Jul 182018
 
 July 18, 2018  Posted by at 9:31 am Finance Tagged with: , , , , , , , , , , ,  


Paul Gauguin Van Gogh painting sunflowers 1888

 

Russia Dumped Most/All Of Its US Treasury Holdings, Disappeared from List (WS)
Japan, EU Sign Trade Deal To Eliminate Nearly All Tariffs (AP)
Going, Going Gone For Australia’s House Price Boom (R.)
Australia’s Expensive Real Estate Problem Remains A Dirty Little Secret (D.)
Right Now, We Are In A New Cold War – Stephen Cohen (Fox)
Is President Trump A Traitor Because He Wants Peace With Russia? (PCR)
A Walk On The Wild Side As Trump Meets Putin At Finland Station (Escobar)
Trump Haters Don’t Get the “Art of the Deal” (Jim Rickards)
Twelve Ham Sandwiches with Russian Dressing (Kunstler)
The EU’s New Data Protection Rules Are Already Hurting Europeans (Mises)
Dear Europe, Follow Ireland, Not France (Lacalle)
Balding Out (Christopher Balding)

 

 

Russia goes for gold.

Russia Dumped Most/All Of Its US Treasury Holdings, Disappeared from List (WS)

It’s a good thing Russia never held as many US Treasury securities as China and Japan. The scenario would have been different. The “grand total” of US Treasury bonds, notes, and bills held by official foreign investors (central banks, governments, etc.) and non-official foreign investors rose by $44.6 billion to $6.17 trillion at the end of May, according to the Treasury Department’s TIC data released Tuesday afternoon. This is in the middle of the range of the past 12 months. But Russia stands out by its sudden absence.

Russia was never a large holder of US Treasuries, compared to China and Japan. In March it was in 16th place with $96.1 billion in Treasury holdings. In April, it liquidated $47.4 billion of its holdings, and ended the month with $48.7 billion. That was down 69% from May 2013 ($153 billion). It knocked Russia into 22nd place behind the UAE and Thailand. And in May, Russia liquidated more of its holdings and disappeared entirely from the TIC’s list of the 33 largest foreign holders of Treasuries. The smallest one on the list was Chile, with $30.2 billion. Russia’s holdings must have fallen below that amount, and I can imagine to zero:

If there was a message in Russia’s liquidation of US Treasuries, it was a pitch in the water: The 10-year Treasury sell-off that had started last September peaked with the 10-year yield at 3.11% on May 17. Since then, the 10-year Treasury has rallied under heavy demand, and the yield has fallen – hence the handwringing about the inverted yield curve. The largest holder of US Treasuries is China, a position it had lost briefly during its era of peak capital-flight from October 2016 through March 2017. Its holdings in May ticked up by $1.2 billion to $1.183 trillion. Its holdings have remained within the same range since August 2017, despite escalating threats of a “trade war.” Japan had been systematically reducing its Treasury holdings. In April its holdings had dropped to $1.031 trillion, the lowest since October 2011. But in May, it increased its holdings by $17.6 billion to $1.049 trillion:

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99% of tariffs to be lifted.

Japan, EU Sign Trade Deal To Eliminate Nearly All Tariffs (AP)

The European Union and Japan signed a landmark deal on Tuesday that will eliminate nearly all tariffs on products they trade. The ambitious pact signed in Tokyo runs counter to President Donald Trump’s moves to hike tariffs on imports from many U.S. trading partners. It covers a third of the global economy and markets of more than 600 million people. “The EU and Japan showed an undeterred determination to lead the world as flag-bearers for free trade,” Abe said at a joint news conference with European Council President Donald Tusk and European Commission President Jean-Claude Juncker.

Tusk praised the deal as “the largest bilateral trade deal ever.” He said the partnership is being strengthened in various other areas, including defense, climate change and human exchange, and is “sending a clear message” against protectionism. The leaders did not mention Trump by name, but they did little to mask what was on their minds — highlighting how Europe and Japan have been pushed closer by Trump’s actions. [..] The deal eliminates about 99 percent of the tariffs on Japanese goods sold to the EU. About 94 percent of the tariffs on European exports to Japan will be lifted, rising to 99 percent in the future. The difference reflects exceptions on such products as rice, which enjoys strong political protection from imports in Japan.

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China’s clampdown.

Going, Going Gone For Australia’s House Price Boom (R.)

It’s a winter weekend in Sydney’s bustling northern suburb of Chatswood and a three-bedroom family house sporting an endless garden is up for auction. It’s priced to sell at A$1.88 million ($1.4 million) but no buyers bite and the sale is abandoned. On the same day, in the heart of the harbor-hugging city a two-bedroom apartment with panoramic views fails to sell as no bidders turn up. Auctions are a bellwether of demand in property-obsessed Australia, where attending sales is almost a national pastime. It is therefore telling that only just over half were successful the weekend last month a Reuters reporter visited some of Sydney’s auctions, compared to more than two-thirds for all of last year.

And while that week was the worst since 2012, it wasn’t a one off. Auction clearance rates have averaged in the mid-to-low 50 percent range for each of the past nine weeks. The recent weakness in the Australian housing market, which has been one of the drivers of an economy that has now grown for 27 years without a downturn, has some economists warning of heightened risks of a recession and even a financial crisis. In anticipation, some hedge funds are shorting the nation’s financial assets and some significant investors are heavily underweight Australia compared to regional benchmarks.

The slack has been partly engineered by the authorities. Curbs on lending to foreigners, foreign buyer taxes and a clampdown on capital flows by Beijing have hurt bubbling demand from Chinese investors, who have been important contributors to the housing boom of recent years. There are signs of a similar fall in Chinese investment in Vancouver, Canada – which has also been a red hot market in recent years and where the authorities have also intervened by raising taxes on foreign buyers. But a decline in Vancouver’s sales is yet to translate into price declines.

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Laundromat.

Australia’s Expensive Real Estate Problem Remains A Dirty Little Secret (D.)

Nobody knows how many billions of dollars in dirty money is pouring into Australia’s housing market, but global authorities describe local real estate as a prime target for money laundering – and you may have paid more for your house because of it. The likelihood of cashed up crooks increasing house prices is much greater than many people realise, given the hidden nature of the problem, a lack of regulation in the Australian real estate industry and the staggering sums involved. AMP chief economist Shane Oliver says criminals willing to pay extra to wash illicit funds have probably already had an impact on the high end of the housing market. “Even one transaction can have a huge effect that pulls the whole lot up.”

Real estate agents say corrupt money can also influence average house prices, because criminals paying more than market value for one house are likely to encourage higher asking prices for similar properties in the same street. “To the extent that money laundering may well have played a role in making houses unaffordable to the average Australian, even if it’s marginal, there’s a case to investigate that,” Mr Oliver says. Estimates vary, however an International Monetary Fund calculation converted to local currency shows up to $5 trillion in corrupt money – more than three times Australia’s GDP – flowing into global financial systems last year. Only 0.2 per cent of the illegal transfers were likely to be seized or frozen, according to a UN report.

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I know, I know, it’s Fox and Tucker Carlson. But this is Stephen Cohen.

Right Now, We Are In A New Cold War – Stephen Cohen (Fox)

NYU Russian studies Professor Emeritus Stephen Cohen says President Trump had no choice but to meet with Putin, blasts ‘pornography passing as analysis’ in the news coverage of Trump.

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“Russian weapons are so superior to the junk produced by the waste-filled US military/security complex that lives high off the hog on the insouciant American taxpayer that it is questionable if the US is even a second class military power.”

Is President Trump A Traitor Because He Wants Peace With Russia? (PCR)

The US Democratic Party is determined to take the world to thermo-nuclear war rather than to admit that Hillary Clinton lost the presidential election fair and square. The Democratic Party was totally corrupted by the Clinton Regime, and now it is totally insane. Leaders of the Democratic Party, such as Nancy Pelosi and Chuck Schumer, my former co-author in the New York Times, have responded in a non-Democratic way to the first step President Trump has taken to reduce the extremely dangerous tensions with Russia that the Clinton, George W. Bush, and Obama regimes created between the two superpowers.

Yes, Russia is a superpower. Russian weapons are so superior to the junk produced by the waste-filled US military/security complex that lives high off the hog on the insouciant American taxpayer that it is questionable if the US is even a second class military power. If the insane neoconservatives, such as Max Boot, William Kristol, and the rest of the neocon scum get their way, the US, the UK, and Europe will be a radioactive ruin for thousands of years.

House Democratic leader Nancy Pelosi (CA), Minority Leader of the US House of Representatives, declared that out of fear of some undefined retribution from Putin, a dossier on Trump perhaps, the President of the United States sold out the American people to Russia because he wants to make peace: “It begs the question, what does Vladimir Putin, what do the Russians have on Donald Trump—personally, politically and financially that he should behave in such a manner?” The “such a manner” Pelosi is speaking about is making peace instead of war.

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“Russophobia is a 24/7 industry..”

A Walk On The Wild Side As Trump Meets Putin At Finland Station (Escobar)

“The Cold War is a thing of the past.” By the time President Putin said as much during preliminary remarks at his joint press conference with President Trump in Helsinki, it was clear this would not stand. Not after so much investment by American conservatives in Cold War 2.0. Russophobia is a 24/7 industry, and all concerned, including its media vassals, remain absolutely livid with the “disgraceful” Trump-Putin presser. Trump has “colluded with Russia.” How could the President of the United States promote “moral equivalence” with a “world-class thug”? Multiple opportunities for apoplectic outrage were in order. Trump: “Our relationship has never been worse than it is now. However, that changed. As of about four hours ago.”

Putin: “The United States could be more decisive in nudging Ukrainian leadership.” Trump: “There was no collusion… I beat Hillary Clinton easily.” Putin: “We should be guided by facts. Can you name a single fact that would definitively prove collusion? This is nonsense.” Then, the clincher: the Russian president calls [Special Counsel] Robert Mueller’s ‘bluff’, offering to interrogate the Russians indicted for alleged election meddling in the US if Mueller makes an official request to Moscow. But in exchange, Russia would expect the US to question Americans on whether Moscow should face charges for illegal actions. Trump hits it out of the park when asked whether he believes US intelligence, which concluded that Russia did meddle in the election, or Putin, who strongly denies it. “President Putin says it’s not Russia. I don’t see any reason why it would be.”

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How it works.

Trump Haters Don’t Get the “Art of the Deal” (Jim Rickards)

I’m continually amazed at the legions of politicos, pundits and so-called “experts” who don’t understand President Trump or how he conducts policy. These elites have a mental model of how a president is supposed to behave and how the policymaking process is supposed to be carried out. Obviously, Trump does not fit their model. Instead of trying to grasp the model that Trump does use, they continually berate and disparage Trump for not living up to their expectations. A more thoughtful group would say, “Well, he’s different, so why don’t we try to understand the differences and analyze the new model?” Really, these people need to get out of Washington, New York and Hollywood more and get away from their screens.

If they knew more everyday Americans, they would come a lot closer to understanding how Trump gets things done. It’s not chaos; it’s just a little different and more down to earth. This is because of Trump’s “art of the deal” style described in his best-selling book by that name. Bush 43 and Obama were totally process-driven. You could see events coming a mile away as they wound their way through the West Wing and Capitol Hill deliberative processes. All you had to do was understand the process and you could forecast big developments in a relatively straightforward way. With Trump, there is a process, but it does not adhere to a timeline or existing template. Trump seems to be the only process participant most of the time.

Here’s the Trump process: 1) Identify a big goal (tax cuts, balanced trade, the wall, etc.). 2) Identify your leverage points versus anyone who stands in your way (elections, tariffs, jobs, etc.). 3) Announce some extreme threat against your opponent that uses your leverage. 4) If the opponent backs down, mitigate the threat, declare victory and go home with a win. 5) If the opponent fires back, double down. If Trump declares tariffs on $50 billion of good from China,and China shoots back with tariffs on $50 billion of goods from the U.S., Trump doubles down with tariffs on $100 billion of goods, etc. Trump will keep escalating until he wins. 6) Eventually, the escalation process can lead to negotiations with at least the perception of a victory for Trump (North Korea) — even if the victory is more visual than real.

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“..the entire exercise is a joke and a fraud..”

Twelve Ham Sandwiches with Russian Dressing (Kunstler)

After two years of Trump-inspired hysteria, it’s pretty obvious what went on in the bungled Obama-Hillary power handoff of 2016 and afterward: the indictable shenanigans of candidate Hillary and her captive DNC prompted a campaign of agit-prop by the US Intel “community” to gaslight the public with a Russian meddling story that morphed uncontrollably into a crusade to make it impossible for Mr. Trump to govern. And what’s followed for many months is an equally bungled effort to conceal, deceive, and confuse the issues in the case by Democratic Party partisans still in high places. It was very likely begun with the tacit knowledge of President Obama, though he remained protected by a shield of plausible deniability.

And it was carried out by high-ranking officials who turned out to be shockingly unprofessional, and whose activities have been disclosed through an electronic data evidence trail. Mr. Trump’s visit to confer with Russian President Putin in Helsinki seems to have provoked a kind of last-gasp effort to keep the increasingly idiotic Russian election meddling story alive — with Robert Mueller’s ballyhooed indictment of twelve “Russian intel agents” alleged to have “hacked” emails and computer files of the DNC and Hillary’s campaign chairman John Podesta. The gaping holes in that part of the tale have long been unearthed so I’ll summarize as briefly as possible:

1) the bandwidth required to transfer the files has been proven to be greater than an internet hack might have conceivably managed in the time allowed and points rather to a direct download into a flash drive device. 2) the DNC computer hard drives, said to be the source of the alleged hacking, disappeared while in the custody of the US Intel Community (including the FBI). 3) the authenticity of the purloined emails by Mr. Podesta and others has never been disputed, and they revealed a lot of potentially criminal behavior by them. 4) Mr. Mueller must know he will never get twelve Russian intel agents into a US courtroom, so the entire exercise is a joke and a fraud. In effect, he’s indicted twelve ham sandwiches with Russian dressing.

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When anti-spam leads to more spam.

The EU’s New Data Protection Rules Are Already Hurting Europeans (Mises)

It’s finally over: the flood of e-mails that every single human being who possesses an inbox has received in the last few weeks thanks to the new data protection rules by the EU. These rules, called GDPR, have caused havoc even before becoming effective on May 25, and have probably caused the greatest spam wave of all time – all in the name of fighting against spam of course. The GDPR rules were designed to protect European consumers from data violations by big tech companies (Brussels thinks that Facebook, Google and Co. are abusing the rights of its people), and include – just as a best of – a “right to be forgotten” (meaning that Europeans can ask companies to delete all their data), “consent” (meaning that the data being processed by a company has to be consented to by the individual – though what “consent” means is still disputed), an obligation to hire a data protection officer if you are a bigger company, and above all else, hefty fines for infringements.

Those infringements shall “be subject to administrative fines up to €20,000,000, or in the case of an undertaking, up to 4 percent of the total worldwide annual turnover of the preceding financial year, whichever is higher.” What has been the result of these data protection rules after a little over a month? Summing it up in one word would probably be: chaos. As the trillions of e-mails that were sent around the globe showed, no one really understands what the rules are all about – or what to do about it.

On the day the rules came into effect, several US pages panickingly switched off their platforms in EU countries, among them the Los Angeles Times, the Chicago Tribune, New York Daily News, and Orlando Sentinel. But not only newspapers have blocked Europeans ever since: the list also includesShoes.com,Instapaper, and the History Channel. Meanwhile, ad companies, being hit the most by the new rules, have pulled out of the EU altogether, including Drawbridge and Verve , citing the GDPR as the reason that they can’t continue their business on the Continent anymore. Those staying have had to incur gigantic costs: British companies have reportedly sunk 1.1 billion dollars, and Americans 7.8 billion in preparation for GDPR.

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There’s always some miracle nation in the EU.

Dear Europe, Follow Ireland, Not France (Lacalle)

Whenever we talk about tax cuts and growth-oriented tax programs in Europe, many tell us that it is not possible and that the European Union does not allow it. However, it is false. Attractive, growth-oriented tax systems are not only possible in the European Union, but those countries that implement them have higher economic growth rates, less unemployment, and a first-class welfare state. To deceive us, we are forced to ignore Ireland, The Netherlands or Luxembourg as well as most of the technology and job creation leaders. Lower taxes and greater liberalization than in the rest of the Eurozone means higher growth, better wealth and greater social welfare. The economic miracle of Ireland is not statism.

Its secret is to put budgetary stability, investment attraction, private initiative and maximize disposable income of citizens as the pillars of its economic policy. Ireland has a corporate tax of 12.5% and a rate of 6.25% on income from patents and intellectual property, a key factor to attract technology companies. Its minimum salary is almost double that of Spain, Portugal and other Eurozone countries, the average pension is higher as well and its health and education systems are of the highest quality, with nine universities among the best in the world according to the Best Global Universities Ranking 2018. Ireland’s debt to GDP is 73%, unemployment is 5.1% (youth unemployment at 11.4%), public deficit is just 0.7% of GDP.

Only a few years ago, Ireland was close to the edge financially, and its 10-year bond yield rose to 14%. Ireland was considered one of the highest risk of default countries with Spain, Portugal, Greece or Italy. Since then, low taxes, budget control and reforms oriented at attracting capital have made Ireland become the fastest-growing European economy, with an unemployment rate that is less than half that of Spain, for example. Deficits have been slashed, debt is under control, the economy is expected to grow 5.1% in 2018, and the economy is expected to reach full employment in 2019.

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Economist Christopher Balding is leaving China after 9 years. Great farewell.

Balding Out (Christopher Balding)

One of my biggest fears living in China has always been that I would be detained. Though I happily pointed out the absurdity of the rapidly encroaching authoritarianism, a fact which continues to elude so many experts not living in China, I tried to make sure I knew where the line was and did not cross it. There is a profound sense of relief to be leaving safely knowing others, Chinese or foreigners, who have had significantly greater difficulties than myself. There are many cases which resulted in significantly more problems for them. I know I am blessed to make it out.

I leave China profoundly worried about the future of China and US China relations. Most attention here has focused on the Thucydides Trap where conflict results from an established and a rising power. This leaves out probably the most important variable not just the distinction between an established and a rising power but the values inherent within each state and the system they want to project defining relations between states and the citizenry to the state.

The United States under Trump and the GOP is facing a significant test and re-evaluation of its principles. However, I remain decidedly confident in the US to handle those tests. The self correction nature of democracy is on clear display. The best case scenario for the Trump administration is to minimize congressional losses with the very real possibility of losing control of the house. President Trump has lost more in the courts than he has won and is under investigations by law enforcement headed by registered Republicans. His own party has been unable to pass consequential legislation except for a tax cut. While none of this confronts the international challenges facing the United States, it speaks to the evolutionary, self corrective nature of US democracy.

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Apr 082018
 
 April 8, 2018  Posted by at 9:10 am Finance Tagged with: , , , , , , , , , ,  


Johannes Vermeer The Concert 1663
Stolen from Gardner Museum March 18 1990, the single largest art theft in the world. Never recovered

 

Richest 1% On Target To Own Two-Thirds Of All Wealth By 2030 (G.)
Britain Aims To Resettle Poisoned Russian Ex-Spy In The US (R.)
Facebook Admits To Deleting Messages From People’s Inboxes (Ind.)
Facebook Confirms It Scans What You Send To Others On Its Messenger App (BBG)
US Homeland Security Database Of Journalists, Bloggers, Media Influencers (JT)
China Cannot Use Its Treasury Holdings As Leverage. Here’s Why (EH)
Australia’s Central Bank Frets Over Chinese Shadow Banking (CBN)
China Risks A ‘Minsky Moment’ (Auerback)
No Brexit for a Eurozone Britain? (Varoufakis)
Legalised Cannabis Could Help Solve America’s Opioid Crisis (Ind.)
US Gene-Editing Ruling Delights Plant Scientists (G.)
Hybrid Swarm Of ‘Mega-Pests’ Threatens Crops Worldwide (Ind.)

 

 

At some point it will stop. But it’s just too tempting.

Richest 1% On Target To Own Two-Thirds Of All Wealth By 2030 (G.)

The world’s richest 1% are on course to control as much as two-thirds of the world’s wealth by 2030, according to a shocking analysis that has lead to a cross-party call for action. World leaders are being warned that the continued accumulation of wealth at the top will fuel growing distrust and anger over the coming decade unless action is taken to restore the balance. An alarming projection produced by the House of Commons library suggests that if trends seen since the 2008 financial crash were to continue, then the top 1% will hold 64% of the world’s wealth by 2030. Even taking the financial crash into account, and measuring their assets over a longer period, they would still hold more than half of all wealth.

Since 2008, the wealth of the richest 1% has been growing at an average of 6% a year – much faster than the 3% growth in wealth of the remaining 99% of the world’s population. Should that continue, the top 1% would hold wealth equating to $305tn (£216.5tn) – up from $140tn today. Analysts suggest wealth has become concentrated at the top because of recent income inequality, higher rates of saving among the wealthy, and the accumulation of assets. The wealthy also invested a large amount of equity in businesses, stocks and other financial assets, which have handed them disproportionate benefits.

New polling by Opinium suggests that voters perceive a major problem with the influence exerted by the very wealthy. Asked to select a group that would have the most power in 2030, most (34%) said the super-rich, while 28% opted for national governments. In a sign of falling levels of trust, those surveyed said they feared the consequences of wealth inequality would be rising levels of corruption (41%) or the “super-rich enjoying unfair influence on government policy” (43%).

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Once they have new identities, nobody can ever ask them a question again.

Britain Aims To Resettle Poisoned Russian Ex-Spy In The US (R.)

Britain is considering offering poisoned Russian ex-spy Sergei Skripal and his daughter Yulia new identities and a fresh life in the United States in an attempt to protect them from further murder attempts, the Sunday Times newspaper reported. It said officials at the MI6 intelligence agency have had discussions with their counterparts in the CIA about resettling the victims poisoned last month in the English city of Salisbury. “They will be offered new identities,” it quoted an unidentified source as saying.

The paper said its sources believed Britain would want to ensure their safety by resettling them in one of the so-called “five eyes” countries, the intelligence-sharing partnership that also includes the United States, Canada, Australia and New Zealand. “The obvious place to resettle them is America because they’re less likely to be killed there and it’s easier to protect them there under a new identity,” it quoted what it called an intelligence source familiar with the negotiations as saying. “There’s a preference for them to be resettled in a five-eyes nation because their case would have huge security implications,” the source added.

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Some are more equal than others.

Facebook Admits To Deleting Messages From People’s Inboxes (Ind.)

Facebook secretly deleted private messages from people’s inboxes that had been sent by CEO Mark Zuckerberg, the company has admitted. Messages disappearing from people’s inboxes was first noted by TechCrunch, who cited three sources whose inboxes had been tampered with. It is not possible for normal Facebook users to delete messages from other people’s inboxes, though Mr Zuckerberg and other executives appear to have had access to the functionality for several years. Facebook said in a statement that the self-destructing feature was added in response to the Sony Pictures hack in 2014 that compromised personal information of Sony employees, as well as copies of unreleased films.

The feature may also have been used to prevent potentially embarrassing messages from resurfacing, such as a 2004 message sent by Mr Zuckerberg that reportedly called users of the social network “dumb fucks” for trusting him with their data. “After Sony Pictures’ emails were hacked in 2014 we made a number of changes to protect our executives’ communications,” Facebook said. “These included limiting the retention period for Mark’s messages in Messenger. We did so in full compliance with our legal obligations to preserve messages.” The messages were also missing when the affected users attempted to recover them using Facebook’s “download your information” tool.

Deleting private messages from people’s inboxes without their consent may potentially go against Facebook’s terms of service, which make no mention of removing content unless it is a violation of the firm’s community standards.

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We spy on you for your own good. Trust us, we know better.

Facebook Confirms It Scans What You Send To Others On Its Messenger App (BBG)

Facebook scans the links and images that people send each other on Facebook Messenger, and reads chats when they’re flagged to moderators, making sure the content abides by the company’s rules. If it doesn’t, it gets blocked or taken down. The company confirmed the practice after an interview published earlier this week with Chief Executive Officer Mark Zuckerberg raised questions about Messenger’s practices and privacy. Zuckerberg told Vox’s Ezra Klein a story about receiving a phone call related to ethnic cleansing in Myanmar. Facebook had detected people trying to send sensational messages through the Messenger app, he said. “In that case, our systems detect what’s going on,” Zuckerberg said. “We stop those messages from going through.”

Some people reacted with concern on Twitter: Was Facebook reading messages more generally? Facebook has been under scrutiny in recent weeks over how it handles users’ private data and the revelation struck a nerve. Messenger doesn’t use the data from the scanned messages for advertising, the company said, but the policy may extend beyond what Messenger users expect. The company told Bloomberg that while Messenger conversations are private, Facebook scans them and uses the same tools to prevent abuse there that it does on the social network more generally. All content must abide by the same “community standards.” People can report posts or messages for violating those standards, which would prompt a review by the company’s “community operations” team.

Automated tools can also do the work. “For example, on Messenger, when you send a photo, our automated systems scan it using photo matching technology to detect known child exploitation imagery or when you send a link, we scan it for malware or viruses,” a Facebook Messenger spokeswoman said in a statement. “Facebook designed these automated tools so we can rapidly stop abusive behavior on our platform.”

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When Facebook looks at everybody’s everything, this should come as no surprise.

US Homeland Security Database Of Journalists, Bloggers, Media Influencers (JT)

The U.S. Department of Homeland Security is looking to create a searchable database of hundreds of thousands of news sources, journalists, bloggers and “media influencers” for the federal government, a move a DHS spokesman called “standard practice.” In a job request posted last week to the Federal Business Opportunities website, the main contracting website used by the federal government, DHS wrote that it is seeking a contractor that is able to monitor up to 290,000 global news sources, track media coverage in up to 100 languages and can “track online, print, broadcast, cable, radio, trade and industry publications, local sources, national/international outlets, traditional news sources, and social media.”

The request also seeks the ability to build lists of journalists “based on beat, location, outlet type/size, and journalist role.” Data to be collected would also include an analysis of each news source’s “sentiment,” as well as geographical spread, top posters, languages, momentum and circulation. The database of “top media influencers” would include “present contact details and any other information that could be relevant, including publications this influencer writes for, and an overview of the previous coverage published by the media influencer.”

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Treasuries are the only thing China can buy with its -dollar- surplus.

China Cannot Use Its Treasury Holdings As Leverage. Here’s Why (EH)

When China builds a trade surplus, it accumulates dollars. And it has to do something with those dollars. That means its purchase of US dollar assets is non-discretionary unless it revalues its currency. Every time there is some kind of dispute between China and the United States, a litany of voices emerges to warn of spiking interest rates. These warnings are wrong-headed. We went through this very same exercise in 2010. And Michael Pettis’s commentary is useful in this context. Let me quote from Michael and explain what it means in today’s context:

“If China runs a current account surplus, it must accumulate net foreign claims by exactly that amount, and the entity against which it accumulates those claims (adjusting for actions by other players within the balance of payments) ultimately must run the corresponding current account deficit. And as long as China ran the largest current account surplus ever recorded as a share of global GDP, and the US the largest current account deficit ever recorded, and especially since China also ran an additional capital account surplus (i.e. other non-PBoC agents ran a net capital inflow), it was almost impossible for the PBoC to do anything but buy US dollar assets. Given the sheer amounts, a substantial portion of these assets had inevitably to be USG bonds.“

The source of acrimony between China and the US is China’s trade surplus with the US. Now, when China builds this surplus, it accumulates dollars. And it has to do something with those dollars. And so, for a large portion of that dollar hoard, the Chinese have decided to store it as Treasury bonds. We don’t have to argue the merits of the Trump trade position here. It’s irrelevant regarding China’s accumulation of Treasury securities or mortgage-backed securities. Note that now it is Germany instead of China that has the largest current account surplus. And the EU has drawn Trump’s ire for this reason.

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“..growing at an average annual rate of approximately 40% since 2009”

Australia’s Central Bank Frets Over Chinese Shadow Banking (CBN)

The Reserve Bank of Australia is concerned that the rapid expansion of China’s shadow banking sector over the past decade poses a threat to financial stability.The RBA estimates that China’s shadow banking sector currently stands at USD$7 trillion, or around 60% of GDP, after growing at an average annual rate of approximately 40% since 2009. This means China’s shadow banking sector is far largely proportionately compared to other emerging economies, and roughly on par with developed nations such as the UK and the US. The RBA points out that shadow banking has brought benefits to the Chinese economy, chief amongst them the provision of more innovative forms of financing to companies otherwise barred from the state-dominated banking system.

Chinese households also benefited by obtaining access to investment products that provide competitive yields, in a highly regulated financial environment that provides few investment options.These benefits have also created problems, however, in the form of surging debt growth beyond the purview of regulatory scrutiny, riskier lending that is still inextricably linked to the Chinese banking system, as well as liquidity and maturity mismatches.These risks have been further exacerbated by the relative inexperience of China’s retail investors, and the perception that many financial instruments such as bank wealth management products enjoy “implicit guarantees. ”Beijing is well aware of the risks associated with exorbitant debt growth via shadow banking activity, launching a crackdown on the sector over a year ago as part of a broader deleveraging campaign.

The recently merged banking and insurance regulator has also flagged a continued focus on local government and state-owned enterprise leverage, alongside concern over the rapid increase in household borrowing.According to RBA analysts, however, Chinese regulators are still struggling to control breakneck credit growth in the economy.“Chinese regulators have been trying to mitigate these risks for some time, but it has been a challenge to design regulations that address these risks and are not easily circumvented,” said RBA officials in the Australian central bank’s March bulletin. In January China posted record growth in lending, which surged to 2.9 trillion yuan (approx. USD$458.5 billion) for a five-fold increase compared to the preceding month.

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What Xi can’t control.

China Risks A ‘Minsky Moment’ (Auerback)

The transformation of China’s economy, both in terms of GDP growth rate and poverty reduction since it started its transition to the market system in the late 1970s, has arguably been the biggest macroeconomic event of the past half-century. The model that has characterized the country’s high output growth rates has followed in the footsteps of the Asian “tigers“: first, its high growth rates of capital accumulation, driven by high investment-output ratios; second, a marked outward orientation through export-led growth policies; and third, the pursuit of industrialization (in particular the production and export of manufacturing goods), a key ingredient for fast growth and development. By almost every metric, China has advanced from economic backwater to the world’s second-largest GDP (and by some measures, is now the largest economy).

But in spite of signs of renewed economic activity in March, the country’s debt build-up has provoked increasing concern amongst Beijing’s policy makers, as it points to an underlying long-term financial fragility, particularly if trade war pressures intensify. Just last October during the Communist Party Plenary, Zhou Xiaochuan, then head of the country’s central bank, warned of a “Minsky moment“: “When there are too many pro-cyclical factors in an economy, cyclical fluctuations will be amplified. If we are too optimistic when things go smoothly, tensions build up, which could lead to a sharp correction, what we call a ‘Minsky Moment’. That’s what we should particularly defend against.”

To elaborate on Zhou’s statement, the economist Hyman Minsky described how once the debt “disease” goes metastatic, there will come a “Minsky moment” (a term originally coined by economist Paul McCulley) when euphoria gives way to concern and then to panic liquidation and credit revulsion. When that dynamic is in full flower, policy makers are powerless to avert it, no matter how much they want to bring the punchbowl back. Governor Zhou’s public warning was no doubt in response to recent rapid increase of debt which, according to Professor L. Randall Wray, “increased from 162% to 260% of GDP between 2008 and 2016,” and remains “a topic of discussion, if not deep concern.”

It may seem odd to warn of a Chinese slowdown, given the recent renewed surge in exports and the corresponding rise in both the manufacturing and non-manufacturing purchasing managing indices (both the manufacturing and service gauges remain above 50, and therefore indicative of robust economic activity). But these gains ought to be viewed against the backdrop of a more hostile external environment for Chinese manufactured goods. Discussing the recently imposed tariffs on steel and aluminum, the New York Times reported that Trump has already provided brief exemptions to “Canada, Mexico, the European Union, Australia, Argentina, Brazil and South Korea” (countries that “account for more than half of the $29 billion in steel sold to the United States in 2017”), which reinforces the idea that it is largely China that remains the major target of Trump’s economic nationalists.

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A nice thought experiment.

No Brexit for a Eurozone Britain? (Varoufakis)

“You can check out any time you like, but you can never leave.” Prior to the 2016 Brexit referendum, I borrowed this line from the Eagles’ 1976 hit “Hotel California” as an argument against Britain exiting the European Union. I told audiences up and down Britain that if they voted to leave the EU, they would end up more entangled with the EU Commission than ever before. As British Prime Minister Theresa May is finding out, disentangling a member state from the EU is an arduous and complex undertaking. But how much harder would Brexit have been had the United Kingdom adopted the euro back in 2000?

For starters, the people of Britain would never have been consulted on whether they wanted to check out of the EU. In a hypothetical eurozone Britain, the very announcement of a referendum on membership would have triggered a bank run. Given Britain’s chronic trade and current-account deficits, an exit from the euro would have necessarily caused a decline in the international value of UK bank deposits. Foreseeing this, depositors would have responded to the announcement of a referendum by immediately withdrawing their euros in cash or by wiring them to Frankfurt, Paris, New York, or elsewhere. And, foreseeing that reaction, no British prime minister, not even David Cameron, would have dared announce a Brexit referendum.

Looking further back, what would the effect of 16 years in the eurozone have been on the relative strength of Leavers and Remainers within the Conservative Party? What would Britain’s economic circumstances have been like prior to 2016 had the euro been the UK’s currency? Would the political pressure to hold the referendum in 2016 have been weaker had Britain shared the same currency as Germany, France, and Greece? As with all counterfactuals, we are treading on thin ice here. Nevertheless, it is not difficult to sketch a plausible economic past for a UK that, hypothetically, entered the eurozone in 2000.

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Time to follow the money on pot.

Legalised Cannabis Could Help Solve America’s Opioid Crisis (Ind.)

Legalised cannabis use may help solve America’s opioid crisis, two scientific studies have suggested. Two separate peer-reviewed studies in the journal JAMA Internal Medicine found significant drops in opioid prescribing in US states that had relaxed their cannabis laws. Both studies appear to offer insights into possible ways to solve a crisis that saw 17,087 people die from prescription opioid overdoes in the US in 2016. The crisis has its origins in soaring prescription rates after a new generation of opioids were marketed in the 1980s and 1990s with inaccurate claims that they could alleviate chronic pain with minimal risk of addiction.

The new research was accompanied by an opinion piece in JAMA Internal Medicine which said both studies produced “results suggesting that cannabis legalisation may play a beneficial role in the opioid crisis”. In the first study, researchers at the University of Georgia, Athens, looked at Medicare Part D prescriptions for people over the age of 65 between 2010 and 2015. It found that prescriptions for all opioids decreased by 2.11 million daily doses per year from an average of 23.08 million daily doses per year when a state instituted any medical cannabis law. When a state opened marijuana dispensaries, opioid prescriptions dropped by 3.7 million daily doses per year.

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Loophole. And a dangerous one.

US Gene-Editing Ruling Delights Plant Scientists (G.)

Researchers in the US have been given the go-ahead to use gene-editing techniques to alter crops and plants. The decision opens the door for scientists to create a new generation of genetically altered crops without serious restriction and paves the way for approvals for similar work in Britain and the rest of Europe. The decision – by the US Department of Agriculture – has delighted scientists who had feared that limitations on the creation and growing of genetically modified crops would also be imposed on crops created using far simpler gene-editing techniques. “I think this decision by American legislators will have all sorts of benefits in the long run,” said Professor Denis Murphy of the University of South Wales.

“This is a win-win situation because agriculture for gene-editing is cheaper, faster, simpler and more precise than the genetic modification of plants, in which a gene is taken from one organism and moved to another.” The European Court of Justice indicated in January that it does not think crops created though gene-editing techniques should be regulated by the rules that govern genetically modified organisms in Europe. “At the same time, Britain’s Acre – the advisory committee on releases into the environment – also seems to be sympathetic to this position,” said Professor Huw Dylan Jones of Aberystwyth University. “It is very encouraging.”

In the wake of hostile green campaigns, Britain imposed severe restrictions on GM crops two decades ago and few have been grown. The prospect that this fate would also befall plants created by the newer and simpler technique of gene-editing worried many researchers who feared a technology at which Britain excels would be banned. These fears are now disappearing, they say. “If we have our own domestic gene-editing industry then scientists trained at our universities will have something to work on here when they qualify,” said Murphy. “At present, our young scientists have to go to work in another country if they want to continue working on the topic.”

Gene-editing could lead to the development of domestic crops particularly suited to Britain, said Dylan Jones. “Loliums and clovers that are good for grazing could be improved to make them more hardy, for example,” he said. “It is very hopeful.” Genetically modified crops are generated through the introduction of foreign DNA sequences. Gene-edited crops are created by editing an organism’s native genome. Gene-editing is more efficient, cheaper, quicker and more precise. By altering the DNA make-up of a gene the characteristics of a cell or an organism can be changed.

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I don’t like calling living creatures ‘pests’, and the tone here is a bit sensational, but the core is resistance against pesticides. We must stop poisoning nature.

Hybrid Swarm Of ‘Mega-Pests’ Threatens Crops Worldwide (Ind.)

A pair of major agricultural pests have combined to produce a “mega-pest” that could threaten crops around the world. Losses from the original pest species, cotton bollworms and corn earworms, already amounts to billions of dollars worth of food. But a hybrid of the two, shows signs of rapidly developing resistance to pesticides and it scientists fear it could cross international boundaries undetected, wiping out all the crops it comes across. Bollworms and earworms are closely related. The bollworm has its origins in Africa, Asia and Europe while the earworm is a native of the Americas. Both are in fact moth caterpillars and they feed on more than 100 plant species including vital crops like corn, cotton, tomato and soybean.

A team of Australian scientists who discovered the hybrid mega-pests think the combination of international species could be creating a new strain with unlimited geographical boundaries. It is impossible to tell which individuals are hybrids just by looking at them, meaning by the time the hybrids have been detected it may be too late. [..] In Australia, a combination of pesticides is currently being employed to manage the nation’s bollworms, but chemical resistance is a major cause for concern. Bollworms are generally better at developing resistance than their earworm cousins, and are immune to the effects of many major insecticides.

However, within the “hybrid swarm” they studied in Brazil the scientists found creatures that were largely earworm in their genetic makeup, but with bollworm DNA coding for pesticide resistance. The scientists warned that the Brazilian case highlighted the threat that new “agriculturally problematic” strains of pest could soon spread throughout the rest of the Americas. “On top of the impact already felt in South America, recent estimates that 65% of the USA’s agricultural output is at risk of being affected by the bollworm demonstrates that this work has the potential to instigate changes to research priorities that will have direct ramifications for the people of America, through the food on their tables and the clothes on their backs,” said Dr Craig Anderson, one of the study’s authors.

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Feb 212018
 
 February 21, 2018  Posted by at 10:32 am Finance Tagged with: , , , , , , , , , ,  


Vincent van Gogh Landscape with House and Ploughman 1889

 

90% Of Americans Strongly Opposed To Each Other (Onion)
Mueller’s Comic Book Indictment (David Stockman)
Foreigners Flock In As Buyers Of US Government Debt (CNBC)
Foreign Investors Cut Treasury Buying As US Flogs Record Level Of Debt (MW)
It’s Going to Be a Long Year for Bond Traders (BBG)
The Bear Still Cometh (Roberts)
Technical Charts Suggest Another Stock-Market Drop Is Coming (ElliottWave)
Final Version Of TPP Trade Deal Dumps Rules The US Wanted (R.)
UK Farmers: Lack Of Migrant Workers Now ‘Mission Critical’ (G.)
Vancouver’s Hot Housing Market Gets Tougher for Wealthy Chinese (BBG)
Amazon Tracks Its Workers Using Wristbands (Jacobin)
Come the Recession, Don’t Count on That Safety Net (NYT)
Plastic Bans Worldwide Will Dent Oil Demand Growth – BP (G.)
There Is No Time Left (CP)

 

 

I know, it’s sad if you need to open with the Onion. But that’s how sad things have become.

“..the 10% of survey participants who indicated otherwise did so because they didn’t consider those they disagreed with to actually be Americans..”

90% Of Americans Strongly Opposed To Each Other (Onion)

In a new study published Tuesday that surveyed U.S. residents about their attitudes toward current events, the Pew Research Center found that approximately 90 percent of Americans described themselves as strongly opposed to each other. “In the questionnaire we administered, nine out of 10 participants indicated they fundamentally disapproved of the actions currently being taken by their fellow citizens,” said polling analyst Babette Randolph, noting that the rate of opposition remained consistent across all 50 states and virtually every demographic regardless of age, gender, race, religion, or political identification. “The vast majority of poll respondents signaled they were dead set against the U.S. populace, condemning in forceful terms the way others have handled things over the past year and giving the people of their nation historically low ratings.” Randolph went on to note that the 10% of survey participants who indicated otherwise did so because they didn’t consider those they disagreed with to actually be Americans.

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Stockman goes through the whole comedy act and leaves little standing. Prior to the “13 Russians”, the Mueller investigation seemed dead. So note the timing.

Mueller’s Comic Book Indictment (David Stockman)

[..] with his comic book indictment, Robert Mueller has actually made himself a mortal threat to America’s democracy and national security. That’s because his indictment is unleashing a rabid anti-Russian mania in the Democratic party and turning flaming liberals and leftwing progressives, who used to form the backbone of the peace party in America, into outright war-mongers. The Donald tweeted over the weekend about Moscow “laughing its ass off” about the Mueller indictment, but we think he missed the mark. It is the Deep State on the banks of the Potomac that is bursting with glee – literally licking its collective chops – about the endless budget boondoggles now assured to be coming its way.

The neocons and military/industrial complex had already taken control of the GOP lock, stock and barrel. Then, his campaign rhetoric about “America First” notwithstanding, Trump abdicated to his empire-minded generals in order to concentrate on his Twitter account. And now in the wake of the RussiaGate hysteria being given a powerful new boost from Mueller’s comic book, the Dems are lining up to say we will see your $700 billion budget and crank it up from there. The truth is, there is a screaming fiscal crisis coming hard upon Imperial Washington. That’s owing to the $15 trillion of new deficits that are now built-in for the next decade – at the very time when the Fed has shut down is massive bond-buying experiment and the Baby Boom is hitting the social security and medicare rolls in droves.

Absent the RussiaGate hoax and the Dems descent into mindless, anti-Putin hysteria, there would have been a moment of maximum danger for the Deep State’s hideously inflated military, intelligence and surveillance operations. In the coming battle against fiscal collapse, they surely would have been on the fiscal chopping block like at no time since the aftermath of Vietnam in the 1970s. But rescue is now at hand. The Dems have been shell-shocked ever since the evening of November 8, 2016, and have worked themselves into deliriums about how it was all a big mistake enabled by Russian meddling and collusion with the Trump campaign. To a substantial degree, however, those narratives were on their last legs until the Mueller indictment came along. For anyone who takes the trouble to read it, of course, it’s just a potpourri of nonsense, marginalia and irrelevance.

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Dick Bove. I know. But even he can’t make it all up.

Foreigners Flock In As Buyers Of US Government Debt (CNBC)

Last week the United States Treasury Department released its latest data related to foreign buying of United States debt. It was a shocker. It showed that in the 12 months leading up to November 2016, the month that Donald Trump was elected president, foreigners had been net sellers of $339 billion in U.S. Treasurys. In the 12 months leading up to December 2017, they had shifted to being net buyers of $20 billion. Contrast this to the prior administration’s record. In November 2008, when Barack Obama was elected president, the trailing 12-month figures showed that foreigners had been net buyers of $301 billion in Treasurys. This dropped to the $339 billion outflow figure in November 2016, just noted, when he lost power. Putting the two sets of numbers together one sees that foreigners swinging $640 billion to the negative during the Obama presidency.

During the Trump presidency to date, foreigners swung positive by $359 billion. Wow!! It appears that foreign U.S. debt buyers are as enthused by the Trump agenda as much as domestic equity buyers are. Or, that the faith in the U.S. economic recovery is global in nature. The largest foreign holding of U.S. debt would be the combined portfolio of China and Hong Kong. It is about 6% of outstanding Treasury debt. This portfolio, if looked at year-over-year numbers, was up 1.5% in August, 2.1% in September, 6.1% in October, 11.1% in November and 10.4% in December. Overall, it grew by $145 billion. Other big buyers year over year were Saudi Arabia (up $47.1 billion), the United Kingdom (up $34.2 billion), Singapore (up $28.1 billion), India (up $26 billion), Switzerland (up $19.3 billion), Russia (up $15.6 billion) Korea (up $11.2 billion) and France (up $10.1 billion). The biggest sellers were Japan (down $47.1 billion) and Germany (down $14.7 billion).

Finally, of note, Ireland’s holdings jumped $51.3 billion possibly due to Brexit. The importance of these numbers cannot be understated. If one segregates the buyers of U.S. debt into its four main categories foreign buying is most important. Presently, it is believed that foreigners own 31.2% of outstanding U.S. debt. American households and businesses own 29.1%; Social Security and other government pension funds own 27.5%; and the Federal Reserve holds 14.2%. There is 2% double counting in the figures mainly in the amount held by Americans. This fiscal year due to the tax cut, higher interest rates and possibly other new fiscal programs, it is expected that the government must raise possibly another trillion dollars along with refinancing a portion of the $20 trillion already owed.

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Err, Wait! We just saw they’re buying, and now they’re not?

Foreign Investors Cut Treasury Buying As US Flogs Record Level Of Debt (MW)

As traders and analysts debate over who will harbor enough appetite to snap up $250 billion of debt sales this week, one group of investors has steadily retreated into the shadows — foreign bond-buyers. With the Federal Reserve halting its asset purchases several months ago, it’s unclear who will take up its place to soak up the deluge of issuance without demanding dramatically higher yields. An increase to spending caps and Republican tax cuts have escalated the Treasury Department’s borrowing needs, with some estimating more than $1 trillion of net issuance this year. Against that backdrop of increased supply, the diminished presence of a key bulwark to the bond market is troubling. “We expect that any increase in [foreign central bank] demand this year will be modest relative to the scale of supply, and that foreign private investor demand will be sporadic,” said strategists at Credit Suisse.

Foreign investors have slowly reduced their participation in Treasury auctions since the 2007-’09 financial crisis, according to Deutsche Bank. In 2008, in the throes of a global recession, foreign bond-buyers rushed into U.S. government paper, one of the largest liquid markets for safe assets in the world. From 2009 to 2011, Wall Street banks and international investors took down around 80% of the U.S. debt issued. But by 2017, foreign buyers took up 16% of the debt sold through auctions, compared with 29% in 2009. t’s not just auctions data that shows foreign investors are pulling back. The international share of the total U.S. debt fell to less than 45% in September 2017, down from 57% in December 2008. Though there was a slight uptick last year, for the most part the downtrend has remained intact.

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With one source saying foreigners are buying, and the other denying that, no wonder it’s going to be a long year.

It’s Going to Be a Long Year for Bond Traders (BBG)

It’s not even March yet, and bond investors probably can’t wait for the year to be over. The Bloomberg Barclays U.S. Aggregate Bond Index has fallen 2.12% since the end of December through Feb. 16, and there’s little on the horizon to suggest a rebound anytime soon. U.S. Treasuries fell across the board Tuesday as the government began flooding the market with supply to rebuild its cash balance and start paying for the recently enacted tax cuts. Investors were asked to digest $179 billion in Treasury bills and two-year notes in a matter of hours, resulting in the highest borrowing rates for the government since 2008. While that’s good news for savers who have suffered with near-zero rates since the financial crisis, it’s not so good for borrowers. Overall, the government is forecast to at least double its debt sales this year to more than $1 trillion- the most since 2010.

In a research note, the strategists at Goldman Sachs wrote that they now see 10-year Treasury yields, which were at 2.89% on Tuesday, rising to 3.25%, up from their prior forecast of 3%. And since Treasuries are the global benchmark, the firm also boosted its yield forecasts for German bunds, U.K. gilts and Japanese government bonds. The nonpartisan Committee for a Responsible Federal Budget said it expects the U.S. budget deficit to swell to $1.2 trillion in fiscal 2019 alone after the Trump administration enacted tax cuts late last year that will reduce federal revenue by $1.5 trillion over a decade. The auctions continue Wednesday, with the sale of $35 billion in five-year notes followed by the sale of $29 billion of seven-year notes on Thursday.

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Central banks make for bigger crises.

The Bear Still Cometh (Roberts)

In April, the current economic expansion will become the second longest in U.S. history. However, that period of expansion will also be the slowest, based on annualized economic growth rates, as well. Could the current economic expansion become the longest in U.S. history? Absolutely. Over the next several weeks, or even months, the markets can certainly extend the current deviations from long-term means even further. But such is the nature of every bull market peak, and bubble, throughout history as the seeming impervious advance lures the last of the stock market “holdouts” back into the markets. The correction over the last couple of weeks did little to correct these major extensions OR significantly change investor’s mental state from “greed” to “fear.”

As discussed above, the bullish trend remains clearly intact for now, but all “bull markets” end….always. Do not be mistaken, the next “bear market” is coming. Of that, there is absolute certainty. As the charts clearly show, “prices are bound by the laws of physics.” While prices can certainly seem to defy the law of gravity in the short-term, the subsequent reversion from extremes has repeatedly led to catastrophic losses for investors who disregard the risk. There are substantial reasons to be pessimistic about the markets longer-term. Economic growth, excessive monetary interventions, earnings, valuations, etc. all suggest that future returns will be substantially lower than those seen over the last eight years. Bullish exuberance has erased the memories of the last two major bear markets and replaced it with “hope” that somehow “this time will be different.”

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Don’t think we really needs technical charts for that.

Technical Charts Suggest Another Stock-Market Drop Is Coming (ElliottWave)

With the market rally experienced over the past week, many in the media are now reconsidering their recent perspective regarding the demise of the bull market. Not only did the market strike the minimal upside target we laid out for members a week ago — once we broke through 2646 on the Emini S&P 500 — it even exceeded our minimal target by about 25 points. However, just as the market has everyone now considering how much more upside we can see, I think we may be setting up for another drop to begin this week. Due to the lack of impulsive patterns evident off the recent lows in many of the charts I am following, it would suggest the stock market is likely going to see a retest of the prior lows, or a lower low before this wave (4) has run its course.

Again, I want to remind you that 4th waves are the most variable of the Elliott Wave 5-wave structure. For this reason, we almost have to expect many twists and turns, especially during the b-wave of that structure. Currently, we are still in the b-wave of this wave (4), and unless we see an impulsive drop below the 2700 support region on the S&P 500 SPX, -0.58% we may remain in this b-wave for the next several weeks. In other words, should we drop below the 2700 region this week in a corrective and overlapping fashion, we will likely be only dropping in a (b) wave within a larger b-wave, as presented in the attached charts in yellow. However, if the market does provide us with an impulsive structure below 2700 for wave 1 of the c-wave down, then we will likely be targeting the 2400 region within the next few weeks.

Yet, the drop we experienced on Friday off the high was not clearly the start of an impulsive structure. While the market has certainly struck the minimum target we set for this wave (4) between 2424 and 2539, the structure of the rally off that low is suggesting that this wave (4) will likely take more time and provide more whipsaw in the coming weeks. However, as long as we hold over the 2400 region support, my expectation is that we have a date with the 3011-3223 region for the S&P, which will likely be struck by the end of 2018 or early 2019. It will be at that point that I expect we can begin a 20%-30% correction.

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Without exports we’re all dead?!

Final Version Of TPP Trade Deal Dumps Rules The US Wanted (R.)

The final version of a landmark deal aimed at cutting trade barriers in some of the Asia-Pacific’s fastest-growing economies was released on Wednesday, signalling the pact was a step closer to reality even without its star member the United States. More than 20 provisions have been suspended or changed in the final text ahead of the deal’s official signing in March, including rules around intellectual property originally included at the behest of Washington. The original 12-member deal was thrown into limbo early last year when U.S. President Donald Trump withdrew from the agreement to prioritize protecting U.S. jobs. The 11 remaining nations, led by Japan, finalized a revised trade pact in January, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It is expected to be signed in Chile on March 8.

The deal will reduce tariffs in economies that together amount to more than 13% of the global GDP — a total of $10 trillion. With the U.S., it would have represented 40%. “The big changes with TPP 11 are the suspension of a whole lot of the provisions of the agreement. They have suspended many of the controversial ones, particularly around pharmaceuticals,” said Kimberlee Weatherall, professor of law at the University of Sydney. Many of these changes had been inserted into the original TPP 12 at the demand of U.S. negotiators, such as rules ramping up intellectual property protection of pharmaceuticals, which some governments and activists worried would raise the costs of medicine. The success of the deal has been touted by officials in Japan and other member countries as an antidote to counter growing U.S. protectionism, and with the hope that Washington would eventually sign back up.

“CPTPP has become more important because of the growing threats to the effective operation of the World Trade Organisation rules,” New Zealand Trade Minister David Parker said on Wednesday.

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In reality, these farmers don’t care where workers come from, they just want them dirt cheap. Give them a good wage and the whole thing changes, you can get Britons to work for you.

UK Farmers: Lack Of Migrant Workers Now ‘Mission Critical’ (G.)

Farmers are running out of patience with what they see as government inaction over the future availability of seasonal fruit and vegetable pickers, the environment secretary has been told. Michael Gove was confronted over the issue at the National Farmers’ Union annual conference, but told delegates that while he understood their plight he did not have the power to accede to their demands for a new deal for non-EU workers on temporary contracts on farms. Ali Capper, who chairs the NFU’s horticulture team, told Gove that the availability of workers to pick fruit and vegetables was now “mission critical for 2018”. Gove told her the NFU’s demand for clarity on labour was “powerfully and loudly” made but that the lead department in the matter was the Home Office, not his.

“It’s already the case that the supply of labour from EU27 countries is diminishing as their economies recover and grow. So, in the future, we will need to look further afield,” he added later, saying he had to abide by decisions in a collective government. Capper welcomed Gove’s acknowledgement that labour shortages were now so great that farmers needed to go beyond the EU, but said time was running out. “We just need action; without wanting to blaspheme, I’m sick of hearing ‘we understand the issue, we know you need access to non-EU and EU workers’,” she said. Meurig Raymond, the outgoing NFU president, told Gove that this was a critical issue for farming, citing a recent Guardian report of a fruit farmer in Herefordshire moving part of his business to China because of Brexit.

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Yesh, like 5% more tax will work miracles.

Vancouver’s Hot Housing Market Gets Tougher for Wealthy Chinese (BBG)

Vancouver, one of the hottest housing markets in North America, is getting a little tougher for wealthy Chinese buyers. British Columbia Finance Minister Carole James announced measures targeting foreign buyers and speculators in the first budget since her government was elected on a pledge to make housing more affordable for residents of Canada’s Pacific Coast province. Starting Wednesday, foreigners will pay the province a 20% tax on top of the listing value, up from 15% now, and a levy on property speculators will be introduced later this year, according to budget documents released Tuesday. The government will also crack down on the condo pre-sale market and beneficial ownership to ensure that property flippers, offshore trusts and hidden investors are paying taxes on gains.

Premier John Horgan faces formidable demands after taking power in a fiercely contested election last July. His New Democratic Party made expensive promises to topple the Liberals, whose 16-year-rule brought the fastest growth in Canada, but also surging property while incomes stagnated. Public outrage has surged amid perceptions that global capital seeking a stable sanctuary, especially from China, is driving double-digit gains in Vancouver, the country’s most expensive property market. “The expectations that we will do everything in our first budget are huge,” James told reporters in the capital Victoria. “Our goal is fairness – fairness for the people who live here, who work here and pay their taxes here.”

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Dickens Redux. Very interesting overview of worker control since the 19th century.

Amazon Tracks Its Workers Using Wristbands (Jacobin)

The latest scandal to emerge from Amazon’s warehouses centers on the company’s newly patented wristband, which gives it the ability to track and record employees’ hands in real time. Some have described the technology as a “dystopian” form of surveillance. Amazon has countered that journalists are engaging in “misguided” speculation. To hear the retail giant tell it, all the device does is move its inventory-tracking equipment from workers’ hands to their wrists — what’s the big deal? Given the level of surveillance and regimentation already in place in Amazon warehouses, the company isn’t completely off base. Currently, warehouse workers called pickers carry a scanner that directs them from product to product. All shift they race the countdown clock, which shows them how many seconds they have to find the item, place it in their trolley, and scan the barcode.

A variation on this method exists in warehouses where robots bring the shelves to workers. There, workers stand in place as stacks of products present themselves one by one. For ten and a half hours, they must stoop and stretch to retrieve an item every nine seconds. The scanners control workers’ behavior by measuring it, preventing slowdowns and allowing managers to create new performance benchmarks. Quick workers raise the bar for everyone, while slow workers risk losing their job. The wristbands introduce a wrinkle to this regimentation, monitoring not just the task but the worker herself. It’s a distinction managers first became obsessed with more than a century ago and crystallized in the “scientific management” movement of the period. Amazon’s peculiar culture notwithstanding, the wristbands in many ways don’t offer anything new, technologically or conceptually. What has changed is workers’ ability to challenge this kind of surveillance.

The first workers required to mechanically record their location while working were the nineteenth-century watchmen. Hired to walk around plants at night, watchmen would look out for irregularities like fires, thieves, open windows, or bad odors. But employers had a problem: who would watch the watchmen? In 1861, they received their answer when the German inventor John Bürk patented one of the first practicable time detectors — a huge watch with a strip of paper running around the casing’s interior. Employers would chain different keys in each room of their property. When watchmen entered a room, they would have to insert the key into the watch, making an indentation on the strip of paper hidden inside. Since each key had a unique pattern, and since the strip of paper was tied to the hands of the clock, the employer could come in the next morning, pull the strip out, and examine a record of when the watchman visited each room.

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Sorry, NYT, it’s not the Republicans who cause this. It’s the Ponzi models. But a good warning: don’t count on the safety net.

Come the Recession, Don’t Count on That Safety Net (NYT)

What will President Trump’s first recession look like? The question is not that far-fetched. The current economic expansion is already the third longest since the middle of the 19th century, according to the National Bureau of Economic Research. If it makes it past June of next year it will be the longest on record. While the economy is hardly booming, trundling along at an annual growth rate of about 2.5%, investors are getting jittery. The stock market tumble after the government reported an uptick in wages last month suggests just how worried investors on Wall Street are that the Federal Reserve might start increasing interest rates more aggressively to forestall inflation. And the tax cuts and spending increases pumped into an expanding economy since December shorten the odds that the Fed will step in forcefully in the not-too-distant future to bring an overheated expansion to an end.

It is hardly premature to ask, in this light, how the Trump administration might manage the fallout from the economic downturn that everybody knows will happen. Unfortunately, the United States could hardly be less prepared. Not only does the government have precious few tools at its disposal to combat a downturn. By slashing taxes while increasing spending, President Trump and his allies in Congress have further boxed the economy into a corner, reducing the space for emergency government action were it to be needed. The federal debt burden is now the heaviest it has been in 70 years. And it is expected to get progressively heavier, as the budget deficit swells.

To top it off, a Republican president and a Republican Congress seem set on completing the longstanding Republican project to gut the safety net built by Presidents Franklin D. Roosevelt and Lyndon B. Johnson, which they blame for encouraging sloth, and replace it with a leaner welfare regime that closely ties government benefits to hard work. As noted in a new set of proposals by leading academics to combat poverty, published Tuesday by the Russell Sage Foundation, anti-poverty policies and related social-welfare benefits over the last quarter-century “have largely shifted from a system of guaranteed income support to a work-based safety net.”

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We waste oil to make petrol, and we waste it the make plastics. It’s like there’s a big plan to get rid of the stuff ASAP. Like nature developed mankind to get rid of a carbon imbalance issue.

Plastic Bans Worldwide Will Dent Oil Demand Growth – BP (G.)

Bans around the world on single use plastic items such as carrier bags will dent growth in oil demand over the next two decades, according to BP. However, the UK-headquartered oil and gas firm said it still expects the global hunger for crude to grow for years and not peak until the late 2030s. Spencer Dale, the group’s chief economist, said: “Just around the world you see increasing awareness of the environmental damage associated with plastics and different types of packaging of one form of another. “If you live in the UK that’s clearly been an issue, but it’s not just a UK-specific thing; you see it worldwide, for example China has changed some of its policies.” Theresa May has branded plastic waste an environmental scourge, and MPs have called for charges on plastic bags to be extended to disposable coffee cups.

Dale predicted such measures around the world could mean 2m barrels per day lower oil demand growth by 2040. But he said single use plastics were only about 15% of all non-combusted oil, which is used for petrochemicals, an industry that BP expects to be a big driver of global growth in crude demand. The company’s energy outlook report, published on Tuesday, forecasts demand peaking at about 110m barrels per day between 2035 and 2040, up from . Much of the growth comes from rising prosperity in the developing world. But Dale said his position was that “nobody knows when it’s going to peak because small changes can shift it by five to 10 years”.

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Robert Hunziker first says that only drastic measures will do, and then blames the US for not adhering to CON21, which has no such drastic measures. It’s hard.

There Is No Time Left (CP)

Imagine a scenario with no temperature difference between the equator and the North Pole. That was 12 million years ago when there was no ice at either pole. In that context, according to professor James G. Anderson of Harvard University, carbon in the atmosphere today is the same as 12 million years ago. The evidence is found in the paleoclimate record. It’s irrefutable. Meaning, today’s big meltdown has only just started. And, we’ve got 5 years to fix it or endure Gonzo World. That’s one big pill to swallow! That scenario comes by way of interpretation of a speech delivered by James G. Anderson at the University of Chicago in January 2018 when he received the Benton Medal for Distinguished Public Service, in part, for his groundbreaking research that led to the Montreal Protocol in 1987 to mitigate damage to the Ozone Layer.

At the time, Anderson was the force behind the most important event in the history of atmospheric chemistry, discovering and diagnosing Antarctica’s ozone hole, which led to the Montreal Protocol. Without that action, ramifications would have been absolutely catastrophic for the planet. Stratospheric ozone is one of the most delicate aspects of planet habitability, providing protection from UV radiation for all life forms. If perchance the stratospheric ozone layer could be lowered to the ground, stacking the otherwise dispersed molecules together, it would be 1/8th of an inch in thickness or the thickness of two pennies. That separates humanity from burning up as the stratospheric ozone absorbs 98% of UV radiation. In his acceptance speech, Anderson, Harvard professor of atmospheric chemistry, now warns that it is foolhardy to assume we can recover from the global warming leviathan simply by cutting back emissions.

Accordingly, the only way humanity can dig itself out of the climate change/global-warming hole is by way of a WWII type effort with total transformation of industry off carbon and removal of carbon from the atmosphere within five years. The situation is so dire that it requires a worldwide Marshall Plan effort, plus kneeling in prayer. Additionally, Anderson says the chance of permanent ice remaining in the Arctic after 2022 is zero. Already, 80% is gone. The problem: Without an ice shield to protect frozen methane hydrates in place for millennia, the Arctic turns into a methane nightmare. This is comparable to poking the global warming monster with a stick, as runaway global warming (“RGW”) emerges from the depths. Interestingly enough, the Arctic Methane Emergency Group/UK, composed of distinguished scientists, seems to be in agreement with this assessment.

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Feb 192018
 
 February 19, 2018  Posted by at 10:56 am Finance Tagged with: , , , , , , , , , ,  


Frank Larson Broadway Billboard Seven Year Itch 1955

 

Global Dividends Hit Record Of $1.25 Trillion In 2017, More To Come (R.)
Jittery US Bond Market Braces For Supply Wave (R.)
How Did America Go Bankrupt? Slowly At First, Then All At Once (CH)
London’s Housing Boom Is Over, Rightmove Says (BBG)
Average Price Of Newly Marketed UK Home Rises Above £300,000 Again (G.)
Ex-CIA Director Thinks US Hypocrisy About Election Meddling Is Hilarious (CJ)
German Carmakers In A Spin Ahead Of Diesel Ban Ruling (R.)
Sweden Is Getting Worried About Its Cashless Society (BBG)
Europe Is A Collection Of Filter Bubbles (BBG)

 

 

As is the case with buybacks, this is all money that execs decide NOT to invest in a company (productivity, modernization, maintenance), but in its stock value.

Global Dividends Hit Record Of $1.25 Trillion In 2017, More To Come (R.)

Global dividends rose 7.7% to an all-time high of $1.25 trillion (1 trillion euros) last year boosted by a buoyant world economy and rising corporate confidence, Janus Henderson said on Monday, predicting another record year ahead. The surge – the strongest since 2014 – was driven by increases in every region and almost every industry with record showings in 11 countries including the United States, Japan, Switzerland, Hong Kong, Taiwan and the Netherlands, the investment manager added. For 2018 Janus Henderson expects dividends to keep the same 7.7% growth rate to reach around $1.35 trillion, as corporate and economic growth remains strong even in more volatile financial markets. “Companies are seeing rising profits and healthy cash flows, and that’s enabling them to fund generous dividends.

The record payout last year was almost three-quarters higher than in 2009, and there is more to come,” Ben Lofthouse, Director of Global Equity Income at Janus Henderson, said. “The next few months are set fair, and we expect global dividends to break new records in 2018.” Adjusting for movements in exchange rates, special one-off dividends and other factors, global dividends rose 6.8% last year and are expected to rise another 6.1% in 2018. Janus said 2017’s dividend growth showed less regional divergence than in previous years, reflecting the broadly based global economic recovery, though Europe lagged behind. European dividends rose just 1.9% to $227 billion, weighed down by cuts from a handful of large companies in France and Spain, lower special dividends and a weak euro during the second quarter, when most dividends are paid, it said.

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How can more debt not be good?

Jittery US Bond Market Braces For Supply Wave (R.)

Bond investors, who have been on edge over signs of growing inflation and a possibly more aggressive Federal Reserve, will have their work cut out for them as the U.S. government seeks to sell $258 billion worth of debt this coming week. The Treasury Department began ramping up its debt issuance earlier this month to fund the expected growth in borrowing tied to the biggest tax overhaul in 30 years and a two-year federal spending package. Last year’s tax reform is expected to add as much as $1.5 trillion to the federal debt load, while the budget agreement would increase government spending by almost $300 billion over the next two years. Analysts worry the combination of a rising budget deficit, faster inflation and more Fed rate increases have ratcheted up the risk of owning Treasuries. Those concerns pushed benchmark 10-year Treasury yields up to 2.944%, a four-year peak last week.

Treasury bill and two-year yields have reached their highest level in more than nine years. The five-year Treasury yield is hovering at its highest levels in nearly eight years, while seven-year yield climbed to levels not seen since April 2011. The increase in U.S. yields may entice investors seeking steady income in the wake of the rollercoaster sessions on Wall Street and other stock markets this month, analysts said. [..] The heavy Treasury supply will kick off on Tuesday with $151 billion worth of bills including record amounts of three-month and six-month T-bills. The rest of the debt sales will spread over a holiday-shortened week with $28 billion of two-year fixed rate notes on Tuesday; $35 billion in five-year debt on Wednesday and $29 billion in seven-year notes on Thursday. The Treasury Department also plans to add $15 billion to an older two-year floating-rate issue.

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Everything is debt. Imagine what would happen if it wasn’t there. Or soon won’t be.

How Did America Go Bankrupt? Slowly At First, Then All At Once (CH)

Clearly, debt has surged since 2000 and particularly since 2008 versus decelerating net full time jobs growth. The number of full time employees is economically critical as, generally speaking, only these jobs offer the means to be a home buyer or build savings and wealth in a consumer driven economy. Part time employment generally offers only subsistence level earnings. But if we look at the change over those periods highlighted, we get a clear picture. Full time jobs are being added at a rapidly declining rate while federal debt is surging in the absence of the growth of full time employees.

And if we look at the federal debt added per full time job added (chart below)…broken arrow…broken arrow!!! That is $1.92 million dollars in new federal debt per net new full time employee since 2008. Compare that to the $30 thousand per net new full time employee from ’70 to ’80…or $140 thousand from ’80 to ’90…and nearly quadruples the $460 thousand per from ’00 to ’08. Despite a far larger total population and after ten years of “recovery” since ’08, this is likely as good as it gets. We are likely at or very near the top of this economic cycle. This pattern is likely to carry forward over the next decade and economic cycle…likely with disastrous results.

[..] US population growth has been decelerating since 1790 and debt to GDP rising (chart below). Originally, the combination of a relatively small population, high immigration, and high birth rates meant annual population growth in excess of 3% and relatively low debt to GDP. Over time, as the population grew, immigration slowed, and birth rates collapsed; US population growth tumbled. Since 1950 total annual population growth (black line in chart below) has decelerated almost 75% (from 2% to 0.6%) but more critically the annual population growth among the under 65 year old population has essentially ceased (as the yellow line in the chart shows) and more debt has been the resounding “solution”. Massive interest rate cuts to incent debt creation have been substituted for the decelerating organic growth.

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About time.

London’s Housing Boom Is Over, Rightmove Says (BBG)

London’s property market has moved out of its boom phase and home sellers need to be more realistic about their price demands, according to Rightmove. The February report from the home-listing website shows that asking prices were down 1% from a year earlier, a sixth consecutive fall. They rose 4.4% on the month, reflecting the usual jump at the start of the spring season. While multiple reports point to a cooling in London housing, the damage is being limited by cautious sellers, who aren’t flooding the market in a panic to dump property. That means the long-running supply-demand imbalance in the city is providing some support to prices. “End-of-the-boom prices normally readjust more quickly if there is an over supply,” Miles Shipside, Rightmove director, said in the report. However, “some would-be sellers are holding back, preventing a glut of competition from forcing prices downward,” he said.

The capital’s housing market was the worst performing in the U.K. in 2017 and there’s little to suggest any upturn is in store. Brexit uncertainty has damped demand, while years of rampant inflation has pushed ownership out of reach for many. The mean asking price in London this month was almost 630,000 pounds ($885,000), more than 20 times average U.K. earnings. For those who need a fast sale, Shipside’s advice is to “sacrifice some of the substantial price gains of the last few years.” The average time to sell a property in London is now 83 days, up from 73 days a year ago. Nationally, asking prices increased 0.8% in February from January, though that was below the 10-year average for the time of year. The average price of 300,000 pounds is up 1.5% year-on-year. That compares with gains of about 6% seen less than two years ago.

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But wait, this quotes Rightmove as well…

Average Price Of Newly Marketed UK Home Rises Above £300,000 Again (G.)

The average price of a UK property coming on to the market has risen by more than £2,400 in a month to just over £300,000 amid evidence of “record” levels of house-hunting activity, according to Rightmove. The website, which tracks 90% of the UK property market, said the national average asking price for a home had increased by 0.8% during the past month, following the 0.7% rise it reported in mid-January. However, some sellers may be over-pricing their properties: the average time to sell has risen once again and is now 72 days, compared with 67 days a month ago and 55 during the summer of 2017. In London, the average has climbed to 83 days. Rightmove said that while it was the norm for new sellers’ asking prices to be buoyant at the start of a new year, “this first complete month in 2018 is seeing more pricing optimism than the comparable period in 2017”.

In general, however, sellers were not being over-ambitious or setting too high a price, it added. The website, which claims to display a stock of more than one million properties to buy or rent, said the average asking price now stood at £300,001, compared with £297,587 a month ago. It described January as its “busiest month ever”, with a record 141m website visits. In all the UK regions it tracks, the typical price of a newly-marketed property rose during the past month, with the exception of south-west England, where the figure slipped back slightly. Scotland saw the biggest monthly increase, at 5.1%, while the north-east and Wales managed 3.6% and 3.5%. However, on a national basis, the annual rate of price growth “remains subdued” at 1.5%, said the website.

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Isn’t it?

Ex-CIA Director Thinks US Hypocrisy About Election Meddling Is Hilarious (CJ)

Take off the terrorist’s mask, and it’s the CIA. Take off the revolutionary’s mask, and it’s the CIA. Take off the Hollywood producer’s mask, and it’s the CIA. Take off the billionaire tech plutocrat’s mask, and it’s the CIA. Take off the news man’s mask, and guess what? It’s the motherfucking CIA. CIA influence is everywhere. Anywhere anything is happening which could potentially interfere with the interests of America’s unelected power establishment, whether inside the US or outside, the depraved, lying, torturing, propagandizing, drug trafficking, coup-staging, warmongering CIA has its fingers in it. Which is why its former director made a cutesy wisecrack and burst out laughing when asked if the US is currently interfering in other democracies.

Fox’s Laura Ingraham unsurprisingly introduced former CIA Director James Woolsey as “an old friend” in a recent interview about Special Prosecutor Robert Mueller’s indictment of 13 alleged members of a Russian troll farm, in which Woolsey unsurprisingly talked about how dangerous Russian “disinformation” is and Ingraham unsurprisingly said that everyone should really be afraid of China. What was surprising, though, was what happened at the end of the interview. “Have we ever tried to meddle in other countries’ elections?” Ingraham asked in response to Woolsey’s Russia remarks. “Oh, probably,” Woolsey said with a grin. “But it was for the good of the system in order to avoid the communists from taking over. For example, in Europe, in ’47, ’48, ’49, the Greeks and the Italians we CIA-”

“We don’t do that anymore though?” Ingraham interrupted. “We don’t mess around in other people’s elections, Jim?” Woolsey smiled and said said “Well…”, followed by a joking incoherent mumble, adding, “Only for a very good cause.” And then they both laughed. They laughed about this. They thought it was funny and cute. They thought it was funny and cute that the very allegation being used to manufacture support for world-threatening new cold war escalations against a nuclear superpower was something they both knew the United States does constantly, usually through Woolsey’s own CIA. The US government’s own data shows that it has deliberately meddled in the elections of 81 foreign governments between 1946 and 2000, including Russia in the nineties. That isn’t even counting the coups and regime changes it facilitated, including right here in my home Australia in the seventies.

The US meddles constantly in other democracies, not “for a good cause” as Woolsey claims, but to advance the agendas of the loosely allied plutocrats, intelligence and defense agencies which comprise America’s permanent government. It does this not to improve or protect the lives of ordinary Americans, but to make the rich richer and the powerful more powerful, usually at the expense of the money, resources, homes, governments, livelihoods and lives of people in other countries. It does this with impunity and without hesitation.

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Carmakers rule the country.

German Carmakers In A Spin Ahead Of Diesel Ban Ruling (R.)

A court will decide on Thursday whether German cities can ban heavily polluting cars, potentially wiping hundreds of millions of euros off the value of diesel cars on the country’s roads. Environmental group DUH has sued Stuttgart in Germany’s carmaking heartland, and Duesseldorf over levels of particulate matter exceeding EU limits after Volkswagen’s 2015 admission to cheating diesel exhaust tests. The scandal led politicians across the world to scrutinize diesel emissions, which contain the matter and nitrogen oxide (NOx) and are known to cause respiratory disease. There are around 15 million diesel vehicles on German streets and environmental groups say levels of particulates exceed the EU threshold in at least 90 German towns and cities.

Local courts ordered them to bar diesel cars which did not conform to the latest standards on days when pollution is heavy, startling German carmakers because an outright ban could trigger a fall in vehicle resale prices, and a rise in the cost of leasing contracts, which are priced on assumed residual values. The German states concerned, where the carmakers and their suppliers have a strong influence, appealed against the decisions, leaving Germany’s federal administrative court – the court of last resort for such matters – to rule on whether such bans can legally be imposed at local level.

“The key question is whether bans can already be considered to be legal instruments,” said Remo Klinger, a lawyer for DUH. “It’s a completely open question of law.” Paris, Madrid, Mexico City and Athens have said they plan to ban diesel vehicles from city centers by 2025, while the mayor of Copenhagen wants to ban new diesel cars from entering the city as soon as next year. France and Britain will ban new petrol and diesel cars by 2040 in a shift to electric vehicles.

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Big Brother is not worried.

Sweden Is Getting Worried About Its Cashless Society (BBG)

‘“No cash accepted” signs are becoming an increasingly common sight in shops and eateries across Sweden as payments go digital and mobile. But the pace at which cash is vanishing has authorities worried. A broad review of central bank legislation that’s underway is now taking a special look at the situation, with an interim report due as early as the summer. “If this development with cash disappearing happens too fast, it can be difficult to maintain the infrastructure” for handling cash, said Mats Dillen, the head of the parliamentary review. He declined to get into more details on what types of proposals could be included in the report. Sweden is widely regarded as the most cashless society on the planet. Most of the country’s bank branches have stopped handling cash; many shops, museums and restaurants now only accept plastic or mobile payments.

But there’s a downside, since many people, in particular the elderly, don’t have access to the digital society. “One may get into a negative spiral which can threaten the cash infrastructure,” Dillen said. “It’s those types of issues we are looking more closely at.” Last year, the amount of cash in circulation dropped to the lowest level since 1990 and is more than 40 percent below its 2007 peak. The declines in 2016 and 2017 were the biggest on record. An annual survey by Insight Intelligence released last month found only 25 percent of Swedes last year paid in cash at least once a week, down from 63 percent just four years ago. A full 36 percent never use cash, or just pay with it once or twice a year.

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There is no such thing as one Europe. And the more the EU promotes the narrative, the more that will become obvious.

Europe Is A Collection Of Filter Bubbles (BBG)

The EU can act in unison at times – for example, on Russia sanctions or, at least so far, on Brexit. But as French President Emmanuel Macron and German Chancellor Angela Merkel try for a closer union in the next few years, they will need to be mindful of the fact that there is no single narrative among the publics in different European countries on matters of economic importance. A recent paper for Bruegel, a Brussels-based think tank, vividly shows this by analyzing coverage of Europe’s recent financial crisis by four important centrist newspapers: Germany’s Sueddeutsche Zeitung, France’s Le Monde, Italy’s La Stampa and Spain’s El Pais. The total data set encompassed 51,714 news stories. The researchers fed them to a content analysis algorithm and then analyzed the results to construct generalized narratives. Their focus was on how blame for the crisis was attributed.

They found that only El Pais consistently attributed blame to Spain itself for its financial troubles during the euro crisis. “In Spain, the connection between the global financial crisis, the local housing bubble and the mismanagement of a previous period of impressive growth was more visible,” Porcaro explained to me. As one might expect, Sueddeutsche Zeitung blames the crisis on a departure from the traditional German social market economic model. Everyone except Germany seems to have contributed, according to the Munich paper — from greedy financial market players to financially imprudent Greeks to the ECB with its loose monetary policy. Le Monde, too, blamed the banks and speculators, but also German intransigence in handling the indebted southern Europeans.

And La Stampa focused on Italy’s role as a victim of circumstance, namely globalization and German-imposed austerity. Banks and financiers didn’t get much attention as culprits from the Italian newspaper, but the Italian political system and government did get some blame, as in Spain. Le Monde and La Stampa, according to the Bruegel paper, both “embrace a sense of desperation that goes far beyond purely economic considerations but calls into question the entire political system and social fabric.” It’s as if the euro area’s four biggest economies didn’t share a reality. The four quality dailies resemble the blind men in the Indian parable, feeling different parts of an elephant’s body, declaring the whole animal should look like a tree or a snake, then coming to blows when they can’t agree.

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Jan 112018
 
 January 11, 2018  Posted by at 10:33 am Finance Tagged with: , , , , , , , , , , ,  


Gutzon Borglum Repairing the Face of Abraham Lincoln, Mount Rushmore 1962

 

Japan Will Trigger ‘The Great Unwind’ – Albert Edwards (MW)
Central Banks Ready To Pop The ‘Everything’ Bubble (Smith)
The $50 Trillion Question for Bonds (BW)
China Weighs Slowing or Halting Purchases of US Treasuries (BBG)
Is Beijing Bluffing On Treasuries? (BBG)
South Korea’s Largest Cryptocurrency Exchanges Raided For Tax Evasion (R.)
South Korea Preparing Bill That Will Ban All Cryptocurrency Trading (CNBC)
China Moves To Shutter Bitcoin Mines (CNBC)
Buy Off Trump With the Wall (Lowry)
Russian Bid To Influence Brexit Vote Detailed In New US Senate Report (G.)
Assange Gets Ecuador ID; ‘First Step’ To Diplomatic Immunity? (RT)
Greece to Remain Under Lenders’ Supervision Until 2059 – Handelsblatt (GR)
Insect Declines: New Alarm Over Mayfly Is ‘Tip Of Iceberg’ (G.)
Theresa May Vows To Eliminate UK Plastic Waste By 2042 (Ind.)

 

 

As Abenomics goes belly-up, so will a large segment of financial markets. Japan is done.

Japan Will Trigger ‘The Great Unwind’ – Albert Edwards (MW)

Japan is the catalyst that could bring the record-setting bull market for stocks across the globe to a screeching halt, according to Société Générale’s uberbear Albert Edwards. The prominent SocGen strategist says surprise monetary tightening in Japan could be the trigger that finally upend what has been an protracted and unrelenting global rally for assets considered risky. While most investors are busy eyeing rate increases in the U.S. and tapering by the ECB in the eurozone, Edwards says they should also watch developments in the world’s third-largest economy, Japan, where corporate profits are surging and inflation has picked up.

“We’ve been looking for surprises and one thing that can catch us out is if the Bank of Japan starts tightening. If it actually follows the Fed and the ECB and announces some sort of tapering,” he said, speaking at SocGen’s annual strategy conference in London on Tuesday. “This could be far more important than the Fed. A lot of major trends start with Japan. People don’t focus on Japan enough in my view,” he added. Investors on Tuesday got a taste of how BOJ tightening can rattle the markets. The central bank said it would buy less of its long-dated bonds, sparking speculation Gov. Haruhiko Kuroda could back away from its ultraloose monetary policy as early as this year. The surprise announcement sent global bond markets into spin on Tuesday. The yield on 10-year U.S. Treasury notes jumped above 2.5% to its highest since March and the 30-year bond yield logged its biggest one-day jump since Dec. 19.

[..] The BOJ has for years been among the most accommodative central banks in the world and as recent as December reaffirmed its commitment to aggressive qualitative and quantitative-easing program, also known as QQE. With inflation stubbornly running below the BOJ’s 2% annual target, the central bank has since early 2016 kept interest rates in negative territory and even introduced a 0%-target for its 10-year government bond yields to avoid deflation. The determined efforts by the BOJ to boost consumer prices have turned investors against the yen with data from the Commodity Futures Trading Commission showing an extreme bearishness toward the Japanese currency. However, downbeat investors on the yen could be caught flat-footed if inflation starts to pick up, prompting the BOJ to halt easing efforts, Edwards warned.

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A concerted effort to let markets implode. And blame Trump.

Central Banks Ready To Pop The ‘Everything’ Bubble (Smith)

Many people do not realize that America is not only entering a new year, but within the next month we will also be entering a new economic era. In early February, Janet Yellen is set to leave the Federal Reserve and be replaced by the new Fed chair nominee, Jerome Powell. Now, to be clear, the Fed chair along with the bank governors do not set central bank policy. Policy for most central banks around the world is dictated in Switzerland by the Bank for International Settlements. Fed chairmen like Janet Yellen are mere mascots implementing policy initiatives as ordered. This is why we are now seeing supposedly separate central banking institutions around the world acting in unison, first with stimulus, then with fiscal tightening. However, it is important to note that each new Fed chair does tend to signal a new shift in action for the central bank.

For example, Alan Greenspan oversaw the low interest rate easy money phase of the Fed, which created the conditions for the derivatives and credit bubble and subsequent crash in 2008. Ben Bernanke oversaw the stimulus and bailout phase, flooding the markets with massive amounts of fiat and engineering an even larger bubble in stocks, bonds and just about every other asset except perhaps some select commodities. Janet Yellen managed the tapering phase, in which stimulus has been carefully and systematically diminished while still maintaining delusional stock market euphoria. Now comes the era of Jerome Powell, who will oversee the last stages of fiscal tightening, the reduction of the Fed balance sheet, faster rate increases and the final implosion of the ‘everything’ bubble.

As I warned before Trump won the election in 2016, a Trump presidency would inevitably be followed by economic crisis, and this would be facilitated by the Federal Reserve pulling the plug on fiat life support measures which kept the illusion of recovery going for the past several years. It is important to note that the mainstream media is consistently referring to Jerome Powell as “Trump’s candidate” for the Fed, or “Trump’s pick” (as if the president really has much of a choice in the roster of candidates for the Fed chair). The public is being subtly conditioned to view Powell as if he is an extension of the Trump administration. This could not be further from the truth. Powell and the Fed are autonomous from government.

[..] So, why is the media insisting on misrepresenting Powell as some kind of Trump agent? Because Trump, and by extension all the conservatives that support him, are meant to take the blame when the ‘everything’ bubble vaporizes our financial structure. Jerome Powell is “Trump’s guy” at the Fed; so any actions Powell takes to crush the recovery narrative will also be blamed on the Trump administration.

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Bond markets want their cake and eat it. First, low yields are a good thing; then rising yields show how good everything has become.

The $50 Trillion Question for Bonds (BW)

Government bond yields, exemplified by the benchmark 10-year U.S. Treasury, have enjoyed three decades of decline. Their recent jump is prompting a heated debate over whether that bull market is over. It matters because there’s more riding on the question than ever before.

The value of benchmark bonds eligible for inclusion in the Bloomberg Barclays Global Aggregate Bond Index, which includes government, corporate and securitized debt from 24 local currency markets, has doubled in the past decade to almost $50 trillion.

While calling the turn in bonds, especially in Europe, has been a widow-making trade in recent years, recent moves certainly look like the trend is no longer your friend. The yield on the two-year Treasury has about doubled in the past year, and is a whisker away from 2%. Even at its current super-low level of about 0.55%, the 10-year German yield is up from its nadir of about minus 0.2% reached in July 2016.

Here’s the thing, though. Even if government bond yields are on a sustained path to higher levels, it’s arguably a positive sign for the global economy. A return to more normal borrowing costs would reinforce hopes that the world is finally free from the debilitating aftershocks from the financial crisis. Moreover, the new normal is still likely to be at lower levels than the old normal. Note that in the past 30 years, the 10-year Treasury yield peaked at about 9.4% in August 1988 and plateaued at 1.36% in July 2016. Its current poke above 2.5% still leaves it at about half of its three-decade average. For central banks seeking to normalize monetary policy, rising government bond yields will come as something for a relief. For investors who bought at the peak of the bull market, however, there could be painful times ahead.

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Only game in town.

China Weighs Slowing or Halting Purchases of US Treasuries (BBG)

China added to bond investors’ jitters on Wednesday as traders braced for what they feared could be the end of a three-decade bull market. Senior government officials in Beijing reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter. The news comes as global debt markets were already selling off amid signs that central banks are starting to step back after years of bond-buying stimulus. Yields on 10-year Treasuries rose for a fifth day, touching the highest since March. China holds the world’s largest foreign-exchange reserves, at $3.1 trillion, and regularly assesses its strategy for investing them. It isn’t clear whether the officials’ recommendations have been adopted.

The market for U.S. government bonds is becoming less attractive relative to other assets, and trade tensions with the U.S. may provide a reason to slow or stop buying American debt, the thinking of these officials goes, according to the people [..] “With markets already dealing with supply indigestion, headlines regarding potentially lower Chinese demand for Treasuries are renewing bearish dynamics,” said Michael Leister at Commerzbank. “Today’s headlines will underscore concerns that the fading global quantitative-easing bid will trigger lasting upside pressure on developed-market yields.” The Chinese officials didn’t specify why trade tensions would spur a cutback in Treasuries purchases, though foreign holdings of U.S. securities have sometimes been a geopolitical football in the past.

[..] Any reduction in Chinese purchases would come just as the U.S. prepares to boost its supply of debt. The Treasury Department said in its most recent quarterly refunding announcement in November that borrowing needs will increase as the Federal Reserve reduces its balance sheet and as fiscal deficits look set to widen. “It’s a complicated chess game as with everything the Chinese do,” said Charles Wyplosz, a professor of international economics at the Graduate Institute of International and Development Studies in Geneva. “For years they have been bothered by the fact that they are so heavily invested in one particular class of U.S. bonds, so it’s just a question of time before they would try to diversify.”

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The dollar is still king.

Is Beijing Bluffing On Treasuries? (BBG)

The Bloomberg News report that senior government officials in Beijing recommended slowing or halting purchases of U.S. Treasuries is encountering a wall of skepticism, and rightly so. Even China’s State Administration of Foreign Exchange said Thursday that the report “might have cited wrong sources or may be fake news.” There’s a third possibility: that Beijing floated a trial balloon to see how the market would react.To the extent China would have to scoop up incoming dollars to keep the value of the yuan from rising too much too soon, what else can it possibly purchase with those dollars? Treasuries maturing in five years pay 2.32%. If China tries to alter the composition of its $3.1 trillion foreign-exchange war chest by swapping dollars to buy comparable securities denominated in any of the world’s main reserve currencies, it will find German bunds and British gilts paying even less.

Japanese and Swiss bonds offer somewhat higher yields. However, if every central bank in the world had given up on the world’s most liquid security every time it got a half-percent extra yield somewhere else, the dollar’s share in the world’s known reserves wouldn’t have held above 60% for almost a quarter-century. (It’s 63.5% now.) If Beijing wants a bargaining chip in trade tensions with the U.S., it should look elsewhere.In 2009, the Chinese central bank did try to diversify away from the dollar. The euro’s share in known global reserves peaked at 28% a few months after Wen Jiabao, the then Chinese premier, said he was “worried” about the huge amount of money his country had lent to the U.S.Then he – and the world – got something rather more real to worry about as the European debt crisis became an existential threat to that region’s single currency. According to the most recent data from the IMF, the euro’s share in worldwide foreign-exchange reserves is now down to 20%.

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As 2018 progresses, we’ll see many reports, across the globe, of taxes owed on 2017 crypto gains.

South Korea’s Largest Cryptocurrency Exchanges Raided For Tax Evasion (R.)

South Korea’s largest cryptocurrency exchanges were raided by police and tax agencies this week for alleged tax evasion, people familiar with the investigation said on Thursday. “A few officials from the National Tax Service raided our office this week,” an official at Coinone, a major cryptocurrency exchange in South Korea, told Reuters. “Local police also have been investigating our company since last year, they think what we do is gambling,” said the official, who spoke on condition of anonymity. He said Coinone was cooperating with the investigation. Bithumb, the second largest virtual currency operator in South Korea, was also raided by the tax authorities on Wednesday.

“We were asked by the tax officials to disclose paperwork and things yesterday,” an official at Bithumb said, requesting anonymity due to the sensitivity of the issue. South Korean financial authorities had previously said they are inspecting six local banks that offer virtual currency accounts to institutions, amid concerns the increasing use of such assets could lead to a surge in crime. The crackdown on Seoul-based operators of some of the world’s busiest virtual currency exchanges comes as the government attempts to calm frenzied demand for cryptocurrency trading in Asia’s fourth largest economy. Bitcoin’s 1,500% surge last year has stoked huge demand for cryptocurency in South Korea, drawing college students to housewives and sparking concerns about a gambling addiction.

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They’re getting serious.

South Korea Preparing Bill That Will Ban All Cryptocurrency Trading (CNBC)

South Korea’s justice minister said on Thursday that a bill is being prepared to ban all cryptocurrency trading in the country. That news is a major development for the cryptocurrency space, as South Korea is one of the biggest markets for major coins like bitcoin and ethereum. According to industry website CryptoCompare, more than 10% of ethereum is traded against the South Korean won — the second largest concentration in terms of fiat currencies behind the dollar. Meanwhile, 5% of all bitcoin are traded against the won. “There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” Park Sang-ki said at a press conference, according to the ministry’s press office.

Bitcoin tumbled more than 12% following Park’s remarks, according to CoinDesk’s bitcoin price index that tracks prices from four exchanges. At 1:26 p.m. HK/SIN, the cryptocurrency price retraced some of its losses to trade at $13,547.7. Park added that he couldn’t disclose more specific details about proposed shutdown of cryptocurrency trading exchanges in the country, adding that various government agencies would work together to implement several measures. Reuters further reported that a press official said the proposed ban on cryptocurrency trading was announced after “enough discussion” with other government agencies including the nation’s finance ministry and financial regulators.

Cryptocurrency trading in South Korea is very speculative and similar to gambling. Major cryptocurrencies like bitcoin and ethereum are priced significantly higher in the country’s exchanges than elsewhere in the world. For example, bitcoin traded at $17,169.65 per token at local exchange Bithumb, which was a 31% premium to the CoinDesk average price. That difference in price is called a “kimchi premium” by many traders. [..] earlier this week, industry data provider CoinMarketCap tweeted that it would exclude some South Korean exchanges in price calculations due to the “extreme divergence in prices from the rest of the world” and for “limited arbitrage opportunity.”

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Beijing doesn’t see bitcoin as an asset to its power politics.

China Moves To Shutter Bitcoin Mines (CNBC)

China is moving to eradicate the country’s bitcoin mining industry over concerns about excessive electricity consumption and financial risk, reflecting authorities’ judgment that cryptocurrencies are not a strategic industry. A multi-agency task force has instructed provincial governments to “actively guide” companies in their respective regions to exit the cryptocurrency mining industry, according to a document seen by the Financial Times. The move to pressure miners follows China’s shutdown of local bitcoin exchanges and its ban on initial coin offerings. Miners create new bitcoins by solving complex maths problems whose solutions are used to validate new bitcoin transactions. Though ostensibly a computational task, the reliance on raw computing power makes the process more akin to industrial manufacturing than traditional high-technology businesses.

Many bitcoin miners have established operations in remote areas without even registering a company. Some have also skirted Chinese regulations that forbid end users from purchasing electricity directly from power producers rather than grid operators. China mines about three-quarters of the world’s bitcoins, according to Liao Xiang, chief executive of Lightningasic, a Shenzhen-based mining operation. Chinese miners have taken advantage of cheap electricity in regions rich in coal or hydroelectric power, including Xinjiang, Inner Mongolia, Sichuan and Yunnan. The global industry accounts for 0.17% of global electricity consumption, more than 161 individual countries, according to Digiconomist, a website that tracks the industry.

[..] Bitcoin mining “consumes a large amount of electricity and also encourages a spirit of speculation in ‘virtual currencies'”, according to the document. Mining operations contradict efforts to prevent financial risk and to discourage activities that “deviate from the needs of the real economy”, it added. The internet finance task force, which includes the People’s Bank of China, has previously led regulatory tightening efforts on peer-to-peer lending and online consumer loans. The order does not call on regional authorities to shut mining operations directly, but rather to squeeze them out by strictly enforcing policies on electricity consumption, land use, tax collection and environmental regulation

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How Democrats sell out Dreamers.

Buy Off Trump With the Wall (Lowry)

There is a very easy way for Democrats to get major concessions from President Donald Trump on immigration: Give him his Wall. This is the key to a deal codifying the Deferred Action for Childhood Arrivals program, the Obama-era de facto amnesty for a segment of so-called Dreamers. All it takes is giving Trump a plausible start to the Wall that the president can then, in his inimitable way, promote as the greatest structure built on a border since Hadrian began his famous handiwork at the northern limit of the Roman Empire in 122. That the Democrats very likely won’t do this speaks to their irrational aversion to a Wall that they can’t view dispassionately any more than Trump can. It used to be that enhanced security on the border, and yes, a physical structure that in places is effectively a wall, had bipartisan support.

The Secure Fence Act of 2006 passed the House by a vote of 283-138 and the Senate 80-19. It called for building roughly 700 miles of double-layer fencing on the border, and no one seemed to believe that the United States had irreparably sullied its reputation. This wasn’t the first time anyone had thought of a fence, of course. There had been barriers in the San Diego area for a very long time, although not particularly robust ones. Beginning in the 1980s, more serious structures were built. According to the San Diego Union-Tribune, there are 46 miles of fencing overall and 13 miles of double fencing in the San Diego-Tijuana corridor, where there used to be a nightly influx of undocumented immigrants. In some sections, the barriers are 10-feet-tall military helicopter pads indistinguishable from a wall.

Again, no one believes San Diego has closed itself off from the world by adopting a common-sensical and — in this urban area — effective prophylactic against illegal immigration. But Democrats now find find physical barriers on the border offensive, especially if they have enough solidity to be called a Wall. One immigration advocate, in a typical sentiment, told The Huffington Post that the Wall is a “tool to instill hate and division.” This lunacy has rapidly become Democratic orthodoxy. Harry Enten of 538 notes that in 2006 almost 40% of Democrats supported building a Wall. By February of last year, Democrats were against it by 89% to 8%.

The hostility toward the Wall is part of a broader Democratic leftward lurch on immigration, but also a simple schoolyard calculus that if Trump supports something, they must oppose it. This forecloses the most basic legislative give-and-take. If Nancy Pelosi and Chuck Schumer gave Trump something significant on the Wall, they would be able to find their way home — as John Jay said after concluding an unpopular treaty with the British in 1795 — by the light of their own burning effigies. Their voters would scorn them as traitors complicit in the alleged horrid bigotry of Donald J. Trump.

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Well, no. Just another instance of everything being insinuated, in the hope that a sliver is remembered. Fake news.

Russian Bid To Influence Brexit Vote Detailed In New US Senate Report (G.)

Russia’s attempts to influence British democracy and the potential vulnerability of parts of the UK political system to anti-democratic meddling during the EU referendum have been detailed in a report prepared by the US Senate. The report by Democrats on the Senate foreign relations committee, titled Putin’s asymmetric assault on democracy in Russia and Europe: implications for US national security, pinpoints the way in which UK campaign finance laws do not require disclosure of political donations if they are from “the beneficial owners of non-British companies that are incorporated in the EU and carry out business in the UK”. This opacity, the report suggests, “may have enabled Russian-related money to be directed with insufficient scrutiny to various UK political actors”.

“Investigative journalists have also raised questions about the sources of sudden and possibly illicit wealth that may have been directed to support the Brexit ‘Leave’ campaign.” The UK Electoral Commission has already launched an investigation into the issue. The senators point out that Ukip and its then-leader, Nigel Farage, did not just fan anti-EU sentiment but also “criticised European sanctions on Russia, and provided flattering assessments of Russian President Putin”. The report adds that although officially the Russian government asserted its neutrality on Brexit, its English-language media outlets RT and Sputnik covered the referendum campaign extensively and offered ‘’systematically one-sided coverage’’. The senators also challenge the adequacy of the investigations by Facebook and Twitter into the allegations of widespread social media interference by the Russians during the referendum.

They reference University of Edinburgh research showing more than 400 Russian-run Twitter accounts that had been active in the US election had also been actively posting about Brexit. In addition, the senators noted that research conducted by a joint team of experts from the University of California at Berkeley and Swansea University reportedly identified 150,000 Twitter accounts with various Russian ties that disseminated messages about Brexit. The report also points to the vast flow of Russian money into the UK, including the London property market. It records how the Metropolitan police noted that a total value of £180m in properties in the UK had been put under investigation as possibly purchased with corrupt proceeds by secretive offshore companies.

Overall the report breaks little new ground in terms of fresh evidence but says the picture remains incomplete. “The allegations that have emerged of Russian interference prior to the Brexit referendum are all the more stunning given the innate resilience within British society to the Kremlin’s anti-democratic agenda,” the senators wrote. The report, which chronicles Russian disinformation efforts in 19 countries, calls on Donald Trump to assert leadership on Russian meddling in the 2016 presidential election, saying: “Never before in American history has so clear a threat to national security been so clearly ignored by a US president.”

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Don’t hold your breath. US and UK want revenge.

Assange Gets Ecuador ID; ‘First Step’ To Diplomatic Immunity? (RT)

The Ecuadorian ID reportedly granted to Julian Assange could mark his first step to obtaining diplomatic immunity, as Ecuador wants to resolve Assange’s indefinite embassy stay, human rights activist Peter Tatchell told RT. “Granting an identity card is potentially the first step towards granting citizenship of Ecuador. And there is a possibility that he could be then granted a diplomatic status, which would give him diplomatic immunity,” Tatchell said. He added that diplomatic immunity would mean that the WikiLeaks co-founder would be “free to leave the embassy and travel to Ecuador and the British government would not be able to lay a finger on him.”

Ecuadorian media reports Assange was given an ID card issued on December 21, citing “reliable sources” and providing the civil registry number of the document. The whistleblower also uploaded a photo of himself on Twitter wearing a yellow, blue and red shirt, the colors of the Ecuadorian flag, but made not comments on the issue. nEcuador usually issues such ID cards for people claiming residency status, which are called cedulas. It is, however, unclear whether Assange was granted residency status or full citizenship.

However, Tatchell says “the Ecuadorian government has made it very clear that it wants a resolution [of this whole situation around Assange] and they are prepared to negotiate [to give] a way for Julian Assange [to leave] the embassy.” He added that “granting him [Assange] an identity card is a new development that can open the door for further things in the future.” The Vienna convention on diplomatic relations states that someone who holds a diplomatic passport is immune from prosecution, the activist explained. It is still no guarantee, however. “There is still a possibility that, even if he was granted diplomatic immunity by the Ecuadorians, the British government might still try to snatch him,” Tatchell said, although “many British officials would be glad to see Assange getting a diplomatic passport and leaving [the UK],” he added.

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Debt. Colony. Forever.

Greece to Remain Under Lenders’ Supervision Until 2059 – Handelsblatt (GR)

In a report about Greece’s new omnibus bill and a potential break from its bailout in August 2018, German newspaper Handelsblatt claims the country will remain under lenders’ supervision for another 40 years. The newspaper says the enormous bill, which was introduced to parliament on Tuesday and is expected to be put to vote next Monday, is highly detailed but lawmakers have not been given enough time to scrutinize it. “The plan is that the multi-bill will pass from the Greek parliament before the next Eurogroup meeting on January 22, so that Greece’s lenders can release the next €5.5 billion bailout tranche, leading the country out of its bailout obligations by August 2018,” the paper notes. It adds that the short time afforded to lawmakers to study the bill and debate it is exactly what Greek PM Alexis Tsipras needs for a smooth vote.

The German paper also notes protests and strikes against the bill scheduled for next Friday and Monday. In spite of the fact the bill will lead to further wage and pension cuts, as well as tax increases, the government majority in parliament — despite vocal unhappiness from some of Tsipras’ own SYRIZA lawmakers — is expected to vote for it, the report says. “Tsipras has pledged to his supporters that the country will break its austerity vicious circle next August and throw out its despised lenders for good,” the report adds. “But with the country committed to more austerity measures until 2022, that is self-delusion.” “A total of 80% of the Greek debt remains in the hands of the country’s lenders,” Handelsblatt concludes. “This means that until Greece pays up its debt, which, with today’s rates it will manage to do by 2059, the country will be under its lenders’ financial supervision.”

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Same findings as the German report last year. This is the food chain that feeds us.

Insect Declines: New Alarm Over Mayfly Is ‘Tip Of Iceberg’ (G.)

Modest levels of pollution found in many English rivers are having a devastating impact on mayflies, new research suggests, killing about 80% of all eggs. Clouds of emerging mayflies were once a regular sight on English summer evenings and they are a key part of the food chain that supports fish, birds and mammals. The finding that even pollution well below guidelines can cause serious harm adds to concerns about plummeting insect numbers. In October, a study found that the abundance of flying insects has plunged by 75% in 25 years, prompting warnings that the world is “on course for ecological Armageddon”, with profound impacts on human society.

Paul Knight, chief executive of Salmon and Trout Conservation (STC), which is conducting an in-depth three-year survey of rivers, said: “The results of this groundbreaking new study are irrefutable. We believe this is just the tip of the iceberg. Lose your invertebrates and other species will follow.” The new research looked at the blue-winged olive, a common mayfly present across the British Isles and most of continental Europe. Its numbers have fallen significantly in recent decades and it has almost vanished from some English rivers. The prime suspects for this decline are fine sediment and phosphate pollution in rivers, which are washed off farmed fields and also result from untreated sewage. Some research has been done on how the larval and adult stages of mayflies are affected by pollution, but not on their eggs.

“The young life stages are the most vulnerable, just as with human babies,” said Nick Everall, at the Aquascience Consultancy and who led the research published in the journal Environmental Pollution. Blue-winged olive eggs are laid on river beds and then have to survive for up to eight months over winter before hatching into nymphs. However, experiments in the laboratory found that the fine sediment settles on the eggs and suffocates them, by preventing oxygen transferring into the egg. The sediment can also allow fungus to grow and kill the eggs, while phosphate is known to affect the development of eggs.

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The Cynical Society:

1) The BBC broadcasts David Attenborough’s new Blue Planet 2 series, in which one episode is all about -plastics- pollution
2) All of Britain watches, so the national conversation becomes ‘something must be done’
3) May has to do/say something, but the plastics industry are her friends, and she judges it’s all lip service anyway that will fade (and those who really care are not her voters)
4) She decides to pay only lip service too, and pushes the issue forward by 25 years, i.e. not her problem

Theresa May Vows To Eliminate UK Plastic Waste By 2042 (Ind.)

Theresa May will commit the UK to eliminating all avoidable plastic waste by 2042 as she launches the Government’s environmental plan for the next 25-years. Under the pledge waste such as the carrier bags, food packaging and disposable plastic straws that litter the country and pollute the seas would be abolished. But the target was given a frosty reception from environmental groups with one leading organisation saying it “lacks urgency, detail and bite”, while another said the country “can’t afford to wait” so long. The broader 25-year plan, first promised three years ago, will also urge supermarkets to set up “plastic-free aisles” for goods with no packaging and confirm plans to extend the 5p charge for carrier bags to all English retailers.

It comes as the Government seeks to burnish its environmental credentials with recent pledges on animal protection and plastic microbeads. But with concern growing around plastic waste, Ms May will say: “We look back in horror at some of the damage done to our environment in the past and wonder how anyone could have thought that, for example, dumping toxic chemicals, untreated, into rivers was ever the right thing to do. “In years to come, I think people will be shocked at how today we allow so much plastic to be produced needlessly. [..] Friends of the Earth CEO Craig Bennett said: “A 25 year plan is clearly needed – but with the nation facing an accelerating environmental crisis we can’t afford to wait a quarter of a century for urgent action to tackle the issues that already threaten our lives, health and planet.”

He went on: “If Theresa May wants to champion the environment she must spell out the bold measures her Government will take in the next few weeks and months.” WWF Chief Executive Tanya Steele welcomed “any step” to reduce plastic waste, adding that plastic-free aisles can spur change. But she said: “If we really want to solve this problem, we need to think bigger and ultimately move towards an end to single-use plastics.” Shadow Environment Secretary Sue Hayman said the plan was now “years behind schedule” branding the plan “a cynical attempt at rebranding the Tories image”. She went on: “[It] appears to contain only weak proposals with Britain’s plastic waste crisis kicked into the long grass.” Liberal Democrat leader Vince Cable said “The Conservatives should be eliminating all avoidable plastic waste now – a target of 2042 beggars belief.”

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Apr 032017
 
 April 3, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , ,  


Paul Wolff Frankfurt Opera House 1934

 

‘Buy Property In Sydney And You’re ‘Pretty Well Set For Life’ (WS)
Sydney Property Prices Rise Almost 20% In Past 12 Months (G.)
Australia Sticks With Blunt Instruments To Battle Housing Bubble (R.)
A ‘Sleeping Beast’ In The Markets Is About To Be Unleashed – SocGen (BI)
Commercial Real Estate Is The Next ”Big Short” (F.)
Euro Is A ‘Knife In The Ribs’ Of The French Says Le Pen (R.)
ECB Leads The Cure For Euro-Pessimism (CNBC)
Scotland Yard Examines Allegations Of Saudi War Crimes In Yemen (G.)
Greek Households Spend €40 Less Per Month On Supermarket Purchases (KTG)
Greece To Accelerate Return Of Migrants To Turkey As Arrivals Pick Up (K.)

 

 

“Once you are in the Sydney housing market, you are pretty well set then for the rest of your life.”

‘Buy Property In Sydney And You’re ‘Pretty Well Set For Life’ (WS)

How far can a desperate government go to keep the whole overleveraged edifice of a housing bubble from tumbling down and doing God-knows-what to the economy and the banks? Australia is trying to find out. The housing bubble in Sydney and Melbourne, by now among the top in the world, is taking on grotesque proportions, not only in price increases, but also in political pronouncements. So much of the economy depends on this bubble that no politician can imagine bringing it down to earth. Prices for all types of homes in Sydney jumped 19% in March year-over-year, according to CoreLogic, with houses up nearly 20% and “units” (we’d call them condos) up 15%. Sydney’s home prices have nearly doubled since 2008. In Melbourne, overall home prices jumped 16%, with houses up 17%, and condos up 5%. The index for all dwellings in Canberra and Hobart also rose in the double-digits.

In Adelaide and Brisbane, prices rose in the mid-single digits. Perth and Darwin showed declines in the 4.5% range. The CoreLogic index is not based on sales pairs, such as the Case-Shiller index in the US, or on median prices, but on its own “hedonic methodology,” which, like the other two methods, has plenty of critics. The government has its own Residential Property Price Indexes. The latest edition, released on March 21, was for Q4 2016, so a little slow. Based on the median price, the index for Sydney jumped 10.3% and for Melbourne 10.8%. Real estate is highly leveraged, and household debt is at an all-time high. Wages even in Sydney haven’t risen at the same pace. So the inevitable is beginning to happen. Affordability becomes a political issue, and delinquencies become a financial issue.

[..] On February 24, Anthony Roberts, New South Wales Minister for Planning and Housing, was speaking at the launch of a 690-unit apartment development at Olympic Park, a suburb of Sydney, heaping praise on the developer for having committed to offer 60 units first to first-time buyers. A new policy on housing affordability would be announced in the “very near future,” Roberts said. But as a first step, he threw in an incentive for first-time buyers. Instead of the normal 10% down payment, they’d only need to make 5%. “This is the beginning, this is the start,” he said. And in hyping the Sydney housing market and the importance of getting in now or be priced out forever, he also said this: “This is about fairness, and this is about enabling people to get into the Sydney housing market. Once you are in the Sydney housing market, you are pretty well set then for the rest of your life.

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Get out while you can.

Sydney Property Prices Rise Almost 20% In Past 12 Months (G.)

Sydney property prices have increased by almost 20% in just 12 months, putting the city at the front of a nationwide trend that has seen dwelling values increase by 12.9% on average. Sydney house values soared by 19.65% in the past year, and unit values increased by 15.27%. New data from CoreLogic, released on Monday, shows house values in Melbourne (up 17.15%), Canberra (13.64%), and Hobart (11.05%) have followed Sydney’s rapid rise. Only homes in Perth (-4.68%) and Darwin (-4.41%) have bucked the trend, slipping backwards over the past year. CoreLogic’s five capital city aggregate – which includes Sydney, Melbourne, Brisbane and the Gold Coast, Adelaide and Perth – shows prices for houses and units rose 12.9% on average last year.

But the news comes as the ratings agency Moody’s warned an increasing number of borrowers have fallen behind on their mortgage and car repayments, saying more borrowers are set to join them amid rising underemployment, record-low wages growth and a more difficult housing market. On Monday, Moody’s said delinquencies for prime residential mortgage-backed securities increased to 1.61% in January, from 1.57% in December, while 30-day delinquencies for car loan asset-backed securities rose to 1.80%, from 1.54% over the same period. “Weaker economic conditions in states reliant on the mining industry, rising underemployment, weak wages growth and less favourable housing market conditions will drive delinquencies higher,” vice president and senior analyst Alena Chen said on Monday.

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More like no instruments at all: “..limit new interest-only loans to 30% of total new mortgage lending..”

Australia Sticks With Blunt Instruments To Battle Housing Bubble (R.)

In their struggle to cool red-hot property prices in Australia’s big cities, authorities are ratcheting up measures that could dent the whole market but avoiding more targeted steps that have had some success in New Zealand and China. Australian regulators first focused on reining in investment loans nationally in 2015, by imposing an annual limit of 10% on how much banks could expand their investor loan book. Those steps worked for a while, but the heat is on again in Sydney, where prices are rising almost 20% a year, having more than doubled since 2008, and Melbourne, where the pace is over 15%, according to property consultant Core Logic.

That and all-time high household debt prompted the Australian Prudential Regulatory Authority (APRA) to move again on Friday, asking banks to limit new interest-only loans to 30% of total new mortgage lending, from 40% now, and promising a lot of “monitoring”, “scrutinizing” and “observing”. Industry players doubt that will do the trick. “I personally don’t think this will have a material impact,” said Simon Orbell at mortgage broker Smartmove, as prices kept rising even though it was already a tough lending market. “Maybe more needs to be done,” he added. [..] There has been market speculation that the Reserve Bank of Australia will be forced to hike interest rates, a yet blunter instrument, though record low inflation and weak wages growth make that an unattractive option. There is also political resistance to measures that could make prices actually fall, with two thirds of households owning their homes.

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Too much uncertainty to unleash it.

A ‘Sleeping Beast’ In The Markets Is About To Be Unleashed – SocGen (BI)

The bond market has been quiet. Too quiet in fact. That’s about to change, says Societe Generale’s fixed income team led by Vincent Chaigneau. “Spring is likely to be more threatening for bond investors as US data improves, political risk in Europe ebbs and investors refocus on a slow central bank exits,” the team wrote in a note to clients on Thursday. The note is titled “The Sleeping Beast.” In the wake of the U.S. Presidential election, traders priced in the prospect that Donald Trump’s agenda of a protectionist trade policy, cutting taxes, rolling back regulations, and massive infrastructure would bring back inflation to the United States. Reflecting this, the yield on 10-year Treasurys rallied more than 80 basis points, reaching a high of 2.64%, in the weeks following the election.

But for the last few months, the yield has been trapped in a tight 35 basis point range as traders take a wait-and-see approach in regards to Trump’s ability to execute his proposed agenda. “We expect that to reverse in spring, especially if Trump proves a little more effective in pushing his agenda through Congress,” Societe Generale wrote. “Treasuries too present some seasonal patterns: the average of the past five years shows the 10yT reaching a low around mid-April before bearish forces start to take over.”

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America turns on the mall.

Commercial Real Estate Is The Next ”Big Short” (F.)

A small but growing group of hedge funds are positioning themselves to profit from the collapse of the real estate market. Sounds like 2007, right? It’s actually happening right now. But this time, hedge funds (along with Deutsche Bank and Morgan Stanley) aren’t targeting subprime mortgages—they’re going after commercial real estate. It’s no secret retailers and malls have been struggling for years, but it looks like the perfect storm is set to hit them in 2017. Bearish bets against commercial loans jumped 50% year-over-year in February—and with problems piling up for malls, it’s no wonder. Around $3.5 billion in retail loans were liquidated in 2016. Investment firm Gapstow Capital said losses on mall loans have been “meaningfully higher than in other areas.” This is because malls are reliant on retailers like Macy’s, J.C. Penny and Sears. Unfortunately for these landlords, their tenants’ businesses are failing, which brings us to…

As a result of falling sales, retailers are shutting up shop at a rate that has not been seen since the 2008 financial crisis.

…and they plan to close hundreds more over the coming years, which is very bad news for malls. Most malls are dependent on one or more of these big retailers. When anchor stores close, it reduces foot traffic, and that hurts other retailers. This begins a cycle of blight, leading other tenants to leave. Alder Hill (a hedge fund started by associates of billionaire David Tepper) is bearish on commercial loans and expects 2017 to be a “tipping point.” Morningstar Credit Ratings estimates roughly 40% of the loans due this year won’t be paid. This comes at a bad time for the industry. Commercial real estate prices have been on a tear since 2009, but with vacancies rising, prices have stagnated.

This, coupled with new rules that came into effect in December (which force banks to hold at least 5% of the loans they make on their books), has caused loan growth to stall. As a result, leading retail analyst Jan Rogers Kniffen expects around one-third of American malls to close in the coming years. So, what are the implications of this commercial collapse?

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But the French love the euro. Hard sell.

Euro Is A ‘Knife In The Ribs’ Of The French Says Le Pen (R.)

French presidential candidate Marine Le Pen told a political rally on Sunday that the euro currency which she wants France to ditch was like a knife in the ribs of the French people. The leader of the eurosceptic and anti-immigrant National Front (FN) also told the rally in the city of Bordeaux that the forthcoming election for president could herald a “change in civilization”. Encouraged by the unexpected election of Donald Trump in the United States and by Britain’s vote to leave the European Union, Le Pen hopes to profit from a similar populist momentum in France, though opinion polls suggest she will lose the May 7 run-off. “We are at the mercy of a currency adapted to Germany and not to our economy. The euro is mostly a knife stuck in our ribs to make us go where others want us to go,” Le Pen said to loud cheers and applause.

Reiterating her anti-globalization and anti-immigration views, she declared: “We do not want France to be open to all commercial and human flows, without protection and borders.” A government under Le Pen’s presidency would take France out of the euro zone and bring back a national currency, hold a referendum on its EU membership and slap taxes on imports and on companies hiring foreigners. Le Pen says she would curb migration, expel all illegal migrants and restrict certain rights now available to all residents, including free education, to French citizens. She hit out at her two main opponents in the French election, independent centrist Emmanuel Macron and conservative candidate Francois Fillon, saying they belonged to “the same system” “The system is panicking because it sees people are waking up,” she said.

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Draghi slays austerity?

ECB Leads The Cure For Euro-Pessimism (CNBC)

The euro-sclerosis and the euro-pessimism are only a few of the old neologisms that got a new lease on life thanks to “reformers” and “crisis managers” who devastated the euro area economy with their – take a deep breath – “austerity growth model,” consisting of deep public spending cuts, tax hikes, jobs-destroying structural reforms and a monetary policy that should look the other way. Predictably, the area’s economy took it on the chin and went down for the count, with millions of lives destroyed by soaring poverty and destitution – until the ECB stepped in to provide the antidote to that cruel nostrum and to begin a long process of healing and recovery.

The ECB’s intervention eventually stiffened the spines, and gave some oxygen, to scared and disoriented political leaders in France, Italy, Spain and Portugal – exactly one-half of the euro area’s GDP – who abandoned the fiscal madness and structural destruction to latch on to the life jacket thrown at them by their lender of last resort. The economic recovery we see now is a result of that policy mix. At 1.7%, the euro area growth last year matched the pace of the U.S. economy and seems poised for further gains in the months ahead. The ECB-driven recovery was also reflected in steadily rising asset values. As of last Friday, the euro area equity prices (Euro Stoxx 50 in dollar terms) were 17.3% above their year-earlier level, with nearly half of that increase (7.6%) recorded since the beginning of this year.

[..] France is the next political test with the first round of elections on April 23. Again, anybody betting against the euro and the EU will lose big. According to the French media, voters are largely indifferent toward the presidential candidates, but the economy is improving and low credit costs have unleashed a real estate boom that’s triggering solid consumer spending. The French are also great fans of the euro: An opinion poll published last Tuesday (March 25) shows that 75% of the French like the European currency, and half of them are pleased with the EU, although they believe that some of their neighbors were greater beneficiaries of the whole project. The French, of course, have Germany in mind. They are looking at Germany’s huge trade surpluses and the industrial takeover by the world-beating manufacturing companies across the Rhine.

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It should be investigating British war crimes.

Scotland Yard Examines Allegations Of Saudi War Crimes In Yemen (G.)

Scotland Yard is examining allegations of war crimes by Saudi Arabia in Yemen, the Guardian can reveal, triggering a possible diplomatic row with Britain on the eve of Theresa May’s visit to the Arab state. The Metropolitan police confirmed that their war crimes unit was assessing whether criminal prosecutions could be brought over Saudi Arabia’s devastating aerial campaign in Yemen. The force’s SO15 counter-terrorism unit revealed to a London human rights lawyer that it had launched a “scoping exercise” into the claims before Maj Gen Ahmed al-Asiri’s visit to the capital last week. The revelation comes as May plans to underline Britain’s close relationship with the Saudi royal family on her visit to the Arab state this week, in which tackling the terror threat from Islamic State will be a key factor.

Speaking in advance of the trip, in which she will also visit Jordan, the prime minister said she wanted to “herald a further intensification in relations between our countries and deepen true strategic partnerships”. She argued that the intelligence relationship with Saudi Arabia had been critical, potentially saving hundreds of lives in the UK, and claimed there were huge possibilities for closer trade links as the UK moves towards leaving the European Union. May plans to stress the need for collaboration in the wake of the Westminster terror attack, while also pledging humanitarian support to Jordan to help it handle the huge volumes of refugees displaced by the Syrian conflict.

But the trip comes under the shadow of a war in Yemen that has killed more than 10,000 civilians and displaced more than 3 million people. The Saudi-led coalition has been accused of killing thousands of civilians and triggering a humanitarian catastrophe in one of the region’s poorest countries. The UK, which along with the US supports the Saudis against the Houthis, has been urged to reconsider its arms exports to Saudi Arabia in light of the bloody air campaign.

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Austerity kills people and economies.

Greek Households Spend €40 Less Per Month On Supermarket Purchases (KTG)

A significant decrease of 13% has been recorded in the amount Greek households spend for daily purchases at the country’s supermarkets. This is the logical consequence caused by low wages, high unemployment rates and increased direct and indirect taxes. Factors that have lead to impoverishment of large groups of the Greek society. Worth mentioning are the extra charges (special consumption fees) imposed as of 1.1.2017 in a variety of supermarket products like coffee. Greek households spend monthly forty euros less for their shopping at the supermarket than in the previous year. The average monthly expenditure of households at the supermarket amounts to 274 euros from 310 last year.

According to research conducted by the Economic University of Athens, the expenditure decrease has been confirmed also by the turnover of the supermarkets. The decrease in sales was 10% in January 2017. The was a slight increase of 2.9% in February, but a serious decline of 15% in March. 63% of respondents said they buy fewer products. 45.8% said they restricted to what is necessary. At the same time, 54.4% said that buy cheaper products especially following a market investigation and that they chase discount offers and products of private label. 81.5% said that they compare prices before they decide which product they will pick up from the supermarket shelf.

99.2% of consumers stated that they do research before going to the supermarket, they know in advance what to buy and they avoid impulse purchases. 38% of respondents said that they would make fewer purchases in 2017, 5% that they will increase their purchases. 57% estimate that their purchases will remain unchanged. The average expenditure per supermarket visit remains almost unchanged. Expenditure in 2017 is at an average of €50.4 euros. It was at 49.5 euros in 2016. However, the frequency of visits has declined down to 6.8 visits per month from 8.5 visits last year.

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Yes, it can still get worse.

Greece To Accelerate Return Of Migrants To Turkey As Arrivals Pick Up (K.)

As the inflow of undocumented migrants to the islands of the eastern Aegean rises with the improving weather, the government is planning action to ease the pressure on increasingly overcrowded reception centers. In the coming days, Migration Minister Yiannis Mouzalas is expected to issue a circular, banning migrants who appeal against a rejection of their application for political asylum from a voluntary repatriation scheme being run by the International Organization for Migration (IOM). Meanwhile police on the islands are boosting efforts to locate and detain migrants who face deportation to Turkey in line with an agreement signed last year between Ankara and Brussels.

Last week, a new detention center opened on Kos, the function of which will be to detain migrants facing deportation. Others awaiting the outcome of asylum applications or inclusion in the IOM’s repatriation scheme are to remain in the island’s main reception center. A similar “closed” center for migrants awaiting deportation is operating on Lesvos. However, police face a problem on Chios, which has seen arrivals from Turkey intensify in recent days, and where local residents vehemently oppose the creation of such a center. A police official told Kathimerini that the main police precinct on the island is already full of migrants and there are no other facilities to accommodate new arrivals. “We don’t know what to do,” he said.

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Feb 102017
 
 February 10, 2017  Posted by at 10:05 am Finance Tagged with: , , , , , , , , ,  


Al Capone’s free soup kitchen, Chicago, 1931

 

US Appeals Court Upholds Suspension Of Trump Travel Ban (AP)
The Crash Will Be Violent (David Stockman)
Foreign Governments Dump US Treasuries as Never Before; Who is Buying? (WS)
Impediments to Growth (Lacy Hunt)
A Game Of Chess (BP)
Biography of President Donald Trump, a.k.a. “Wayne Newton” (Jim Kunstler)
What Would it Cost a Country to Leave the Euro? (WS)
Varoufakis Accuses Creditors Of Going After Greece’s ‘Little People’ (Ind.)
Greece Hopeful Of Imminent EU Debt Deal Despite German Warning (G.)
Greek Crisis Descends Into Blame Game (Tel.)
China Bitcoin Exchanges Halt Withdrawals After PBOC Talks (BBG)
Where US Immigrants Have Come From Over Time (BI)
The World According to a Free-Range Short Seller (BBG)
Radiation at Japan’s Fukushima Reactor Is Now at ‘Unimaginable’ Levels (Fox)
Ground-Breaking Research Uncovers New Risks of GMOs, Glyphosate (NGR)
‘No One Accepts Responsibility’: Thirteen Refugees Dead In Greece (IRR)

 

 

It is crucial for the US political system to be tested this way. So far, it seems to work, but we’re in very early innings. Important to recognize that Trump and Bannon merely attempt to use the broader executive powers developed under Clinton, Bush and Obama. A major problem can be that the judiciary has alredy become very politicized, with presidents getting to pick judges.

US Appeals Court Upholds Suspension Of Trump Travel Ban (AP)

Trump’s ban on travelers from seven predominantly Muslim nations, dealing another legal setback to the new administration’s immigration policy. In a unanimous decision, the panel of three judges from the San Francisco-based 9th U.S. Circuit Court of Appeals declined to block a lower-court ruling that suspended the ban and allowed previously barred travelers to enter the U.S. An appeal to the U.S. Supreme Court is possible. The court rejected the administration’s claim that it did not have the authority to review the president’s executive order. “There is no precedent to support this claimed unreviewability, which runs contrary to the fundamental structure of our constitutional democracy,” the court said. The judges noted that the states had raised serious allegations about religious discrimination.

Following news of the ruling, Trump tweeted, “See you in court, the security of our nation is at stake!” U.S. District Judge James Robart in Seattle issued a temporary restraining order halting the ban last week after Washington state and Minnesota sued. The ban temporarily suspended the nation’s refugee program and immigration from countries that have raised terrorism concerns. Justice Department lawyers appealed to the 9th Circuit, arguing that the president has the constitutional power to restrict entry to the United States and that the courts cannot second-guess his determination that such a step was needed to prevent terrorism. The states said Trump’s travel ban harmed individuals, businesses and universities. Citing Trump’s campaign promise to stop Muslims from entering the U.S., they said the ban unconstitutionally blocked entry to people based on religion.

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“..the first half of the year will be consumed in nasty partisan battles over cabinet appointments, the Gorsuch nomination, interminable maneuvers over the travel ban and follow-on measures of extreme vetting and the Obamacare repeal/replace battle.”

The Crash Will Be Violent (David Stockman)

[..] What will be coming soon, however, is the mother of all debt ceiling crises — an eruption of beltway dysfunction that will finally demolish the notion that Trump is good for the economy and the stock market. The debt ceiling holiday ends on March 15, and it appears that the rudderless Treasury Department — Mnuchin has not yet been approved as Treasury Secretary and there are no Trump deputies, either — may be engaging in a bit of sabotage. That is, the cash balance has run down from a peak of about $450 billion to just $304 billion as of last Friday. Unless reversed soon, this means that the Treasury will run out of cash by perhaps July 4th rather than Labor Day. After that, all hell will break loose.

Washington has been obviously dysfunctional for years, but the virtue of the Great Disrupter is that his tweets, tangents, inconsistencies and unpredictabilities guarantee that the system will soon shut down entirely. Consequently, the first half of the year will be consumed in nasty partisan battles over cabinet appointments, the Gorsuch nomination, interminable maneuvers over the travel ban and follow-on measures of extreme vetting and the Obamacare repeal/replace battle. Then, the second half of 2017 will degenerate into a non-stop battle over raising the debt ceiling and continuing resolutions for fiscal year (FY) 2018 which begins October 1. That will mean, in turn, that there is no budget resolution embodying the Trump/GOP fiscal agenda, and therefore no basis for filibuster-proof “reconciliation instructions” on the tax cut.

This latter point, in fact, needs special emphasis. The frail GOP majorities now in place will be too battered and fractured by the interim battles to coalesce around a ten-year budget resolution that embodies the $10 trillion of incremental deficits already built into the CBO baseline — plus trillions more for defense, veterans, border control, the Mexican Wall, an infrastructure bonanza and big tax cuts, too. It will never happen. There is not remotely a GOP majority for such a resolution. But without an FY 2018 budget resolution, inertia and the K-Street lobbies will rule. Without a 51-vote majority rule in the Senate, a material, deficit-neutral cut in the corporate tax rate would be absolutely impossible to pass. Yet that’s exactly what the casino is currently pricing-in.

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Foreign investors.

Foreign Governments Dump US Treasuries as Never Before; Who is Buying? (WS)

It started with a whimper a couple of years ago and has turned into a roar: foreign governments are dumping US Treasuries. The signs are coming from all sides. The data from the US Treasury Department points at it. The People’s Bank of China points at it in its data releases on its foreign exchange reserves. Japan too has started selling Treasuries, as have other governments and central banks. Some, like China and Saudi Arabia, are unloading their foreign exchange reserves to counteract capital flight, prop up their own currencies, or defend a currency peg. Others might sell US Treasuries because QE is over and yields are rising as the Fed has embarked on ending its eight years of zero-interest-rate policy with what looks like years of wild flip-flopping, while some of the Fed heads are talking out loud about unwinding QE and shedding some of the Treasuries on its balance sheet.

Inflation has picked up too, and Treasury yields have begun to rise, and when yields rise, bond prices fall, and so unloading US Treasuries at what might be seen as the peak may just be an investment decision by some official institutions. The chart below from Goldman Sachs, via Christine Hughes at Otterwood Capital, shows the net transactions of US Treasury bonds and notes in billions of dollars by foreign official institutions (central banks, government funds, and the like) on a 12-month moving average. Note how it started with a whimper, bounced back a little, before turning into wholesale dumping, hitting record after record (red marks added):

The People’s Bank of China reported two days ago that foreign exchange reserves fell by another $12.3 billion in January, to $2.998 trillion, the seventh month in a row of declines, and the lowest in six years. They’re down 25%, or almost exactly $1 trillion, from their peak in June 2014 of nearly $4 trillion (via Trading Economics, red line added):

China’s foreign exchange reserves are composed of assets that are denominated in different currencies, but China does not provide details. So of the $1 trillion in reserves that it shed since 2014, not all were denominated in dollars. The US Treasury Department provides another partial view, based on data collected primarily from US-based custodians and broker-dealers that are holding these securities for China and other countries. But the US Treasury cannot determine which country owns the Treasuries held in custodial accounts overseas. Based on this limited data, China’s holdings of US Treasuries have plunged by $215.2 billion, or 17%, over the most recent 12 reporting months through November, to just above $1 trillion.

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From a Mish article quoting an unpublished report. I wonder when all these people will begin to understand my point that growth is gone. Only then will the pieces fall into place. Note: calling Weak Global Growth and Impediment to Growth sounds a bit silly.

Impediments to Growth (Lacy Hunt)

1. Unproductive Debt At the end of the third quarter, domestic nonfinancial debt and total debt reached $47.0 and $69.4 trillion, respectively. Neither of these figures includes a sizeable volume of vehicle and other leases that will come due in the next few years nor unfunded pension liabilities that will eventually be due. The total figure is much larger as it includes debt of financial institutions as well as foreign debt owed. The broader series points to the complexity of the debt overhang. Netting out the financial institutions and foreign debt is certainly appropriate for closed economies, but it is not appropriate for the current economy.

Total debt gained $3.1 trillion in the past four quarters, or $5.70 dollars for each $1.00 of GDP growth. From 1870 to 2015, $1.90 of total debt generated $1.00 dollar of GDP. We estimate that approximately $20 trillion of debt in the U.S. will reset within the next two years. Interest rates across the curve are up approximately 100 basis points from the lows of last year. Unless rates reverse, the annual interest costs will jump $200 billion within two years and move steadily higher thereafter as more debt obligations mature. This sum is equivalent to almost two-fifths of the $533 billion in nominal GDP in the past four quarters. This situation is the same problem that has constantly dogged highly indebted economies like the U.S., Japan and the Eurozone.

2. Record Global Debt The IMF calculated that the gross debt in the global non-financial sector was $217 trillion, or 325% of GDP, at the end of the third quarter of 2016. Total debt at the end of the third quarter 2016 was more than triple its level at the end of 1999. Debt in China surged by $3 trillion in just the first three quarters of 2016. Chinese debt at the end of the third quarter soared to 390% of GDP, an estimated 20% higher than U.S. debt-to-GDP. This debt surge explains the shortfall in the Chinese growth target for 2016, a major capital flight, a precipitous fall of the Yuan against the dollar and a large hike in their overnight lending rate. Such policies lose their effectiveness over time. [As stated by] Nobel laureate F. A. Hayek (1933):“To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about.”

3. Weak Global Growth Based on figures from the World Bank and the IMF through 2016, growth in a 60-country composite was just 1.1%, a fraction of the 7.2% average since 1961. Even with the small gain for 2016, the three-year average growth was -0.8%. As such, the last three years have provided more evidence that the benefits of a massive debt surge are elusive. World trade volume also confirms the fragile state of economic conditions. Trade peaked at 115.4 in February 2016, with September 2016 1.7% below that peak, according to the Netherlands Bureau of Economic Policy Analysis. Over the last 12 months, world trade volume fell 0.7%, compared to the 5.1% average growth since 1992.

4. Eroding Demographics World trade volume also confirms the fragile state of economic conditions. Trade peaked at 115.4 in February 2016, with September 2016 1.7% below that peak, according to the Netherlands Bureau of Economic Policy Analysis. Over the last 12 months, world trade volume fell 0.7%, compared to the 5.1% average growth since 1992.

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Absolutely delightful.

A Game Of Chess (BP)

Chess is a game where the number of possible positions rises at an astronomical rate. By the 2nd move of the game there are already 400 possible positions and after each person moves twice, that number rises to 8902. My coach explained to me that I was not trained enough to even begin to keep track of those things and that my only chance of ever winning was to take the initiative and never give it up. “You must know what your opponent will do next by playing his game for him.” was the advice I received. Now, I won’t bore you with the particulars but it boiled down to throwing punches each and every turn without exception. In other words, if my opponent must always waste his turn responding to what I am doing then he never gets an opportunity to come at me in the millions of possibilities that reside in the game. Again, if I throw the punch – even one that can be easily blocked, then I only have to worry about one combination and not millions.

My Russian chess coach next taught me that I should Proudly Announce what exactly I am doing and why I am doing it. He explained to me that bad chess players believe that they can hide their strategy even though all the pieces are right there in plain sight for anyone to see. A good chess player has no fear of this because they will choose positions that are unassailable so why not announce them? As a coach, I made all of my students tell each other why they were making the moves that they made as well as what they were planning next. It entirely removed luck from the game and quickly made them into superior players.

My Russian coach next stressed Time as something I should focus on to round out my game. He said that I shouldn’t move the same piece twice in a row and that my “wild punches” should focus on getting my pieces on to the board and into play as quickly as possible. So, if I do everything correctly, I have an opponent that will have a disorganized defense, no offense and few pieces even in play and this will work 9 out of 10 times. The only time it doesn’t work for me is when I go against players that have memorized hundreds of games and have memorized how to get out of these traps.

With all that said, let’s see if President Trump is playing chess. First, we can all agree that Trump, if nothing else, throws a lot of punches. We really saw this in the primaries where barely a day could go by without some scandal that would supposedly end his presidential bid. His opponents and the press erroneously thought that responding to each and every “outrage” was the correct thing to do without ever taking the time to think whether or not they had just walked into a trap. They would use their turn to block his Twitter attack but he wouldn’t move that piece again once that was in play but, instead, brought on the next outrage – just like my coach instructed me to do.

Second, Trump is very vocal in what he is going to do. Just like I had my students announced to each other their plans, Trump has been nothing but transparent about what he intends to do. After all, announcing your plans only works if your position is unassailable. It demoralizes your opponent. You rub their face in it. Another benefit to being vocal is that it encourages your opponent to bring out his favorite piece to deal with said announced plans. This is a big mistake as any good chess player will quickly recognize which piece his opponent favors and then go take them.

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“Fraid Jim lost it.

Biography of President Donald Trump, a.k.a. “Wayne Newton” (Jim Kunstler)

And so it happened years ago on the Trump family’s annual Christmas pilgrimage to Paraguay that Papa Fred and Mama Mary Anne fell in socially with the circle around Klaus Furtwänkler, Waffen-SS Gruppenführer (ret.) in the little resort village of Nueva Bavaria. The former commandant of the Flossenbürg work camp (granite quarries) introduced young Donald to the song “Danke Schoen” popularized by the vocalist Eva Braun at the 1936 Berlin Olympics. Since earliest childhood, with his love for the “spotlight,” Donald had entertained the family with renditions of Disney’s beloved hits, “Zip-a-dee-doo-dah,” “When I See an Elephant Fly,” and “Hi-Diddle-Dee-Dee (an Actor’s Life for Me).” The next evening, on Furtwänkler’s 3,000-hectare estancia, before an audience of fifty “special guests” at the Heiliger Abend buffet (Arapaima snapper with red cabbage and potato salad), Donald performed “Danke Schoen” to wild applause, propelling him into a career in show business. Not a few of the frauleins present fainted.


Young Donald or someone else?

To protect Papa’s real estate business interests in Queens, New York, Donald adopted the professional name “Wayne Newton” and was withdrawn from military school to perform on the county fair circuit across the states that would later self- identify by the color “red” — but which, given our adversarial relations with the USSR at the time, styled themselves red, white, and blue. Six month’s later, “Wayne” caught the eye of Las Vegas promoter Sal “Cukarach” Vaselino while playing the Refrigeration Engineers annual meet-up at the Sands Hotel, and then after a six-week smash engagement at the Golden Nugget in 1963, “Wayne” was inducted into the notorious Frank Sinatra / Dean Martin Rat-pack as its first underage member. (Rat-pack consigliere Peter Lawford introduced the talented lad to the concept of “sloppy seconds”).

[..] Back on the convention circuit with Jules the Singing Jackrabbit, Wayne played the 1983 National Realtors Association Pump-and-Dump Expo and was influenced to get his first real estate license. “Why pay for milk when you can own the cash cow,” keynote speaker Ivan Boesky advised “Wayne,” prompting him to return to his New York City “roots” and resume his identity as “The Donald,” son of “The Fred” Trump. A carefully orchestrated life of public appearances at Gotham charity events and a lavish wedding to model Ivana Zelníková reestablished Donald Trump as a fixture on the glittering Manhattan scene – meanwhile, a Greyhound Bus mechanic and aspiring country crooner named Bud Gorch, a “dead-ringer” look-alike for the erstwhile “Wayne Newton,” was recruited by the Trump Organization to impersonate the once-again in-demand Las Vegas star. Gorch-as-Wayne successfully premiered his new act at the National Colorectal Surgeons Association Chron’s and Colitis Congress and the “great switch” was achieved. The rest, as they say, is history!


Who actually was it onstage at the National Organ Transplant Association Convention, 1967?

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The door is ajar.

What Would it Cost a Country to Leave the Euro? (WS)

[Le Pen] is campaigning on taking France out of the euro (after holding a referendum) and re-denominating the entire €2.4 trillion pile of French government debt into new franc. Then the government can just print the money it wants to spend. There are some complications with her plan, including that the diverse and bickering French political class will unite into a slick monolithic bloc against her during the second round. And if she still wins, her government will face that bloc in parliament. But hey. And now people are seriously thinking about it. Greece was on the verge of leaving the euro, but then within a millimeter of actually taking the step, it blinked and inched back from the precipice in the hot summer of 2015. And so for now still no one knows what the cost would be to leave…

[..] Now ECB President Mario Draghi is stumbling into the fray. “The euro is irrevocable,” he told the European Parliament on Monday, to counter the populist rejection of the euro. “This is the treaty,” he said. Which evoked memories of the good ol’ days of the sovereign debt crisis, when, to put an end to it in July 2012, Draghi said that the euro was “irreversible” and that the ECB was “ready to do whatever it takes to preserve the euro.” At the time, the Spanish 10-year yield was above 7% and the Italian 10-year yield was above 6%. So now, same tune, different scenario. It’s not a debt crisis. It’s just a question of whether or not it’s possible to leave the euro, and if yes, how much it would cost. And that question has already been raised officially.

On January 18, Draghi had sent a letter to European Union lawmakers Marco Valli and Marco Zanni, telling them: “If a country were to leave the Eurosystem, its national central bank’s claims on or liabilities to the ECB would need to be settled in full.” That was the opening – the IF. “If a country were to leave…” It meant that a country could leave! It was the first official admission that this was actually possible. It was just a matter of cost. That’s how Zani saw Draghi’s response. Bloomberg: “I wanted to bring up the issue of exit from the euro and how it can happen,” he said in an interview before the testimony. “Draghi has now clearly admitted that such an exit is possible and now there is need to have more clarity about the cost. I’m sure that in case of Italy’s exit from the euro, benefits exceed costs.”

Alas, in his testimony before the European Parliament, Draghi refused to put a price tag on leaving the euro. Valli asked him whether the “liabilities” Draghi had referred to that would “need to be settled in full” were the so-called Target2 imbalances. These are a result of payment settlements within the European System of Central Banks. They’d soared during the debt crisis to hundreds of billions of euros, a sign of the underlying financial tensions between debtor and creditor countries. But Draghi dodged the question: “I cannot answer a question that is based on hypotheses, on assumptions which are not foreseen” by the European treaties, he said. “What I could do is send you a written answer which compares our Target2 system with the Federal Reserve-based system.” Which was very helpful.

But even though he refused to put a price tag on leaving the euro, the whole exchange confirmed that it’s possible to leave the euro, though there is nothing in the treaties that mentions leaving the euro.

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Yanis is spot on right. The Greeks are now being sacrificed on the altar of incumbents afraid to lose elections. The insane narrative that Germans and Dutch ‘give’ billions to Greece persists. That says a lot about the press in these countries.

Varoufakis Accuses Creditors Of Going After Greece’s ‘Little People’ (Ind.)

Former Greek finance minister Yanis Varoufakis has said that everyday life in Greece is unsustainable and that the country’s European creditors are going after the “little people” rather than “corrupt oligarchs”. Speaking to BBC Radio 4’s Today programme, the 55-year old economist said that the country has been put on a fiscal path which makes everyday life “unsustainable” in Greece. “The German finance minister agrees that no Greek government, however reformist it might be, can sustain the current debt obligations of Greece,” he said. Earlier in the day, Wolfgang Schäuble told German broadcaster ARD that Greece must reform or quit the euro. “A country in desperate need of reform has been made unreformable by unsustainable macroeconomic policies,” Mr Varoufakis said.

He said that “instead of attacking the worst cases of corruption, for six years now the creditors have been after the little people, the small pharmacists, the very poor pensioners instead of going for the oligarchies”. Greece in 2010 was given a huge loan that Mr Varoufakis said was not designed to save the bankrupt country but to “cynically transfer huge banking losses from the books of the Franco German banks onto the shoulders of the weakest taxpayers in Europe”. Earlier this week, the IMF warned Greece’s debts are on an “explosive” path, despite years of economic reform. The IMF has insisted on additional debt relief and reduced fiscal targets before it participates financially in Greece’s current bailout program. Germany, which faces national elections, has resisted such moves. Statistics agency ELSTAT said on Thursday that Greece’s jobless rate came in at 23% in November, unchanged from the previous month. But although the jobless rate has come down from record highs, it remains more than double the euro zone’s average of 9.8% in November.

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Why try anymore?

Greece Hopeful Of Imminent EU Debt Deal Despite German Warning (G.)

The Greek government has expressed hope of an imminent deal with its EU creditors, despite a warning from the German finance minister, Wolfgang Schäuble, that the country could cut its debts only by leaving the single currency. Athens is in a familiar stand-off with the German finance ministry as it seeks easier repayment terms on its €330bn debt pile, which the IMF has described as unsustainable and explosive. The IMF has so far declined to get involved in the latest Greek rescue effort, a three-year EU bailout worth €86bn set to run until August 2018. The fund says it will only join if Greece gets significant debt relief, although its board is split. Germany and the Netherlands, which both face elections this year, think the IMF’s involvement is crucial for the bailout plan to continue.

Tensions – and Greek borrowing costs – have risen in recent weeks, ahead of a meeting of eurozone finance ministers on 20 February, which is widely seen as the last moment to reach agreement before the eurozone election cycle. The Dutch go to the polls in March; French presidential elections follow in April-May and German elections in the autumn. George Katrougalos, Greece’s Europe minister, voiced confidence that a deal was within reach: “I am optimistic that we can have such an agreement before the Eurogroup of 20 February.” He told journalists in Brussels that Europe was not the problem. “If we had just to deal with the Europeans we would have already completed this review in December. All the delay is due to the ambivalence of the IMF to participate or not to participate.”

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“Klaus Regling, the managing director of the European Stability Mechanism, argued that “Greece’s debt situation does not have to be cause for alarm”…

Greek Crisis Descends Into Blame Game (Tel.)

Greece is under mounting pressure to embark on a new wave of economic reforms, as its international creditors demand extra efforts to drag the country out of its latest crisis. At the same time Germany is facing fresh demands from the International Monetary Fund (IMF) to write off some of the money it loaned to Greece in the most recent €86bn (£73bn) bailout. And the IMF has been forced to defend its dire predictions of permanent economic gloom as the Greek government rejects the IMF’s assessment of its reforms, public finances and economic performance. On top of that, the IMF itself is split, with a minority of directors pushing for extra spending cuts and tax hikes in Greece to try to improve its public finances. The IMF tried to address its internal splits, stressing that it wants debt relief for Greece combined with economic reforms, not austerity. It does still demand serious action, though – unless the economy picks up and debts are slashed, it has warned Greece’s debts are on an “explosive” path.

“Our strong preference is for a primary [Greek budget] surplus target of 1.5pc and that this should be accompanied by significant debt relief. We’ve referred to this as the ‘two legs’ of the programme that we think is required,” said Gerry RIce, the IMF’s spokesman. “We think this target, the 1.5, can be obtained by the policies envisaged by the current European Stability Mechanism programme – in short, the IMF is not asking for any more austerity for Greece.” That passes much of the pressure on to Germany and the other nations which have loaned Greece money, but are unwilling to write off the debt. Germany renewed the pressure on Greece to press ahead with more economic reforms. Its finance minister Wolfgang Schauble told a German TV station that the Lisbon Treaty prevents governments from writing off these debts.

Instead, he argued, Greece must continue reforming to make its economy more competitive. Meanwhile Klaus Regling, the managing director of the European Stability Mechanism, argued that “Greece’s debt situation does not have to be cause for alarm”. Writing in the Financial Times, he said that the IMF has failed to fully appreciate the amount of support on offer from other eurozone countries to Greece, largely in the form of very generous loans. “It is hard to overestimate the significance of this pledge, made by the finance ministers of the eurozone. Solidarity with Greece will continue,” he said. “We would not have lent this amount if we did not think we would get our money back,” he said, ruling out debt relief and backing more economic reforms.

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Beijing decides what bitcoin is.

China Bitcoin Exchanges Halt Withdrawals After PBOC Talks (BBG)

China’s three biggest bitcoin exchanges took steps to prevent withdrawals of the cryptocurrency amid pressure from the nation’s central bank to clamp down on capital outflows. BTC China subjected all bitcoin withdrawals to a 72-hour review, while Huobi and OKCoin suspended them completely, the three venues said in separate statements on Thursday. They all said the measures were in response to central bank requirements. Conversion to and from the yuan is not affected and the curbs will be dropped after updates to compliance systems, the exchanges said. The People’s Bank of China told nine bitcoin venues at a meeting in Beijing on Wednesday that it will close exchanges that violate rules on foreign exchange management, money laundering, and payment and settlement.

Chinese authorities are scrutinizing the cryptocurrency amid concerns it’s being used to spirit money out of the country, undermining official efforts to clamp down on capital outflows and prop up the yuan. Demand from investors in Asia’s largest economy, home to most of the world’s bitcoin trades, has fueled a 160% rally versus the dollar over the past year. Huobi and OKCoin said it will take about a month to upgrade systems in line with new PBOC guidelines. BTC China did not give a timing for when any upgrade would be completed. “The Chinese government is worried about capital flight,” said Arthur Hayes, a former market maker at Citigroup who now runs BitMEX, a bitcoin derivatives venue in Hong Kong. “Bitcoin is seen as another way to move money out of China, even though most people trade it for onshore capital appreciation and as another asset in their portfolio.”

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A long history of immgrant bans.

Where US Immigrants Have Come From Over Time (BI)

President Donald Trump’s recent executive orders on immigration may have reignited public debate, but Americans have long harbored anti-immigrant sentiments. One-third of Americans said in a 2016 Pew Research Center survey that immigrants are a “burden on our country because they take our jobs, housing and health care,” and 38% say immigration should be decreased. On the flip side, 59% of Americans say immigrants “strengthen our country because of their hard work and talents” and either think immigration should stay at its present level or increase. Today, immigrants make up 13.5% of the US population — on par with the share in 1860, according to the Migration Policy Institute. The overall number of immigrants coming to the US peaked from 2000-05 at 5 million, and has been declining since then. Here are the major regions where immigrants entering the US have come from since 1820:

US immigrants were largely of European descent in the 1800s, and started coming from the Americas (largely Mexico) in the 1960s. The sharp decrease in the 1920s is due to Congress passing the Exclusion Act, which set limits on the number of immigrants who could enter the US, based on a quota system of the percentage of nationalities already in the country. Barely anyone from Asia could enter at all. Congress revised the law in 1952, and immigration started to tick up again.

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Wonderful story.

The World According to a Free-Range Short Seller (BBG)

Some of the most respected people in the investing industry say that, dating back to the 1980s, nobody has had a better nose for sniffing out fraud than the 56-year-old Cohodes. He’s exposed suspect accounting at a number of high-profile companies, including the Belgian speech-recognition software developer Lernout & Hauspie, which went bankrupt in 2001 after being valued at about $10 billion, and mortgage lender NovaStar Financial, where his efforts earned him a Harvard Business School case study published in 2013. “I would not want to be his adversary if I was still a criminal today,” says Sam Antar, who was sentenced to six months of house arrest and 1,200 hours of community service for cooking the books at New York consumer-electronics chain Crazy Eddie in one of the largest securities frauds unearthed in the 1980s. “A character like Marc”—the two crossed paths later in his life when both were focused on detecting fraud—“you stay away from.”

And that’s been relatively easy for at least part of the past eight years. In 2008 the hedge fund Cohodes worked at for more than two decades went out of business under controversial circumstances. He maintains that Goldman Sachs, its prime broker, closed it too hastily by making needless margin calls, a claim Goldman disputes. The fallout spurred a bout of what Cohodes likens to post-traumatic stress disorder. “What happened to me would put the average person under,” he says. He retreated to his farm, where he recuperated by spending his days delivering eggs to San Francisco, cheering on the Oakland Raiders, and traveling to see a friend’s rock band, Collective Soul. Besides, the vast majority of stocks were rising because of central bank stimulus, depriving him of ideal opportunities as a short seller.

Now Cohodes is back. His time among the horses and chickens—outside the money management industry—may even have helped him return to the top of his game. Slimmed down and fighting fit, he’s been winning big on a series of short bets against Canadian companies since he made his comeback. Cohodes says he’s been betting against embattled Valeant Pharmaceuticals International since the summer of 2015. Around the same time, he began shorting another debt-laden Canadian drugmaker, Concordia International, which he calls “the poor man’s Valeant.” Both stocks lost most of their value last year. Cohodes says he’s committed to exposing companies that he believes may be ripping off ordinary, unwary investors—“Joe Six-pack,” as he puts it. “Legitimate companies don’t know who the f— I am. And they don’t care,” Cohodes says. “The bad guys? They know. And they do care.”

And he’ll go to great lengths to chase them down: dumpster-diving to find clues of wrongdoing, lambasting enemies on Twitter (where his rambunctious character is on full display), and hotfooting it across Las Vegas to check whether new business offices reported by NovaStar were real. (They weren’t, according to Cohodes; one was a private home, another a massage parlor.) “I’m a pretty driven guy,” he says.

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Still trying to find a good report on this, it’s frustrating. One detail: radiation levels are measured at a certain distance from the source, having some suggest real levels at that source could be 5000 sievert.

Radiation at Japan’s Fukushima Reactor Is Now at ‘Unimaginable’ Levels (Fox)

The radiation levels at Japan’s crippled Fukushima nuclear power plant are now at “unimaginable” levels. Adam Housley, who reported from the area in 2011 following the catastrophic triple-meltdown, said this morning that new fuel leaks have been discovered. He said the radiation levels – as high as 530 sieverts per hour – are now the highest they’ve been since 2011 when a tsunami hit the coastal reactor. “To put this in very simple terms. Four sieverts can kill a handful of people,” he explained.

He said that critics, including the U.S. military in 2011, have long questioned whether Tokyo Electric Power Co. (TEPCO) and officials have been providing accurate information on the severity of the radiation. TEPCO maintains that the radiation is confined to the site and not a risk to the public. It’s expected to take at least $300 billion and four decades to fix it. Housley said small levels of radiation are still being detected off the coasts of California and Oregon and scientists fear it could get worse. “The worry is with 300 tons of radioactive water going into the Pacific every day, what is that doing to the Pacific Ocean?” said Housley. He added that critics are now questioning whether the radiation has been this severe all along.

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Keep paying attention.

Ground-Breaking Research Uncovers New Risks of GMOs, Glyphosate (NGR)

Within just a few weeks, two studies were published in the peer-reviewed journal Scientific Reports that cast new doubts on the safety of genetically modified foods and glyphosate herbicide. The first found that a genetically modified corn, NK 603, was not substantially equivalent to a non-GMO counterpart, which is contrary to claims of GMO proponents. The second study found that glyphosate, the main ingredient in Monsanto’s Roundup herbicide, can cause a serious liver disease at doses thousands of times lower than that allowed by law. Dr. Michael Antoniou, Head of the Gene Expression and Therapy Group at King’s College London in the United Kingdom, led the ground-breaking research.

The main focus of research within Dr. Antoniou’s group is the study of the molecular mechanisms of the regulation of gene function. He has used these discoveries to develop efficient gene expression systems for efficacious and safe biotechnological applications, including gene therapy. More recently, Dr. Antoniou has expanded his research program to include using molecular profiling “omics” methods in evaluating the safety of foods derived from GMO crops, low dose exposure from their associated pesticides, and other chemical pollutants. Dr. Antoniou is also a co-author of GMO Myths and Truths, an evidence-based examination of the claims made for the safety of genetically modified crops and foods.

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Too many parties involved see misery as being a positive for their goals. Very few aim at actually solving the problems.

‘No One Accepts Responsibility’: Thirteen Refugees Dead In Greece (IRR)

The IRR has been trying to ascertain the circumstances in which thirteen refugees and migrants died since April 2016 in Greece, with six of these deaths occurring in hotspots. In only one of these cases are we in a position to provide the full name of the deceased; the only available identifier is nationality. At least six of the dead were refugees from Syria, including Syrian Kurds, three were from Afghanistan. Five of the dead were living at the hotspot at Moria, on the Greek island of Lesbos where over 3,000 refugees are accommodated, well above stated capacity. Those who died here did so because the heaters and gas canisters they had obtained in order to keep warm or cook food were faulty, or used in dangerous situations. An Iraqi man died of a cardiac arrest at a hotspot in Samos (refugee population around 1,800 in a place designed for less than half that number).

Since the Idomeni makeshift migrant camp close to the Macedonian border was cleared by police in May 2016, sub-standard government refugee camps lacking basic amenities have been set up, with three of the dead living in such facilities around Thessaloniki. The oldest to die was a grandmother of 66, the youngest a two-month-old baby. There are three children amongst the dead. The remaining two deaths we have recorded were of men who died of hypothermia after having crossed from Turkey via the river Evros. It’s likely that they made the perilous crossing in order to avoid being detained in the hotspots on the Greek islands. Autopsy results are shrouded in secrecy. Nevertheless, the facts speak for themselves. Overcrowded, unprotected and dangerous conditions are all symptoms of institutional neglect. The simple truth is that the securitisation of asylum policy has come at the expense of refugee protection, as well as basic human rights.

[..] The deaths that have occurred over the winter have at least been reported in the media, partly because human rights defenders, wary of the positive communication strategy of the UNHCR and the EU, issued a number of press releases. Even so, officialdom does not appear over- anxious to investigate. What is particularly worrying is the secrecy shrouding autopsy results, which, if left unchallenged, will ensure that completely avoidable deaths such as these become the new normal. Philippa Kempson, of the Eftalou/ Molovos refugee support group on Lesbos, told IRR News of her fear that the ‘deaths could be subject to cover ups’, and her particular concern that ‘the “accidental” deaths in Moria still do not have a conclusive cause of death’. She also drew attention to the escalation in suicide attempts, particularly amongst unaccompanied minors, at Moria. ‘No one accepts responsibility for what is going on, just a circle of blame,’ she said.

In fact, evading accountability is hard-wired into the way refugee reception is organised in Greece, as there is no central authority responsible for the camps’ administration but a number of actors – a mixture of EU officials, the Greek army and other Greek institutions, the Red Cross and the UNHCR. This means that when anything goes wrong, the various actors end up blaming each other – something academics refer to as a process of distanciation, in which complex chains of responsibility make it difficult to connect cause (ie, government policies) with effect (ie, border-related deaths). Guardian journalist Patrick Kingsley made a similar point in his recent exposé of how a multi-million pound fund administered by the EU’s aid department ECHO, implemented in Greece by UNHCR and aimed at creating adequate facilities to protect refugees from the winter, has been mishandled. Kingsley points out that as ‘no single actor has overall control of all funding and management decisions in the camps, this has allowed most parties to distance themselves from blame’.

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Dec 142016
 
 December 14, 2016  Posted by at 10:02 am Finance Tagged with: , , , , , , , , ,  


Louise Rosskam General store in Lincoln, Vermont 1940

Janet Yellen Needs To Announce Her Resignation — Not A Rate Hike (Crudele)
Stephen Roach Flags Trade, China Under Trump, Tillerson (CNBC)
Trump May Be Turning China’s $1.16 Trillion Of Treasuries Into A Weapon (F.)
China To Fine Unnamed US Automaker For ‘Monopolistic Behavior’ (R.)
Top US Spy Agency Has Not Embraced CIA Assessment On Russia Hacking (R.)
Lavrov Hints ISIS Recapture Of Palmyra Orchestrated By US (R.)
There Is More Than One Truth To Tell In The Awful Story Of Aleppo (Fisk)
How To Make A Profit From Defeating Climate Change (Carney/Bloomberg)
Greece ‘Boxed In’ as EU and IMF Fight Over Nation’s Debt Relief Plan (G.)
Tsipras To Propose To EU Leaders That IMF Be Excluded (Kath.)
Crisis Leaves Greeks Gloomiest In Europe And Beyond (R.)
Final EPA Study Confirms Fracking Contaminates Drinking Water (EW)
A Crack In Antarctica Is Forming An Iceberg The Size Of Delaware (PopSci)

 

 

“Yellen is a lame-duck chair. And Trump is going to want to cook her goose. It isn’t going to be pheasant.”

Janet Yellen Needs To Announce Her Resignation — Not A Rate Hike (Crudele)

If Janet Yellen had any class, she wouldn’t just be announcing an interest rate hike this week – she would also be offering her resignation. Yellen was appointed chair of the Federal Reserve by President Obama in 2014. While most heads of government agencies will soon be offering their resignations to President-elect Donald Trump, the Fed is not a government agency. It’s an independent entity. Which means Yellen doesn’t have to resign. Her term as chair – which makes her, perhaps, the second-most powerful person in Washington — doesn’t end until January 2018. And even then, she can hang around as a mere board member – one of 14 – until 2024. So, although Yellen and her colleagues have screwed things up, they get to keep their jobs. And boy has the Fed screwed things up — both before and since the financial crisis that started in 2007. [..]

It’s clear that Trump doesn’t like Yellen. And she hasn’t said anything nice about the incoming president or his policies either. So the two aren’t likely to get along. Yellen has shown no inclination to give up her job even though Trump has lashed out at her. “I think the Fed is being totally controlled,” Trump said during a campaign stop at the Economic Club of New York. “They’re not raising rates. And they’re being controlled politically.” Welcome to reality, Mr. Trump. The Fed lost its independence four decades ago. And you’ll be trying to control it soon. Yellen has hit back at Trump, saying that his pledge to spend $1 trillion on infrastructure to help the economy was dangerous. She said that after Trump spent that much money, there “is not a lot of fiscal space should a shock to the economy occur.”

Yellen also continued to assert her preposterous notion that the “economy is operating close to full employment.” If true, why hasn’t she already raised interest rates vigorously? And why, if the economy was doing so well, did the election go so badly for the incumbents — the Democrats? The Fed boss understands economics better than Trump. The higher borrowing costs that are already being seen (and which the Fed will pile onto this week) will automatically cause government borrowing costs – and therefore, spending – to increase and make US debt levels much worse. How much worse? That depends on how high rates go and how reluctant the Chinese are to continue to lend us money, especially now that Trump has picked a fight with Beijing. Yellen is a lame-duck chair. And Trump is going to want to cook her goose. It isn’t going to be pheasant.

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Few people in the west know China the way Roach does.

Stephen Roach Flags Trade, China Under Trump, Tillerson (CNBC)

Stock markets are euphoric after Donald Trump’s victory as pundits bet on U.S. economic growth based on the president-elect’s stimulus plans, but be aware of trade deficits and funding U.S. consumption, said Yale economist and noted author on China, Stephen Roach. “Given the overall savings of the U.S., that spells bigger trade deficits and for a president who is clearly raising some protectionist flags at a time when our trade deficits are going to widen, that’s a big disconnect,” Roach, a former chairman of Morgan Stanley Asia and chief economist, told CNBC’s “Squawk Box”. “The idea of larger trade deficits colliding with protectionist shifts in policy is a very worrisome development for the U.S. and for the broader global economy,” added Roach.

Roach’s comments come against a background of Trump having campaigned on remedying a wide trade gap in favor of Beijing that he said was spurred by moves to artificially weaken the yuan and restrict entry into home markets. He has also angered China by taking a congratulatory phone call from Taiwan President Tsai Ing-wen and calling into question the foundations of the “One China” policy. China is the world’s top holder of U.S Treasurys, and any major change in that stance would have broad macroeconomic impact. “The deeper question is less about the integrity of the leadership skills he can bring to the job, but how much scope for action he will have in the Trump administration … (after) Mr Trump has made some very strong statements about a number of critical foreign policy issues,” said Roach.

Roach also commented broadly on issues that will have to be resolved in the early phase of a Trump administration, including how a U.S. savings shortfall will be financed, suggesting choices of higher interest rates or a weak dollar as possibilities. He also expects a reassessment of Trump’s economic policies and outcomes in late 2017. As for Trump’s goals to shore up the battered manufacturing industries, Roach said Americans will have to pay a price for penalizing offshore operations. “As they bring those activities home, the cost of goods sold, the prices that go to American families who are hard strapped who voted for Mr. Trump, those prices are going to go up … We can’t have it both ways,”he said.

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Only, the author doesn’t really say how.

Trump May Be Turning China’s $1.16 Trillion Of Treasuries Into A Weapon (F.)

When Donald Trump talks about China devaluing its currency it’s difficult for investors to figure out exactly what he’s trying to convey. China, in fact, is trying to strengthen its own currency against the dollar as part of an effort to prevent capital from leaving the country. It leaves people uncertain whether Trump–who has access to people who know the capital markets and can point out his mistake–simply misunderstands what’s happening in global capital markets, or if he’s picking a fight with China. Trump’s decision to take a phone call Dec. 2 from Taiwan’s President, Tsai Ing-wen, sent off alarms in Beijing, and leaders there appear to be moving toward the conclusion that Trump is picking a fight. Trump’s response that the longstanding U.S. “one China” policy may be a bargaining chip in potential trade negotiations made matters worse.

China subsequently sent a bomber capable of carrying a nuclear payload outside its borders over the contested South China Sea in a show of force aimed at expressing displeasure with Trump’s posture. China held $1.16 trillion of U.S. government debt as of September, according to the most recent data available from the Treasury. That’s down by $100 billion from the year before. During that period Treasuries have actually rallied, with the benchmark 10-year note yield falling to 1.60% from 1.99%. China’s reduction in holdings didn’t hurt the bond market, as the economic stresses that led them to allocate cash away from Treasuries led other investors to seek out safety in the debt. China is well-positioned to use the bond market to show its displeasure with the U.S. in a manner that would be more than symbolic: it could sell more Treasuries. For the President-elect, who has plans to borrow to pay to ramp up infrastructure spending, that could cause real pain. The 10-year note yield has risen to a two-year high of 2.49% up from 1.88% on election day.

For more than a decade, politicians have expressed concern that China and other foreign government could use their significant stakes in Treasuries against the U.S. by dumping them on the market. Such a move would potentially drive borrowing costs throughout the U.S. sharply higher. Bond market conventional wisdom has been that this would be unlikely because it would reduce the value of the seller’s remaining reserves, weakening it’s own capital bulwarks against a future crisis. Trump’s pugnacity mixed with his seeming willingness to ignore facts contrary to his argument make it hard to assess his motives, which may scramble conventional thinking and raise the risks of an unorthodox response from China.

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Let the games begin.

China To Fine Unnamed US Automaker For ‘Monopolistic Behavior’ (R.)

China will soon slap a penalty on an unnamed U.S. automaker for monopolistic behavior, the official China Daily newspaper reported on Wednesday, quoting a senior state planning official. News of the penalty comes at a sensitive time for China-U.S. relations after U.S. president-elect Donald Trump called into question a long-standing U.S. policy of acknowledging that Taiwan is part of “one China”. Beijing maintains that self-ruled Taiwan is a wayward province of China and has never renounced the use of force to take it back. Investigators found the U.S. company had instructed distributors to fix prices starting in 2014, Zhang Handong, director of the National Development and Reform Commission’s price supervision bureau, was quoted as saying.

In an exclusive interview with the newspaper, Zhang said no one should “read anything improper” into the timing or target of the penalty. China, the world’s largest auto market, has become crucial to the strategies of car companies around the world, including major U.S. players General Motors and Ford. “We are unaware of the issue,” said Mark Truby, Ford’s chief spokesman for its Asia-Pacific operations. In a statement, GM said: “GM fully respects local laws and regulations wherever we operate. We do not comment on media speculation.”

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There’s just so much borrowing going on. And that was never the Chinese way.

Just Another Chinese Cash Crunch, But Bigger (BBG)

In markets where investors are highly leveraged, things tend to happen slowly at first, then fast. China is having one of those moments, and as with the 2008 crisis, it can’t be pinned on one event. On Monday, the Shanghai Composite Index sank 2.5%, then extended that decline Tuesday before rebounding to close little changed. The one-year government note yield rose 7 basis points to 2.72%, on top of Monday’s 15 basis-point increase. The root cause may be banks. There’s clearly a liquidity squeeze on Chinese lenders. Nothing new there: Financial institutions tend to face higher demand for cash in December, and this year that’s been exacerbated because Chinese New Year falls early – the holiday, when many people withdraw deposits to buy gifts and travel, begins Jan. 28.

Perhaps more important, banks also want to boost the deposits they can account for as of Dec. 31, when they close their books. Financial institutions struggled to meet a loan-to-deposit ratio ceiling of 75%, and that cap was scrapped in June. None of the banks wants to show that the amount they lend is completely disconnected from what they have in the coffers, however. Which may explain why short-term deposit rates are far higher than longer-term ones. In simple terms, this is a seasonal cash crunch. The issue is that this time it’s on steroids, because it comes after several months when the People’s Bank of China increased short-term rates. This boosted funding costs for wealth-management products and for investors using leverage to buy everything from stocks to bonds to iron ore. As some of the trades begin to offer negative returns, these investors are selling.

Curiously, Hong Kong is going through a similar issue because of the impending Federal Reserve rate increase. Then the vicious circle of leverage begins: Assets being sold drop below agreed levels, triggering margin calls – or the requirement that someone borrowing money to buy securities post more cash to back up the loan. To meet those calls, investors sell more of their securities, putting further pressure on prices and prompting new margin calls. The slump in Chinese stocks last year was exacerbated by just such a dynamic. Investors must now hope that China has learned the lesson from that rout and will use its pension funds to steady the market. Otherwise, if this selloff really is the result of a liquidity squeeze, it’s unlikely to stop before February, when people return from the holiday.

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And neither has the FBI.

Top US Spy Agency Has Not Embraced CIA Assessment On Russia Hacking (R.)

The overseers of the U.S. intelligence community have not embraced a CIA assessment that Russian cyber attacks were aimed at helping Republican President-elect Donald Trump win the 2016 election, three American officials said on Monday. While the Office of the Director of National Intelligence (ODNI) does not dispute the CIA’s analysis of Russian hacking operations, it has not endorsed their assessment because of a lack of conclusive evidence that Moscow intended to boost Trump over Democratic opponent Hillary Clinton, said the officials, who declined to be named. The position of the ODNI, which oversees the 17 agency-strong U.S. intelligence community, could give Trump fresh ammunition to dispute the CIA assessment, which he rejected as “ridiculous” in weekend remarks, and press his assertion that no evidence implicates Russia in the cyber attacks.

Trump’s rejection of the CIA’s judgment marks the latest in a string of disputes over Russia’s international conduct that have erupted between the president-elect and the intelligence community he will soon command. “ODNI is not arguing that the agency (CIA) is wrong, only that they can’t prove intent,” said one of the three U.S. officials. “Of course they can’t, absent agents in on the decision-making in Moscow.” The FBI, whose evidentiary standards require it to make cases that can stand up in court, declined to accept the CIA’s analysis – a deductive assessment of the available intelligence – for the same reason, the three officials said. [..] In October, the U.S. government formally accused Russia of a campaign of cyber attacks against American political organizations ahead of the Nov. 8 presidential election. President Barack Obama has said he warned Vladimir Putin about consequences for the attacks.

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That’s quite the claim. Especially since all western reporting contradicts even the possibility.

Lavrov Hints ISIS Recapture Of Palmyra Orchestrated By US (R.)

Foreign Minister Sergei Lavrov said talks with the United States on Syria were at a dead end, and Islamic State’s advance to Palmyra may have been staged by the United States and its regional allies to allow Syrian rebels in Aleppo a respite. During a visit to Belgrade, Lavrov said Russia was ready to quickly negotiate with the United States the opening of corridors for the pullout of rebels from Aleppo, but said these would have to be agreed before any ceasefire happened. “Our American colleagues do, so to speak, agree with that, and from Dec. 3 when we met John Kerry in Rome they supported such a concept and even gave us their approval on paper,” Lavrov told reporters at a news conference with his Serbian counterpart on Monday.

“But after three days they revoked that agreement and returned to their old, dead-end position which comprises this: Before the agreement on corridors there has to be a truce… as I understand, this would just mean the rebels would get a break,” he said. Earlier in the day, a military source said the Syrian army was on the verge of announcing victory in its battle to retake rebel-held eastern Aleppo. The Syrian army made new advances on Monday after taking the Sheikh Saeed district, leaving rebels trapped in a tiny part of the city. Lavrov also said he believed that Islamic State’s seizure of Palmyra might have been engineered by the U.S.-led coalition to divert attention from Aleppo. “That leads us to a thought – and I am sincerely hoping I am wrong, that this is all orchestrated, coordinated to give a break to those bandits that are in eastern Aleppo,” he said.

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Robert Fisk suggests Lavrov may be on to something.

There Is More Than One Truth To Tell In The Awful Story Of Aleppo (Fisk)

[..] it’s time to tell the other truth: that many of the “rebels” whom we in the West have been supporting – and which our preposterous Prime Minister Theresa May indirectly blessed when she grovelled to the Gulf head-choppers last week – are among the cruellest and most ruthless of fighters in the Middle East. And while we have been tut-tutting at the frightfulness of Isis during the siege of Mosul (an event all too similar to Aleppo, although you wouldn’t think so from reading our narrative of the story), we have been willfully ignoring the behaviour of the rebels of Aleppo. Only a few weeks ago, I interviewed one of the very first Muslim families to flee eastern Aleppo during a ceasefire. The father had just been told that his brother was to be executed by the rebels because he crossed the frontline with his wife and son.

He condemned the rebels for closing the schools and putting weapons close to hospitals. And he was no pro-regime stooge; he even admired Isis for their good behaviour in the early days of the siege. Around the same time, Syrian soldiers were privately expressing their belief to me that the Americans would allow Isis to leave Mosul to again attack the regime in Syria. An American general had actually expressed his fear that Iraqi Shiite militiamen might prevent Isis from fleeing across the Iraqi border to Syria. Well, so it came to pass. In three vast columns of suicide trucks and thousands of armed supporters, Isis has just swarmed across the desert from Mosul in Iraq, and from Raqqa and Deir ez-Zour in eastern Syria to seize the beautiful city of Palmyra all over again.

It is highly instructive to look at our reporting of these two parallel events. Almost every headline today speaks of the “fall” of Aleppo to the Syrian army – when in any other circumstances, we would have surely said that the army had “recaptured” it from the “rebels” – while Isis was reported to have “recaptured” Palmyra when (given their own murderous behaviour) we should surely have announced that the Roman city had “fallen” once more under their grotesque rule. Words matter. These are the men – our “chaps”, I suppose, if we keep to the current jihadi narrative – who after their first occupation of the city last year beheaded the 82-year-old scholar who tried to protect the Roman treasures and then placed his spectacles back on his decapitated head.

By their own admission, the Russians flew 64 bombing sorties against the Isis attackers outside Palmyra. But given the huge columns of dust thrown up by the Isis convoys, why didn’t the American air force join in the bombardment of their greatest enemy? But no: for some reason, the US satellites and drones and intelligence just didn’t spot them – any more than they did when Isis drove identical convoys of suicide trucks to seize Palmyra when they first took the city in May 2015. There’s no doubting what a setback Palmyra represents for both the Syrian army and the Russians – however symbolic rather than military. Syrian officers told me in Palmyra earlier this year that Isis would never be allowed to return. There was a Russian military base in the city. Russian aircraft flew overhead. A Russian orchestra had just played in the Roman ruins to celebrate Palmyra’s liberation.

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The craziest thing I’ve seen in a long time.

How To Make A Profit From Defeating Climate Change (Carney/Bloomberg)

From rising sea levels to more severe storms and more intense droughts, climate change will present serious risks to, and create major opportunities for, nearly every industry. Citizens, consumers, businesses, governments, and international organisations are all taking action. And entrepreneurs are developing disruptive technologies that will create and destroy value. The challenge is that investors currently don’t have the information they need to respond to these developments. This must change if financial markets are going to do what they do best: allocate capital to manage risks and seize new opportunities. Without the necessary information, market adjustments to climate change will be incomplete, late and potentially destabilising.

Public policy, consumer demand and technological innovation are driving a shift towards a low-carbon economy. Which companies and industries are most, and least, dependent on fossil fuels? And who stands ready to provide resilient and sustainable infrastructure? Which financial institutions are best positioned to gain and which to lose? In every case, which firms have the governance, resources and the strategy to manage, and profit from, these major shifts? We believe that financial disclosure is essential to a market-based solution to climate change. A properly functioning market will price in the risks associated with climate change and reward firms that mitigate them. As its impact becomes more commonplace and public policy responses more active, climate change has become a material risk that isn’t properly disclosed.

In response to a G20 request to consider the financial stability risks, the Financial Stability Board created a taskforce on climate-related financial disclosures. Its purpose is to develop voluntary, consistent disclosures to help investors, lenders and insurance underwriters manage material climate risks. As befits a solution by the market for the market, the taskforce is led by members of the private sector from across the G20, including major companies, large investors, global banks and insurers. After a year of intensive work and widespread consultation its recommendations are now publicly available. They concentrate on the practical, material disclosures most relevant to investors and creditors and which can be compiled by all companies that raise capital as well as financial institutions.

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Poul Thomsen was always a disgrace.

Greece ‘Boxed In’ as EU and IMF Fight Over Nation’s Debt Relief Plan (G.)

The row over how to stabilise the indebted Greek economy has resurfaced with renewed vigour after the European Union on Tuesday angrily rejected charges by the IMF that its current rescue programme is “not credible”. The spectre of the country’s economic crisis flaring up again deepened as the extent of the differences between creditors was laid bare. Caught in the middle, Athens also ratcheted up the rhetoric, as its finance minister told the Guardian that the IMF was “economising with the truth”. “Greece is being boxed into a corner,” said Euclid Tsakalotos, claiming that the country was under intense pressure to specify new austerity measures that made “no economic or political sense”. The war of words intensified after the IMF issued a 1,300-word statement distancing itself from the economic policies underpinning the nation’s latest bailout.

The adjustment programme agreed last summer in exchange for €86bn (£72bn) worth of rescue loans – a plan the IMF has so far refused to support – was based on measures that were “unfriendly to growth”, wrote Poul Thomsen, who directs the IMF’s European department, and Maurice Obstfeld, its chief economist. “It is not the IMF that is demanding more austerity,” the officials argued in a blog published late on Monday. “If Greece agrees with its European partners on ambitious fiscal targets, don’t criticise the IMF … when we ask to see the measures required to make such targets credible.” Athens, they said, had agreed to achieve a budget surplus – where state tax income exceeds expenditure – of 3.5% of GDP once the bailout expired in 2018, a feat that was not feasible without further cuts, said the IMF.

On Tuesday, the European commission hit back, insisting that the economic fundamentals were not only sound, but working. “The European institutions consider that the policies of the ESM program are sound and if fully implemented can return Greece to sustainable growth and can allow Greece to regain market access,” said commission spokeswoman Annika Breidthardt. The plan, she added, had undergone “several parts of scrutiny”, and even the European court of auditors had provided feedback, which had been taken into account. [..] Hopes of a political breakthrough are now resting on meetings Tsipras will have later this week with German and French leaders. But on past form, lenders are unlikely to yield, and Greek officials are now worrying that the row could be the precursor of the IMF pulling out of the programme altogether.

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“s it likely when around 45% of pensioners receive monthly payments below the poverty line of €665, and almost 4 million people, that is more than a third of the population, have been classed as being at risk of poverty or social exclusion, that Greece’s main problem is that pensions and tax credit allowances are too generous?”

Tsipras To Propose To EU Leaders That IMF Be Excluded (Kath.)

Prime Minister Alexis Tsipras is to suggest to European counterparts this week that the IMF should be left out of the Greek program, sources have told Kathimerini. Tsipras is expected to sound out Francois Hollande, who he is due to hold talks with Wednesday, and Angela Merkel, with whom he will have a working lunch on Friday, about the idea of the Fund no longer having a role in Greece’s bailout. If an agreement cannot be reached on this proposal, Tsipras will put forward the possibility of the IMF retaining just a technical role in the program. Athens believes that the political cost of the Fund remaining on board has become too high after the latest spat between the government and the organization, which flared up as the institutions returned to the Greek capital for further talks aimed at completing the bailout review.

The talks resumed under a cloud after the IMF’s European director Poul Thomsen and head of research Maurice Obstfeld published a blog post on Monday night in which they denied that the Fund was responsible for asking Greece to adopt more austerity measures and claimed that the country’s pensions and tax benefits are still too generous. Finance Minister Euclid Tsakalotos confronted the IMF mission chief Delia Velculescu over the blog post when talks between the Greek government and the institutions resumed in Athens Tuesday. Velculescu is said to have assured the Greek minister that the IMF did not want to make negotiations harder but simply to express its view.

A little earlier, Tsakalotos had publicly countered the claims made by the IMF officials in their article. “In effect [the Fund] is arguing for Greek pensioners and poorer wage earners to make further economies, while it economizes on the truth,” he told The Guardian. “Greek expenditure on both pensions and other subsidies is about 70% of the EU average and 52% of that of Germany. Is it likely when around 45% of pensioners receive monthly payments below the poverty line of €665, and almost 4 million people, that is more than a third of the population, have been classed as being at risk of poverty or social exclusion, that Greece’s main problem is that pensions and tax credit allowances are too generous?” he added.

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But of course they are short on anti-depressants too.

Crisis Leaves Greeks Gloomiest In Europe And Beyond (R.)

Greece’s debt crisis has made its population the unhappiest not only in western Europe but also in comparison with people in some former Communist countries, a study showed on Tuesday. The “Life in Transition” survey conducted by the European Bank for Reconstruction and Development (EBRD) and the World Bank has questioned households across a broad region since 1991 as the Cold War came to an end, but Greece was included for the first time this year. Over 92% of Greeks said the debt crisis had affected them, with 76% of households suffering reduced income due to wage or pension cuts, job losses, delayed or suspended pay or fewer working hours.

Only one in 10 Greeks were satisfied with their financial situation and only 24% with life overall, compared with 72% in Germany and 42% in Italy, the two western European countries used as comparisons. The figure was 48% in post-communist countries. Austerity measures demanded by international creditors have been tough on Greeks. Pensions, for example, have been reduced by about a third since the crisis began in 2009. Only 16% of the respondents in Greece saw their situation improving over the next four years, compared with 48% in post-communist countries and 35 and 23% in Germany and Italy, respectively. “This signals that, despite the recent political changes and attempts at economic reforms that have taken place in the country, Greeks do not see their situation improving for the foreseeable future”, the report said.

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So that stops all fracking, right?!

Final EPA Study Confirms Fracking Contaminates Drinking Water (EW)

The U.S. Environmental Protection Agency (EPA) has released its widely anticipated final report on hydraulic fracturing, or fracking, confirming that the controversial drilling process indeed impacts drinking water “under some circumstances.” Notably, the report also removes the EPA’s misleading line that fracking has not led to “widespread, systemic impacts on drinking water resources.”The report, done at the request of Congress, provides scientific evidence that hydraulic fracturing activities can impact drinking water resources in the United States under some circumstances,” the agency stated in a media advisory. This conclusion is a major reversal from the EPA’s June 2015 pro-fracking draft report. That specific “widespread, systemic” line baffled many experts, scientists and landowners who—despite the egregious headlines—saw clear evidence of fracking-related contamination in water samples.

Conversely, the EPA’s top line encouraged Big Oil and Gas to push for more drilling around the globe. But as it turns out, a damning exposé from Marketplace and APM Reports revealed last month that top EPA officials made critical, last-minute alterations to the agency’s draft report and corresponding press materials to soft-pedal clear evidence of fracking’s ill effects on the environment and public health. Thomas Burke, EPA deputy assistant administrator and science advisor, discussed the agency’s final report released Tuesday. “There are instances when hyrdofracking has impacted drinking water resources. That’s an important conclusion, an important consideration for moving forward,” Burke told reporters today, according to The Hill. Regarding the EPA’s contentious “national, systemic conclusion,” Burke said, “that’s a different question that this study does not have adequate evidence to really make a conclusive, quantified statement.”

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Small state, but big chunk of ice.

A Crack In Antarctica Is Forming An Iceberg The Size Of Delaware (PopSci)

An iceberg the size of Delaware is starting to break away from Antarctica. It began with a small crack, but has now grown 70 miles long and more than 300 feet wide. When it reaches the edges of the ice sheet, the state-sized chunk will drift away into the sea. The crack is a third of a mile deep—reaching all the way to the sea below. It’s a relatively new rift in the ice sheet, called Larsen C, but is following in its icy brethren’s footsteps: Larsen A and B both broke away from the main Antarctic sheet in the last two decades in much the same way. All three began with clefts in the ice and eventually floated away to disintegrate. That dramatic a cleft is unusual—it’s more common for ice sheets to slowly break up along the edges and fall in smaller chunks. Only in the last half century has it become common for the Antarctic to form these dramatic fault lines, and scientists say global warming is likely to blame.

NASA has been monitoring the Larsen ice sheets since Larsen A broke off in 1995. Larsen B followed it in 2002, and Larsen C is expected to go the same way soon. Operation IceBridge has surveyed the polar ice caps annually for the past eight years as a way to track changes in the glaciers and ice sheets. The MIDAS Project, a U.K.-based research group, first reported the Larsen C rift in 2014 and has kept a watchful eye on it ever since. [..] The more than 2,400 square miles that is likely to break away from Larsen C will only be about 12% of the ice sheet’s total area. But once that part comes loose, the MIDAS Project predicts that the rest of the sheet could become unstable and completely disintegrate. The crack is growing steadily and shows no signs of stopping, though the break won’t happen immediately. It takes much longer for ice sheets to break up—unlike many human relationships, this one will last through the holiday season.


A rare ice crack not formed by that squirrel from the Ice Age movies – NASA/John Sonntag

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Oct 182016
 
 October 18, 2016  Posted by at 9:06 am Finance Tagged with: , , , , , , , , , , ,  


Russell Lee Hollywood, California. Used car lot. 1942

US Bondholders Risk a $1.1 Trillion Hit if Rates Spike (BBG)
US First Home Buyers Even More Leveraged Than During Housing Bubble (MW)
China’s Bad Credit (Balding)
Foreigners Shun Gilts On Hard Brexit Talk, As Hallowe’en Verdict Awaits (AEP)
The Cashless Society Is a Creepy Fantasy (BBG)
Greece in 2050: A Country For Old Men (Kath.)
Judge Rejects Riot Charges For Journalist Amy Goodman On Pipeline Protest (G.)
State Department Official Pressured FBI To Declassify Clinton Email (R.)
RBS Backtracks Over Closure Of RT Bank Accounts (RT)
The Odor of Desperation (Jim Kunstler)
Pentagon Backtracks, Voices Caution On Latest Yemen Missile Incident (R.)
We Have To Begin To Look Outside. Because There Is More Out There (Adam Curtis)

 

 

As Gilts sell off… Very reassuring.

US Bondholders Risk a $1.1 Trillion Hit if Rates Spike (BBG)

First they came for the yield, then they came for the duration. A Goldman Sachs analysis says investors could be mired in a world of pain if yields on long-dated assets snap higher. Just a modest backup in rates could inflict outsized losses on bond portfolios — a sobering prospect in light of the recent jump in longer-dated bond yields that’s already eating into bondholders’ capital returns. A 1% increase in interest rates could inflict a $1.1 trillion loss to the Bloomberg Barclays U.S. Aggregate Index, analysts at Goldman calculate, representing a larger loss for bondholders than at any other point in history. With the bank predicting the selloff in bonds has further to run, that remains “far from a tail scenario,” its analysts write.

Bets on longer-maturity obligations had paid off handsomely for most of the year amid a global bond rally triggered by expectations that weak economic activity will persuade central banks in advanced economies to postpone tightening monetary policy. Asset purchases by the BOJ, BOE and the ECB helped the average maturity of new U.S. corporate bonds climb to a peak of 11.3 years in August. With average bond maturities worldwide now more than double the inflation-adjusted level of 2009, and three times that of 1994, Goldman says there’s an elevated risk of losses if rates spike higher. “We see potential for the rates market to continue to sell off, and the notional amount of duration dollars at risk is unprecedentedly large,” Goldman fixed-income analysts, led by Marty Young, wrote in the report on Monday.

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“..lack of affordability. “We have our eye on the wrong ball..”

US First Home Buyers Even More Leveraged Than During Housing Bubble (MW)

Ever since the shock of the financial crisis ebbed and buyers began to return to the housing market, one truth has dominated: mortgage lending is tight. But is it? It’s true that only the borrowers with the highest credit scores get home loans now. So much lending to people with higher credit scores and so little to those on the lower end of the spectrum has shifted the average FICO score up about 40 points since before the bubble burst. But measured in another way, lending is shockingly loose. And, according to one economist, that tells us a lot not just about the housing market, but about the economy as a whole. The 20% down payment may linger in Americans’ imagination, but it’s even less real today than Jimmy Stewart’s small-town banker from 1946.

American homeowners, particularly those at the lower end of the market, are increasingly leveraged to pay for their houses, says Sam Khater, deputy chief economist at data provider CoreLogic. In fact, owners of entry-level homes, those in the $150,000 to $300,000 range — have more debt and less equity now than they did in 2005, at the height of mortgage mania. For Khater, that says less about credit markets and more about another defining feature of the post-recession housing market — its lack of affordability. “We have our eye on the wrong ball,” he told MarketWatch. “What I worry about is the leverage not from a default perspective but from an affordability perspective. Demand for credit has been weak. But the much bigger issue is the supply of housing, not supply of credit.”

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Swaps won’t rescue China’s bad debt. It’s just multiple state-owned firms selling each other the things.

China’s Bad Credit (Balding)

There is good news when it comes to China’s scary and still-growing pile of debt: At least the government recognizes the problem. Its attempts to mitigate those risks, however, seem doomed to fall short. The government’s recent decision to create a market for credit default swaps is a case in point. The idea, as elsewhere, is to give banks and investors a means of pricing and trading the risk of Chinese companies defaulting on their debts. The need is obvious: Official measures of non-performing loans are worsening, while unofficial estimates say their share may have reached anywhere from 8% to 20%. Anything that spreads that risk should improve financial stability. Yet, as envisioned, this new CDS market is unlikely to do much to improve the situation.

For one thing, all but the largest companies already have to purchase credit insurance when taking out loans from giant state banks. There’s no pricing differential on this insurance, of course. But for the new system to function effectively, the government would have to let markets freely set the price of credit risk. China doesn’t exactly have a stellar record of allowing markets to set prices in any field, whether in stocks, real estate or currencies. If credit default swaps started to indicate a rising risk of default at a major state-owned company, it’s hard to imagine officials wouldn’t intervene to reverse that impression. This is dangerous on multiple levels. Already, several Chinese credit insurance firms have collapsed because they underestimated credit risk, forcing government bailouts. Continuing to underprice risk will only encourage the over-allocation of credit that’s gotten China into trouble thus far.

There’s also little reason to think that creating a CDS market would shift risk away from the most vulnerable banks. In a heavily concentrated banking and lending market such as China, where major financial institutions all trade with each other, swaps are likely to produce no net change to risk levels. Think of a simple example. Assume that Bank A has loans totaling 100 billion yuan but wants to protect itself against the risk of default by buying a CDS from Bank B that covers these companies. Now assume that Bank B does the same to cover its 100 billion yuan of loans, with A as the counter-party. If we assume these are similar baskets of loans – a reasonable assumption for major banks within a single country – then there’s been no net change in credit risk for either bank.

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It doesn’t get much more serious than this: “The UK faces a balance of payments crisis..”

Foreigners Shun Gilts On Hard Brexit Talk, As Hallowe’en Verdict Awaits (AEP)

The bond vigilantes are sharpening their knives. The last five trading sessions have seen a sudden and potentially ominous shift in the reflexes of the Gilts market, a sign that ‘hard Brexit’ rhetoric has rattled global debt managers. “For the first time, foreign investors are beginning to question the credit-worthiness of the United Kingdom,“ said Vatsala Datta, UK rates strategist at RBC. We will find out how serious it is on October 31 – Hallowe’en day – when the UK Debt Management Office publishes its monthly data on foreign holdings of Gilts. Central banks, sovereign wealth funds, and the like, currently hold £503bn of British public debt or 27pc of the total, a bigger share than UK pension funds and insurance companies.

Yields on 10-year Gilts have spiked by 62 basis points to 1.14pc from their trough in August. Until last week this was pure a ‘reflation trade’, a turbo-charged variant of what has been happening in the US and other parts of the world as markets price in accelerating global growth and a commodity rebound. Britain got a double-dose because the sharp fall in sterling automatically pushed up the likelihood of future inflation, and that is what bondholders hate most. It is easy to measure the inflation component of moves by tracking how the ‘break-even inflation rate’ rises in tandem with the headline bond yield. “The correlation was exact. It has now broken down,” said Ms Datta. Break-even rates stopped rising last week, yet this time Gilt yields spiked higher, a divergence of 18 basis points.

RBC said the pattern in the interlocking currency and debt markets is clear: sterling is no longer trading like a bona fide reserve currency. “The parallel sell-off in gilts and sterling is potentially a worrying development, consistent with the UK’s having growing difficulty funding its internal and external deficits,” it said. What typically happens when a blue chip currency like the US dollar or the Swiss franc falls is that central banks and fund managers buy more of that country’s bonds to keep a constant weighting. This is a mechanical practice. It happens unless managers take a conscious decision to override their model. It is why foreign holdings of UK Gilts have risen by 20pc over the last year, and why they surged at an even faster rate after the referendum.

This foreign rush into Gilts happened not in spite of the falling pound, but because of it. All of a sudden this has stopped. Loose proxies such as ‘swap spreads’ suggest an outright exodus from Gilts even as the pound weakens. It is symptomatic that the Japanese bank Nomura has issued a string of tough reports about what could happen if the British government opts to leave the EU single market, warning that an erratic UK can no longer count on the “kindness of strangers” to fund its current account deficit. “The UK faces a balance of payments crisis,” it says, menacingly.

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“..if we’re going to cite unlawful transactions as a rationale for banning cash, it only makes sense to ban banks and accounting firms first.”

The Cashless Society Is a Creepy Fantasy (BBG)

It’s fun to imagine a world without cash. Liberated from the burden of physical currency, consumers could make purchases from the convenience of a mobile device. Every transaction would come equipped with fraud protection, reward points and a digital record of its time and location. Comprehensive tracking could help the Internal Revenue Service reclaim billions of tax dollars lost to unreported income, like the $80 I made selling a used refrigerator on Craigslist. Drug dealers, helpless without an anonymous medium of exchange, would acquire wholesome professions. El Chapo might become a claims adjuster. Such is the utopia recently described by Nathan Heller in the New Yorker and by a former chief economist of the International Monetary Fund, Kenneth Rogoff, in a new book, “The Curse of Cash.”

But this universe is missing one of the fundamental aspects of human civilization. A world without cash is a world without money. Money belongs to its current holder. It doesn’t matter if a banknote was lost or stolen at some point in the past. Money is current; that’s why it’s called currency! A bank deposit, however, grants custody of money to the bank. An account balance is not actually money, but a claim on money. This is an important distinction. A claim is only as good as its enforceability, and in a cashless society every transaction must pass through a financial gatekeeper. Banks, being private institutions, have the right to refuse transactions at their discretion. We can’t expect every payment to be given due process.

This means that politically unpopular organizations could easily be deprived of economic access. Past attempts to curb money laundering have already inadvertently cut off financial services for legitimate individuals, businesses, and charities. The removal of paper currency would undoubtedly leave similar collateral damage. The crime-fighting case against cash is overstated. Last year, a risk assessment of money laundering and terrorist financing conducted by the U.K. government found that regulated institutions such as banks (like HSBC) and accountancy service providers (like the Panamanian tax-shelter specialist Mossack Fonseca) posed the highest risk of facilitating the illicit storage or movement of funds. Cash came in a close third, but if we’re going to cite unlawful transactions as a rationale for banning cash, it only makes sense to ban banks and accounting firms first.

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Extrapolating trends is a pretty much useless exercise.

Greece in 2050: A Country For Old Men (Kath.)

By 2050, Greece’s population is expected to shrink by 800,000 to 2.5 million people to between 8.3 and 10 million, and one in three of its residents will be over the age of 65 (30-33% compared to the present 21% and 7% in 1951), while under-14s will represent just 12-14.8% from 15% today and 28% in 1951. This dystopian view of the country – with empty schools and offices – emerges from a recent study on Greece’s demographic prospects, presented by the Athens-based Dianeosis research organization. The study explored eight different scenarios, all of which calculated a significant drop in the population by 2050. The most optimistic saw a reduction of 800,000 people and the rapid aging of society. The median age is seen reaching 49-52 years from 44 today and 26 in 1951.

By then, the study says, 50-year-olds will be the young ’uns. The number of school-age children (3-17) will drop from 1.6 million today to 1.4 million in the optimistic scenario and 1 million in the pessimistic one and the economically active population will shrink from 4.7 million people today to between 3 and 3.7 million, meaning that a much lower number of people will be able to work to cover the country’s needs. The study by Dianeosis reflects trends that are already being noted: On January 1, 2015, Greece’s population came to 10.8 million from 11.1 million in 2011, marking the first time since 1951 that the number of the country’s residents has gone down.

There are three factors that affect population fluctuations – births, deaths and migration – which can be separated into two categories, the natural process of births and deaths, and the migration factor, which includes both inflows and outflows. Today, births are decreasing and deaths going up due to sliding standards of living and a crumbling public healthcare system. Meanwhile, the outflow of mainly young Greeks and foreigners from the country is on the rise, while, despite the arrival of thousands of migrants, the crisis is preventing their numbers from being made up by fresh inflows.

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It helps when politicians actually know the law.

Judge Rejects Riot Charges For Journalist Amy Goodman On Pipeline Protest (G.)

A North Dakota judge rejected prosecutors’ “riot” charges against Democracy Now! host Amy Goodman for her reporting on the oil pipeline protests, a decision that advocates hailed as a major victory for freedom of the press. After the award-winning broadcast journalist filmed security guards working for the Dakota access pipeline using dogs and pepper spray on protesters, authorities issued a warrant for Goodman’s arrest and alleged that she participated in a “riot”, a serious offense that could result in months in jail. On Monday, judge John Grinsteiner ruled that the state lacked probable cause for the riot charge, blocking prosecutors from moving forward with the controversial prosecution.

“I feel vindicated. Most importantly, journalism is vindicated,” Goodman told reporters and supporters on a live Facebook video Monday afternoon. “We have a right to report. It’s also critical that we are on the front lines. Today, the judge sided with … freedom of the press.” The case stems from a 3 September report when Goodman traveled to the Native American-led protest against a controversial $3.8bn oil pipeline that the Standing Rock Sioux tribe says is threatening its water supply and cultural heritage. Goodman’s dispatch on the use of dogs went viral and has since garnered 14m views on Facebook and also prompted coverage from many news outlets, including CBS, NBC, NPR and CNN.

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I picked the Reuters take on this. There are many others, some much more negative. The crux: This is getting way out of hand. Trying to interfere with classified material is crazy and desperate. And very illegal.

State Department Official Pressured FBI To Declassify Clinton Email (R.)

A senior State Department official sought to shield Hillary Clinton last year by pressuring the FBI to drop its insistence that an email on the private server she used while secretary of state contained classified information, according to records of interviews with FBI officials released on Monday. The accusation against Patrick Kennedy, the State Department’s most senior manager, appears in the latest release of interview summaries from the Federal Bureau of Investigation’s year-long investigation into Clinton’s sending and receiving classified government secrets via her unauthorized server.

Although the FBI decided against declassifying the email’s contents, the claim of interference added fuel to Republicans’ belief that officials in President Barack Obama’s administration have sought to protect Clinton, a Democrat, from criminal liability as she seeks to succeed Obama in the Nov. 8 election. The FBI recommended against bringing any charges in July and has defended the integrity of its investigation. Clinton has said her decision to use a private server in her home for her work as the U.S. secretary of state from 2009 to 2013 was a mistake and has apologized. One FBI official, whose name is redacted, told investigators that Kennedy repeatedly “pressured” the various officials at the FBI to declassify information in one of Clinton’s emails.

The email was about the deadly 2012 attack on a U.S. compound in Benghazi, Libya, and included information that originated from the FBI, which meant that the FBI had final say on whether it would remain classified. The dispute began in the summer of 2015 as officials were busy reviewing the roughly 30,000 emails Clinton returned to the State Department ahead of their court-ordered public release in batches in 2015 and 2016. The official said the State Department’s office of legal counsel called him to question the FBI’s ruling that the information was classified, but the FBI stood by its decision. Soon after that call, one of the official’s FBI colleagues received a call from Kennedy in which Kennedy “asked his assistance in altering the email’s classification in exchange for a ‘quid pro quo.'”

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From the Times (behind paywall): “The state-owned bank withdrew its planned punitive action after Moscow claimed it would freeze the BBC’s finances in Russia and report Britain to international watchdogs for breaching commitments to freedom of speech.”

RBS Backtracks Over Closure Of RT Bank Accounts (RT)

The Royal Bank of Scotland (RBS) appears to have backtracked from its earlier statement that the looming closure of RT accounts is not up for discussion. In a letter to RT, the bank said the situation is being reviewed and the bank is contacting the customer. The e-mailed response began with apologies for the delay in the reply. These decisions are not taken lightly. We are reviewing the situation and are contacting the customer to discuss this further. The bank accounts remain open and are still operative,” Sarah Hinton-Smith, Head of Corporate & Institutional, Commercial & Private Media at RBS Communications, wrote. However, the response by Hinton-Smith contradicted an earlier statement by RBS, which said that the decision to suspend banking services to RT was final and not up for discussion.

The broadcaster addressed the Royal Bank of Scotland representative over the contradiction, pointing out that “your statement seems to suggest that the bank will contact RT and that there will be a review and further discussion.” “There’s not much more of a steer I can give other than what is in the statement,” Hinton-Smith replied via email. Earlier Monday, the National Westminster Bank (NatWest), which is part of RBS Group, informed RT UK’s office in London that it will no longer have the broadcaster among its customers, without providing any explanation for the decision.

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“..the fact that the US polity now so desperately has to fight for survival shows how frail its legitimacy is.”

The Odor of Desperation (Jim Kunstler)

It must be obvious even to nine-year-old casual observers of the scene that the US national election is hacking itself. It doesn’t require hacking assistance from any other entity. The two major parties could not have found worse candidates for president, and the struggle between them has turned into the most sordid public spectacle in US electoral history. Of course, the Russian hacking blame-game story emanates from the security apparatus controlled by a Democratic Party executive establishment desperate to preserve its perks and privileges . (I write as a still-registered-but-disaffected Democrat).

The reams of released emails from Clinton campaign chairman John Podesta, and other figures in HRC’s employ, depict a record of tactical mendacity, a gleeful eagerness to lie to the public, and a disregard for the world’s opinion that are plenty bad enough on their own. And Trump’s own fantastic gift for blunder could hardly be improved on by a meddling foreign power. The US political system is blowing itself to pieces. I say this with the understanding that political systems are emergent phenomena with the primary goal of maintaining their control on the agencies of power at all costs. That is, it’s natural for a polity to fight for its own survival. But the fact that the US polity now so desperately has to fight for survival shows how frail its legitimacy is.

It wouldn’t take much to shove it off a precipice into a new kind of civil war much more confusing and irresolvable than the one we went through in the 1860s. Events and circumstances are driving the US insane literally. We can’t construct a coherent consensus about what is happening to us and therefore we can’t form a set of coherent plans for doing anything about it. The main event is that our debt has far exceeded our ability to produce enough new wealth to service the debt, and our attempts to work around it with Federal Reserve accounting fraud only make the problem worse day by day and hour by hour. All of it tends to undermine both national morale and living standards, while it shoves us into the crisis I call the long emergency.

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If anything ever smelled like a flase flag, it was this. Mere days after the world turned on the US and its Saudi friends for bombing a funeral procession, the Houthis supposedly shot at a US destroyer, missed by a mile and a half, and next thing you knew all of a sudden the US was itself involved in the so-called war, which is really just slaughter.

Pentagon Backtracks, Voices Caution On Latest Yemen Missile Incident (R.)

The Pentagon declined to say on Monday whether the USS Mason destroyer was targeted by multiple inbound missiles fired from Yemen on Saturday, as initially thought, saying a review was under way to determine what happened. Any determination that the USS Mason guided-missile destroyer was targeted on Saturday could have military repercussions, since the United States has threatened to retaliate again should its ships come under fire from territory in Yemen controlled by Iran-aligned Houthi fighters. The United States carried out cruise missile strikes against radar sites in Yemen on Thursday after two confirmed attempts last week to hit the USS Mason with coastal cruise missiles. “We are still assessing the situation. There are still some aspects to this that we are trying to clarify for ourselves given the threat – the potential threat – to our people,” Pentagon spokesman Peter Cook told a news briefing.

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Unfortunately, Curtis’ film Hypernormalization is for now still only available in Britain. Far as I know.

We Have To Begin To Look Outside. Because There Is More Out There (Adam Curtis)

Power is all around us. It’s just that it has shifted and mutated into a massive system of management and control, whose tentacles reach into all parts of our lives. But we can’t see it because we still think of power in the old terms – of politicians telling us what to do. The aim of the film I have made – HyperNormalisation – is to bring that new power into focus, and show its true dimensions. It ranges from a giant computer high up in the mountains of northeast America that manages and controls over 7% of the worlds total wealth, to the complex algorithms that constantly monitor every move and choice you make online, to modern scientific ideas about what the normal human being should be – in their weight and in their feelings and moods.

What links all these systems is an overriding aim is to keep the world stable. To avoid all change. The giant computer constantly compares events happening around the world to events in the past. If it sees a dangerous pattern, it immediately adjusts its trillions of dollars to keep things stable. That is real power. The algorithms on social media constantly look at the patterns of what you like and then feed you more of that – so you enter into an echo chamber that constantly feeds you back to you. So again nothing changes – and you learn nothing new that would contradict how you feel. That too is real power. What results is a system which cocoons us and makes us feel safe. And that means we have become terrified of all change.

But that fear of change is in the interest of a system that wants to hold everything stable. And stops us from ever challenging it. But it is impossible to keep things frozen forever. The world is dynamic. Things happen that you can never predict just by reading the past. This is why more and more we are being hit by events – the horror in Syria, Brexit, Trump, the waves of refugees – that neither we nor our leaders have the mental map to understand let alone deal with. Because we have bought into the dream that the world can be held stable and safe. The short film I have made for VICE is about how, if you pull back and look at the everyday life all around you, you can see the cracks appearing through the shiny surface of the cocoon we are living in.

So much of the modern world is beginning to feel odd, unreal and sometimes fake. I think these are the dynamic forces outside beginning to pierce through as the system begins to fail. It will fail – because a system of power that has no vision of the future can never last. It cannot deal with change. We have to begin to look outside. Because there is more out there…

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Jan 222016
 
 January 22, 2016  Posted by at 9:46 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle January 22 2016


DPC The steamer Cincinnati off Manhattan 1900

Two Refugee Boats Sink off Greek Islands; At Least 21 Dead (GR)
At Least 12 Refugees Killed In New Tragedy Off Turkey (AFP)
Japanese Stocks Surge by Most in 4 Months In ‘Short Squeeze Galore’ (BBG)
Japan Must Let Zombie Companies Die (BBG)
China Shares Struggle Higher On Global Stimulus Hopes (Reuters)
Draghi’s Groundhog Day Heralds Seven Weeks of ECB Market Dialog (BBG)
A Scared World Is Taking Its Money And Running Back Home – and to the US (BBG)
Battered Emerging Markets Race to Stem Outflows (WSJ)
US Is Hiding -Saudi- Treasury Bond Data That’s Suddenly Become Crucial (BBG)
Is Something Blowing Up In OIL? (ZH)
Trillions Could Be Lost In British Housing Bubble Collapse (WMN)
Hundreds Of Mountain Tops Leveled To Make Way For The New Silk Road (Forbers)
Glory Days Of Chinese Steel Leave Behind Abandoned Mills And Broken Lives (G.)
Italy Could Trigger Europe’s Next Financial Crisis (Stratfor)
IMF Demands EU Debt Relief For Greece Before New Bailout (Guardian)
Capital Controls Cut Greek Exports By €3.5 Billion In 6 Months (Kath.)
Over 120,000 Greek Homes Close To Repossession (Kath.)
One Third of Greeks Cannot Afford Heating Or Hot Water (KTG)
Greece Demands That Refugees Declare Final EU Destination (Reuters)
Germany Takes Refugees’ Valuables ‘To Pay For Their Stay’ (Local)

And these f**king clowns are partying in Davos?

Two Refugee Boats Sink off Greek Islands; At Least 21 Dead (GR)

Two boats carrying refugees and migrants from Turkey to Greece have sunk in the Aegean, leaving 21 dead with six children among them. In two separate incidents off the Greek islands of Kalolymnos and Farmakonisi, at least 21 people lost their lives dead, while dozens were saved by the Hellenic Coast Guard. In the Kalolymnos island area, a boat carrying an unknown number of refugees and migrants sank, despite the good weather conditions. The coast guard rescue boats pulled 14 dead out of the water and managed to rescue 26 people so far.

According to survivors, more than 50 people were aboard the vessel. Rescue efforts continue. Earlier, on another similar incident off Farmakonisi island, seven refugees drowned with six of them being children. According to the coast guard, the refugees were aboard a wooden boat that crashed on rocks. As a result a woman and six children lost their lives. A Frontex boat and a Hellenic Coast Guard boat rushed on the spot and managed to rescue an underage girl. The remaining passengers had managed to reach the coast safely.

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That’s a total of at least 33 deaths overnight.

At Least 12 Refugees Killed In New Tragedy Off Turkey (AFP)

At least 12 migrants were killed and several more went missing Thursday when their boat sank while trying to cross the Aegean Sea from Turkey to EU member Greece, Turkish media reports said. The boat, carrying some 50 migrants, struck trouble after leaving the western Turkish resort of Foca in the Izmir region for the Greek island of Lesvos. Twenty-eight people were saved while up to dozen more are still feared missing, NTV television said.

Turkey, which is home to some 2.2 million refugees from Syria’s civil war, has become a hub for migrants seeking to reach Europe, many of whom pay people smugglers thousands of dollars for the risky crossing. Ankara reached an agreement with the EU in November to stem the flow of refugees heading to Europe, in return for financial assistance. Brussels vowed to provide €3 billion as well as political concessions to Ankara in return for its cooperation in tackling Europe’s worst migrant crisis since World War II. But onset of winter and rougher sea conditions do not appear to have deterred the migrants, with boats still arriving on the Greek islands daily.

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Yeah, central banks offered some ‘hope’ too, but that‘s not it: some ‘barrier’ in the markets got triggered big time. Is it that Japan fell into bear territory yesterday?

Japanese Stocks Surge by Most in 4 Months In ‘Short Squeeze Galore’ (BBG)

Japanese stocks surged by the most in four months as investors weighed prospects for central bank stimulus and bought back into a bear market to cover short positions. The Topix index jumped 5.6% to 1,374.19 at the close in Tokyo, the most since Sept. 9 and paring its worst monthly loss since October 2008. The Nikkei 225 Stock Average soared 5.9% to 16,958.53, also supported by a report the Bank of Japan is considering extra monetary easing. Global equities halted losses on the brink of a bear market as oil rallied and the ECB signaled it may boost stimulus. “We’re seeing short squeeze galore,” said Mikey Hsia at Sunrise Brokers. “Much of this is technical. Japan has had big moves for three days in a row now – it’s becoming common.”

All of the 33 Topix industry groups rose, led by developers, oil explorers and harbor transporters. Volume was 21% above the 30-day average. The index still closed down 2% for the week. [..] The Topix’s 14-day relative strength index closed at 21.29 Thursday, below the level of 30 that some traders say indicates shares will rise. When the measure slid to 24.4 on Jan. 12, the Topix jumped 2.9% the next day. Bearish bets on Tokyo’s stock exchange accounted for more than 40% of total trading value on Thursday. [..] The Japanese gauges fell into a bear a bear market on Wednesday. The Nikkei 225 previously entered a bear market in June 2013, after plunging 20% in less than a month. The gauge soon rebounded, rallying 31% from its low on June 13, 2013, through the end of that year.

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FoxConn is reportedly preparing a bid for Sharp.

Japan Must Let Zombie Companies Die (BBG)

[..] one day, in May 2015, you open your newspaper and see that Sharp has been bailed out by two of Japan’s largest banks, Mizuho Bank and Bank of Tokyo-Mitsubishi. These banks are themselves backed by government bailout guarantees, meaning that Sharp has been indirectly rescued by the government – a prime example of the zombie-firm phenomenon that economists have been complaining about for decades. With those cheap bank loans, the ailing Japanese giant can afford to keep putting out TVs at fire sale prices, making no profit but squeezing your own margins. But you soldier on. The bank bailout does nothing to improve Sharp’s corporate strategy — the company’s managers are content to drag out the status quo for as long as possible.

Eventually, you think, Sharp will quit, the market will become less crowded, and your innovative products and manufacturing processes will be rewarded with bigger profit margins. Then, in January 2016, the Japanese government steps directly into the fray. The Innovation Network Corp. of Japan offers to bail out Sharp with an injection of 200 billion yen (about $1.7 billion). INCJ, which is funded by industrial giants but backed by government guarantees, will keep Sharp’s struggling LCD division alive and merge it with a rival, Japan Display Inc., itself a consortium of large corporations. Faced with this kind of firepower, there is no way you can stay in the market. Nor can you expect a similar bailout – you employ only 100 people, while Sharp employs 50,000.

You fold your startup and move across the Pacific to Silicon Valley, following in the footsteps of other Japanese entrepreneurs. The story of this young Japanese entrepreneur is fictitious, though there are some real-world parallels. But the part about the Sharp bailouts – first by the banks and now by the government – is all too true. Japan Inc. looks dead set on keeping the flailing electronics giant alive. That will keep the market flooded with artificially cheap Sharp products – mobile phones, solar panels, air conditioners, printers, microwave ovens and a host of other items. Entrepreneurs looking to use the Japanese market as a launching pad for innovative products and processes will find themselves blocked by zombies.

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Beijing needs to get cautious about its reassuring statements. It’s about credibility.

China Shares Struggle Higher On Global Stimulus Hopes (Reuters)

China’s fragile shares rose modestly on Friday, showing only a muted response to hints of more policy stimulus in Europe and Japan, which prompted a rally in battered oil prices and global equities. The benchmark Shanghai Composite Index was up 0.6% in the early afternoon, recovering a little of Thursday’s sharp losses. The CSI300 index of the largest listed companies in Shanghai and Shenzhen was also up 0.6%. The indexes veered between positive and negative territory in the morning, with little volume behind the trading. Investors appear increasingly reluctant to risk their money on China’s fickle markets, which have slumped about 17-18% so far this year, and morning gains have often turned to losses by close of day as traders quickly take profits.

Highlighting the lack of faith in the markets, trading volumes in January have been about a third of typical levels last year, which only exaggerates price movements. On Thursday, Vice President Li Yuanchao sought to reassure investors that Beijing would use regulations to prevent volatility in a market that was “not yet mature”. “An excessively fluctuating market is a market of speculation where only the few will gain the most benefit when most people suffer,” Li, who is attending the World Economic Forum in Davos, said in an interview with Bloomberg. Measured by actions rather than words, regulators’ attempts to curb volatility, notably a new circuit breaker mechanism that was ditched after three days of violent falls, have conspicuously failed. The stock markets and China’s yuan currency have come under pressure as a raft of economic indicators have confirmed the country’s declining growth, putting the world’s second-largest economy at the top of global investors’ worry list along with plunging crude oil prices.

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That stupid inflation focus is a killer.

Draghi’s Groundhog Day Heralds Seven Weeks of ECB Market Dialog (BBG)

Once again, Mario Draghi has given himself a month and a half to convince investors he’ll do what’s needed to reignite consumer prices. This time he may hone the message more. The ECB president’s hint that policy makers will bolster stimulus on March 10 raises the prospect of the Governing Council delivering another expansion to its €1.5 trillion bond-buying program, including potentially taking it into new asset classes. Emphasizing the ECB’s ambition to reporters on Thursday, Draghi said that there are “no limits” to how far officials will go to safeguard their inflation goal. “It’s a bit like Groundhog Day,” said Carsten Brzeski at ING-Diba in Frankfurt, reminiscing about the 1993 Bill Murray comedy. “The only question is, will he fulfill the dreams of markets this time around, or will he disappoint again?”

Draghi’s comments herald seven weeks of expectation management as officials hope to better guide some investors stung by the result of the last meeting of 2015, when fresh stimulus fell short of predictions stoked at the previous decision. While the president didn’t elaborate on how he plans to better explain things this time round, he also didn’t exclude that officials had a role in an outcome that sent bond yields and the euro surging. “Communication is a two-way affair,” Draghi said. “It’s very hard to put the blame of some disappointment on one side only.” His challenge has become tougher. With an inflation rate that hasn’t been near the goal of just under 2% in three years, and China’s economic slowdown increasingly dragging on global trade and disrupting markets, the 25-member Governing Council risks being seen as too slow and cumbersome.

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Long predicted: the USD is coming home.

A Scared World Is Taking Its Money And Running Back Home – and to the US (BBG)

A tide of money went out to emerging markets for more than a decade, pushed by accommodative monetary policy in the U.S. and pulled by the promise of robust growth. Now that tide is coming back in as investors seek to repatriate funds or flock to U.S.-dollar denominated assets as a safe haven amid sluggish economic growth and global market turmoil. “There are around $47 trillion in private and official investment abroad and far too many that wish to retreat home or to the U.S.,” writes Deutsche Bank Macro Strategist Sebastien Galy in a report titled “The Retreat of Global Balance Sheets.” “These flows are triggered in good part by a recognition that emerging markets’ potential growth is slowing down structurally without enough compensating growth in developed economies.”

The broad implications of this is that liquidity will be starved in parts of the emerging markets but ample in advanced economies and that the U.S. dollar and euro should benefit, the latter more so from direct investments than from portfolio inflows. In some respects, emerging markets have become victims of their own success, notes Galy, who explains how we reached this point: “Growth is easier initially in an emerging economy as each additional unit of capital and labor offers a high return. As the economy grows their returns diminish as the relatively inefficient services sector grows relative to manufacturing. Intervening against currency appreciation accelerates this transition by importing easier Fed policy. But with a mispricing of capital, it typically leads to an over usage, inefficiencies and in some cases excessive domestic valuations. As growth slows down structurally, the promises of ever stronger growth fades leaving investors potentially with unsustainable debt levels.”

China, which has seen its marginal return on credit growth continue to shrink, is perhaps the poster child for the sequence Galy describes. This course of events has led Beijing to begin drawing down on its foreign reserves, which are primarily composed of U.S. debt, in a move that puts upward pressure on U.S. Treasury yields and has the opposite effect on the value of the dollar. This dynamic, however, is swamped by the appetite for Treasuries from the private sector, says the strategist. [..] Repatriation will be fueled primarily by portfolio outflows from riskier emerging market positions and sovereign wealth fund liquidations. Since U.S. investors have far and away the highest stock of foreign equity ownership, this trend is also conducive to more greenback strength.

In fact, Galy found that “during the rapid rise in the dollar in 2015, the foreign exchange hedging decision had a clear causal and feedback loop on the spot price.” That is, as the dollar rose, more investors chose to use hedged equity exchange-traded funds, which provided an impetus for further gains in the greenback.

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But they can’t.

Battered Emerging Markets Race to Stem Outflows (WSJ)

A number of emerging markets are taking a risky approach to dealing with growing pressure on their currencies: They’re trying to ban it. Oil-dependent Azerbaijan said this week it would slap a 20% tax on any transaction that takes money out of the country. Saudi Arabia told banks with branches there to stop allowing traders to make certain bets on further depreciation of its currency, the riyal. Nigeria recently halted imports of goods including rice and toothpicks and imposed spending limits on credit and debit cards denominated in foreign currency. The capital controls are aimed at deterring or slowing the outflow of money and reducing the downward pressure on currencies that traders are betting have farther to fall.

But they also risk exacerbating the problem by driving away foreign investors who bristle at limitations on the flow of capital and hurting businesses that need to hedge. “It’s a sign of economic weakness and a dramatic shift in terms of trade, and it also increases the risk premium because of the policy uncertainty,” said George Hoguet at State Street Global Advisors. How emerging markets will manage a massive outflow of capital, weakness in their currencies and a swollen debt burden is a major question hanging over the global economy. Trillions of dollars flowed into emerging markets in the years after the financial crisis. But slowing growth in China and a collapse in oil and other commodity prices has reversed the tide.

Emerging markets suffered record net outflows of $732 billion in 2015, with China accounting for the bulk of that, according to the Institute of International Finance. Their currencies, meanwhile, weakened an average 17.6% against the dollar last year, according to money manager Ashmore Group, and the trend has shown no signs of letting up. The Russian ruble, Mexican peso and Colombian peso all hit record lows against the dollar on Wednesday. Emerging-market currencies fell 3% in the first two weeks of 2016.

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Bonkers.

US Is Hiding -Saudi- Treasury Bond Data That’s Suddenly Become Crucial (BBG)

It’s a secret of the vast U.S. Treasury market, a holdover from an age of oil shortages and mighty petrodollars: Just how much of America’s debt does Saudi Arabia own? But now that question – unanswered since the 1970s, under an unusual blackout by the U.S. Treasury Department – has come to the fore as Saudi Arabia is pressured by plunging oil prices and costly wars in the Middle East. In the past year alone, Saudi Arabia burned through about $100 billion of foreign-exchange reserves to plug its biggest budget shortfall in a quarter-century. For the first time, it’s also considering selling a piece of its crown jewel – state oil company Saudi Aramco. The signs of strain are prompting concern over Saudi Arabia’s outsize position in the world’s largest and most important bond market.

A big risk is that the kingdom is selling some of its Treasury holdings, believed to be among the largest in the world, to raise needed dollars. Or could it be buying, looking for a port in the latest financial storm? As a matter of policy, the Treasury has never disclosed the holdings of Saudi Arabia, long a key ally in the volatile Middle East, and instead groups it with 14 other mostly OPEC nations including Kuwait, the United Arab Emirates and Nigeria. For more than a hundred other countries, from China to the Vatican, the Treasury provides a detailed breakdown of how much U.S. debt each holds. “It’s mind-boggling they haven’t undone it,” said Edwin Truman, the former Treasury assistant secretary for international affairs during the late 1990s. Because relations were rocky and the U.S. needed their oil, the Treasury “didn’t want to offend OPEC. It’s hard to justify this special treatment for OPEC at this point.”

For its part, the Treasury “aggregates data where more detailed reporting might disclose the positions of individual holders,” spokeswoman Whitney Smith said. While that position is consistent with the International Investment and Trade in Services Survey Act, which governs disclosures of investments made by foreign persons and governments, and shields individuals in countries where Treasuries are narrowly held, it hasn’t kept the Treasury from disclosing figures for a whole host of other countries – large and small. They range from the $3 million stake held by the Seychelles, to the $69.7 billion investment from the oil-producing economy of Norway, and those of China and Japan, which are both in excess of $1 trillion. Apart from the kingdom itself, only a handful of Treasury officials, and those at the Federal Reserve who compile the data on their behalf, have a clear picture of Saudi Arabia’s U.S. debt holdings and whether they’re rising or falling. For everyone else, it’s a guessing game.

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“Even after [yesterday’s] drop, OIL is still at a roughly 20% premium to its underlying index.”

Is Something Blowing Up In OIL? (ZH)

A week ago we warned of some insane movements and mysterious bid in OIL (the Barclays iPath oil tracking ETN) as it traded a stunning 36% rich to its underlying NAV. Well with oil resurgent today, as contracts roll, something just imploded in OIL…

As Barrons noted, the sharp performance divergence stems from the ETN’s massive price premium over the value of the index it tracks. Pravit Chintawongvanich, head derivatives strategist at Macro Risk Advisors, notes that OIL’s premium rose sharply in recent days and accelerated to 48% by Wednesday’s close. He told Barron’s that institutional traders noticed the extreme premium and are now betting against OIL on the premise that the unusually large premium will revert to normal.

Trading volume in OIL was already more than triple the average over the past month on Thursday with three hours left in the trading day. Even after today’s drop, OIL is still at a roughly 20% premium to its underlying index. Chintawongvanich says that it’s not too late for investors who own OIL to ditch it for USO: “You don’t want to be stuck holding the bag when this drops to NAV.” Simply put – retail moms and pops who piled into OIL without thinking about NAV or technical flows just got f##ked! As we concluded previously, The current situation is eerily reminiscent to the heyday of the mortgage market in 2007, when mortgage defaults started to pick up, and yet the credit default swaps that tracked them continued to decline, bringing losses to those brave enough to trade against the crowd.

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Not could, will.

Trillions Could Be Lost In British Housing Bubble Collapse (WMN)

It is interesting how the Brits’ fascination with property has evolved over time. At present prices, UK residential property is now ‘worth’ about £5 trillion (£5,000 billion) and about 65% is owner occupied. Commercial property, all those shops, factories, offices, plant is ‘only’ £400 billion. The London Stock Exchange, which includes multinational giants with most of their assets and income overseas, is only worth £2.25 trillion. British Government Bonds are £1.5 trillion. There is approximately £700 billion of cash on deposits held by individuals.

It is interesting how something in which we live – and costing us considerable upkeep – has become so significant in terms of our societal structure. I am very alarmed at the excessive price levels of the average ‘home’ but our governments must be concerned that so much of our economics are impacted by what is happening in housing – and the confidence of those who own it. We should all never forget that over-reliance upon one economic asset, a simple box in which to live, however pretty or comfortable, does not make it immune from irrational excess and frankly, the figures are all out of kilter regardless of the lack of enough new homes being built and the insatiable demand for them – apparently (but never forget that all the people here at the moment do have somewhere to live).

[..] the order of asset values should perhaps be: stock market (the base of all our commerce), residential property, commercial property, government bonds. You can see the model requires some considerable re-balancing but perhaps a doubling of the stockmarket is more unlikely than a halving of the value of homes (though the latter would still constitute significant ‘value’ though I shouldn’t wish even to countenance what that would mean for the economy and bad debts). Sadly though, this may be the necessary adjustment required to return to ‘normality’ so watch-out as each could indeed arise.

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Man’s respect for his planet.

Hundreds Of Mountain Tops Leveled To Make Way For The New Silk Road (Forbers)

“Four years ago, all mountains,” my local driver Li Wang said as we putted slowly forward in his diminutive, beaten and battered old Japanese car through the newly built-up downtown of Lanzhou New Area (LNA). This is a place where hundreds of mountain tops have been removed to make flat land for development — an initiative which surely ranks among the most extreme undertakings in the history of urbanization. Lanzhou, the 3.6 million person provincial capital of western China’s Gansu province, was once a big market town on the ancient Silk Road, and there is now a major movement underway to revive this historic relevance. Strategically located on the geographic and cultural cusps between the Chinese heartland and Central Asia, Lanzhou is again being utilized as a gateway to the west, and is being primed to be a major hub of the Silk Road Economic Belt.

The Silk Road Economic Belt is the land-based half of China’s One Belt One Road (OBOR) initiative that will facilitate the creation of a colossal network of new highways, rail lines, logistics and industrial zones, pipelines, power plants, sea ports, administrative centers, and new cities that will stretch from East Asia to Western Europe, spanning 60 countries and over half of the world’s GDP. I was on my way out to see where some of this New Silk Road infrastructure was going to be built, riding along the new six lane highway that extended over an expanse of perfectly flat land through the center of LNA. On both sides of the road were arrays of nearly identical 30-story high-rises packed neatly within their respective 500X500 meter plots. Dozens of these complexes were lined up in bunches, amounting to hundreds of towers and tens of thousands of new apartments.

This was a planned city, a giant grid branded onto the parched desert silt, devised by urban designers who seemed to deify the right angle, and built in a singular blast of development. Most of the buildings of this new city were still empty, but it was evident that life here was starting to simmer. Some of the apartment complexes had opened and residents had already moved in; there were people walking on the sidewalks and cars in the streets. Shops were beginning to open. Li Wang took great pride in pointing out the almost ridiculous amount of banks that lined the main drag. Sprinklers showered the bare desert in hopes that something would grow. An excessive amount of gigantic jumbotrons — mainstays in new Chinese cities — were switched on, blasting promotional videos from the development companies and the local government about the great things they were building here. Just a few years ago none of this existed; it was all mountains.

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“China is blessed with the strong and long-term focused leadership of President Xi Jinping, the best leader in the world … With his leadership, we can deal with the inevitable risks and volatilities arising out of the transition.”

Glory Days Of Chinese Steel Leave Behind Abandoned Mills And Broken Lives (G.)

A billboard on the motorway into China’s steel capital evokes the golden era of the country’s blistering economic rise. “Gathering great wealth!” it boasts. “Business wins the future!” But at the Fufeng steel plant on the outskirts of Tangshan, a once booming industrial hub about 200km south-east of Beijing, there is scant sign of those glory days. Since Fufeng’s owners declared bankruptcy early last year – laying off about 2,000 workers and sparking protests in the process – weeds and rust have begun to consume the steel mill’s industrial ruins. “There’s nobody here – just us,” said one of three security guards braving snow and sub-zero temperatures to watch over the dilapidated facility, which, like many others in the region, has been forced out of business by massive over-capacity and plummeting demand.

Tangshan, a city of about seven million inhabitants in Hebei, China’s steel-making heartlands, was levelled by a devastating 1976 earthquake that is said to have claimed 250,000 lives. But it rose from the ashes to become a heavy-industry powerhouse, propping up a massive Chinese construction boom and churning out more steel in 2014 than the United States. Those days now appear over, as concerns mount over the health of China’s economy and its possible impact on the rest of the world, and Beijing fights to reinvent the world’s second-largest economy and clear its smog-choked skies, in turn piling the pressure on heavily polluting steel plants.

Since China began ramping up efforts to slash steel over-capacity and transition to a more sustainable, consumption-led economic model, some corners of Tangshan’s once bustling industrial sprawl have taken on the appearance of ghost towns. [..] “Things are bleak,” said one retired mill worker who lives in Kua Number One village, just beside Fufeng. Another man, who works at the nearby Guofeng mill, which is still operating, but only just, claimed his monthly pay had been cut by 25%. “Life is really hard right now,” he complained. “Everything here is about steel. If it shuts down, it’s over. If our mill closes, we will have no land, no money and no work,” said the 52-year-old father of one, who declined to give his name.

This week, China announced that its economy last year grew at its slowest rate in 25 years, contributing to fears of an accelerated slowdown that could affect financial markets across the world. On Thursday, Fang Xinghai, a Stanford-educated top economic adviser to president Xi Jinping, attempted to reassure the world over his country’s ability to avoid a hard landing that would have severe consequences for the global economy. “China is blessed with the strong and long-term focused leadership of President Xi Jinping, the best leader in the world,” Fang, the former deputy head of the Shanghai Stock Exchange, told the Wall Street Journal. “With his leadership, we can deal with the inevitable risks and volatilities arising out of the transition.”

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How will the ECB try to solve this with Hollande stating that France is in an economic emergency?

Italy Could Trigger Europe’s Next Financial Crisis (Stratfor)

In the current period of uncertainty, Italy – particularly its banks – appears to be the victim of the moment. The Italian banking index is down 18% this year, and Italy’s third-largest and most historically troubled bank, Monte dei Paschi, has lost 50% of its value during the same period. The most dramatic drops have taken place this week. The Italian stock market regulator has deemed it necessary to ban short selling on Monte dei Paschi stock in an attempt to prevent speculators from benefiting by driving it lower, yet it continues to fall. As is so often the case with the markets, these actions are rooted in fact but with a layer of sentiment on top. Italy’s banks are indeed troubled; their non-performing loans amount to more than €200 billion, and Monte dei Paschi had an extremely weak balance sheet long before a 2013 derivatives scandal dealt it another blow.

But those non-performing loans have been growing ever since 2008, and that growth has slowed of late. Italy’s banking crisis has long been brewing, and the markets appear to be taking it seriously for the first time since ECB President Mario Draghi defused the last market panic by promising to do “whatever it takes to save the euro” in mid-2012. Either way, the market sell-off could seriously damage Italy’s economy. New regulations brought in at the start of the year heighten the risk of a bank run because investors and depositors must now bear the pain of an Italian bank going bust. This is a strong incentive for a bank’s depositors and investors to move their funds elsewhere if they believe the bank is in danger (sentiment plays a role again), and there are reports that Monte dei Paschi depositors are doing just that.

Italy and the European institutions must now look for ways to reverse the sentiment that is making Italian banks the victims and reassure the markets of the banks’ safety. The drastic way of achieving this would be a government bailout, but this is unlikely both because of the new rules and because bailouts typically occur when a crisis is in a more developed state. Another way would be persuading another Italian bank to buy Monte dei Paschi and take on its risky assets at a discount, thereby reassuring the market that Italy’s largest problem is now solved. This is possible in theory, though the travails of banks that bought their weaker peers in the crisis of 2008 might make it a hard sell for potential suitors.

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And the EU won’t give it.

IMF Demands EU Debt Relief For Greece Before New Bailout (Guardian)

The EU will need to provide significant debt relief for Greece if it is to persuade the IMF to put its financial clout behind the country’s third bailout package, the Washington-based organisation has said. After what was described as a cordial meeting between the IMF’s managing director, Christine Lagarde, and the Greek prime minister, Alexis Tsipras, on the sidelines of the World Economic Forum in Davos, the fund said it was only prepared to support the recession-ravaged eurozone country on a strings-attached basis. It said Greece had to be prepared to implement a tough package of economic reform and the country’s eurozone partners had to be willing to write down Greece’s debts.

The IMF took part in the first two Greek bailouts but is concerned that, at 175% of GDP, Greece’s debts are too burdensome and will prevent a lasting recovery. Lagarde told Tsipras the IMF regarded reform of Greece’s pension system, which accounts for 10% of GDP, as vital. The IMF said of the talks: “The managing director reiterated that the IMF stands ready to continue to support Greece in achieving robust economic growth and sustainable public finances through a credible and comprehensive medium-term economic programme. “Such a programme would require strong economic policies, not least pension reforms as well as significant debt relief from Greece’s European partners to ensure that debt is on a sustainable downward trajectory.” The Greek government said the talks had been sincere.

Earlier in the day, Tsipras told Davos he was committed to reforming the Greek economy, which lost 25% of its GDP through austerity programmes which sent jobless rates to twice the eurozone average. But he criticised Europe’s insistence on lowering budget deficits, saying: “We must all understand that, next to balanced budgets, we must also have growth … We need to be more realistic, and show more solidarity too.” The German finance minister, Wolfgang Schäuble, appeared unimpressed by Tsipras’s call for greater solidarity, and suggested he needed to deliver on the promises made to creditors. “My advice is, if we want to make Europe stronger we should implement what we agreed to implement. We can simply say, ‘implementation, stupid’,” Schäuble said.

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The EU leaves behind only rubble.

Capital Controls Cut Greek Exports By €3.5 Billion In 6 Months (Kath.)

From end-June to November 2015, the capital controls cost Greek exports, and therefore the economy in general, some €3.5 billion, or 2 %age points of the country’s GDP, according to an analysis of Bank of Greece data by the Panhellenic Exporters Association. In addition to the €1.88 billion net loss in takings in the first 11 months of last year compared with the year before, exports are believed to have missed out on another €1.65 billion as according to the course set in the first half of the year, the momentum would have seen exports swell considerably in 2015.

At the same time, the transactions terms between Greek enterprises and foreign partners (clients or suppliers) remain very tough, according to the exporters. Furthermore, foreign clients of Greek companies are delaying payments as the local firms are at a disadvantage and cannot exert pressure on them. In 2015 foreign companies extended the payment time for Greek exports by an average of 13 days compared to 2014. The ratio of payments to declared exports dropped to 96.27% in 2015, from 98.48% in 2014, the Bank of Greece data showed. The value of exported goods came to €23.6 billion last year while payments came to just €22.7 billion.

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Who’s better off when all these people are evicted? BTW, you think Tsipras is going to throw them out on the street?

Over 120,000 Greek Homes Close To Repossession (Kath.)

An estimated 122,700 households in Greece are facing the threat of losing their homes due to accumulated loan and tax obligations that they cannot pay, a survey by Marc research company for the Hellenic Confederation of Professionals, Craftsmen and Merchants showed on Thursday. Households’ fears are on the rise due to a change in the legislative framework concerning repossessions valid as of January 1 that has made the criteria for acquiring protection status stricter. A great number of households surveyed (36.3%) said that they live on up to €10,000 per year, which is the lowest income bracket. This is up from 34.4% in 2014 and 28.1% in 2013. Of particular concern is the finding that more than half of the households polled (51.8%) have a pension as their main source of income, up from 42.3% in 2012. Just 6.1% of respondents said they have a business activity as the main source of income, less than half of the share recorded in 2012 (12.6%).

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Dire straits.

One Third of Greeks Cannot Afford Heating Or Hot Water (KTG)

Residents in several underprivileged suburbs of Athens and Piraeus have seen their economic situation to have dramatically deteriorate and consequently also their living standards. According to a survey conducted by the Greek Ombudsman: one in five residents seeks soup kitchens and social groceries in order to get food. Three in ten have no heating and hot water. One in four living in apartment buildings have not turn on the radiators since 2010. The survey has been conducted in 2015 and in Kypseli, Ano Patisia and Agios Panteleimonas districts of Athens as well as in Nikaia-Rendis and Perama suburbs of Piraeus. 17% of the residents of these areas have experienced electricity and/or water outage due to unpaid bills. One in four had to make debt arrangements with the Power or Water company in order to gain again access to electricity and/or water.

Almost half (48.5%) said that in the last five years, they have faced difficulties in the repayment of debts to banks, credit cards, taxes, rents, building maintenance cost, tutor schools and schools. One in six (17%) said that they have experienced power/water outage and one in four (23.4%) said that they live in apartment buildings where the central heating does not operate for economic reasons. 80.2% said that their need for heating in winter and cooling in summer is not covered. 29.2% said that their needs for heating/cooling, cooking, hot water, refrigerator and electricity are not covered due to economic reasons. 35.03% use electricity for heating (electric radiator or A/C), 33.09% use heating oil, 9.04% use natural gas, 8.47% use firewood and 7.34% use LPG. 17% said that they had no telephone landline, 23.2 had no personal computer and 27.7% had no internet access.

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All I can think is: poor people. Children freezing to death, caught between politicians playing a power game, who care nothing about human lives.

Greece Demands That Refugees Declare Final EU Destination (Reuters)

Migrants and refugees arriving in Greece must state their final destination to travel further into the European Union, a Greek police source told Reuters on Thursday, following moves by neighbouring states to quell migrant flows. Serbia on Wednesday said it would deny migrants access to its territory unless they planned to seek asylum in Austria or Germany. “As of today, the final destination – as stated by the migrants – will be registered in the official documents,” the official said without disclosing the reason for the decision.

It was not clear whether the refugees would be banned from travelling further depending on their final destination. But most migrants were expected to state Austria or Germany, refugee agency officials said. Greece, a main gateway to Europe for migrants crossing the Aegean sea, has faced criticism from other EU governments who say it has done little to manage the flow of hundreds of thousands of people arriving from Turkey on its shores. Austria wants to cap the number of people it allowed to claim asylum this year at less than half last year’s figure, it said on Wendesday. It has said it would bar all migrants intending to pass through its northern neighbour Germany to other western European countries.

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Sure, why not. They haven’t lost enough yet.

Germany Takes Refugees’ Valuables ‘To Pay For Their Stay’ (Local)

Germany’s southern states are confiscating cash and valuables from refugees after they arrive, authorities in Bavaria confirmed on Thursday. “The practice in Bavaria and the federal rules set out in law correspond in substance with the process in Switzerland,” Bavarian interior minister Joachim Herrmann told Bild on Thursday. “Cash holdings and valuables can be secured [by the authorities] if they are over €750 and if the person has an outstanding bill, or is expected to have one.” Authorities in Baden-Württemberg have a tougher regime, where police confiscate cash and valuables above €350. The average amount per person confiscated by authorities in the southern states was “in the four figures,” Bild reported.

By confiscating valuables, the states are implementing federal laws, which require asylum seekers to use up their own resources before receiving state aid. “If you apply for asylum here, you must use up your income and wealth before receiving aid,” Aydan Özoguz, the federal government’s integration commissioner, told Bild. “That includes, for example, family jewellery. Even if some prejudices persist – you don’t have it any better as an asylum seeker as someone on unemployment benefit,” Özoguz added. [..] Only the Left party (Die Linke) criticized the confiscations, with MP Ulla Jelpke telling Der Tagesspiegel that “those who apply for asylum are exercising their basic rights [under the German Constititution]. “That must not – even if they are rejected – be tied up with costs,” she argued.

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