Mar 302017
 
 March 30, 2017  Posted by at 9:05 am Finance Tagged with: , , , , , , , , ,  No Responses »
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Carole Lombard 1926

 


Fed’s Williams Says Bank Lending Slowdown Doesn’t Worry Him Yet (YF)
Retailing in America: Game Theory in Reverse (DiMartinoBooth)
‘Deep Subprime’ Auto Loans Are Surging (BBG)
Margin Debt Hit All-Time High in February (WSJ)
US Oil Export Surge Steals More OPEC Share (CNBC)
Australia World’s Worst Money Laundering Property Market (TI)
Sydney, Melbourne House Price Gains Accelerate (AFR)
Auckland Housing Market Losing All Capital Gains Of The Last 12 Months (INZ)
House Panel Passes Bill To Audit The Fed (MW)
Hawaii Judge Places Indefinite Hold On Trump Travel Ban (BBC)
Paul Ryan Opposes Trump Working With Democrats On Healthcare (R.)
Democrats Against Single Payer (Jacobin)
American Empire Crumbling (Quinn)
The EU Cannot Survive If It Sticks To Business As Usual (Varoufakis)
Capitalism Inevitably Creates A ‘Sad’ Unfair World – Physicist (Ind.)
‘That Was Some Weird Shit’ (NYMag)
146 Feared Dead In Mediterranean, Boy The Sole Survivor (R.)

 

 

Today’s main theme just has to be W’s ‘That Was Some Weird Shit’. Here’s the graph to go with it.

Fed’s Williams Says Bank Lending Slowdown Doesn’t Worry Him Yet (YF)

A recent slowdown in bank lending has some observers concerned that the post-election pops in optimism are sending a false signal about the strength of the U.S. economy. To San Francisco Fed president John Williams, however, this decline is out of step with everything else credit markets are saying about the economy. “The big picture is: I don’t see any signs of a slowing either on the demand side or on the credit supply side,” Williams told Yahoo Finance on Wednesday. “Overall, the other indicators, everything we see, [says] economic conditions are good,” Williams added. “Confidence is good, and we’re not seeing any signs of bank lending standards changing fundamentally. So it’s hard to see anything, from my viewpoint, that [says] credit is less available.”

In recent months, the growth rate of commercial and industrial loans, as tracked by the Federal Reserve’s weekly H.8 report on assets and liability of U.S. banks, has been on the decline. This is viewed by many as a negative development in an economy where lending and borrowing activity serve as proxies for the economy’s overall health. But Williams also cautioned that lending data can reveal economic developments on a lag. For example, he noted to Yahoo Finance that in 2008 bank lending increased, which contradicted the notion that the financial markets were seizing up. Indeed, companies were unable to borrow by tapping the bond markets. However, the lending did increase because companies drew from existing lines of credit.

Right now, Williams noted that one story behind the drop in C&I loan growth going around is that oil and gas companies last year drew on lines of credit, boosting loan growth at the time. And thus the current decline in lending, which appears out of step with broader economic conditions, is occurring largely because of difficult year-over-year comparisons.

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Retail demise exposes banks.

Retailing in America: Game Theory in Reverse (DiMartinoBooth)

On March 21st, Sears Holding Corporation submitted a filing with its regulators that it has “substantial doubt” it can continue as a “going concern.” Don’t recall companies being charged with making their own death throes’ announcements from your Accounting coursework? You are correct. Meet the new and improved U.S. accounting rules that have just come into effect for public companies reporting annual periods that ended after December 15, 2016, Sears included. The change shifted the onus to disclose from a given company’s auditors to its management. It was telling that the Sears news fell on the very same day discount retailer Payless announced it could soon file for bankruptcy protection. That same day, the less ubiquitous Bebe female fashion chain said it too was ‘exploring strategic options,’ typically code for that same ill-fated Chapter in the court system.

[..] At the opposite end of the denial spectrum sits Boston Fed President Eric Rosengren, who is and has been publicly worried about an entirely different sort of challenge facing the real estate market. It’s no secret that apartment prices are soaring. Over the past year, prices have risen 11%, leading the broad market. While that increase may seem benign in and of itself, consider how the sector has fared over the course of the recovery: prices have recouped an eye-watering 240% of their peak-to-trough losses. In sharp contrast, retail has performed the worst; it’s only recovered 96% of its losses. Rosengren is rightly worried that the “sharp” increase in apartment prices could catalyze financial instability. He went on to say that, “Because real estate holdings are widespread, and the monetary and macro-prudential tools for handling valuation concerns are somewhat limited, I believe we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn.”

If you would indulge a translation: The bubble in commercial real estate (CRE) could trigger systemic risk, which of course, no central bank can contain. The ‘macro-prudential’ tools to which Rosengren refers include rules and caps on banks’ exposure to CRE. Odds are, however, that the horse has already fled the barn. Over the past five years, CRE lending has been running at roughly double economic growth, a dangerous dynamic. The result: banks’ exposure to CRE has reached record levels. Last year alone, bank holdings of CRE and multifamily mortgages rose nine and 12%, respectively. More worrisome yet is that the most concentrated cohort – those with more than 300% of their risk-based capital at risk – is banks with less than $50 billion in assets; most have assets south of $10 billion. How exactly will small banks confront a systemic risk conflagration? That pesky potential presumably is what’s robbing Rosengren of sleep at night. He might just remember that small German lenders called Landesbanks were where subprime bombs detonated unexpectedly way back when.

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Anyone who can fog a mirror is back

‘Deep Subprime’ Auto Loans Are Surging (BBG)

About a third of the risky car loans that are bundled into bonds are considered “deep subprime,” a level that has surged since 2010 and is translating to higher delinquencies on the loans, according to Morgan Stanley. Consumers are falling behind on most subprime car loans, but deep subprime borrowers have deteriorated fastest, the analysts said. Sixty-day delinquencies for bonds backed by these loans have risen 3 percentage points since 2012, compared with just 0.89 percentage points on all other subprime auto securities, Morgan Stanley’s Vishwanath Tirupattur, James Egan and Jeen Ng said in a report dated March 24. “The securitization market has become more heavily weighted towards issuers that we would consider deep subprime,” the strategists wrote. “Auto loan fundamental performance, especially within ABS pools, continues to deteriorate.”

The percentage of subprime auto-loan securitizations considered deep subprime has risen to 32.5% from 5.1% since 2010, Morgan Stanley said. The researchers define deep subprime as lenders with consumer credit grades known as FICO scores below 550. The scale from Fair Isaac Corp. ranges from 300 to 850 and while there’s no firm definition of subprime, borrower scores below 600 are in general considered high credit risks. As Wall Street banks have found it tougher to profit under new regulatory regimes born out of the last subprime crisis, they’ve become more willing to underwrite riskier auto-loan asset-backed security sales. Investors, starved for returns with about $8 trillion of debt globally carrying negative yields, have in turn proven to be insatiable, further facilitating higher levels of risk in the market for the securities.

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The casino’s open for business.

Margin Debt Hit All-Time High in February (WSJ)

Margin debt climbed to a record high in February, a fresh sign of bullishness for flummoxed investors trying to navigate the political and economic crosscurrents driving markets. The amount investors borrowed against their brokerage accounts climbed to $528.2 billion in February, according to the most recent data available from the New York Stock Exchange, released Wednesday. That is up 2.9% from $513.3 billion in January, which had been the first margin debt record in nearly two years. With margin debt, investors pledge securities, typically stocks or bonds, to obtain a loan from their brokerage firms. The money doesn’t have to be used to buy more investments, though it often is. The gauge tends to climb—and pull back—along with broader stock market gauges, which have been rising to fresh records in the wake of November’s presidential election.

Rising levels of margin debt are generally considered to be a measure of investor confidence. Investors are more willing to take out debt against investments when shares are rising and they have more value in their portfolios to borrow against. But experts say a steep rise can indicate that investors are losing sight of market risks and betting that stocks can only go up. Margin debt has a history of peaking right before financial collapses like the ones in 2000 and 2008. When stocks move lower, investors who are buying with borrowed money often must pull out of the market, exacerbating the decline. Before January, the previous record high for margin debt was $505 billion in the spring of 2015. Margin debt then started falling, months ahead of a summer swoon that sent major indexes down more than 10%.

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As demand falls.

US Oil Export Surge Steals More OPEC Share (CNBC)

As OPEC tries to keep oil off the world market, U.S. oil producers are pouring more onto it. The U.S. last week sent more than 1 million barrels a day of crude out of the country, the third biggest export week ever, and double the average amount exported in 2016. It is also the third time this year that U.S. exports exceeded a million barrels a day, an industry record. “It should be somewhat supportive of [U.S. oil prices] in the short run, particularly if the exports keep up. But it obviously is a challenge for the global market and a renewed threat to OPEC and their designs of keeping prices up,” said John Kilduff of Again Capital While the U.S. exported oil, it also exported fuel last week — a steadily growing business. The U.S. sold 1.1 million barrels of diesel fuel, in line with the recent average, but 608,000 barrels a day of gasoline, up from less than 400,000 barrels a day a year ago.

Analyst say the jump in exports means U.S. producers are grabbing more share at the expense of OPEC and its partners, at a time when the cartel and other producers are considering whether to extend their deal to hold 1.8 million barrels of oil off the market. But the U.S. may also be seeing the early signs of a potential rebalancing of its own supply picture, and that could ultimately help clear a logjam of domestic oil barrels. “What we’re now seeing in the U.S. is refinery utilization increasing, as the maintenance season draws to a close. At the same time, there’s good demand for gasoline and diesel which is helping get inventories under control. Those product inventories are less than they were this time last year,” said Andrew Lipow, president of Lipow Oil Associates. U.S. refineries supplied 9.5 million barrels a day of gasoline last week, up from 9.2 million the week earlier. Refinery runs increased by 425,000 barrels a day.

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Transparency International reports.

Australia World’s Worst Money Laundering Property Market (TI)

The real estate market has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds… According to the Financial Action Task Force (FATF), real estate accounted for up to 30% of criminal assets confiscated worldwide between 2011 and 2013… In many such cases, property is purchased through anonymous shell companies or trusts without undergoing proper due diligence by the professionals involved in the deal. The ease with which such anonymous companies or trusts can acquire property and launder money is directly related to the insufficient rules and enforcement practices in attractive markets… This assessment identifies the following 10 main problems that have enabled corrupt individuals and other criminals to easily purchase luxurious properties anonymously and hide their stolen money in Australia, Canada, the UK and the US:

• Inadequate coverage of anti-money laundering provision
• Identification of the beneficial owners of legal entities, trusts and other legal arrangements is still not the norm
• Foreign companies have access to the real estate market with few requirements or checks
• Over-reliance on due diligence checks by financial institutions leads to cash transactions going unnoticed
• Insufficient rules on suspicious transaction reports and weak implementation
• Weak or no checks on politically exposed persons and their associates
• Limited control over professionals who can engage in real estate transactions: no “fit and proper” test
• Limited understanding of and action on money laundering risks in the sector
• Inconsistent supervision
• Lack of sanctions

Australia has severe deficiencies under all 10 areas identified in the research and is therefore not in line with any of the commitments to tackle corruption and money laundering in real estate made in international forums. In Australia, real estate agents are not subject to the provisions of the Anti-Money Laundering and CounterTerrorism Financing Act 2006. Other professionals such as lawyers and accountants who may also play a role in the sector are not covered either. This means that properties can be bought and sold without any due diligence on the parties. Currently there are no requirements for real estate agents or any professional involved in real estate deals to submit STRs, even if they suspect illegal activity is taking place, and there are no requirements or rules for verifying whether customers are PEPs or their close associates…

In Australia, Canada and the US, the current anti-money laundering framework shows a tendency to rely on financial institutions to conduct the necessary background checks on real estate transactions… there are no checks on cash transactions. In Australia, 70% of Chinese buyers pay in cash and they represent the largest proportion of foreign purchases in the country.

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How this does not scare very single person out of their socks, I can’t imagine.

Sydney, Melbourne House Price Gains Accelerate (AFR)

House price growth accelerated further in March, with gains in Sydney and Melbourne pushing higher than previous cyclical peaks, preliminary CoreLogic figures show. Data for the first 28 days of the month shows Sydney prices have risen 19% over the past year while Melbourne has posted a 16% gain, the company said on Thursday. The combined capital city average of 1.4% – the same pace of growth as February – suggests that the strengthening in the two largest cities offsets further weakness in other markets. “The early results come after a strong rebound in housing market conditions through the latter half of 2016 and into 2017,” CoreLogic head of research Asia Pacific Tim Lawless said. “The strong capital gain results are further evidenced by a continuation in low stock levels, high auction clearance rates and strong investment demand.”

In other data that will underpin property prices, official figures released on Thursday show Sydney’s population hit five million, and Melbourne is the country’s fastest-growing capital. Some caution is needed. A methodology change by CoreLogic last year exaggerated price growth in Sydney and Melbourne while also exacerbating the declines in the falling Perth market. CoreLogic has not yet revised the figures to account for the methodology and distortions will only drop out of the year-on-year comparison in June. It’s clear the market is buoyant, however. Even with lenders tightening loan conditions to investor borrowers, they are increasing discounts to owner owner occupiers to protect market share, Deloitte’s annual Australian mortgage report said on Thursday.

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Nice bubble you got there. Wouldn’t want anything to happen to it, would you?

Auckland Housing Market Losing All Capital Gains Of The Last 12 Months (INZ)

The Auckland housing market is on the verge of having all of the capital gains it made in the last 12 months wiped out. Prices of Auckland properties have fallen so much in the last few months that median prices are within a hair’s breadth of going into negative territory on an annual basis. They may already be there. In February the average price of Auckland homes sold by Harcourts, the country’s largest real estate agency, was $934,428, down 1.1% compared to where it was in February last year. While Harcourts’ average prices can be a bit choppy on a month by month basis, the figures do not appear to be an aberration. According to the Real Estate Institute of New Zealand, Auckland’s median selling price peaked at $868,000 in October last year and has declined every month since. In February it hit $800,000, down 7.8% from October’s peak.

But just as significantly, Auckland’s median price in March last year was $820,000. So even if the median price for March this year doesn’t fall any further from where it was in February, or if it increases by anything less than $20,000, Auckland’s median price will have declined to the point where it will be below where it was 12 months previously. Then it’s goodbye capital gains. The interesting thing about those numbers is that the downward trend they show is occurring at a time when Auckland’s migration-driven population growth is increasing at record levels and construction of new housing continues to fall miserably below the numbers that are required, exacerbating the region’s growing housing shortage. How can this be? As you might expect, the market is being influenced by forces converging from several different directions.

One of the biggest changes to affect the Auckland market over the last few months has been the relative absence of local ethnic Chinese buyers. It would be hard to underestimate the impact they were having on Auckland’s residential property market up until about the end of the third quarter of last year. They dominated some of what are often called the “big room” auctions where several dozen properties could be auctioned in a single day, and it wasn’t uncommon for them to account for around 70% of sales. Often they were competing amongst themselves for properties and their bidding could be fierce. Sometimes it seemed as if the prices they were prepared to pay knew no limits. Then late last year, just as the market geared up for the summer selling season, the Chinese tide went out.

Auckland now has a significant population of Chinese people, so there will always be some who are actively buying or selling properties. But the numbers are well down on where they were a year ago. Auctions that were packed with Chinese buyers this time last year are now much quieter and Chinese faces are often more notable by their absence rather than their presence. When they are buying, they are more likely to be buying a home for themselves or perhaps their children than a pure investment property, and their bidding has been far more cautious than it was just a few months ago. Often they will bid on a property only to let it be passed in, figuring that they may not face much competition from other buyers in post-auction negotiations. With the odd exception, the days of the bidding frenzy are over.

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All for it.

House Panel Passes Bill To Audit The Fed (MW)

A House panel on Tuesday approved legislation that would let a government watchdog audit the Federal Reserve’s monetary policy decisions, a move bitterly opposed by the central bank. The House Committee on oversight and government reform passed the measure by voice vote after roughly 30 minutes of debate. The bill was the brainchild of Ron Paul, the former House Republican and libertarian presidential candidate and sharp critic of the U.S. monetary policy. Versions of the bill have twice passed the House by wide margins but then stalled due to lack of support from Democrats in the Senate and the Obama administration. Analysts said the measure has a better chance to become law now that Republicans control both houses of Congress and the White House. Paul’s son, Rand, the Republican senator from Kentucky, has introduced a similar measure in the Senate.

Democrats in the committee were firmly against the bill. “This bill would open the floodgates to political interference in monetary-policy making,” said Del. Eleanor Holmes Norton, a Democrat from the District of Columbia. Rep. Carolyn Maloney, a Democrat from New York, said the measure would lead to higher interest rates because it would undermine the market’s confidence in the independence of the central bank. Republicans said the measure was needed to rein in the Fed. “It is ironic that the arsonists that caused the financial collapse are now being given credit…for putting out the fire. Almost every macroeconomist concedes in retrospect that [the Fed’s] extended period of easy money led to the financial crisis,” said Rep. Thomas Massie, a Republican from Kentucky.

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What good could it do to go to the Ninth Circuit Court at this point?

Hawaii Judge Places Indefinite Hold On Trump Travel Ban (BBC)

A US federal judge in Hawaii has indefinitely extended the suspension of President Trump’s new travel ban. Judge Derrick Watson’s ruling means Mr Trump will be barred from enforcing the ban on six mostly Muslim nations while it is contested in court. In a lawsuit, the US state says the ban would harm tourism and the ability to recruit foreign students and workers. President Trump says his revised travel ban seeks to prevent terrorists from entering the United States. Judge Watson made the ruling late on Wednesday after hearing arguments from attorneys for the state of Hawaii and the US Department of Justice. The judge turned his earlier temporary restraining order into a preliminary injunction that would have a more lasting effect.

President Trump’s executive order on 6 March would have placed a 90-day ban on people from Iran, Libya, Somalia, Sudan and Yemen and a 120-day ban on refugees. An earlier version of the order, issued in late January, sparked confusion and protests, and was blocked by a judge in Seattle. Other courts across the US have issued different rulings on Mr Trump’s revised ban, with a judge in Maryland halting a part of the ban earlier this month. Mr Trump has complained of “unprecedented judicial overreach”, pledging to take the case “as far as it needs to go”. An appeal against the Hawaii decision would be expected to go next to the Ninth Circuit Court of Appeals – the same court which in February said it would not block a ruling by a Seattle court to halt the original travel ban.

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Because working together is so last century?!

Paul Ryan Opposes Trump Working With Democrats On Healthcare (R.)

U.S. House of Representatives Speaker Paul Ryan, the top Republican in Congress, said he does not want President Donald Trump to work with Democrats on new legislation for revamping the country’s health insurance system, commonly called Obamacare. In an interview with “CBS This Morning” that will air on Thursday, Ryan said he fears the Republican Party, which failed last week to come together and agree on a healthcare overhaul, is pushing the president to the other side of the aisle so he can make good on campaign promises to redo Obamacare. “I don’t want that to happen,” Ryan said, referring to Trump’s offer to work with Democrats. Carrying out those reforms with Democrats is “hardly a conservative thing,” Ryan said, according to interview excerpts released on Wednesday.

“I don’t want government running health care. The government shouldn’t tell you what you must do with your life, with your healthcare,” he said. On Tuesday, Trump told senators attending a White House reception that he expected lawmakers to reach a deal “very quickly” on healthcare, but he did not offer specifics. “I think it’s going to happen because we’ve all been promising – Democrat, Republican – we’ve all been promising that to the American people,” he said. Trump said after the failure of the Republican plan last week that Democrats, none of whom supported the bill, would be willing to negotiate new healthcare legislation because Obamacare is destined to “explode.”

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Who’s left to represent actual Americans?

Democrats Against Single Payer (Jacobin)

Virginia Democratic senator Chuck Robb, one of the DLC’s founders, warned in 1989 that “policies forged in the economic crisis of the 1930s and the social and cultural schisms of the 1960s” were irrelevant to most Americans. Two years later, Bill Clinton’s issue director Bruce Reed, who doubled as policy director for the DLC, made sure to distance Clinton from single payer. The issue flared up again during the 2008 Democratic primary fight, where both Obama and Hillary Clinton tried hedging their bets. Clinton put forward a plan that was basically Obamacare while insisting that “Medicare for All” could still be on the cards under the right circumstances. Meanwhile Obama repeatedly flip-flopped, at one point telling an audience that “the Canadian model won’t work in the United States” and that “we’ve got to develop a uniquely American approach,” and nine days later hinting to a different audience that over time single payer may be on the table.

DLC leaders felt reassured however, telling the New York Times they were “pleased that none of the Democratic candidates supports a single-payer health-care system.” So Democrats’ attempts to quell their base’s clamoring for a comprehensive, public health-care system isn’t new. What is new is the open, public disparagement of such a goal — not just by Democratic leaders, but by leading liberal commentators, too. Ironically, this appears largely to have been due to the Sanders campaign — or rather, the challenge it posed to Hillary Clinton’s previously wide-open road to the White House. Needing to differentiate herself from Sanders’s unabashed progressivism, and to dampen popular enthusiasm for his message, Clinton began attacking his policies, despite her historic sympathy toward single payer.

Sanders’s proposals were “ideas that sound good on paper but will never make it in real life,” she told crowds; for good measure, she insisted that single-payer health care “will never, ever come to pass.” Two years earlier, she explained her opposition to the policy on the basis that “we don’t have a one size fits all; our country is quite diverse.” In January 2016, she warned breathlessly that Sanders’s plan would “end all the kinds of health care we know” and claimed it would “send health insurance to the states,” while her daughter warned that it would “dismantle Obamacare” and “strip millions and millions and millions of people off their health insurance.”

As late as October, Clinton’s team was still trying to distance herself from Trump’s accusation that she — heaven forbid! — “wants to go to a single-payer plan,” with her spokesman directing Politifact to an earlier fact-check confirming her lack of support for the policy. (Lest we mistake this for mere expediency, we can rest assured that at least some of the Clinton camp really felt this way: campaign manager John Podesta declared in an email to ThinkProgress editor-in-chief Judd Legum that Sanders’s “actual proposal sucks, but we live in a leftie alternative universe.”)

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Jim Quinn’s series on the similarities between Isaac Asimov’s Foundation Trilogy and Strauss & Howe’s Fourth Turning.

American Empire Crumbling (Quinn)

You can hear the creaking as the winds of this Fourth Turning winter howl through the branches of this dying empire. Trump may have forced the Deep State Second Foundation to reveal itself as they seek to destroy him, but the relentless decline of the American Empire continues unabated. Tinkering around the edges of a healthcare system designed to benefit mega-corporations and the Deep State will do nothing to reverse or even delay the decline. Slowing the growth of government when the national debt is already $20 trillion and headed to $30 trillion within the next decade won’t cure the rot in our tree trunk. Completely ignoring the $200 trillion of unfunded welfare state liabilities helps accelerate the inevitable collapse of this empire. Cutting taxes while expanding the war making machine known as the military industrial complex does nothing to reverse what is already in motion.

In addition to the absolutely quantifiable reasons why the American Empire will collapse, there are demographic, cultural, and societal trends which will contribute dramatically to the fall. The rapidly aging populace, with 10,000 Americans per day turning 65 years old, is the driving force towards national bankruptcy, as this inexorable demographic tsunami sweeps over the fraying fabric of welfare state promises. The onslaught of illegal immigrants and purposeful execution of a plan by the effete liberal elite to weaken our common American culture through the insertion of Muslim refugees into our communities, is undermining the shared values which built the country. The immigrants who built this country assimilated, learned the language, worked hard, and adopted our common culture. The hordes invading America at this time hate our values and refuse to assimilate. This Soros funded effort to create diversity havoc throughout the world is part of the globalization one world order plan.

As Europe disintegrates under the unrelenting wave of violent refugees creating upheaval, chaos, and spreading religious zealotry through viciousness, the next target is the mighty American Empire. Fighting in the streets between the normal law abiding Trump supporters and the Soros funded, draped in black, flag burning, social justice warrior criminals has begun. Widespread societal strife is just around the corner. When the next financial crisis, created by the Deep State to further their plans, destroys the remaining wealth of the barely surviving middle class, all hell will break loose in the streets. The 86% of the country occupied by red state, gun owning, Trump supporters will openly go to war against the condescending, left wing, violence provoking blue state liberals. Blood will be spilled in copious amounts. It always does during Fourth Turnings.

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It cannot survive, period.

The EU Cannot Survive If It Sticks To Business As Usual (Varoufakis)

Angela Merkel, the German Chancellor, had for years opposed the idea of a Europe that proceeds at different speeds – allowing some countries to be less integrated than others, due to their domestic political situation. But now – after the colossal economic mismanagement of the euro crisis has weakened the EU’s legitimacy, given Eurosceptics a major impetus, and caused the EU to shift to an advanced stage of disintegration – Mrs Merkel and her fellow EU leaders seem to think that a multi-speed Europe is essential to keeping the bloc together. At the weekend, as EU leaders gathered to celebrate the 60th anniversary of the Treaty of Rome, leaders of the remaining 27 member states signed the Rome Declaration, which says that they will “act together, at different paces and intensity where necessary, while moving in the same direction, as we have done in the past.”

The failure to keep the EU together along a single path toward common values, a common market and a common currency will come to be embraced and rebranded as a new start, leading to a Europe in which a coalition of the willing will proceed with the original ambition while the rest form outer circles, connected to the inner core by unspecified bonds. In principle, such a manifold EU will allow for the East’s self-proclaimed illiberal democracies to remain in the single market, refusing to relocate a single refugee or to adhere to standards of press freedom and judicial independence that other European countries consider essential. Countries like Austria will be able to put up electrified fences around their borders. It could even leave the door open for the UK to return as part of one of Europe’s outer circles. Whether one approves of this vision or not, the fact is that its chances depend on a major prerequisite: a consolidated, stable eurozone.

One only needs to state this to recognize the second paradox of our post-Brexit reality: In its current state, the eurozone cannot provide the stability that the EU – and Europe more broadly – needs to survive. The refusal to deal rationally with the bankruptcy of the Greek state is a useful litmus test for the European establishment’s capacity to stabilize the eurozone. As it stands, the prospects for a stabilized eurozone do not look good. Business as usual – the establishment’s favored option – could soon produce a major Italian crisis that the eurozone cannot survive. The only alternative under discussion is a eurozone federation-light, with a tiny common budget that Berlin will agree to in exchange for direct control of French, Italian and Spanish national budgets. Even if this were to happen, which is doubtful given the political climate, it will be too little, too late to stabilize the eurozone.

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“Professor Jeremy Baumberg, director of the NanoPhotonic Centres at Cambridge University, was distinctly unimpressed. “It seems to me an extremely poorly written paper, conflating many ideas in a rather unrigorous mishmash,” he said.”

Capitalism Inevitably Creates A ‘Sad’ Unfair World – Physicist (Ind.)

Capitalism is inherently unfair and will produce a world full of ‘sad’ and disgusting inequalities, but Communism is also “doomed to fail”, a leading scientist claims to have proved using the laws of physics. Professor Adrian Bejan told The Independent he was so excited by the “huge” implications of his theory that he kept having to pinch himself. A former member of the Romanian national basketball team, he is now an expert in thermodynamics and fluid mechanics at Duke University in the US, having written 30 books and more than 600 scientific papers. He now claims to have shown that physics can essentially explain economics. Inequality has been seen as a factor in the election of Donald Trump as US President and in the UK referendum vote in favour of Brexit.According to Oxfam, the richest eight men own the same wealth as the poorest 50% of the world’s population.

Professor Bejan said it was possible to explain how such inequality can develop by demonstrating that wealth moves around in a society like water in a river basin using the laws of physics. In a natural environment, water flows from small tributaries into larger and larger streams. And, according to Professor Bejan’s theory, the same is true of money. So, in a free market system, wealth will naturally flow from the poorest in the small tributaries to the richest in the wide rivers. Using this analogy, Communism is comparable to an attempt to restrict the flow of water to a network of equally sized concrete channels, which Professor Bejan said would inevitably be overcome by the forces of nature. But, just as humans do sometimes harness rivers to produce energy or divert them around cities, it is possible to alter the flow of money in society, he added.

And this is exactly what is being done by liberal democracies around the world with measures such as free education and healthcare, anti-trust regulations designed to prevent large corporations abusing their power, and the rule of law. “I want to see less inequality in the distribution of wealth. I get not just sad, but disgusted by it,” Professor Bejan said.

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Getting more popular by the day.

‘That Was Some Weird Shit’ (NYMag)

The inauguration of Donald Trump was a surreal experience for pretty much everyone who witnessed it, whether or not they were at the event and regardless of who they supported in the election. On the dais, the stoic presence of Hillary Clinton – whom candidate Trump had said he would send to prison if he took office – underlined the strangeness of the moment. George W. Bush, also savaged by Trump during the campaign, was there too. He gave the same reason for attending that Bill and Hillary Clinton did: to honor the peaceful transfer of power. Bush’s endearing struggle with his poncho at the event quickly became a meme, prompting many Democrats on social media to admit that they already pined for the relative normalcy of his administration. Following Trump’s short and dire speech, Bush departed the scene and never offered public comment on the ceremony. But, according to three people who were present, Bush gave a brief assessment of Trump’s inaugural after leaving the dais: “That was some weird shit.” All three heard him say it.

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On and on and on.

146 Feared Dead In Mediterranean, Boy The Sole Survivor (R.)

Dozens of people are feared to have drowned after a rubber boat carrying migrants and refugees from Libya sank in the Mediterranean. The sole survivor – a 16-year-old Gambian boy – told rescuers that 146 other people were on board when the boat sank. A Spanish frigate, the Canarias, found the boy hanging on to a piece of debris in the sea on Tuesday. He was transferred to an Italian Coast Guard ship and brought to the Sicilian island of Lampedusa early on Wednesday. “He was very tired when they found him. He’s resting now, so we’ll have more details later,” said the International Organisation for Migration (IOM) spokesman Flavio Di Giacomo in Rome, after speaking to staff in Lampedusa.

“The boy said they left Sabratha, Libya, a couple of days ago on a rubber boat with 147 sub-Saharan Africans on board, including five children and some pregnant women,” Di Giacomo said. In the past two days, rescuers have picked up more than 1,100 migrants at sea and recovered one body, Italy’s Coast Guard said. The Coast Guard did not comment on the latest shipwreck. So far this year nearly 600 migrants have died trying to reach Italy from North Africa, IOM estimates, after 4,600 deaths last year. Migrant arrivals to Italy are up more than 50% this year on the same period of last year. Early on Wednesday the Golfo Azzurro, a humanitarian vessel, rescued about 400 migrants – mainly from Morocco, Algeria, Libya, Gambia and Bangladesh – including 16 women and two children.

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Mar 262017
 
 March 26, 2017  Posted by at 8:56 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Marion Post Wolcott “Center of town. Woodstock, Vermont. Snowy night” 1940

 


Will Trump’s Victory Break Up the Democratic Party? (Michael Hudson)
Condo Flippers in Miami-Dade Face The End Of A Bubble (WS)
What Global Central Bank Normalization Would Look Like (ZH)
Populism: The Phenomenon (Dalio et al)
The Peak Of – Dirty – Cash? (ZH)
Explaining Why White Middle Aged America Is Killing Itself (Worstall)
Brexit Vote Is ‘Closed Nationalism’ That Belongs In Past, Says Italian PM (G.)
Drink and Women – It’s A Culture Thang (DA)
Portugal’s Cabral Says Dijsselbloem Resignation Is Best for EU (BBG)
Trump Marks Greek Independence Day With Ominous Message (AP)
Syrian Asylum Seekers In UK Forced Into Poverty, Fear Deportation (G.)
Ogallala: What Happens to the US Midwest When the Water’s Gone? (NatGeo)

 

 

Long analysis by Hudson. Trump as Obama’s legacy. And ousting Bernie has left America without a Democratic party, like some self-fulfilling prophecy. (Graph is from another source, but a very good fit)

Will Trump’s Victory Break Up the Democratic Party? (Michael Hudson)

Trump is sufficiently intuitive to proclaim the euro a disaster, and he recommends that Greece leave it. He supports the rising nationalist parties in Britain, France, Italy, Greece and the Netherlands, all of which urge withdrawal from the eurozone – and reconciliation with Russia instead of sanctions. In place of the ill-fated TPP and TTIP, Trump advocates country-by-country trade deals favoring the United States. Toward this end, his designated ambassador to the European Union, Ted Malloch, urges the EU’s breakup. The EU is refusing to accept him as ambassador. At the time this volume is going to press, there is no way of knowing how successful these international reversals will be. What is more clear is what Trump’s political impact will have at home. His victory – or more accurately, Hillary’s resounding loss and the way she lost – has encouraged enormous pressure for a realignment of both parties.

Regardless of what President Trump may achieve vis-à-vis Europe, his actions as celebrity chaos agent may break up U.S. politics across the political spectrum. The Democratic Party has lost its ability to pose as the party of labor and the middle class. Firmly controlled by Wall Street and California billionaires, the Democratic National Committee (DNC) strategy of identity politics encourages any identity except that of wage earners. The candidates backed by the Donor Class have been Blue Dogs pledged to promote Wall Street and neocons urging a New Cold War with Russia. They preferred to lose with Hillary than to win behind Bernie Sanders. So Trump’s electoral victory is their legacy as well as Obama’s. Instead of Trump’s victory dispelling that strategy, the Democrats are doubling down. It is as if identity politics is all they have.

Trying to ride on Barack Obama’s coattails didn’t work. Promising “hope and change,” he won by posing as a transformational president, leading the Democrats to control of the White House, Senate and Congress in 2008. Swept into office by a national reaction against the George Bush’s Oil War in Iraq and the junk-mortgage crisis that left the economy debt-ridden, they had free rein to pass whatever new laws they chose – even a Public Option in health care if they had wanted, or make Wall Street banks absorb the losses from their bad and often fraudulent loans. But it turned out that Obama’s role was to prevent the changes that voters hoped to see, and indeed that the economy needed to recover: financial reform, debt writedowns to bring junk mortgages in line with fair market prices, and throwing crooked bankers in jail.

Obama rescued the banks, not the economy, and turned over the Justice Department and regulatory agencies to his Wall Street campaign contributors. He did not even pull back from war in the Near East, but extended it to Libya and Syria, blundering into the Ukrainian coup as well. Having dashed the hopes of his followers, Obama then praised his chosen successor Hillary Clinton as his “Third Term.” Enjoying this kiss of death, Hillary promised to keep up Obama’s policies. The straw that pushed voters over the edge was when she asked voters, “Aren’t you better off today than you were eight years ago?” Who were they going to believe: their eyes, or Hillary? National income statistics showed that only the top 5% of the population were better off. All the growth in GDP during Obama’s tenure went to them – the Donor Class that had gained control of the Democratic Party leadership. Real incomes have fallen for the remaining 95%.

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Rates still no low enough?

Condo Flippers in Miami-Dade Face The End Of A Bubble (WS)

Miami-Dade’s spectacular condo flipping mania is in turmoil, with sales plunging, inventory-for-sale soaring, and new supply flooding the market. It’s not like Miami hasn’t been through this before. In February, existing home sales of all types fell 10% year-over-year, to 1,835 homes. These sales “do not include Miami’s multi-billion dollar new construction condo market,” the Miami Association of Realtors clarified in its report on March 23. And this new construction market that is not included has become distressed. Sales of single-family homes fell 10% in February, to 881 houses. The report blamed the shortage of properties “in popular price points.” Prices have been rising sharply, and at the price points where people could actually buy a house – below $250,000 – few sellers were playing ball.

Hence a stalling market. Sales of high-priced units rose, but they weren’t enough to pull out the totals. Condo sales fell 10% as well, to 954 units. This time, the report didn’t blame the lack of supply. Instead: “Existing condo sales are competing with a robust new construction market.” At the same time, inventory of existing condos for sale, not including new units, rose 10% to 15,289. At the current sales rate, supply soared 29% to 14 months. This chart by StatFunding shows the plunge in sales and the surge in condos listed for sale. I circled the last five Februaries on the sales line (red). From February 2014 to February 2017, condo sales have plunged 25%. Andrew Stearns, StatFunding’s founder and CEO, calls the resale inventory – the dark green line that has soared 90% since early 2013 – “scary”:

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When ‘normalization’ becomes the scariest idea around.

What Global Central Bank Normalization Would Look Like (ZH)

As a result of countless failures by central banks to normalize monetary policy over the past 7 years, the market – especially bonds and rates – has become openly cynical and outright skeptical regarding the possibility of a successful renormalization of policy by global central banks. After all, Japan has been trying to do that for over 30 years and has yet to succeed; the ECB hiked in 2011 resulting in near collapse of the Eurozone. Ironically, the recent Trumpflation trade – which few expected as a result of the “shocking” Trump election victory – has emerged as the most credible catalyst to prompt inflation not only in the US but around the globe, resulting in two Fed rate hikes in rapid succession.

Still, now that Obamacare repeal has failed, and questions are rising whether Trump will be able to implement his proposed Tax reform, the market has aggressively faded not only the broader Trumpflation trade, but also all of the recent dollar strength since the US election: in short, bets on a “bening” global reflation are rapidly fading, suggesting that the latest push to normalize monetary policy will once again result in failure. And yet, “what if it goes according to plan” this time? That’s the question posed by Barclays’ Christian Keller who notes that, at least for the time being, “The synchronized upswing in the global economy continues, supporting sentiment, which thus far has ignored elevated policy uncertainties. Headline inflation is increasing due to stable oil prices, while core inflation rates are mixed.”

And, assuming nothing changes, this sets the backdrop for monetary policy normalization, albeit at different speeds and modes. Taking this thought experiment one step further, what would happen if indeed this time central banks are successful to renormalize monetary policy without leading to a market crash. In that case, Barclays expects three Fed hikes in 2017 and 2018, respectively. The ECB is likely to taper further in 2018 and to start increasing depo rates in parallel (in 2018). Conveniently, Barclays has created the following chart which lays out what “coordinated global renormalization” would look like. It can serve as a benchmark to those keeping tabs on where various central banks are in the current attempt to restore monetary normalcy.

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Franklin D. Roosevelt, populist.

Populism: The Phenomenon (Dalio et al)

Populism is a political and social phenomenon that arises from the common man, typically not well- educated, being fed up with 1) wealth and opportunity gaps, 2) perceived cultural threats from those with different values in the country and from outsiders, 3) the “establishment elites” in positions of power, and 4) government not working effectively for them. These sentiments lead that constituency to put strong leaders in power. Populist leaders are typically confrontational rather than collaborative and exclusive rather than inclusive. As a result, conflicts typically occur between opposing factions (usually the economic and socially left versus the right), both within the country and between countries. These conflicts typically become progressively more forceful in self- reinforcing ways.

Within countries, conflicts often lead to disorder (e.g., strikes and protests) that prompt stronger reactions and the growing pressure to more forcefully regain order by suppressing the other side. Influencing and, in some cases, controlling the media typically becomes an important aspect of engaging in the conflicts. In some cases, these conflicts have led to civil wars. Such conflicts have led a number of democracies to become dictatorships to bring order to the disorder that results from these conflicts. Between countries, conflicts typically occur because populist leaders’ natures are more confrontational than cooperative and because conflicts with other countries help to unify support for the leadership within their countries.

In other words, populism is a rebellion of the common man against the elites and, to some extent, against the system. The rebellion and the conflict that comes with it occur in varying degrees. Sometimes the system bends with it and sometimes the system breaks. Whether it bends or breaks in response to this rebellion and conflict depends on how flexible and well established the system is. It also seems to depend on how reasonable and respectful of the system the populists who gain power are.

[..] In the period between the two great wars (i.e., the 1920s-30s), most major countries were swept away by populism, and it drove world history more than any other force. The previously mentioned sentiments by the common man put into power populist leaders in all major countries except the United States and the UK (though we’d consider Franklin D. Roosevelt to be a quasi-populist, for reasons described below). Disorder and conflict between the left and the right (e.g., strikes that shut down operations, policies meant to undermine the opposition and the press, etc.) prompted democracies in Italy, Germany, Spain, and Japan to choose dictatorships because collective/inclusive decision making was perceived as tolerance for behaviors that undermined order, so autocratic leaders were given dictatorial powers to gain control.

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The differences are huge. In lots of countries going cashless is not going to fly.

The Peak Of – Dirty – Cash? (ZH)

In several major economies it’s crunch time for the future of cash. Goldman Sachs notes that this is largely policy-driven: tangible steps are being taken to wean economies off cash (e.g. India, Europe); but adds that, at the same time consumer expectations around convenience are rising and enabling technologies have proliferated in the shape of contactless cards, mobile wallets, cryptocurrencies and more. So, they ask, does the decline in cash payments imply the demise of cash? Not necessarily. Technology has been an important catalyst for shrinking cash usage, but it is by no means a new phenomenon. As we wrote in 2012, the first technological step-change in the payments arena was the shift from cash to plastic money, i.e. credit and debit cards, which happened in the 1960s.

There are many parallels to be drawn between that period and the ongoing shift to digital money: an initial period of an increasing number of providers was followed by a consolidation stage that established a few players (Visa and MasterCard primarily) as the industry standards, eventually accelerating the adoption of plastic money. However, the availability of technology alone has not ensured the demise of cash. As the following chart shows, there are several advanced economies in which it is still the dominant mode of payment in volume terms (surprisingly quite a few European countries are in the bottom left quadrant).

Japan is a striking example of this; lots of tech and lots of cash. The US also stands out, and this could at least partly be attributed to the fact that regulators in the US have explicitly stated that the market should manage the shift to digital payments by itself. On the other hand, Scandinavian countries are on the cusp of becoming some of the first cashless societies, as a result of industry-co-ordinated steps and government initiatives. Swish, a payment app developed jointly by the major Swedish banks, has been adopted by nearly half the Swedish population, and is now used to make over nine million payments a month. About 900 of Sweden’s 1,600 bank branches no longer keep cash on hand or take cash deposits and many, especially in rural areas, no longer have ATMs.

In conjunction with that, cash transactions were just c.2% of the value and 20% of the volume of all payments made last year (down from 40% five years ago). Denmark’s move to a cashless society is a deliberate result of policy, with the government removing the obligation for some retailers to accept payment in cash. Without this legislative push, we believe cash is very difficult to disrupt and substitute. After all, it is a free and convenient mode of transacting. So far, the selling point of the most broadly used alternatives to cash (cheques and cards) is greater convenience. But that hasn’t been sufficient to meaningfully reduce the market share of cash in countries outside Scandinavia and Canada.

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Plenty of theories.

Explaining Why White Middle Aged America Is Killing Itself (Worstall)

Back 18 months the team of Anne Case and Angus Deaton (who has since gained the economics Nobel) released a famous paper pointing out that white rural Americans were killing themselves. So much so that expected lifespans were in fact falling such was the rise in middle aged morbidity. That original paper found that the effect was geographically concentrated. And as I remarked at the time that’s a bit of a problem for the causality of that rise in morbidity. For we’ve got rather a lot of migration out of those rural areas. And it’s the better educated doing the leaving. Thus it is possible (no, no one has studied this in enough detail as yet for anyone to know) that the effect found is entirely down to those migration effects.

We know very well that poorer and less educated people are more likely to die in middle age than richer and better educated. So, if all the better educated and thus, in our current society, higher income people move away we will observe a rise in the death rate among the remnant population. Case and Deaton have returned to this subject with a new paper. And they agree that there is some of this compositional effect in their earlier findings: “It is important not to focus on those with less than a high school degree, a group that has grown markedly smaller over time, and is likely to be increasingly negatively selected on health.” And: “.. we note that for age-groups younger than 45, there has been a decline in the fraction of WNHs with only a high school degree, so that selection may be playing some role for the younger groups.”

Excellent, so that intuition of mine about those compositional effects was indeed correct at least in part. However, this new paper then drives a steamroller through my explanation by showing that this rise in morbidity is country-wide among that class and age group, middle aged and less educated whites. Except, well, I’m not quite sure it does. Fortunately, as I said last time, this is such an important result coming from such a well known name that it will be fully investigated. It’s not just going to be either ignored nor accepted at face value either. People will keep picking away at this until the definitive answer is understood.

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Yeah, the idea behind the EU was good. The execution has been terrible though. Celebrate while holding your breath.

Brexit Vote Is ‘Closed Nationalism’ That Belongs In Past, Says Italian PM (G.)

Britain’s decision to leave the EU has been described by the Italian prime minister as “closed nationalism” that belongs in the past during a summit in Rome to celebrate the bloc’s 60th anniversary. In an address at the Orazi and Curiazi Hall of the Capitol in the Piazza del Campidoglio, where the EU was founded six decades ago, Paolo Gentiloni expressed his discomfort with the motives behind the referendum result. He blamed the EU for not responding adequately to the economic crisis of 2008, but said: “That triggered in part of public opinion, unfortunately the majority of public opinion in the United Kingdom, it triggered a crisis of rejection. It brought forward the closed nationalism that we thought has been closed down in the archives.”

The leaders of the 27 member states that will make up the EU after the UK’s departure assembled on Saturday to mark the day on which six nations signed what was to become the Treaty of Rome. They signed a Rome declaration, which offered ringing phrases about peace and unity, and the importance of maintaining the union. “We, the leaders of 27 member states and of EU institutions, take pride in the achievements of the European Union: the construction of European unity is a bold, far-sighted endeavour,” it says. “Sixty years ago, recovering from the tragedy of two world wars, we decided to bond together and rebuild our continent from its ashes.

“We have built a unique union with common institutions and strong values, a community of peace, freedom, democracy, human rights and the rule of law, a major economic power with unparalleled levels of social protection and welfare. “European unity started as the dream of a few, it became the hope of the many. Then Europe became one again. Today, we are united and stronger: hundreds of millions of people across Europe benefit from living in an enlarged union that has overcome the old divides.” The document stipulates that the EU will make progress on a social dimension, building on its citizens’ rights, and that some member states will enhance their cooperation, particularly in the field of defence. The text concludes: “We have united for the better. Europe is our common future.”

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Grains vs grapes. Why Southern Europeans are not big drinkers.

Drink and Women – It’s A Culture Thang (DA)

When it comes to consumables, though, blowing it on drink is not such a southern European thing. On old professor of mine, an expert in the history of booze (among other substances) often observed that Europe is divided into north and south by distinct cultures of intoxication rooted in our prehistory – the grape in the south, the grain in the north, originally the function of geography and climate which in turn determined access to different sources of plant sugar.

It is the grain-fermenting northerners who have traditionally drunk themselves to oblivion, and it is them that felt the teetotal backlash of the protestant reformation, whereas the Mediterranean world used their fermented grape juice more sparingly and even made it “taboo” by ghoulishly turning it into blood in the Christian sacrament. It is said that you can still observe this divide by walking down the main street of any Mediterranean town hosting a Club 18-30 resort in high tourist season. Some might say, therefore, that Jeroen is merely projecting his own cultural inclinations. They don’t call it Dutch courage for nothing.

No, when it comes to consumables, another famous one-line aetiology of the Greek crisis comes to mind: “We ate it together” (”Mazí ta fágame”), is what PASOK grandee Theodoros Pangalos poffered in 2010 in response to the question “where did the money go?”. A succinct description of the workings of clientelism, delivered by a true master of the art. The saying survives and thrives, in large part because it had a grotesque, evocative appeal in light of the speaker’s own well-fed physique, an apparent embodiment of gluttony openly admitting to the sin and beckoning us to join him at the trough. In the popular imagination it conjured up images of the Greek political class, bloated with greed both physical and metaphorical, sharing a well-furnished table with their clients, the ordinary voters.

And although we, too, like to accuse our elites of eating Marie Antoinette’s cake and caviar (or perhaps the Greek pre-crisis equivalent, lobster spaghetti), the most appropriate fare loading down the table would be a cholesterol feast, most likely at Baïraktaris, the legendary Athens kebab house and political hangout. Not the starched white tablecloths of Washington’s Palm Grill, London’s private clubs, or the Michelin-starred chateaux of Gallic political intrigue, but oilcloth and stacks of paper napkins, the great equaliser, where we do indeed tuck in together in large, boisterous groups. You may recall Baïraktaris as the scene of another famous apophthegm, by another regular, former Prime Minister Costas Karamanlis, to the effect that “five pimps run this country”. And that is as far as I will go with the “women” element.

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Bartender, stop serving this man.

Portugal’s Cabral Says Dijsselbloem Resignation Is Best for EU (BBG)

Portugal’s Economy Minister Manuel Caldeira Cabral said Jeroen Dijsselbloem, whose Dutch party lost elections this month, should quit as chairman of the European finance ministers’ group after his comments about the duties of nations getting aid were deemed offensive. “It would be the best thing for Europe and the best thing he could do,” Cabral said in a Bloomberg Television interview from the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. “He just lost an election and I think he should not be trying to blame others for his own failures.” Dijsselbloem is under pressure to resign as leader of the euro area’s finance ministers after a German newspaper cited him saying, “I can’t spend all my money on women and drink and then at the end ask for your help.”

That remark inflamed tensions between stronger economies in the north and weaker nations including Greece, Ireland and Portugal. The Eurogroup chief has said he regrets causing offense, but doesn’t intend to resign. “I don’t think we can let the Eurogroup be divided in that way, and for that reason that person should be out,” Cabral said. “One of the worst things that some European responsibles have done in the past is not being leaders and trying to surpass their own difficulties at home by accusing other countries. This is a way of destroying Europe.”

On the U.K.’s withdrawal from the European Union, Cabral said the bloc must focus on getting good results from negotiations in the next two to five years and then moving on to other issues. He said broader trade pacts should be the goal rather than making Brexit the only thing on the agenda for Europe and the U.K. The EU should focus on trade talks that give serious results and make a priority “of opening to the world, of negotiating with Asia, of being part of this intuitive of One Belt-One Road with China and establishing links with Asia,” he said in the interview.

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Large military parade yesterday in Athens. Fighter jets flying so low car alarms were going off all the time.

Trump Marks Greek Independence Day With Ominous Message (AP)

President Donald Trump has marked Greek Independence Day with a rather ominous message. At a White House reception, Trump said that in the years to come “we don’t know what will be required to defend our freedom.” But he said it will take “great courage, and we will show it.” Greek Independence Day commemorates the start of the 1821 war that led to Greece’s independence after nearly 400 years as part of the Ottoman Empire. It’s celebrated annually on March 25. Trump told the crowd, “I love the Greeks.” He also introduced Greek-American members of the White House staff, including chief of staff Reince Priebus. Trump said Priebus is “really terrific and hard-working,” along with being “one of the top Greeks in the country.”

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“..they were often too scared to pick up their allowance for fear of being detained.”

Syrian Asylum Seekers In UK Forced Into Poverty, Fear Deportation (G.)

Hundreds of Syrian asylum seekers are struggling to survive in the UK, with some facing destitution and others forced into exploitative work because they are afraid of being detained and deported. The Observer has found Syrian asylum seekers working in warehouses, construction sites and garages for as little as £10 a day. Many had stopped signing in with the Home Office after being held in detention centres for months. Hundreds more are living in destitution, reliant on charities for food parcels and clothes. Mike Adamson, chief executive of the British Red Cross, said: “A two-tier system, where Syrian nationals who arrive in the UK as asylum seekers are left vulnerable to exploitation, seems completely at odds with the spirit behind the government’s commitment to offer a safe home to 20,000 Syrian refugees under its resettlement programme.

The Observer interviewed 10 Syrians, all living in limbo because of the Dublin regulation, which means asylum seekers can be sent back to the first EU country they reach. The men were fighting removal to countries including Bulgaria, where Human Rights Watch found asylum seekers being shot at, beaten with weapons by uniformed officials and sent back to Turkey. Several of the men we spoke to were being threatened with removal to Hungary, despite the fact that the Home Office told the Observer that it is not currently returning asylum seekers there. At least 50 Syrians have been removed under the regulation since the start of 2015, prompting some to drop off the radar. Eight of the men interviewed said that they had stopped signing in with immigration authorities because they were afraid of detention and removal. Most had family in the UK and were supporting themselves by working illegally.

[..] The Red Cross said it had seen 1,341 destitute Syrian asylum seekers in Britain last year, up from 1,159 the year before. In South Yorkshire, a quarter of all destitute asylum seekers seen, of all nationalities, said they experienced hunger every day. In nearly half of all the cases seen by the Red Cross, asylum seekers were facing destitution, despite receiving the full £36 a week afforded to them under government rules. The Syrians the Observer interviewed said they were often too scared to pick up their allowance for fear of being detained.

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Return to the desert. It’ll take centuries to refill the aquifer.

Ogallala: What Happens to the US Midwest When the Water’s Gone? (NatGeo)

For the past 60 years, the Ogallala has been pumped out faster than raindrops and snowmelt can seep back into the ground to replenish it, thanks largely to irrigation machinery like the one sleeping nearby. As a result, in parts of western Kansas, the aquifer has declined by more than 60% during that period. In some parts, it is already exhausted. The decline is steady now, dry years or wet. In 2015 rain was exceptionally heavy—50 to 100% above normal. Even so, water levels in the wells dropped again. Wilson’s field report will put the best face on it, noting it was the slowest decline in five years.

Tagging along with Wilson, I am nearing the end of a 5,000-mile journey along the back roads of Ogallala territory, from South Dakota to Texas. My drive has taken me through some of the most productive farmland anywhere, home to at least a $20-billion-a-year industry that grows nearly one-fifth of the United States’ wheat, corn, and beef cattle. It’s also a place facing hard choices: Farmers can reduce consumption of water to further extend the life of the aquifer. Or they can continue on their path toward an end that is already in sight. Some don’t like to frame the dilemma quite so starkly. But if they don’t reduce pumping and the aquifer is drained, food markets will be profoundly affected around the world. In the coming decades this slow-speed crisis will unfold just as the world needs to increase food production by 60%, according to the United Nations, to feed more than nine billion people by mid-century.

The draining of North America’s largest aquifer is playing out in similar ways across the world, as large groundwater basins in Asia, Africa, and the Middle East decline rapidly. Many of these aquifers, including the southern Ogallala, have little ability to recharge. Once their water is gone, they could take thousands of years to refill. “The consequences will be huge,” says Jay Famiglietti, senior water scientist at NASA Jet Propulsion Laboratory and lead researcher on a study using satellites to record changes in the world’s 37 largest aquifers. “We need to sustain groundwater to sustain food production, and we’re not doing it. Is draining the Ogallala the smartest thing for food production in the U.S. and globally? This is the question we need to answer.”

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Mar 252017
 
 March 25, 2017  Posted by at 9:07 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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Dorothea Lange Drought hit OK farm family on way to CA 1936

 


With Health Bill Down, Trump Can Still Unleash HHS To Bedevil Obamacare (MW)
The Heart Of The American Dream Has Stopped Beating (DiMartino Booth)
Pension Crisis Too Big for Markets to Ignore (Danielle DiMartino Booth)
The Swamp Drains Trump (Jim Kunstler)
It Was A Very Bad Earnings Season (Snider)
Flynn and Turkish Officials Discussed Kidnapping Erdogan Foe From US (WSJ)
A ‘Deaths Of Despair’ Crisis Is Gripping America (BI)
New Canadian Budget Drops Obsession With Balanced Budgets (Star)
US Debt of $20 Trillion Visualized in Stacks of Physical Cash (Demonocracy)
The Pound Is Going To Take A Huge Hit, According To Deutsche Bank (Ind.)
Leaving Euro Would Not Help France And Italy – ECB Chief Economist (Ind.)
Greece to Break Off Face-to-Face Talks With Creditors (BBG)
Where Next For Greece? (Makropolis)

 

 

Big defeat. But not a knock-out. Trump needs better advisers.

With Health Bill Down, Trump Can Still Unleash HHS To Bedevil Obamacare (MW)

In a spectacular turn of events, a shortage of support prompted Republican leadership to pull their health-care plan from a House of Representatives vote on Friday. The move means that the Affordable Care Act, also know as Obamacare, will remain in place “for the foreseeable future,” according to House Speaker Paul Ryan. Democrats, ACA supporters and opponents of the Republican American Health Care Act quickly hailed the development as a victory. But what was a legislative battle now is likely to move into the executive realm and the Department of Health and Human Services, led by longtime ACA opponent Dr. Tom Price. Experts say there is plenty that President Donald Trump’s administration can do to undermine the ACA. And any poor deterioration in the performance of the ACA could give Republicans a new opening: Trump indicated Friday that he might re-visit health care after Obamacare “explodes.”

“It’s going to be interesting to see how they balance the responsibility for ensuring the government functions with their hatred for the law,” said Spencer Perlman, director of health-care research at Veda Partners. “If they want to completely sabotage it they probably could, and call it a self-fulfilling prophecy.” The latter is all the more likely because the ACA works best with the help of administrative support and resources. Think of the ACA as a plant, one that requires light and tending-to, that gets inherited by a downright hostile owner. The best example of this occurred during enrollment for 2017 exchange plans. The months-long enrollment period began under former President Barack Obama’s administration, which passed the ACA, and ended under President Trump’s administration.

Enrollment, which had looked like it was on track to surpass previous years, dropped off following the transition, which many attributed to a dearth of marketing and promotional activity under Trump. Plus, the ACA’s problems — which may have helped elect Trump — still exist. Many insurers, including UnitedHealth, Humana and Aetna have exited the exchanges on which many participants purchase health insurance, contributing to a 25% on average increase in premiums. “The biggest thing that needs to be done is figuring out some way to attract young, healthy people” to exchange plans, Perlman said. But HHS, under Price’s leadership, seems unlikely to try to improve the law. And “purposefully sabotaging the exchanges and the ACA probably isn’t difficult,” said Perlman. And for that matter, HHS is “probably the only game in town right now” that can do it.

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“..55% of mortgages in active foreclosure were originated between 2004 and 2008..”

The Heart Of The American Dream Has Stopped Beating (DiMartino Booth)

According to ATTOM Data Solutions, the new parent company of RealtyTrac, default notices, scheduled auctions and bank repossessions slid to 933,045 last year, the lowest tally since the 717,522 reported in 2006. Is the final chapter written? Not if you live in judicial foreclosure states such as New York, New Jersey and Florida where ‘legacy’ foreclosures take years to clear. At the end of last year, 55% of mortgages in active foreclosure were originated between 2004 and 2008. Factor in what’s still in the pipeline and one in ten circa 2006 homeowners will have lost their homes before it is all said and done. That helps explain one part of the chart below which was generously shared with me by one Dr. Gates. Longtime readers of these missives will recognize the nom de plume of my inside-industry economic sleuth. His first take on this sad visual, was that, “The heart of the American Dream has stopped beating.” Did that stop your heart as it did my own?

As you can see, after a steady 40-year build, owner-occupied housing has stagnated and sits at the lowest level since 2004. This has sent the homeownership rate crashing to 63.4%, the lowest since 1967. It would be nice to think that things were looking up for would-be homeowners. But it’s difficult to be overly optimistic when the local newspaper reports that house flipping in the Dallas-Ft. Worth area rose 21% in 2016, seven times the national rate. In all, 193,000 properties nationwide were flipped for a quick inside-12-months profit last year, a 3.1 increase to a nine-year high. Moreover, the median age of a flipped home rose to a two-decade high of 37 years, about double the median age of homes flipped before the crisis hit. That translated into a median gross profit of $69,624 on a median selling price of $189,900 in 2016, a neat 49.2% margin, the highest on record. Awesome!

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Very good -and scary- from Danielle DiMartino Booth. I’ve often asked: what happened to pension funds investing in AAA paper? But there’s more: without accounting tricks dominoes would already be falling. This is not some coincidence, it’s actual policy as conducted by The American Academy of Actuaries.

Pension Crisis Too Big for Markets to Ignore (Danielle DiMartino Booth)

The question is why haven’t the headlines presaged pension implosions? As was the case with the subprime crisis, the writing appears to be on the wall. And yet calamity has yet to strike. How so? Call it the triumvirate of conspirators – the actuaries, accountants and their accomplices in office. Throw in the law of big numbers, very big numbers, and you get to a disaster in a seemingly permanent state of making. Unfunded pension obligations have risen to $1.9 trillion from $292 billion since 2007. Credit rating firms have begun downgrading states and municipalities whose pensions risk overwhelming their budgets. New Jersey and the cities of Chicago, Houston and Dallas are some of the issuers in the crosshairs.

Morgan Stanley says municipal bond issuance is down this year in part because of borrowers are wary of running up new debts to effectively service pensions. Federal Reserve data show that in 1952, the average public pension had 96% of its portfolio invested in bonds and cash equivalents. Assets matched future liabilities. But a loosening of state laws in the 1980s opened the door to riskier investments. In 1992, fixed income and cash had fallen to an average of 47% of holdings. By 2016, these safe investments had declined to 27%. It’s no coincidence that pensions’ flight from safety has coincided with the drop in interest rates. That said, unlike their private peers, public pensions discount their liabilities using the rate of returns they assume their overall portfolio will generate.

In fiscal 2016, which ended June 30th, the average return for public pensions was somewhere in the neighborhood of 1.5%. Corporations’ accounting rules dictate the use of more realistic bond yields to discount their pensions’ future liabilities. Put differently, companies have been forced to set aside something closer to what it will really cost to service their obligations as opposed to the fantasy figures allowed among public pensions. So why not just flip the switch and require truth and honesty in public pension math? Too many cities and potentially states would buckle under the weight of more realistic assumed rates of return. By some estimates, unfunded liabilities would triple to upwards of $6 trillion if the prevailing yields on Treasuries were used.

That would translate into much steeper funding requirements at a time when budgets are already severely constrained. Pockets of the country would face essential public service budgets being slashed to dangerous levels. What’s a pension to do? Increasingly, the answer is swing for the fences. Forget the fact that just under half of pension assets are in the second-most overvalued stock market in history. Even as Fed officials publicly fret about commercial real estate valuations, pensions have socked away 8% of their portfolios into this less than liquid asset class. Even further out on the risk and liquidity spectrum is the 10% that pensions have allocated to private equity and limited partnerships.

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“While the nation remains entertained by all this, the Potemkin financial system will wobble, crash, and burn and the humiliation of Donald Trump will be complete.”

The Swamp Drains Trump (Jim Kunstler)

One can’t help marveling at the way the “Russian interference” motif has shifted the spotlight off the substance of what Wikileaks revealed about Clinton Foundation and DNC misdeeds onto Trump campaign officials “colluding” with Russians, supposedly to support their interference in the election. It’s true that the election is way over and the public is no longer concerned with Hillary or her foundation (which is closing shop anyway). But the switcheroo is impressive, and quite confusing, considering recently retired NSA James Clapper just two weeks ago said on NBC’s Meet the Press that there was “no evidence” of collusion Between Trump and Russia. Okay… uh, say what? On Monday, FBI Director James Comey revealed that his agency had been investigating the Trump Campaign since at least last August. Is that so…? Investigating how? Some sort of electronic surveillance?

Well, what else would they do nowadays? Send a gumshoe to a hotel room where he could press his ear on a drinking glass against the wall to eavesdrop on Paul Manafort? I don’t think so. Of course they were sifting through emails, phone calls, and every other sort of electronic communication. Trump’s big blunder was to tweet that he’d been “wiretapped.” Like the FBI patched into a bunch of cables with alligator clips in the basement of Trump Tower … or planted a “bug” in the earpiece of his bedside phone. How quaint. We also don’t have ice boxes anymore, though plenty of struggling weight-watchers across the land speak guiltily of “raiding the icebox.” But if it’s true, as Mr. Comey said, that the FBI had been investigating Trump’s campaign, the people around him, and Trump himself, since August, how could they not have captured some of Trump’s conversations?

[..] So, the long and the short of it is that the RussiaGate story is spinning out of control, and Trump’s adversaries — who go well beyond Congress into the Deep State — might be getting enough leverage to dump Trump. Either they will maneuver him and his people into some kind of perjury rap, or they will tie up the government in such a web of investigative procedural rigmarole that all the country lawyers who ever snapped their galluses will never be able to unravel it. While the nation remains entertained by all this, the Potemkin financial system will wobble, crash, and burn and the humiliation of Donald Trump will be complete. Abandoned by the Republican Party, isolated and crazed in the White House, tweeting out mad appeals to heaven, he’ll either voluntarily pass the baton to Mike Pence or he will be declared unfit to serve and removed under the 25th amendment.

The after-effects of that will be something to behold: a “lose-lose” for both old-line political parties. The Trumpists will never forgive the Republican Party, and the Democrats will have gained nothing. Don’t let the door bang you on the butt on your way out.

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What a surprise.

It Was A Very Bad Earnings Season (Snider)

With nearly all of the S&P 500 companies having reported their Q4 numbers, we can safely claim that it was a very bad earnings season. It may seem incredulous to categorize the quarter that way given that EPS growth (as reported) was +29%, but even that rate tells us something significant about how there is, actually, a relationship between economy and at least corporate profits. Keynes famously said that we should never worry about the long run for there we will all be dead, but EPS has arrived at the long run and there is still quite a lot of living to do. As late as October, analysts were projecting $29 in earnings for the S&P 500 in Q4 2016. As of the middle of the earnings reports last month, that estimate suddenly dropped to just $26.37. In the month since that time, with the almost all of the rest having now reported, the current figure is just $24.15 – a decline of over $2 in four weeks. Therefore, 29% growth is hugely disappointing because it wasn’t 55% growth as was projected when the quarter began.

It is also the timing of the downgrades that is important as it relates to both “reflation” and the economy meant to support it. All throughout last year, in the aftermath of the near-recession to start 2016, EPS estimates for Q4 (and beyond) were very stable, unusually so given the recent past. That shows us how analysts, at least, were expecting the economy to go once it got past “global turmoil.” It was the “V” shaped rebound typical for past cyclical behavior. But it wasn’t until companies actually started reporting earnings that the belief was tested and then found severely lacking. With just $24.15 for Q4, total EPS was for the calendar year less than $95, the ninth straight quarter below the $100 level. More importantly, on a trailing-twelve month basis, EPS don’t appear to be in any hurry (except in future estimates) to revisit the prior peak of $106 all the way back in Q3 2014.

 

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Like a cheap crime novel: Flynn gets paid $530,000 “on behalf of an Israeli company seeking to export natural gas to Turkey”, and ends up discussing kidnapping Erdogan’s enemy. Oh, and Biden knew about this conversation. So Obama knew too.

Flynn and Turkish Officials Discussed Kidnapping Erdogan Foe From US (WSJ)

Retired Army Lt. Gen. Mike Flynn, while serving as an adviser to the Trump campaign, met with top Turkish government ministers and discussed removing a Muslim cleric from the U.S. and taking him to Turkey, according to former Central Intelligence Agency Director James Woolsey, who attended, and others who were briefed on the meeting. The discussion late last summer involved ideas about how to get Fethullah Gulen, a cleric whom Turkey has accused of orchestrating last summer’s failed military coup, to Turkey without going through the U.S. extradition legal process, according to Mr. Woolsey and those who were briefed. Mr. Woolsey told The Wall Street Journal he arrived at the meeting in New York on Sept. 19 in the middle of the discussion and found the topic startling and the actions being discussed possibly illegal.

The Turkish ministers were interested in open-ended thinking on the subject, and the ideas were raised hypothetically, said the people who were briefed. The ministers in attendance included the son-in-law of Turkish President Recep Tayyip Erdogan and the country’s foreign minister, foreign-lobbying disclosure documents show. Mr. Woolsey said the idea was “a covert step in the dead of night to whisk this guy away.” The discussion, he said, didn’t include actual tactics for removing Mr. Gulen from his U.S. home. If specific plans had been discussed, Mr. Woolsey said, he would have spoken up and questioned their legality. It isn’t known who raised the idea or what Mr. Flynn concluded about it. Price Floyd, a spokesman for Mr. Flynn, who was advising the Trump campaign on national security at the time of the meeting, disputed the account, saying “at no time did Gen. Flynn discuss any illegal actions, nonjudicial physical removal or any other such activities.”

[..] On March 2, weeks after Mr. Flynn’s departure from the Trump administration, the Flynn Intel Group, his consulting firm, filed with the Justice Department as a foreign agent for the government of Turkey. Mr. Trump was unaware Mr. Flynn had been consulting on behalf of the Turkish government when he named him national security adviser, White House press secretary Sean Spicer said this month. In its filing, Mr. Flynn’s firm said its work from August to November “could be construed to have principally benefited the Republic of Turkey.” The filing said his firm’s fee, $530,000, wasn’t paid by the government but by Inovo BV, a Dutch firm owned by a Turkish businessman, Ekim Alptekin.

[..] Mr. Woolsey said he didn’t say anything during the discussion, but later cautioned some attendees that trying to remove Mr. Gulen was a bad idea that might violate U.S. law. Mr. Woolsey said he also informed the U.S. government by notifying Vice President Joe Biden through a mutual friend. [..] Inovo hired Mr. Flynn on behalf of an Israeli company seeking to export natural gas to Turkey, the filing said, and Mr. Alptekin wanted information on the U.S.-Turkey political climate to advise the gas company about its Turkish investments.

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“.. he identified three kinds of suicide: altruistic, anomic, and egoistic. Of the three, the most complicated is anomic suicide. Anomie essentially means the breakdown of social values and norms, and Durkheim closely associated anomic suicide with economic catastrophe.”

A ‘Deaths Of Despair’ Crisis Is Gripping America (BI)

[..] this isn’t the first time that social change has caused self-destructiveness on a mass scale. Indeed, 19th-century French sociologist Emile Durkheim wrote about similar problems in his time, and might refer to the plague of white middle-class mortality we see today as “a state of upheaval.” Of course, the lesson of the 2016 presidential election was that working- and middle-class whites are suffering. What Durkheim offers, though, is the argument for why the newly elected government in Washington — voted in by this very constituency — is getting the solution all wrong. The way to fix this problem is not through less government — but through more. Durkheim’s seminal work, the 1897 book “Suicide,” remains one of the most in-depth examinations of why these situations occur in society, and it is as relevant as ever. Its lessons are an indication that as a country, we are moving swiftly, carelessly in the wrong direction.

The Americans we are talking about are white and middle class. They are aged 45-55. They are losing the battle against heart disease and cancer, and they are succumbing to drugs, alcohol and suicide at rates unseen in modern history or in other developed countries. “The combined effect means that mortality rates of whites with no more than a high school degree, which were around 30% lower than mortality rates of blacks in 1999, grew to be 30% higher than blacks by 2015,” Case and Deaton wrote. The easy thing to say is that these people are suffering from economic and social anxiety and leave it at that. What’s harder to pinpoint is what exactly that means and how to fix it. Economic conditions for minorities in the same social class and in the same communities are as hard, if not harder, than they are for middle class whites. But death rates aren’t increasing for them.

This is where Durkheim comes in. He wrote his work in the midst of another state of upheaval, as industrialization was taking over the world and old economic patterns were falling away. This was the beginning of modern life as we now know it. And it was killing people. Durkheim found that the degree to which a person is integrated in society is inversely correlated to their likelihood to engage in life-threatening behaviors and suicide. In his work, he identified three kinds of suicide: altruistic, anomic, and egoistic. Of the three, the most complicated is anomic suicide. Anomie essentially means the breakdown of social values and norms, and Durkheim closely associated anomic suicide with economic catastrophe. [..] One of the big factors, then, in the increase in substance abuse and suicide among the white middle class could be a decline in the social framework as a result of the rapid economic changes seen over the last few decades.

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We’re getting into Steve Keen territory. At last.

New Canadian Budget Drops Obsession With Balanced Budgets (Star)

I’m intrigued by Modern Monetary Theory, which maintains governments can create (or ‘print’) money to fill public needs and can’t go into debt to themselves, though they should keep an eye on inflation.

Sorry, but I’m afraid I don’t agree that Wednesday’s federal budget was a non-event: “cynical,” a “placeholder,” “bafflegab and buzzwords” — as others wrote. I think this budget rocked, in one sense: it did a 180 on the stifling monomania of the last 30 years. I’m referring to the obsession with deficits. As recently as last election, the Liberals promised a balanced budget by the end of their first term. Now their projected deficits are even higher but that promise is gone and the thought process, transformed. Finance minister Bill Morneau blandly says, they’ll “be responsible every step along the way” and “show a decline in net debt to GDP,” which totally shifts the metric. He might as well have trilled, “Tra-la-la, we really don’t care.” It’s a damn earthquake.

For proof, look not at the opposition – Rona Ambrose predictably called it “spending out of control”- but at the journalists, who were left sputtering. It’s so radical they struggled for words. Peter Mansbridge began interviewing Morneau with: “How does it feel to know you’ll likely never have a balanced budget?” I wish Morneau had said, “I’m fine, but is there anything I can do to help you through this?” Mansbridge couldn’t stop, turning plaintively to his panel: “I tried to get him on the deficit … Is there a right and wrong any more?” Jennifer Ditchburn tried to soothe him with, “Deficit is a word they just don’t use any more.”

If I’m hyperventilating, it’s because I’ve led a cramped existence all these years, bowed under the weight of deficitism since I first heard the phrase, “Yeah, but how ya gonna pay for that?” during the 1988 election. No one knew where it came from or how it usurped all other political concerns, like a missive from heaven, or the Fraser Institute. Paul Martin adopted it, using it to sink the Canada we knew, and his own career. Yet, there’s apparently an ebb and flow to these things: a Nanos poll says Canadians now want Ottawa to run deficits as long as overall debt declines relative to GDP. That’s a pretty sophisticated alteration for ordinary folks to make intuitively; it makes you wonder if someone isn’t pulling strings somewhere and decided to drop a new backdrop (to public discourse) over the previous one.

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Nicely done. Like the music.

US Debt of $20 Trillion Visualized in Stacks of Physical Cash (Demonocracy)

Showing stacks of physical cash in following sequence: $100, $10,000, $1 Million, $2 Billion, $1 Trillion, $20 Trillion The faith and value of the US Dollar rests on the Government’s ability to repay its debt. “The money in the video has already been spent”

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Sounds reasonable.

The Pound Is Going To Take A Huge Hit, According To Deutsche Bank (Ind.)

When it comes to the pound, currency analysts at Deutsche Bank have for months proved to be some of the most bearish across the City, but they’ve just turned even more pessimistic in their outlook for the battered currency. In its latest special report on Brexit released this week, the German lender said the pound could fall as a low as $1.06 against the dollar by the end of 2017, or another 15%. “We do not see sterling (currently) fully pricing a hard Brexit outcome,” the bank wrote. “Combined with limited adjustment in the UK’s current account deficit and slowing growth, we see further downside, and forecast $1.06 in by year-end,” it added.

In an interview with Bloomberg in February, George Saravelos, the German lender’s global co-head of foreign exchange, hinted that the bank could cut its official forecast. He said at the time that sterling could still slip by 16% against the dollar to $1.05 cent as the “incredibly complicated” nature of Brexit becomes ever more clear. Most economists’ forecasts are still more optimistic than Deutsche Bank’s, but few expect the currency to recover from its post-referendum lows any time soon. According to poll of more than 60 banks and research institutions conducted by Reuters that was released earlier this month, forecasters on average expect the currency to trade at $1.23 against the dollar by the end of June, and drop to $1.21 in the subsequent three to six months.

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Praet is a true believer.

Leaving Euro Would Not Help France And Italy – ECB Chief Economist (Ind.)

The chief economist of the ECB has warned Italy and France that their economic problems would not be solved by breaking up the single currency. In an interview with Italy’s Il Sole 24 Ore newspaper, Peter Praet, an executive board member of the ECB, said the idea that the euro was the root cause of high unemployment and low growth in certain European countries was a populist “deception”. “What I do worry about is the populist narrative that things were better before the euro,” he said. “This is a deception. We arrived at monetary union after disastrous experiences with floating exchange rates and some unsuccessful attempts of orderly floating. “The devaluations that populists claim is a free lunch and allows to regain competitiveness by miracle proved extremely expensive.”

With specific reference to Italy, he said: “The nostalgic alternative that everything will be all right just by returning to the lira amounts to fooling the people. The cost of a regime change would be huge and the poor would be the ones that suffer the most.” Mr Praet acknowledged that the euro had lost popularity in many European countries, but said that it had been made a “scapegoat” for other economic policy failures by politicians. However, many credible economists argue that in the absence of fiscal stimulus by core countries in Europe that run current account surpluses, the monetary restrictions of the single currency are indeed driving the economic distress of the likes of France, Italy, Portugal and Greece.

Italy’s Five Star movement, currently leading in national opinion polls, has proposed a referendum on Italy’s membership of the single currency. Marine Le Pen’s Front National in France has previously called for the reinstatement of the franc, although she did not reiterate this in the national debate among presidential candidates earlier this week ahead of April’s national elections. The level of Italy’s GDP is barely higher than when the single currency was formed in 2000 and its working age unemployment rate currently stands at 12 per cent. The French unemployment rate is just below 10% and for young people it is double that.

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An outright lie: “Greece can only do that if Greece has a competitive economy. To that end, it needs to carry out reforms, and we’re giving Greece time to do that.”

Greece to Break Off Face-to-Face Talks With Creditors (BBG)

Greece and the institutions managing its bailout review will break off negotiations in Brussels without having cleared a path to conclude the deliberations that would release needed rescue funds. Finance Minister Euclid Tsakalotos, who was meeting with officials from the euro area and the IMF will return to Athens by Saturday. The two sides still have issues to work out, said the official, who asked not to be named in line with policy. Some progress was made and discussions will continue from their respective headquarters, according to a spokesman from the European Stability Mechanism, the euro-area’s bailout monitor. Greece is edging closer to a repeat of the 2015 drama that pushed Europe’s most indebted state to the edge of economic collapse, as the government in Athens and its creditors disagree over reforms to the pension system and the labor and energy markets.

Greece needs to complete the review in order to get the next portion of its aid payment before it has more than €7 billion of bonds come due in July. German Finance Minister Wolfgang Schaeuble increased the pressure on Prime Minister Alexis Tsipras to accede to creditor demands. “Greece has said it wants to stay in the euro,” Schaeuble said in an interview on Deutschlandfunk radio on Friday. “Greece can only do that if Greece has a competitive economy. To that end, it needs to carry out reforms, and we’re giving Greece time to do that.” [..] European Commission President Jean-Claude Juncker urged Greece and its creditors in an emailed statement to reach a deal that respects commitments made on all sides. In response to Tsipras’s letter, Juncker called on the Greeks not to reverse reforms and creditors “to give Greece the desired and necessary room for maneuver to build its own future.”

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Reasonable overview, but any talk of agreements that could lead Greece back to growth is nonsense. The EU would never sign such an agreement. Theie attitude to date has made that abundantly clear.

Where Next For Greece? (Makropolis)

In September last year, when Alexis Tsipras visited New York to speak at the UN Assembly, he held a meeting with some heavyweights of the international investment community. The Greek prime minister was reportedly advised by the participants that if he wanted to build trust in Greece as an attractive investment destination, he should shift focus from his main objective of debt relief towards ensuring Greece’s participation in the ECB’s QE programme. The investors apparently pointed out to the SYRIZA leader that such a development would have a wide range of benefits for Greece and provide the steadiest path towards regaining market access and the successful completion of the current programme, without the need to follow it up with a fourth memorandum of understanding (MoU).

Tsipras seemingly heeded the advice and, just as the second review was about to start, he charted a path out of the crisis. He set out his intention to close the review by December 2016, secure QE at the start of 2017 and dip his toe back into the markets with a small issue or two early this summer when Greece has to roll over the bond that it issued in 2014, when Antonis Samaras was prime minister. However, the timetable Tsipras identified last autumn has gone up in smoke.

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Mar 242017
 
 March 24, 2017  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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DPC “Broad Street and curb market, New York” 1906

 


Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)
The US Has the Most Expensive Healthcare System in the World (Statista)
‘Deaths of Despair’ Surge in White US Middle Class (Vox)
The Retail Apocalypse Has Officially Descended On America (BI)
WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)
China’s Property Bubble Risks Youth Revolt (CNBC)
China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)
Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)
Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)
Greek Objections Mar Preparations For EU’s 60th Birthday (R.)
Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)
40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)
EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)
Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

 

 

This will attract some media attention. Better do it after the markets close.

Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)

President Donald Trump reportedly laid down an ultimatum to House Republicans on Thursday night: Pass the health-care bill, as is, on Friday, or live with Obamacare. The hard line came after more than a day of frantic negotiations to win the support of conservative Republicans who oppose the bill, and could block its passage. A vote on the bill had been scheduled for Thursday night, but was postponed earlier in the day after the GOP couldn’t win over holdout lawmakers. White House budget director Mitch Mulvaney dropped Trump’s demand in a meeting with rank-and-file House Republicans, and said the administration and House Speaker Paul Ryan were done with negotiations, according to a report in The Wall Street Journal. If Friday’s bill fails, Trump is resigned to live with Obamacare and move on, he said.

CNN similarly reported that the closed-door meeting ended with an ultimatum, and Rep. Chris Collins (R-N.Y.) told the network that the vote is expected to be held Friday afternoon. The move is a gamble by the Trump administration, which has placed much political capital in its promise to repeal and replace the Affordable Care Act, also known as Obamacare. “They’re going to bring it up, pass or fail,” Rep. Mike Simpson (R-Idaho) told the Washington Post. The GOP can’t afford more than 21 dissenting votes, but CNN counted 26 “no” votes and four more “likely” no votes. Every House Democrat is expected to oppose the bill.

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And what’s worse, no way out.

The US Has the Most Expensive Healthcare System in the World (Statista)

If the American Healthcare Act, President Trump’s first major legislative effort, is going to a vote in the House of Representatives as scheduled on Thursday, it is by no means clear that it will receive the 215 votes it needs for passage. When the Republican healthcare plan was first presented to the public on March 6, it left people from both sides of the political spectrum dissatisfied. While Democrats fear that the suggested bill, which would repeal large portions of Obama’s Patient Protection and Affordable Care Act, would leave millions of Americans uninsured and hurt the poor and vulnerable, many Republicans think it doesn’t go far enough in erasing all traces of Obamacare.

For many years now, the American healthcare system has been flawed. As our chart illustrates, U.S. health spending per capita (including public and private spending) is higher than it is anywhere else in the world, and yet, the country lags behind other nations in several aspects such as life expectancy and health insurance coverage. This chart shows health spending (public and private) per capita in selected countries.

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Not my original observation, but true: it looks a lot like Russia in the 1990s.

‘Deaths of Despair’ Surge in White US Middle Class (Vox)

In 2015, a blockbuster study came to a surprising conclusion: Middle-aged white Americans are dying younger for the first time in decades, despite positive life expectancy trends in other wealthy countries and other segments of the US population. The research, by Princeton University’s Anne Case and Angus Deaton, highlighted the links between economic struggles, suicides, and alcohol and drug overdoses. Since then, Case and Deaton have been working to more fully explain their findings. They’ve now come to a compelling conclusion: It’s complicated. There’s no single reason for this disturbing increase in the mortality rate, but a toxic cocktail of factors. In a new 60-page paper, “Mortality and morbidity in the 21st Century,” out in draft form in the Brookings Papers on Economic Activity Thursday, the researchers weave a narrative of “cumulative disadvantage” over a lifetime for white people ages 45 through 54, particularly those with low levels of education.

[..] The US, particularly middle-aged white Americans, is an outlier in the developed world when it comes to this mid-life mortality uptick. “Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US,” Case and Deaton write. “In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.” If American wants to turn the trend around, then it has to become a little more like other countries with more generous safety nets and more accessible health care, the researchers said.

Introducing a single-payer health system, for example, or value-added or goods and services taxes that support a stronger safety net would be top of their policy wish list. (America right now is, of course, moving in the opposite direction under Trump, and shredding the safety net.) They also admit, though, that it’s taken decades to reverse the mortality progress in America, and it won’t be turned around quickly or easily. But there is one “no-brainer” change that could help, Case added. “The easy thing would be close the tap on prescription opioids for chronic pain.” Unlike health care and increasing taxes, opioids are actually a public health issue with bipartisan support. Deaton, for his part, was hopeful. Paraphrasing Milton Friedman, he said, “All policy seems impossible until it suddenly becomes inevitable.”

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“Visits declined by 50% between 2010 and 2013..” “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

The Retail Apocalypse Has Officially Descended On America (BI)

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades. More than 3,500 stores are expected to close in the next couple of months. Department stores like JCPenney, Macy’s, Sears, and Kmart are among the companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess. Some retailers are exiting the brick-and-mortar business altogether and trying to shift to an all-online model. For example, Bebe is closing all its stores — about 170 — to focus on increasing its online sales, according to a Bloomberg report. The Limited also recently shut down all 250 of its stores, but it still sells merchandise online.

Others, such as Sears and JCPenney, are aggressively paring down their store counts to unload unprofitable locations and try to staunch losses. Sears is shutting down about 10% of its Sears and Kmart locations, or 150 stores, and JCPenney is shutting down about 14% of its locations, or 138 stores. According to many analysts, the retail apocalypse has been a long time coming in the US, where stores per capita far outnumber that of any other country. The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia, the next two countries with the most retail space per capita, according to a Morningstar Credit Ratings report from October. Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield.

[..] as longtime retail analyst Howard Davidowitz observed in 2014, “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

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This could be a huge blow to Apple. Who wants to buy something the CIA has already tinkered with in the factory? Expect giant lawsuits too. Apple knew.

WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)

Today, March 23rd 2017, WikiLeaks releases Vault 7 “Dark Matter”, which contains documentation for several CIA projects that infect Apple Mac Computer firmware (meaning the infection persists even if the operating system is re-installed) developed by the CIA’s Embedded Development Branch (EDB). These documents explain the techniques used by CIA to gain ‘persistence’ on Apple Mac devices, including Macs and iPhones and demonstrate their use of EFI/UEFI and firmware malware. Among others, these documents reveal the “Sonic Screwdriver” project which, as explained by the CIA, is a “mechanism for executing code on peripheral devices while a Mac laptop or desktop is booting” allowing an attacker to boot its attack software for example from a USB stick “even when a firmware password is enabled”. The CIA’s “Sonic Screwdriver” infector is stored on the modified firmware of an Apple Thunderbolt-to-Ethernet adapter.

“DarkSeaSkies” is “an implant that persists in the EFI firmware of an Apple MacBook Air computer” and consists of “DarkMatter”, “SeaPea” and “NightSkies”, respectively EFI, kernel-space and user-space implants. Documents on the “Triton” MacOSX malware, its infector “Dark Mallet” and its EFI-persistent version “DerStake” are also included in this release. While the DerStake1.4 manual released today dates to 2013, other Vault 7 documents show that as of 2016 the CIA continues to rely on and update these systems and is working on the production of DerStarke2.0.

Also included in this release is the manual for the CIA’s “NightSkies 1.2” a “beacon/loader/implant tool” for the Apple iPhone. Noteworthy is that NightSkies had reached 1.2 by 2008, and is expressly designed to be physically installed onto factory fresh iPhones. i.e the CIA has been infecting the iPhone supply chain of its targets since at least 2008. While CIA assets are sometimes used to physically infect systems in the custody of a target it is likely that many CIA physical access attacks have infected the targeted organization’s supply chain including by interdicting mail orders and other shipments (opening, infecting, and resending) leaving the United States or otherwise.

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A lot of cities around the world share that risk.

China’s Property Bubble Risks Youth Revolt (CNBC)

China faces the risk of youth disenchantment as property prices rise beyond their reach, a renowned Chinese economist said Friday. “In a regular country, wealth should be concentrated in the financial markets, not fixed assets,” said Renmin University of China Vice President Wu Xiaoqiu at a media interview at the Boao Forum in the province of Hainan. He highlighted the risks from the current property bubble in China, such as negative asset values if prices tank. More importantly, the social risks that come from the property bubble in the form of youth disenchantment with not being to afford a home will be damaging, he said. “If young people lose hope, the economy will suffer, as housing is a necessity,” he said.

Wu said he was hopeful the authorities would find a solution to constrain the froth in Chinese real estate, but admitted that repeated measures to curb speculation have so far only met with short-term success. Wu’s comments follow a People’s Bank of China survey published on Tuesday, which found that 52.2% of urban households perceived housing prices to be “unacceptably high” in the first quarter of the year, Reuters reported. In February, gains in Chinese home prices picked up pace after they slowed in the previous four months despite government efforts to curb speculation, Reuters reported on Sunday. Prices in the big cities of Beijing, Shanghai and Shenzhen rose 22.1%, 21.1% and 13.5%, respectively, from a year ago.

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Wow.

China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)

In December 2016, Muddy Waters’ Carson Block said China’s largest dairy farm operator, Hong-Kong listed China Huishan Dairy, is “worth close to zero” and questioned its profitability in a report. Today, with no catalyst, it suddenly almost is. The stock collapsed over 90% in minutes to a record low. The sudden crash wiped out about $4.2 billion in market value in the stock, which is a member of the MSCI China Index.

In December, Muddy Waters alleged that Huishan had been overstating its spending on its cow farms by as much as 1.6 billion yuan to “support the company’s income statement.” The report also alleged that the company made an unannounced transfer of a subsidiary that owned at least four cow farms to an undisclosed related party and Muddy Waters concluded that Chairman Yang Kai controls the subsidiary and farms. Those findings came from several months of research including visits to 35 farms and five production facilities, drone flyovers of Huishan sites and interviews with alfalfa suppliers, according to the report. Muddy Waters said it has shorted Huishan’s stock.

“It will be even harder for Huishan to get funded in the capital market after the report, amid a couple of earlier allegations that have raised some red flags to investors,” said Robin Yuen at RHB OSK Securities Hong Kong. Still, Huishan’s shares and operations are unlikely to “collapse” due to its high share concentration and sufficient cash flow generated by its dairy business, he said by telephone. About 73% of Huishan’s shares are held by Champ Harvest Ltd., a company that’s in turn 90% owned by Yang. A buying spree by Yang had supported the shares last year, making it a painful trade for short sellers. A one-year rally of about 80% through a peak in June had made the shares expensive.

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“If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.”

Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)

For the last three years, the political establishment in Italy and beyond have had a field day attacking, ridiculing, and vilifying Beppe Grillo’s 5-star movement. Europe’s media have tarred him with the brush of populism. In 2013 The Economist labelled him a clown on its front cover. Yet his party still leads the polls. And that lead is growing. A new Ipsos poll in Corriere della Sera newspaper has put Beppe Grillo’s 5-Star Movement on 32.3% – its highest ever reading. It placed 5.5 points ahead of the governing PD, on 26.8%, after the PD dropped more than three%age points in a month, as former prime minister Matteo Renzi battles to reassert his authority following a walkout by a left-wing faction. Internal political battles are nothing new in Italy. The country enjoys a hard-earned reputation for political instability and paralysis, having seen 63 governments come and go since 1945.

The problem this time around is that internal weakness and strife in Italy’s traditional center-left and center-right parties could end up gifting the next election to a party that refuses to play by the book. If it wins the next elections, which could be brought forward to as early as June this year, 5-Star Movement has pledged to hold a referendum of its own – albeit a non-binding one – on Italy’s membership of the euro. As polls have shown, there is much broader public apathy toward the single currency than in just about any other euro zone nation. Grillo’s plan could also receive the backing of former prime minister Silvio Berlusconi who is determined to pull off a political comeback and is talking of restoring the Italian Lira.

As Reuters reports, such a scenario could spook financial markets “wary of both the 5-Star’s euroskepticism and the threat of prolonged political instability in Italy,” which boasts a public debt burden of over €2 trillion (133% of GDP). In any normal situation that would be a problem. But Italy is not in a normal situation; it is on the cusp of a potentially very large financial crisis that, if mishandled, could bring down Europe’s entire financial system. Unlike many other Eurozone economies like Spain, Ireland Portugal, Italy did not experience a real estate or stock market bubble in the 2000s; nor were its banks heavily exposed to the financial derivatives that helped spread the fallout from the U.S. subprime crisis all around the world. As such, Italy has not had cause to bail out its financial system — until now.

[..] Italy’s current predicament is a multi-headed hydra: a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one, and all coming to a head at the same time. It’s the reason why economists including Deutsche Bank’s Marco Stringa are calling Italy, not France or Greece, the “main risk” to euro-area stability. From a Eurozone-stability point of view, and from a bondholder point of view, the best-case scenario would be the rescue of Italy’s banks, with taxpayers bearing most of the brunt. That should help steady investor nerves and put an end to the gathering exodus of funds out of Italian assets. But even then, the social, political and economic price to be paid in a country already with public debt of over €2 trillion, youth unemployment of almost 40%, and an economy that is 12% smaller than it was 10 years ago, will almost certainly be way too high. If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.

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He’s blowing up the EU without noticing a thing.

Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)

German Finance Minister Wolfgang Schaeuble on Friday criticised Foreign Minister Sigmar Gabriel for saying Germany should provide more money for Greece and the European Union overall. Schaueble told Deutschlandfunk radio he was annoyed by Gabriel’s suggestion because it “goes in the wrong direction completely” and sent the wrong message. He added that Europe’s problem was not primarily money but that its money needed to be used in the right way. On whether Greece can stay in the euro zone, Schaeuble said: “Greece can only do that if it has a competitive economy.” He said the country needed to carry out reforms and that would take time, adding: “But if the time is not used to carry out reforms because that’s uncomfortable, then that’s the wrong path.”

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Feels like a funeral party.

Greek Objections Mar Preparations For EU’s 60th Birthday (R.)

Greece has stuck to its objections to a declaration to mark the European Union’s 60th anniversary, officials in Brussels and Athens said on Thursday, a potentially embarrassing setback for the bloc as it seeks to rebuild unity ahead of Brexit. The leaders of the EU’s 27 remaining states will mark the anniversary on Saturday at a gathering in Rome overshadowed by Britain’s unprecedented decision to leave. London is due to formally trigger the divorce negotiations next week. Athens has threatened not to sign the Rome declaration charting the future of the post-Brexit EU, making a link between agreeing to the text and separate talks on reforms that lenders are seeking from Greece in exchange for new loans. “The negotiations on the draft Rome Declaration have ended as the text was finalized by the EU27,” an EU source said. “Only Greece has a general reservation on the text.”

Greece has said it wants the Rome text to spell out more clearly the protection of labor rights. Greece’s separate debt talks with international lenders are now stuck over this specific issue. One diplomat in Brussels said the issue may now only be resolved at the highest level with Greek Prime Minister Alexis Tsipras. Another EU diplomat said any attempt by Athens to win leverage on the international debt talks by holding off in Rome should not succeed: “We won’t be blackmailed by one member state which is linking one EU issue with a totally different one.” As well as Greece, Poland indicated on Thursday it might also refuse to endorse the declaration, though diplomats played down the threat. Warsaw is particularly opposed to a ‘multi-speed Europe,’ an idea promoted by Germany, France and Brussels, among others, to help improve decision-making in the post-Brexit EU.

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“Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)

Greece will support a declaration marking the EU’s 60th birthday but needs the bloc’s backing against IMF demands on labour reforms, Greek Prime Minister Alexis Tsipras said ahead of a Summit in Rome on Friday. In a letter addressed to EU Council President Donald Tusk and Commission President Jean Claude Juncker, Tsipras called for a clear statement on whether the declaration would apply to Greece, as talks over a key bailout review hit a snag again. “We intend to support the Rome Declaration, a document which moves in a positive direction,” Tsipras said. “Nevertheless, in order to be able to celebrate these achievements, it has to be made clear, on an official level, whether they apply also to Greece. Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Earlier this week, Greece threatened not to sign the Rome declaration, demanding a clearer commitment protecting workers’ rights – an issue on which it is at odds with its international lenders who demand more reforms in return for new loans. The disagreements among Athens, the EU and the IMF – which has yet to decide whether it will participate in the country’s current bailout – have delayed a crucial bailout review. As leaders prepared for the summit, Greek ministers were negotiating with lenders’ representatives in Brussels pension cuts and labour reforms, including freeing up mass layoffs and on collective bargaining. The latest round of talks ended inconclusively late on Thursday, according to Greek officials. [..] Greece has cut pensions 12 times since it signed up to its first bailout in 2010. It has also reduced wages and implemented labour reforms to make its market more flexible and competitive.

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Just imagine that. And then talk about recovery. No, all you need to do is reform!

40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)

Four in 10 Greek businesses (40.3%) consider it likely that they will have to close shop within the year, according to a survey by the Hellenic Confederation of Professionals, Craftsmen and Merchants (GSEVEE), presented by the ANA-MPA news agency on Thursday. According to the survey, around 18,700 businesses will close in the first six months of the year, forcing thousands to join growing unemployment lines in the crisis-hit country. The majority of shutdowns, according to GSEVEE, will be in and around the capital and will concern the manufacturing sector, while some 34,000 jobs will be lost by the closure of companies that are currently considered high risk. 7 in 10 businesses have reported increasing liquidity problems and a shortage of capital from the market, with the number of firms indebted to the state and their suppliers growing by 10% compared to last year.

Over four in five small and medium-sized businesses (SMEs) admit to being exposed to credit risks, seeing a slump in economic activity and operating with the prospect of shrinking rather than expanding in the near future. In terms of employment, the forecasts for the first half of the year do not bode well, as for every two businesses (8.1% of the total) that plan to hire new staff, another three will be letting people go. GSEVEE estimates that 2,000 salaried jobs will be lost by June, without accounting for the impact on employment of the projected shutdowns. Moreover, 40% of those businesses that do plan to hire staff in the first half of 2017 said they won’t be offering payroll positions, but part-time or outsourced work.

Sentiment is also bleak, with 58.8% of respondents expecting conditions to deteriorate and just 11% seeing a possible improvement through June. As such, just 3.6% of businesses plan to make new investments and 6.4% have applied to investment funding programs for that period. “There needs to be a national plan for the country irrespective of who is in power, and politicians need to learn how to make decisions and give orders,” GSEVEE President Giorgos Kavvathas was quoted by the ANA-MPA news agency as saying. “Moreover, the uncertainty of the situation concerning the outcome of the negotiation [with foreign creditors] exacerbates fears and risks, which in turn make small businesses and the self-employed more vulnerable.”

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Could be another scary spring and summer.

EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)

European Commissioner for Migration Dimitris Avramopoulos on Thursday underlined the need to safeguard a deal between Brussels and Ankara to curb human smuggling in the Aegean, noting that some 3 million refugees were in Turkey waiting to cross into Greece in a bid to reach Western and Northern Europe. In comments during a visit to Athens, Avramopoulos said the deal signed last year between Turkey and the EU had reduced an influx of migrants toward Europe and curbed deaths at sea. Reception centers on the islands of the eastern Aegean, the first point of arrival for most migrants arriving in Greece from Turkey, are already overcrowded. A woman and a child were injured in clashes between Afghan and Algerian migrants on Chios on Wednesday night.

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We’re on track for multiple records.

Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

More than 250 African migrants were feared drowned in the Mediterranean Thursday after a charity’s rescue boat found five corpses close to two sinking rubber dinghies off Libya. The UN’s refugee agency (UNHCR) said it was “deeply alarmed” after the Golfo Azzuro, a boat operated by Spanish NGO Proactiva Open Arms, reported the recovery of the bodies close to the drifting, partially-submerged dinghies, 15 miles off the Libyan coast. “We don’t think there can be any other explanation than that these dinghies would have been full of people,” Proactiva spokeswoman Laura Lanuza told AFP. “It seems clear that they sunk.” She added that the inflatables, of a kind usually used by people traffickers, would typically have been carrying 120-140 migrants each.

“In over a year we have never seen any of these dinghies that were anything other than packed.” Lanuza said the bodies recovered were African men with estimated ages of between 16 and 25. They had drowned in the 24 hours prior to them being discovered shortly after dawn on Thursday in waters directly north of the Libyan port of Sabrata, according to the rescue boat’s medical staff. Vincent Cochetel, director of the UN refugee agency (UNHCR)’s Europe bureau, said NGO boats patrolling the area had been called to the aid of a third stricken boat on Thursday afternoon, raising fears others may have perished on what Proactiva called “a black day in the Mediterranean.”

Despite rough winter seas, migrant departures from Libya on boats chartered by people traffickers have accelerated in recent months from already-record levels. Nearly 6,000 people have been picked up by Italian-coordinated rescue boats since the end of last week, bringing the number brought to Italy since the start of 2017 to nearly 22,000, a significant rise on the same period in previous years. Aid groups say the accelerating exodus is being driven by worsening living conditions for migrants in Libya and by fears the sea route to Europe could soon be closed to traffickers. Prior to the latest fatal incident, the UN had estimated that at least 440 migrants had died trying to make the crossing from Libya to Italy since the start of 2017. Its refugee agency estimates total deaths crossing the Mediterranean at nearly 600.

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Mar 232017
 
 March 23, 2017  Posted by at 9:18 am Finance Tagged with: , , , , , , , , , ,  6 Responses »
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Unknown GMC truck Associated Oil fuel tanker, San Francisco 1935

 


I Don’t Think The US Should Remain As One Political Entity – Casey (IM)
Trump Tantrum Looms On Wall Street If Healthcare Effort Stalls (R.)
The US Student Debt Bubble Is Even Bigger Than The Subprime Fiasco (Black)
US Auto-Loan Quality To Deteriorate Further, Forcing Tighter Underwriting (MW)
Oil Price Drops Below $50 For First Time Since OPEC Deal (Tel.)
China Shadow Banks Hit by Record Premium for One-Week Cash (ZH)
Zombie Companies are China’s Real Problem (BBG)
China Debt Risks Go Global Amid Record Junk Sales Abroad (BBG)
A Fake $3.6 Trillion Deal Is Easy to Sneak Past the SEC
Elite Economists: Often Wrong, Never In Doubt (720G)
Trump the Destroyer (Matt Taibbi)
Erdogan Warns Europeans ‘Will Not Walk Safely’ If Attitude Persists (R.)
Lavish EU Rome Treaty Summit Will Skirt Issues in Stumbling Italy (BBG)
Greek Consumption Slumps Further In 2017 (K.)
Nine Years Later, Greece Is Still In A Debt Crisis.. (Black)
In Greece, Europe’s New Rules Strip Refugees Of Right To Seek Protection (K.)

 

 

So there.

I Don’t Think The US Should Remain As One Political Entity – Casey (IM)

What’s going on in the US now is a culture clash. The people that live in the so-called “red counties” that voted for Trump—which is the vast majority of the geographical area of the US, flyover country—are aligned against the people that live in the blue counties, the coasts and big cities. They don’t just dislike each other and disagree on politics; they can no longer even have a conversation. They hate each other on a visceral gut level. They have totally different world views. It’s a culture clash. I’ve never seen anything like this in my lifetime.

There hasn’t been anything like this since the War Between the States, which shouldn’t be called “The Civil War,” because it wasn’t a civil war. A civil war is where two groups try to take over the same government. It was a war of secession, where one group simply tries to leave. We might have something like that again, hopefully nonviolent this time. I don’t think the US should any longer remain as one political entity. It should break up so that people with one cultural view can join that group and the others join other groups. National unity is an anachronism.

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Credibility.

Trump Tantrum Looms On Wall Street If Healthcare Effort Stalls (R.)

The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration’s healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth. Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a healthcare bill a litmus test which could give stock investors another reason to sell. “If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades,” said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital. U.S. stocks rallied after the November presidential election, with the S&P 500 posting a string of record highs up to earlier this month, on bets that the pro-growth Trump agenda would be quickly pushed by a Republican Party with majorities in both chambers of Congress.

The S&P 500 ended slightly higher on Wednesday, the day before a floor vote on Trump’s healthcare proposal scheduled in the House of Representatives. On Tuesday, stocks had the biggest one-day drop since before Trump won the election, on concerns about opposition to the bill. Investors extrapolated that a stalling bill could mean uphill battles for other Trump proposals. Trump and Republican congressional leaders appeared to be losing the battle to get enough support to pass it. Any hint of further trouble for Trump’s agenda, especially his proposed tax cut, could precipitate a stock market correction, said Byron Wien, veteran investor and vice chairman of Blackstone Advisory Partners. “The fact that they are having trouble with (healthcare repeal) casts a shadow over the tax cut and the tax cut was supposed to be the principal fiscal stimulus for the improvement in real GDP,” Wien said. “Without that improvement in GDP, earnings aren’t going to be there and the market is vulnerable.”

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“This is particularly interesting because student loans essentially have no collateral.”

The US Student Debt Bubble Is Even Bigger Than The Subprime Fiasco (Black)

In 1988, a bank called Guardian Savings and Loan made financial history by issuing the first ever “subprime” mortgage bond. The idea was revolutionary. The bank essentially took all the mortgages they had loaned to borrowers with bad credit, and pooled everything together into a giant bond that they could then sell to other banks and investors. The idea caught on, and pretty soon, everyone was doing it. As Bethany McLean and Joe Nocera describe in their excellent history of the financial crisis (All the Devils are Here), the first subprime bubble hit in the 1990s. Early subprime lenders like First Alliance Mortgage Company (FAMCO) had spent years making aggressive loans to people with bad credit, and eventually the consequences caught up with them. FAMCO declared bankruptcy in 2000, and many of its competitors went bust as well.

Wall Street claimed that it had learned its lesson, and the government gave them all a slap on the wrist. But it didn’t take very long for the madness to start again. By 2002, banks were already loaning money to high-risk borrowers. And by 2005, all conservative lending standards had been abandoned. Borrowers with pitiful credit and no job could borrow vast sums of money to buy a house without putting down a single penny. It was madness. By 2007, the total value of these subprime loans hit a whopping $1.3 trillion. Remember that number. And of course, we know what happened the next year: the entire financial system came crashing down. Duh. It turned out that making $1.3 trillion worth of idiotic loans wasn’t such a good idea. By 2009, 50% of those subprime mortgages were “underwater”, meaning that borrowers owed more money on the mortgage than the home was worth.

In fact, delinquency rates for ALL mortgages across the country peaked at 11.5% in 2010, which only extended the crisis. But hey, at least that’s never going to happen again. Except… I was looking at some data the other day in a slightly different market: student loans. Over the last decade or so, there’s been an absolute explosion in student loans, growing from $260 billion in 2004 to $1.31 trillion last year. So, the total value of student loans in America today is LARGER than the total value of subprime loans at the peak of the financial bubble. And just like the subprime mortgages, many student loans are in default. According to the Fed’s most recent Household Debt and Credit Report, the student loan default rate is 11.2%, almost the same as the peak mortgage default rate in 2010. This is particularly interesting because student loans essentially have no collateral. Lenders make loans to students… but it’s not like the students have to pony up their iPhones as security.

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You have to wonder what exactly is keeping the US economy afloat.

US Auto-Loan Quality To Deteriorate Further, Forcing Tighter Underwriting (MW)

Auto loan and lease credit performance will continue to deteriorate in 2017, led by the vulnerable subprime sector, Fitch Ratings said in a report released Wednesday. “Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years,” said Michael Taiano, a director at the credit-ratings agency. Banks are starting to lose market share to captive auto finance companies and credit unions as they begin to tighten underwriting standards in response to deteriorating asset quality, Fitch said. According to the Federal Reserve’s January 2017 senior loan officer survey, 11.6% of respondents (net of those who eased) reported tightening standards, compared with the five-year average of 6.1%.

“This trend is consistent with comments made by several banks on earnings conference calls over the past couple of quarters,” Fitch said in the report. Fitch considers continued tightening by auto lenders as a credit-positive but it’s also paying attention to market nuances. The tightening, to date, primarily relates to pricing and loan-to-value (how much is still owed on the car compared to its resale value), but average loan terms continue to extend into the 72- to 84-month category. “The tightening of underwriting standards is likely a response to expected deterioration in used vehicle prices and the weaker credit performance experienced in the subprime segment,” added Taiano. Used-car price declines have accelerated more recently, which will likely pressure recovery values on defaulted loans and lease residuals, the analysts said.

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Might as well call off the theater.

Oil Price Drops Below $50 For First Time Since OPEC Deal (Tel.)

The oil price has fallen back below the key $50 a barrel mark for the first time since November after surging US oil supplies dealt a blow to OPEC’s plan to erode the global oversupply of crude. The flagging oil price bounded above $50 a barrel late last year after a historic co-operation deal between OPEC and the world’s largest oil producers outside of the cartel to limit output for the first half of this year. The November deal was the first action taken by the group to limit supply for over eight years but since then the quicker than expected return of fracking rigs across the US has punctured the buoyant market sentiment of recent months. Brent crude prices peaked at $56 a barrel earlier this year and were still above $52 this week.

But by Wednesday the price fell to just above $50 a barrel and briefly broke below the important psychological level to $49.86 on Wednesday afternoon. Market analysts fear that a more sustained period below $50 could trigger a sell-off from hedge funds which would drive even greater losses in the market. The price plunge was sparked by the latest weekly US stockpile data which revealed a bigger than expected increase of 5 million barrels a day compared to a forecast rise of 1.8 million barrels. The flood of US shale emerged a day after Libya announced that would increase its output to take advantage of higher revenues from its oil exports. “The market is increasingly worried that the continued overhang of supply is not being brought down fast enough,” said Ole Hansen, a commodities analyst with SaxoBank.

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Beijing forced to save the shadows.

China Shadow Banks Hit by Record Premium for One-Week Cash (ZH)

During the so-called Chinese Banking Liquidity Crisis of 2013, the relative cost of funds for non-bank institutions spiked to 100bps. So, the fact that the ‘shadow banking’ liquidity premium has exploded to almost 250 points – by far a record – in the last few days should indicate just how stressed Chinese money markets are. While interbank borrowing rates have climbed across the board, the surge has been unusually steep for non-bank institutions, including securities companies and investment firms. They’re now paying what amounts to a record premium for short-term funds relative to large Chinese banks, according to data compiled by Bloomberg.

The premium is reflected in the gap between China’s seven-day repurchase rate fixing and the weighted average rate, which, by Bloomberg notes, widened to as much as 2.47 percentage points on Wednesday after some small lenders were said to miss payments in the interbank market. Non-bank borrowers tend to have a greater influence on the fixing, while large banks have more sway over the weighted average. “It’s more expensive and difficult for non-bank financial institutions to get funding in the market,” said Becky Liu at Standard Chartered. “Bigger lenders who have access to regulatory funding are not lending much of the money out.” Without access to deposits or central bank liquidity facilities, many of China’s non-bank institutions must rely on volatile money markets. As Bloomberg points out, The People’s Bank of China has been guiding those rates higher in recent months to encourage a reduction of leverage, while also stepping in at times to prevent a liquidity crunch.

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State owned zombies.

Zombie Companies are China’s Real Problem (BBG)

China needs to take on its state-owned “zombie companies,” which keep borrowing even though they aren’t earning enough to repay loans or interest, says Nicholas Lardy of the Peterson Institute for International Economics. “That’s where the real problem is,” Lardy said Thursday in a Bloomberg Television interview from the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. “It’s a component of the run-up in debt that they really have to focus on.” While flagging this concern, Lardy, a senior fellow at Peterson in Washington and author of “Markets Over Mao: The Rise of Private Business in China,” said anxiety over China’s debt growth is overstated. Household deposits will continue to underpin the banking and financial system, which means the situation with zombie firms is unlikely to reach a critical point.

Household savings are “very sticky, they’re not going anywhere, and the central bank can come in to the rescue if there are problems,” he said. Chinese corporate profits will probably continue to recover this year and after-tax earnings needed to service the debt load is improving, Lardy said. Another positive sign is a slowdown in the buildup of debt outstanding to non-financial companies. The combination of that slackening and companies’ increasing earning power “is improving the overall situation,” he said. When it comes to U.S. President Donald Trump’s negative rhetoric on China, the country’s leaders deserve “very high marks so far” for their cool reaction. “They’ve been waiting to see what Mr. Trump is actually going to do as opposed to what he’s talked about, so they haven’t overreacted,” he said. “They’ve made very careful preparations for the worst case if Trump does move in a very strong protectionist direction.”

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Zombies and junk.

China Debt Risks Go Global Amid Record Junk Sales Abroad (BBG)

China’s riskiest corporate borrowers are raising an unprecedented amount of debt overseas, leaving global investors to shoulder more credit risks after onshore defaults quadrupled in 2016. Junk-rated firms, most of which are property developers, have sold $6.1 billion of dollar bonds since Dec. 31, a record quarter, data compiled by Bloomberg show. In contrast, such borrowers have slashed fundraising at home as the central bank pushes up borrowing costs and regulators curb real estate financing. Onshore yuan note offerings by companies with local ratings of AA, considered junk in China, fell this quarter to the least since 2011 at 31.3 billion yuan ($4.54 billion). Global investors desperate for yield have lapped up offerings from China. Rates on dollar junk notes from the nation have dropped 81 basis points this year to 6.11%, near a record low, according to a Bank of America Merrill Lynch index.

Some investors have warned of froth. Goldman Sachs Group Inc. said last month that it sees little value in the country’s high-yield property bonds. Hedge fund Double Haven Capital (Hong Kong) has said it is betting against Chinese junk securities. “Today’s market valuations are tight and investors are focusing on yields without taking into account credit risks,” said Raja Mukherji at PIMCO. “That’s where I see a lot of risk, where investors are not differentiating on credit quality on a risk-adjusted basis.” Lower-rated issuers turning to dollar debt after scrapping financing at home include Shandong Yuhuang Chemical on China’s east coast. The chemical firm canceled a 500 million yuan local bond sale in January citing “insufficient demand.” It then issued $300 million of three-year bonds at 6.625% this week. Some developers have grown desperate for cash as regulators tighten housing curbs and restrict their domestic fundraising. That’s raising concern among international investors in China’s real estate sector who have been burned before.

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Priceless humor: “Congress has already raised the alarm.” After three decades, that is.

A Fake $3.6 Trillion Deal Is Easy to Sneak Past the SEC

A few hours after the New York market close on Feb. 1, an obscure Chicago artist by the name of Antonio Lee told the world he had become the world’s richest man. The 32-year-old painter said Google’s parent, Alphabet Inc., had bought his art company in exchange for a chunk of stock that made him wealthier than Bill Gates, Warren Buffett and Jeff Bezos – combined. Of course, none of it was true. Yet, on that day, Lee managed to issue his fabricated report in the most authoritative of places: The U.S. Securities and Exchange Commission’s Edgar database – the foundation of hundreds of billions of dollars in financial transactions each day. For more than three decades, the SEC has accepted online submissions of regulatory filings – basically, no questions asked.

As many as 800,000 forms are filed each year, or about 3,000 per weekday. But, in a little known vulnerability at the heart of American capitalism, the government doesn’t vet them, and rarely even takes down those known to be shams. “The SEC can’t stop them,” said Lawrence West, a former SEC associate enforcement director. “They can only punish the filer afterward and remove the filing from the system. So, caveat lector – let the reader beware.” Congress has already raised the alarm. For its part, the SEC, which declined to comment, has said those who make filings are responsible for their truthfulness and that only a handful have been reported as bogus. Submitting false information exposes the culprit to SEC civil-fraud charges, or even federal criminal prosecution.

On May 14, 2015, Nedko Nedev, a dual citizen of the United States and Bulgaria, filed an SEC form indicating he was making a tender offer – an outright purchase – for Avon, the cosmetics company. Avon’s shares jumped 20% before trading was halted, and the company denied the news. (A federal grand jury later indicted Nedev on market manipulation and other charges.) After the fraudulent Avon filing, U.S. Senator Chuck Grassley, the Iowa Republican and former chairman of the Finance Committee, told the SEC it must review its posting standards. “This pattern of fraudulent conduct is troubling, especially in light of the relative ease in which a fake posting can be made,” Grassley wrote in a letter to the agency. In response, Mary Jo White, who then chaired the SEC, said it wouldn’t be feasible to check information. She noted that there were on average 125 first-time filers daily in 2014, and the agency was studying whether its authentication process could be strengthened without delaying disclosure of key information to investors.

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Only a major reset will do.

Elite Economists: Often Wrong, Never In Doubt (720G)

Since the U.S. economic recovery from the 2008 financial crisis, institutional economists began each subsequent year outlining their well-paid view of how things will transpire over the course of the coming 12-months. Like a broken record, they have continually over-estimated expectations for growth, inflation, consumer spending and capital expenditures. Their optimistic biases were based on the eventual success of the Federal Reserve’s (Fed) plan to restart the economy by encouraging the assumption of more debt by consumers and corporations alike. But in 2017, something important changed. For the first time since the financial crisis, there will be a new administration in power directing public policy, and the new regime could not be more different from the one that just departed. This is important because of the ubiquitous influence of politics.

The anxiety and uncertainties of those first few years following the worst recession since the Great Depression gradually gave way to an uncomfortable stability. The anxieties of losing jobs and homes subsided but yielded to the frustration of always remaining a step or two behind prosperity. While job prospects slowly improved, wages did not. Business did not boom as is normally the case within a few quarters of a recovery, and the cost of education and health care stole what little ground most Americans thought they were making. Politics was at work in ways with which many were pleased, but many more were not. If that were not the case, then Donald Trump probably would not be the 45th President of the United States. Within hours of Donald Trump’s victory, U.S. markets began to anticipate, for the first time since the financial crisis, an escape hatch out of financial repression and regulatory oppression.

As shown below, an element of economic and financial optimism that had been missing since at least 2008 began to re-emerge. What the Fed struggled to manufacture in eight years of extraordinary monetary policy actions, the election of Donald Trump accomplished quite literally overnight. Expectations for a dramatic change in public policy under a new administration radically improved sentiment. Whether or not these changes are durable will depend upon the economy’s ability to match expectations.

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I find the Trump bashing parade very tiresome, but Matt’s funny.

Trump the Destroyer (Matt Taibbi)

There is no other story in the world, no other show to watch. The first and most notable consequence of Trump’s administration is that his ability to generate celebrity has massively increased, his persona now turbocharged by the vast powers of the presidency. Trump has always been a reality star without peer, but now the most powerful man on Earth is prisoner to his talents as an attention-generation machine. Worse, he is leader of a society incapable of discouraging him. The numbers bear out that we are living through a severely amplified déjà vu of last year’s media-Trump codependent lunacies. TV-news viewership traditionally plummets after a presidential election, but under Trump, it’s soaring. Ratings since November for the major cable news networks are up an astonishing 50% in some cases, with CNN expecting to improve on its record 2016 to make a billion dollars – that’s billion with a “b” – in profits this year.

Even the long-suffering newspaper business is crawling off its deathbed, with The New York Times adding 132,000 subscribers in the first 18 days after the election. If Trump really hates the press, being the first person in decades to reverse the industry’s seemingly inexorable financial decline sure is a funny way of showing it. On the campaign trail, ballooning celebrity equaled victory. But as the country is finding out, fame and governance have nothing to do with one another. Trump! is bigger than ever. But the Trump presidency is fast withering on the vine in a bizarre, Dorian Gray-style inverse correlation. Which would be a problem for Trump, if he cared. But does he? During the election, Trump exploded every idea we ever had about how politics is supposed to work. The easiest marks in his con-artist conquest of the system were the people who kept trying to measure him according to conventional standards of candidate behavior.

You remember the Beltway priests who said no one could ever win the White House by insulting women, the disabled, veterans, Hispanics, “the blacks,” by using a Charlie Chan voice to talk about Asians, etc. Now he’s in office and we’re again facing the trap of conventional assumptions. Surely Trump wants to rule? It couldn’t be that the presidency is just a puppy Trump never intended to care for, could it? Toward the end of his CPAC speech, following a fusillade of anti-media tirades that will dominate the headlines for days, Trump, in an offhand voice, casually mentions what a chore the presidency can be. “I still don’t have my Cabinet approved,” he sighs. In truth, Trump does have much of his team approved. In the early days of his administration, while his Democratic opposition was still reeling from November’s defeat, Trump managed to stuff the top of his Cabinet with a jaw-dropping collection of perverts, tyrants and imbeciles, the likes of which Washington has never seen.

En route to taking this crucial first beachhead in his invasion of the capital, Trump did what he always does: stoked chaos, created hurricanes of misdirection, ignored rules and dared the system of checks and balances to stop him. By conventional standards, the system held up fairly well. But this is not a conventional president. He was a new kind of candidate and now is a new kind of leader: one who stumbles like a drunk up Capitol Hill, but manages even in defeat to continually pull the country in his direction, transforming not our laws but our consciousness, one shriveling brain cell at a time.

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Tourism is a very big source of income for Turkey. Erdogan’s killing it off with a vengeance.

Erdogan Warns Europeans ‘Will Not Walk Safely’ If Attitude Persists (R.)

President Tayyip Erdogan said on Wednesday that Europeans would not be able to walk safely on the streets if they kept up their current attitude toward Turkey, his latest salvo in a row over campaigning by Turkish politicians in Europe. Turkey has been embroiled in a dispute with Germany and the Netherlands over campaign appearances by Turkish officials seeking to drum up support for an April 16 referendum that could boost Erdogan’s powers. Ankara has accused its European allies of using “Nazi methods” by banning Turkish ministers from addressing rallies in Europe over security concerns. The comments have led to a sharp deterioration in ties with the European Union, which Turkey still aspires to join.

“Turkey is not a country you can pull and push around, not a country whose citizens you can drag on the ground,” Erdogan said at an event for Turkish journalists in Ankara, in comments broadcast live on national television. “If Europe continues this way, no European in any part of the world can walk safely on the streets. Europe will be damaged by this. We, as Turkey, call on Europe to respect human rights and democracy,” he said. Germany’s Frank-Walter Steinmeier used his first speech as president on Wednesday to warn Erdogan that he risked destroying everything his country had achieved in recent years, and that he risked damaging diplomatic ties. “The way we look (at Turkey) is characterized by worry, that everything that has been built up over years and decades is collapsing,” Steinmeier said in his inaugural speech in the largely ceremonial role. He called for an end to the “unspeakable Nazi comparisons.”

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Can’t let a little crisis get in the way of your champagne and caviar.

Lavish EU Rome Treaty Summit Will Skirt Issues in Stumbling Italy (BBG)

As leaders celebrate the European Union’s 60th birthday in Rome this weekend, the host nation may be hoping that a pomp-filled ceremony distracts from any probing questions. Overshadowed by the sting of Brexit and elections in the Netherlands, France and Germany, Italy’s lingering problems have left it as the weak link among Europe’s powerhouse economies. It’s stumbling through a stop-start slow recovery from a record-long recession, unemployment is twice that of Germany’s, and voters, weary of EU institutions, are flirting with the same kind of populism grabbing attention elsewhere. The gathering on Saturday on the city’s Capitol hill is to celebrate the Treaty of Rome, the bedrock agreement signed on March 25, 1957 for what is now the EU.

From its beginnings as the European Economic Community – with Italy among the six founding members – it has since grown to a union of 28 nations stretching 4,000 kilometers from Ireland in the northwest to Cyprus in the southeast. The U.K. is heading toward a lengthy exit from the EU known as Brexit, raising questions among the remaining 27 about the bloc’s long-term future. “Italy was until very recently at the forefront of the European integration process,” Luigi Zingales, professor of finance at University of Chicago Booth School of Business, said in an interview. “Today it’s undoubtedly Europe’s weakest link.” The economy grew just 0.9% last year, below the euro area’s 1.7%, and unemployment is at 11.9%. A recent EU poll put Italy as the monetary union’s second-most euro-skeptic state after Cyprus with only 41% saying the single currency is “a good thing.” The average in the 19-member euro area is 56%.

That widespread disenchantment may be felt at elections due in about one year. A poll published on Tuesday by Corriere della Sera put support for the Five Star Movement, which calls for a referendum to ditch the euro, at a record 32.3%, well ahead of the ruling Democratic Party. Summit host Prime Minister Paolo Gentiloni has only been in power since December, when Matteo Renzi resigned after losing a constitutional reform referendum. For Zingales, Italy has problems that European policy makers “would rather not talk about now as they don’t want to scare people.” That’s because across the bloc, politicians are still fighting voter resentment over the loss of wealth since the financial crisis, bitterness about bailouts and anger over a perceived increase in inequality. “Sixty years after the signing of the Treaties of Rome, the risk of political paralysis in Europe has never been greater,” Bank of Italy Governor Ignazio Visco told a conference in Rome this month.

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The EU can celebrate only because it’s murdering one of its members. Greece needs stimulus but gets the opposite.

Greek Consumption Slumps Further In 2017 (K.)

The year has started with some alarm bells regarding the course of consumer spending, generating concern not only about the impact on the supermarket sector and industry, but also on the economy in general. In the first week of March the year-on-year drop in supermarket turnover amounted to 15%, while in January the decline had come to 10%. Shrinking consumption is a sure sign that the economic contraction will be extended into another year, given its important role in the economy. The new indirect taxes on a number of commodities, the increased social security contributions, the persistently high unemployment and the ongoing uncertainty over the bailout review talks have hurt consumer confidence and eroded disposable incomes.

In this context, it will be exceptionally difficult to achieve the fiscal targets, especially if the uncertainty goes on or is ended with the imposition of additional austerity measures that would only see incomes shrink further. According to projections by IRI market researchers, supermarket sales in 2017 are expected to decline 3.6% from last year, with the worst-case scenario pointing to a 4.4% drop. Supermarket sales turnover dropped at the steepest rate seen in the crisis years in 2016, down 6.5%, after falling 2.1% in 2015, 1.4% in 2014, 3.5% in 2013 and 3.4% in 2012.

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“For a continent that has been at war with itself for 10 centuries and only managed to play nice for the last 30 or so years, it’s foolish to expect these bailouts to last forever.”

Nine Years Later, Greece Is Still In A Debt Crisis.. (Black)

Greece has had nine different governments since 2009. At least thirteen austerity measures. Multiple bailouts. Severe capital controls. And a full-out debt restructuring in which creditors accepted a 50% loss. Yet despite all these measures GREECE IS STILL IN A DEBT CRISIS. Right now, in fact, Greece is careening towards another major chapter in its never-ending debt drama. Just like the United States, the Greek government is set to run out of money (yet again) in a few months and is in need of a fresh bailout from the IMF and EU. (The EU is code for “Germany”…) Without another bailout, Greece will go bust in July– this is basic arithmetic, not some wild theory. And this matters. If Greece defaults, everyone dumb enough to have loaned them money will take a BIG hit. This includes a multitude of banks across Germany, Austria, France, and the rest of Europe.

Many of those banks already have extremely low levels of capital and simply cannot afford a major loss. (Last year, for example, the IMF specifically singled out Germany’s Deutsche Bank as being the top contributor to systemic risk in the global financial system.) So a Greek default poses as major risk to a number of those banks. More importantly, due to the interconnectedness of the financial system, a Greek default poses a major risk to anyone with exposure to those banks. Think about it like this: if Greece defaults and Bank A goes down, then Bank A will no longer be able to meet its obligations to Bank B. Bank B will suffer a loss as well. A single event can set off a chain reaction, what’s called ‘contagion’ in finance. And it’s possible that Greece could be that event. This is what European officials have been so desperate to prevent for the last nine years, and why they’ve always come to the rescue with a bailout.

It has nothing to do with community or generosity. They’re hopelessly trying to prevent another 2008-style meltdown of the financial system. But their measures have limits. How much longer do Greek citizens accept being vassals of Germany, suffering through debilitating capital controls and austerity measures? How much longer do German taxpayers continue forking over their hard-earned wages to bail out Greek retirees? After all, they’ve spent nine years trying to ‘fix’ Greece, and the situation has only become worse. For a continent that has been at war with itself for 10 centuries and only managed to play nice for the last 30 or so years, it’s foolish to expect these bailouts to last forever. And whether it’s this July or some date in the future, Greece could end up being the catalyst which sets off a chain reaction on both sides of the Atlantic.

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It’s time for lawyers to step in.

In Greece, Europe’s New Rules Strip Refugees Of Right To Seek Protection (K.)

EU leaders are celebrating a year since they carved out the agreement with Turkey that stemmed the flood of refugees seeking to escape war and strife on Europe’s doorstep. But the importance of the agreement goes far beyond the fact that it has contributed to deterring refugees from coming to Greece. At the Norwegian Refugee Council, we fear that the system Europe is putting in place in Greece is slowly stripping people of their right to seek international protection. Greece took the positive step to enshrine in law some key checks and balances to protect the vulnerable – a victim of torture, a disabled person, an unaccompanied child – so they could have their asylum case heard on the Greek mainland rather than remaining on the islands.

But a European Commission action plan is putting Greece under pressure to change safeguards enshrined in Greek law. NRC, along with other human rights and humanitarian organizations, wrote an open letter to the Greek Parliament this month urging lawmakers to keep that protection for those most in need. Importantly, this is just another quiet example of how what is happening in Greece is setting precedents that may irrevocably change the 1951 Refugee Convention. Europe is testing things out in Greece. [..] It was Europe and its postwar crisis that led to the 1951 convention that protects those displaced by war. Now that convention risks expiring on the doorstep of the same continent that gave birth to it – Europe is in danger of becoming, as NRC’s Secretary-General Jan Egeland has said, the convention’s “burial agent.”

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Mar 212017
 
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Fred Stein Streetcrossing, Paris 1935

 


To Make America Great Again, Trump Will Have To Make the Dollar Weak Again (MW)
The Fed Gave Trump Just Enough Rope To Hang Himself With – Deutsche (ZH)
S&P 500 Companies Blow $1.7 Trillion On Making Earnings Look Less Bad (WS)
US “Too Big To Fail” Banks Top $1 Trillion – What Happens Next? (ZH)
Australia’s Central Bank Warns Of Growing Risks In Housing, Debt (CNBC)
Australia Bank Regulators To Unleash New Crackdown On Lenders (AFR)
Toronto Home Prices May Jump 25% This Year – TD (BBG)
Canada Real Estate: This Is Going To Blow Sky High (Bergin)
British Banks Handled Vast Sums Of Laundered Russian Money (G.)
What Central Banks Get Wrong About Economic Equilibrium (BBG)
Full Speed Ahead for Murphy’s Law (Jim Kunstler)
Earth Is A Planet In Upheaval Breaking Into ‘Uncharted Territory’ (G.)
Three-Quarters Of Older People In The UK Are Lonely (G.)
Greek Public Hospitals Stretched Further As Access Granted To Uninsured (K.)
Sharp Increase In Refugees Reaching Aegean Islands From Turkey (K.)

 

 

Currency manipulation?

To Make America Great Again, Trump Will Have To Make the Dollar Weak Again (MW)

If Donald Trump really wants to Make America Great Again, he’s going to have to Make the Dollar Weak Again first. So argued hedge fund manager Mathew Klody of MCN Capital Management at this week’s Grant’s investment conference in New York. He made an intriguing case. If Klody’s right, Trump may just be blowing smoke when he talks about tariffs and border-adjustment taxes. And, most importantly, if Klody is right, we should also buy foreign currencies, especially those issued by emerging markets. Sooner or later, the president will need to drive down the dollar, and for those based in the U.S. that will drive up foreign currencies. Mexican pesos, anyone? This is not far-fetched. Research Affiliates, the smart investment advisers in Newport Beach, Calif., argue that emerging market currencies are among the most attractive asset classes available to investors.

They’re expecting those currencies to produce returns in U.S. dollars of inflation plus about 3.5% a year over the next decade, with far less volatility than stocks. Incidentally, if Klody’s analysis is right, Trump should also, logically, be good for gold. The collapse of American manufacturing towns, and the old industrial middle class, has gone hand in hand with a staggering 40-year rise in the dollar, Klody observed. It is standard economics that as your currency rises, your exports become more expensive and less competitive in foreign markets. Meanwhile, the reverse happens at home: Imports from overseas get cheaper and cheaper compared with domestic production. Klody noted that since the mid-1970s, the U.S. dollar has quadrupled in price — yes, really — when measured against the Federal Reserve’s broad basket of foreign currencies.

It may be mere coincidence that during that same period, imports have surged, and the U.S. has lost its global dominance in many areas of manufacturing. MCN Capital’s Klody notes that during the period that the dollar soared, workers’ share of domestic income has plummeted.From the 1940s through the early 1970s, the working man and woman got a pretty consistent 50% of national domestic income.Since the mid-1970s, it’s collapsed to around 43%. And, yes, that’s happened under most political regimes (the Clinton-Gingrich-dot-com years in the 1990s being an exception).That, of course, is a big reason why Trump won. Klody himself came from a small town in Pennsylvania that used to be a classic American industrial boomtown. And now, according to the town’s mayor, it looks like a deserted bomb site.

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Tyler: “The above, simply summarized: the Fed has given Trump just enough rope to hang himself with; and since all that matters now is how effective the President will be in passing his political agenda – which is not looking good- should Trump fails, the one of two possible outcomes that is most likely is the one where the “curve bear flattens or inverts”, prompting the next, long overdue, recession. “

The Fed Gave Trump Just Enough Rope To Hang Himself With – Deutsche (ZH)

Aleksandar Kocic: “The subtext of the last week’s Fed “package” is a compromise motivated by a desire to extend the comfort zone and to hedge their position against possible fiscal irresponsibility, while, at the same time, not stand in the way to any possible fiscal stimulus (or its absence) by hiking too aggressively…. Depending on the interplay between degree of political resolve and the Fed actions we could see two distinct paths of resolution of the existing tensions in the mid- or long-run. Last week, the Fed delivered what appears as a dovish hike, in all likelihood to be followed with two hikes more in 2017 and three in 2018. Such a choice of the Fed action was a compromise driven by the developments in the labor market and the key events in Europe, on one side, combined with the risk associated with the approval of the fiscal stimulus, on the other.

The subtext of this compromise can be interpreted as being motivated by the Fed’s desire to extend the comfort zone and to hedge their position against possible fiscal irresponsibility, while, at the same time, not stand in the way to any possible fiscal stimulus by hiking too aggressively. Despite all the efforts not to create more uncertainty, this is likely to create at least mild ambiguity regarding the long-run. A Fed which is not in a standby position waiting for the fiscal package to arrive and kick in is going to be supportive for USD and higher real rates. The March FOMC “package” (in terms of rate hike, dots, rhetoric and Q&E) implies effectively a real rate rise and is most likely bearish for breakevens, which could diminish the effect of the border tax on the trade deficit and, as such, reduce the impact on growth potential.

In addition, having higher real rates increases the costs of borrowing and possibly creates political resistance against deficit expansions and structural steepening of the curve. On top of that, given what we saw in the last weeks, this suggests that the political process around the budget plan and the Legislative package already expected by the market is going to be anything but smooth, which is adding further doubts about its success and timing. Depending on the interplay of politics and policy – degree of political resolve and the Fed actions – we could see two distinct paths of resolution of the existing tensions in the mid- or long-run.

On one hand, it appears that the Fed is removing uncertainty around the terminal rate, while on the other, politics is creating a binary outcomes which could have a dramatically different effect on long rates. In that context, we are facing a future with bifurcating back end of the curve. Either political bottlenecks clear and the stimulus gets approved and goes full force leading to higher growth potential with subsequent rise in price levels and structural steepening of the curve, or political tensions effectively sabotage either its arrival or content (or both), and the curve initially bear flattens or even twists with rate shorts capitulation accelerating the rally of the back end.”

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Find a -nearly- deserted island to live on.

S&P 500 Companies Blow $1.7 Trillion On Making Earnings Look Less Bad (WS)

The S&P 500 index, closing today at 2,373, hovers near its all-time high. Total market capitalization of the 500 companies in the index exceeds $20 trillion, or 106% of US GDP. In the three-plus years since the end of January 2014, the index has soared 33%. And yet, over these three-plus years, even with financial engineering driven to the utmost state of perfection, including $1.7 trillion in share buybacks and despite “ex-bad-items” accounting schemes that are giving even the SEC goosebumps – despite all these efforts, the crucial and beautifully doctored “adjusted” earnings-per-share, perhaps the single most manipulated metric out there, has gone nowhere. “Adjusted” earnings per share are back where they’d been at the end of January 2014. It’s a sad sign when not even financial engineering can conjure up the appearance of earnings growth.

Companies report earnings in two ways: 1) All companies report as required under GAAP (our slightly inconvenient Generally Accepted Accounting Principles). These earnings are often a loss or way too small and shrinking, instead of growing, and hence not very palatable. 2) So most companies also report pro-forma, ex-bad-items, “adjusted” earnings, based on the companies’ own notions of what matters. Analysts and the media hype that metric. This is just a method of reporting the same results in a more glamorous manner. Then there’s financial engineering. Companies borrowed heavily over the past few years and used those funds to purchase their own shares. This hollowed out equity and left companies with piles of debt.

Over the past three years, companies blew $1.7 trillion on share buybacks. This money was not invested in productive activities that would have expanded the company and the economy, and generated cash flow to service this debt. All it did was reduce the number of shares outstanding. This has the effect of increasing earnings per share (EPS) though the company didn’t actually make more money. Add this system of share buybacks to the system of “adjusting” earnings per share via reporting schemes, and the result should be a miracle of soaring “adjusted” EPS. But no.

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“..surged 30% since Donald Trump was elected president..”

US “Too Big To Fail” Banks Top $1 Trillion – What Happens Next? (ZH)

For the first time ever, the market cap of America’s “Big Four” banks topped $1 trillion having surged 30% since Donald Trump was elected president. While to some this is cause for celebration, we note that the last time a nation’s “big four” banks topped $1 trillion in market cap did not end well… As Bloomberg notes, the four biggest U.S. banks were worth the most on record versus China’s “Big Four” this month, as JPMorgan, Wells Fargo, Bank of America, and Citigroup were worth over $250 billion more than Industrial & Commercial Bank, China Construction Bank, Bank of China, and Agricultural Bank of China combined. The four Chinese banks, the world’s most profitable, were worth about the same as the U.S. foursome as recently as June. However, as the chart shows, while the American quartet’s combined market value closed above $1 trillion for the first time last month, China achieved that goals in June 2015… and it did not end well.

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Too late now.

Australia’s Central Bank Warns Of Growing Risks In Housing, Debt (CNBC)

Australia’s central bank saw growing risks in the nation’s hot housing market when it left rates steady earlier this month, underlining the case against further easing in policy. Minutes of its March meeting showed the Reserve Bank of Australia (RBA) was generally optimistic about the economy as it transitioned away from a decade long boom in mining investment. However, board members felt there had been a “build-up of risks” in the housing market as borrowing for investment fueled brisk price rises in Sydney and Melbourne. Home prices accelerated at an annual pace of 11.7% in February, with Sydney running red-hot at 18.4%, data from property consultant CoreLogic showed. Governor Philip Lowe has repeatedly argued that cutting rates further could encourage a renewed borrowing binge by households who are already heavily indebted, outweighing any economic benefits.

With wages growing at record lows, debt was outpacing incomes and threatening to weigh on consumer spending. Data out recently showed retail sales grew at a tepid pace for a third straight month while the outlook for capital expenditure remained uninspiring. The RBA noted tighter supervision had contributed to “some” strengthening in lending standard by the banks, which has also been raising rates on some mortgage products recently. Analysts suspect even stricter standards are likely to be imposed by regulators in coming weeks. Housing affordability, or the lack of it, has become a hot-button issue for the conservative government of Malcolm Turnbull which has promised measures to ease the problem in its May budget. The RBA’s angst over housing has convinced financial markets there will be no more cuts in interest rates, already at all time lows of 1.5%.

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They’re too scared too crack down on anything. Housing can bring down the entire Oz economy by now.

“I don’t use the B-word. I refuse to use the B-word..”

Australia Bank Regulators To Unleash New Crackdown On Lenders (AFR)

Regulators are preparing to impose a fresh wave of constraints on the banks to slow investor lending growth, crack down on interest-only loans, and force buyers to stump up more equity on purchases as they scramble to manage a rampant property boom. Warning that financial and economic risks have grown in recent months, particularly across east coast property markets, the nation’s top financial regulators and Treasurer Scott Morrison unleashed co-ordinated calls for fresh restraint from banks. “Watch this space,” declared Australian Prudential Regulation Authority chairman Wayne Byres on Monday, speaking just hours after Mr Morrison urged APRA and the Australian Securities and Investments commission to use “the levers that they have”. Leaping house price growth over recent months in Sydney and Melbourne, as well as a tsunami of new apartment stock due to hit the market in coming months are creating a wall of uncertainty over the financial stability of the housing market.

That’s being exacerbated by concerns over heavily indebted households’ ability to withstand a rising global interest rate environment at a time of record-low wages growth. In a sign of growing tensions between members of the Council of Financial Regulators – which includes APRA, ASIC, Treasury and chaired by the Reserve Bank – Mr Byres pointedly refused to describe the property market as being in a “bubble”, saying use of the term was “superficial” and “binary”. “I don’t use the B-word. I refuse to use the B-word,” Mr Byres said. “We are in it – we are not in it. If we are in it we’re all going to be ruined – if we are not in it we’re going to be right. It’s too simplistic.” By contrast, Greg Medcraft, ASIC’s chairman, bluntly repeated his view that the market was in a bubble. “I have been saying for a while that I thought it was a bubble and other people are catching up now. “Clearly the issue is if you raise interest rates that’s a big tool but then you affect the whole economy.”

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Hike rates into this.

Toronto Home Prices May Jump 25% This Year – TD (BBG)

Toronto’s housing market is likely to stay strong for the rest of the year, with home prices jumping as much as 25%, amid hints that speculators are fueling demand and posing a potential risk to the economy, TD Economics Chief Economist Beata Caranci said. A “strong Toronto home-price forecast is not a vote of confidence in market fundamentals,” Caranci wrote Monday in a note to clients. “It’s getting harder to ignore warning signs that market demand pressures are increasingly reflecting speculative forces.” Residential prices in Canada’s largest metropolitan region are forecast to grow 20 to 25% this year, up from a previous estimate of 10 to 15%, according to the report by TD Economics, part of Toronto-Dominion Bank.

Toronto-area prices have climbed 19% in the past 12 months, the fastest clip since the 1980s, when a frenzied housing market resulted in year-over-year increases of 55%, Caranci said. “Evidence is building that speculative forces are growing deeper roots, which raises the risk that prices will move closer to the top end of that forecast in the absence of policy measures,” Caranci wrote. As for next year, higher mortgage rates and fewer affordable properties will likely cut the growth rate to 3 to 5%, though a lack of clarity on housing speculation makes predictions difficult, Caranci said. A housing market driven by speculators seeking a quick profit boosts the risk of rapidly unwinding price gains at the same time homebuyers are contending with larger debt burdens, she said.

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Seen this movie so many times before.

Canada Real Estate: This Is Going To Blow Sky High (Bergin)

Originally, I thought this would be a bit of a joke. There were billboards in all the Toronto subway cars advertising the Canadian Real Estate Wealth Expo – learn how to become a millionaire. I thought this was so ridiculous, it may be fun. What better way to experience the top of the housing market than watching Tony Robbins and Pitbull along with a bunch of US real estate professionals explain how Toronto real estate is the path to riches. Prices were originally $150 per ticket, but I was able to buy for $50. While it deeply bothers me that I paid $50 to these shameless (amoral) self-promoters, I thought it would be worth it to witness, in person, the top of the housing market. I had thought, there can’t be that many people stupid enough to attend this, but I was very wrong – 15,000 people were there! I was blown away. Bubbles are largely psychological. This crowd was tangible proof of that.

15k people in one spot listening to Americans explain why real estate in Toronto is an exceptional investment. The whole experience was horrifying. The crowd was very well-dressed, middle- to upper-middle class (from appearances), and super excited to hear how much money could be made if you just buy real estate (most of them clearly already owned). The first real segment of the expo was a panel of Canadian developers and real estate agents giving their views on the market. It actually started off a touch bearish, which surprised me. Two of the panelists were saying that prices are exceptionally high and no market goes up forever. With that slight bit of caution thrown out there, it became a real estate FOMO-building talk.

There are, apparently, two very important things to know when dealing with real estate. First, you have to face your fear; this fear is to be ignored and then you should ‘just do it’ and ‘buy now’. The next step is find what you can afford and then buy it. Ignore all ‘non-doers’, don’t overanalyze or focus on the numbers, just fucking buy. To allay fears the speakers are actually quite clever as they shift between a long to short term focus when it suits. For example, now is a great time to buy because short-term the market is on fire. If, however, markets cool then you just hold because it always goes up long-term – and you are a savvy long-term buyer, aren’t you? By showing no scenario where you can lose I can see how this pitch works on the susceptible.

The second important factor in real estate is financing. Not everyone has money, so what can they do? The answers were shocking. Be ‘creative’ was the first response. Pool your money, borrow from friends and family, own just 5% of a house, get the money however you can and just do it – remember, it only goes up. Other financing suggestions were get cozy with a lender and they will ‘bend the rules’ for you! The fact that the biggest condo developer in Canada (Brad Lamb) said lenders will bend (but not break, apparently) rules to get you financing in front of 15k people with most people smiling and nodding was shocking. So there you go – when it comes to Toronto real estate, just do it (using borrowed money any way you can get it).

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Well, actually, it’s HSBC again. And a few minor conspirators.

British Banks Handled Vast Sums Of Laundered Russian Money (G.)

Britain’s high street banks processed nearly $740m from a vast money-laundering operation run by Russian criminals with links to the Russian government and the KGB, the Guardian can reveal. HSBC, the Royal Bank of Scotland, Lloyds, Barclays and Coutts are among 17 banks based in the UK, or with branches here, that are facing questions over what they knew about the international scheme and why they did not turn away suspicious money transfers. Documents seen by the Guardian show that at least $20bn appears to have been moved out of Russia during a four-year period between 2010 and 2014. The true figure could be $80bn, detectives believe. One senior figure involved in the inquiry said the money from Russia was “obviously either stolen or with criminal origin”.

Investigators are still trying to identify some of the wealthy and politically influential Russians behind the operation, known as “the Global Laundromat”. They estimate a group of about 500 people were involved. These include oligarchs, Moscow bankers, and figures working for or connected to the FSB, the successor spy agency to the KGB. Igor Putin, the cousin of Russia’s president, Vladimir, sat on the board of a Moscow bank which held accounts involved in the fraud. British-registered companies played a prominent role in this extensive money-laundering network. The real owners of most of the firms used in the scheme remain secret, however, because of the anonymity provided by controversial offshore laws.

The Global Laundromat banking records were obtained by the Organized Crime and Corruption Reporting Project (OCCRP) and Novaya Gazeta from sources who wish to remain anonymous. OCCRP shared the data with the Guardian and media partners in 32 countries. The documents include details of about 70,000 banking transactions, including 1,920 that went through UK banks and 373 via US banks.

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More of this interview with Steve in a few days, hopefully.

What Central Banks Get Wrong About Economic Equilibrium (BBG)

In today’s “Morning Must Read,” Bloomberg’s Tom Keene highlights comments on economic equilibrium models. He speaks with Kingston University Economics Professor Steve Keen on “Bloomberg Surveillance.”

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“What can go wrong awaits in markets, banks, currencies, and the immense dark pools of counterparty obligations that amount to black holes where notions of value are sucked out of the universe.”

Full Speed Ahead for Murphy’s Law (Jim Kunstler)

In the 1950s, finance made up about 5% of the economy. It’s mission then was pretty simple and straightforward: to manage the accumulated wealth of the nation (capital) and then allocate it to those who proposed to generate greater wealth via new productive activities, mostly industrial, ad infinitum. It turned out that ad infinitum doesn’t work in a world of finite resources — but the ride had been so intoxicating that we couldn’t bring ourselves to believe it, and still can’t. With industry expiring, or moving elsewhere (also temporarily), we inflated finance to nearly 40% of the economy. The new financialization was, in effect, setting a matrix of rackets in motion.

What had worked as capital management before was allowed to mutate into various forms of swindling and fraud — such as the bundling of dishonestly acquired mortgages into giant bonds and then selling them to pension funds desperate for “yield,” or the orgy of merger and acquisition in health care that turned hospitals into cash registers, or the revenue streams on derivative “plays” that amounted to bets with no possibility of ever being paid off, or the three-card-monte games of interest rate arbitrage played by central banks and their “primary dealer” concubines. Some of what I’ve listed above may be incomprehensible to the blog reader, and that is because these rackets were crafted to be opaque and recondite.

The rackets continue without regulation or prosecution because there is an unstated appreciation in government, and in the corporate board rooms, that it’s all we’ve got left. What remains of the accustomed standard of living in America is supported by wishing and fakery and all that is now coming to a climax as we steam full speed ahead into Murphy’s law: if something can go wrong, it will. When all of America comes to realize that President Trump doesn’t know what he’s doing, it will make last November’s national nervous breakdown look like a momentary case of the vapors. What can go wrong awaits in markets, banks, currencies, and the immense dark pools of counterparty obligations that amount to black holes where notions of value are sucked out of the universe. There is so much that can go wrong. And then it will. And then maybe that will prompt us back to consider being a nation again.

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Sometimes I think we’re going to live to see Noah’s next ark.

Earth Is A Planet In Upheaval Breaking Into ‘Uncharted Territory’ (G.)

The record-breaking heat that made 2016 the hottest year ever recorded has continued into 2017, pushing the world into “truly uncharted territory”, according to the World Meteorological Organisation. The WMO’s assessment of the climate in 2016, published on Tuesday, reports unprecedented heat across the globe, exceptionally low ice at both poles and surging sea-level rise. Global warming is largely being driven by emissions from human activities, but a strong El Niño – a natural climate cycle – added to the heat in 2016. The El Niño is now waning, but the extremes continue to be seen, with temperature records tumbling in the US in February and polar heatwaves pushing ice cover to new lows.

“Even without a strong El Niño in 2017, we are seeing other remarkable changes across the planet that are challenging the limits of our understanding of the climate system. We are now in truly uncharted territory,” said David Carlson, director of the WMO’s world climate research programme. “Earth is a planet in upheaval due to human-caused changes in the atmosphere,” said Jeffrey Kargel, a glaciologist at the University of Arizona in the US. “In general, drastically changing conditions do not help civilisation, which thrives on stability.” The WMO report was “startling”, said Prof David Reay, an emissions expert at the University of Edinburgh: “The need for concerted action on climate change has never been so stark nor the stakes so high.”

[..] 2016 saw the hottest global average among thermometer measurements stretching back to 1880. But scientific research indicates the world was last this warm about 115,000 years ago and that the planet has not experienced such high levels of carbon dioxide in the atmosphere for 4m years. 2017 has seen temperature records continue to tumble, in the US where February was exceptionally warm, and in Australia, where prolonged and extreme heat struck many states. The consequences have been particularly stark at the poles. “Arctic ice conditions have been tracking at record low conditions since October, persisting for six consecutive months, something not seen before in the [four-decade] satellite data record,” said Prof Julienne Stroeve, at University College London in the UK. “Over in the southern hemisphere, the sea ice also broke new record lows in the seasonal maximum and minimum extents, leading to the least amount of global sea ice ever recorded.”

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Ah, look at all the lonely people
Where do they all come from?
All the lonely people
Where do they all belong?

Three-Quarters Of Older People In The UK Are Lonely (G.)

Almost three-quarters of older people in the UK are lonely and more than half of those have never spoken to anyone about how they feel, according to a survey carried out for the Jo Cox commision on loneliness. The poll by Gransnet, the over-50s social networking site, also found that about seven in 10 (71%) respondents – average age 63 – said their close friends and family would be surprised or astonished to hear that they felt lonely. Gransnet is one of nine organisations – including Age UK, the Alzheimer’s Society and the Silver Line helpline for older people – working to address the issue of loneliness in older people, which is the current focus of the commission, set up by Cox before her murder last June. They are urging individuals and businesses to look for signs of loneliness and refer people to organisations that can help.

But they also want people to take time to speak to neighbours, family, old friends or those they encounter randomly. The chairs of the cross-party commission, the Labour MP Rachel Reeves and Conservative MP Seema Kennedy, said there was a stigma around loneliness that must be tackled. “We all need to act and encourage older people to freely talk about their loneliness,” they said. “Everyone can play a part in ending loneliness among older people in their communities by simply starting a conversation with those around you. “How we care and act for those around us could mean the difference between an older person just coping, to them loving and enjoying later life.” Almost half (49%) of the 73% who described themselves as lonely in the online poll said they had been so for years, 11% said they had always felt lonely and 56% said they had never spoken about their loneliness to anyone.

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Pure Greek tragedy. But you can’t leave 2.5 million people untreated.

Greek Public Hospitals Stretched Further As Access Granted To Uninsured (K.)

A change in legislation last April has given access to the public health system to some 2.5 million Greeks who did not have social insurance but has also put a financial strain on hospitals, whose funding has not increased. Treating uninsured patients cost public hospitals in Athens €57.2 million last year. Across Greece, €23.5 million was spent on providing free lab tests to about 204,000 people. “Our experience shows that the number of uninsured people coming to the hospitals is increasing,” the vice president of the Athens-Piraeus Hospital Doctors’ Association, Ilias Sioras, told Kathimerini. “But the hospitals do not have adequate funds.” State funding is at €1.1 billion this year, the same as in 2016.

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If Erdogan gets desperate enough he’ll pull the plug and turn this into a Europe supports terrorism narrative. Woe Greece.

Sharp Increase In Refugees Reaching Aegean Islands From Turkey (K.)

New arrivals to the eastern Aegean islands of Lesvos, Chios and Samos have raised the number of migrants landing in Greece from neighboring Turkey since last Thursday to 566, government figures showed on Monday. The figure represents a significant increase compared to arrivals in the rest of March and for the whole of February. In the past four days, 195 migrants landed on Lesvos, 341 on Chios and 30 on Samos. More than 14,000 migrants remain stuck on the islands of the eastern Aegean awaiting the outcome of their applications for asylum or deportation. The majority are living in overcrowded reception facilities where conditions have been described as “unacceptable” and “inhumane” by human rights groups.

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Mar 182017
 
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Andreas Feininger Production B-17 heavy bomber at Boeing plant, Seattle 1942

 


How Bankers Became The Top Exploiters Of The Economy (Michael Hudson)
World Out Of Whack: What’s Next For Global Real Estate? (CE)
Make Big Banks Put 20% Down—Just Like Home Buyers Do (Kashkari)
Deepening EU Banking Crisis Meets Euro-TARP on Angel Dust (DQ)
The Paranoid Attempts To Tie Trump To Russia (Qz)
Clinton Ally Says Smoke, But No Fire: No Russia-Trump Collusion (NBC)
Justice Dept. Delivers Documents On Wiretap Claim To Congress (R.)
Secret Service Says Laptop Stolen From Agent’s Car In New York (R.)
A Bad Week and Getting Badder Bigly Fast (Jim Kunstler)
Athens Sees Turk Effort To Dispute Greek Sovereignty In Aegean (K.)
Turkey Threatens To Send Europe ‘15,000 Refugees A Month’ (AFP)
Over 10,000 Refugees Relocated, IOM Says (K.)

 

 

Absolutely brilliant interview with Michael Hudson. Read the whole thing. It’ll give you so much insight.

How Bankers Became The Top Exploiters Of The Economy (Michael Hudson)

There are two ways of thinking about the economy. The school textbooks only talk about was producing goods and services for wages and profits. They don’t talk about rent or unearned income. That’s what I mean by “unreal” – not grounded in production. And they don’t talk about interest either, or the framework of debt and property rights. There’s a lot of talk about what seems to be the circular flow between producers and consumers. That circular flow is called Say’s law. For example, Henry Ford said he paid his workers $5 a day so that they could afford to buy the cars that they produced. Workers are depicted as paying their wages to buy what they make. All that seemed to make sense, but the economy of production is different from financial and property wealth. Who owns the assets, and who owes debts to whom?

If you look at the economic framework in terms of assets and debt, you find that the 1% makes its money by holding the 99% in debt. Or at least, you could say that the 5% make its money by holding the 95% in debt. The trick is to get other people in debt. How do you do that? You make them think that they can gain. They’re willing to borrow to buy a home, because they think that since 1945, the way that most American families have gotten rich – indeed, the way the middle class was created throughout most western countries – was by the increasing price of real estate they bought on credit. What they didn’t realize was that the price of real estate was being bid up in two ways. Number 1: By more bank lending, on easier terms. Number 2: By public infrastructure spending. Cities, states and federal governments built parks, museums, roads, railroads, water and sewer systems, and electric utilities. But this began to come to an end with Reagan and Thatcher in 1980.

You have had a privatization of public infrastructure – goods that the public sector provided for free, saving people from having to pay monopoly prices. Instead of financing public investment by progressive taxation, it was financed by borrowing. Banks got more and more aggressive and reckless in creating new credit, because they felt they were guaranteed against loss. That was the essence of financialization. Financial engineering replaced industrial engineering. What people thought was wealth turned out to be a rentier overhead. This confusion between real tangible wealth and financial overhead claims on the economy was recognized already over 100 years ago by somebody who won a Nobel Prize: Frederick Soddy. But he won the Nobel Prize in chemistry. He wrote many books saying what people think of wealth— stocks and bonds, bank loans and property rights —are virtual wealth. They are financial claims on real wealth.

A stock or bond is a claim on the income that real wealth can make. So it’s on the opposite side of the balance sheet from assets. It’s on the liabilities side. Economists used to talk about land as a factor of production. But land rights are really a property claim, like a monopoly claim. It’s as if you’d say Walt Disney’s patents on Mickey Mouse or movies that Walt Disney makes are a factor of production. They’re really a property right to charge a monopoly price. The right to charge a monopoly price for a cable service isn’t really a factor of production. It’s extractive. It’s what economists call a zero-sum activity. So classical economics has a different idea of what national income is from today’s idea. A monopoly right is not an addition to national wealth or income just because monopolists make more. It’s a subtraction from the economy’s circular flow.

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Painful.

World Out Of Whack: What’s Next For Global Real Estate? (CE)

Ever since anyone can remember, global real estate prices have been going up. Pretty much doesn’t matter which country you’re from (unless, of course, it’s Syria, or Iraq… or Fuhggedistan): if you bought something in the last 2 to 3 decades, it’s like the ceilings were insulated with helium. Even when the 2008 crisis hit and we had Captain Clever ensuring the world that things were just peachy: “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.” – Ben Bernanke, March 28, 2007 Even with that setback real estate has marched upward. The US, of course, took a decent breather and is only today back to where it was pre the GFC. But the US isn’t the world, so let’s look at what everyone else has been up to. Take a look at this:

In truth, it hasn’t just been Mr. and Mrs. Smith in their tweed coats buying up UK properties, just as it hasn’t been Sheila and Bruce in Sydney, or even Maple and Hudson in Canada. A significant amount of buying power in these markets has come from offshore buyers, largely frightened Chinese money being parked. It’s pretty extraordinary, really.Prices alone don’t provide us with the entire picture or provide us with context. I mean, real estate prices in Harare went through the roof, too, in the 2008-09 period (in ZWD) but the currency went through the floor and real purchasing power collapsed. Context, therefore, is important.Also, clearly a swanky penthouse in Manhattan overlooking the Hudson river shouldn’t be priced the same as a swanky penthouse in Vientiane overlooking the Mekong. The main difference? Incomes. So let’s take a look at prices relative to incomes for a better understanding.

Buying a house in the US actually makes a lot more sense. Certainly relative to its international peers the US is cheap. In fact, if you factor in the ability to fix debt for a ridiculously long time in a currency that’s ultimately going to get hammered, and if you need to find somewhere to live then you’ve found a way to essentially be synthetically short the bond market (provided you fix your rates). I’m not advocating this as a strategy but merely pointing out the mechanics of the trade. As investors we’re interested in viewing real estate as we would any investment or asset, and as such understanding the cashflows is important. Naturally, incomes relative to asset prices tell us what the owner’s cashflows are relative to the asset they’ve buying… and the same analysis can be conducted against student loans, car loans – any credit instrument, really. Here’s rents (cashflows) relative to asset prices:

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Kashkari makes sense. Lots of it. But will he push it through? Put his career on the line for it?

Make Big Banks Put 20% Down—Just Like Home Buyers Do (Kashkari)

There’s a straightforward way to help prevent the next financial crisis, fix the too-big-to-fail problem, and still relax regulations on community lenders: increase capital requirements for the largest banks. In November, the Federal Reserve Bank of Minneapolis, which I lead, announced a draft proposal to do precisely that. Our plan would increase capital requirements on the biggest banks—those with assets over $250 billion—to at least 23.5%. It would reduce the risk of a taxpayer bailout to less than 10% over the next century. Alarmingly, there has been recent public discussion of moving in the opposite direction. Several large-bank CEOs have suggested that their capital requirements are already too high and are holding back lending.

[..] Bank of America CEO Brian Moynihan recently asked, “Do we have [to hold] an extra $20 billion in capital? Which doesn’t sound like a lot, but that’s $200 billion in loans we could make.” It is true that some regulations implemented after the 2008 financial crisis are imposing undue burdens, especially on small banks, without actually making the financial system safer. But the assertion that capital requirements are holding back lending is demonstrably false. How can I prove it? Simple: Borrowing costs for homeowners and businesses are near record lows. If loans were scarce, borrowers would be competing for them, driving up costs. That isn’t happening. Nor do other indicators suggest a lack of loans. Bank credit has grown 23% over the past three years, about twice as much as nominal GDP.

Only 4% of small businesses surveyed by the National Federation of Independent Business report not having their credit needs met. If capital standards are relaxed, banks will almost certainly use the newly freed money to buy back their stock and increase dividends. The goal for large banks won’t be to increase lending, but to boost their stock prices. Let’s not forget: That’s the job of a bank CEO. It isn’t to protect taxpayers. [..] There is a simple and fair solution to the too-big-to-fail problem. Banks ask us to put 20% down when buying our homes to protect them in case we run into trouble. Similarly, taxpayers should make large banks put 20% down in the form of equity to prevent bailouts in case the financial system runs into trouble. Higher capital for large banks and streamlined regulation for small banks would minimize frustration for borrowers. If 20% down is reasonable to ask of us, it is reasonable to ask of the banks.

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This is why we get the calls for Eurobonds again, and the world’s biggest bad bank.

Deepening EU Banking Crisis Meets Euro-TARP on Angel Dust (DQ)

The total stock of non-performing loans (NPL) in the EU is estimated at over €1 trillion, or 5.4% of total loans, a ratio three times higher than in other major regions of the world. On a country-by-country basis, things take look even scarier. Currently 10 (out of 28) EU countries have an NPL ratio above 10% (orders of magnitude higher than what is generally considered safe). And among Eurozone countries, where the ECB’s monetary policies have direct impact, there are these NPL stalwarts: Ireland: 15.8%; Italy: 16.6%; Portugal: 19.2%; Slovenia: 19.7%; Greece: 46.6%; Cyprus: 49%. That bears repeating: in Greece and Cyprus, two of the Eurozone’s most bailed out economies, virtually half of all the bank loans are toxic. Then there’s Italy, whose €350 billion of NPLs account for roughly a third of Europe’s entire bad debt stock.

Italy’s government and financial sector have spent the last year and a half failing spectacularly to come up with a solution to the problem. The two “bad bank” funds they created to help clean up the banks’ toxic balance sheets, Atlante I and Atlante II, are the financial equivalent of bringing a butter knife to a machete fight. So underfunded are they, they even strugggled to hold aloft smaller, regional Italian banks like Veneto Banca and Popolare di Vicenza, which are now pleading for a bailout from Rome, which in turn is pleading for clemency from Brussels. What little funds Atlante I and Atlante II have left are hemorrhaging value as the “assets” they’ve been used to buy up, invariably at prices that were way too high (often at over 40 cents on the euro), continue to deteriorate. The recent decision of Italy’s two biggest banks, Unicredit and Intesa Sao Paolo, to significantly write down their investment in Atlante is almost certain to discourage the private sector from pumping fresh funds into bailing out weaker banks.

Which means someone else must step in, and soon. And that someone is almost certain to be the European taxpayer. In February ECB Vice President Vitor Constancio called for the creation of a whole new class of government-backed “bad banks” to help buy some of the €1 trillion of bad loans putrefying on bank balance sheets. Constancio’s idea bore a striking resemblance to a formal proposal put forward by the European Banking Authority (EBA) for the creation of a massive EU-wide bad bank that, in the words of EBA president Andrea Enria, would “make it much easier to achieve critical mass and to create a well functioning market for (impaired) assets.” Here’s how it would work, according to Enria’s words:

“The banks would sell their non-performing loans to the asset management company at a price reflecting the real economic value of the loans, which is likely to be below the book value, but above the market price currently prevailing in illiquid markets. So the banks will likely have to take additional losses. The asset manager would then have three years to sell those assets to private investors. There would be a guarantee from the member state of each bank transferring assets to the asset management company, underpinned by warrants on each bank’s equity. This would protect the asset management company from future losses if the final sale price is below the initial transfer price.”

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The Democrats are self-imploding over this. They need leadership, fast. And untainted.

The Paranoid Attempts To Tie Trump To Russia (Qz)

In the months following Donald Trump’s surprise victory in the US presidential election, it has become increasingly clear that the Democratic party is unwilling—and perhaps unable—to come to terms with the country’s post-election reality. The party’s inability to accept defeat has since manifested itself through an increasingly hysterical campaign to blame Hillary Clinton’s defeat on alleged Russian interference. The charge that Russia, in the words of respected Russia expert and longtime Clinton associate Strobe Talbott, breached “the firewall of American democracy” has been repeated so often and by so many that it has taken on the patina of fact. It has become an article of faith, among disappointed Clinton partisans, mainstream political commentators, Democrats on Capitol Hill and Republicans like senator Lindsey Graham, that the election was tainted and that Trump’s legitimacy as president is questionable, at best.

The tendency to blame domestic disappointments on foreign bogeymen is not new and is perhaps better understood as a wave that periodically surfaces, then temporarily subsumes American politics. Indeed, this current reliance on conspiracy theories and accusations of unpatriotic disloyalty has been a feature, not a bug, of discourse regarding Russia since the onset of the crisis in Ukraine in early 2014. Yet this paranoia is, so far, little more than a distraction. By blaming Clinton’s loss on Russia, the political establishment is able to largely ignore the way economic, trade, and foreign policies failed large numbers of Americans. And, by elevating Vladimir Putin to supervillain status, this neo-McCarthyism is hindering debate and undermining legitimate attempts to deescalate tensions with our Russian colleagues.

MSNBC’s house intellectual Rachel Maddow has been among the most vociferous and, at times, most incisive critics of president Trump. Yet she also recently questioned whether Trump is actually under the control of the Kremlin. During her broadcast on March 9, Maddow told viewers that what she finds “particularly unsettling” is that “we are also starting to see what may be signs of continuing [Russian] influence in our country. Not just during the campaign but during the administration. Basically, signs of what could be a continuing operation.” That Maddow, a popular and respected liberal voice, would indulge in rhetoric of this sort is a worrying sign given the lack of hard evidence it is based on.

While many have convinced themselves that Russia tipped the scale of the election toward Trump, the more sinister allegations of Putin infiltrating the White House have not been born out. Even the former Director of National Intelligence James Clapper admitted in an interview with NBC’s Chuck Todd in early March that he has “no knowledge” and “no evidence” of “collusion” between Russia and the Trump campaign. Yet Maddow’s charge recalls some of the worst excesses of the early 1950’s, when our political life was marred by the Red Scare and a climate of paranoia prevailed. Unsubstantiated allegations, not dissimilar to the kind Maddow just levied, were characteristic of that era.

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Steele was paying his ‘sources’ through third parties.

Clinton Ally Says Smoke, But No Fire: No Russia-Trump Collusion (NBC)

Former Acting CIA Director Michael Morell, who endorsed Hillary Clinton and called Donald Trump a dupe of Russia, cast doubt Wednesday night on allegations that members of the Trump campaign colluded with Russia. Morell, who was in line to become CIA director if Clinton won, said he had seen no evidence that Trump associates cooperated with Russians. He also raised questions about the dossier written by a former British intelligence officer, which alleged a conspiracy between the Trump campaign and Russia. His comments were in sharp contrast to those of many Clinton partisans — such as former communications director Jennifer Palmieri — who have stated publicly they believe the Trump campaign cooperated with Russia’s efforts to interfere in the election against Clinton. Morell said he had learned that the former officer, Christopher Steele, paid his key Russian sources, and interviewed them through intermediaries.

“On the question of the Trump campaign conspiring with the Russians here, there is smoke, but there is no fire, at all,” Morell said at an event sponsored by the Cipher Brief, an intelligence web site. “There’s no little campfire, there’s no little candle, there’s no spark. And there’s a lot of people looking for it.” Morell pointed out that former Director of National Intelligence James Clapper said on Meet the Press on March 5 that he had seen no evidence of a conspiracy when he left office January 20. “That’s a pretty strong statement by General Clapper,” Morell said. About the dossier, Morell said, “Unless you know the sources, and unless you know how a particular source acquired a particular piece of information, you can’t judge the information — you just can’t.” The dossier “doesn’t take you anywhere, I don’t think,” he said.

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No proof on this side of the fence either. Everybody’s just making stuff up.

Justice Dept. Delivers Documents On Wiretap Claim To Congress (R.)

The U.S. Justice Department on Friday said it delivered documents to congressional committees responding to their request for information that could shed light on President Donald Trump’s claims that former President Barack Obama ordered U.S. agencies to spy on him. The information was sent to the House and Senate intelligence and judiciary committees, said Sarah Isgur Flores, a Justice Department spokeswoman. The chairman of the House Intelligence Committee, Republican Devin Nunes, said in a statement late on Friday that the Justice Department had “fully complied” with the panel’s request.

A government source, who requested anonymity when discussing sensitive information, said an initial examination of the material turned over by the Justice Department indicates that it contains no evidence to confirm Trump’s claims that the Obama administration had wiretapped him or the Trump Tower in New York. The House Intelligence Committee will hold a hearing on Monday on allegations of Russian meddling in the U.S. election. Federal Bureau of Investigation Director James Comey and National Security Agency Director Mike Rogers will testify and are expected to field questions on Trump’s wiretap claim. Leaders of both the House and Senate intelligence committees, including from Trump’s Republican Party, have said they have found no evidence to substantiate Trump’s claims that Obama ordered U.S. agencies to spy on Trump or his entourage. The White House has publicly offered no proof of the allegation.

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What an insane story this is. How did the media get all their info?

Secret Service Says Laptop Stolen From Agent’s Car In New York (R.)

The U.S. Secret Service said on Friday a laptop was stolen from an agent’s car in New York City but that such agency-issued computers contain multiple layers of security and are not permitted to contain classified information. The agency said in a statement that it was withholding additional comment while an investigation continues. ABC News, citing law enforcement sources, said the laptop contained floor plans for Trump Tower, details on the criminal investigation of Hillary Clinton’s use of a private email server and other national security information. The New York Daily News, citing police sources, said authorities had been searching for the laptop since it was stolen on Thursday morning from the agent’s vehicle in the New York City borough of Brooklyn.

Some items stolen with the laptop, including coins and a black bag with the Secret Service insignia on it, were later recovered, the newspaper reported. CBS News, also citing law enforcement sources, said that some of the documents on the computer included important files on Pope Francis. The agent also told investigators that while nothing about the White House or foreign leaders is stored on the laptop, the information there could compromise national security, the Daily News reported. “There’s data on there that’s highly sensitive,” a police source told the newspaper, adding: “They’re scrambling like mad.”

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Jim was interviewed by Tucker Carlson about this, hope the video shows below (embedding Fox doesn’t always work). Really, Jim, Fox? I know, who else is left?

A Bad Week and Getting Badder Bigly Fast (Jim Kunstler)

[..] it also looks a bit as though the Golden Golem of Re-Greatification has wandered into a political minefield so dense with booby traps that he’s already out of moves. First there’s the debt ceiling problem — which has so far received almost no attention from the Kardashianized collective news media. As David Stockman has pointed out on his blog, the US Treasury amassed a “war chest” of nearly half a trillion dollars last fall (via various book-keeping shenanigans) in expectation that President Hillary would need it to ride out some fiscal bad weather early in her reign. Then, the truly inconceivable happened and Hillary won bigly in the wrong states and not bigly enough in the right ones, and, well….

Immediately, with Trump ascendant, the Treasury and its handmaidens at the Federal Reserve engineered a rapid burn-through of the war chest at a rate of about $90-billion a month since November, so that now there remains only about a month’s worth of walking-around money to run the US Government. With the old debt ceiling truce expired, congress would have to resolve to raise it, to legally enable the Treasury to resume its massive borrowing operations, or else the government won’t be able to pay invoices or issue pension checks or meet any obligations. It could even default on its “no risk” bonds. Those dangers are theoretical for the moment, especially since there is always more accounting fraud to resort to when all else fails. But the longer a debt ceiling stalemate goes on in congress, the more trapped President Trump will be.

The cherry on top is the Federal Reserve’s move to raise interest rates the same day the debt ceiling truce expired. That will thunder through the system, making many loans more expensive to repay, dampening the real estate markets (at a time when commercial real estate is already tanking), and draining all kinds of other mojo (however falsely engineered) from the Potemkin economy. As if being trapped in a political minefield isn’t bad enough, the remaining safe patch Trump is stranded on turns out to be the LaBrea Tar Pit of health care reform. At this point, the crusade is doing worse than going nowhere — it’s getting sucked into the primordial bitumen where the mastodons and camelops sleep.

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Watch out, Merkel, Trump, NATO. You’re playing with fire.

Athens Sees Turk Effort To Dispute Greek Sovereignty In Aegean (K.)

In what is seen in Athens as an effort by Ankara to push through its message that Greece has limited sovereignty in the area of the Eastern Mediterranean surrounding the island of Kastelorizo, Turkish forces have in recent days maintained a steady presence in the region, either through military exercises or with the dispatch of research vessels. According to a navigational telex (navtex) issued by Turkey, the Piri Reis oceanographic vessel will remain in the area south of Kastelorizo until Monday. Furthermore, according to another two navigational telexes, Turkey is planning to conduct exercises with live ammunition in areas west and east of Kastelorizo (within Turkish territorial waters).

Moreover, Ankara has already announced that it will conduct hydrocarbon explorations in the Eastern Mediterranean next month. It remains to be seen exactly what part of the Eastern Mediterranean Turkey plans to explore. In Athens, Turkey’s moves are seen to be clearly linked to the decision by Cyprus to move ahead, in spite of Ankara’s objections, with the extraction of natural gas from drilling block 11 in its exclusive economic zone (EEZ). In an interview with CNN Greece, which will be broadcast Friday, Cyprus President Nicos Anastasiades again expressed his concerns over the tensions that may be further fueled in the period stretching “from now until the Turkish referendum (on April 16),” and by the ongoing effort to create “an atmosphere of fanaticism within Turkish society.”

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The Erdogan referendum is one month from now. Much more important to him till then than international relations.

Turkey Threatens To Send Europe ‘15,000 Refugees A Month’ (AFP)

Turkey’s Interior Minister Suleyman Soylu has threatened to “blow the mind” of Europe by sending 15,000 refugees a month to EU territory, in an intensifying dispute with the bloc. Ankara and Brussels almost a year ago on March 18 signed a landmark deal that has substantially lessened the flow of migrants from Turkey to Europe. But the accord is now hanging in the balance due to the diplomatic crisis over the blocking of Turkish ministers from holding rallies in Europe. “If you want, we could open the way for 15,000 refugees that we don’t send each month and blow the mind” of Europe, Soylu said in a speech late Thursday, quoted by the Anadolu news agency. Foreign Minister Mevlut Cavusoglu has already indicated that Turkey could rip up the deal and said Turkey was no longer readmitting migrants who crossed into Greece.

The crisis was sparked when the Netherlands and Germany refused to allow Turkish ministers to campaign in a April 16 referendum on expanding President Recep Tayyip Erdogan’s powers, prompting the Turkish strongman to compare them with Nazi Germany. Soylu, a hardliner considered close to Erdogan, accused The Hague and Berlin of involvement in June 2013 anti-Erdogan protests, October 2014 pro-Kurdish riots and the July 15, 2016 failed coup attempt. “They are trying to complete the work that they did not finish. Who is doing this work? It’s the Netherlands and Germany,” Soylu said. He accused Europe of failing to help Turkey enter the bloc and of not helping with its fight against terror. “Europe, do you have that kind of courage…? Let us remind you that you cannot play games in this region and ignore Turkey,” he added.

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There were supposed to be 160,000. And this is less than one month of what Turkey threatens to send over.

Over 10,000 Refugees Relocated, IOM Says (K.)

More than 10,000 asylum seekers from Syria, Iraq and Eritrea have been relocated from Greece to other European Union states since the launch of the bloc’s relocation program in 2015, according to the International Organization for Migration, which is implementing the scheme. Since the beginning of March, 367 people have left Greece for Belgium, Estonia, Germany, Malta, Portugal, Slovenia and Spain, bringing the total number of people relocated from Greece to 10,004, IOM said on Friday. Over the same period, another 475 people were relocated from Italy. The total number of people relocated from Greece and Italy since the program was launched in October 2015 now stands at 14,439, the organization said.

“We have seen a steady increase of pledges and acceptance from participating EU countries in the past few months. At this rate, there will be a further 15,000 to 18,000 relocations from Greece by the end of the program,” said Eugenio Ambrosi, director of IOM’s Regional Office for the EU, Norway and Switzerland. The numbers are short of the original target as 66,400 places had been allocated for relocation from Greece and 39,600 from Italy. “We cannot rest at ease because the overall numbers are too low given the needs in Greece and the commitments that were made. We continue to encourage EU member-states to follow through fully on their commitments,” Ambrosi said.

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Mar 172017
 
 March 17, 2017  Posted by at 8:54 am Finance Tagged with: , , , , , , , ,  1 Response »
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DPC Wall Street and Trinity Church, New York 1903

 


California Judge Seeks To Prevent Immigration Arrests Inside State Courts (R.)
Collapsing Pensions Will Fuel America’s Next Financial Crisis (MW)
Statoil CEO Warns of Globalization ‘In Reverse’ (BBG)
Treasury’s Mnuchin Says Trump Does Not Want Trade Wars (R.)
Would Trump Budget Cut Meals On Wheels Funding? (BI)
Dutch Election Puts Question Mark Over Eurogroup Chief Dijsselbloem (R.)
Congressman Huizenga Introduces Bill to Oppose IMF’s Third Greek Bailout (YV)
Senators Demand State Department Probe Into Soros Organizations (ZH)
Mounting Costs, Not PBOC, Could Slow China’s Bank Debt Binge (BBG)
Will Chrystia Freeland Finally Ruin Canadian-Russian Relations? (SCF)
The Energy Market Explained (Clarke and Dawe)
Greek Public Health System On Brink, Doctors Warn (K.)
First-Time Asylum Applicants In Greece Up 339% In 2016 (Amna)
Refugees In Greece Suffering After EU Deal With Turkey, Say NGOs (G.)
Child Refugees In Greece Self-Harming And Attempting Suicide (Ind.)
Ai Weiwei Slams ‘Shameful’ Politicians Ignoring Refugees (AFP)

 

 

One very big step over the decency line.

California Judge Seeks To Prevent Immigration Arrests Inside State Courts (R.)

Chief Justice Tani Cantil-Sakauye said she was gravely troubled by recent reports that federal agents were “stalking undocumented immigrants in our courthouses to make arrests,” in a letter addressed to U.S. Attorney General Jeff Sessions and Secretary of Homeland Security John Kelly. “Courthouses should not be used as bait in the necessary enforcement of our country’s immigration law,” Cantil-Sakauye wrote. Trump has vowed to increase deportations and has widened the net of illegal immigrants prioritized for detention and removal. “We will review the letter and have no further comment at this time,” Peter Carr, a spokesman for the U.S. Department of Justice, said in an email.

Immigrant rights groups say federal agents have entered courthouses with increased frequency this year, including in California, Massachusetts, Maryland and Texas, said National Immigration Law Center staff attorney Melissa Keaney. “It’s definitely an issue we’re seeing a tremendous increase in under the new administration,” Keaney said by phone on Thursday. Cantil-Sakauye stopped short of questioning the legal right of federal agents to enter courthouses to locate and detain unauthorized immigrants. Her letter said the presence of immigration agents in California courthouses could undermine “public trust and confidence in our state court system,” which serves “millions of the most vulnerable Californians.”

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I don’t think pensions are in line to be the next crisis, but they will certainly cause one.

Collapsing Pensions Will Fuel America’s Next Financial Crisis (MW)

Washington has a knack for ignoring long-term financial shortfalls and painting overly rosy scenarios about the future to make their numbers work in the here and now. Case in point: Donald Trump’s unrealistic projection that the U.S. economy will grow at 3% this year, when the latest GDP forecasts have actually been reduced to 1.8% by a number of economists. Then there is Social Security. Many politicians are just too intimidated, uninformed or complacent to tackle the unsustainability of Social Security — which by the latest tally will see its trust fund go to zero just 17 years from now, in 2034. But while fudging GDP numbers is dangerous for America’s economic outlook and the demise of Social Security in two decades is a serious long-term concern, America faces a mathematical problem that dwarfs both of these items: A pending pension crisis that could leave millions of Americans high and dry in the very near future.

Sure, it would be difficult for many if the U.S. economy stumbles under misguided Trump policies. And yes, the idea of even modest cuts to Social Security in the coming decades could serious affect millions of seniors. But take a look South Carolina’s government pension plan, which covers roughly 550,000 people – one out of nine state residents – but is a staggering $24.1 billion in the red. This is not a distant concern, but a system already in crisis. Younger workers are being asked to do much more to support the pensions of retirees. An analysis by the The Post and Courier of Charleston noted recently that “Government workers and their employers have seen five hikes in their pension plan contributions since 2012, and there’s no end in sight.” (Most now contribute 8.66% of their pay, vs. 6.5% before the changes.) At the same time, the pension fund has been chasing more stocks and alternative investments instead of relying on stable investments like bonds that may be much less volatile but generate only meager returns.

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Of course Big Oil CEOs like globalization. But it’s still quite something to hear an oil exec claim: “Cross-border cooperation is also essential to solve climate change..”

Statoil CEO Warns of Globalization ‘In Reverse’ (BBG)

After the surprise election of Donald Trump, the head of Norway’s biggest oil company headed to Washington D.C. this month looking for reassurance. He came away as worried as ever. “I was looking for clarity, also some guidance, good advice, and also some people to talk to – new relationships within the administration,” Statoil CEO Eldar Saetre told a conference in Oslo on Thursday. “I have to be honest with you – I didn’t get much of any of it.” Saetre, whose company has stakes in three U.S. onshore areas and in the Gulf of Mexico, was concerned about the protectionist bent of the new president’s rhetoric. Combined with last year’s Brexit vote and looming elections in Europe where nationalists are gaining influence, he sees Trump’s victory as a threat to global free trade.

“From Brexit to Trump, we see warning signs that globalization could be going in reverse,” Saetre said at the annual Swedbank Energy Summit. “For our industry, I believe that would be very negative.” Trump’s energy policies could benefit oil producers in the U.S. by loosening regulations and freeing up more areas for drilling. However, his protectionist agenda could affect economic growth and trading relations with countries from neighboring Mexico to Asia. “Global collaboration and integrated markets have been and will remain key to make our industry prosper,” Saetre said. “Fair, open access to markets are keys to enable investments, value creation and jobs in our industry.” Cross-border cooperation is also essential to solve climate change, making it “more important than ever,” Saetre said.

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Schäuble and Mnuchin. Lovely pair.

Treasury’s Mnuchin Says Trump Does Not Want Trade Wars (R.)

U.S. Treasury Secretary Steven Mnuchin said on Thursday that the Trump administration has no desire to get into trade wars, but certain trade relationships need to be re-examined to make them fairer for U.S. workers. At a news conference with German Finance Minister Wolfgang Schaeuble, Mnuchin said that President Donald Trump views trade as important for economic growth. But when asked whether the Group of 20 finance ministers should explicitly reaffirm their past vow to resist protectionism, Mnuchin repeated his view that some U.S. trade relationships need to be re-examined to make them fairer and more reciprocal. “It is not our desire to get into trade wars,” Mnuchin said. “The president does believe in free trade but he wants free and fair trade.” Differences over trade could become a sticking point for G20 finance officials at a meeting in the spa town of Baden-Baden, Germany this weekend.

Schaeuble told Reuters in an interview that it was unclear whether the anti-protectionism language would remain in the G20 statement to be issued at the meeting’s close on Saturday. Given that Trump’s “America First” agenda, trade issues could be set aside for G20 leaders to tackle at a summit in July, Schaeuble said. But both Schaeuble and Mnuchin both said they had a constructive discussion ahead of the G20 meeting and pledged to work together through differences to promote growth. “It was a good start,” Schaeuble said of the meeting, adding that it was a positive sign for international cooperation and the G20 process. “We have found a good basis to talk openly about issues where we don’t have the same stance from the outset,” Schaeuble said. Mnuchin said the ministers agreed that they should fight currency manipulation.

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This viral story looks sensationalized. Meals on Wheels gets just part of its funding from the Community Development Block Grant program. I included the article anyway because we’re getting into Bizarro World territory here: “You’re only focusing on recipients of the money,” Mulvaney said. “We’re trying to focus on both the recipients of the money and the folks who give us the money in the first place. I think it’s fairly compassionate to go to them and say, ‘Look, we’re not going to ask you for your hard-earned money anymore.'”

Would Trump Budget Cut Meals On Wheels Funding? (BI)

President Donald Trump’s proposed budget, unveiled on Thursday, would cut federal funding for Meals on Wheels, a program that provides daily meals to millions of low-income seniors across the country. White House Office of Management and Budget Director Mick Mulvaney told reporters at a press conference Thursday that Meals on Wheels “sounds great.” But he said that along with other anti-poverty programs, it is “not showing any results.” “We can’t spend money on programs just because they sound good,” Mulvaney told reporters. “We’re not going to spend money on programs that cannot show that they actually deliver the promises that we’ve made to people.”

Trump’s budget would strip $3 billion from the Community Development Block Grant program, which supports a variety of community-development and anti-poverty programs. Those include Meals on Wheels, which provided 219 million meals to 2.4 million seniors in 2016. CNN reporter Jim Acosta asked Mulvaney if the funding cuts were “hard-hearted.” Mulvaney responded that reducing government spending on ineffective programs is “probably one of the most compassionate things we can do.” “You’re only focusing on half of the equation, right? You’re only focusing on recipients of the money,” Mulvaney said. “We’re trying to focus on both the recipients of the money and the folks who give us the money in the first place. I think it’s fairly compassionate to go to them and say, ‘Look, we’re not going to ask you for your hard-earned money anymore.'”

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Get rid of him already. Right now. Then again, Kazimir is probably next in line, and he’s just as bad. Cooler heads should demand a more reasonable, not neo-liberal choice. Fat chance.

Dutch Election Puts Question Mark Over Eurogroup Chief Dijsselbloem (R.)

Jeroen Dijsselbloem may have to stand down as president of the Eurogroup which coordinates policy in the eurozone if he cannot retain his role as Dutch finance minister in a new coalition after his party was routed in Wednesday’s election. The Labor Party crashed from second to seventh place in preliminary results, losing more than three-quarters of its seats and making it hard for victorious liberal Prime Minister Mark Rutte to retain Dijsselbloem in such a senior cabinet post, even though he has made clear his appreciation of his work. Neither man commented on the matter directly Thursday. Dijsselbloem is due to represent the Eurogroup at a G20 meeting in Germany Friday and to chair the monthly meeting of the 19 eurozone finance ministers in Brussels on Monday.

While other eurozone finance ministers may seek his role, there is a lack of obvious contenders, particularly given that many governments will resist appointing a politician from the right because conservatives hold most other top EU jobs. It is just possible Dijsselbloem might retain his Dutch portfolio. There has also been speculation that the Eurogroup could keep him on as chairman even if he loses his national job – although some senior officials say that is most unlikely. Dijsselbloem, whose second 30-month term ends in January, has been popular with fellow ministers, balancing a background on the left with support from conservative Wolfgang Schaeuble, who wields Germany’s power on the Eurogroup and insists on strict terms for Greece and other states awarded bailout loans.

The Dutchman will remain in office for weeks, and possibly months, as Rutte struggles to put together a new coalition after Wednesday’s election. Rutte’s own party lost seats and the anti-immigration party of Geert Wilders finished in second place. Eurogroup rules do not stipulate that its president must be a serving finance minister. But senior eurozone officials have said lately that they do not believe fellow ministers would keep Dijsselbloem on if he lost his main job in The Hague. In the longer term, there has been talk of making the position a full-time one, with its own staff. But that is not yet agreed.

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Dijsselbloem’s ‘friend’ Varoufakis found this.

Congressman Huizenga Introduces Bill to Oppose IMF’s Third Greek Bailout (YV)

Anyone who doubted that the IMF is in deep trouble over its inane involvement in the toxic Greek bailout, and Berlin’s policy of extending Greece’s insolvency ad infinitum while the country’s social economy shrinks, should now have no more doubts. Congressman Bill Huizenga (R-MI), a senior member of the House Financial Services Committee, yesterday introduced the IMF Reform and Integrity Act, which would require the U.S. to oppose the International Monetary Fund’s (IMF) co-financing of a third Greek bailout with the European Stability Mechanism. If such co-financing were to go forward, the bill would prohibit the U.S. from supporting an IMF quota increase until funds are repaid in full.

“The IMF is supposed to be a lender of last resort, not a fig leaf of first resort for Eurozone members,” said Congressman Huizenga. “The IMF isn’t a fund to rescue political parties in creditor nations, nor should it be a junior partner to outside organizations that lack the commitment to do their work. For seven years now, the IMF has been used to shield Eurozone officials from their voters, which has tarnished the Fund’s reputation, prolonged Greece’s misery, and put off hard choices about Europe’s future that must be made regardless. As the IMF’s largest shareholder, the U.S. should ensure that the Fund remains independent and free from politicization that could put taxpayer dollars at risk. This bill will help make that a reality.”

In addition, the IMF Reform and Integrity Act cancels supplementary IMF funds that have already been deactivated, rescinding them and sending those resources back to the U.S. Treasury. The bill also clarifies existing law to require the U.S. Executive Director of the Fund to oppose any loan to a country whose debt is unsustainable.

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Why Putin threw out Soros, and America should too.

Senators Demand State Department Probe Into Soros Organizations (ZH)

Senator Mike Lee (R-UT) and a group of his colleagues are calling on the newly appointed Secretary of State Rex Tillerson to immediately investigate how US taxpayer funds are being used by the State Department and the United States Agency for International Development (USAID) to support Soros-backed, leftist political groups in several Eastern European countries including Macedonia and Albania. According to the letter, potentially millions of taxpayer dollars are being funneled through USAID to Soros’ Open Society Foundations with the explicit goal of pushing his progressive agenda. “Unfortunately, we have received a credible report that, over the past few years, the U.S. Mission there has actively intervened in the party politics of Macedonia, as well as in the shaping of its media environment and civil society, often favoring left-leaning political group over others. We find these reports discoraging and, if true, highly problematic.”

“Much of the concerning activity in Macedonia has been perpetuated through USAID funds awarded to implementing entities such as George Soros’ Open Society Foundations. As the recipient of multiple grant awards and serving as a USAID contractor implementing projects in this small nation of 2.1 million people, our taxpayer funded foreign aid goes far, allowing Foundation Open Society – Macedonia (FOSM) to push a progressive agenda and invigorate the political left. Our foreign aid should only be used to promote a political agenda if it is in the security or economic interests of our country to do so, and even at that, we must be cautious and respectful in such an endeavor. We should be especially wary of promoting policies that remain controversial even in our own country and that have the potential to harm our relationship with the citizens of recipient countries.”

As Fox News pointed out, USAID gave nearly $15 million to Soros’ Foundation Open Society – Macedonia, and other Soros-linked organizations in the region, in the last 4 years of Obama’s presidency alone. “The USAID website shows that between 2012 and 2016, USAID gave almost $5 million in taxpayer cash to FOSM for “The Civil Society Project,” which “aims to empower Macedonian citizens to hold government accountable.” USAID’s website links to www.soros.org.mk, and says the project trained hundreds of young Macedonians “in youth activism and the use of new media instruments.” The State Department told lawmakers that in addition to that project, USAID has recently funded a new Civic Engagement Project which partners with four organizations, including FOSM. The cost is believed to be around $9.5 million. A citizen’s initiative called “Stop Operation Soros” has also published a white paper alleging U.S. money has been funding violent riots in the streets [..]

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Can the shadow sector step in once again?

Mounting Costs, Not PBOC, Could Slow China’s Bank Debt Binge (BBG)

China may avoid having to pull out the big stick when it comes to reining in a record short-term borrowing spree by its smaller banks. The increased cost to lenders of issuing so-called negotiable certificates of deposit will naturally deflate a market that jumped by 90% in February from a year earlier, according to Ping An Securities. Demand is also waning for the securities, used by Chinese banks as a way of leveraging up investments and expanding their balance sheets, with mutual funds cutting their holdings to the lowest level in at least a year in January. “It’s unsustainable for commercial banks to take such high costs,” said Shi Lei at Ping An, a unit of China’s second-largest insurer. “NCDs are now even more expensive than short-term commercial paper. It will be corrected as lenders complete their adjustments in the term structure of the debt.”

Introduced by the People’s Bank of China in 2013 as a fresh source of money for smaller lenders which have difficulty competing for savings against big state banks, NCDs have morphed into a way for them to fund purchases of each other’s wealth-management products. That boosts refinancing risks in a banking system that will see a record 3.65 trillion yuan ($529 billion) of the notes maturing this quarter. This hasn’t escaped the attention of the authorities, with the PBOC looking at classifying NCDs as interbank liabilities, Caixin.com reported in January, a move that would quell growth in the market given limits on how much in interbank debt Chinese lenders are allowed to hold relative to their overall liabilities. The central bank has been ramping up its campaign to contain leverage since August, tightening money-market rates as a way of discouraging borrowing. The PBOC boosted borrowing costs for lenders Thursday, just hours after the Federal Reserve lifted benchmark interest rates.

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It’s remarkable that she still has her job. What a blemish on Canada she is.

Will Chrystia Freeland Finally Ruin Canadian-Russian Relations? (SCF)

On 10 January 2017 Canadian PM Justin Trudeau fired his minister of external affairs, Stéphane Dion, and replaced him with Chrystia Freeland, who was then minister of international trade. This cabinet shuffle might not have gotten much public notice except that Dion is a distinguished parliamentarian, former leader of the party and leader of the opposition, and a former key minister in the Liberal government of Jean Chrétien. Freeland, on the other hand, is a well-known Ukrainian ultra-nationalist and self-declared Russophobe and hater of Russian President Vladimir Putin. The sacking of Dion was also noteworthy because Trudeau had run on an electoral platform in 2015 promising, inter alia, to improve Canadian relations with Russia, spoilt by the Conservative government of Stephen Harper. When Dion became minister of external affairs, he confirmed the Liberal commitment to re-establish more constructive Canadian-Russian relations.

[..] Why should Canadians care one way or another whether their government supports the Ukraine and sends arms and advisors there to strengthen Ukrainian military forces? Well, the most important reason is that the present government in Kiev is illegitimate in spite of democratic appearances. It is the spawn of a violent coup d’état in February 2014, brokered and supported by the United States and the European Union, which overthrew the democratically elected president Viktor Yanukovich. The vanguard of the Kiev coup d’état are neo-Nazi, fascist or ultra nationalist political and paramilitary organisations, notably the political party Svoboda, the paramilitary Pravyi sektor and various other paramilitary forces such as the so-called Azov and Aidar battalions. These paramilitary units were and are used to crush opposition in those parts of the Ukraine controlled by Kiev.

Neo-Nazi violence and intimidation worked in many places, but not in others. In the Crimea, the population united almost to the last man and woman, to toss out the putschist authorities and to vote for reunification with Russia. In the east, in the Donbass, the anti-fascist resistance repulsed Kiev punitive forces with heavy losses. These remarkable feats of arms, redolent of so many others in Russian history, were wasted by Moscow, which disregarded a first principle of war that one never lets an enemy withdraw to fight another day. «He who spares the aggressor», Stalin once remarked, «wants another war.» It may shock some people to hear Stalin quoted, but Plutarch, Sun Tzu, or Clausewitz might have said the same thing. Moscow supported the so-called Minsk peace accords which were never respected by the Kiev authorities. Ultra-nationalists even boasted that they had agreed to Minsk solely in order to rest and refit their beaten forces. It was only a ruse de guerre.

These are the forces which the Canadian government now supports with the enthusiastic backing of Minister Freeland. For her, it must be a lifelong dream-come-true. There has been much press comment during the last week or so about Freeland’s Ukrainian grandfather, Mykhailo Chomiak, a Nazi collaborator during World War II. Freeland claimed that he was only a refugee from Stalinist violence. He might have been, but he also collaborated with Nazi Germany. In many places in Europe, France and Italy, for example, collaborators were summarily shot or imprisoned after the war. In France, more than 5,000 were executed including Pierre Laval, a prominent French politician, who sided with Nazi Germany and vaunted collaboration to oppose the USSR. Another 38,000 French collaborators were jailed. Chomiak was lucky he was not hanged and that he ended up in northern Alberta, to die a well-to-do farmer.

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More brilliance. “We don’t have en energy system. We have an energy market.”

The Energy Market Explained (Clarke and Dawe)

“Wal Socket. Energy Consultant”

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A European crime. One of many perpetrated on Greece.

Greek Public Health System On Brink, Doctors Warn (K.)

The National Health System (ESY) is on the the brink of collapse, according to the Panhellenic Medical Association (PIS), which cited chronic shortages in staff and equipment at public hospitals around the country due to limited finances, and disruptions in the primary healthcare system. The association added that the only reason the health system is still running is due to the efforts of existing staff, whose endurance levels, however, are being put to the test. “The average age of ESY doctors is 60. And these people will be leaving in a few years,” said PIS president Michail Vlastarakos, adding that public hospitals need 6,500 additional permanent medical staff.

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And the EU still hasn’t supplied the promised help for dealing with the applications.

First-Time Asylum Applicants In Greece Up 339% In 2016 (Amna)

There was a 339% increase of in the number of first-time asylum applicants in Greece in 2016, which rose to 49,875 in 2016 from 11,370 in 2015, according to figures released by Eurostat on Thursday. On the basis of these figures, Greece ranks second among EU countries for the total number of asylum applications filed in relation to its population. Germany is first with 8,789 applications per million population, followed by Greece with 4,525 applications per million population. Third is Austria with 4,587, followed by Malta (3,989), Luxembourg (3,582) and Cyprus (3,350). The number of new asylum applicants on an EU level dropped to 1.204 million in 2016, for a percentage change of -4%, but were more than double the number of applicants in 2014. Most asylum applicants in EU member-states were Syrians (28%), Afghans (15%) and Iraqis (11%). In Greece, Syrians accounted for more than half of asylum applicants (53%), Iraqis for 10% and Pakistanis 9%.

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The NGOs themselves are part of the problem too.

Refugees In Greece Suffering After EU Deal With Turkey, Say NGOs (G.)

Greece is being used as a testing ground for degrading asylum policies that fall short of the democratic values Europe would normally uphold, say refugee groups marking the first anniversary of a deal designed to slow arrivals to the continent. The accord struck last year between Turkey and the EU has been praised in some quarters for having slowed arrivals into Europe and reduced deaths in the Aegean sea. But basic human rights were lost in the process, the organisations claim. “Greece has become a testing ground for policies that are eroding international protection standards,” said the Norwegian Refugee Council, International Rescue Committee and Oxfam, in a joint report based on extensive fieldwork on Aegean islands where more than 14,000 men, women and children are trapped in abysmal conditions.

“Over the course of the year, there have been deaths, suicide attempts, people engaging in self harm, and children, women and men exposed to abuse and sexual violence.” The withering assessment, coming almost 12 months to the day since the agreement was reached between Ankara and Brussels, is in stark contrast to the official view of an accord hailed by the EU, at the time, as a breakthrough in the migration crisis. Agreed in exchange for €6bn in refugee aid to Ankara, it was seen as a vital step in resolving a crisis that at its height threatened to tear the bloc apart. Since its implementation, the number of refugees and migrants going to Europe via Turkey has dropped dramatically.

Islands such as Lesbos, which is near Turkey, are reporting 100 arrivals or fewer a day, while in 2015, when more than 1 million people streamed into Europe, it received 10,000 men, women and children over one weekend. But NGOs say the reality on the ground is that the deal has prolonged and exacerbated human suffering. The report found that, incarcerated on Greek islands, asylum seekers had been made to live in substandard and overcrowded conditions for months on end. With limited access to fair and effective asylum procedures they were subject to “a convoluted and constantly changing process” that lacked oversights and checks and balances. Often legal experts were unable to keep track of a system that was impossible for people to navigate alone.

A separate report by Save the Children and Médecins Sans Frontières warned that there were worrying levels of mental health problems among migrants and refugees in the Greek camps. It said people including children as young as nine were cutting themselves, attempting suicide and using drugs to cope with the “endless misery”. Mental health was “rapidly deteriorating due to the conditions created as a result of this deal”, Save the Children said. [..] The report expressed the NGOs’ fears that the deal would become a blueprint for crises elsewhere. “Beyond the deeply concerning situation in Greece, the EU is looking to replicate this model elsewhere, and, in so doing, risks setting a dangerous precedent for the rest of the world,” said the report.

Read more …

Creating child zombies.

Child Refugees In Greece Self-Harming And Attempting Suicide (Ind.)

Desperate refugees trapped in Greece are self-harming and attempting suicide as a result of “disastrous” EU policies, aid agencies have warned. More refugees are dying than ever before while attempting to reach Europe, almost a year after a controversial deal was struck with Turkey in an effort to prevent boat crossings across the Aegean Sea. The agreement has stranded thousands of asylum seekers in Greece, where aid agencies say children are among rising numbers of migrants trying to kill themselves after months trapped in squalid camps. Research by Save the Children found more than 5,000 minors are living in “appalling conditions” that are driving a mounting mental health crisis. It has recorded children as young as nine self-harming and 12-year-olds attempting suicide, sometimes filming themselves in the act, as well as a spike in drug and alcohol abuse by teenagers who are exploited by dealers in camps.

Violent protests and deaths are traumatising the youngest and most vulnerable refugees, whose families say they are too scared to let their children play out of sight in case they are hurt or abused. Save the Children staff report that some unaccompanied children live in “24-hour survival mode” and sleep in shifts to try to stay safe, while others disappear or pay smugglers to leave the Greek islands. “The EU-Turkey deal was meant to end the flow of ‘irregular migrants’ to Greece, but at what cost?” said Andreas Ring, Save the Children’s humanitarian representative. “Many of these children have escaped war and conflict only to end up in camps many of them call ‘hell’ and where they say they are made to feel more like animals than humans.” Since 20 March 2016, all migrants arriving on Greek islands have been held, under threat of deportation to Turkey, while their asylum applications are processed, but legal blocks have slowed transfers and left refugees in overcrowded tent camps for up to a year.

Read more …

“..you cannot be so short-sighted, you cannot have no vision, you cannot sacrifice human dignity and human rights for political gain..”

Ai Weiwei Slams ‘Shameful’ Politicians Ignoring Refugees (AFP)

Chinese dissident artist Ai Weiwei on Thursday slammed “shameful” politicians who ignore refugees as he launched a giant art installation centered on their fate at the National Gallery in Prague. Called “Law of the Journey”, the show features a 70-metre-long (230-foot-long) inflatable boat with 258 oversize refugee figures. A tribute to the thousands who have drowned crossing the Mediterranean, the piece is Ai’s biggest-ever installation. It will be on display until the end of the year. “My message is very clear: being a politician or a political group, you cannot be so short-sighted, you cannot have no vision, you cannot sacrifice human dignity and human rights for political gain,” Ai told AFP. “I think this is very, very shameful behaviour,” he added.

The Czech Republic and the other post-Communist central European members have rejected EU plans to allow Muslim refugees on their territories throughout the migrant crisis. Immigration from Muslim countries has become a hot political topic in these states, although most refugees have opted for wealthier western countries like Germany or Sweden. “If we see somebody who has been victimised by war or desperately trying to find a peaceful place, if we don’t accept those people, the real challenge and the real crisis is not of all the people who feel the pain but rather for the people who ignore to recognise it or pretend that it doesn’t exist,” said Ai. “That is both a tragedy and a crime,” said the 59-year-old painter, sculptor and photographer. Ai spent the last year visiting such migrant and refugee hotspots as the US-Mexican border badlands to the Turkish-Syrian frontier and crowded holding camps on Greek islands.

Read more …

Mar 162017
 
 March 16, 2017  Posted by at 2:53 pm Finance Tagged with: , , , , , , ,  9 Responses »
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Marc Riboud Sur les Quais de Paris 1953

 

The Dutch elections on Wednesday have provided a whole bunch of Orwellian narratives. PM Mark Rutte’s right wing VVD party, actually the ‘business’ -or should we say ‘rent-seekers’ in 2017- party, who lost some 20% of the seats they had obtained in the previous parliamentary election in November 2012, down from 41 to 33 seats, is declared the big winner. While Geert Wilders’ very right wing party, PVV, won 25% more seats -it went from 16 to 20- and is the big loser.

Moreover, Rutte’s coalition partner, labor PvdA, gave up 29 out of 38 seats to end up with just 9. That’s a loss of over 75%. Together, the coalition partners went from 79 seats in the 2012 election to 42 in 2017. That’s an almost 50% less. Not that it could prevent Rutte from proudly declaring: “We want to stick to the course we have – safe and stable and prosperous..” Makes you wonder who the ‘we’ are that he’s talking about.

That course he wants to stick to had a finance minister named Dijsselbloem, and his party just lost by over 75%. So he won’t be back. But perhaps the EU can pull another ‘Tusk’, and leave him in place in Brussels as chairman of the Eurogroup no matter what voters in his own country think of him. Still, declaring your intention to ‘stick to the course’ when your coalition has just been sawed in half, it’s quite something.

 

The only reasons Rutte’s VVD ended up being the biggest party all have to do with Wilders. The anxiety over the election all had to do with polls. Wilders is a one man party and a a one trick pony. If he would leave, his party would dissolve. And his sole ‘message’ is that Islam is bad and should vanish from first Holland and then Europe. He doesn’t really have any other political program points. Ok, there’s Brussels. Doesn’t like that either.

Perhaps that’s why he largely shunned the pre-election debates. Problem with that is, these things attract a lot of TV viewers, crucial free air-time. All in all, since he’s his own worst enemy in many respects, it’s not that much of a surprise that Wilders’ support collapsed, and that’s just if we were to take Dutch pollsters more serious than their counterparts in the US and UK.

Talking of which, according to Rutte, those are the countries where ‘the wrong kind of populism’ has won and delivered Trump and Brexit. And of course there are lots of people who agree with that. What either they, or Rutte himself, would label ‘the right kind of populism’ is unclear. Maybe Rutte himself is the right kind of populist?

 

The row with Turkey over the weekend must have helped Rutte quite a bit. Not only were his actions in the row met with approval by a large majority of the Dutch population, including just about all other party leaders, the Dutch also got to think about what WIlders would do in such a situation. And there can be no doubt that Rutte is seen as much more of a statesman than Wilders.

Not that the row is over. After Turkey announced yesterday it would return 40 Dutch cows (?!) , today Turkish Foreign Minister Cavusoglu said Europe’s politicians are “taking Europe toward an abyss”, and: “Soon religious wars will break out in Europe. That’s the way it’s going.” There can be no doubt that a shouting war like this with Wilders as one of the participants would take on a whole different shape, and a different choice of words.

What Rutte’s going to do next is form a new coalition, this time not with the left but with the center-right, and no-one will be able to tell the difference. If Dutch, and European, and global, politics have one main problem, it’s that. Left is right and right is left and winners are losers. If a guy like Dijsselbloem can squeeze Greek society dry in his capacity as Eurogroup head, while he runs as a leftist candidate in his own country, and loses hugely, anything goes.

 

All those who think they can see in the Dutch experience, a sign that Marine Le Pen’s chances in France’s presidential elections in April and May have dropped a lot, would appear to be delusional. Judging from reactions in the financial markets, many seem to be. But Le Pen is much less of a fringe figure than Wilders is, and she certainly wouldn’t shun a debate. It’s true that her Front National is a one-woman operation, bit she has a much clearer political program than Wilders does.

And she doesn’t have an opponent like Rutte, who’s become a formidable presence domestically, as anyone would be who can be PM for many years and not be put out by the curb. The man who should be Le Pen’s main adversary is not; Hollande is out by that curb and doesn’t even dare run again. His Socialist party has become a joke. The next strongest opponent should be François Fillon, but he’s all but gone now he’s been placed under formal investigation.

That leaves only Emmanual Macron, an independent without a party and without a program. In France, you can be elected president in such a situation, but your hand are tied in all sorts of ways, because you need parliament to vote for things.

..the nuances of the French political system put Macron in a spot of bother. The president derives their power from the support of a majority in the lower house of parliament, the National Assembly. Macron was a minister for the Socialist Party government but quit in 2016 to form his own political movement. Now he doesn’t even have a party, let alone a majority. Although the constitution of the French Fifth Republic, created by Charles De Gaulle in 1958, extended presidential powers, it did not enable the president to run the country.

There are only a few presidential powers that do not need the prime minister’s authorisation. The president can appoint a prime minister, dissolve the National Assembly, authorise a referendum and become a “temporary dictator” in exceptional circumstances imperilling the nation. They can also appoint three judges to the Constitutional Council and refer any law to this body. While all important tasks, this does not, by any stretch of the imagination, amount to running a country. The president can’t suggest laws, pass them through parliament and then implement them without the prime minister.

The role of a president is best defined as a “referee”. Presidential powers give the ability to oversee operations and act when the smooth running of institutions is impeded. So a president is able to step in if a grave situation arises or to unlock a standoff between the prime minister and parliament, such as by announcing a referendum on a disputed issue or by dismissing the National Assembly.

So, why does everyone see the president as the key figure? In a nutshell, it’s because the constitution has never been truly applied. There lies the devilish beauty of French politics. A country known since the 1789 revolution for its inability to foster strong majorities in parliament has succeeded, from 1962, in providing solid majorities.

Perhaps those who believe that what happened in Holland is also likely to happen in France are swayed by the notion that both are part of the EU. But they are very different countries and cultures, and different political systems. And Le Pen is no Wilders. She doesn’t say crazy things anymore, she’s cleansed the public image of her party by getting rid of her father, and she keeps any remaining extremists out of view.

There is still plenty suspicion in France about her, and about her party, but there are also a lot of people who agree with a lot of what she says. The perhaps most noteworthy statement she’s made recently is that she would step down if she loses the referendum about membership of the EU she intends to launch if elected president. That should keep Brussels on their toes. Marine means what she says. And a lot of French people may get to like her for that. In a political landscape in which the competition keeps shooting itself in the foot.

Another thing about Le Pen is that her political program contains quite a few bits and bolts that could be labeled leftist; a 35-hour work week, retirement at 60, lower energy prices. It’s just that she wants to reserve these things for the French. Foreigners, especially, Muslims, are not invited. And she is very much opposed to neo-liberalism and globalization:

They’ve made an ideology out of it. An economic globalism which rejects all limits, all regulation of globalization, and which consequently weakens the immune defences of the nation state, dispossessing it of its constituent elements: borders, national currency, the authority of its laws and management of the economy, thus enabling another globalism to be born and to grow: Islamist fundamentalism..

Le Pen’s popularity does not come from an overwhelming innate racism in France -though such a thing certainly exists-. It comes instead from the formidable failure that the country’s immigration policy has been for many decades. At the outskirts of major cities ghetto’s have been allowed to form in which those that come from former French colonies, especially in Africa, feel trapped with no way out. The French tend to feel superior to all other people, and the political system has let the situation slip completely out of hand.

Now France, and Europe is general, will have to deal with this mess. So far, the main European reaction is to turn Greece into a prison camp for a new wave of refugees and migrants. That can of course only make things worse. And it doesn’t solve any of the existing problems. Which makes the rise of Marine Le Pen inevitable.

And Wilders too; he’s the no. 2 party in Holland, because his party won 33% more seats than in 2012 to go from 15 to 20. That 33% gain, versus Rutte’s 20% loss, makes Wilders a loser in the eyes of many ‘relieved’ observers.

Winners are losers, and as is evident in Le Pen’s social policies for the French, in European coalition governments that contain Labor and right wing parties, and in the course of the Democratic party in the US, left is definitely the same as right.

Orwell always wins. Next problem: the actual left are not represented by anyone anymore.


MarcRiboud Sur les Quais de Paris 1953

 

The Dutch elections on Wednesday have provided a whole bunch of Orwellian narratives. PM Mark Rutte’s right wing VVD party, actually the ‘business’ -or should we say ‘rent-seekers’ in 2017- party, who lost some 20% of the seats they had obtained in the previous parliamentary election in November 2012, down from 41 to 33 seats, is declared the big winner. While Geert Wilders’ very right wing party, PVV, won 25% more seats -it went from 16 to 20- and is the big loser.

Moreover, Rutte’s coalition partner, labor PvdA, gave up 29 out of 38 seats to end up with just 9. That’s a loss of over 75%. Together, the coalition partners went from 79 seats in the 2012 election to 42 in 2017. That’s an almost 50% less. Not that it could prevent Rutte from proudly declaring: “We want to stick to the course we have – safe and stable and prosperous..” Makes you wonder who the ‘we’ are that he’s talking about.

That course he wants to stick to had a finance minister named Dijsselbloem, and his party just lost by over 75%. So he won’t be back. But perhaps the EU can pull another ‘Tusk’, and leave him in place in Brussels as chairman of the Eurogroup no matter what voters in his own country think of him. Still, declaring your intention to ‘stick to the course’ when your coalition has just been sawed in half, it’s quite something.

 

The only reasons Rutte’s VVD ended up being the biggest party all have to do with Wilders. The anxiety over the election all had to do with polls. Wilders is a one man party and a a one trick pony. If he would leave, his party would dissolve. And his sole ‘message’ is that Islam is bad and should vanish from first Holland and then Europe. He doesn’t really have any other political program points. Ok, there’s Brussels. Doesn’t like that either.

Perhaps that’s why he largely shunned the pre-election debates. Problem with that is, these things attract a lot of TV viewers, crucial free air-time. All in all, since he’s his own worst enemy in many respects, it’s not that much of a surprise that Wilders’ support collapsed, and that’s just if we were to take Dutch pollsters more serious than their counterparts in the US and UK.

Talking of which, according to Rutte, those are the countries where ‘the wrong kind of populism’ has won and delivered Trump and Brexit. And of course there are lots of people who agree with that. What either they, or Rutte himself, would label ‘the right kind of populism’ is unclear. Maybe Rutte himself is the right kind of populist?

 

The row with Turkey over the weekend must have helped Rutte quite a bit. Not only were his actions in the row met with approval by a large majority of the Dutch population, including just about all other party leaders, the Dutch also got to think about what WIlders would do in such a situation. And there can be no doubt that Rutte is seen as much more of a statesman than Wilders.

Not that the row is over. After Turkey announced yesterday it would return 40 Dutch cows (?!) , today Turkish Foreign Minister Cavusoglu said Europe’s politicians are “taking Europe toward an abyss”, and: “Soon religious wars will break out in Europe. That’s the way it’s going.” There can be no doubt that a shouting war like this with Wilders as one of the participants would take on a whole different shape, and a different choice of words.

What Rutte’s going to do next is form a new coalition, this time not with the left but with the center-right, and no-one will be able to tell the difference. If Dutch, and European, and global, politics have one main problem, it’s that. Left is right and right is left and winners are losers. If a guy like Dijsselbloem can squeeze Greek society dry in his capacity as Eurogroup head, while he runs as a leftist candidate in his own country, and loses hugely, anything goes.

 

All those who think they can see in the Dutch experience, a sign that Marine Le Pen’s chances in France’s presidential elections in April and May have dropped a lot, would appear to be delusional. Judging from reactions in the financial markets, many seem to be. But Le Pen is much less of a fringe figure than Wilders is, and she certainly wouldn’t shun a debate. It’s true that her Front National is a one-woman operation, bit she has a much clearer political program than Wilders does.

And she doesn’t have an opponent like Rutte, who’s become a formidable presence domestically, as anyone would be who can be PM for many years and not be put out by the curb. The man who should be Le Pen’s main adversary is not; Hollande is out by that curb and doesn’t even dare run again. His Socialist party has become a joke. The next strongest opponent should be François Fillon, but he’s all but gone now he’s been placed under formal investigation.

That leaves only Emmanual Macron, an independent without a party and without a program. In France, you can be elected president in such a situation, but your hand are tied in all sorts of ways, because you need parliament to vote for things.

..the nuances of the French political system put Macron in a spot of bother. The president derives their power from the support of a majority in the lower house of parliament, the National Assembly. Macron was a minister for the Socialist Party government but quit in 2016 to form his own political movement. Now he doesn’t even have a party, let alone a majority. Although the constitution of the French Fifth Republic, created by Charles De Gaulle in 1958, extended presidential powers, it did not enable the president to run the country.

There are only a few presidential powers that do not need the prime minister’s authorisation. The president can appoint a prime minister, dissolve the National Assembly, authorise a referendum and become a “temporary dictator” in exceptional circumstances imperilling the nation. They can also appoint three judges to the Constitutional Council and refer any law to this body. While all important tasks, this does not, by any stretch of the imagination, amount to running a country. The president can’t suggest laws, pass them through parliament and then implement them without the prime minister.

The role of a president is best defined as a “referee”. Presidential powers give the ability to oversee operations and act when the smooth running of institutions is impeded. So a president is able to step in if a grave situation arises or to unlock a standoff between the prime minister and parliament, such as by announcing a referendum on a disputed issue or by dismissing the National Assembly.

So, why does everyone see the president as the key figure? In a nutshell, it’s because the constitution has never been truly applied. There lies the devilish beauty of French politics. A country known since the 1789 revolution for its inability to foster strong majorities in parliament has succeeded, from 1962, in providing solid majorities.

Perhaps those who believe that what happened in Holland is also likely to happen in France are swayed by the notion that both are part of the EU. But they are very different countries and cultures, and different political systems. And Le Pen is no Wilders. She doesn’t say crazy things anymore, she’s cleansed the public image of her party by getting rid of her father, and she keeps any remaining extremists out of view.

There is still plenty suspicion in France about her, and about her party, but there are also a lot of people who agree with a lot of what she says. The perhaps most noteworthy statement she’s made recently is that she would step down if she loses the referendum about membership of the EU she intends to launch if elected president. That should keep Brussels on their toes. Marine means what she says. And a lot of French people may get to like her for that. In a political landscape in which the competition keeps shooting itself in the foot.

Another thing about Le Pen is that her political program contains quite a few bits and bolts that could be labeled leftist; a 35-hour work week, retirement at 60, lower energy prices. It’s just that she wants to reserve these things for the French. Foreigners, especially, Muslims, are not invited. And she is very much opposed to neo-liberalism and globalization:

They’ve made an ideology out of it. An economic globalism which rejects all limits, all regulation of globalization, and which consequently weakens the immune defences of the nation state, dispossessing it of its constituent elements: borders, national currency, the authority of its laws and management of the economy, thus enabling another globalism to be born and to grow: Islamist fundamentalism..

Le Pen’s popularity does not come from an overwhelming innate racism in France -though such a thing certainly exists-. It comes instead from the formidable failure that the country’s immigration policy has been for many decades. At the outskirts of major cities ghetto’s have been allowed to form in which those that come from former French colonies, especially in Africa, feel trapped with no way out. The French tend to feel superior to all other people, and the political system has let the situation slip completely out of hand.

Now France, and Europe is general, will have to deal with this mess. So far, the main European reaction is to turn Greece into a prison camp for a new wave of refugees and migrants. That can of course only make things worse. And it doesn’t solve any of the existing problems. Which makes the rise of Marine Le Pen inevitable.

And Wilders too; he’s the no. 2 party in Holland, because his party won 33% more seats than in 2012 to go from 15 to 20. That 33% gain, versus Rutte’s 20% loss, makes Wilders a loser in the eyes of many ‘relieved’ observers.

Winners are losers, and as is evident in Le Pen’s social policies for the French, in European coalition governments that contain Labor and right wing parties, and in the course of the Democratic party in the US, left is definitely the same as right.

Orwell always wins. Next problem: the actual left are not represented by anyone anymore.

 

 

Mar 162017
 
 March 16, 2017  Posted by at 9:16 am Finance Tagged with: , , , , , , , , , ,  No Responses »
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Arthur Rothstein “Quack doctor, Pittsburgh, Pennsylvania” 1938

 


Hawaii Judge Halts Trump’s New Travel Ban Before It Can Go Into Effect (R.)
Trump Proposes Historic Cuts Across Government to Fund Defense (BBG)
Janet Yellen Explains Why She Hiked In A 0.9% GDP Quarter (ZH)
Fed Rate Hikes + Low Growth = Recession (MW)
How The Fed Rate Hike Will Impact Millions Of Americans (MW)
How Global Central Banks Have Set Interest Rates Since 2008 (Tel.)
Beware the Debt Ceiling (BBG)
Amazon Is Going To Kill More American Jobs Than China Did (MW)
PM Mark Rutte Sees Off Challenge Of Geert Wilders In Dutch Election (G.)
Northern Ireland Vote Jolts Already Disunited Kingdom (R.)
Erdogan, Europe Head for Political Blow-Up They Can’t Afford (BBG)
Turkey Protests Dutch Government by Returning 40 Holstein Cows (BBG)
Spike In Number Of Greeks Renouncing Inheritance To Avoid Taxes (K.)
New Zealand River Granted Same Legal Rights As Human Being (G.)

 

 

Not much room left to move, it would seem. And the Supreme Court is still some distance away, if the case even gets there.

Hawaii Judge Halts Trump’s New Travel Ban Before It Can Go Into Effect (R.)

Just hours before President Donald Trump’s revised travel ban was set to go into effect, a U.S. federal judge in Hawaii on Wednesday issued an emergency halt to the order’s implementation. The action was the latest legal blow to the administration’s efforts to temporarily ban refugees as well as travelers from six predominantly Muslim countries, which the President has said is needed for national security. Trump lashed out at the judge’s ruling, saying it “makes us look weak.” Trump signed the new ban on March 6 in a bid to overcome legal problems with a January executive order that caused chaos at airports and sparked mass protests before a Washington judge stopped its enforcement in February. U.S. District Judge Derrick Watson put an emergency stop to the new order in response to a lawsuit filed by the state of Hawaii, which argued that the order discriminated against Muslims in violation of the U.S. Constitution.

Judge Watson concluded in his ruling that while the order did not mention Islam by name, “a reasonable, objective observer … would conclude that the Executive Order was issued with a purpose to disfavor a particular religion.” Watson was appointed to the bench by former Democratic President Barack Obama. Speaking at a rally in Nashville, Trump called his revised executive order a “watered-down version” of his first. “I think we ought to go back to the first one and go all the way, which is what I wanted to do in the first place,” Trump said. Trump called the judge’s block “unprecedented judicial overreach” and said he will take the case “as far as it needs to go,” including to the U.S. Supreme Court. The Department of Justice called the ruling “flawed both in reasoning and in scope,” adding that the president has broad authority in national security matters. “The Department will continue to defend this Executive Order in the courts,” it said a statement.

[..] The government, in its court filings cautioned the court against looking for secret motives in the executive order and against performing “judicial psychoanalysis of a drafter’s heart of heart.” Watson said he did not need to do that, because evidence of motive could be found in the president’s public statements. He said he did not give credence to the government’s argument that the order was not anti-Muslim because it targeted only a small percentage of Muslim-majority countries. “The notion that one can demonstrate animus toward any group of people only by targeting all of them at once is fundamentally flawed,” the judge wrote.

Read more …

The military-industrial complex.

Trump Proposes Historic Cuts Across Government to Fund Defense (BBG)

President Donald Trump is proposing historically deep budget cuts that would touch almost every federal agency and program and dramatically reorder government priorities to boost defense and security spending. The president’s fiscal 2018 budget request, which will be formally delivered Thursday to Congress, would slash or eliminate many of the Great Society programs that Republicans have for decades tried to peel back while showering the Pentagon and Department of Homeland Security with new resources. Some of the deepest cuts are reserved for the agencies and programs Trump has often derided. The State Department would be hit with a 28% reduction below fiscal 2016 levels that mainly targets international aid and development assistance; the EPA would face a 30% reduction.

Also in the crosshairs are agriculture programs, clean energy projects and federal research funding. “You see reductions in many agencies as he tries to shrink the role of government, drive efficiencies, go after waste, duplicative programs,” Office of Management and Budget Director Mick Mulvaney told reporters. “If he said it in the campaign, it’s in the budget.” Trump’s proposal for $1.15 trillion in federal discretionary funding for fiscal year 2018 is certain to face vigorous opposition from lawmakers in both parties who will resist chopping favored programs, whether foreign aid, rural water projects, or development grants for Appalachia and the Mississippi Delta. In addition to a solid wall of opposition from Democrats, senior Republicans including Senate Majority Leader Mitch McConnell have raised objections to specific agency cuts even before the budget request went to the Capitol.

Read more …

It’s all about credibility. “Fighting inflationary pressures”?!

Janet Yellen Explains Why She Hiked In A 0.9% GDP Quarter (ZH)

It appears that, the worse the economy was doing, the higher the odds of a rate hike.

Putting the Federal Reserve's third rate hike in 11 years into context, if the Atlanta Fed's forecast is accurate, 0.9% GDP would mark the weakest quarter since 1980 in which rates were raised (according to Bloomberg data).

We look forward to Ms. Yellen explaining her reasoning – Inflation no longer "transitory"? Asset prices in a bubble? Because we want to crush Trump's economic policies? Because the banks told us to?

For now it appears what matters to The Fed is not 'hard' real economic data but 'soft' survey and confidence data…

Read more …

“..raising interest rates off ultralow levels during a period of tepid economic growth coincides with recessions in the following three to nine months..”

Fed Rate Hikes + Low Growth = Recession (MW)

The Federal Reserve on Wednesday lifted benchmark interest rates for only the third time in about a decade, and that has caused trepidation among some market participants. Lance Roberts, chief investment strategist at Clarity Financial, makes the case in one chart that raising interest rates off ultralow levels during a period of tepid economic growth coincides with recessions in the following three to nine months (see chart below, which compares real, inflation-adjusted, GDP to Fed interest rate levels).

The Fed lifted key rates by a quarter-point Wednesday to a range of 0.75% to 1%. The rate increase comes as the U.S. economy has been growing at a lackluster pace. Government data show that gross domestic product—the official report card of economic performance—was growing at a seasonally adjusted pace of 1.9% in the fourth quarter compared with 1.6% in 2016 and 2.6% in 2015. “Outside of inflated asset prices, there is little evidence of real economic growth, as witnessed by an average annual GDP growth rate of just 1.3% since 2008, which by the way is the lowest in history since…well, ever,” Roberts wrote in a blog post March 9 (see chart below):

Woeful productivity, defined as the average output per hour of work, has been another bugaboo for economists and the Fed, for the past six years. Higher rates could exacerbate both problems, especially since corporations tend to benefit when borrowing costs are low. Roberts told MarketWatch in a recent interview that the “Fed lifts interest rates to slow economic growth and quell inflationary pressures.” He argues that outside of a stock market that has been mostly zooming higher, “economic growth is weak.”

Read more …

Debtors get screwed, savers get some air. Sounds cute and all, but there’s so much debt out there.

How The Fed Rate Hike Will Impact Millions Of Americans (MW)

Bad news for those with credit card debt: The Federal Reserve hiked its key rate on Wednesday by a quarter%age point and, as a result, your own interest rates could rise almost immediately. The Fed raised the rate for federal funds by a quarter%age point, to 0.75% to 1% at the end of its two-day meeting on Wednesday, and signaled two further rates rises in 2017. In other words, the Fed announced an increase in how much banks will be charged to borrow money from Federal Reserve banks. (The Fed raises and lowers interest rates in an attempt to control inflation.) That increase will most likely eventually be passed on to consumers, said Sean McQuay, a credit card expert at the personal finance website NerdWallet. Many households with credit card debt — the average household carrying credit card debt has more than $16,000 — will likely take a hit. Here’s how the latest Fed rate increase could impact your credit cards and bank accounts.

Credit cards Because a rise in the federal funds rate means banks will likely pay more to borrow from the Federal Reserve, they may pass that cost on to consumers. Credit card interest rates are variable (banks and credit card companies should state that their rates are variable in the literature customers receive to learn about their cards), and they are tied to the prime rate, an index a few%age points above the federal funds rate. It is a benchmark that banks use to set home equity lines of credit and credit card rates; as federal funds rates rise, the prime rate does, too. As a result, credit card holders are likely to see their interest rates rise, and that will happen soon, said Greg McBride, the chief financial analyst at the personal finance company Bankrate, told MarketWatch.

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Written just before Yellen’s hike.

How Global Central Banks Have Set Interest Rates Since 2008 (Tel.)

After the financial crisis in 2008 central banks across the world cut their base lending rates to varying degrees, with some introducing negative rates of interest. [..] The US economy has performed strongly in recent months, leading Fed chair Janet Yellen to say that policymakers are now ready to change their stance on interest rates. The expectation is that there will be a steady hike in rates in the coming years and that, in the longer term, interest rates should be hovering around 3pc. Market traders are predicting three interest rate rise in the US this year alone. Ms Yellen has said that waiting too long to raise interest rates risked more rapid increases later if the economy started to overheat. If the Fed does see fit to continue to increase interest rates, it could signal the start of a similar pattern in other countries that have, thus far, kept rates very low since the financial crisis.

The Bank of England’s base lending rate stood at 5.75pc in July 2007 but was slashed repeatedly in the following months and years. Since March 2009 the Bank’s lending rate has been languishing below 1pc. In contrast to the expected direction of interest rates in the US, last August BoE Governor Mark Carney cut the rate again from 0.5pc to 0.25pc. [..] The ECB’s deposit rate has been at -0.4pc since early 2016 while the Swiss National Bank’s lending rate has been even lower than this. Mark Carney has said that the next move on interest rates in the UK will be an upward one but that it will be “limited and gradual”. However with the economic uncertainty surrounding Brexit it may be some time before rate rises catch up with the US. And it is likely to be some time before the ECB feels it can gamble with a significant rate rise.

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June 1 drop-off.

Beware the Debt Ceiling (BBG)

Euphoria has been pervasive in the stock market since the election. But investors seem to be overlooking the risk of a U.S. government default resulting from a failure by Congress to raise the debt ceiling. The possibility is greater than anyone seems to realize, even with a supposedly unified government. In particular, the markets seem to be ignoring two vital numbers, which together could have profound consequences for global markets: 218 and $189 billion. In order to raise or suspend the debt ceiling (which will technically be reinstated on March 16), 218 votes are needed in the House of Representatives. The Treasury’s cash balance will need to last until this happens, or the U.S. will default. The opening cash balance this month was $189 billion, and Treasury is burning an average of $2 billion per day – with the ability to issue new debt.

Net redemptions of existing debt not held by the government are running north of $100 billion a month. Treasury Secretary Steven Mnuchin has acknowledged the coming deadline, encouraging Congress last week to raise the limit immediately. Reaching 218 votes in favor of raising or suspending the debt ceiling might be harder than in any previous fiscal showdown. President Donald Trump almost certainly wants to raise the ceiling, but he may not have the votes. While Republicans control 237 seats in the House, the Tea Party wing of the party has in the past has steadfastly refused to go along with increases. The Republican Party is already facing a revolt on its right flank over its failure to offer a clean repeal of the Affordable Care Act. Many members of this resistance constitute the ultra-right “Freedom Caucus,” which was willing to stand its ground during previous debt ceiling showdowns.

The Freedom Caucus has 29 members, which means there might be only 208 votes to raise the ceiling. (It’s interesting to recall that, in 2013, President Trump himself tweeted that he was “embarrassed” that Republicans had voted to extend the ceiling.) It may be unrealistic to expect Democrats to save the day – at least initially. House Democrats may be more than happy to sit back and watch Republicans fight among themselves. If the Democrats eventually ride to the rescue, it probably won’t be until after a period of Republican-on-Republican violence. Nobody wants the Treasury to reach the point where it has to prioritize payment of interest over other obligations – a threshold where creditworthiness and market confidence will have begun to retreat. The bond market already seems to be reacting to this possibility, sending yields higher and prices lower, even as the S&P/Dow/Nasdaq have been on a tear and are showing scant concern over the potential turmoil.

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Change with an enormous impact. Do we really want this?

Amazon Is Going To Kill More American Jobs Than China Did (MW)

Amazon.com has been crowing about its plans to create 100,000 American jobs in the next year, but as with other recent job-creation announcements, that figure is meaningless without context. What Amazon won’t tell us is that every job created at Amazon destroys one or two or three others. What Jeff Bezos doesn’t want you to know is that Amazon is going to destroy more American jobs than China ever did. Amazon has revolutionized the way Americans consume. Those who want to shop for everything from books to diapers increasingly go online instead of to the malls. And for about half of those online purchases, the transaction goes through Amazon.

For the consumer, Amazon has brought lower prices and unimaginable convenience. I can buy almost any consumer product I want just by clicking on my phone or computer — or even easier, by just saying: “Alexa: buy me one” — and it will be shipped to my door within days or even hours for free. I can buy books for my Kindle, or music for my phone instantly. I can watch movies or TV shows on demand. But for retail workers, Amazon is a grave threat. Just ask the 10,100 workers who are losing their jobs at Macy’s. Or the 4,000 at The Limited. Or the thousands of workers at Sears and Kmart, which just announced 150 stores will be closing. Or the 125,000 retail workers who’ve been laid off over the past two years.

Amazon and other online sellers have decimated some sectors of the retail industry in the past few years. For instance, employment at department stores has plunged by 250,000 (or 14%) since 2012. Employment at clothing and electronics stores is down sharply from the earlier peaks as more sales move online. “Consumers’ affinity for digital shopping felt like it hit a tipping point in Holiday 2014 and has rapidly accelerated this year,” Ken Perkins, the president of Retail Metrics, wrote in a research note in December. And when he says “digital shopping,” he really means Amazon, which has increased its share of online purchases from about 10% five years ago to nearly 40% in the 2016 holiday season.

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Rutte lost big and is the winner.

PM Mark Rutte Sees Off Challenge Of Geert Wilders In Dutch Election (G.)

The Dutch prime minister, Mark Rutte, has seen off a challenge from the anti-Islam populist Geert Wilders to claim a resounding victory in parliamentary elections widely seen as a test for resurgent nationalism before key European polls. With nearly 95% of votes counted and no further significant changes expected, Rutte’s centre-right, liberal VVD was assured of 33 MPs, by far the largest party in the 150-seat Dutch parliament, national news agency ANP said. Wilders’ Freedom party (PVV) looked certain to finish second, but a long way behind on 20 seats, just ahead of the Christian Democrat CDA and liberal-progressive D66 which both ended up in third position on 19 seats. “Our message to the Netherlands – that we will hold our course, and keep this country safe, stable and prosperous – got through,” Rutte told a cheering crowd of supporters at the VVD’s election night party.

After Britain’s shock Brexit vote and Donald Trump’s presidential victory in the US, he added, the eyes of the world had been on the vote: “This was an evening when … the Netherlands said ‘Stop’ to the wrong sort of populism.” A first-place finish for the anti-immigration, anti-EU PVV would have rocked Europe. In France, the far-right leader Marine Le Pen is expected to make the second-round runoff in the presidential election in May, while the Eurosceptic Alternative für Deutschland (AfD) is on target to win its first federal parliament seats later in the year. Relieved European politicians were quick to applaud. A spokesman for European commission president Jean-Claude Juncker hailed “a vote against extremists” while French foreign minister Jean-Marc Ayrault tweeted: “Congratulations to the Netherlands for halting the advance of the far right.”

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What’s going to be left by the time Brexit is reality?

Northern Ireland Vote Jolts Already Disunited Kingdom (R.)

A nationalist surge at elections in Northern Ireland and a Scottish demand for a second independence referendum have raised doubts over whether the United Kingdom can hold together after it leaves the European Union. Last year’s referendum on EU membership saw England and Wales vote to leave while Scotland and Northern Ireland voted to remain, straining the ties that bind the UK together. Scottish leader Nicola Sturgeon dealt a blow to British Prime Minister Theresa May on Monday by demanding a new vote on independence in late 2018 or early 2019, making her move much sooner than expected. But while the Scottish issue had been well flagged since the Brexit vote, a snap provincial assembly election in Northern Ireland produced a genuine shock: for the first time since the partition of Ireland in 1921, unionists lost their majority.

Nationalist party Sinn Fein, backed by many of Northern Ireland’s Catholics, narrowed the gap with the Democratic Unionist Party, whose support base is among pro-British Protestants, to just one seat. This has revived the slow-burning question of whether Northern Ireland will stay in the United Kingdom over the long term or become part of the Republic of Ireland. This could be achieved by a referendum, often referred to as a border poll. “A border poll might be 10 years away and it might still be lost, but clearly this election has shown a different dynamic in Northern Ireland politics,” said Peter Shirlow, Director of Irish Studies at the University of Liverpool. “This opens the door for a different scenario.”

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No visa-free travel either.

Erdogan, Europe Head for Political Blow-Up They Can’t Afford (BBG)

Politicians in Turkey and the European Union stoking tensions for short-term electoral gain may have done lasting damage to vital economic and security ties. While relations between the EU and Turkey have been rocky for years, the furor of recent days – with Turkish President Recep Tayyip Erdogan freely hurling the Nazi epithet at his western antagonists – marks a rift that could prove irreparable. Turkey has been negotiating EU membership since 2005, but progress has come close to a halt. “Even without anyone saying it, Turkey’s EU membership talks will go into an irreversible coma now,” said Marc Pierini, who served as the EU’s ambassador to Turkey from 2006-2011 and is a visiting scholar at Carnegie Europe, a Brussels-based think tank. “That will suit everybody, except Turkey’s democrats.”

[..] Pierini sees a wider clash between two populisms – one anti-Muslim in Europe, and the other fighting for the Islamization of the secular Turkish Republic – that risks an uncontrolled downward spiral. Europe’s leaders, he said, “are losing sight of the fundamentals, that you have a counter-revolution going on in Turkey,” where Erdogan is trying to reverse the westward course on which Mustafa Kemal Ataturk set the country in 1923. Hanging in the balance is a deal struck a year ago, under which Turkey agreed to cooperate in stemming the flow of refugees from Syria. In exchange, the EU provided more than $3 billion in economic aid and pledges both to “re-energize” Turkey’s stalled membership talks and deliver visa-free travel for Turks entering the 26-nation Schengen area, both of which are increasingly politically toxic for EU leaders.

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Where it hurts.

Turkey Protests Dutch Government by Returning 40 Holstein Cows (BBG)

Two months after a Turkish butcher broke the Internet, the country’s red meat producers are trying a novel way to break the Dutch government’s resolve. Members of the Ankara-based Beef and Lamb Producers Association have sent 40 Holstein cows back to the Netherlands to show their displeasure at a decision to prevent Turkish ministers from conducting political campaigning on their soil, the association’s chairman Bulent Tunc said in telephone interview. A fiery diplomatic spat has erupted between the two countries after the EU state, which is holding its own elections on Wednesday, refused access to Turkish ministers seeking to campaign on a referendum to expand President Recep Tayyip Erdogan’s powers.

While Tunc called the number of cows being shipped away “symbolic,” he spoke of widespread support for the Turkish president’s stance among association members, who number 160,000. Those involved in the cattle trade are also considering putting a stop to purchases of tractors, equipment, feed and bull semen — and extending the boycott to Austria, which Tunc accused of sharing the Dutch government’s stance. “There are many alternatives,” he said, citing Brazil and Romania as possibilities. “Turkey is a huge market for livestock imports and countries are dying to get in.”

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More Greek tragedies. Imagine having to give up age-old family homes and/or land because you can’t afford taxes.

Spike In Number Of Greeks Renouncing Inheritance To Avoid Taxes (K.)

An increasing number of people are turning their backs on properties they have inherited to avoid paying the higher taxes that accompany them, according to new data from the country’s courts which show that applications for renunciation of property rose 86.4% last year compared to 2013. According to the latest statistics, which were made public on Wednesday, a total of 54,422 such applications were lodged with the country’s local courts last year, compared to 45,628 in 2015 and 29,199 in 2013. Experts attribute the rise to the tremendous increase in property taxes that successive governments have imposed over the years as part of bailout agreements with Greece’s creditors. According to official figures, property owners paid seven times more in taxes last year compared to 2009, the year before the crisis hit.

In 2009, property taxes did not exceed €500 million, while revenue collected from property reached €3.5 billion last year. Most of those who filed documents last year to renounce their inheritance did so in the country’s major cities, with 11,655 applications recorded in Athens, 5,563 in Thessaloniki, 1,938 in Piraeus and 1,473 in Patra. People are not only giving up family houses and apartments but also plots of lands. According to Nikos Stasinopoulos, formerly the head of the association representing Greek notaries, many people in the provinces give up inherited land even when the tax they would have to pay on it is relatively small. He offered the example of one beneficiary in the region of Gortynia who gave up a plot on which he faced a €150 levy, and a second who inherited a total of 98 plots of land in the region of Larissa from his father and aunt and was “relieved” to discover that he could hand them over to the state to avoid paying tax.

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We have lost all wisdom. Only native peoples have any left.

“..all Maori tribes regard themselves as part of the universe, at one with and equal to the mountains, the rivers and the seas.”

New Zealand River Granted Same Legal Rights As Human Being (G.)

In a world-first a New Zealand river has been granted the same legal rights as a human being. The local Maori tribe of Whanganui in the north island has fought for the recognition of their river – the third-largest in New Zealand – as an ancestor for 140 years. On Wednesday, hundreds of tribal representatives wept with joy when their bid to have their kin awarded legal status as a living entity was passed into law. “The reason we have taken this approach is because we consider the river an ancestor and always have,” said Gerrard Albert, the lead negotiator for the Whanganui iwi [tribe]. “We have fought to find an approximation in law so that all others can understand that from our perspective treating the river as a living entity is the correct way to approach it, as in indivisible whole, instead of the traditional model for the last 100 years of treating it from a perspective of ownership and management.”

The new status of the river means if someone abused or harmed it the law now sees no differentiation between harming the tribe or harming the river because they are one and the same. Chris Finlayson, the minister for the treaty of Waitangi negotiations, said the decision brought the longest-running litigation in New Zealand’s history to an end. “Te Awa Tupua will have its own legal identity with all the corresponding rights, duties and liabilities of a legal person,” said Finlayson in a statement. “The approach of granting legal personality to a river is unique … it responds to the view of the iwi of the Whanganui river which has long recognised Te Awa Tupua through its traditions, customs and practise.” Two guardians will be appointed to act on behalf of the Whanganui river, one from the crown and one from the Whanganui iwi.

Albert said all Maori tribes regarded themselves as part of the universe, at one with and equal to the mountains, the rivers and the seas. [..] “We can trace our genealogy to the origins of the universe,” said Albert. “And therefore rather than us being masters of the natural world, we are part of it. We want to live like that as our starting point. And that is not an anti-development, or anti-economic use of the river but to begin with the view that it is a living being, and then consider its future from that central belief.”

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