintained. Based on the information Facebook itself makes available, this is false.

In its latest publicly available “transparency report,” Facebook says it helps block free expression as a matter of policy — so long as it’s technically legal in a given market. For instance, in the United Arab Emirates, a country that Human Rights Watch says “arbitrarily detains and in some cases forcibly disappears individuals who criticize the authorities,” Facebook does its part to help.

Read more …

if only the UK had functioning media.

Only 17% Expect A Good Brexit Deal For Britain, Just 40% Back Leave (ES)

Fewer than one in five voters now expect Britain to secure a good Brexit deal as Theresa May’s plans remain under fire, according to damning new research. The proportion of people expecting a good deal has slumped dramatically from 33% in February last year to just 17% in June 2018, the survey showed. The data was conducted and shared ahead of the publication of the Prime Minister’s heavily criticised Chequers plan for the UK’s future relationship with the EU. Some 57% of voters now predict Britain will end talks with a bad deal, up from 37% since February 2017. That’s according to the survey for NatCen Social Research. Just over 50% now expect the UK’s economy to be worse of as a result of Brexit, while just 38% said Britain’s departure would mean lower immigration.

According to the new figurers, only 13% said the Government had handled negotiations well so far. That’s down from 29% in February last year. Some 64% said it had handled talks badly. There was also very little support for the EU’s approach to negotiations, with 57% saying Brussels had handled them badly. Only 16% said it had handled them well. The report, by polling expert Professor Sir John Curtice of Strathclyde University, found that 59% of members of a NatCen panel now say they would vote Remain in a second referendum. Just 41% were backing Leave. However, the researchers cautioned that this apparently comfortable lead for Remain may be skewed by the fact those responding reported voting against Brexit by a margin of 53-47% in the 2016 referendum.

Read more …

Chequers is all May has.

Chequers Plan Is Dead,’ Says MP, Who Reported Rejection By Barnier (G.)

Theresa May’s Brexit plan was left mired in uncertainty after reports that the EU’s chief negotiator, Michel Barnier, told British MPs that “les propositions sont mortes” in a Brussels meeting. The Labour MP Stephen Kinnock revealed that in talks this week Barnier had declared the Chequers proposals “dead” and suggested that there was a fundamental misunderstanding in the UK about how the single market worked. “I can tell you absolutely, unequivocally, without a shadow of a doubt that Chequers is dead in the water. Michel Barnier made it crystal clear that Chequers is completely unacceptable to the EU,” Kinnock said.

The senior remainer urged the Brexit secretary, Dominic Raab, and the prime minister’s Brexit adviser Olly Robbins, appearing before the European scrutiny committee on Wednesday, to accept that Brussels was not simply “sabre rattling” as a negotiating tactic. May faces a concerted campaign to “chuck Chequers” from disgruntled Tory MPs, led by the former ministers Boris Johnson and David Davis. There are also deep-rooted concerns in Brussels over her facilitated customs arrangement and common rulebook proposals. Bill Cash, the veteran Tory Eurosceptic, told the committee that Chequers should be “put out of its misery” as the plan satisfied “virtually no one” while the former Brexit minister David Jones asked why the government was “flogging this dead horse”.

Read more …

Only thing to do for the US is to get out of the way, let Kim and Moon do what their people want them to: make peace, reunite. Trump understands this, Pompeo does not.

Kim Jong Un Wants To Denuclearize During Trump’s First Term (R.)

North Korean leader Kim Jong Un said he wants to denuclearize the Korean peninsula during U.S. President Donald Trump’s first term, as he agreed to hold a third summit with his South Korean counterpart this month in Pyongyang, Seoul officials said on Thursday. Kim and South Korean President Moon Jae-in will meet in the North Korean capital on Sept. 18-20, during which they will discuss “practical measures” toward denuclearization, the South’s national security adviser, Chung Eui-yong, told reporters a day after meeting Kim in Pyongyang.

Kim told the South Korean officials that his faith in Trump remains “unchanged” and he wanted to denuclearize and end long-standing hostile relations between North Korea and the United States during Trump’s first term ending early 2021, Chung said. Kim’s remarks to South Korean officials mark the first time that the North Korean leader has offered a potential timeline for dismantling his country’s nuclear weapons programme. Kim “reaffirmed his determination to completely denuclearize” the peninsula, and expressed his willingness for close cooperation with South Korea and the United States in that regard, Chung said.

Read more …

For years, Abenomics was all about stimulus will create inflation. Double or nothing!

BOJ Board Member Urges More Stimulus, ‘No Room For Complacency’ (R.)

Bank of Japan (BOJ) board member Goushi Kataoka criticized on Thursday the central bank’s decision in July to make its policy framework more sustainable, arguing that it should have instead ramped up stimulus to hasten the achievement of its elusive price target. He also warned that escalating trade frictions could weigh on Japan’s export-reliant economy by slowing global economic expansion next year. “Global trade frictions are intensifying and there’s no room for complacency,” Kataoka said in a speech to business leaders in Yokohama, a city near Tokyo. Kataoka, who opposed the BOJ’s decision in July to take steps to address the rising costs of prolonged easing, said it was counter-productive to allow long-term yields to rise at a time inflation remained low.

“There’s no need to allow long-term interest rates to move in a wider range at a time when the BOJ is cutting its inflation forecasts,” he said. “Allowing long-term rates to rise at a time inflation and inflation expectations aren’t heightening much could delay achievement of the BOJ’s price target,” Kataoka said, adding that the BOJ must instead take additional easing measures to fire up inflation. Under its yield curve control policy, the central bank guides short-term interest rates at minus 0.1 percent and the 10-year government bond yield around zero percent.

Read more …

Germany’s surplus inside the EU is the bigger problem.

Huge Surplus Draws Germany Back Into Trump’s Trade War Line Of Fire (R.)

German trade figures later this week will serve as a reminder to global economy watchers, especially the primary occupant of 1600 Pennsylvania Avenue NW, Washington, D.C., of the chasm between countries that run huge current account surpluses and deficits. U.S. president Donald Trump last week renewed his attack on Germany and Europe for, in his view, manipulating the euro lower to boost exports and trade in their favour at the expense of U.S. companies. “Almost as bad as China, just smaller,” Trump told Bloomberg News. In fact, when it comes to trade surpluses vis-à-vis the United States and more broadly, Germany is bigger than China. If that U.S.-German chasm is allowed to go unchecked and stretch further, the snapback could trigger a surge in currency market volatility – currently near historic lows – and maybe even pose a threat to global financial stability.

Euro/dollar is the world’s most liquid and important exchange rate, accounting for almost a quarter of all FX trades, or around $1 trillion a day. It is so stable precisely because it is so deep and liquid. But there’s no guarantee it will remain an oasis of calm. Developed markets have been largely untouched by the volatility tearing through large parts of emerging markets right now, but no corner of world markets would be spared from turbulence, stress or rapid moves in the euro/dollar exchange rate. Germany had a larger trade surplus with the United States than any other country in the first half of this year, worth some 24.4 billion euros ($28.5 billion) which contributed to a global trade surplus of 121.5 billion euros.

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Intereting development.

Here’s Another Headache For Beaten-Up Auto Stocks (MW)

Americans are falling out of love with their cars — at least when it comes to the daily commute. Wolf Richter, of the Wolf Street financial blog, cites this growing challenge for the auto market, in our call of the day. “Driving, while still by far the top way of getting to work in America, has lost some ground,” Richter writes. “For auto makers, this is not a propitious trend.” Richter has created the chart below that’s based on recent Gallup polling. It shows a jump in the percentage of American workers who don’t use a car in their commute. That figure climbed to 16% this year, up from 9% in 2007. Instead of driving themselves or carpooling, these folks are taking public transportation, telecommuting, biking, walking or doing “something else” (maybe going by boat or scooter?). “This shift is real,” Richter says. “While the annual increments are small, spread over time they will further impact the dynamics of the auto industry.”

Read more …

The people who save lives are arrested by those who don’t. But in the end the value you attach to another person’s life is the one you attach to your own.

Tunisian Fishermen Await Trial In Italy After ‘Saving 100s Of Migrants’ (G.)

Friends and colleagues have rallied to the defence of six Tunisian men awaiting trial in Italy on people smuggling charges, saying they are fishermen who have saved hundreds of migrants and refugees over the years who risked drowning in the Mediterranean. The men were arrested at sea at the weekend after their trawler released a small vessel it had been towing with 14 migrants onboard, 24 miles from the coast of the Italian island of Lampedusa. Italian authorities said an aeroplane crew from the European border agency Frontex had first located the trawler almost 80 nautical miles from Lampedusa and decided to monitor the situation.They alerted the Italian police after the migrant vessel was released, who then arrested all crew members at sea.

According to their lawyers, the Tunisians maintain that they saw a migrant vessel in distress and a common decision was made to tow it to safety in Italian waters. They claim they called the Italian coastguard so it could intervene and take them to shore. Prosecutors have accused the men of illegally escorting the boat into Italian waters and say they have no evidence of an SOS sent by either the migrant boat or by the fishermen’s vessel. Among those arrested were 45-year-old Chamseddine Ben Alì Bourassine, who is known in his native city, Zarzis, which lies close to the Libyan border, for saving migrants and bringing human remains caught in his nets back to shore to give the often anonymous dead a dignified burial.

[..] Giulia Bertoluzzi, an Italian filmmaker and journalist who directed the documentary Strange Fish, about Bourassine, said the men were well known in their home town. “In Zarzis, Bourassine and his crew are known as anonymous heroes”, Bertoluzzi told the Guardian. “Some time ago a petition was circulated to nominate him for the Nobel peace prize. He saved thousands of lives since.”

Read more …

The Skripal story has been a stinker from the get-go, but come on, now you have Aunt Millie photoshopping pics?

The Impossible Photo (Craig Murray)

Russia has developed an astonishing new technology enabling its secret agents to occupy precisely the same space at precisely the same time. These CCTV images released by Scotland yard today allegedly show Alexander Petrov and Ruslan Boshirov both occupying exactly the same space at Gatwick airport at precisely the same second. 16.22.43 on 2 March 2018. Note neither photo shows the other following less than a second behind. There is no physically possible explanation for this. You can see ten yards behind each of them, and neither has anybody behind for at least ten yards. Yet they were both photographed in the same spot at the same second. The only possible explanations are:
1) One of the two is travelling faster than Usain Bolt can sprint 2) Scotland Yard has issued doctored CCTV images/timeline. I am going with the Met issuing doctored images.

Read more …

Jul 172018
 
 July 17, 2018  Posted by at 12:50 pm Finance Tagged with: , , , , , , , , , ,  


Ivan Aivazovsky Among the waves 1898

 

Yeah, just keep ’em coming, right, so that when the last one falls flat on its face people will have already forgotten about it and instead focus on the new one. It’s been the modus operandi of the US MSM ever since Donald Trump emerged as an actual presidential candidate, and they haven’t let go.

They realize by now that it divides the nation, it costs them a large chunk of their potential readers and viewers, and creates chaos all around, but the bottom line is it makes them money. Because those people who fall into the echo chamber trap, tumble into it fast and furious, and will gladly pay to read yet another installment of how bad the man really is.

But it is getting out of hand, guys and gals, it is becoming a real and present danger to the -formerly- United States. The anti-Russia propaganda machine far predates Trump, but manufacturing an ever closer link between the two has proven to be a masterstroke of media genius.

That Vladimir Putin is an existential threat to the US and indeed the entire western world is a narrative taken straight out of Edward Bernays’ playbook. And it works like a charm. The problem is, it is also the biggest threat to peace anywhere on the globe that we have ever seen since WWII.

Putin is a patriot who came to the fore in mostly unexplained ways, named by American puppet Boris Yeltsin as his successor, only to save his country from US-induced plundering and restore Russia as a functioning country. Far from perfect, but functioning. Don’t forget that Russian life-expectancy fell by many years in the post-Gorbachev era. And then look now.

Yes, Putin uses some hard-handed tactics from time to time. He has no choice: the US threat to Russia is an ongoing one. There’s still a huge economic threat, of which US sanctions are but a minor part, there’s an intelligence threat, there’s NATO encroaching upon Russia’s borders.

Thus far, Putin has been able to counter them all. And his popularity among Russia’s population is far higher than that of any western politician. His people understand and recognize what he’s done and why he’s done it. He refuses for his country to be overrun and sold off to the highest bidders.

 

Just a few of the points of contention: Crimea – The US tried to take away Russia’s only warm water port. Putin countered with what through non-western eyes was tactical masterpiece; no violence, no shots fired, an election that saw an overwhelming majority of Crimeans voted to (re-)join Russia.

Connected to Crimea is Ukraine. Putin had -and has- to protect Russian-speaking people in the region. Who were going to be under threat from the very dubious, neo-nazi linked government installed by the US after the coup. All Putin has been able to achieve so far is a very brittle stand still. But ‘his’ people in Eastern Ukraine have strong links to the Russian area just across the border. He’s not going to sell them out.

Connected to Ukraine is MH17. The Netherlands commemorates the victims of the shooting down again today. Several years of investigating have come up with no conclusive proof, even if they say it has. The problem is that the investigation was -is- led by The Netherlands itself. You don’t let the biggest victim conduct an investigation.

What’s worse: the Ukraine was actively involved in the investigation, even when it was a potential culprit. Try to write that scenario into the plot of one of your favorite TV crime series. Won’t fly.

 

Then the novichok ‘events’ in the UK. Again, no evidence, but tons of allegations. And if Russia says it’s not guilty, everyone says and writes: of course they would say that. They get accused anyway. Still, no evidence is no evidence. the time that intelligence agencies were believed on their word is over. And they did it to themselves.

In the regard, it’s useful to see that Robert Mueller was one of the people who ‘swore’ that the Weapons of Mass Destruction ‘evidence’ against Saddam Hussein was real. We now know it was complete and utter fiction. Intelligence has overplayed its hand, and they won’t get it back for a long time.

People now realize they cannot be trusted. Well, not those who read and view the MSM, but then that’s sort of the entire point, isn’t it? That’s where the dividing line is being drawn. The CIA, FBI et al present a view of the world in concoction with the media that they think a sufficient number of people will swallow, and that’s really all they care for.

And boy, it is successful. The vitriol spewed over the Helsinki summit is something to behold. #TreasonSummit was a trending hashtag. For a meeting that was long overdue and aimed at calming down tensions. The by now very poorly named ‘social’ media play an ever bigger role in these things.

People can say whatever they want on them, without feeling they’ll ever actually be tested on their claims. One after the other, and each one trying to outdo the last. It all leads up to one particular worldview at the exclusion of all others. And again, that is very dangerous.

 

Mueller’s indictment of 12 Russians, which just happened to coincide with the first meeting of American and Russian presidents in an exceptionally long time, has been shot full of holes by many commentators, see for instance Adam Carter and Aaron Mate, but those views won’t make it to CNN or the NYT.

But despite the fact that the indictment is hollow and riddled with holes, it’s been a large part of why people call Trump a traitor for meeting with Putin. It ties together their opinions, carefully built along Bernays principles over the past two years. It’s a Matrix, it’s a trap. But then they throw in another story, of a 29 year-old Russian(!) girl arrested for allegedly setting up links between Russia and the NRA when she was 24 or so, and that replaces the Mueller indictment in most attention spans. And so the carrousel goes on. The torture never stops.

See, the idea is that you get yourself informed and then form your own opinion. Not that you let others pre-cook and pre-chew your opinions for you. Still, once you’re inside the deafening echo chamber, that’s what inevitably happens. Because there’s so much one-sided innuendo in there, your head aches and you just give up all resistance. Just to have a quiet moment.

And so very many Americans end up believing that indeed their president is guilty of treason. Because so many pundits claim that he is. But how many of them understand what treason really is, how serious an allegation it is? Is doesn’t really matter anymore, does it? Because all those others say he is, and they can’t all be wrong. And the echo chamber gives you a headache.

This is where I should say that somebody better do something about this, but it’s hard to see what. The divide has grown into a chasm. And that both sides are equally to blame for that doesn’t excuse either side’s wilful blindness. But yes, I hear you, it makes them money.

Still, if a US president can no longer talk to another president without being accused of treason, you’re in a scary predicament.

At some point you’re going to need real proof. And Bob Mueller is not going to get it for you. That’s what his indictment of the 12 Russians, as well as the moment he released it, makes abundantly clear. Mueller is -forever- going to hide behind the ‘Trust me, I’m the FBI’ line. Well, he betrayed you before. Wisen up. Demand evidence.

We know Mueller betrayed America when he made false claims over WMD. We have no evidence that Trump betrayed his country, we have only allegations. He may be a poor choice for president, but that’s not the same thing.

 

 

Jul 132018
 
 July 13, 2018  Posted by at 9:20 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh View of Saintes-Maries-de-la-Mer 1888

 

Stock Markets See the US Winning the Trade War, Defying Propaganda (WS)
A Decade On, Pre-Crisis Mortgages Linger For Big Banks, Homeowners (R.)
Fed’s Escape From Crisis Holdings Could Hit Dead End (R.)
Social Security, Medicare To Add Another $50 Trillion to Our National Debt (JM)
China’s Record Trade Surplus With US Further Inflames Trade Tensions (R.)
Approval Of Brexit Negotiations Lowest On Record (Orb)
No Brand Of Brexit Can Command A Commons Majority (G.)
Donald Trump Is Right. NATO Is A Costly White Elephant (G.)
Trump Ready To Help Some NATO States Buy US Arms (R.)
Who Wants To Disrupt Strategic Balance In The Black Sea Region? (SCF)
Germany Puts Last Bailout Tranche to Greece on Hold (GR)
Europe’s Remarkable Ability To Remain In Denial (Varoufakis)
US Judge Asked To Create Mental Health Fund For Migrant Children (R.)
Facebook Users Marked With “Treason” Label (ZH)

 

 

“Now they had a fig leaf – the threat of future tariffs – behind which to hide their long-planned offshoring strategies.”

Stock Markets See the US Winning the Trade War, Defying Propaganda (WS)

The trade war talk has been going on since the presidential campaign but markets just brushed it off and rallied. In 2018, the trade war verbiage moved to the foreground. But until June 14, the administration vacillated between thinking about tariffs and putting the trade war “on hold,” depending on who was doing the talking or tweeting. This vacillation ended on June 14 (Thursday) evening, when it was reported that Trump had approved to hit an initial list of $50 billion in goods (1,300 products) from China with tariffs of 25%. At the time, the administration was also preparing a second list of products, accounting for another $100 billion in imports from China.

On the evening of June 19 (Monday), Trump threatened to hit another $200 billion of imports from China with tariffs of 10%. And on Tuesday, the Shanghai stock market plunged. Markets were taking it seriously. Since then, Corporate America’s propaganda machine – the same that for the past two decades had extolled the unrivalled virtues of offshoring production to cheap countries – fired up the mainstream media, which launched into incessant, deafening, repetitive, and manipulative coverage of how these tariffs would hurt US jobs more than anything.

Two glorious examples are Harley-Davidson and GM, which had been laying off workers and shutting plants in the US for years as they were offshoring production to cheap countries. For example, in July 2017, Harley-Davidson announced layoffs in the US as it was building a factory in Thailand. GM has been laying off workers in the US since 2016, even as it opted to produce more models in Mexico. Now they had a fig leaf – the threat of future tariffs – behind which to hide their long-planned offshoring strategies.

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TBTF banks have no incentive to come clean.

A Decade On, Pre-Crisis Mortgages Linger For Big Banks, Homeowners (R.)

A decade on big U.S. banks are still running down and selling off crisis-era mortgages, a process executives point to as weighing on loan growth. Eager to see a turning point in loan books, analysts count these portfolios as one factor, along with home equity loan runoff and new mortgage demand, to watch for when deciphering the true loan growth picture as U.S. second-quarter bank earnings start on Friday. Wells Fargo and Bank of America executives have flagged portfolios from prior to the 2008-2009 crisis era where banks are no longer originating similar new products when they are asked to predict a turning point in consumer loans. “These are portfolios of a bygone era that were very, very painful for the banks,” said Gerard Cassidy at RBC Capital Markets.

“They are not plain vanilla portfolios, which means they are more costly to manage. It may just not be worth the headache.” Analysts have said higher loan growth is critical to driving bank’s stock prices, but they anticipate only a modest acceleration year over year, driven primarily by commercial and industrial loans, not residential. “Remember that there’s a portion of that book that, again, is pre-crisis,” Chief Executive Tim Sloan said about Wells Fargo’s mortgage book at a May conference. He added the bank continues to examine the older portfolio’s risk-return tradeoff and sells assets when the opportunity arises, factors “that could have some impact” on growth.

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Backpedalling.

Fed’s Escape From Crisis Holdings Could Hit Dead End (R.)

Not long ago the Federal Reserve expected to quietly shed nearly half of its $4.5-trillion portfolio by around 2022, leaving little trace of the extraordinary steps it took to face down the financial crisis. But an unexpected market kink could force the Fed to scrap the plan two or three years early and permanently leave it holding $1 trillion more than it wanted. The U.S. central bank is making adjustments on the fly and keeping its options open. “I don’t think that’s problematic in any way” to halt the process “somewhat earlier,” William Dudley, the former New York Fed president and key architect of the portfolio strategy, told reporters last month.

Yet if the world’s largest holder of U.S. bonds tossed out its play book and effectively took on a more accommodative stance, the result could be an across-the-board easing of market borrowing costs, the foreign-exchange value of the dollar, and of the growing strains on emerging markets. “The evidence that we have suggests that the ultimate size of the balance sheet will be bigger than what people expected,” said Matthew Luzzetti, senior economist at Deutsche Bank Securities in New York. All of this amounts to the final chapter in the Fed’s unprecedented decision over the last decade to buy some $3.5 trillion in mortgage and Treasury bonds in an effort to boost riskier investments, hiring and economic recovery from recession. In a nod to a stronger U.S. economy, the Fed since 2015 has raised interest rates well above zero and, since October of last year, begun shrinking its balance sheet to a more normal but yet-unspecified size.

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“As of this year, both programs are in negative cash flow, meaning Congress must provide additional cash to pay the promised benefits.”

Social Security, Medicare To Add Another $50 Trillion to Our National Debt (JM)

The official, on-the-books federal debt is currently about $21.2 trillion, according to the US National Debt Clock. $21.2T is the face amount of all outstanding Treasury paper, including so-called “internal” debt. This is about 105% of GDP and it’s only the federal government. If you add in state and local debt, that adds another $3.1 trillion to bring total government debt in the US to $24.3 trillion or more than 120% of GDP. Then there’s corporate debt, home mortgages, credit cards, student loans, and more. Add it all together and total debt is about 330% of GDP, according to the IIF data I cited in Debt Clock Ticking. We are in hock up to our ears. In calculating debt, however, we don’t factor in Social Security and Medicare. These aren’t yet debt because they have dedicated revenue streams: payroll taxes.

Most Medicare recipients also pay premiums. To date, these revenue sources have covered current expenditures and more, allowing the programs to build up reserves. But that’s about to change. As of this year, both programs are in negative cash flow, meaning Congress must provide additional cash to pay the promised benefits. It will get worse, too. The so-called “trust funds” are going to run dry sooner or later, and it may be sooner. This month’s annual trustee report estimated Social Security will run out of reserves in 2034, and the hospitalization part of Medicare will go dry in 2026. Just for the record, those “trust funds” don’t exist except as an accounting fiction. It is like you saving $100,000 for your child’s education and then borrowing all the money from your child’s education fund.

You can pretend that you have set aside $100,000 for your child’s future education, but when it comes time to make those payments, you’ll have to pull it out of current income or liquidate other assets. The US government has borrowed (or used or whatever euphemism you want to apply) all the money in those trust funds. So, talking about running out of reserves in 2034 or 2026 is rather meaningless. We’ve already run out of reserves. Any time a politician talks about putting a “lock box” around Social Security or Medicare trust funds, he or she is either staggeringly ignorant or lying.

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Stockpiling ahead of the crash?!

China’s Record Trade Surplus With US Further Inflames Trade Tensions (R.)

China’s trade surplus with the United States swelled to a record in June as its overall exports remained solid, a result that could further inflame a bitter trade dispute with Washington. The data came after the administration of U.S. President Donald Trump raised the stakes in its trade row with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports, including numerous consumer items. China’s trade surplus with the United States, which is at the center of the tariff tussle, widened to a record monthly high of $28.97 billion, up from $24.58 billion in May, according to Reuters calculations based on official data going back to 2008.

Trump, who has demanded Beijing cut the trade surplus, could use the latest result to further ratchet up pressure on China after both sides last week imposed tit-for-tat tariffs on $34 billion of each other’s goods. Washington has warned it may ultimately impose tariffs on more than $500 billion worth of Chinese goods – nearly the total amount of U.S. imports from China last year. The dispute has jolted global financial markets, raising worries a full-scale trade war could derail the world economy. Chinese stocks fell into bear market territory and the yuan currency has skidded, though there have been signs in recent days its central bank is moving to slow the currency’s declines.

[..] China’s exports to the United States rose 13.6 percent in the first half of 2018 from a year earlier, while its imports from the U.S. rose 11.8 percent in the same period. Separate data showed Chinese shipments to U.S. ports rose more than expected in June, suggesting some retailers moved up orders to insulate themselves from the intensifying trade war that threatens to send up costs on a growing number of consumer products. For January-June China’s trade surplus with the United States rose to $133.76 billion, compared with about $117.51 billion in the same period last year.

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May will have to find something else.

Approval Of Brexit Negotiations Lowest On Record (Orb)

Approval of the Brexit negotiations has seen a significant fall in July – now the lowest on record. Last month 36% approved of the negotiations and it is now 29%. In June, 32% agreed that Theresa May would get the right deal for Britain in the Brexit negotiations – this has now fallen to 26% – the lowest again on record. These 2,027 interviews were carried out before the resignation of Brexit Secretary David Davis and Foreign Secretary Boris Johnson.

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Perhaps the biggest one of a million problems.

No Brand Of Brexit Can Command A Commons Majority (G.)

Theresa May’s new cabinet has now rallied behind her Chequers plan, set out fully in the government’s white paper on future UK-EU relations. However, far from settling the Brexit debate, recent events have given rise to another nightmare scenario that is only just beginning to take shape: that every conceivable Brexit outcome may now not command a parliamentary majority. The conventional wisdom in Westminster is that since the general election last year, there is no House of Commons majority for a hard Brexit. With a working majority of only 13, including the Democratic Unionists, it would take just seven Tory MPs to oppose it. But there are at least 20-30 pro-European Tories minded to do so.

Yet May’s softer Brexit blueprint has also significantly increased the prospect of Eurosceptic Conservative MPs voting against her EU deal when it is put to parliament later this year. In the febrile atmosphere at Westminster this week, there have been rumours that up to 70 Tories could oppose it – especially if, as seems likely, May makes further concessions in order to win the EU’s backing for a bespoke deal, instead of having to choose between a Canada or Norway-style agreement. Hints in the white paper about a preferential system for EU migrants, despite May’s rhetoric about ending free movement of labour, will fuel the Tory revolt.

May’s embrace for a softer Brexit has therefore changed the Commons arithmetic – and the political calculations that come with it. It is now Labour MPs, rather than Tory ones, who may prove critical. In recognition of this, May has been reaching out to Labour MPs in the hope that soft Brexit supporters vote for her deal, neutralising the impact of the Eurosceptics voting against it. In an unusual move, David Lidington, the Cabinet Office minister and May’s de facto deputy, briefed Labour (as well as Liberal Democrat and SNP) MPs on the Chequers plan. But Labour won’t want to save May. Their leader, Jeremy Corbyn, will almost certainly whip Labour MPs to oppose May’s deal, in the hope that the ensuing chaos will result in an election.

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What I said a few days ago.

Donald Trump Is Right. NATO Is A Costly White Elephant (G.)

Nato was founded in 1949 in response to Stalin’s blockade of Berlin. It was meant to “keep the Soviet Union out, the Americans in, and the Germans down”. Since then, it has welcomed the American nuclear shield, at vast cost to America. Otherwise, its only military achievements have been the breakup of Yugoslavia and the loss of a squalid 17-year war in Afghanistan. Neither has anything to do with the North Atlantic. Nothing better symbolised this than Theresa May’s bizarre gift to Trump this week of 450 British troops for Kabul. Nato was about deterring an attack on Europe from Russia. In 1945, the west agreed the Potsdam settlement, accepting the Soviets’ “sphere of influence” over eastern Europe.

Thus when Russia invaded Hungary in 1956 and Czechoslovakia in 1968, there was no question of Nato, or Europe, retaliating. The iron curtain was iron. Come 1989 and the collapse of Potsdam Europe, Nato did not approach a broken Russia to agree some new settlement. It did the opposite. To protests from Russia’s weakened leader, Boris Yeltsin, it gathered former Warsaw Pact states under its wing and advanced its border east towards Russia. It embraced Poland, Czechoslovakia and Hungary, then the Baltic states, Romania and Bulgaria. It was like Khrushchev stationing missiles in Cuba. Only Germany counselled caution.

Nato’s provocation was so blatant as to be an open invitation to any new populist leader in Moscow to exploit Russia’s bruised patriotism: hence Vladimir Putin. He and his kleptocratic cronies are virtually a Nato creation. But the fact that America was party to the provocation does not invalidate Trump’s question. What is Nato’s policy beyond needling Russia and feebly relying on the American shield?

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But in the end, it’s all about money. That’s why NATO still exists. Nothing to do with security.

Trump Ready To Help Some NATO States Buy US Arms (R.)

U.S. President Donald Trump said on Thursday he was ready to help smaller NATO countries to buy U.S. weapons as he pushed them to spend more on their own defense. Speaking after a NATO summit, at which he said nations had agreed on new spending pledges, Trump said some less wealthy members had asked during meetings in Brussels if he could help them buy U.S. arms equipment, but did not name the countries. Asked about pressures on countries with weaker finances, he said, “We have many wealthy countries with us today but we have some that aren’t so wealthy and they did ask me if they could buy the military equipment, and could I help them out, and we will help them out a little bit,” he told a news conference.

“We are not going to finance it for them but we will make sure that they are able to get payments and various other things so they can buy – because the United States makes by far the best military equipment in the world: the best jets, the best missiles, the best guns, the best everything.” Trump claimed a personal victory at the summit after telling European allies to increase spending or lose Washington’s support. The White House has been pushing a “Buy American” initiative which aims to help drum up billions of dollars more in arms business. The initiative has raised concerns in Europe, where some see increased weapons sales as a key goal of Trump’s repeated calls for NATO members to increase their military spending.

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Americans have no business there. Go home.

Who Wants To Disrupt Strategic Balance In The Black Sea Region? (SCF)

The US-led series of drills in and around Ukraine’s Black Sea coastline is part of NATO exercise Sea Breeze that kicked off on July 9 to last until July 21. The training event involves an international armada representing 19 countries, including such non-NATO states as Ukraine, India, Georgia, the United Arab Emirates and Moldova. All in all, 29 warships, 1 submarine, and 25 aircraft are involved in the exercise held in Odessa and Mykolayiv and the northwestern Black Sea region. The Black Sea regional security is actually an issue paid little attention to. It’s not addressed by an international forum. NATO official documents adopt an openly provocative language to challenge Russia.

The North Atlantic Alliance always emphasizes the Black Sea’s role as a critical intersection. The US-led NATO activities have been intensifying since 2014 to turn the region into another hotbed along with the South China Sea and the Baltic. Turkey, Bulgaria, and Romania, three of the six Black Sea countries, are NATO members. Ukraine and Georgia are the bloc’s close partners aspiring for membership. The alliance has a significant military presence in Romania, including a US Aegis Ashore BMD system capable of firing long-range cruise missiles at Russia.

American military presence in Romania and Bulgaria is gradually growing. The US plans to deploy up to 2,500 troops at Novo Selo, Bulgaria. The facility is large enough to accommodate as many as 5,000 servicemen. Heavy tanks deployment is envisaged. The 1997 NATO-Russia Founding Act, where NATO pledged not to deploy “substantial forces” near Russia, seems to be forgotten. The US Navy’s policy is aimed at ramping up its presence there. The presence of American warships perilously close to Russia’s borders is undoubtedly provocative. For comparison, the Russian Navy does not stage regular maneuvers in the Caribbean Sea with such allies as Cuba, Nicaragua and Venezuela though nothing prevents it from doing so.

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First, Berlin forces Greece to keep the islands loaded with refugees. Then it forces them to load more taxes on the already destroyed economies there.

Germany Puts Last Bailout Tranche to Greece on Hold (GR)

Germany blocked a final 15 billion-euro ($17.5 billion) bailout payment to Greece after the government in Athens postponed a value-added tax (VAT) hike on a handful of islands that have been hit hard by the influx of migrants. For the tranche to be unblocked by early August, Finance Minister Euclid Tsakalotos pledged at yesterday’s Eurogroup that the measure to retain the 30 percent VAT discount on Lesvos, Chios, Samos, Leros and Kos will end in January 2019, and that the loss of 28 million euros of revenues will be offset from other sources.

The SYRIZA-led government postponed the VAT hike in the islands without consulting Greece’s creditors. Germany was eager to send a message to Athens that it will not tolerate any deviation from the program in the future. Commentators say that the Eurogroup decision shows how difficult it will be for the southern country to regain financial sovereignty even as it exits an eight-year bailout regime in August.

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Given how Greece gets treated, denial doesn’t sound like the correct term.

Europe’s Remarkable Ability To Remain In Denial (Varoufakis)

Europe’s establishment is luxuriating in two recent announcements that would have been momentous even if they were only partly accurate: the end of Greece’s debt crisis, and a Franco-German accord to redesign the eurozone. Unfortunately, both reports offer fresh proof of the European Union (EU) establishment’s remarkable talent for never missing an opportunity to miss an opportunity. The two announcements did not come in the same week by accident. The Greek debt implosion, back in 2010, was the ugly symptom of the eurozone’s design flaws, which is why it triggered a domino effect across the continent. Greece’s continuing insolvency reflects the deep disagreements within the Franco-German axis concerning eurozone redesign.

While three French presidents and the same German chancellor were failing to agree on the institutional changes that would render the eurozone sustainable, Greece was asked to bleed quietly. In 2015, the Greeks staged a rebellion, which Europe’s establishment ruthlessly crushed. Neither Brexit nor the EU’s steady delegitimation in the eyes of European voters managed to convince the establishment to change its ways. French President Emmanuel Macron’s election seemed the last hope for the new Berlin-Paris accord needed to prevent a suffocating Italy from triggering the next—this time lethal—domino effect.

Under Macron, new, hopeful ideas were proposed: a common budget for the eurozone; a new safe debt instrument and quasi-federal tax-raising capacities; a common unemployment insurance fund; common bank deposit insurance and a common pot from which to recapitalize failing banks. Moreover, a new investment fund would mobilize idle savings across Europe, without adding to the fiscal stress of member states. A year later, with Italy on a collision course with the EU, the Meseberg Summit between German Chancellor Angela Merkel and Macron delivered an agreement on eurozone reform. A few days later, the Eurogroup of eurozone finance ministers delivered its own “solution” to the Greek debt crisis.

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Sensible.

US Judge Asked To Create Mental Health Fund For Migrant Children (R.)

A civil rights group asked a federal judge on Thursday to order the U.S. government to provide mental health counseling for the around 2,000 immigrant children separated from their parents by officials at the U.S.-Mexican border. The request by the American Civil Liberties Union follows a chaotic week for U.S. immigration officials, who failed to meet a court-ordered deadline on Tuesday for reuniting children under the age of five. The government “must establish a fund to pay for professional mental health counseling, which will be used to treat children who are suffering from severe trauma as a result of their forcible separation from their parents,” said the ACLU in court papers filed late Thursday.

The group said the cost of the fund could be determined at a future date. The rights group brought the lawsuit that prompted U.S. Judge Dana Sabraw in San Diego last month to order the government to reunite families separated at the border. The family separation policy was instituted as part of President Donald Trump’s efforts to curtail illegal immigration. The administration ended the practice last month after widespread protests. The government, in the same court filing on Thursday, acknowledged that it had missed a Tuesday deadline for reuniting the youngest children with their parents, but said it had now complied with the judge’s order.

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How does anyone make this, too, about Russia? It’s your own people who use this for spying on you. Targeting ‘Russians’ is just a way to divert your attention from that.

Facebook Users Marked With “Treason” Label (ZH)

Beleaguered social media giant Facebook has removed “treason” from their database of the keywords assigned to users for advertising purposes, the company stated Wednesday after Danish state broadcaster DR reported its existence. Company spokesman Joe Osborne replied “National treason was an advertising interest because of its historical significance, but as it is an illegal act, we have removed it.” Facebook tags its more than 2 billion users with a wide variety of keywords depending on their interests – from shopping habits to political and religious views in order to sell more efficiently targeted advertising.

This makes Facebook a sublime sales channel for companies. Categorizing users in areas of interest means that companies with ads on Facebook can buy into an almost perfect audience. Eg. garden equipment for people with special interest in gardens, etc. But categorization also allows intelligence services in all countries to look at the population over the shoulder. DR suggests that the a government such as Russia could have used the “treason” tag to locate around 65,000 Facebook users who had been marked with the keyword. The article notes that they do not know “if the Russian authorities have used Facebook’s “treason” keyword” for nefarious purposes – adding “Only the Russian authorities know that.”

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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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Sep 292016
 
 September 29, 2016  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 29 2016


DPC “Wood Street, Pittsburgh, Pennsylvania.” 1905

OPEC Agrees Modest Oil Output Curbs In First Deal Since 2008 (R.)
Congress Rejects Obama Veto, Saudi 9/11 Bill Becomes Law (R.)
Desperate Central Bankers (Stephen Roach)
Disturbing Facts About The Fed’s Phony Housing “Recovery” (Adler)
China’s Richest Man: Country’s Real Estate Is ‘Biggest Bubble In History’ (CNN)
Beige Book Sounds Warning Over Chinese Economy (WSJ)
China Property Bubble In Global Perspective (BBG)
‘Radioactive’ Deutsche Bank Could Go Nuclear At Any Time (Exp.)
Europe’s Banks ‘Not Investable’ Says Credit Suisse CEO (G.)
Rep. Gowdy Questions FBI Director Comey (USHouseJudiciary)
Varoufakis: UK Should Activate Article 50 Now, Create Space And Time (CityAM)
Hard Brexit Looms As 28 Red Lines Turn Deeper Shade Of Scarlet (BBG)
Greece Approves Plan To Transfer State Utilities To New Asset Fund (DW)
The Planned Destruction Of Greece Continues … (Mitchell)
Brussels Pushes Greece For Action On Migrants Before Dublin Pact Reboot (Kath.)

 

 

Entirely meaningless. No-one’s committed to any specific cuts. In the end it’s all about market share and nobody wants to lose any.

OPEC Agrees Modest Oil Output Curbs In First Deal Since 2008 (R.)

OPEC agreed on Wednesday modest oil output cuts in the first such deal since 2008, with the group’s leader Saudi Arabia softening its stance on arch-rival Iran amid mounting pressure from low oil prices. “OPEC made an exceptional decision today … After two and a half years, OPEC reached consensus to manage the market,” said Iranian Oil Minister Bijan Zanganeh, who had repeatedly clashed with Saudi Arabia during previous meetings. He and other ministers said the OPEC would reduce output to a range of 32.5-33.0 million barrels per day. OPEC estimates its current output at 33.24 million bpd.

“We have decided to decrease the production around 700,000 bpd,” Zanganeh said. The move would effectively re-establish OPEC production ceilings abandoned a year ago. However, how much each country will produce is to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia. Oil prices jumped more than 5% to trade above $48 per barrel as of 2015 GMT. Many traders said they were impressed OPEC had managed to reach a compromise after years of wrangling but others said they wanted to see the details.

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Wonder how this plays into the OPEC ‘agreement’.

Congress Rejects Obama Veto, Saudi 9/11 Bill Becomes Law (R.)

Congress on Wednesday overwhelmingly rejected President Barack Obama’s veto of legislation allowing relatives of the victims of the Sept. 11 attacks to sue Saudi Arabia, the first veto override of his presidency, just four months before it ends. The House of Representatives voted 348-77 against the veto, hours after the Senate rejected it 97-1, meaning the “Justice Against Sponsors of Terrorism Act” will become law. The vote was a blow to Obama as well as to Saudi Arabia, one of the United States’ longest-standing allies in the Arab world, and some lawmakers who supported the override already plan to revisit the issue. Obama said he thought the Congress had made a mistake, reiterating his belief that the legislation set a dangerous precedent and indicating that he thought political considerations were behind the vote.

“If you’re perceived as voting against 9/11 families right before an election, not surprisingly, that’s a hard vote for people to take. But it would have been the right thing to do,” he said on CNN. Obama’s 11 previous vetoes were all sustained. But this time almost all his strongest Democratic supporters in Congress joined Republicans to oppose him in one of their last actions before leaving Washington to campaign for the Nov. 8 election. “Overriding a presidential veto is something we don’t take lightly, but it was important in this case that the families of the victims of 9/11 be allowed to pursue justice, even if that pursuit causes some diplomatic discomforts,” Senator Charles Schumer, a top Senate Democrat, said in a statement.

Schumer represents New York, site of the World Trade Center and home to many of the nearly 3,000 people killed in the 2001 attacks, survivors and families of victims. The law, known as JASTA, passed the House and Senate without objections earlier this year. Support was fueled by impatience in Congress with Saudi Arabia over its human rights record, promotion of a severe form of Islam tied to militancy and failure to do more to ease the international refugee crisis. The law grants an exception to the legal principle of sovereign immunity in cases of terrorism on U.S. soil, clearing the way for lawsuits seeking damages from the Saudi government.

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“..it is strikingly reminiscent of the so-called liquidity trap of the 1930s, when central banks were also “pushing on a string.”

Desperate Central Bankers (Stephen Roach)

As in Japan, America’s subpar recovery has been largely unresponsive to the Fed’s aggressive strain of unconventional stimulus – zero interest rates, three doses of balance-sheet expansion (QE1, QE2, and QE3), and a yield curve twist operation that seems to be the antecedent of the BOJ’s latest move. (The BOJ has just announced that it is targeting zero interest rates for ten-year Japanese government bonds.) Notwithstanding the persistent growth shortfall, central bankers remain steadfast that their approach is working, by delivering what they call “mandate-compliant” outcomes. The Fed points to the sharp reduction of the US unemployment rate – from 10% in October 2009 to 4.9% today – as prima facie evidence of an economy that is nearing one of the targets of the Fed’s so-called dual mandate.

But when seemingly solid employment growth is juxtaposed against weak output, the story unravels, revealing a major productivity slowdown that raises serious questions about America’s long-term growth potential and an eventual buildup of cost and inflationary pressures. The Fed can’t be faulted for trying, argue the counter-factualists who insist that only unconventional monetary policies stood between the Great Recession and another Great Depression. That, however, is more an assertion than a verifiable conclusion. While policy traction has been notably absent in the real economies of both Japan and the US, asset markets are a different story. Equities and bonds have soared on the back of monetary policies that have led to rock-bottom interest rates and massive liquidity injections.

The new unconventional monetary policies in both countries are obviously missing the disconnect between asset markets and real economic activity. This reflects the aftermath of wrenching balance-sheet recessions, in which aggregate demand, artificially propped up by asset-price bubbles, collapsed when the bubbles burst, leading to chronic impairment of overleveraged, asset-dependent consumers (America) and businesses (Japan). Under such circumstances, the lack of response at the zero bound of policy interest rates is hardly surprising. In fact, it is strikingly reminiscent of the so-called liquidity trap of the 1930s, when central banks were also “pushing on a string.”

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The Fed kills the American homeownership dream.

Disturbing Facts About The Fed’s Phony Housing “Recovery” (Adler)

But the Fed got the result it intended. It wanted to inflate prices to save the banks from their stupidity and criminality. Decisions were made at the highest levels of the Fed and the Federal Government to not only let the banks off the hook, but to rescue them. The only way to do that was to forego prosecution of massive criminal wrongdoing, and to engineer price inflation, so that the criminal perpetrators of the fraud that drove the Great Bubble would be free to re-offend. The Fed’s claim of trying to help the typical consumer is hogwash. The benefits of the low interest rate policy have flowed only to the upper income strata. In our monthly updates of our “Thanks Fed For Helping the Average Guy” we see that the chance of the “average guy” to buy a new home remains virtually nil.

Not only has there been no recovery in homes priced under $200,000, sales in that price range have essentially disappeared in spite of the world’s major central banks pushing mortgage rates down. Builders no longer have any interest in producing product in that price range because demand has weakened so much at that level. People at the reported median US household income simply can’t afford to buy houses regardless of the fact that they may be borderline qualified. Prior to the housing crash, most new homes sold were in the under $200,000 price range.Since 2007, mortgage rates have been cut nearly in half. Yet production and sales of homes in the under $200,000 range have continued falling, now down 61% since 2007.

Builders have shifted their efforts to the $200-$400k range, where they still have some margin, and can move enough inventory to earn a profit. The higher the price of the home, the more profitable it is for a builder. Unfortunately, homes priced above $230,000 are beyond the reach of households earning the reported median household income of $56,000, a figure which itself we believe is overstated. Because of central bank driven housing inflation, and suppression of household income growth (also partly attributable to ZIRP) home ownership is increasingly out of reach for an ever growing percentage of US households If monetary policy were helping the housing market, the rate of homeownership should be at least stable. Instead, as mortgage rates have been consistently suppressed since 2007, homeownership has fallen concurrently.

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The bubble made him a billionaire.

China’s Richest Man: Country’s Real Estate Is ‘Biggest Bubble In History’ (CNN)

Chinese billionaire Wang Jianlin made his fortune in the country’s real estate market – and now he’s warning that it’s spiraling out of control. It’s the “biggest bubble in history,” he told CNNMoney in an exclusive interview Wednesday. Bubble is a sensitive word in China after the dramatic rise and spectacular crash in the country’s stock market last year, which wiped out the savings of millions of small investors who thought Beijing wouldn’t allow the market to drop. After struggling to contain the fallout from the stock market debacle, China’s leaders could face a similar headache in the real estate sector. The big problem, according to Wang, is that prices keep rising in major Chinese metropolises like Shanghai but are falling in thousands of smaller cities where huge numbers of properties lie empty.

“I don’t see a good solution to this problem,” he said. “The government has come up with all sorts of measures – limiting purchase or credit – but none have worked.” It’s a serious worry in China, where the economy is slowing at the same time as high debt levels continue to increase rapidly. There are massive sums at stake in the real estate market: direct loans to the sector stood at roughly 24 trillion yuan ($3.6 trillion) at the end of June, according to Capital Economics.

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“Deteriorating corporate finances and a rebalancing reversal seem a high price to pay for a quarter’s worth of stability..”

Beige Book Sounds Warning Over Chinese Economy (WSJ)

Recent stability in the Chinese economy masks deep-seated problems that threaten to rattle global markets in advance of a leadership change next year, according to a survey. Ignoring these risks is shortsighted, said authors of the China Beige Book International, a quarterly survey that tracks the world’s second-largest economy. Data from the group’s third-quarter survey of 3,100 Chinese firms and 160 bankers point to some potential problems. New growth engines intended to shift the economy away from investment toward consumption-led growth are increasingly wobbly as corporate cash flow is squeezed and Beijing doubles down on traditional engines to stabilize output, the China Beige Book says.

“I’d find it earth-shatteringly surprising if we don’t have a significant problem between now and China’s leadership change” in the fall of 2017 when the 19th Party Congress convenes, said Leland Miller, China Beige Book’s president. “This is not a stable economy. It’s one that twists and turns and happens to end up at the same spot. There are real problems below the surface.” Growth in China’s service industry, a cornerstone of its planned transition to a new and more sustainable economic model, weakened during the third quarter as financial services, private healthcare, telecommunications, media and other subsectors flagged, the group’s data showed. In retail, the apparel, luxury goods and food sectors slowed, it said, as online retailers continued to cannibalize brick-and-mortar sales.

Despite Beijing’s pledge to reduce excess Industrial capacity and pare debt, China remains heavily dependent on government spending to power traditional debt-fueled growth engines, the group said. Much of the economic momentum during the third quarter came from infrastructure, manufacturing, commodities and real estate and many of these sectors are in danger of losing momentum, it said. While property sales remained strong in major cities, cash flow in the sector tightened and borrowing increased, a sign that investors should “think about getting off this train sooner rather than later,” the China Beige Book said. “Deteriorating corporate finances and a rebalancing reversal seem a high price to pay for a quarter’s worth of stability,” the group added.

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“..the real-estate boom is leading couples to divorce, as a move to pay less property-related taxes..”

China Property Bubble In Global Perspective (BBG)

China is turning Japanese. That’s the increasingly held view of observers comparing China’s frenzied real-estate market with the epic bust that more than two decades ago hobbled one of its biggest economic rivals. While the two scenarios aren’t a carbon copy, similarities between China’s record credit boom in recent years and Japan’s bubble era have been made at various times by a number of economists and investors. Now, those voices are being heard more often – even within China. Huang Yiping, a Peking University professor who advises China’s central bank, warned Saturday about leverage that continues to climb, saying that the top risk is more and more investment generates less growth. “That’s exactly the story that unfolded in Japan.”

[..] Hardly a week goes by without a warning that China is stoking a new bubble only a year after a $5 trillion stock market crash that rocked policy makers. Curbs to cool demand have struggled for traction, and Chinese media outlets carry reports of panic buying. A commentary published by a WeChat account affiliated to the People’s Daily, the Communist Party’s mouthpiece, on Monday said the real-estate boom is leading couples to divorce, as a move to pay less property-related taxes. It also said companies risk losing competitiveness as they focus on gaining from real estate rather than focusing on their own industry.

One example of a company benefiting from property: Nanjing Putian Telecommunication-B, a loss-making telecommunication equipment manufacturer, which is selling two apartments in the heart of Beijing’s school district to shore up its balance sheet. The value of the residences is estimated to have risen more than 10-fold since the firm bought them in 2004. At least 73 listed companies said they’re planning to sell or have sold properties to shore up cash. “I am big on the parallels,” said Roy Smith, the New York University academic who as a banker in 1990 anticipated Japan’s decline. Japan’s market crash “led to a financial crisis that they never recovered from. China probably faces a debt-led financial crisis too, which could have significant consequences,” he said.

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“..it’s the interconnectedness with the rest of the system that is the problem.”

‘Radioactive’ Deutsche Bank Could Go Nuclear At Any Time (Exp.)

Germany’s biggest bank reportedly has a $45 TRILLION portfolio of underlying assets that its clients are taking a position in – which equates to more than 10 times Germany’s entire GDP. And the problem is that no one really knows what’s makes up Deutsche’s book of exposure and so-called derivatives book because it’s so opaque and complicated, according to Michael Hewson, chief market analyst at CMC Markets UK. He told Express.co.uk: “Deutsche has the biggest derivatives book in the world, and people will say that its hedged to a greater or lesser extent, but it’s the interconnectedness with the rest of the system that is the problem. “There doesn’t seem to be transparency about what’s in its book. No one really knows what the ripple-out effects would be.”

“That makes Deutsche radioactive about whether or not I would want to invest in it. “A bank becomes a risk to the financial system as a whole when the degree to which it is interconnected with other institutions increases. Deutsche Bank is currently a counterparty to virtually every major bank in the world, in virtually all asset classes. Deutsche Bank denies it has the biggest derivatives exposure – its portfolio of financial contracts based on the value of other assets – and insists that 85% of its exposure is to investment grade counter-parties. Investor confidence in Deustsche has been shaken over the last two days after German Chancellor Angela Merkel said it would not step in to rescue the bank if needed. But experts claim Berlin could be left with little choice but to intervene.

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“..there was doubt that European banks still had a viable business model…”

Europe’s Banks ‘Not Investable’ Says Credit Suisse CEO (G.)

One of Europe’s most senior bankers has said the embattled sector is “not really investable”, in remarks that underline the difficulties the continent’s big banks could face if they have to raise new funds. Tidjane Thiam, chief executive of Credit Suisse, issued the warning about the problems the sector faces as the focus remained on Deutsche Bank and its battle to reduce a $14bn (£10.5bn) penalty from the US authorities for mis-selling mortgage bonds. On Wednesday the German government raced to deny a report that it was preparing a bailout plan under which it might take a 25% stake in Deutsche Bank, which is the country’s biggest bank. With assets half the size of the German economy it is regarded as the bank that poses the biggest risk to global financial stability.

Shares in Deutsche Bank have plunged to near-30-year lows this week amid reports – which were then denied – that it had asked for German government intervention to help reduce the punishment from the US Department of Justice (DoJ). Their decline was arrested on Wednesday, when the bank sold a UK insurance company for €1bn; they closed 2% higher at €10.76. Thiam told a Bloomberg conference that Europe’s banks were in a “very fragile situation” and said there was doubt that European banks still had a viable business model. Concerns about rock-bottom interest rates and how much capital banks should hold meant returns to investors were too low, making banks “not really investable”.

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Comey’s back in the Senate. A few painful minutes of that here. He’ll either have to come clean or resign.

Rep. Gowdy Questions FBI Director Comey (USHouseJudiciary)

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Get out of the EU while you can!

Varoufakis: UK Should Activate Article 50 Now, Create Space And Time (CityAM)

Academic, EU-tormenter, former Greek finance minister and leather-jacket-wearing big thinker Yanis Varoufakis has blasted George Osborne and told the UK to get a move on with triggering Article 50. In an interview with the Today programme, Varoufakis, who resigned from the Syriza-led government last summer after he helped prime minister Alexis Tsipras take Greece to the edge of leaving the single currency, also outlined his latest thinking on what he sees as the doomed European project. Echoing statements made to the Institute of Directors yesterday, Varoufakis said the UK was about to travel into unchartered waters, and would discover just how difficult and inflexible the European institutions can be.

You can check out any time you like, as the Hotel California song says, but you can’t really leave. The proof is Theresa May has not even dared to trigger Article 50. It’s like Harrison Ford going into Indiana Jones’ castle and the path behind him fragmenting. You can get in, but getting out is not at all clear.

On what strategy the UK should adopt, Varoufakis, who was an academic before entering parliament for the first time in 2015 and diverting his considerable attention to anti-austerity campaigning, said: “My advice is simple: Activate Article 50, use those years as best you can and then strike a deal for the three or four years after Britain should be associated in a Norway-style agreement, and then use that period to have a robust debate on what’s to become later. “You need to create space and time during which to prepare yourself as a nation and a government. “The discussion before Brexit was very low quality, verging between scare-mongering on the one side and xenophobia on the other. There was no debate about a post-Brexit Britian.”

Varoufakis also suggested the Eurozone was on the brink of a breaking up and, despite calls from academics, politicians, economists and people on both the left and right that the European project is unsustainable, he believes not enough people are aware of its failures. He added: “Given these centrifugal forces, Brexit inspires several forces within the Eurozone to go it alone. The trouble with the euro … given it was very very badly constructed, is that it was always going to lead to a rupture which would make the EU totally and utterly unsustainable. “My great fear is that if the Eurozone goes, the EU goes. The repercussions are going to be dire.”

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An entire list of threats.

Hard Brexit Looms As 28 Red Lines Turn Deeper Shade Of Scarlet (BBG)

EU governments are refusing to grant the U.K. any leeway on the link between immigration and trade as it prepares to leave the bloc, raising the likelihood of a “hard Brexit.” Almost 100 days since a referendum signaled the end of Britain’s four decades of EU membership, a Bloomberg News analysis has identified a hardening of positions with even the U.K.’s traditional allies such as Ireland insisting it cannot “cherry pick” in the looming divorce talks. The U.K. “cannot have the advantages of the EU without carrying out the obligations,” Irish Finance Minister Michael Noonan said. Such intransigence may mean PM Theresa May ends up favoring a clean break from the EU to secure her goal of tougher immigration controls even if that costs the country access to the single market, a scenario dreaded by bankers and business executives.

“The dynamics within the government give the upper hand at the moment to the hard Brexit supporters,” former Foreign Secretary David Miliband told Bloomberg TV. The analysis is based on interviews and public comments from officials in all 28 EU governments. Among the other demands listed is that Britain must have “inferior” terms to what it currently enjoys as an EU member for fear that too many concessions will fan calls to leave from elsewhere in the region. Some want the U.K. to keep contributing to the EU budget in return for what benefits it does secure. Central eastern European countries are particularly animated on ensuring that the rights of their citizens to work in the U.K. are protected, with some threatening to veto any Brexit deal that doesn’t allow for that. Others are worried the U.K. will seek to slash corporate taxes.

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Treason. “We think this is a crime because it involves basic public services.”

Greece Approves Plan To Transfer State Utilities To New Asset Fund (DW)

Greece’s parliament passed new reforms on Tuesday night to cut pension expenditure and transfer control of public utilities to a new asset fund. The reforms seek to unlock €2.8 billion in financial loans as part of the country’s latest bailout program. The reforms were passed by a narrow 152-141 majority vote in Greece’s 300-seat parliament, after 152 parliamentary members of the ruling Syriza-Independent Greeks coalition approved the reform bill. Only one member of the coalition voted against the bill, along with all opposition members. The reforms will see public assets transferred to a new asset fund created by Greece’s creditors. Assets include airports and motorways, as well as water and electricity utilities.

The holding company groups together these state entities with the country’s privatization agency, the bank stability fund and state real estate. It will be led by an official chosen by Greece’s creditors, although Greece’s Finance Ministry will retain overall control. The reforms sparked significant backlash among demonstrators and public sector workers. Ahead of the vote, protestors outside of the parliament in Athens chanted, “Next you’ll sell the Acropolis!” Greece’s public sector union criticized the reforms, saying that the transfer of public assets paved the way for a fire-sale to private investors. “Health, education, electricity and water are not commodities. They belong to the people,” the union said in a statement.

Workers at Greece’s public water utility companies in Athens and Thessaloniki walked out on Tuesday to protest the reforms. “They are handing over the nation’s wealth and sovereignty,” George Sinioris, head of the water company workers association said. “We think this is a crime because it involves basic public services. We will respond with court challenges, strikes, building occupations and other forms of protest.”

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” If an organisation can exhibit psychopathy then the IMF has it!”

The Planned Destruction Of Greece Continues … (Mitchell)

After all the hoopla last year with the rise and fall of Syriza one’s attention span strays from what is happening in Greece at present and how it demonstrates the continued (and permanent) failure of the Eurozone. We also become inured to badness after badness is normalised. I was reminded of the depth of the malaise in that nation last week when I was in Kansas City. I won’t disclose confidences but an influential person (in the Greek context) I spoke to now regard their previous support for remaining within the Eurozone as a mistake and they consider my assessment of the situation (which they opposed at the time) to be closer to reality.

That was an interesting conversation and credit to them for being able to recognise an error of judgement. I was also reminded of the absurdity of the Eurozone when the IMF released its latest – Greece: Staff Concluding Statement of the 2016 Article IV Mission (September 23, 2016). This is normalisation of badness in bold! The current thinking is that the Greek unemployment rate will remain in double figures until at least 2050, that business investment has collapsed, real GDP is around 27% below its pre-GFC level – and – more significant and accelerated austerity is required. If an organisation can exhibit psychopathy then the IMF has it!

Conclusion: I haven’t written about Greece (or the Eurozone) for a while – it is depressing thinking about it really and I cannot imagine how the citizens in Greece are dealing with the planned destruction of their prosperity by highly paid officials in Brussels, Frankfurt and, particularly Washington. The scale of the destruction is beyond belief really and constitutes in my non-legal brain a crime against humanity. Someone in the IMF and Brussels should be paying for the professional incompetence that has created this human disaster.

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The world on its head. We all understand that it’s Brussels that has failed to live up to its commitments. Not Greece. But let them try out that Dublin reboot on Italy, see what happens.

Brussels Pushes Greece For Action On Migrants Before Dublin Pact Reboot (Kath.)

European officials are calling on Athens to take action by the end of this year ahead of the review and reactivation of the Dublin Regulation, which would lead to EU member-states returning migrants to Greece. The European Commission on Wednesday asked Athens to improve reception facilities, accelerate the processing of asylum claims and create separate facilities for unaccompanied minors. European Migration Commissioner Dimitris Avramopoulos said there will be no returns to Greece in the months leading up to the review of the pact, which stipulates that migrants lodge their asylum appeals in the first EU country they enter.

He said the goal remains a “gradual resumption” of migrant transfers to Greece but that “we need to avoid that an unsustainable burden be put on Greece.” Meanwhile the Commission aims to relocate 30,000 migrants from Greece to other EU countries by the end of next year. The presense of migrants in Greece has fuelled tensions with protests on Chios and in Rethymno on Wednesday.

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Jul 302015
 
 July 30, 2015  Posted by at 9:41 am Finance Tagged with: , , , , , , ,  


Harris&Ewing Harding inauguration 1921

The Great Reset – Act II (Russell Napier)
Treason Charges: What Lurks Behind The Bizarre Allegations (Varoufakis)
This Is A Recipe For A European Civil War (AEP)
The Defeat Of Europe (Yanis Varoufakis)
If Varoufakis Is Charged With Treason, Then Dijsselbloem Should Be As Well (ZH)
In Defence Of Yanis Varoufakis (El-Erian)
Yanis Varoufakis Is Being Pilloried For Doing What Had To Be Done (Legrain)
After Greece, Everyone Will Want A Plan B To Leave The Euro (MarketWatch)
Bulgaria, Greece’s New Treasury (Novinite)
Hay For Cheese? Barter Booms in Cash-Squeezed Rural Greece (Reuters)
Tsipras Faces New Challenge From Syriza Hardliners Over Greek Bailout (FT)
‘Iron Lady’ To Play Central Role In Next Act Of Greek Bailout Drama (Guardian)
Spain Thinks Its Workers Are Not Really As Unemployed As They Say (Economist)
Nigel Farage On EU Referendum And The Mess In Dover-Calais (BBCBreakfast)

The Automatic Earth has been warning of deflation since its inception. There is no other possible outcome once deleveraging starts. And deleveraging has been postponed, and postponed only, through QE programs. Which are a bottomless pit.

The Great Reset – Act II (Russell Napier)

In May 2011 this analyst changed his mind about the impact of the monetary love being spread around the world by developed world central bankers. He stopped forecasting higher inflation and instead foresaw the return of deflation. Fresh from the battering in the deflationary storm of 2007-2009 investors did not want to hear that such monetary love would be in vain. They counted on central bankers then, just as they are counting on them now, to restore a level of nominal GDP growth that can prevent the severe burning of another painful deleveraging through default. Central bankers, the argument goes, need to boost financial asset prices to achieve higher nominal growth and that higher growth, when finally achieved, will be good for asset prices anyway.

So while their love may be for higher nominal GDP growth, the goodwill this spreads to asset prices should be priced in if it succeeds in creating inflation. However, a list of some prices that have been falling from last year – gold, steel, iron ore, copper, crude, coffee, cocoa, live cattle, hogs, orange juice, wheat, sugar, cotton, natural gas, silver, platinum, palladium, aluminium and tin – must raise questions as to whether there is reflation or whether this monetary love is in vain. This analyst is told that such major decline in prices across a broad spectrum of commodities and products represents a supply shock and not the failure of central banks to spur demand! Such supply side synchronicity is highly unlikely. This is nothing less than a failure to reflate and it is due to the growing crisis in Emerging Markets.

It was in a report called The Great Reset, in May 2011, that this analyst suggested the world was more likely to move towards deflation rather than higher inflation. There were many reasons for this change of mind, but key to it was a realisation that EM external surpluses had peaked. That sounds like a rather esoteric reason to change from an inflationist to deflationist stance, and it was not one that was of any concern to investors. However, the end of a long period (1998-2011) when external surpluses, combined with exchange-rate intervention policies, forced EM to create more domestic high-powered money, while simultaneously depressing the yields on US Treasuries, seemed both important and deflationary. Crucially, The Great Reset predicted this decline in EM external surpluses would produce tighter monetary policy in both EM and the developed world despite the efforts of central bankers to prevent it.

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Smear.

Treason Charges: What Lurks Behind The Bizarre Allegations (Varoufakis)

The bizarre attempt to have me indicted me on… treason charges, allegedly for conspiring to push Greece out of the Eurozone, reflects something much broader. It reflects a determined effort to de-legitimise our five-month long (25th January to 5th July 2015) negotiation with a troika incensed that we had the audacity to dispute the wisdom and efficacy of its failed program for Greece. The aim of my self-styled persecutors is to characterise our defiant negotiating stance as an aberration, an error or, even better from the perspective of Greece’s troika-friendly oligarchic establishment, as a ‘crime’ against Greece’s national interest. My dastardly ‘crime’ was that, expressing the collective will of our government, I personified the sins of:

• Facing down the Eurogroup’s leaders as an equal that has the right to say ‘NO’ and to present powerful analytical reasons for rebuffing the catastrophic illogicality of huge loans to an insolvent state in condirion of self-defeating austerity

• Demonstrating that one can be a committed Europeanist, strive to keep one’s nation in the Eurozone, and, at the very same time, reject Eurogroup policies which damage Europe, deconstruct the euro and, crucially, trap one’s country in austerity-driven debt-bondage

• Planning for contingencies that leading Eurogroup colleagues, and high ranking troika officials, were threatening me with in face-to-face discussions

• Unveiling how previous Greek governments turned crucial government departments, such as the General Secretariat of Public Revenues and the Hellenic Statistical Office, into departments effectively controlled by the troika and reliably pressed into the service of undermining the elected government.

It is amply clear that the Greek government has a duty to recover national and democratic sovereignty over all departments of state, and in particular those of the Finance Ministry. If it does not, it will continue to forfeit the instruments of policy making that voters expect it to utilise in pursuit of the mandate they bestowed upon it. In my ministerial endeavours, my team and I devised innovative methods for developing the Finance Ministry’s tools to deal efficiently with the troika-induced liquidity crunch while recouping executive powers previously usurped by the troika with the consent of previous governments.

Instead of indicting, and persecuting, those who, to this day, function within the public sector as the troika’s minions and lieutenants (while receiving their substantial salaries from the long-suffering Greek taxpayers), politicians and parties whom the electorate condemned for their efforts to turn Greece into a protectorate are now persecuting me, aided and abetted by the oligarchs’ media. I wear their accusations as badges of honour. The proud and honest negotiation that the SYRIZA government conducted from the first day we were elected has already changed Europe’s public debates for the better. The debate about the democratic deficit afflicting the Eurozone is now unstoppable. Alas, the troika’s domestic cheerleaders do not seem able to bear this historic success. Their efforts to criminalise it will crash of the same shoals that wrecked their blatant propaganda campaign against the ‘No’ vote in the 5th July referendum: the great majority of the fearless Greek people.

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“So we now have a Europe where the political temperature is rising to boiling point: where the EMU elites are refusing to shift course; and where mischievous lawyers are concocting criminal charges against anybody daring to explore a way out of the trap.”

This Is A Recipe For A European Civil War (AEP)

It has come to this. The first finance minister of a eurozone country to draw up contingency plans for a possible euro exit is under investigation for treason. Greece’s chief prosecutor is examining criminal charges against a five-man “working group” in the country’s finance ministry for the sin of designing a “Plan B”, a parallel system of euro liquidity and bank payments that could – in extremis – lead to a return of the drachma. It is hard to see how a monetary union held together by judicial power, coercion and fear in this way can have a future in any of Europe’s ancient nation states. The criminalisation of any Grexit debate shuts off the option of an orderly return to the drachma, even though there is a high probability – some say a near certainty – that the latest EMU loan package for Greece will prove unworkable and precipitate the country’s exit from the single currency within a year.

As a matter of practical statecraft, this is sheer madness. The Greek newspaper Kathimerini – the voice of the oligarchy – reported that the charges would include “breach of duty, violation of currency laws and belonging to a criminal organisation”, as well as violating data privacy by hacking into the Greek tax base. The prosecutor appears to have latched onto a legal suit by a private lawyer accusing Yanis Varoufakis of treason. It is nothing less than an attempt to destroy the mercurial former finance minister, lest he return as an avenging political force. The Greek “Plan B” was approved from the outset by prime minister Alexis Tsipras. It was designed originally to create an alternative source of euro liquidity if the ECB cut off emergency funding for the Greek banking system.

The ECB did in fact do exactly that – arguably violating the ECB’s Treaty to uphold financial stability, and acting ultra vires in a purely political move as the enforcer of the creditors – when the Syriza government threw down the gauntlet with an anti-austerity referendum. Mr Varoufakis insists that his plan was based on California’s IOU scheme in 2009 to cover tax rebates and to pay contractors when liquidity dried up after the Lehman crisis. His purpose was to reflate the economy within the eurozone, not to leave it. Yet it had a double function, and there lies the alleged treason. “At the drop of a hat it could be converted to a new drachma,” he said.

Pablo Iglesias, the pony-tailed leader of Spain’s Podemos movement, has drawn his own conclusions after watching Europe’s first radical-Left government in modern times brought to its knees by liquidity asphyxiation, and then further crushed by internal forces within Greece. He accused Germany of imposing a Carthaginian settlement as punishment for daring to call a referendum, and warned that the “limits of democracy in Europe” are now brutally clear. The lesson to be learned is that if Podemos is elected in Spain it must expect a trial of strength (“medir fuerzas”) and make sure it takes power in the fullest sense. You can interpret this how you will, but there is a hint of Leninist defiance in these words, a warning that Podemos may feel compelled to launch pre-emptive strikes against the entreched positions of the Spanish establisment, in the media, the judiciary, the security forces and the commanding heights of the economy.

The fate of Syriza has clearly tainted the radical-Left brand. The EMU creditor powers have shown all too clearly that if you buck the system, your country will pay a bitter price. It is hard to explain to Spanish voters – or indeed to anybody – how Mr Tsipras could accept a package of draconian demands rejected by the Greek people in a landslide vote just a week earlier. Podemos has lost its electoral lead and has dropped to 17pc in the polls, trailing the Socialists by a wide margin. But it would be premature to conclude that this is the end of the story. The deeper message – still entering the collective consciousness – is that no Leftist government can pursue sovereign policies within the constraints of EMU.

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Le Monde Diplomatique has posted the article in picture format. Click the link to read.

The Defeat Of Europe (Yanis Varoufakis)

Le Monde Diplomatique has posted the article in picture format. Click the link to read.

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And Schäuble. And many others.

If Varoufakis Is Charged With Treason, Then Dijsselbloem Should Be As Well (ZH)

What makes matters confusing, is that the core allegation made by Varoufakis, namely that the Troika controls Greece tax revenues and had to be sabotaged, was strictly denied: European Commission spokeswoman Mina Andreeva on Tuesday described as “false and unfounded” Varoufakis’s claims that Greece’s General Secretariat for Public Revenues is controlled by the country’s creditors. In other words, if Andreeva is right, then Varoufakis’ transgression of threatening to hijack the Greek tax system was merely hot air, and the former finmin is guilty of nothing more than self-aggrandizement.

On the other hand, if Greece does find it has a legal basis to criminally charge Varoufakis with treason merely for preparing for a Plan B, then it brings up an interesting question: if Varoufakis was a criminal merely for preparing for existing the Euro, then comparable treason charges should also be lobbed against none other than Varoufakis’ nemesis – Eurogroup president and Dutch finance minister Jeroen Dijsselbloem. Recall from the November 28 post that “Netherlands, Germany Have Euro Disaster Plan – Possible Return to Guilder and Mark”, to wit:

The Dutch finance ministry prepared for a scenario in which the Netherlands could return to its former currency – the guilder. They hosted meetings with a team of legal, economic and foreign affairs experts to discuss the possibility of returning to the Dutch guilder in early 2012. At the time the Euro was in crisis, Greece was on the verge of leaving or being pushed out of the Euro and the debt crisis was hitting Spain and Italy hard. The Greek prime minister Georgios Papandreou and his Italian counterpart Silvio Berlusconi had resigned and there were concerns that the eurozone debt crisis was spinning out of control – leading to contagion and the risk of a systemic collapse.

A TV documentary broke the story last Tuesday. The rumours were confirmed on Thursday by the current Dutch minister of finance, Jeroen Dijsselbloem, and the current President of the Eurogroup of finance ministers in a television interview which was covered by EU Observer and Bloomberg. “It is true that [the ministry of] finance and the then government had also prepared themselves for the worst scenario”, said Dijsselbloem.

This is precisely what Varoufakis was doing too.

“Government leaders, including the Dutch government, have always said: we want to keep that eurozone together. But [the Dutch government] also looked at: what if that fails. And it prepared for that.” While Dijsselbloem said there was no need to be “secretive” about the plans now, such discussions were shrouded in secrecy at the time to avoid spreading panic on the financial markets.

Again, precisely like in the Greek scenario. In fact, if throwing people in jail, may round up Wolfi Schauble as well:

Jan Kees de Jager, finance minister from February 2010 to November 2012, acknowledged that a team of legal experts, economists and foreign affairs specialists often met at his ministry on Fridays to discuss possible scenarios. “The fact that in Europe multiple scenarios were discussed was something some countries found rather scary. They did not do that at all, strikingly enough”, said De Jager in the TV documentary. “We were one of the few countries, together with Germany. We even had a team together that discussed scenarios, Germany-Netherlands.”

When the EU Observer requested confirmation from Germany, the German ministry of finance did not officially deny that it had drawn up similar plans, stating simply: “We and our partners in the euro zone, including the Netherlands, were and still are determined to do everything possible to prevent a breakup of the eurozone.” [..] This is quite a revelation. At that time the German finance minister Wolfgang Schauble had said that the Euro could survive without Greece. Whether it could survive without the Dutch is another matter entirely.

Fast forward 3 years when Greece, too, was making preparations for “preventing the breakup of the eurozone” in doing precisely what Schauble wanted as recently as three weeks ago: implementing a parallel currency which would enable Greece to take its “temporary” sabbatical from the Eurozone. So one wonders: where are the legal suits accusing Dijsselbloem and Schauble of the same “treason” that Varoufakis may have to vigorously defend himself in a kangaroo court designed to be nothing but a spectacle showing what happens to anyone in Europe who dares to give Germany the finger, either literally or metaphorically.

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El-Erian comes laden with salt.

In Defence Of Yanis Varoufakis (El-Erian)

From blaming him for the renewed collapse of the Greek economy to accusing him of illegally plotting Greece’s exit from the eurozone, it has become fashionable to disparage Yanis Varoufakis, the country’s former finance minister. While I have never met or spoken to him, I believe that he is getting a bad rap (and increasingly so). In the process, attention is being diverted away from the issues that are central to Greece’s ability to recover and prosper – whether it stays in the eurozone or decides to leave. That is why it is important to take note of the ideas that Varoufakis continues to espouse. Greeks and others may fault him for pursuing his agenda with too little politesse while in office. But the essence of that agenda was – and remains – largely correct.

Following an impressive election victory by his Syriza party in January, Greece’s prime minister, Alexis Tsipras, appointed Varoufakis to lead the delicate negotiations with the country’s creditors. His mandate was to recast the relationship in two important ways: render its terms more amenable to economic growth and job creation; and restore balance and dignity to the treatment of Greece by its European partners and the IMF. These objectives reflected Greece’s frustrating and disappointing experience under two previous bailout packages administered by “the institutions”. In pursuing them, Varoufakis felt empowered by the scale of Syriza’s electoral win and compelled by economic logic to press three issues that many economists believe must be addressed if sustained growth is to be restored: less and more intelligent austerity; structural reforms that better meet social objectives; and debt reduction.

These issues remain as relevant today, with Varoufakis out of government, as they were when he was tirelessly advocating for them during visits to European capitals and in tense late-night negotiations in Brussels. Indeed, many observers view the agreement on a third bailout programme that Greece reached with its creditors – barely a week after Varoufakis resigned – as simply more of the same. At best, the deal will bring a respite – one that is likely to prove both short and shallow. [..] Now that he is out of office, Varoufakis is being blamed for much more than failing to adapt his approach to political reality. Some hold him responsible for the renewed collapse of the Greek economy, the unprecedented shuttering of the banking system, and the imposition of stifling capital controls.

Others are calling for criminal investigations, characterising the work he led on a plan B (whereby Greece would introduce a new payments system either in parallel or instead of the euro) as tantamount to treason. But, love him or hate him (and, it seems, very few people who have encountered him feel indifferent), Varoufakis was never the arbiter of Greece’s fate. Yes, he should have adopted a more conciliatory style and shown greater appreciation for the norms of European negotiations; and, yes, he overestimated Greece’s bargaining power, wrongly assuming that pressing the threat of Grexit would compel his European partners to reconsider their long-entrenched positions. But, relative to the macro situation, these are minor issues.

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Another thing I said days ago. Surprise me, tell me something new. Alternatively: read me.

Yanis Varoufakis Is Being Pilloried For Doing What Had To Be Done (Legrain)

Yanis Varoufakis has few friends in official circles these days. Greece’s outspoken former finance minister has long been loathed by his erstwhile eurozone counterparts, on whom he counterproductively impressed their mediocrity. Since he has been jettisoned by his prime minister, Alexis Tsipras, and criticised Greece’s capitulation to Germany’s iniquitous demands, his former Syriza colleagues are losing patience with him too. He is becoming the perfect fall guy for having devised a daring escape plan in the event that Greece’s creditors shut down its banking system and severed its international economic ties – as they eventually did. While Varoufakis’s plan to create a parallel payments system based on the country’s tax register was certainly unorthodox, it was completely understandable.

Until the recent revelations, Varoufakis was being criticised for standing up to Greece’s eurozone creditors without preparing a Plan B in case negotiations failed. As many experts and commentators, including me, advised, the Greek government needed to prepare for a parallel currency to provide liquidity to the economy in case eurozone authorities turned off the taps. That way it could credibly threaten to default on its debts while remaining in the eurozone – and thus, it hoped, convince its creditors to offer the debt relief that the depressed Greek economy desperately needed to recover.

But now it turns out Varoufakis did have a plan B, he is being attacked for that too. Some criticise the supposed recklessness and duplicity of preparing for a parallel currency that could have become a new drachma, given the government’s official commitment to staying in the euro. But that is disingenuous. Governments should and do prepare for all sorts of eventualities. The Bank of England is right to prepare for the possibility of Brexit, which may happen even though it is not government policy. One hopes that Whitehall has plans for dealing with a nuclear winter or a catastrophic epidemic. Varoufakis was right to prepare for how to cope with an outcome that wasn’t just possible, but likely.

Others object that the plan wouldn’t have worked. But why not? In principle, the idea of setting up a parallel payments system involving people’s tax numbers is ingenious. Since the value of the parallel currency would derive from the fact that the Greek government accepted it as payment for overdue, current and future taxes, it makes a lot of sense. Given that it takes time to print and distribute banknotes, starting with a purely electronic system is also sensible.

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Part of why the tapes were leaked?!

After Greece, Everyone Will Want A Plan B To Leave The Euro (MarketWatch)

Surely now every finance minister in Europe is going to be continually asked whether they, like the Greeks, have put in place a contingency plan for an alternative currency. It will be a very hard question to answer. If they say no, then they look irresponsible — after all, one of the key tasks of any government is to prepare for all kinds of terrible things that might happen. If they say yes, however, then they undermine their membership in the single currency. It is lose-lose — but that does not mean it is not going to happen. The Irish? They will certainly be expected to have a plan in place, given the underlying strength of their economy, and what happened to them last time around. The Spanish? With the rise of their own anti-austerity parties, they will certainly need to prepare for all eventualities.

The same is true of the Italians and the Portuguese. Once the questions start, they will be impossible to stop. The trouble is, that is now how a currency is mean to work. No one ever asks the governor of Virginia what plans he has put in place should the state decide to pull out of the dollar. No one asks the leader of Manchester Council whether they have prepared for leaving the sterling zone, or the leaders of Osaka whether they might replace the yen. It would be like asking whether they planned to colonize Mars — – the question would be too far-fetched to even be put. It simply wouldn’t happen. That is because properly functioning currency systems are permanent.

The Greeks and the German have changed that. Varoufakis’s legacy is, in truth, a reversible euro. A country might be a member, but only for the moment, and only so long as it works. It will always have a Plan B stored away somewhere, just in case. And yet, that is not a currency. It is fixed-exchange-rate system. The problem is that fixed-currency systems don’t often survive an economic shock. The euro is staggering on for now. But the chances of it surviving the next big wave or turmoil in the markets have just been dramatically reduced.

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Hilarious in its tragedy.

Bulgaria, Greece’s New Treasury (Novinite)

A short trip to Bulgaria is the only thing Greeks have to do to circumvent capital controls, German weekly Der Spiegel says. “Strict controls which actually had to save Greece’s banks from collapse, are leading to a mass exodus to the poorest EU member state,” it reports in a Tuesday article. Up to €14,000 are successfully transferred to Bulgaria every week despite capital controls. Something not only “normal citizens” do (with thousands having opened bank accounts there), but also companies which open branch offices or move their headquarters to the country, Der Spiegel argues. This is partly owned to the fact that one is allowed to have €2000 daily (or €14,000 weekly) transferred from their account for a trip abroad.

A bank employee in Bulgaria is quoted as saying that for Greek citizens it is quite easy to have accounts set up in her bank in either leva (the Bulgarian currency, BGN) or euro – all it takes is an ID document and wait for two hours. “We have many foreign clients. Of course, Greeks too,” she told the author of the article. Greeks are fearing that a return to the drachma might cost much of their wealth. “In the months when Greece’s crisis peaked they have withdrawn around EUR 45 B from their bank accounts. Now they are bringing the money abroad.” For companies, low corporate and personal taxes in Bulgaria turn out attractive, being at 10% compared to Greece’s 29% of corporate tax. The latter rate was introduced to comply with the demands of international lenders.

Lower minimum wage and levels of red tape add to Bulgaria’s appeal, and Greek entrepreneurs are able to set up a Bulgaria-based subsidiary normally in just a week. As a result, there were 11 500 entities with Greek participation in Bulgaria, 2500 more than the year before. Krasen Stanchev, an economist with the Institute for Market Economy, is quoted as saying that some EUR 4.5-5 B have been invested by Greek companies into Bulgaria since the crisis began. “Until a few years ago Greece was still a beacon of hope and a role model for other countries in the Balkans. We were a developed economy, integrated into the West, part of the center of Europe… Now even Albania looks more attractive,” an entrepreneur is quoted as saying.

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Something tells me the Greeks will come out of this in good shape.

Hay For Cheese? Barter Booms in Cash-Squeezed Rural Greece (Reuters)

Panagiotis Koutras, a cattle herder and farmer, recalls how he sold clover for animal feed worth 2,000 euros to a farmer who did not have cash and paid him in wheat. Another farmer offered his heavy equipment to cover €4,000 of a €6,000 bill for products Koutras had supplied him. Kostas Zavlagas, who produces cotton, wheat, and clover recounted how he gave bales of hay and machine parts to another farmer who did not have cash to pay him. “He is going to pay me back in some sort of product when he is able to, maybe in cheese,” says 47-year-old Zavlagas. “It’s representative of the daily issues that farmers face and why they turn to barter trading to resolve them.”

Still, for the country’s tax inspectors, the practice raises questions about whether it is fuelling endemic tax dodging since it is difficult to monitor whether receipts are issued to ensure value-added-tax is paid. “Barter is not illegal as long as the relevant legal documents are issued for every transaction,” said Christos Kyriazopoulos, research director at the finance ministry’s anti-corruption unit. “But we are closely monitoring the phenomenon, it’s something that we have our eyes on.” Many Greeks are reluctant to encourage the use of barter or to talk about it openly, fearing it symbolizes a society moving in reverse after seven years of economic crisis.

“Of course, a barter economy is something that we shouldn’t aspire to and should be a thing of the past – the last time we had it on a large scale was when we were under occupation,” says Stamatis of the Mermix platform, referring to Nazi German rule during World War Two. “But aren’t capital controls a financial form of occupation?”

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“The IMF is part of the so-called “quadriga” of bailout monitors that also includes the EC, the ECB and, for the first time, the European Stability Mechanism, the EU’s own bailout fund.”

Tsipras Faces New Challenge From Syriza Hardliners Over Greek Bailout (FT)

Alexis Tsipras will on Thursday face an unprecedented challenge to his authority, as the central committee of his governing Syriza party meets to discuss the prime minister’s plan to hold a snap election as soon as Greece signs up to a €86bn third bailout. After abandoning its earlier vows of unity, Left Platform, an anti-bailout faction of the party led by Panayotis Lafazanis, the former energy minister, appeared to be preparing for a showdown that could split Syriza and deprive Mr Tsipras of his parliamentary majority. The development was a reminder of the threats facing Greece’s prime minister as he tries to finalise a bailout deal with international creditors that is deeply unpopular within his own leftwing party.

Mr Tsipras has so far succeeded at winning parliamentary support for two packages of reforms connected to the bailout even as he has expressed his own misgivings about them. In the process, he appears to have energised Mr Lafazanis, a former Communist party official who has advocated a return to the drachma. The prime minister is expected to propose an extraordinary party congress for September, provided his government can meet its own tight deadline of August 12 to strike a deal with creditors. The central committee meeting also coincides with the arrival in Athens of Delia Valesescu, the IMF’s new head of mission. The IMF is part of the so-called “quadriga” of bailout monitors that also includes the EC, the ECB and, for the first time, the European Stability Mechanism, the EU’s own bailout fund.

Earlier this week technical experts from the EU and IMF gained access to the national accounting office at the finance ministry for the first time since Syriza came to power in January, reflecting a more accommodating attitude towards the creditors since Yanis Varoufakis, the combative finance minister, stepped down earlier this month. Mr Tsipras’s newfound willingness to negotiate tough economic reforms with the deeply unpopular bailout monitors in order to keep Greece in the euro has left Mr Lafazanis sounding disappointed and increasingly angry.

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Maybe Romanians are good with diktats?

‘Iron Lady’ To Play Central Role In Next Act Of Greek Bailout Drama (Guardian)

Delia Velculescu, the Romanian economist chosen to lead the International Monetary Fund’s negotiating team in Greece, was dubbed the “iron lady” during the fraught talks over Cyprus’s bailout. Given the poor relationship between Athens and its creditors, her toughness will be tested anew in the coming days. Velculescu arrives in Athens on Thursday amid uncertainty over the IMF’s willingness to throw its weight behind a third bailout for the stricken eurozone state. Alexis Tsipras, the Greek prime minister, hopes to negotiate a deal before 20 August, but the IMF will subject any agreement to rigorous examination. The IMF has indicated that it regards Greece’s debt burden as unsustainable, and any new deal must include debt relief.

It is far from clear whether Athens’ eurozone creditors are ready to offer this. Velculescu will have to decide what role the Washington-based lender is willing to play in any new rescue – and what should be expected of Greece in return. Velculescu is not well known in her native Romania, having left for the US to attend university and later joined the IMF. “Inside Romanian financial institutions, she’s known due to her position at the IMF, but among journalists and the general public she is mostly unknown,” said Cristian Pantazi, editor-in-chief of Hotnews, an online Romanian news agency. “People who do know her here characterise her as a very serious and dedicated professional.”

Velculescu holds a masters and PhD in economics from Johns Hopkins University in Maryland, and has been at the IMF since 2002. She co-authored an earlier IMF review of the Greek economy in 2009, and this, coupled with her time in Cyprus as the IMF’s chief representative between 2012 and 2014, has led to her securing a prominent role in trying to resolve the ongoing crisis in Greece. [..] it was the Cyprus bailout in 2013 that made her name. It was the Cypriot media who portrayed Velculescu as an “iron lady” who was very tough and demanding in terms of fiscal consolidation and the requirements she made on the country. However, those who dealt with her during Cyprus’s bailout talks have a different viewpoint.

“She had a reputation for being tough, but I didn’t experience the toughness in my dealings with her,” said Marios Clerides, general manager at the Cooperative Central Bank in Cyprus. “She and the troika came across as resolved rather than aggressive,” he added. “She has quite a negative reputation in Cyprus,” said Alexander Apostolides, an economics historian at the European University Cyprus, who was a presidential adviser during the negotiations. “We are a male-dominated society and the fact that she was a woman caused some issues,” he said, but added that in his experience she was “a person willing to listen to other ideas and alternatives, more ready than others to hear other approaches”.

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Good work. Steve will be able to point out tons of erroneous assumptions in mainstream economics.

Help Make Minsky Easier To Use (Steve Keen)

Minsky has been programmed almost exclusively by Dr Russell Standish, and $10,000 will buy 100 hours of Russell’s programming time. About A$230,000 has been spent on it so far-with US$128,000 coming from an initial INET grant (when the US$ was worth less than the A$), US$78,000 from a Kickstarter campaign, and sundry other amounts from supporters like Bruce Ramsay, who runs the Ending Overlending page that is linked to from this blog. This funding enabled Russell to build the basic functionality Minsky needed, along with a lot of innovative smarts that set it apart from its much more established rivals in system dynamics programs like Matlab’s Simulink, Vensim, Stella and Vissim that cost thousands of dollars a copy and have been around for decades.

For example, Minsky is the only system dynamics program that lets you use Greek characters and symbols, superscripts and subscripts; it runs plots dynamically while a simulation is running (which only Vissim also does in the system dynamics product space), it s the only program that lets you insert variables and operators by typing directly onto the canvas rather than having to use the mouse and toolbox palettes; and of course it s the only program that supports double-entry bookkeeping to allow complex inter-related financial accounts to be simulated dynamically. But the program is still incomplete.

Some basic things like an IF/THEN/ELSE block are missing; some aspects of grouping don’t work properly yet, you can’t save part of a Minsky file as a toolkit, and so on. I’m putting $10,000 of my own cash in to get these things done now and there are many other features that should be added. These range from simple things like adding shortcut keys for Save As to the final ambitions I have for the program enabling it to model multiple sectors and multiple economies at once. If we can raise another $30,000 or so, we can also address one of the main complaints that I hear about Minsky: to quote my good friend Tom Ferguson, INET’s Research Director, from our dinner together in London last month, “Why is Minsky so hard to use?”

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Crack down on the poor.

Spain Thinks Its Workers Are Not Really As Unemployed As They Say (Economist)

He had the dishevelled air of a bon vivant, someone who enjoyed his food and cared little for appearances. When he showed up in the tiny hillside village of Gaucin at the beginning of the year, driving an old car and asking for directions, no one knew who he was, or cared. But he eased into village life, gossiping with the locals in the bars, mostly about who owned what in the area. He had done his homework on Owners Direct and Airbnb, two home-rental websites, and had a list of a hundred houses that were being rented out to holidaymakers. Next he began asking about villagers who were working part-time for cash as cleaners, gardeners or handymen, some of them officially claiming to be unemployed. Soon the word spread: the taxman had come to town.

The inspectors have come to villages like Gaucin to tackle the Spanish government’s difficulties in collecting revenue, in the face of economic problems that have driven much of the country’s business activity into the shadows. Spain’s economy has been growing lately, creating 411,000 net jobs in the second quarter according to figures released on July 23rd by the national statistics agency. But while unemployment fell 1.4 %age points, it is still an agonising 22.4%, having remained above 20% for five years. As elsewhere in southern Europe, this prolonged stagnation has encouraged workers and businesses to dodge taxes by shifting to the black market.

While northern European countries now promote electronic transactions, shopkeepers and housecleaners in Spain are happy to accept cash in order to dodge value-added tax of 21%. The grey economy is estimated to make up between a fifth and a quarter of Spain’s GDP. The government’s tax crackdown has netted almost €35 billion extra for the state’s coffers in the past three years. But the tax agency (or Agencia Tributaria) sees scope to improve that take. It plans to step up surveillance of social media and e-commerce sites, as well as of businesses such as hotels and restaurants which it suspects of keeping two sets of accounts to under-report income. Members of the public are encouraged to blow the whistle, and to report any payments of €2,500 or more in cash. Tax inspectors are offered financial incentives to meet ambitious targets.

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Go Nigel go.

Nigel Farage On EU Referendum And The Mess In Dover-Calais (BBCBreakfast)

UKIPs Nigel Farage on the EU referendum campaign, and moving it forward as all the other Eurosceptics are lazy bastards, and the immigration mess on Dover-Calais route with illegal immigrants smuggling themselves onto Eurotunnel trains.

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