Nov 202018
 
 November 20, 2018  Posted by at 10:42 am Finance Tagged with: , , , , , , , , , ,  


Henri Rousseau The waterfall 1910

 

China’s Next Crisis: Companies Guaranteeing Each Other’s Debt (ZH)
Another Volatility Spike May Be Ahead (Colombo)
FANGMAN Stocks Plunge 4.4%, Down $905 Billion, or 20%, since Aug. 31 (WS)
Nissan-Renault-Mitsubishi Chief Ghosn Arrested Over Financial Misconduct (AFP)
Dozens In Saudi Royal Family Turn Against Crown Prince (R.)
Germany Bans 18 Saudis Linked To Khashoggi Murder From Schengen Zone (AP)
France Says To Decide Soon On Sanctions Over Khashoggi Killing (R.)
Saudis, Houthis Agree To Yemen Peace Talks (ZH)
A Revote Is Necessary After Brenda Snipes Resigns (Vos)
White House Restores Acosta’s Press Pass, Issues News Conference Rules (MW)
Britain’s Enemy Is Not Russia But Its Own Ruling Class (Wight)
Surge In Marine Refuges Brings World Close To Protected Areas Goal (G.)
Fishing Nations Fail In Bid To Cut Quotas For Depleted Bigeye Tuna (AFP)

 

 

Simple and direct swindle. I’ll guarantee your debt if you guarantee mine, it doesn’t matter if we’re both broke. Beijing has known about this for years, but like with the shadow banks, decided to let it flourish because that meets its goals. Both are examples of how China can ‘grow’ its debt, without this showing up in its books. Don’t let the PBOC do it, people can see that.

China’s Next Crisis: Companies Guaranteeing Each Other’s Debt (ZH)

[..] the province of Shandong has emerged as the potential epicenter for the next debt crisis: here, at least 20 private firms provide guarantees that account for at least 10% of their total net assets – a ratio surpassing all other regions, according to Lv Pin, an analyst from CITIC Securities. “Private firms in Shandong have been exposed to more risks as they are caught up in the cross-guarantee trap, with bonds being dumped on the secondary market,” said Chen Su, bond portfolio manager at Qingdao Rural Commercial Bank Co. And, as noted above, local companies started suffering more financing difficulties as banks cut lending to this region earlier this year, Su said.

What makes this particular problem especially vexing is that, like a loose thread, once one company with cross-guarantees finds itself unable to fund its debt obligations, a cross-guarantee cascade is sprung, and dozens of other firms may end up unable to either satisfy their “guaranteed” commitments to the original debtor, until – ultimately – they are unable repay their own creditors. Bloomberg notes that cross-guarantee troubles have been cropping up for a while: “When a disclosure last year showed that Shandong Yuhuang Chemical Co. had guaranteed 1.35 billion yuan of obligations tied to Hongye Chemical Group, yields on Yuhuang’s 2020 dollar note shot up more than 2.30 percentage points in a week.”

For now, there hasn’t been a default serious enough to drag down numerous firms at the same time, although that may soon change. However, to make sure it doesn’t, China is engaging in what it does best to avoid a credit crisis: government funded bailouts. Sure enough, the province of Shandong is making efforts to avert any credit collapse. Its state assets regulator said a government-backed 10 billion yuan fund will be set up to address liquidity risks at listed companies, the China Securities Journal reported on Friday. More broadly, as we reported two weeks ago, China’s central bank has launched initiatives to aid credit to small and medium enterprises, and support bond issuance.

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The spike is guaranteed, it’s only the timing that’s not.

Another Volatility Spike May Be Ahead (Colombo)

The chart below shows the VIX Volatility Index, which appears to be forming a triangle pattern that may indicate that another big move is ahead. If the VIX breaks out of this pattern in a convincing manner, it would likely lead to even higher volatility and fear (which would correspond with another leg down in the stock market). On the other hand, if the VIX breaks down from this pattern, it could be the sign of a more extended market bounce or Santa Claus rally ahead.

In my early-October volatility warning, one of the charts I showed was the inverted 10-year/2-year Treasury spread and how it leads the VIX by approximately three years. According to this logic, the January and October volatility spikes were only the beginning of a much larger bullish volatility cycle (ie., one that accompanies a full-blown bear market).

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Easy money, easy losses.

FANGMAN Stocks Plunge 4.4%, Down $905 Billion, or 20%, since Aug. 31 (WS)

Folks who went through the wholesale Nasdaq destruction of 2000-2002 will just smile mildly because that’s when the Nasdaq, as the dotcom bubble imploded, lost 78%. Given our Everything Bubble is even bigger and crazier, the Nasdaq’s current sell-off barely registers on my own Richter scale, so to speak. The Dow fell 1.6%, is down just 7.2% from its peak, and for the year is clinging to a 1.2% gain. And the S&P 500 dropped 1.7% today and is down 8.5% from the peak. It too remains, if by the thinnest margin, in the green for the year. Nevertheless, real sums have started to evaporate. And much of it happened with the biggest stocks in so-called tech.

The seven FANGMAN stocks – Facebook, Amazon, Netflix, Google’s parent Alphabet, Microsoft, Apple, and NVIDIA – got hosed today. Again. Their combined market cap dropped 4.4% today, giving up $170 billion without breaking into a sweat. Since their combined market-cap peak of $4.63 trillion at the end of August, $905 billion have dissolved into ambient air. Down 19.6% in ca. 11 weeks. Despite the sell-off, the FANGMAN as a whole are still green for the year, and are back where they’d first been on January 11. So, from that perspective, this $905 billion that disappeared isn’t any kind of big deal unless it’s your money that disappeared along with it:

Let’s start by blaming Apple due to its number 1 mega-cap status. Its shares dropped nearly 4% today and are down 20.4% from their peak at the beginning of October. Once upon a time, the company was worth $1.12 trillion. It ended the day at $882 billion. $238 billion gone in ca. eight weeks. Not a day goes by when we don’t hear from an Apple supplier blaming an unnamed huge customer that can only be Apple for having to slash their revenue forecasts – apparently because three iPhone models are not selling very well. Apple’s principle that it can always make up for falling sales of devices by raising prices even further on the fewer devices it sells can only succeed for so long. At some point, consumers switch to something else or just refuse to “upgrade” at an ever faster rate, as Apple has to raise prices at an ever faster rate…. You know where this is going.

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Making tens of millions a year wasn’t enough.

Nissan-Renault-Mitsubishi Chief Ghosn Arrested Over Financial Misconduct (AFP)

Nissan chairman Carlos Ghosn faces being fired this week after being arrested in Japan over allegations of financial misconduct, the firm said Monday, in a stunning fall from grace for one of the world’s best-known businessmen. Ghosn’s arrest and his likely dismissal from Nissan, as well as possibly from Mitsubishi and Renault, sent shockwaves through the auto industry, where he is a towering figure, credited with turning around several major manufacturers. Besides being chairman of Nissan, the 64-year-old is also CEO of Renault and leads the Nissan-Renault-Mitsubishi alliance.

Nissan’s board will meet Thursday to decide his fate, and Mitsubishi said it would propose he be dismissed as chairman “promptly.” Renault said its board would meet “shortly”, after Ghosn was detained over allegations including underreporting his income. At a hastily organised press conference, Nissan CEO Hiroto Saikawa expressed “despair,” but also suggested that Ghosn had accrued too much power and eluded proper oversight. “Too much authority was given to one person in terms of governance,” he told reporters at Nissan’s headquarters in Yokohama. “I have to say that this is a dark side of the Ghosn era which lasted for a long time.”

The news of Ghosn’s downfall emerged unexpectedly on Monday evening, with local media first reporting he was being questioned by prosecutors and that Nissan’s headquarters was being raided. Shortly afterwards, Nissan said in a statement that it had been investigating Ghosn and Representative Director Greg Kelly for months after a whistleblower report. “These two gentleman are arrested this evening, that’s what I understand,” Saikawa said at the press conference. He said the company had uncovered years of financial misconduct including under-reporting of income and inappropriate personal use of company assets.

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Waiting for the King to die. Then let the war games begin. Meanwhile, can Trump afford to contradict the CIA? If he follows the CIA conclusion that MbS did it, what risk is that to the petrodollar? Shouldn’t Congress speak out on this?

Dozens In Saudi Royal Family Turn Against Crown Prince (R.)

Amid international uproar over the killing of journalist Jamal Khashoggi, some members of Saudi Arabia’s ruling family are agitating to prevent Crown Prince Mohammed bin Salman from becoming king, three sources close to the royal court said. Dozens of princes and cousins from powerful branches of the Al Saud family want to see a change in the line of succession but would not act while King Salman – the crown prince’s 82-year-old father – is still alive, the sources said. They recognize that the king is unlikely to turn against his favorite son, known in the West as MbS. Rather, they are discussing the possibility with other family members that after the king’s death, Prince Ahmed bin Abdulaziz, 76, a younger full brother of King Salman and uncle of the crown prince, could take the throne, according to the sources.

Prince Ahmed, King Salman’s only surviving full brother, would have the support of family members, the security apparatus and some Western powers, one of the Saudi sources said. Prince Ahmed returned to Riyadh in October after 2-1/2 months abroad. During the trip, he appeared to criticize the Saudi leadership while responding to protesters outside a London residence chanting for the downfall of the Al Saud dynasty. He was one of only three people on the Allegiance Council, made up of the ruling family’s senior members, who opposed MbS becoming crown prince in 2017, two Saudi sources said at the time.

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Germany decides for 26 other sovereign nations who they can let in (yeah, they talked to France and UK). Can Hungary do the same? If not, that’s a really big problem for the EU. Some more equal than others.

Germany Bans 18 Saudis Linked To Khashoggi Murder From Schengen Zone (AP)

Germany’s foreign minister says Berlin has banned 18 Saudi nationals from entering Europe’s border-free Schengen zone because they are believed to be connected to the killing of journalist Jamal Khashoggi. Heiko Maas told reporters in Brussels on Monday that Germany issued the ban for the 26-country zone in close co-ordination with France, which is part of the Schengen area, and Britain, which is not. “There are more questions than answers in this case, with the crime itself and who is behind it,” he said. Turkish and Saudi authorities say that Khashoggi was killed on Oct. 2 in Istanbul by a team from the kingdom, after he went to the Saudi Consulate to get marriage documents.

Maas said the 18 Saudis are “allegedly connected to this crime” but gave no further information. His Berlin office said they can’t release the names due to German privacy protections. The move comes a day after U.S. President Donald Trump said there was no reason for him to listen to a recording of the “very violent, very vicious” killing of Khashoggi, a columnist for the Washington Post who had been critical of Saudi Crown Prince Mohammed bin Salman.

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They won’t do anything, other than banning a few people pointed out by the Saudi’s themselves: “..we don’t intend to meddle in how the Saudi authorities are going to resolve this.”

France Says To Decide Soon On Sanctions Over Khashoggi Killing (R.)

France will decide very soon to impose sanctions on individuals linked to the murder of Saudi journalist Jamal Khashoggi, Foreign Minister Jean-Yves Le Drian said on Monday. “We are working very closely with Germany at this moment … and we will decide ourselves a certain number of sanctions very quickly over what we know (about the murder),” Le Drian told Europe 1 radio when asked whether Paris would follow Germany in imposing travel bans on Saudi individuals. “But we believe that we need to go beyond that, because the whole truth needs to be known.” “We want all the truth to be established and today it’s not the case. When I say all the truth, I mean the circumstances, those responsible need to be designated and once we’ve decided ourselves on the subject then we’ll take the necessary sanctions.”

French reaction has been relatively guarded given it is keen to retain its influence with Riyadh and protect commercial relations spanning energy, finance and military weapons sales. Asked about a CIA assessment blaming Saudi Crown Prince Mohammed bin Salman (MBS) for the killing and whether he could stay in his position, Le Drian said Paris had no intention of meddling in Saudi affairs. “He took some very strong initiatives that nobody was expecting … very significant initiatives and a modernization project that everyone appreciated,” Le Drian said. “What we’re seeing today is that it’s more complicated than that, but we don’t intend to meddle in how the Saudi authorities are going to resolve this.”

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Look like this might be what he US gets from the Khashoggi killing.

Saudis, Houthis Agree To Yemen Peace Talks (ZH)

The prospect for peace – or at least a lasting ceasefire – is advancing rapidly following a surprise weekend proposal by Yemen’s Houghis to halt all attacks on Saudi coalition forces. On Sunday the head of Yemen’s Iran-backed Houthi Supreme Revolutionary Committee Mohammed Ali al-Houthi, said “We are willing to freeze and stop military operations” — something which now appears to have taken effect, according to a breaking Reuters report. In the biggest turning point in the war which has raged since 2015, Reuters confirms: “Houthi rebels in Yemen said on Monday they were halting drone and missile attacks on Saudi Arabia, the United Arab Emirates and their Yemeni allies, responding to a demand from the United Nations.”

“We announce our initiative…to halt missile and drone strikes on the countries of aggression,” an official Houthi statement reads. Crucially, it appears this halt in fighting was precipitated by a Saudi agreement to the Houthi extension of an olive branch as according to the AFP Yemen’s internationally recognized Saudi-backed government says it has informed UN envoy Martin Griffiths it is ready to take part in proposed peace talks with Houthi rebels to be held in Sweden. “The [Saudi-backed Yemen] government has informed the UN envoy to Yemen … that it will send a government delegation to the talks with the aim of reaching a political solution,” Yemen’s pro-Saudi foreign ministry said, quoted by the official Saba news agency.

[..] On Monday Saudi King Salman told his country’s top advisory body, the Shura Council: “our support for Yemen was not an option but a duty… to help the Yemeni people confront the Iran-backed militias” — choosing to frame the ceasefire as if Riyadh has been on the side of “the people” the whole time. The King agreed there should be a “political solution” and a “comprehensive national dialogue” in Yemen, according to Reuters.

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Tech progress has bypassed the US. It can’t even organize an election.

A Revote Is Necessary After Brenda Snipes Resigns (Vos)

Recent press reports indicated that Brenda Snipes submitted her resignation from her position as Broward County Supervisor of Elections. The news does little to ameliorate the devastating corruption riddling Broward County politics. In the eyes of many observers, Snipes and her associates should rightfully be serving prison sentences for repeated election rigging that became colloquially known as the ‘Brenda Snipes Process.’ Shortly after the news was announced, Tim Canova called for the resignation of Snipes’s Director, Dozel Spencer. Likewise, many point out that Brenda Snipes is simply the public face of a deeply corrupt political system, and without real change, business will most likely continue as usual in the Southern Florida county.

In this writer’s opinion, two steps are as necessary as they are unlikely to be implemented: invalidation of the congressional race in the 23rd Congressional district, and prosecution of those involved in election rigging, including Debbie Wasserman-Schultz. As readers may recall, Brenda Snipes and former DNC Chairwoman Debbie Wasserman Schultz have been responsible for multiple instances actual election interference and actual data breaches that may have benefitted foreign interests. While the entire beltway establishment collectively lost its mind over fictitious allegations of Russian hacking and election interference, the real culprits have escaped both punishment and press scrutiny. It was Wasserman-Schultz who infamously worked to tip the scale in favor of Hillary Clinton’s campaign during the 2016 Democratic Primary.

She is the only defendant named personally in the ongoing DNC Fraud lawsuit, in which lawyers for the defense infamously argued that the DNC has the right to favor one primary candidate over another, later claiming that such practice is protected by the first amendment, despite the fact that it runs contrary to the party’s charter. Shortly before this year’s midterms, Donald Trump’s Department of Justice announced it would not prosecute the Awan scandal, in which Debbie Wasserman-Schultz was also personally embroiled. Disobedient Media’s Kenneth Whittle reported on concerns that the Awan brothers may have passed sensitive material stolen from Congress members to countries including Israel, Saudi Arabia, and China via Pakistan’s intelligence agency, the ISI.

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He gets a single question.

White House Restores Acosta’s Press Pass, Issues News Conference Rules (MW)

The White House said Monday it restored CNN reporter Jim Acosta’s press pass, as well as instituted a set of rules to govern future news conferences. Acosta’s pass had been revoked — then temporarily restored by a judge — following a testy news conference with President Donald Trump. White House press secretary Sarah Sanders said the administration notified Acosta his pass was restored, but also that he and other reporters would need to abide by four rules. The rules direct a journalist to ask a single question; permit journalists follow-up questions at the discretion of the president or other officials; require journalists to give up a microphone to other journalists; and threaten the revocation of journalists’ passes for not respecting the rules.

Sanders also hinted at the possibility more rules could be forthcoming. “It would be a great loss for all if, instead of relying on the professionalism of White House journalists, we were compelled to devise a lengthy and detailed code of conduct for White House events,” she said in a statement. Acosta and Trump sparred at a Nov. 7 news conference. Judge Timothy Kelly, a Trump appointee, later temporarily restored Acosta’s credentials. The rules and restoration of his pass come after the administration initially indicated it planned to try to keep excluding the CNN reporter from the White House.

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Not a lot of shame left there. Straight back to the days of Marx and Dickens.

Britain’s Enemy Is Not Russia But Its Own Ruling Class (Wight)

As the UK political establishment rips itself to pieces over Brexit, a far greater crisis continues to afflict millions of victims of Tory austerity. A devastating UN report into poverty in the UK provides incontrovertible evidence that the enemy of the British people is the very ruling class that has gone out of its way these past few years to convince them it is Russia. Professor Philip Alston, in his capacity as the United Nations Special Rapporteur on extreme poverty and human rights, spent two weeks touring the United Kingdom. He did so investigating the impact of eight years of one of the most extreme austerity programs among advanced G20 economies in response to the 2008 financial crash and subsequent global recession.

What he found was evidence of a systematic, wilful, concerted and brutal economic war unleashed by the country’s right-wing Tory establishment against the poorest and most vulnerable section of British society – upending the lives of millions of people who were not responsible for the aforementioned financial crash and recession but who have been forced to pay the price. From the report’s introduction: “It…seems patently unjust and contrary to British values that so many people are living in poverty. This is obvious to anyone who opens their eyes to see the immense growth in foodbanks and the queues waiting outside them, the people sleeping rough in the streets, the growth of homelessness, the sense of deep despair that leads even the Government to appoint a Minister for Suicide Prevention and civil society to report in depth on unheard of levels of loneliness and isolation.”

Though as a citizen of the UK I respectfully beg to differ with the professor’s claim that such social and economic carnage seems “contrary to British values,”(on the contrary it is entirely in keeping with the values of the country’s Tory establishment, an establishment for whom the dehumanization of the poor and working class is central to its ideology), the point he makes about it being “obvious to anyone who opens their eyes,” is well made. For it is now the case that in every town and city centre in Britain, it is impossible to walk in any direction for more than a minute before coming across homeless people begging in the street. And the fact that some 13,000 of them are former soldiers, casualties of the country’s various military adventures in recent years, undertaken in service to Washington, exposes the pious platitudes peddled by politicians and the government as reverence for the troops and their ‘sacrifice,’ as insincere garbage.

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Oh yeah, we’re doing just great. Paper parks don’t protect a thing.

Surge In Marine Refuges Brings World Close To Protected Areas Goal (G.)

A record surge in the creation of marine protected areas has taken the international community close to its goal of creating nature refuges on 17% of the world’s land and 10% of seas by 2020, according to a new UN report. Protected regions now cover more than five times the territory of the US, but the authors said this good news was often undermined by poor enforcement. Some reserves are little more than “paper parks” with little value to nature conservation. At least one has been turned into an industrial zone. More than 27m square kilometres of seas (7% of the total) and 20m sq km of land (15% of the total) now have protected status, according to the Protected Planet report, which was released on Sunday at the UN biodiversity conference in Sharm el-Sheikh, Egypt.

Almost all of the growth has been in marine regions, most notably with the creation last year of the world’s biggest protected area: the 2m sq km Ross Sea reserve, one-fifth of which is in the Antarctic. The no-fishing zone will be managed by New Zealand and the US. “We have seen an enormous expansion in the past two years. There is now more marine protected area than terrestrial, which nobody would have predicted,” said Kathy McKinnon of the International Union for the Conservation of Nature. “I think we’ll continue to see a substantial increase, I’d guess, to at least 10% in the near future.” The UN convention on biological diversity says it has received national commitments for an additional 4.5m sq km of land and 16m sq km of oceans to be given protected status in the next two years.

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I have an idea how this is going to end. Jellyfish sandwiches.

Fishing Nations Fail In Bid To Cut Quotas For Depleted Bigeye Tuna (AFP)

Dozens of nations on Monday failed to agree on measures to preserve one of the planet’s most valuable fish: the bigeye tuna, backbone of a billion-dollar business that is severely overfished. Some 50 countries as well as European Union member states wrapped up a meeting of the International Commission for the Conservation of Atlantic Tunas (ICCAT) in the Croatian seaside city of Dubrovnik without reaching a consensus on quotas. “It’s a setback and it’s bad news,” said Javier Garat Perez, secretary general of the Spanish fishing confederation Cepesca. Scientists shocked many in the industry last month when they warned that unless catch levels are sharply reduced, stocks of the fatty, fast-swimming predator could crash within a decade or two.

They warned that populations had fallen to less than 20 percent of historic levels. Less iconic than Atlantic bluefin but more valuable as an industry, bigeye (Thunnus obesus) – one of several so-called tropical tunas – is prized for sashimi in Japan and canned for supermarket sales worldwide. Three years ago, ICCAT introduced a 65,000-tonne catch limit for the seven largest fishers of bigeye, and a moratorium in certain areas of ocean. But other countries are not bound by the quotas, and bigeye hauls last year topped 80,000 tonnes – far too high to begin replenishing stocks.

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Sep 162015
 
 September 16, 2015  Posted by at 11:27 am Finance Tagged with: , , , , , , , , ,  


‘Daly’ Somewhere in the South, possibly Miami 1941

Why the Fed Should Raise Rates Now (Brad Brooks)
Volatility Seen Lingering No Matter What The Fed Does (Reuters)
Kyle Bass: China’s Real Problem Is Its Banking Sector (CNBC)
China Braces for Second Onshore Bond Default by State Firm (Bloomberg)
Chinese Retreat From Australian Property As Capital Controls Bite (AFR)
1,300 Hedge Funds Liquidate Amid China’s $5 Trillion Stocks Selloff (Bloomberg)
Chief Of Biggest China Brokerage Swept Up In Stock-Rout Probe (Bloomberg)
West ‘Ignored Russian Offer In 2012 To Have Syria’s Assad Step Down’ (Guardian)
Hungary Locks Down EU Border, Taking Migrant Crisis Into Its Own Hands (Reuters)
Spanish ‘Safe Cities’ Hope To Offer A Haven For Refugees (Le Monde)
Refugees May Become Trapped In Greece, Minister Fears (Reuters)
Europe’s Frontex Gears Up To Thwart Unwanted Migrants (Reuters)
ECB Says Quantitative Easing Relatively Small So Far (Reuters)
Ukraine On Brink Of Debt Deal That Greece Can Only Dream Of (Ind.)
Tuna And Mackerel Populations Suffer Catastrophic 74% Decline (Guardian)
Land Degradation Costs World $10.6 Trillion A Year, 17% of World GDP (Guardian)
Indigenous Australia Storytelling Accurate on Sea Level Rises 7000 Years Ago (G.)

Plenty reasons. Plenty for the other side too.

Why the Fed Should Raise Rates Now (Brad Brooks)

Now that U.S. stock markets have experienced their first 10% correction since 2011, investors are again looking to the Federal Reserve to bail them out. Although the Fed hasn’t raised interest rates in almost 10 years, sympathetic pundits say it’s still too soon to raise them now. The economist Larry Summers, runner-up for the top spot at the Fed a few years ago, says raising rates would risk “tipping some parts of the financial system into crisis.” How did our financial system weaken to the point where a quarter of a % increase in rates is more than it can handle? The process started a dozen years ago, when Alan Greenspan – then chairman of the Fed – decided to lower rates to 1% after the country had emerged from the mild recession that followed the popping of the tech bubble.

Then, when the Fed began to tighten policy, it did so with agonizing slowness – raising rates just a quarter of a % at a time, so as not to upset the financial markets. This set the table for the subprime housing debt mess in a way that neither Greenspan nor his successor, Ben Bernanke, could foresee. Everyone assumed real estate was too diverse an asset class to ever be in a bubble. Despite credible warnings about the potential problems starting in 2005, the Fed and Treasury were still blindsided in 2008 by the enormous losses at Bear Stearns, Lehman and AIG. Suddenly, the emergency 0% overnight lending rate was required and, almost seven years later, it’s still deemed necessary. Meanwhile, three rounds of quantitative easing have added roughly $3.5 trillion in purchases to the Fed’s balance sheet.

What we have to show for this is a more concentrated financial system, in which the top five banks control nearly half of all U.S. financial assets. Even more troubling is evidence that, this time around, asset bubbles have formed in multiple arenas. Earlier this year, the economist Robert Shiller, who predicted the tech and real estate bubbles, warned that the U.S. now faces a potential bubble in the bond market. The high-end housing and art markets also seem to be in bubbly territory, but before they can cause too much trouble we’re likely to see a serious correction in the U.S. equity market.

The trigger is likely to be the hundreds of billions of dollars worth of bad debt in the energy sector – loans that were made to finance the fracking frenzy. Even when the price of oil was twice what it is today, many of the borrowers involved were not cash-flow positive, and few adequately hedged their exposure. While the experts like to talk about how quickly the price of oil rebounded after the financial crisis, the current oversupply makes today’s situation more akin to what happened in the 1980s. That took years to correct, as desperate companies and governments kept producing more crude.

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If volatility stays no matter what they do, they might as well…

Volatility Seen Lingering No Matter What The Fed Does (Reuters)

While investors, traders and forecasters may be on the fence as to whether the Fed pulls the trigger this week on the first U.S. interest rate hike in nearly a decade, Wall Street’s “smart money” is decisive on one thing: market volatility will linger. Heading into Thursday’s potentially momentous decision on interest rates from the Federal Open Market Committee, the Federal Reserve’s monetary policy-setting panel, speculative positions in CBOE VIX index futures are the most net long on record. To this crowd of hedge funds and other big speculators, it really doesn’t matter what the Fed does. Raising rates for the first time since 2006 would almost certainly send waves through equity markets, and not moving will keep the guessing game – and accompanying market gyrations – alive for weeks to come.

“There is a general consensus in the market that the Fed meeting will continue the volatility, and if they don’t do anything it may sustain the volatility at least for six more weeks till their next meeting,” said J.J. Kinahan, chief strategist at TD Ameritrade in Chicago. The most recent weekly Commitments of Traders data from the Commodity Futures Trading Commission shows speculative net long positions in VIX futures stood at 37,925 contracts as of Sept. 13. Not only is that a record high, it is more than two standard deviations from the norm.

Since VIX futures, a forward-looking gauge of market risk, were introduced in 2004, speculative positions have been skewed toward lower volatility far more often than not. Long VIX futures positions benefit from increased volatility and can be used to protect equity portfolios. Moreover, positioning in VIX futures has flipped like never before over the last month as the Fed guessing game has been compounded by worries over the health of China’s economy and its wobbly stock market. In contrast to the latest positioning, speculators in early August were net short by 64,445 contracts – a reversal of more than 100,000 in five weeks – highlighting the strong conviction of hedge funds and other large speculators that market gyrations are far from over.

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“..Chinese bank assets rose about 400% since 2007, and are now about $31 trillion against an economy with a GDP of $10 trillion.” “..a “likely” 10% asset loss in that banking sector would amount to $3 trillion.”

Kyle Bass: China’s Real Problem Is Its Banking Sector (CNBC)

While many are watching its stock market, China’s real problem may lie with its banking system, according to one hedge fund manager. Kyle Bass, Hayman Capital Management founder and managing partner, told CNBC’s “Squawk on the Street” on Tuesday that Chinese banks will likely experience losses that may affect the country as a whole. “Those that are watching whether Chinese stocks go up or down aren’t paying attention, in my opinion, to what the real problem is,” Bass said. “And the real problem is the loans in this banking sector.” The hedge fund manager said that Chinese bank assets rose about 400% since 2007, and are now about $31 trillion against an economy with a GDP of $10 trillion.

“When you run a bank expansion that aggressively, that quickly, you’re going to have some losses,” he said, adding that “the scary thing about that” is a “likely” 10% asset loss in that banking sector would amount to $3 trillion. Such losses would force China to use much of its foreign exchange reserves (which stand at about $3.6 trillion) and sell bonds to recapitalize the banking system, he said. Bass said these issues are mirrored in many emerging markets—especially those in Asia—and could therefore ultimately affect global GDP.

While the ripples of an emerging market downturn could draw U.S. GDP lower than estimated, countries like South Africa could be seriously impacted. Bass said his investment group is closing watching nations that run twin deficits, and those that may have to devalue their currency “in order to come back to some level of competitiveness with the rest of the world.” As the loan cycle forces emerging market banks to see steep losses, “the next two years are going to be tough,” he said. “We talk about this race to the bottom and this currency war. Well it’s happening as we speak,” he said. “China literally just started with its devaluation process—wait until you see where that goes.”

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When the state can’t keep its own companies alive, who’s going to trust it to save stocks?

China Braces for Second Onshore Bond Default by State Firm (Bloomberg)

China National Erzhong Group may miss an interest payment later this month after one of its creditors filed a restructuring request, putting it at risk of becoming the second state-owned company to default in the nation’s onshore bond market. The smelting-equipment maker might not be able to pay a coupon that’s due Sept. 28 on its 1 billion yuan ($157 million) of 5.65% 2017 notes if a local court accepts the creditor’s restructuring application before that date, according to a statement posted on Chinamoney.com.cn. China National Erzhong, based in China’s western Sichuan province, issued the five-year securities in 2012 at par and the debentures are currently trading at 67.72% of that.

Uncertainty over the payment comes as deflation risks, overcapacity and spiraling corporate debt cloud the outlook for China’s economy, forecast to expand at the slowest pace since 1990 this year. Baoding Tianwei Group failed to pay interest of 85.5 million yuan on one of its bonds in April, becoming the first state-owned enterprise to default in the onshore market. “Because Erzhong is a state-owned company, if it defaults it may arouse investors’ concern about companies’ credit risks,” said Qu Qing, a bond analyst at Huachuang Securities Co. in Beijing.

Five interest rate cuts by the People’s Bank of China since November and rules to relax yuan bond issuance onshore mean Chinese companies are becoming less reliant on dollar funding and more reliant on the nation’s domestic market. Local corporate bond sales have jumped 77% to 7.85 trillion yuan in 2015 from the same period last year, according to data compiled by Bloomberg. The extra spread investors demand to own five-year AA- rated bonds over government debt has narrowed 69.5 basis points since Dec. 31 to 214 basis points Tuesday, according to data compiled by ChinaBond. China National Erzhong is a wholly owned subsidiary of state-owned China National Machinery, according to a China International Capital Corp. report in April.

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And New Zealand, and Canada, and…

Chinese Retreat From Australian Property As Capital Controls Bite (AFR)

Chinese purchases of Australian property have dropped significantly in the past month, according to agents, as buyers struggle to shift money out of the country following Beijing’s move to tighten capital controls. One Chinese agent said the latest efforts by the central government to avoid large capital outflows were having a “significant impact” on his business. “It has affected 70 to 80% of current transactions and some have already been suspended,” said the agent who asked not to be named. The tighter foreign exchange rules are also set to impact the federal government’s relaunched Significant Investor Visa (SIV), which provides fast-tracked residency for those investing at least $5 million into Australia.

“I think it will be big, big trouble for the SIV program because the amount of money is just too large,” said one Shanghai-based adviser, who sells Australian property and advises wealthy clients on their migration plans. Only seven SIV applications have been submitted since the new rules were introduced on July 1, which require investors to put their money into riskier assets such as venture capital and emerging companies. China has previously tolerated significant capital outflows via so called “grey channels”, but has tightened up enforcement in recent weeks as the economy slows and fears over capital flight put downward pressure on the currency.

The crackdown from Beijing has seen Chinese banks setting up watch lists for unusual transactions, according to one bank manager, who asked not to be named as he was not authorised to speak about the policy. He said the operation was aimed at cracking down on a practice whereby family and friends of those wanting to purchase a property overseas all transfer US$50,000 into an overseas account. That’s the limit each Chinese individual is allowed to move out of the country each year. The purchaser then pays back his friends and family in China and uses the money from the overseas account to put down a deposit on the property.

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Relatively small, but of course crazily leveraged.

1,300 Hedge Funds Liquidate Amid China’s $5 Trillion Stocks Selloff (Bloomberg)

It’s about to get even uglier for China’s hedge funds. The newfangled industry, short on expertise and ways to protect itself from market declines, has seen almost 1,300 funds liquidate amid China’s $5 trillion stocks selloff, and a similar number may be at risk, according to Howbuy Investment Management Co. Now, a government crackdown on short selling and other hedging strategies have made prospering in a bear market difficult. It’s an inglorious turn for China’s on-again, off-again love affair with stocks, which saw the number of hedge-fund-like vehicles explode in past years as the government made it easier to register funds and introduced new financial instruments. The market rout – and the regulatory response to it – has revealed cracks in the industry that suggest it may need years to recover.

In the most devastating blow to domestic hedge funds, China has imposed new restrictions on trading in stock-index futures, a key investment strategy to dampen volatility and avoid big losses. “It spells the end, at least temporarily, for China domestic hedge funds,” Hao Hong at BOCOM International said in an interview. China’s hedge-fund industry has grown rapidly as the nation’s stock market jumped and wealthy individuals and smaller institutions sought to profit from that surge. The number of private placement securities funds, the Chinese equivalent of hedge funds, more than doubled from the beginning of the year, peaking at 11,159 as of Aug. 31, managing 1.62 trillion yuan (about $254 billion) in assets, according to the China Securities Regulatory Commission. Individual investors are required to have at least 5 million yuan in assets to invest in hedge funds, while institutions must have at least 10 million yuan.

While these vehicles in China are broadly categorized as hedge funds, there is one key difference with counterparts in the U.S., Europe and Hong Kong. Most of them are long-only, meaning they bet solely on rising markets. Even before government restrictions on practices such as short-selling, many limited hedging so they maximize benefits from a market that had advanced almost 50% in the two years through 2014 and rallied another 60% through mid-June. Most China-based managers rarely wager against individual securities because the practice is expensive and many new managers lack the expertise for complex strategies, Alexis He at Z-Ben Advisors said.

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If you don’t let people sell anything, you don’t have a market.

Chief Of Biggest China Brokerage Swept Up In Stock-Rout Probe (Bloomberg)

The president of China’s biggest brokerage has been swept up in a widening campaign to root out financial wrongdoing and assign blame for the nation’s US$5 trillion stock rout. The probe of Citic Securities Co. president Cheng Boming comes after the state-run Xinhua News Agency reported last month that four executives at Citic had admitted to so-called insider trading. The firm is part of Citic Group, the nation’s first state-owned investment corporation, which was set up in 1979 as part of paramount leader Deng Xiaoping’s push to modernize the country. Since the market crash, China’s targets have ranged from so-called “malicious” short sellers to a journalist from business magazine Caijing whose report was alleged to have caused market panic. Authorities say they want to “purify” the market.

“There does seem to be a bit of a witch hunt for a scapegoat at the moment, but I think this is mostly signaling by the authorities that they will not tolerate what they perceive as ‘unhelpful’ selling in the market,” said Tony Hann, a London-based money manager at Blackfriars Asset Management, which oversees about US$350 million. Citic confirmed the police investigation of Cheng in a statement to Shanghai’s stock exchange. Shares of the company fell 1.2% in Shanghai to 13.36 yuan, the lowest intraday level since Nov. 7, as of 9:38 am local time. The stock has slumped 58% since June amid a rout in Chinese equities that dragged down the benchmark index from a more than seven-year high. Citic Securities is one of the brokerages whose booming margin lending had helped fuel the stock-market’s prior rally.

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Just think of all the money made by the weapons industry in the intervening years…

West ‘Ignored Russian Offer In 2012 To Have Syria’s Assad Step Down’ (Guardian)

Russia proposed more than three years ago that Syria’s president, Bashar al-Assad, could step down as part of a peace deal, according to a senior negotiator involved in back-channel discussions at the time. Former Finnish president and Nobel peace prize laureate Martti Ahtisaari said western powers failed to seize on the proposal. Since it was made, in 2012, tens of thousands of people have been killed and millions uprooted, causing the world’s gravest refugee crisis since the second world war. Ahtisaari held talks with envoys from the five permanent members of the UN security council in February 2012. He said that during those discussions, the Russian ambassador, Vitaly Churkin, laid out a three-point plan, which included a proposal for Assad to cede power at some point after peace talks had started between the regime and the opposition.

But he said that the US, Britain and France were so convinced that the Syrian dictator was about to fall, they ignored the proposal. “It was an opportunity lost in 2012,” Ahtisaari said in an interview. Officially, Russia has staunchly backed Assad through the four-and-half-year Syrian war, insisting that his removal cannot be part of any peace settlement. Assad has said that Russia will never abandon him. Moscow has recently begun sending troops, tanks and aircraft in an effort to stabilise the Assad regime and fight Islamic State extremists. Ahtisaari won the Nobel prize in 2008 “for his efforts on several continents and over more than three decades, to resolve international conflicts”, including in Namibia, Aceh in Indonesia, Kosovo and Iraq.

On 22 February 2012 he was sent to meet the missions of the permanent five nations (the US, Russia, UK, France and China) at UN headquarters in New York by The Elders, a group of former world leaders advocating peace and human rights that has included Nelson Mandela, Jimmy Carter, and former UN secretary general Kofi Annan. “The most intriguing was the meeting I had with Vitaly Churkin because I know this guy,” Ahtisaari recalled. “We don’t necessarily agree on many issues but we can talk candidly. I explained what I was doing there and he said: ‘Martti, sit down and I’ll tell you what we should do.’

“He said three things: One – we should not give arms to the opposition. Two – we should get a dialogue going between the opposition and Assad straight away. Three – we should find an elegant way for Assad to step aside.” Churkin declined to comment on what he said had been a “private conversation” with Ahtisaari. The Finnish former president, however, was adamant about the nature of the discussion. “There was no question because I went back and asked him a second time,” he said, noting that Churkin had just returned from a trip to Moscow and there seemed little doubt he was raising the proposal on behalf of the Kremlin.

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And others will follow that. Watch Croatia and Slovenia. Europe will need to close all entrances. And even then refugess will still keep coming.

Hungary Locks Down EU Border, Taking Migrant Crisis Into Its Own Hands (Reuters)

Hungary’s right-wing government shut the main land route for migrants into the EU on Tuesday, taking matters into its own hands to halt Europe’s influx of refugees. An emergency effort led by Germany to force European Union member states to accept mandatory quotas of refugees collapsed in discord. Berlin called for financial penalties against countries that refused to accommodate their share of migrants, drawing a furious response from central Europe. A Czech official accused Berlin of making empty threats while Slovakia said such penalties would bring the “end of the EU”. Under new rules that took effect from midnight, Hungary said anyone seeking asylum at its border with Serbia, the EU’s external frontier, would automatically be turned back.

Anyone trying to sneak through would face jail. In scenes with echoes of the Cold War, families with small children sat in fields beneath the former communist country’s new 3.5-metre (10 foot) high fence, which runs almost the length of the border, topped with razor wire. [..] Eastern European countries argue that a more welcoming stance encourages more people to make dangerous voyages, and risks attracting an uncontrolled influx that would overwhelm social welfare systems and dilute national cultures. Under its new rules, Hungary said it will now automatically turn back refugees who arrive by land over the main route from Serbia, a country it has declared “safe”. Asylum claims would be processed within eight days and those at the Serbian border should be rejected within hours.

“If someone is a refugee, we will ask them whether they have submitted an asylum request in Serbia. If they had not done so, given that Serbia is a safe country, they will be rejected,” Orban was quoted as telling private broadcaster TV2 on Monday. “We will start a new era,” government spokesman Zoltan Kovacs said shortly after midnight on the border. “We will stop the inflow of illegal migrants over our green borders.” Serbia called the new Hungarian rules “unacceptable”. The United Nations disputed the definition of Serbia as safe, saying the poor ex-Yugoslav state lacked capacity to house thousands of refugees turned back at Europe’s gates.

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Poorer countries have more decency.

Spanish ‘Safe Cities’ Hope To Offer A Haven For Refugees (Le Monde)

The Spanish government, led by Mariano Rajoy, may have dragged its feet in response to pressure from Brussels to take Syrian refugees, but Barcelona, Madrid and several other cities governed by councils with roots in the indignado movement took the initiative with a network of “safe cities” to assist some of those arriving in Europe. Ada Colau, the mayor of Barcelona, started the ball rolling when she announced the launch of a register of families willing to open their home to refugees or simply help them. It proved an immediate success. Thousands of Catalans emailed their details to the list. A dozen cities have signed up to the scheme. Madrid mayor Manuela Carmena has been looking at “ways of alleviating the distress”.

Valencia plans to open emergency accommodation for refugees and is allocating 110 social workers specifically to look after children. Several councils have asked banks to release housing stock that has been vacant since the property market tumbled. Other cities involved include Pamplona, Zaragoza, La Coruña and Malaga. Colau said the predicament of people fleeing war and persecution was “shameful, condemning Europe for dodging the issue and criticising the “ridiculous” figure initially proposed by the Rajoy government to cope with the crisis. The Spanish government has since agreed it would accept its share of migrants under the European commission’s proposed new quota system, according to AFP.

Spain agreed to take in another 14,931 refugees as proposed by the commission, in addition to the 2,379 it had initially said it would accept. The government had initially announced that it would only be accepting 2,379 refugees, as part of EU efforts to solve the crisis, whereas Brussels had initially wanted it to take 5,849.

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Maybe Europe likes it that way.

Refugees May Become Trapped In Greece, Minister Fears (Reuters)

Greece may find it increasingly hard to cope with refugees entering the country as unilateral decisions by other European nations cause bottlenecks and worsening weather fails to deter new arrivals, its interim maritime minister said. Greece has this year become the main gateway for hundreds of thousands of refugees flowing into Europe, many fleeing conflict in Syria and Afghanistan, in the continent’s biggest migration crisis since World War Two. “We cannot carry this load alone,” Christos Zois told Reuters in an interview on Tuesday from his office overlooking the busy port of Piraeus, where thousands of refugees and migrants arrive from the country’s eastern islands every day.

“This is not Greece’s problem alone. We’re not guarding Greece’s borders, we’re guarding the European Union’s borders. We need support – economic and moral support.” Its economy already crippled by years of recession and bailout-driven austerity, Greece has repeatedly called for European Union funds to help it weather the refugee crisis. Of the record 430,000 refugees and migrants that have made the journey across the Mediterranean to Europe so far this year, 309,000 have arrived via Greece, according to the International Organization for Migration. In July and August alone, Greece saw 150,000 arrivals, Zois said.

So far the vast majority have used the country only as a transit point along a route taking them north to richer states. But decisions by Hungary to fence off that route and by Germany to reimpose border controls have increased the risk that Greece will be unable to move the migrants on, possibly tipping its economy back into recession. Asked if he was concerned that refugees might become trapped in Greece, the minister said: “I’m not optimistic because I see that everyone is buying time which, meanwhile… is running out.” His unease is shared by the IOM, a United Nations partner agency. “The expectation is that the refugees and migrants …will just build up … and add enormous pressure on the Greek authorities,” IOM spokesman Leonard Doyle told a briefing in Geneva.

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Another vile institution in the EU: “..could imagine Frontex one day having forces of its own to deploy.”

Europe’s Frontex Gears Up To Thwart Unwanted Migrants (Reuters)

Europe’s border agency Frontex is preparing to speed up identification of illegal migrants and help deport them in large numbers as irregular arrivals this year topped a record half a million. “When you have up to 40% of migrants coming from a third country not granted refugee status and if nothing happens, if they are not returned, what message does the EU convey to potential migrants?” Frontex head Fabrice Leggeri told Reuters a day after EU ministers agreed to grant the agency more powers and resources. EU data show just under half of asylum claims were granted last year but less than half of those rejected were deported. Frenchman Leggeri, who took over the coordinating agency for the EU’s external borders in January, warned that more migrants may have to be detained and forcibly sent home.

But he voiced concern that national governments have cut back on border guards during the recession, limiting the numbers of trained personnel available for secondment by Frontex to crisis zones. After a call last week by EU chief executive Jean-Claude Juncker for a dedicated EU border guard and coastguard service, Leggeri said he was keen to extend typical periods of secondment for staff to a year or more from as little as a month and could imagine Frontex one day having forces of its own to deploy. Funding and staff are still being worked out, Leggeri said, but Frontex is now working on ways to speed fingerprinting and registration of people claiming asylum, notably to filter those fleeing for their lives from those simply seeking a better life.

With Europe opening its doors to Syrians, Frontex operations in Greece had revealed high levels of “nationality swapping” – of people initially claiming to be Syrian, 13% were not. “Those 13% are very likely irregular migrants, some are from North Africa,” he said. “They must be returned.”

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Clueless in Frankfurt: “China can still stabilize its situation and to keep growth above 6% is achievable in the short term.”

ECB Says Quantitative Easing Relatively Small So Far (Reuters)

The European Central Bank has scope to buy more assets as its quantitative easing has been small compared to similar schemes elsewhere, ECB Vice President Vitor Constancio said, adding that Europe also needs the US and Chinese economies to motor ahead. The asset buys, started in March to lift the bloc out of deflation, helped Europe to weather the Greek and Chinese turmoil but euro area inflation could turn negative again in the coming months so the bank stands ready to increase the size, composition and duration of the scheme, if necessary, Constancio said. Drawing a comparison with other major central banks around the globe, Constancio said the European scheme is dwarfed by past asset buys, particularly by the US Federal Reserve and the Bank of Japan.

“The total amount that we have purchased represents 5.3% of the GDP (gross domestic product) of the euro area, whereas what the Fed has done represents almost 25% of the US GDP, what the Bank of Japan has done represents 64% of the Japanese GDP and what the UK has done 21% of the UK’s GDP,” Constancio told Reuters in an interview. “So we are very far from what the major central banks have done,” Constancio, 71, said. “This is not a benchmark …(but) there is scope, if the necessity is there.” But Constancio also dismissed criticism from some that quantitative easing was not working, pointing to improved inflation expectations, growth in bank lending and a drop in borrowing costs despite the anxiety in financial markets.

He also said that the bank needs to look through volatility even if market turbulence is now more prevalent than in the past. “Monetary policy is not about fine tuning volatility in financial markets,” he said. “Central banks should be independent from financial markets and not follow all their fluctuations.” The ECB’s 1 trillion-euro plus asset-buying program is set to run for another year but the majority of analysts polled by Reuters expect the scheme to be expanded as sharply lower commodity prices dampen long term price expectations and as inflation, now at 0.2%, takes years to pick up. Indeed, one of the ECB’s top measures of long-term inflation expectations, the five-year, five-year euro zone breakeven forward has fallen to below 1.7%, short of the ECB’s inflation target of just under 2%.

Pointing to uncertainties, Constancio said much depended on the United States and China. “We need a strong recovery in the US,” Constancio said. “China can still stabilize its situation and to keep growth above 6% is achievable in the short term.”

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More equal.

Ukraine On Brink Of Debt Deal That Greece Can Only Dream Of (Ind.)

In a rare piece of European economic good news, Ukraine’s major creditors look set to write off 20% of the embattled country’s foreign debt. Prime Minister Arseniy Yatsenyuk, speaking at an economic conference on the weekend, said he expects parliament to approve the measures in the next few days. The deal will effectively restructure £11.7bn of Ukraine’s total foreign loans, thus helping the country avoid the drawn-out negotiations suffered by Greece in recent months. It also unlocks support from the IMF and halts principal payments for the next four years to help the country get back on its feet. Ukraine is currently in the grip of a deep recession following mismanagement by previous governments as well as dealing with ongoing skirmishes with pro-Russia rebels in the east of the country.

Ukraine’s finance minister Natalie Jaresko told The New York Times that the deal showed that creditors can work with debt-burdened countries and not end up on “opposite sides of the table”: It’s a benchmark for emerging markets [that could serve as a template]. It is every sovereign’s dream. I would hope that it shows that you don’t need to rush into a default, even having the willingness to use a moratorium if needed. The deal has been praised in many corners, but it’s not clear what will happen if Russia, a major creditor not present at the talks, decides not to participate. The domineering neighbour is unlikely to view the deal favourably given that the Ukrainian finance ministry released a statement saying the deal will allow more money to be channelled into fighting pro-Russia separatists.

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We’re going to wreck it all.

Tuna And Mackerel Populations Suffer Catastrophic 74% Decline (Guardian)

Tuna and mackerel populations have suffered a “catastrophic” decline of nearly three quarters in the last 40 years, according to new research. WWF and the Zoological Society of London found that numbers of the scombridae family of fish, which also includes bonito, fell by 74% between 1970 and 2012, outstripping a decline of 49% for 1,234 ocean species over the same period. The conservation charity warned that we face losing species critical to human food security, unless drastic action is taken to halt overfishing and other threats to marine life. Louise Heaps, chief advisor on marine policy at WWF UK, said: “This is catastrophic. We are destroying vital food sources, and the ecology of our oceans.”

Attention in recent years has focused on species such as bluefin tuna, now on the verge of extinction, but other close relatives commonly found on restaurant menus or in tins, such as yellowtail tuna and albacore, are now also becoming increasingly scarce. Only skipjack, also often tinned, is showing “a surprising degree of resilience”, according to Heaps, one of the authors of the Living Blue Planet report, published on Wednesday. Other species suffering major declines include sea cucumbers, a luxury food in Asia, which have fallen 98% in number in the Galapagos and 94% in in the Egyptian Red Sea. Populations of endangered leatherback turtles, which can be seen in UK waters, have plummeted. Overfishing is not the only culprit behind a halving of marine species since 1970.

Pollution, including plastic detritus which can build up in the digestive systems of fish; the loss of key habitats such as coastal mangrove swamps; and climate change are also taking a heavy toll, with the oceans becoming more acidic as a result of the carbon dioxide we are pouring into the atmosphere. “I am terrified about acidification,” Heaps told the Guardian. “That situation is looking very bleak. We were taught in the 1980s that the solution to pollution is dilution, but that suggests the oceans have an infinite capacity to absorb our pollution. That is not true, and we have reached the capacity now.” She predicts that all of the world’s coral reefs could be effectively lost by 2050, if current trends are allowed to continue unchecked, and said that evidence of the effects of acidification – which damages tiny marine animals that rely on calcium to make their shells and other organs – could be found from the Antarctic to the US west coast.

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Externalities. Bills to pay later.

Land Degradation Costs World $10.6 Trillion A Year, 17% of World GDP (Guardian)

Land degradation is costing the world as much as $10.6tn every year, equivalent to 17% of global GDP, a report has warned. More than half of the world’s arable land is moderately or severely degraded, according to a report published on Tuesday by the Economics of Land Degradation (ELD) Initiative (pdf). The report estimates the cost of this environmental destruction, not only from lost agricultural production and diminished livelihoods, but also from the lost value of ecosystem services formerly provided by the land, including water filtration, erosion prevention, nutrient cycling and the provision of clean air. Land degradation – decreased vegetation cover and increased soil erosion – also means that land is less able to store carbon, contributing to climate change.

Land use changes represent the second biggest source of greenhouse gas emissions after fossil fuel combustion, the study says. “Burgeoning populations with shifting demographics and distributions are increasing the demands on land to produce food, energy, water, resources and livelihoods,” the report says. Desertification, the result of climate change, is having a profound effect on migration. Karmenu Vella, European commissioner for Environment, Maritime Affairs and Fisheries, said that land degradation and desertification is forcing hundreds of thousands to move from their homes. A study by the UN’s Convention to Combat Desertification (UNCCD), which was cited by the authors of the ELD report, found that the process may drive an estimated 50 million people from their homes in the next 10 years.

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An awfully underestimated civilization.

Indigenous Australia Storytelling Accurate on Sea Level Rises 7000 Years Ago (G.)

Indigenous stories of dramatic sea level rises across Australia date back more than 7000 years in a continuous oral tradition without parallel anywhere in the world, according to new research. Sunshine Coast University marine geographer Patrick Nunn and University of New England linguist Nicholas Reid believe that 21 Indigenous stories from across the continent faithfully record events between 18,000 and 7000 years ago, when the sea rose 120m. Reid said a key feature of Indigenous storytelling culture – a distinctive “cross-generational cross-checking” process – might explain the remarkable consistency in accounts passed down by preliterate people which researchers previously believed could not persist for more than 800 years.

“The idea that 300 generations could faithfully tell a story that didn’t degenerate into Chinese whispers, that was passing on factual information that we know happened from independent chronology, that just seems too good to be true, right?” Reid told Guardian Australia. “It’s an extraordinary thing. We don’t find this in other places around the world. The sea being 120 metres lower and then coming up over the continental shelf, that happened in Africa, America, Asia and everywhere else. But it’s only in Australia that we’re finding this large canon of stories that are all faithfully telling the same thing.” Scholars of oral traditions have previously been sceptical of how accurately they reflect real events.

However, Nunn and Reid’s paper, “Aboriginal memories of inundation of the Australian coast dating from more than 7000 years ago”, published in Australian Geographer, argues the stories provide empirical corroboration of a postglacial sea level rise documented by marine geographers. Some of the stories are straight factual accounts, such as those around Port Phillip Bay near Melbourne, which tell of the loss of kangaroo hunting grounds. Others, especially older stories such as those from around Spencer Gulf in South Australia, are allegorical: an ancestral being angered by the misbehaviour of a clan punishes them by taking their country, gouging a groove with a magical kangaroo bone for the sea to swallow up the land.

“Our sense originally is that the sea level must have been creeping up very slowly and not been noticeable in an individual’s lifetime,” Reid said. “But we’ve come to realise through conducting this research that Australia must in fact have been abuzz with news about this. “There must have been constant inland movement, reestablishing relationships with country, negotiating with inland neighbours about encroaching onto their territory,” Reid said. “There would have been massive ramifications of this.” The fortunes of those faced with the decision to retreat as camps, tracks and dreaming places were slowly swallowed up – especially on islands – were mixed.

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