Oct 092017
 
 October 9, 2017  Posted by at 9:04 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Joan Miro The tilled field 1924

 

CEO Stock Buybacks Parasitize the Economy (Ralph Nader)
The Economy Is Humming. Bankers Are Cheering. What Could Go Wrong? (NYT)
Flatliners (NT)
Schäuble: Another Financial Crisis Is Coming Due To Spiraling Global Debt (ZH)
EU Plan To Prevent Bank Runs Could Backfire, Create Panic (BBG)
Hackers And Fraudsters Are Causing Cryptocurrency Chaos (Ind.)
Is This The Geopolitical Shift Of The Century? (OP)
Tensions Rise As US, Turkey Halt Visitor Visas, Send Lira Tumbling (BBG)
Sanctions Against Russia Have Cost European Union €30 Billion (RT)
Spain is the Blueprint for How All Governments Will Act (Martin Armstrong)
Catalans Call for Talks as Spain Enters Crunch Week (BBG)
Greece Foreclosures Target Seems Unattainable (K.)
Nearly There, But Never Further Away (FP)

 

 

And the parasite is killing its host.

CEO Stock Buybacks Parasitize the Economy (Ralph Nader)

The monster of economic waste—over $7 trillion of dictated stock buybacks since 2003 by the self-enriching CEOs of large corporations—started with a little noticed change in 1982 by the Securities and Exchange Commission (SEC) under President Ronald Reagan. That was when SEC Chairman John Shad, a former Wall Street CEO, redefined unlawful ‘stock manipulation’ to exclude stock buybacks. Then after Clinton pushed through congress a $1 million cap on CEO pay that could be deductible, CEO compensation consultants wanted much of CEO pay to reflect the price of the company’s stock. The stock buyback mania was unleashed. Its core was not to benefit shareholders (other than perhaps hedge fund speculators) by improving the earnings per share ratio. Its real motivation was to increase CEO pay no matter how badly such burning out of shareholder dollars hurt the company, its workers and the overall pace of economic growth.

In a massive conflict of interest between greedy top corporate executives and their own company, CEO-driven stock buybacks extract capital from corporations instead of contributing capital for corporate needs, as the capitalist theory would dictate. Yes, due to the malicious, toady SEC “business judgement” rule, CEOs can take trillions of dollars away from productive pursuits without even having to ask the companies’ owners—the shareholders—for approval. What could competent management have done with this treasure trove of shareholder money which came originally from consumer purchases? They could have invested more in research and development, in productive plant and equipment, in raising worker pay (and thereby consumer demand), in shoring up shaky pension fund reserves, or increasing dividends to shareholders.

The leading expert on this subject—economics professor William Lazonick of the University of Massachusetts—wrote a widely read article in 2013 in the Harvard Business Review titled “Profits Without Prosperity” documenting the intricate ways CEOs use buybacks to escalate their pay up to 300 to 500 times (averaging over $10,000 an hour plus lavish benefits) the average pay of their workers. This compared to only 30 times the average pay gap in 1978. This has led to increasing inequality and stagnant middle class wages. [..] In a review of 64 companies, including major retailers such as JC Penny and Macy’s, these firms spent more dollars in stock buybacks “than their businesses are currently worth in market value”! [..] The scholars concluded that “Buybacks are a way of disinvesting – we call it ‘committing corporate suicide’..

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How much time do I have?

The Economy Is Humming. Bankers Are Cheering. What Could Go Wrong? (NYT)

For decades, the global economy has been defined by dissonance. There has been the Japanese recession. The financial crises in the United States and Europe. And drama in emerging markets throughout. But as central bankers, finance ministers and money managers descend on Washington this week for the fall meetings of the IMF, they will confront an unusual reality: global markets and economies rising in unison. Never mind political turmoil, populist uprisings and threats of nuclear war. From Wall Street to Washington, economists have been upgrading their forecasts for the global economy this year, with the consensus now pointing to an expansion of more than 3% — up noticeably from 2.6% in 2016. Economists from the IMF are likely to follow suit when the fund releases its biannual report on the global economy on Tuesday.

The rosy numbers are noteworthy. But what’s more startling is that virtually every major developed and emerging economy is growing simultaneously, the first time this has happened in 10 years. “In terms of positive cycles, it is difficult to find very many precedents here,” said Brian Coulton, the chief economist at Fitch, the debt ratings agency. “It is the strongest growth we have seen since 2010.” In Japan, a reform-minded government and aggressive action by the central bank have pushed growth to 1.5% — up from 0.3% three years ago. In Europe, strong domestic demand in Germany and robust recoveries in countries like Spain, Portugal and Italy are expected to spur 2.2% growth in the eurozone. That would be more than double its average annual growth in the previous five years.

Aggressive infrastructure spending by China; bold economic reforms by countries including Brazil, Indonesia and India; and rising commodities prices (helping countries such as Russia) have spurred growth in emerging markets. And in the United States, despite doubts about President Trump’s ability to pass a major tax bill, the economy and financial markets chug along. In fact, one of the few large economies not following an upward path is Britain, whose pending exit from the European Union is taking a toll. Having grown at an average annual pace of just over 2% from 2012 to 2016, the British economy is expanding just 1.5% this year. [..] “We are in a boom today, but we should not forget that the financial system is still relatively unstable,” said Jim Reid, a credit strategist at Deutsche Bank.

Mr. Reid, who spices up his market analyses by regaling clients with pop songs on the piano, recently published a detailed study on what he expects will be the causes of the next global financial crisis. Pick your poison: an abrupt slowdown in China, the rise of populism, debt problems in Japan or an ugly outcome to Britain’s move to leave the European Union. His overriding worry, though, is that investors and policy makers aren’t prepared for what will happen when global central banks put a halt to their easy-money policies. Since the 2008 crisis, Mr. Reid noted, central banks have accumulated more than $14 trillion in assets — an amount that exceeds the annual output of China by $3 trillion. What happens when the central banks all start to sell? “This is unprecedented,” Mr. Reid said. “And no one knows what the outcome will be.”

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Compressed volatility.

Flatliners (NT)

We find ourselves in a very unique point in history and in a world dominated by false narratives. It is a challenge to keep an analytical grip on reality, but I’ll try to tie a few threads together here to put everything in a macro context. Firstly the underlying base reality: Free money, easy money, whatever you want to call it, permeates everything we see in financial markets. Indeed I would argue price appreciation has been paid for with unprecedented and, in my view, unsustainable volatility compression. A couple of charts really highlight this. Most clearly perhaps is the precise trend line tagging we can observe in the correlated picture of price appreciation and volatility compression since the February 2016 lows:

The $VIX’s corollary, the inverse $XIV, embarked on an explosive near one way journey since the US election coinciding with over $2 trillion central bank intervention in just the first 9 months of 2017:

And it has continued to this day and just made another all time high this past week on a massive negative divergence. It is the magnitude of this volatility compression that explains the current trading environment we find ourselves in. Aside from the obvious artificial liquidity avalanche we’ve had speculated about the driver of all this and the answer may simply be the promise of even more free money, specifically tax cuts. As some of you may recall from my analysis over the past year I’ve been very clear that math ultimately will bring out truth in any narrative. In this case that notion that tax cuts pay for themselves is a fantasy. It always has been. Can it result in a short term bump in spending or even growth? Yes it is possible, especially if structured right.

But any historical analysis will show you that tax cuts, especially already coming from a relatively low base, will just add to debt via larger deficits. Recently the White House budget director finally acknowledged this very reality: “a tax plan that doesn’t add to the deficit won’t spur growth” My criticism has been that all this marketing talk is simply a lie and will structurally put the country further at risk of trillion dollar deficits and a massive debt explosion that is already baked in even without tax cuts.

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But he makes no attempt to apologize?!

Schäuble: Another Financial Crisis Is Coming Due To Spiraling Global Debt (ZH)

Schauble warned that the world was in danger of “encouraging new bubbles to form”. “Economists all over the world are concerned about the increased risks arising from the accumulation of more and more liquidity and the growth of public and private debt. I myself am concerned about this, too,” he said echoing the concern voiced just one day earlier by IMF head Christine Lagarde, said the world was enjoying its best growth spurt since the start of the decade, but warned of “threats on the horizon” from “high levels of debt in many countries to rapid credit expansion in China, to excessive risk-taking in financial markets”. Schäuble also echoed the latest warning from the BIS, which last month said that the world had become so used to cheap credit that higher interest rates could derail the global economic recovery.

Meanwhile, Schäuble defended austerity, saying the word was, “strictly speaking, an Anglo-Saxon way of describing a solid financial policy which doesn’t necessarily see more, or higher deficits as a good thing.” The soon to be former finance minister also took a pot shot at the UK: “The UK always made fun of Rhineland capitalism,” he said, contrasting Germany’s consensus-driven, social market model with Anglo-American free markets and deregulation. “[But] we have seen that the tools of the social market economy were more effective at dealing with the [financial] crisis…than in the places where the crisis arose.”

Of course, Germany’s success – almost entirely a function of the common currency which has effectively kept the Deutsche Mark from soaring – has come at the expense of crisis after crisis among Europe’s southern states. Unfortunately it has resulted in an entire generation of unemployed youth in countries like Greece, Italy and Spain. Still, in keeping with his dour image, Schäuble’s last words were pessimistic: “We have to ensure that we will be resilient enough if we ever face a new economic crisis,” he added. “We won’t always have such positive economic times as we have now” concluded the jolly 75-year-old. Perhaps Wolfi is worrying too much: after all, according to Janet Yellen, “we will not see another crisis in our lifetime.” And if we do, well central banks are primed and ready to injects trillions more to keep the artificial “recovery” and market “all time highs” can kicked just a little bit further.

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They’ll screw this one up, too.

EU Plan To Prevent Bank Runs Could Backfire, Create Panic (BBG)

Three years since their banking union began to take shape, European Union regulators are seeking fresh powers to deal with lenders in trouble. Their plan would let them stop withdrawals from a failing bank for a few days while they address the problem, with the aim of preventing a run. But this approach could easily have the opposite effect, spreading panic to the whole financial system. There’s a better way. Instead of freezing bank accounts, EU governments should enable regulators to keep a bank going while they restructure it and search for a new owner. This will require EU governments to commit additional resources for the task. The ECB and the euro zone’s Single Resolution Board have been calling for the power to freeze bank accounts – a so-called moratorium – since the swift resolution of Banco Popular in June.

They succeeded in winding down the troubled Spanish lender by selling it to rival Banco Santander, but had to do it on a weekday night with a run on deposits in progress. The regulators say that next time it might be impossible to find a buyer overnight. A moratorium would relieve that pressure and perhaps allow them to sell the bank at a better price. This approach would mirror an arrangement which is currently in place in Germany, and it’s superficially appealing: Closing a bank would certainly stop a run. But it could also have unintended consequences. Depositors may run from a bank in trouble sooner — fearing that if they wait too long they may not be able to withdraw their money. It could also lead depositors to empty their accounts as soon as the bank re-opens. Most dangerous of all, freezing accounts in one bank could spread panic to the rest of the system, as other depositors fear the same will happen to them.

The idea also puts international cooperation on bank resolution at risk. The EU regulators’ plan threatens to disrupt measures put in place after the bankruptcy of Lehman Brothers in 2008. Bank of England economists recently warned in a working paper that adopting the new moratorium might prompt banks to back out of the existing arrangements for handling financial emergencies.

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An extensive look at crypto. Much better than the headline makes you think.

Hackers And Fraudsters Are Causing Cryptocurrency Chaos (Ind.)

Cryptocurrencies were supposed to offer a secure, digital way to conduct financial transactions but they have been dogged by doubts. Concerns have largely focused on their astronomical gains in value and the likelihood of painful price crashes. Equally perilous, though, are the exchanges where virtual currencies are bought, sold and stored. These exchanges, which match buyers and sellers and sometimes hold traders’ funds, have become magnets for fraud and mires of technological dysfunction, posing an underappreciated risk to anyone who trades digital coins. Huge sums are at stake. As the prices of bitcoin and other virtual currencies have soared this year – bitcoin has quadrupled – legions of investors and speculators have turned to online exchanges.

Billions of dollars’ worth of bitcoins and other cryptocurrencies, which aren’t backed by any governments or central banks, are now traded on exchanges every day. “These are new assets. No one really knows what to make of them,” said David L Yermack, chairman of the finance department at New York University’s Stern School of Business. “If you’re a consumer, there’s nothing to protect you.” Regulators and governments are still debating how to handle cryptocurrencies, and Mr Yermack says the US Congress will ultimately have to take action. Some of the freewheeling exchanges are plagued with poor security and lack investor protections common in more regulated financial markets. Some Chinese exchanges have falsely inflated their trading volume to lure new customers, according to former employees.

There have been at least three dozen heists of cryptocurrency exchanges since 2011; many of the hacked exchanges later shut down. More than 980,000 bitcoins have been stolen, which today would be worth about $4bn. Few have been recovered. Burned investors have been left at the mercy of exchanges as to whether they will receive any compensation. Nearly 25,000 customers of Mt. Gox, once the world’s largest bitcoin exchange, are still waiting for compensation more than three years after its collapse into bankruptcy in Japan. The exchange said it lost about 650,000 bitcoins. Claims approved by the bankruptcy trustee total more than $400m.

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Not without China, no.

Is This The Geopolitical Shift Of The Century? (OP)

The geopolitical reality in the Middle East is changing dramatically. The impact of the Arab Spring, the retraction of the U.S. military, and diminishing economic influence on the Arab world – as displayed during the Obama Administration – are facts. The emergence of a Russian-Iranian-Turkish triangle is the new reality. The Western hegemony in the MENA region has ended, and not in a shy way, but with a long list of military conflicts and destabilization. The first visit of a Saudi king to Russia shows the growing power of Russia in the Middle East. It also shows that not only Arab countries such as Saudi Arabia and the UAE, but also Egypt and Libya, are more likely to consider Moscow as a strategic ally.

King Salman’s visit to Moscow could herald not only several multibillion business deals, but could be the first real step towards a new regional geopolitical and military alliance between OPEC leader Saudi Arabia and Russia. This cooperation will not only have severe consequences for Western interests but also could partly undermine or reshape the position of OPEC at the same time. Russian president Vladimir Putin is currently hosting a large Saudi delegation, led by King Salman and supported by Saudi minister of energy Khalid Al Falih. Moscow’s open attitude to Saudi Arabia—a lifetime Washington ally and strong opponent of the growing Iran power projections in the Arab world—show that Putin understands the current pivotal changes in the Middle East.

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Direct result of Turkey’s deal with Russia on Syria.

Tensions Rise As US, Turkey Halt Visitor Visas, Send Lira Tumbling (BBG)

The U.S. and Turkey each suspended visa services for citizens looking to visit the other country, a sharp escalation of a diplomatic spat that sent the lira down more than 6% against the U.S. dollar. The moves followed the Oct. 4 arrest of a Turkish national who works at the U.S. consulate in Istanbul for alleged involvement in the July 2016 coup attempt against President Recep Tayyip Erdogan. Hours after the Trump administration halted visa services in Turkey on Sunday, Erdogan’s government responded in kind, even repeating verbatim much of the U.S. statement. Both sides said “recent events” had forced them to “reassess the commitment” of the other to the security of mission facilities and personnel.

Only two weeks ago, U.S. President Donald Trump had heaped praise on Erdogan when they met on the sidelines of the United Nations General Assembly in New York, saying the Turkish leader “is becoming a friend of mine” and “frankly, he’s getting high marks.” The U.S. on Thursday called charges against the man “wholly without merit,” saying it was “deeply disturbed” by the arrest and “by leaks from Turkish government sources seemingly aimed at trying the employee in the media rather than a court of law.” Turkey responded by saying the arrested Turkish citizen wasn’t part of the U.S. Consulate’s staff but a “local employee.” The lira was at 3.7323 per dollar as of 10:37 a.m. in Singapore on Monday, down more than 3% from Friday’s close, and touched as low as 3.8533. The currency is heading for a seventh day of declines, the longest stretch since May 2016.

Relations between Turkey, a NATO member, and some Western countries soured after the failed 2016 coup. Erdogan has accused U.S.-based Turkish preacher Fethullah Gulen of organizing the attempted overthrow, and has become increasingly impatient with the U.S. for not turning him over. “I would expect that there will be some sort of de-escalation at the leadership level – Trump and Erdogan will speak or meet,” said Murat Yurtbilir, who specializes in Turkish affairs at the Australian National University. “But the underlying problems won’t go away: the Gulen issue, Turkey’s slow switch toward Russia’s policy in Syria and the economy. ”

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But but but….

Sanctions Against Russia Have Cost European Union €30 Billion (RT)

New research by the Austrian Institute of Economic Research (WIFO) suggests the EU’s economic sanctions against Russia introduced three years ago have cost European countries billions of euro. The survey, which was conducted at the request of the European Parliament and published on Friday, showed EU exports to Russia declining annually by 15.7% since 2014. Up to 40% of that decrease was due to sanctions, it said. As a result of the penalties, Russia has lost its place as EU’s fourth largest trading partner and currently ranks fifth behind the US, Switzerland, China, and Turkey. WIFO calculated EU exports to Russia nosedived from €120 billion four years ago to €72 billion in 2016. According to the research, Cyprus was hit most as exports to Russia plunged 34.5% over the past two years. Greece suffered a 23.2% fall; Croatia’s exports were down 21%.

Austrian exports to Russia dropped by almost ten% or by €1 billion, WIFO said. Poland and the UK have lost €3 billion each. The researchers said the impact of sanctions was most damaging during the first year, as “not much progress has been made in switching trade flows to other countries.” EU sanctions against Russia were introduced in 2014 over the country’s alleged involvement in the conflict in eastern Ukraine. The penalties targeted Russia’s financial, energy, and defense sectors, along with some government officials, businessmen, and public figures. Moscow responded by imposing an embargo on agricultural produce and food and raw materials on countries that joined the anti-Russian sanctions. Since then the sides have repeatedly broadened and extended the restrictive measures.

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“You can always write a law and claim it is unconstitutional to separate. That does not make it legal, moral, or ethical.”

Moreover, it contradicts the UN Charter.

Spain is the Blueprint for How All Governments Will Act (Martin Armstrong)

What is going on in Spain is the blueprint what what other governments will do. The Spanish people themselves outside of Catalonia are deeply divided. Many see this as offensive and others see the government as offensive. We are looking at the breakup of the USA as well and do not forget the civil war to prevent separatists in America. The real issue is that people ban together for creating society and civilization and then government abuses its power and the process of decline begins. This is throughout history and it really does not matter what culture or country. It is all the same. Spain’s Constitutional Court, the puppet of Rajoy, on Thursday ordered the suspension of Monday’s session of the regional Catalan parliament. Rajoy is demonstrating that government will not tolerate losing power.

You can always write a law and claim it is unconstitutional to separate. That does not make it legal, moral, or ethical. Reuters reported: “The suspension order further aggravated one of the biggest crises to hit Spain since the establishment of democracy on the 1975 death of General Francisco Franco. But Spanish markets rose on perceptions the order might ward off, at least for now, an outright independence declaration.” The structure of the EU in attempting to federalize Europe required a single federal debt. That is what they failed to do so you ended up with a half-baked cake. This is why we have the problems in Europe as we do. But make no mistake about it, this is a political problem and what happens in Europe will be a contagion as it was in 1931. This will eventually cause major problems politically in the States as well.

Justice Scalia I greatly admired. However, his letter on the separatist movement in the USA said that the civil war decided there was no right to separate. I disagree with that opinion, but that is my opinion. There are those who object to my writing about Catalonia from the Madrid side. They create a list of hateful names directed at me personally and then say I know nothing of Spain. They are making the same mistake as government. They assume that government and Rajoy is Spain. The people are the sovereign of Spain – not Rajoy nor his Constitutional Court. If you cannot see that government is supposed to be “elected” by the people, they are not to be the ruler of the people as some monarch, they you have missed the entire point of history. You can hate me all you want, but it is your life you are surrendering to government and that of your posterity. We have a choice. We either understand that government when unchecked will go too far and surrender as sheep, or we stand up and try to make the future better for our posterity.

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Someone better intervene.

Catalans Call for Talks as Spain Enters Crunch Week (BBG)

A senior member of the Catalan administration called for dialogue with Spain, warning that all of Europe faces economic damage unless a resolution is found to his region’s standoff with the central government in Madrid. After a weekend of mass demonstrations in favor of Spanish unity, Raul Romeva, foreign affairs chief for the separatist government in Barcelona, insisted that the door was open for talks if Prime Minister Mariano Rajoy would grasp the chance of dialogue. “We need two to tango, we need the other side to be at the table,” Romeva said in an interview in Barcelona on Sunday. “We’re always going to be at the negotiation table, but to start negotiations we need the other party to negotiate with.”

The hint of an olive branch came as both sides hurtle toward crunch time in a dispute that threatens the breakup of Spain. Catalan President Carles Puigdemont has vowed to press ahead with his independence drive in a declaration due as soon as Tuesday, while Rajoy pledged that “national unity will be maintained” by using all instruments available to him. “The risk of this getting a lot worse, with correspondingly bad market development for Spanish assets, is still too great for my risk appetite,” said Erik Nielsen, chief economist at UniCredit. He predicted at least another week of pressure on Spanish and Catalan debt and assets before “things will eventually normalize.”

[..] Romeva invoked the crisis in the euro area that sent yields soaring on Spanish government debt and curbed access to finance, warning that the economic fallout of any worsening of the situation won’t be limited to Catalonia. “This simply won’t affect the Catalan economy, it’s going to affect the Spanish economy, it’s going to affect the European economy,” Romeva said. He blamed Madrid for causing the political uncertainty that’s prompted a stampede for the exit. “What causes uncertainty is the incapability of the political central state – or the Spanish state – to provide a political solution,” he said.

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Since Greece entered the bailout mechanism, foreclosures are down by 89%. Good.

Greece Foreclosures Target Seems Unattainable (K.)

Foreclosures, which have been practically frozen for the last eight years, represent the credit system’s Achilles’ heel. The impact from the paralysis of the auction system is already obvious in banks’ financial results on the reduction of nonperforming loans and threatens to undermine the target set for containing nonperforming exposures (NPEs). The ECB’s Single Supervisory Mechanism (SSM) has asked Greek lenders to bring down their NPEs by €11.5 billion through liquidations (property auctions) up to 2019. Meeting this target requires foreclosures worth €5.5 billion per year while takings from auctions have been poor.

The foreclosures scheduled for this year only concern 5,600 properties, worth €1.1 billion. This is the smallest number of auctions in recent years, given that 2016 (when auctions were held for 4,800 properties) was practically wasted due to protracted strikes by Greece’s lawyers and notaries. This year’s figures actually concern mostly auctions demanded by the state or private lenders, while banks have only instigated few auctions, mainly concerning commercial or industrial properties. For comparison purposes, one has to see the statistics from 2009, before Greece entered the bailout mechanism, when foreclosures numbered 52,000 and their value reached €4.2 billion. This means an 89% drop since then.

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I’ve said it before: the EU is the mafia.

Nearly There, But Never Further Away (FP)

The guard forced the migrants to kneel and began barking orders in Arabic, a language that few of the once-hopeful souls who had traveled to Libya from sub-Saharan Africa spoke. A gaunt, elderly man in ripped jeans and a tattered T-shirt failed to comply. The guard, wearing a crisp new uniform emblazoned with the insignia of Libya’s anti-illegal immigration police division, raised his wooden club and brought it down hard on the man’s back, driving him face down into the ground with the first blow. It was early May, three weeks after the staff at the Triq al-Sikka migrant detention center in the Libyan capital of Tripoli had received human rights training from the International Organization for Migration (IOM). The guard struck the elderly man again on the back and clubbed the back of his legs.

Then he moved methodically down the line of kneeling migrants, beating each man as if he were responsible for his fellow prisoner’s infraction. Cries of pain echoed through the barren, warehouse-like facility, where more than 100 half-starved migrants were locked away in crowded cells. Some had been there for months, enduring regular beatings and surviving on a few handfuls of macaroni and a single packet of juice each day. Others had recently been rounded up off the streets in raids targeting black African migrants. Soon after the beatings began, other guards at the facility noticed my presence and quickly ushered me into a waiting area outside the well-appointed office of Col. Mohamed Beshr, the urbane head of Libya’s anti-illegal immigration police.

Beshr is a key player in recent joint EU-Libyan efforts to halt migration to Europe, including intercepting migrants at sea and detaining them on land. He has welcomed high-level European diplomats and U.N. representatives to the Triq al-Sikka facility, and his office is filled with certificates from workshops run by IOM, the European Union, and Britain’s development agency. Yet Beshr seemed frustrated by my questions about the abuses openly taking place at the detention center he oversaw. To hear him tell it, his European partners cared about only one thing, even if they wouldn’t say it: preventing migrants from showing up on Italy’s shores. “Are they looking for a real solution to this humanitarian crisis?” Beshr asked, smirking and raising his eyebrows. “Or do they just want us to be the place where migrants are stopped?”

Eighteen months after the EU unveiled its controversial plan to curb illegal migration through Libya — now the primary point of departure for sub-Saharan Africans crossing the Mediterranean Sea to Europe — migrants have become a commodity to be captured, sold, traded, and leveraged. Regardless of their immigration status, they are hunted down by militias loyal to Libya’s U.N.-backed government, caged in overcrowded prisons, and sold on open markets that human rights advocates have likened to slave auctions. They have been tortured, raped, and killed — abuses that are sometimes broadcast online by the abusers themselves as they attempt to extract ransoms from migrants’ families.

The detention-industrial complex that has taken hold in war-torn Libya is not purely the result of a breakdown in order or the work of militias run amok in a state of anarchy. Visits to five different detention centers and interviews with dozens of Libyan militia leaders, government officials, migrants, and local NGO officials indicate that it is the consequence of hundreds of millions of dollars in pledged and anticipated support from European nations as they try to stem the flow of unwanted migrants toward their shores.

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Sep 242017
 
 September 24, 2017  Posted by at 6:41 pm Finance Tagged with: , , , , , , , , , , ,  2 Responses »
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Robert Frank London 1952-53

 

‘Tis the jolly time of elections, referendums, flags and other democracy-related issues. They are all linked in some way or another, even if that’s not always obvious. Elections, in New Zealand and Germany this weekend, referendums in Catalonia and Kurdistan the coming week, a looming Party Congress in China, quarrels about a flag in the US and then there’s always Brexit.

About China: the Congress is only in October, Xi Jinping looks sure to broaden his powers even more, and it ain’t all that democratic, but we should still follow it, if only because party officials will be either demoted or promoted, and some of them govern more people than most kings, queens, presidents and prime ministers. They say everything’s bigger in Texas, but in China everything really is. Including debt.

New Zealand: the election very early this morning didn’t bring a much hoped for win for Labour, or any clear winner at all, so don’t expect any grand changes in policy. New Zealand won’t wake up till its economy dives and the housing bubble pops.

Germany: Angela Merkel has set up today’s election so that she has no competition. Though she will see the ultra-right AfD enter parliament. Still, her main ‘rival’, alleged left wing Martin Schulz, is a carbon copy of Merkel when it comes to the main issues, i.e. immigration and the EU. An election that is as dull as Angela herself, even though she’ll lose 10% or so. The next one won’t be, guaranteed.

As for the US, no elections there, but another round of big words about nationalism, patriotism and the flag. Donald Trump is well aware that 75% or so of Americans say the flag must be respected, so criticizing people for kneeling instead of standing when the anthem gets played is an easy win for him. No amount of famous athletes is going to change that.

It all doesn’t seem very smart or sophisticated. But then, the US is the only western country I know of that plays the anthem at domestic sports games and has children vow a Pledge of Allegiance to it every single day. Other countries can’t even imagine doing that. They keep their anthems for special occasions. And even then only a few people stand up when it’s played. For most, it’s much ado about nothing but a strip of cotton.

What is perhaps interesting is that a whole list of NFL team owners donated a million dollars to Trump, and now speak out against him and ‘side with their players’, even though not one of them has offered Colin Kaepernick a job since he got fired for going down on one knee. Should I add ‘allegedly’? The only right way to handle the issue would seem to be to talk about why Kaepernick and others do what they do, not that they do it. There’s more than enough division in the country to warrant such talks.

Let Trump invite Kaepernick and Stephen Curry, maybe even Lebron and Stevie Wonder, to the White House with the very intention to talk about that. In the current hostile climate that is not going to happen though, even if Da Donald might want to. There’s a group of people who after 30 years of a deteriorating economy said ‘this is not my country anymore’, and voted for the only -apparent- alternative available, Trump, and another group who then said ‘this is not my president’.

And never the twain shall have a conversation. Somebody better find a way to get them to talk about it, or worse is to come. Far too many Americans identify themselves solely as not being someone else. Yeah, Trump too, but he’s been under constant siege from all sides, and of course he’ll fight back. No, that does not make me a Trump cheerleader, as some have suggested, but what’s happening today threatens to blow up the entire nation, after first having eroded the whole political system. This is a serious risk.

Now spymaster James Clapper is saying again that the whole Russia thing, for which there still is zero proof, could make the election invalid. Well, not without proof, Jimbo. And until you do have that proof, shut up, it’s poisonous (he knows). Instead, go help the 3.5 million literally powerless Americans in Puerto Rico. There are plenty issues to deal with that don’t involve bashing your president. Keep that for later.

 

(Proposed) referendums (referenda?) in Catalunya and ‘Kurdistan’ raise interesting questions about sovereignty and self determination. We’ll see a lot more of that going forward. I’ve repeatedly mentioned the issue of sovereignty when it comes to Greece, which cannot really be called sovereign anymore because others, foreigners, make all main decisions about its economy.

There may be plenty different definitions of sovereignty, but there can be no doubt it means that a domestic authority has control over a country. That also means that possible changes to that authority can only be made domestically. To come back to Greece briefly, I’m surprised that no constitutional lawyers or scholars have questioned respective governments handing de facto control to ‘outsiders’.

But that can be both deepened and broadened to the decision to join both first the EU, and later the euro. Have all 27 EU countries run these decisions by their constitutional lawyers and highest courts? I’ve never seen an opinion like that from any country. Does a country’s ruling authority have the power to sign away its sovereignty? I would bet in most cases it does not, or the constitution involved was/is either shoddily written or not worth much to begin with.

That any elected US president -or Congress, Senate- would have the power to sell the country to the highest bidder -or any part of it- sounds preposterous, even if I’m no constitutional lawyer or scholar. What countries CAN do, of course, is sign treaties and other agreements concerning defence or trade, among others. But any possible sovereignty violations would always need to be scrutinized at the highest domestically available level of judicial power.

Moreover, I would argue that sovereignty is not something that can be divided, split up or broken into separate parts. You’re either sovereign or you’re not. One country, indivisible, as the US Pledge of Allegiance states (but that doesn’t mean a group of people inside a country can’t seek its own sovereignty).

 

The ‘composition’ of the EU raises a lot of questions. Many countries have given up their rights to control over their currencies, and therefore their entire economic policies, and though the euro is undoubtedly beneficial in some areas, it has turned out to be a straight-jacket in others, when less sunny economic times arrived.

So what happens if those less sunny times are here to stay? Will countries like Greece continue to bend over for Germany, and for the ECB it controls, or will some of these countries (re-)examine their rights to sovereignty? How is this defined in the EU charter anyway? It has to be there, or many constitutions were violated to begin with when countries signed up. Sovereignty that is not properly defined is meaningless.

Another, non-economic, example concerns the Visegrad countries, Czech Republic, Hungary, Poland and Slovakia. It’s wonderfully ironic that Wikipedia says the Visegrad alliance (est. in 1991) was formed “for the purposes of furthering their European integration”, ironic because one might be tempted to think it does the opposite. The Visegrad countries refuse to be part of the EU’s scheme to resettle refugees.

And Brussels tries to force them to comply with that scheme, with threat after threat. But that too, no matter how one views the issue or where one’s sympathies lie, is in the end a sovereignty issue. And what use is it to force refugees upon a country that doesn’t want them? The bigger question is of course: why were they ever invited into the EU when they think that way, and that way is fundamentally different from that prevalent in Brussels and other member countries?

Or perhaps the even bigger question should be: how do you combine a country’s sovereignty with a political and economic union of nations that must sign away parts of their sovereignty -and therefore all of it, as argued before-. If you ask me, it’s not nearly as easy -let alone legal- as they try to make it look.

 

Catalunya and ‘Kurdistan’ are good examples – albeit from a different angle- of that same conundrum. A topic closely linked to sovereignty is self-determination. Wikipedia:

The right of people to self-determination is a cardinal principle in modern international law (commonly regarded as a jus cogens rule), binding, as such, on the United Nations as authoritative interpretation of the {UN] Charter’s norms. It states that a people, based on respect for the principle of equal rights and fair equality of opportunity, have the right to freely choose their sovereignty and international political status with no interference.

[..] on 11 February 1918 US President Woodrow Wilson stated: “National aspirations must be respected; people may now be dominated and governed only by their own consent.

‘Self determination’ is not a mere phrase; it is an imperative principle of action.

The Kurds have been denied that right for a very long time. For reasons related to divide and rule policies in a whole slew of different global powers both in the region and outside of it, and reasons related to oil. After being a major force in the fight against ISIS, and after seeing Turkey get ever more agressive against them -again-, the Kurds have -not for the first time- planned a referendum for a sovereign state. As the UN charter unequivocally says is their right.

The problem is, they want to establish their state on land that other countries claim is theirs. Even if the Kurds have lived there for a long time. And that’s a common theme in most of these ‘events’. Catalunya, Palestina, ‘Kurdistan’, they’re told they can perhaps have independence and sovereignty, but not on land where their people have lived for 1000s of years, because that land ‘belongs to us’.

And holding a referendum is therefore unconstitutional, says Spain, or whatever legal term is thrown out. But if the UN charter makes the international community’s position as clear as it does, how can it contradict a member nation’s constitution? Was that member not paying attention when it signed up to the Charter, or did the UN itself let that one slip?

 

 

Catalunya (Catalonia) is the northeast tip of Spain. Its people have long wanted independence and never gotten it. When present day Spain was formed, it was made part of Spain. And now the people want their own nation. It is not hard. But then again it is. We are now one week before October 1, the date the referendum was planned, and the Spanish government has done everything it could and then some to frustrate the referendum, and therefore the will of the people of Catalunya.

As the politicians who inhabit the EU and UN sit by idly, scared silly of burning their fingers. After arresting Catalan politicians and confiscating anything that could be used to hold the referendum, Spain has sent cruise ships full of police to Catalan harbors, and tried to take over control of the Catalan police force. But Catalan politicians and harbor crew have refused to let the ships dock, and Catalan police won’t obey Spanish orders.

It’s starting to look like Spain PM Rajoy wants to provoke a violent Catalan reaction, so he can send in his army and blame Barcelona and environs. What he doesn’t want to understand is that this will be the end of his government, his career, and of any chance Catalunya will remain part of Spain other than in the short term. It feels like Franco’s military, who, don’t forget, only relinquished control some 40 years ago, are still there in spirit if not physically.

For everybody’s sake, we can only hope someone does something to stop Rajoy and whoever’s behind his decisions, because if anyone ever wondered why the Catalans wanted to be independent, after those decisions there can be no question anymore. If he sends in the army, Spain as a whole will be something of the past. But first the referendum result, which was very doubtful all along, has now been settled: nearly all Catalans stand united against Rajoy today.

And Catalans are a mixed people. Many do not have their roots there, or even speak the language. But they will not turn on their friends and neighbors.

 

Kurdistan’s situation is even a lot more convoluted than Catalunya’s. Borders in the Middle East were drawn more or less at random by the French and British after the fall of the Ottoman Empire nearly 100 years ago. And the Kurds never got their independence, or their country. But now they want it. However, they live spread over 4 different countries, Turkey, Iran, Iraq and Syria. And some of the land they live on has oil. Lots of it. And the cradle of civilization, between the Tigris and Euphrates rivers.

 

 

Just about everyone, including the US, all countries in the region, and the old colonial powers, have declared their resistance to the Kurdish referendum. Getting back to the UN charter et al, isn’t that a curious position? Politicians sign lofty declarations, but when their successors are called upon to uphold them, nobody’s home. And it’s not as if self-determination is such a difficult topic to understand.

The referendum will be held on September 25 in Iraq’s semi-autonomous Kurdish region, so not in other Kurdish regions. Therefore only 900,000 people, out of some 35 million Kurds, get to vote. But the question on the ballot will be:

“Do you want the Kurdistan region and the Kurdistani areas outside the region’s administration to become an independent state?”

And that of course means something much more, and much bigger. There’s a ‘Kurdistan’ in Iran, Syria and Turkey as well. Kurds there don’t get to vote, though.

Quoting Bloomberg: “The vote will be held in the three governorates officially ruled by the KRG, as well as in disputed areas currently controlled by Kurdish forces, known as the peshmerga. The Kurds expanded their domain in 2014 when, faced with Islamic State attacks, the Iraqi army deserted the oil-rich city Kirkuk.”

Here’s where the Kurds were living according to the 2014 CIA World Factbook:

 

 

As is the case in Catalunya, Iraq’s parliament and top court have declared the vote unconstitutional. That again raises the question: how can a vote violate a country’s constitution if and when that country has signed the UN charter which explicitly defines every people’s right to self-determination? Who’s been asleep when both documents were signed?

How could the UN let countries sign its charter whose constitutions violated that same charter? Have we all just been playing fast and loose all along? Or, more interestingly, what are we all going to do now that we know about this? Are we going to take self-determination away from people, and sign that into a whole new UN charter? Or are we going to make sure the charter is upheld and make countries change their constitutions to comply with it?

 

There is a third option (very much in favor): to not do anything. But that gets more dangerous all the time. The days that people could just be ignored are gone. Social media have probably played a large role in that. And so have changing power relationships.

The EU is blowing itself up through increasing calls for more Europe just as people want less. I’ve said it often before: centralization stops when and where economic growth does. And despite all the creative accounting we see, economic growth is definitely gone in Europe. Just ask Greece, Spain. Ask the people, not the politicians. People will only accept their decisions being made by far away ‘leaders’ if they perceive them as beneficial to their lives, the lives of their children.

Those days are gone, no matter the propaganda. That’s true all over Europe, and it’s true all across the US. The refusal by incumbent powers to recognize this, admit to it, is what gives us the likes of Trump and Brexit and countless other challengers. That Marine Le Pen and others have failed to date doesn’t mean the status quo wins; others will follow. In that vein I was surprised to see Yanis Varoufakis, whom I hold in very great esteem, declare in name of his DiEM 25 movement that:

“I am not taking sides on whether Catalonia should be independent or not” and “What we’re promoting in DiEM25 would solve the problem. We want a real European Union that becomes a single jurisdiction, a country if you want to call it that. In that scenario, it doesn’t matter if Catalonia is part of Spain!”

Europe will not be one country. Nor should it want to be. Europe has 1000 different ways to work together, and the EU has been an utter failure at that. While it has done a ton of good, it is being -predictably- destroyed by the power politics at its top levels. Nobody ever told Europeans that they would wind up living as German provinces. But that is what they are.

As Varoufakis himself makes abundantly clear is his book Adults in the Room. That’s why Germans have no real choice in today’s election: they have such utter control of the EU they would be crazy to vote against it. But at the same time, the rest of the ‘Union’ would be crazy to let them hold that power.

And I know that DiEM25 wants to change and reform the EU, but how will they do that knowing they need Germany, more than all other countries, to accomplish it, as Germany is sitting so pretty? Calls for a one-country Europe seem at the very least irresponsibly premature. That’s very far from reality. First things first. No cheating. You can’t say it doesn’t matter what happen to the Catalans today because ‘we’ have bigger plans for tomorrow. That means abandoning them. That’s not a new Europe: that’s what they already have today.

 

As for ‘Kurdistan’, what can we do but hope and pray? Hope that the old European colonial powers, as well as Turkey, Iraq and Iran, plus Russia and China, live up to the UN Charter they signed, and let the Kurds show they can be a force for peace in the region, which needs one so badly?! They have shown in no uncertain terms they can defend themselves, and their land, against anyone who threatens them. The Kurdish women army, YPJ, is all you need to know when it comes to that. They are the bravest amongst us.

If they had their own country, they would continue to do just that, and better. Which just goes to show that nationalism and patriotism are not of necessity negative emotions. It gives people an identity. Which is exactly why brighter heads than the present ones put the right to self-determination in the UN Charter, at a time, 1945, when the world had seen indescribable destruction.

There’s a lesson there. That we seem to have forgotten already. And now have to learn all over again. Through Colin Kaepernick, through the unbelievable Kurdish women’s YPG army, though the streets of Barcelona. Our world is screwed up, and we need to unscrew it.

 

 

Jul 212017
 
 July 21, 2017  Posted by at 8:58 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Francis Bacon Three Studies of Lucian Freud 1969

 

European Central Bank Sticks To Low Rate Monetary Policy (R.)
Bill Gross Is Worried Central Banks Will Lead The World Into Recession (CNBC)
EU Threatens Poland With ‘Nuclear Option’ Over Supreme Court Control (Ind.)
Germany Steps Up Economic Pressure On Turkey In Rights Row (R.)
Britain Hasn’t Been This Risky in 40 Years (BBG)
Concorde Was The Flying Brexit (G.)
Why The Moaning? If Anything Can Halt Capitalism’s Fat Cats, It’s Brexit (G.)
Australia Prime Minister Quietly Issues Warning On House Prices (NCA)
Bitcoin Bubble Dwarfs Tulip Mania From 400 Years Ago – Prechter Jr (CNBC)
Elon Musk: I Got ‘Approval’ For New York-DC Hyperloop. Officials Deny (G.)
To Save Rural Iowa, We Must Oppose Monsanto-Bayer Merger (Dmr)
Son of Cecil The Lion Killed By Trophy Hunter (G.)

 

 

Same old song: he misses all targets and then vows to do more of the same. Tries to convey a message of recovery but talks about even more QE.

European Central Bank Sticks To Low Rate Monetary Policy (R.)

The European Central Bank left its ultra-easy monetary policy stance unchanged as expected on Thursday, keeping rates at record lows and even leaving the door open to more asset buys if the outlook worsens. After ECB chief Mario Draghi raised the prospect of policy tightening last month, he signalled that any policy tweaks would come only gradually, setting the scene for a possible discussion in September about a long-awaited tapering of its asset buys. “We need to be persistent and patient because we aren’t there yet, and prudent,” Draghi told his regular news conference after a meeting of ECB policy-makers in Frankfurt. He stressed that the bank’s governing council were unanimous both on the decision to keep its guidance unchanged and to avoid setting a precise date for a discussion of future policy, noting only that it would occur in the autumn.

The prospect of reduced monetary stimulus has kept financial markets edgy, with investors sifting through clues to gauge how big central banks around the globe will unwind unconventional policy that have kept borrowing costs at rock bottom. Euro and government bond yields across the bloc initially slipped after the statement. But as Draghi spoke, eurozone bond yields gained ostensibly on his confirmation of expectations that the taper would be discussed in autumn. The euro firmed more than 3% and German 10-year yields doubled since Draghi’s policy hint. Indeed, the euro’s 11% rise this year will weigh on inflation, compounding the impact of a more than 10% drop in crude oil prices. “As core inflation remains subdued, the ECB will likely prefer to err on the side of caution, that is moving more slowly rather than faster than many observers project,” Holger Schmieding at Berenberg noted.

Read more …

It’s the only thing they’re good at.

Bill Gross Is Worried Central Banks Will Lead The World Into Recession (CNBC)

Bond guru Bill Gross is warning about looming interest rate increases and the damage they can do to a debt-laden global economy. In his monthly investor outlook, the Janus Henderson Advisors fund manager said the course of global central banks toward tightening policy could be perilous for the economic recovery. Raising interest rates will increase the cost of short-term debt that corporations and individuals hold. In the U.S. alone, households have $14.9 trillion in debt while businesses owe $13.7 trillion, according to the Federal Reserve. “While governments and the U.S. Treasury can afford the additional expense, levered corporations and individuals in many cases cannot,” Gross said. The Fed is on a course of gradual rate increases, with financial markets expecting it to approve one more rate hike this year.

In addition, other central banks are pulling the reins on bond-buying and other liquidity programs aimed at injecting cash into their respective economies. Gross charged that the adherence of central bankers to hard-and-fast rules that govern when they should tighten policy has “distorted capitalism as we once knew it, with unknown consequences lurking in the shadows of future years.” For instance, he cast doubt on the belief it takes short-term interest rates exceeding longer-term rates — a condition known in economist as an inverted yield curve — to produce a recession. “The reliance on historical models in an era of extraordinary monetary policy should suggest caution,” Gross wrote. “Logically (a concept seemingly foreign to central banks staffs) in a domestic and global economy that is increasingly higher and higher levered, the cost of short-term finance should not have to rise to the level of a 10-year Treasury note to produce recession.”

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The EU kicking members out? i’d call that a bluff. But the Union is shaking on its foundations.

EU Threatens Poland With ‘Nuclear Option’ Over Supreme Court Control (Ind.)

The President of Poland has been urged to veto a bill passed by lawmakers in the country that would give parliament the power to appoint Supreme Court judges. Guy Verhofstadt, the President of the Alliance of Liberals and Democrats for Europe in the European Parliament, has called on President Andrzej Duda to take action and said the European Commission should trigger the EU’s Article 7 if the issue is not resolved. The Article has been often described as a “nuclear option” and can lead to the suspension of a member country’s voting rights. “The European Parliament made it clear earlier this week that these new laws are incompatible with EU Membership and would irredeemably weaken Poland’s future place in the West,” Mr Verhofstadt said. European Council President Donald Tusk, who is also a former Polish prime minister, called for an urgent meeting with President Duda to discuss the “political crisis” in the country.

Mr Tusk described the move as backwards backward and said it went “against European standards and values”. “The European Union is not only money and procedures. It is first and foremost values and high standards of public life. That is why a wave of criticism of the government is rising in Europe and in the whole West,” Mr Tusk said. The bill was passed despite objections from lawyers and opposition politicians after critcisms it undermines democracy and the rule of law. The move would put courts under direct government control and Poland’s human rights ombudsman, Adam Bodnar, told parliament that the legislation, would “deprive citizens of the right to an independent court”. “We are planting an explosive under our judiciary,” he said.

Read more …

And then Erdogan can send more refugees. Merkel screwed this up years ago.

Germany Steps Up Economic Pressure On Turkey In Rights Row (R.)

Germany told its citizens on Thursday to exercise caution if travelling to Turkey and threatened measures that could hinder German investment there, in a sign of growing impatience with a NATO ally after the detention of rights activists. The mass-selling daily Bild newspaper, citing government sources, also reported that Berlin was putting arms projects with Ankara on hold. Foreign Minister Sigmar Gabriel highlighted alarm at what Berlin sees as the growing unpredictability of Turkish President Tayyip Erdogan. “Everyone can be affected. The most absurd things are possible,” he said in advice to travellers. Gabriel broke off his holiday to deal with the crisis after Turkey arrested six human rights activists including German national Peter Steudtner on accusations of terrorism, the latest in a series of diplomatic rows.

Germany, Turkey’s chief export partner, called the allegations absurd. “We need our policies towards Turkey to go in a new direction…we can’t continue as we have done,” Gabriel told reporters in unusually direct language touching on sensitive commercial matters including corporate investment guarantees. The Turkish foreign ministry said it would make the “necessary response” to comments it described as one-sided. Foreign Minister Mevlut Cavusoglu later accused Germany of harbouring members of the Kurdistan Workers Party (PKK), which has fought an insurgency in southeast Turkey since 1984, and the network of U.S.-based cleric Fethullah Gulen that Ankara blames for a failed coup last July. “As a country providing shelter to PKK and FETO terrorists in its own territory, statements by Germany are just double standards and unacceptable,” Cavusoglu said on Twitter.

Read more …

But that’s true for most of the world.

Britain Hasn’t Been This Risky in 40 Years (BBG)

Britain is having a flashback to the 1970s, and it’s not flared trousers making a comeback. As Parliament breaks for the summer, Prime Minister Theresa May needs to come up with answers to the political drama unfolding at home and threatening her Brexit strategy as investors predict more trouble on the horizon for a country once seen as the stable counterpoint to European turmoil. You would have to go back 40 years to find a time when the country was deemed this politically risky, according to Mark Dowding at London-based BlueBay Asset Management. The ambivalence toward Europe, the political fragility of the government and a population grown weary of making sacrifices are all reminiscent of a time when Britain was tormented over whether to join a forerunner of the European Union and an economic crisis forced it to seek a humiliating bailout.

“Back in the 1970s the U.K. went to the IMF eventually and that’s likely where we will be once more,” warned Dowding. “We seem to have created some self-inflicted wounds here and it looks like we’ll be struggling for some time.” Like Edward Heath in 1974, May took a gamble in calling a snap election only for the Conservatives to lose their majority. Unlike him, she stayed on but with her future the subject of constant speculation and her rival, Labour leader Jeremy Corbyn, waiting in the wings with a promise to loosen the fiscal reins. The latest poll shows that no prime minister since 1977 has been as unpopular as she is a mere month after prevailing in elections. The next big test of her authority will be the Conservative conference in October, where challengers for the leadership might emerge.

Eurasia Group Managing Director Mujtaba Rahman said that “even though May will survive through to the party conference it’s unclear whether she survives on the other side of that.” The fallout from the Brexit vote, May’s tenuous position and a heightened security alert have created a level of turmoil rarely seen since the so-called lost decade when widespread labor unrest and political instability played out against a backdrop of terrorist attacks by Irish republicans.

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Don’t know how far the analogy really goes, but a great headline.

Concorde Was The Flying Brexit (G.)

The idea that we now live in an age of ‘post-truth’ implies that once-upon-a-time politics was guided by objective reality. Clearly, this is nonsense. We shouldn’t mistake a period in which the media and political establishment offered more coherent stories for a time when politics was truthful. In the recent past, politics could be astonishingly dishonest, especially when it came to supporting national machines. Concorde, the fastest lame duck ever built, was a flying Brexit. The political establishment privately despaired about its costs, whilst knowingly pretending that the project would improve Britain’s place in the world. Few politicians actually believed in the Concorde project. It was accepted inside Whitehall that the scheme would be an economic disaster.

After Harold Wilson came to power in 1964, the Anglo-French supersonic airliner only survived because the government was concerned that unilaterally cancelling the project would lead the French to sue them for more than it would cost to continue to develop the machine. Edward Heath, the Conservative prime minister, also wanted to cancel Concorde. Heath even personally stopped Prince Phillip flying it on the grounds that it would be quite embarrassing for the government to scrap the aeroplane soon after it had been treated to a royal pilot. Concorde only continued because Heath wanted to enter the European Economic Community. Annoying the French was to be avoided. Once Britain was in the Community, the unions kept Concorde afloat.

The second Wilson administration, a minority government, could not risk killing off Concorde for fear that the resulting the outcry in the labour movement would endanger their fragile political position. What, then, did politicians say about Concorde? Well, Concorde was not only going to bring supersonic speed to civil air travel, but also ensure that Britain could capture a crucial new export market and create a world-beating aviation industry in the coming supersonic revolution. In this bright future, Britain’s technology would be bought across the world. Most of the politicians who made these arguments knew better.

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Brexit under Labour. How much worse could it be?

Why The Moaning? If Anything Can Halt Capitalism’s Fat Cats, It’s Brexit (G.)

Jeremy Corbyn is not the first leader of the Labour party to have form as a Eurosceptic. Hugh Gaitskell was so fearful of the drive for European political union that he warned about Britain ending a thousand years of history as an independent state. Clement Attlee was no big fan of what was then called the common market either. But this was all a long time ago. Under a succession of leaders starting with Neil Kinnock, Labour warmed to Europe. In the 1980s, with Thatcherism rampant at home, the party saw Brussels as providing protection from free-market zealotry. In the 1990s, under Tony Blair, the feeling was that globalisation had made the nation state redundant. Even so, a small number of Labour MPs remained unreconciled. They pointed out that Labour’s love affair with Europe began just as Europe’s economic performance started to deteriorate.

They opposed the Maastricht treaty that paved the way for the single currency on the grounds that it would create an undemocratic central bank with deflationary tendencies. Corbyn was one member of this band. John McDonnell, now the shadow chancellor, was another. Unlike the majority of their parliamentary colleagues and most trade union leaders, they never bought the idea that being a progressive meant being positive about Europe. They saw nothing especially progressive about mass unemployment, the impact of the common agricultural policy on the developing world, the Transatlantic Trade and Investment Partnership, or the bias towards austerity ingrained in the stability and growth pact. Rather, they saw neoliberalism being hardwired into the European project. As indeed it was.

None of this really mattered until Corbyn became Labour leader two years ago. But since 2015 the maverick outsiders have become the maverick insiders. What’s more, the shambolic state of the Conservatives means that Corbyn and McDonnell could soon be neighbours in Downing Street and responsible for Brexit. Parliamentary arithmetic and the determination of the Tories to avoid another election at all costs makes this unlikely, but these are strange and unpredictable times. What Corbyn and McDonnell think about Europe now counts in a way that it didn’t before.

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“Clearly you need to remember that asset price movements go in two directions..”

Australia Prime Minister Quietly Issues Warning On House Prices (NCA)

The Prime Minister has issued a quiet warning to Australians investing in housing that they cannot continue to assume house prices will only go up. “Clearly you need to remember that asset price movements go in two directions,” Prime Minister Malcolm Turnbull said after a speech to an economics conference this week. In particular, this is relevant to housing. “It has been a pretty good one-way bet for a long time — but it is going to be important for people to be prudent.” Mr Turnbull made the comments alongside an observation that interest rates have risen for many borrowers. Interest rates are a big factor in the housing market. The lower the interest rate, the more you can borrow from the bank and the more you can pay for a house. Australians have borrowed a lot, and for now the risks of borrowing have been well managed, Mr Turnbull said.

But that could change. “High levels of indebtedness that are incurred with low levels of interest rates always pose a risk when you have the prospect of an increase in rates. Particularly if it has all been built on an assumption of rising asset prices.” Interest rates have been at record lows until banks recently tweaked up rates on certain investor loans. Higher interest rates across the whole housing market could be next. Financial market pricing hints that official interest rates are more likely to go up than down when the RBA next makes a move, perhaps in 2018. Mr Turnbull made his comments at the Economic and Social Outlook Conference, presented by the Melbourne Institute and The Australian. At the conference, which was thronging with people who watch the Australian economy with laser focus, Mr Turnbull was far from the only speaker worried about Australian house prices and debt.

Read more …

“Crypto tech is like the internet in 1999: It was poised to take over the world, but the NASDAQ still fell almost 90% during the dot-com bust of 2000-2002.”

Bitcoin Bubble Dwarfs Tulip Mania From 400 Years Ago – Prechter Jr (CNBC)

Just as many on Wall Street are warming up to bitcoin, one of the lone financial analysts who forecast a surge when the digital currency was just six cents now has an extremely negative view. “A bearish trifecta — the Elliott wave pattern, optimistic psychology and even fundamentals in the form of blockchain bottlenecks — will lead to the collapse of today’s crypto-mania,” analyst Elliott Prechter wrote in the July 13 edition of The Elliott Wave Theorist newsletter. “The price activity and manic sentiment that led to present prices have dwarfed even the Tulip mania of nearly 400 years ago,” he said. “The success of Bitcoin has spawned 800-plus clones (alt-coins) and counting, most of which are high-tech, pump-and-dump schemes.” “Nevertheless, investors have eagerly bid them up,” Prechter added.

He’s the son of the famed technical analyst Robert Prechter, who popularized the Elliott Wave by using it to forecast the stock market crash of 1987 and has published a newsletter since 1979. However, debate over the accuracy of the Elliott Wave has grown after Robert Prechter called the end of the 1990s bull market five years before it actually ended. The principle is a sophisticated form of technical analysis widely followed by traders that analyzes cycles of sentiment in an attempt to predict market performance — five waves typically signals a coming downturn. Regarding bitcoin, “under the Elliott Wave model, what we’re seeing, we’re making a final fifth wave from six cents,” the younger Prechter told CNBC in a phone interview Thursday.

“It does not imply it will go to zero. It does not imply it will go to six cents. I do think it will happen to the clones [newly formed digital currencies].” In September 2010, Elliott Prechter wrote in The Elliott Wave Theorist about bitcoin when it traded at 6 cents. Very few in the financial world seriously considered the digital currency at the time. “It proved to be the buying opportunity not just of a lifetime, but so far of all time,” Prechter said. Bitcoin hit a record of $3,025 in June, 50,000 times its price in 2010. The digital currency traded near $2,652 Thursday, more than twice where it started the year. [..] To be sure, Prechter told CNBC that a mania “can be both a mania and a revolution at the same time.”

Like many digital currency enthusiasts, he sees significant potential in the cryptocurrencies for automating the banking and legal industries. “The distant future of crypto is bright,” Prechter said in the report. “Crypto tech is like the internet in 1999: It was poised to take over the world, but the NASDAQ still fell almost 90% during the dot-com bust of 2000-2002.” But bitcoin may not be part of that future. “It’s too soon to know if Bitcoin is Facebook or MySpace,” Prechter said.

Read more …

The Tesla Tulip.

Elon Musk: I Got ‘Approval’ For New York-DC Hyperloop. Officials Deny (G.)

Elon Musk does not have government approval to build a Hyperloop tunnel from New York City to Washington DC. The Tesla executive took to Twitter this morning to tantalize his legion of fans and the tech press with the “news” that he had “just received verbal govt approval for The Boring Company to build an underground NY-Phil-Balt-DC Hyperloop. NY-DC in 29 mins … City center to city center in each case, with up to a dozen or more entry/exit elevators in each city.” Lest any billionaires need to brush up on civics 101: the US system of government does not operate on “verbal government approvals”. Musk walked back his claim about 90 minutes later, tweeting: “Still a lot of work needed to receive formal approval, but am optimistic that will occur rapidly”. A lot of work is needed to receive formal approval, indeed.

Musk was received with typical credulity by the tech press, and considerable consternation by various government agencies. Several spokespeople who answered the phones at relevant city, state and federal government bodies laughed upon hearing of the claim that an interstate transit project with a significant street-level footprint in four of the east coast’s largest cities could be approved verbally. “Who gave him permission to do that?” asked a spokesman with the Maryland department of transportation. “Elon Musk has had no contact with Philadelphia officials on this matter,” said Mike Dunn, the city spokesman. “We do not know what he means when he says he received ‘verbal government approval’. There are numerous hurdles for this unproven ‘hyperloop’ technology before it can become reality.”

A spokesperson for the state of Pennsylvania confirmed that neither the governor nor the state’s department of transportation had been contacted by Musk or his company. Ben Sarle, a spokesman for the New York City mayor’s office, said in an email: “Nobody in City Hall, or any of our city agencies, has heard from Mr Musk or any representatives of his company.”

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Makes you ponder what voice people have left in their own societies.

To Save Rural Iowa, We Must Oppose Monsanto-Bayer Merger (Dmr)

Iowa farmers face a crisis. Crop prices have fallen by more than 50 percent since 2013, with no end in sight. At the same time, farmers hold more debt and possess fewer capital reserves to fall back on. In fact, farmers’ debt levels are almost as high as they were prior to the farm crisis of the mid-1980s. Meanwhile, a wave of mergers among the world’s agricultural giants is upending the markets for seeds, fertilizers and pesticides. If approved, the proposed merger would result in just two companies — Monsanto-Bayer and Dow-DuPont — controlling about three-quarters of the U.S. corn seed market. The power that these corporations would hold in the seed market is unprecedented.

Farmers are already being squeezed. The price of corn seed has more than doubled in the past 10 years — from $51 per acre in 2006 to $102 in 2015 — as a result of similar consolidation, including Monsanto’s purchases of DeKalb and Cargill’s international seed business. If the Monsanto-Bayer merger is permitted, this problem will only intensify, further limiting farmers’ choices and making the products they need even more expensive. The merger does not just strengthen Monsanto’s control over the corn seed industry. It also helps the company grow its dominance in other areas, like fertilizers, pesticides, and precision farming technology. Monsanto’s goal is to bundle all of these products together, sort of like how a cable company bundles internet, phone and television.

And just like with most cable companies, the service will be overpriced and shoddy because it will leave farmers with no other option. Yet this mega-merger is moving forward with barely a murmur of concern from our elected officials in Washington. Not a single senator raised this matter at confirmation hearings for Secretary of Agriculture Sonny Perdue. Even worse, the nominee to lead the Department of Justice’s Antitrust Division is a former lobbyist who asserted in a recent interview that “a monopoly is perfectly legal.” It is not surprising that Monsanto and Bayer alone spent $120 million in the last decade on lobbying elected officials at the federal level.

And while stopping the Monsanto-Bayer merger would be a good first step, we need to go even further to prevent these giants from bullying Iowa farmers. Monsanto and other agricultural giants like it are just too big. A century ago, President Teddy Roosevelt broke up the trusts and monopolies of his time because he understood that the deck was stacked against consumers, farmers and small businesses. We need to take a cue from Roosevelt and break up Monsanto and other Big Ag corporations like it.

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Easy solution, and high time: put a bounty on the heads of these idiots. Organize it halfway decently and you’ll get a lot of donations.

Son of Cecil The Lion Killed By Trophy Hunter (G.)

A son of Cecil the lion has been killed by trophy hunters in Zimbabwe, meeting the same fate as his father whose death in 2015 caused a global outcry. Xanda was six years old and had fathered a number of cubs himself. He was shot on 7 July just outside the Hwange National Park, not far from where Cecil died, but news of the death only became public on Thursday. The trophy hunt was organised by Zimbabwean private hunter Richard Cooke but his clients, who may have paid tens of thousands of dollars, have not been revealed. Xanda was wearing a GPS tracking collar, fitted by scientists led by Andrew Loveridge at Oxford University, who have studied the Hwange lions for many years.

“Xanda was one of these gorgeous Kalahari lions, with a big mane, big body, beautiful condition – a very, very lovely animal,” Loveridge told the Guardian. “Personally, I think it is sad that anyone wants to shoot a lion, but there are people who will pay money to do that.” “I put the collar on Xanda last October and spent a bit of time following him around,” he said. “You have handled them so you feel a personal engagement with the animal.” But Loveridge does not condemn trophy hunting outright: “Trophy hunting protects an area about the size of France and Spain combined in Africa. So if you throw trophy hunting out, what happens to all that habitat?” Xanda was the pride male in a group with two adult lionesses and cubs which roamed near the boundary of the national park.

“He was shot 2km from the park boundary, which is a hop and a skip for a lion,” Loveridge said. The scientists want a 5km no-hunting zone around the park. “It is something we have suggested for years,” he said. “But there is a lot of resistance because a lot of the hunting happens right on the boundary, because that is where the animals are. The photo-tourism operators in Hwange are very keen to have that discussion. They are annoyed that this has happened.” Xanda’s death poses no immediate danger to the 550-strong lion population in Hwange national park, which spreads over 15,000 square kilometres, Loveridge said: “The lion population is pretty healthy, but it would probably be better if it didn’t happen,” said Loveridge.

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Jul 142017
 
 July 14, 2017  Posted by at 9:21 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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Pablo Picasso Nude, Green Leaves and Bust 1932

 

Global Shares Rise To Record New Highs (R.)
Britain In Worse Shape To Withstand A Recession Than In 2007 (G.)
IMF Warns Canada On Housing, Trade, Rate Hikes (R.)
40% Of The Fed’s Interest On Excess Reserves Is Paid To Foreign Banks (ZH)
Will Corporate Bonds Cross Over? (DDMB)
Turkey Chooses Russia Over NATO for Missile Defense (BBG)
100,000 and Counting: No Letup in Turkey Coup Purges a Year On (BBG)
Philip Morris’ Anti-Anti-Smoking Campaign (R.)
Globalisation: The Rise And Fall Of An Idea That Swept The World (G.)
Tepco: Decision Already Been Made To Release Radioactive Tritium Into Sea (JT)
Italy’s Poor Almost Triple in a Decade Amid Economic Slumps

 

 

Nothing has value anymore.

Global Shares Rise To Record New Highs (R.)

Upbeat data helped send world shares to a fourth all-time high in less than a month on Thursday as Wall Street edged higher in anticipation of solid earnings, while crude oil gained on evidence of stronger demand in China. Stocks were buoyed in Asia and elsewhere a day after Federal Reserve Chair Janet Yellen signaled a rise in interest rates would be less aggressive than some investors had expected. Sentiment was boosted after China reported upbeat data on exports and imports for June, the latest sign that the global growth is picking up a bit. That offset reports of higher production by key members of OPEC in a report by the International Energy Agency (IEA), lifting oil prices.

The data pushed Asian shares up more than 1% and lifted MSCI’s 47-country gauge of global equity markets to a fresh record high with a gain of 0.29%. “Yesterday’s move was in response to Yellen comments that should inflation remain below the 2% target rate, the central bank will be less aggressive in their tightening program,” said Sam Stovall, chief investment strategist at CFRA Research. “Today, the market is saying that’s old news and let’s focus on the matter at hand, which is earnings that will be coming out in earnest this week,” Stovall said. U.S. shares rose in anticipation second-quarter earnings will grow 7.8% for S&P 500 companies, according to Thomson Reuters data.

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Don’t worry, everybody is.

Britain In Worse Shape To Withstand A Recession Than In 2007 (G.)

Britain’s public finances are in worse shape to withstand a recession than they were on the eve of the 2007 financial crash a decade ago and face the twin threat of a fresh downturn and Brexit, the Treasury’s independent forecaster has warned. The Office for Budget Responsibility – the UK’s fiscal watchdog – said another recession was inevitable at some point and that Theresa May’s failure to win a parliamentary majority in last month’s election left the public finances more vulnerable to being blown off course than they were in 2007. In its first in-depth analysis of the fiscal risks facing Britain, the OBR said its main message was clear: “Governments should expect nasty fiscal surprises from time to time – because policy can only reduce risks, not eliminate them – and plan accordingly.

“And they have to do so in the context of ongoing pressures that are likely to weigh on receipts and drive up spending and a variety of risks that governments choose to expose themselves to for policy reasons. This is true for any government, but this one also has to manage the uncertainties posed by Brexit, which could influence the likelihood or impact of other risks.” The OBR said the size of the UK’s Brexit divorce bill – currently a matter of dispute between London and Brussels – would have little impact on the public finances. But it noted that even a small fall in Britain’s underlying growth rate after departure from the EU would lead to a big increase in the country’s debt burden.

If a knock to trade with the rest of Europe caused productivity to slip by just 0.1 percentage points over the next 50 years, tax receipts would be £36bn lower. With spending growth left unchanged, the debt-to-GDP ratio would end up around 50 percentage points higher, the OBR added. The campaign group Open Britain said the OBR’s report showed “a hard Brexit poses a real threat to our economy. People voted for £350m a week for the NHS, not a £36bn black hole in the public finances that could mean severe cuts to the NHS”.

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Has Australia been warned yet?

IMF Warns Canada On Housing, Trade, Rate Hikes (R.)

The IMF said on Thursday that while Canada’s economy has regained momentum, housing imbalances have increased and uncertainty surrounding trade negotiations with the United States could hurt the recovery. The report, written before the central bank raised interest rates by a quarter of a percentage point on Wednesday to 0.75%, also said the Bank of Canada’s current monetary policy stance is appropriate, and it cautioned against tightening. “While the output gap has started to close, monetary policy should stay accommodative until signs of durable growth and higher inflation emerge,” it said, adding that rate hikes should be “approached cautiously.” Cheng Hoon Lim, IMF mission chief for Canada, later clarified that even with Wednesday’s rate hike, monetary policy remains “appropriately accommodative.”

“The Bank of Canada’s increase of the policy rate reflects encouraging economic data over the past few months. We welcome the good news on the economy,” Lim said in an emailed statement. “Given the considerable uncertainty around the growth and inflation outlook, the Bank should continue to take a cautious approach in further adjusting the monetary policy stance,” she added. In a statement following its annual policy review with Canada, the IMF cautioned that risks to Canada’s outlook are significant – particularly the danger of a sharp correction in the housing market, a further decline in oil prices, or U.S. protectionism. It said financial stability risks could emerge if the housing correction is accompanied by a recession, but said stress tests have shown Canadian banks could withstand a “significant loss” on their uninsured residential mortgage portfolio, in part because of high capital position.

House prices in Toronto and Vancouver have more than doubled since 2009 and the boom has fueled record household debt, a vulnerability that has also been noted by the Bank of Canada. “The main risk on the domestic side is a sharp correction in the housing market that impairs bank balance sheets, triggers negative feedback loops in the economy, and increases contingent claims on the government,” the Fund said. The Fund also warned U.S. protectionism could hurt Canada, laying out a scenario for higher tariffs that could come with the renegotiation of NAFTA. If the United States raises the average tariff on imports from Canada by 2.1 percentage points and there is no retaliation from Canada, there would be a short-term impact on real GDP of about 0.4%.

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Bankers have no more use for borders than birds do.

40% Of The Fed’s Interest On Excess Reserves Is Paid To Foreign Banks (ZH)

Recall that as we showed first all the way back in 2011, the total cash on the books of commercial banks with operations in the US tracks the Fed’s excess reserves almost dollar for dollar. More importantly, the number is broken down by small and large domestic banks, as well as international banks. It is the last number that is of biggest interest, because now that Congress is finally scrutinizing the $4.5 trillion elephant in the room, i.e., the Fed’s balance sheet, it may be interested to know that approximately 40%, or $838 billion as of the latest weekly data, in reserves parked at the Fed belongs to foreign banks.

While we will reserve judgment, and merely point out that of the $100 or so billion in dividends and buybacks announced by US banks after the latest stress test a substantial amount comes directly courtesy of the Fed – cash that ultimately ends up in shareholders’ pockets – we will note that the interest the Fed pays to foreign banks operating in the US who have parked reserves at the Fed, amounts to $10.4 billion annualized as of this moment. This is a subsidy from the Fed, supposedly an institution that exists for the benefit of the US population, going directly and without any frictions to foreign banks, who – just like in the US – then proceed to dividend and buybacks these funds, “returning” them to their own shareholders, most of whom are foreign individuals.

While the number appears modest, it is poised to grow substantially as the Fed Funds rate is expected to keep growing, ultimately hitting 3.0% according to the Fed. Indicatively, assuming excess reserves remain unchanged for the next 2-3 years and rates rise to 3.0%, that would imply a total annual subsidy to commercial banks amounting to $65 billion, of which $25 billion would go to foreign banks every year. We wonder if this is the main reason why the Fed is so desperate to trim its balance sheet as it hikes rates, as sooner or later, someone in Congress will figure this out.

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Unintended consequences? One of many?

Will Corporate Bonds Cross Over? (DDMB)

Unbeknownst to unassuming corporate bond holders, they too will soon be forced into the slow lane. For the moment, the vast majority fancy themselves that equally exasperating driver who won’t get out of the fast lane, determined to bully their way to their damned destination. As for the perils of tailgating, they’re for the other guy, the less agile driver with rubbery reflexes. That’s all good and well and has been for many years. Bond market fender benders are nearly nonexistent. The question is: Will central bankers worldwide turn placid parkways into highways to hell as they ‘remove accommodation,’ to borrow from their gently genteel jargon? That’s certainly one way to interpret Federal Reserve Chair Janet Yellen’s latest promise to shrink the balance sheet ‘appreciably.’

Care for a translation? How easily does “Aggressive Quantitative Tightening” roll off the tongue? Perhaps you’ve just bitten yours instead. Enter the International Monetary Fund (IMF), The Institute of International Finance (IIF), The Bank of International Settlements (BIS), and by the way, the Emerging Markets complex including and especially China. As a former central banker, it is with embarrassing ease yours truly can bandy about fantastic figures. No surprise that nary an eyebrow was raised at the latest figures out of the IIF that aggregate global debt is closing in on $220 trillion, as touched on last week. Consider that to be the broad backdrop. Now, narrow in on the IMF’s concerns that financial stability could be rocked by a rumble in US corporate debt markets.

Using firms’ capacity to service their debts from current earnings as a simple and elegant yard stick, the report warned that one in ten firms are failing outright. The last two years of levering up have exacted rapid damage: earnings have fallen to less than six times interest expense, this during an era of unprecedented low interest rates. And as record non-financial debt as a percentage of GDP quickly approaches 50%, the share of income required to service this mountain is at a seven-year high. Should financial conditions tighten (the report was published in April prior to the Fed’s June rate hike), one-in-five firms are likely to default, which rises to 22% if rates continue to rise.

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“..The Russian system would not be compatible with other NATO defense systems, but also wouldn’t be subject to the same constraints imposed by the alliance, which prevents Turkey from deploying such systems on the Armenian border, Aegean coast or Greek border..”

Turkey Chooses Russia Over NATO for Missile Defense (BBG)

Turkey has agreed to pay $2.5 billion to acquire Russia’s most advanced missile defense system, a senior Turkish official said, in a deal that signals a turn away from the NATO military alliance that has anchored Turkey to the West for more than six decades. The preliminary agreement sees Turkey receiving two S-400 missile batteries from Russia within the next year, and then producing another two inside Turkey, according to the Turkish official, who asked not to be named because of the sensitivity of the matter. A spokesman for Russia’s arms-export company Rosoboronexport OJSC said he couldn’t immediately comment on details of a deal with Turkey. Turkey has reached the point of an agreement on a missile defense system before, only to scupper the deal later amid protests and condemnation from NATO.

Under pressure from the U.S., Turkey gave up an earlier plan to buy a similar missile-defense system from a state-run Chinese company, which had been sanctioned by the U.S. for alleged missile sales to Iran. Turkey has been in NATO since the early years of the Cold War, playing a key role as a frontline state bordering the Soviet Union. But ties with fellow members have been strained in recent years, with Turkish President Recep Tayyip Erdogan pursuing a more assertive and independent foreign policy as conflict engulfed neighboring Iraq and Syria. Tensions with the U.S. mounted over U.S. support for Kurdish militants in Syria that Turkey considers terrorists, and the relationship with the European Union soured as the bloc pushed back against what it sees as Turkey’s increasingly autocratic turn.

Last month, Germany decided to withdraw from the main NATO base in Turkey, Incirlik, after Turkey refused to allow German lawmakers to visit troops there. The missile deal with Russia “is a clear sign that Turkey is disappointed in the U.S. and Europe,” said Konstantin Makienko, an analyst at the Center for Analysis of Strategies and Technologies, a Moscow think-tank. “But until the advance is paid and the assembly begins, we can’t be sure of anything.” The Russian system would not be compatible with other NATO defense systems, but also wouldn’t be subject to the same constraints imposed by the alliance, which prevents Turkey from deploying such systems on the Armenian border, Aegean coast or Greek border, the official said. The Russian deal would allow Turkey to deploy the missile defense systems anywhere in the country, the official said.

[..] The official said the systems delivered to Turkey would not have a friend-or-foe identification system, which means they could be deployed against any threat without restriction.

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That must have been one hell of a conspiracy.

100,000 and Counting: No Letup in Turkey Coup Purges a Year On (BBG)

The scale of Turkey’s crackdown on alleged government opponents following last year’s attempted coup was confirmed by a top official, as the nation prepares to mark the anniversary of the failed putsch amid deepening concern over the rule of law. Authorities have fired 103,824 state employees and suspended 33,483 more since the July 15 bid to seize power by a section of the military, Deputy Prime Minister Numan Kurtulmus said in an interview. The purge of suspected followers of U.S.-based cleric Fethullah Gulen, accused by the government of orchestrating the coup attempt, is necessary to ensure national security, he said. ustice Ministry data showed 50,546 suspected members of Gulen’s organization were in prison on July 3, and that arrest warrants had been issued for 8,000 others. The preacher denies involvement in the takeover attempt.

“There might be crypto members of Feto who walk on the snow without leaving tracks,” Kurtulmus said, using an abbreviation of Gulen’s first name that officials have adopted since the defeated military power grab to refer to his movement. “Related agencies are carefully conducting their work against this possibility.” Just this week, Erdogan rebuffed criticism over the detention of a group of international rights activists, including the director of Amnesty International Turkey, as they held a workshop on an island off Istanbul. “They gathered as if they were holding a meeting to continue July 15,” the president said. Amnesty criticized Turkey on Tuesday after the detentions were extended by seven days. “It is truly absurd that they are under investigation for membership of an armed terrorist organization,” Amnesty Europe Director John Dalhuisen said in an email. “For them to be entering a second week in police cells is a shocking indictment of the ruthless treatment of those who attempt to stand up for human rights in Turkey.”

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Dirty deeds.

Philip Morris’ Anti-Anti-Smoking Campaign (R.)

A group of cigarette company executives stood in the lobby of a drab convention center near New Delhi last November. They were waiting for credentials to enter the World Health Organization’s global tobacco treaty conference, one designed to curb smoking and combat the influence of the cigarette industry. Treaty officials didn’t want them there. But still, among those lined up hoping to get in were executives from Japan Tobacco International and British American Tobacco Plc. There was a big name missing from the group: Philip Morris International Inc. A Philip Morris representative later told Reuters its employees didn’t turn up because the company knew it wasn’t welcome. In fact, executives from the largest publicly traded tobacco firm had flown in from around the world to New Delhi for the anti-tobacco meeting.

Unknown to treaty organizers, they were staying at a hotel an hour from the convention center, working from an operations room there. Philip Morris International would soon be holding secret meetings with delegates from the government of Vietnam and other treaty members. The object of these clandestine activities: the WHO’s Framework Convention on Tobacco Control, or FCTC, a treaty aimed at reducing smoking globally. Reuters has found that Philip Morris International is running a secretive campaign to block or weaken treaty provisions that save millions of lives by curbing tobacco use. [..] Confidential company documents and interviews with current and former Philip Morris employees reveal an offensive that stretches from the Americas to Africa to Asia, from hardscrabble tobacco fields to the halls of political power, in what may be one of the broadest corporate lobbying efforts in existence.

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It needs growth, and there ain’t none.

Globalisation: The Rise And Fall Of An Idea That Swept The World (G.)

It was only a few decades ago that globalisation was held by many, even by some critics, to be an inevitable, unstoppable force. “Rejecting globalisation,” the American journalist George Packer has written, “was like rejecting the sunrise.” Globalisation could take place in services, capital and ideas, making it a notoriously imprecise term; but what it meant most often was making it cheaper to trade across borders – something that seemed to many at the time to be an unquestionable good. In practice, this often meant that industry would move from rich countries, where labour was expensive, to poor countries, where labour was cheaper. People in the rich countries would either have to accept lower wages to compete, or lose their jobs. But no matter what, the goods they formerly produced would now be imported, and be even cheaper.

And the unemployed could get new, higher-skilled jobs (if they got the requisite training). Mainstream economists and politicians upheld the consensus about the merits of globalisation, with little concern that there might be political consequences. Back then, economists could calmly chalk up anti-globalisation sentiment to a marginal group of delusional protesters, or disgruntled stragglers still toiling uselessly in “sunset industries”. These days, as sizable constituencies have voted in country after country for anti-free-trade policies, or candidates that promise to limit them, the old self-assurance is gone. Millions have rejected, with uncertain results, the punishing logic that globalisation could not be stopped. The backlash has swelled a wave of soul-searching among economists, one that had already begun to roll ashore with the financial crisis. How did they fail to foresee the repercussions?

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The world should not allow the Fukushima secrecy any longer.

Tepco: Decision Already Been Made To Release Radioactive Tritium Into Sea (JT)

Radioactive tritium, said to pose little risk to human health, will be released from the crippled Fukushima No. 1 nuclear power complex into the sea, according to a top official of the plant operator. “The decision has already been made,” Takashi Kawamura, chairman of Tokyo Electric Power Company, said in a recent interview with media outlets, referring to the discharge of tritium, which remains in filtered water even after highly toxic radioactive materials are removed from water used to cool the damaged reactors at the plant. At other nuclear power plants, tritium-containing water has routinely been released into the sea after it is diluted. But the move by Tepco has prompted worries among local fishermen about the potential ramifications for their livelihood as public perceptions about fish and other marine products caught off Fukushima could worsen.

They are the first public remarks by the utility’s management on the matter, as Tepco continues its cleanup of toxic water and tanks containing it continue to fill the premises of the plant, where three reactors suffered meltdowns after tsunami flooded the complex in March 2011 following a massive earthquake. Kawamura’s comments came at a time when a government panel is still debating how to deal with tritium-containing water at the Fukushima plant, including whether to dump it into sea. Saying its next move is contingent on the panel’s decision, Kawamura indicated in the interview that Tepco will wait for a decision by the government before it actually starts releasing the water into sea. “We cannot keep going if we do not have the support of the state” as well as Fukushima Prefecture and other stakeholders, he said.

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The EU is one big success story.

Italy’s Poor Almost Triple in a Decade Amid Economic Slumps

Italians living below the level of absolute poverty almost tripled over the last decade as the country went through a double-dip, record-long recession. The absolute poor, or those unable to purchase a basket of necessary goods and services, reached 4.7 million last year, up from almost 1.7 million in 2006, national statistics agency Istat said Thursday. That is 7.9% of the population, with many of them concentrated in the nation’s southern regions. As Italy went through its deepest, and then its longest, recession since World War II between 2008 and 2013, more than a quarter of the nation’s industrial production was wiped out. Over the same period unemployment also rose, with the rate rising to as high as 13% in 2014 from a low of 5.7% in 2007. Joblessness was at 11.3% at last check in May.

For decades, Italy has grappled with a low fertility rate – just 1.35 children per woman compared with a 1.58 average across the 28-nation EU as of 2015, the last year for which comparable data are available. “The poverty report shows how it is pointless to wonder why there are fewer newborn in Italy,” said Gigi De Palo, head of Italy’s Forum of Family Associations. “Making a child means becoming poor, it seems like in Italy children are not seen as a common good.” The number of absolute poor rose last year in the younger-age classes, reaching 10% in the group of those between 18 and 34 years old. It fell among seniors to 3.8% in the age group of 65 and older, the Istat report also showed.

Earlier this year, the Rome-based parliament approved a new anti-poverty tool called inclusion income that is replacing existing income-support measures. It will benefit 400,000 households, for a total of 1.7 million people, Il Sole 24 Ore daily reported, citing parliamentary documents. The program will be funded with resources of around €2 billion ($2.3 billion) this year which should rise to nearly €2.2 billion in 2018, Sole also said

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Apr 122017
 
 April 12, 2017  Posted by at 8:25 pm Finance Tagged with: , , , , , , ,  8 Responses »
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Frederick Carl Frieseke Girl In Blue Arranging Flowers 1915

 

Potential earthquakes and black swans are right ahead of us. What else is new? On April 16, Turkey has a referendum to decide whether Erdogan will become de facto supreme ruler. What happens if he loses the referendum is completely unclear, undiscussed even, but it’s obvious a loss would have the country shake on its already shaky foundations.

The Turkish economy is in horrible shape and Erdogan’s post-coup firings (hundreds of thousands) and jailings (tens of thousands) have made large parts of society unattended. The biggest of which may well be the army; you can’t fire large numbers of officers and pilots and expect to retain the same strike effectiveness.

Erdogan’s ongoing war on the Kurds is also turning against him, or at least internationally. Both Russia and the US acknowledge the important role Kurdish forces play in the battle against ISIS, and they’re not going to turn against them. So while Turkey demands a major role in neighboring Syria, it has essentially been put off-side, or benched.

Russia maintains (some of) its boycotts of Turkish products ($260 million worth of tomatoes) that were the result of Erdogan downing a Russian jet in late 2015, and the refuses to deliver arch-enemy Gülen, despite Michael Flynn’s best efforts. This means, by the way, that the country simply hasn’t provided irrefutable proof of the man’s role in the coup (if it was ever a real coup).

If Erdogan cannot come up a winner on Sunday, he would lose a lot of face. And he might lose more than that. Of course one must question if it’s even a option that the Turkish people vote NO, and that that would subsequently be announced as the referendum result. He controls just about anything in the country already; why not this too, by right or by might?!

 

Second black swan: France. It could be a genuine black one, as in unexpected. Less than two weeks before the first round of the presidential election, all of a sudden another contender has come to the fore. Far left Jean-Luc Mélenchon was never given any chance of winning, but one TV debate later his popularity is rising fast.

The French have long been tired of their political system, and this time around that could mean all established parties are out. Even perhaps including Emmanuel Macron, who doesn’t belong to a party but is still perceived as a member of the establishment, no matter how hard he tries not to be.

Come round two on May 7, voters might be faced with the -stark- choice between far left and far right, with a big gaping empty hole in between. That would leave no option of a ‘safe choice’, the big hope of everyone who doesn’t like Marine Le Pen. It would also leave no candidate who unwaveringly supports the euro or even the EU.

In fact, it’s ironic -make that funny- to what extent far left and far right ideas ‘meet in the middle’. Add to the irony that Melenchon’s rise makes a Le Pen presidency that much more likely, because a ‘communist’ is seen as at least as dangerous as Le Pen. That might give her the undecided votes she will need to prevail.

 

US Secretary of State Rex Tillerson is in Moscow, he’s way out of his league, and he knows it. His task is, if you read between the lines, to deliver warnings and threats to Putin and Russian Foreign Minister Lavrov, but both are not only at least as smart as Rex, they have the many years of experience in international politics that he woefully lacks.

The White House issued a ‘we can prove it was Assad, and it was sarin’ report yesterday, but they can not. The sarin accusation even makes little sense given the photos of people attending to the victims with bare hands. Accusing Russia of being complicit in Assad attacking his own people with gas/chemicals doesn’t really fly either.

Tillerson said earlier in the week that Russia is either ‘incompetent or complicit’, that it should have made sure Assad had no chemical arsenal. But a 2013 treaty between the US and Russia established a UN body, the Organisation for the Prohibition of Chemical Weapons (OPCW), that is responsible for that. And the US is part of that body, and as such co-responsible.

And yes, there will be people saying that Russia delivered chemical capacity to Assad despite the treaty. But why should it? That question falls into the same category as why Assad would use chemicals to begin with at this point in time. It makes no sense, there is no logic. But then in the US logic has been in short supply for a while, certainly when politics are concerned.

Tillerson apparently was told to tell Russia that it has to stop supporting Assad or else, but that is just real dumb. Syria is Russia’s only haven in the Middle East, and there’s no chance they will give it up. And why should they? Would the world be a better place if the US can do whatever it wants in the region? Haven’t the utterly failed regime changes in Iraq and Libya done enough damage?

Sure, Assad may be a shaky asset. But what about the Saudi’s and their western-supported obliteration of the entire nation and peoples of Yemen? Want to look at some pictures that can drive Ivanka to tears? You won’t see them in your media, and neither will she. It’s all just biased nonsense, and by now it’s hard to see how Trump will find his own way in, let alone find his way out of, this foreign swamp.

Threatening Russia is certainly not that way. But sure, the President must feel eager to disprove the unproven non-stop allegations of collaboration between him and Putin. And the one-sided attacks did indeed stop only when the bombs started to fall. It’s all so predictable it makes you want to puke all over your morning paper all over every single morning, Groundhog Day style.

 

The New York Times was awarded a Pulitzer for “agenda-setting reporting on Vladimir Putin’s efforts to project Russia’s power abroad”. I kid you not. The American press has lost all concerns about its own credibility, and the Pulitzers follow them with a vengeance. And that same press did a weather-vane like 180 as soon as 59 Tomahawks were aimed and fired at an abandoned airport in the sand.

They were anti-Trump mongers the whole time, and changed like a leaf on a tree in seconds, to become pro-war mongers. It’s something to behold. They love him! The starkest example, among too many to keep count of, was presented in a publication named The Hill, which we are apparently supposed to take serious. It’s just another WaPo and NYT clone, but this thing by “General Anthony J. Tata, Opinion Contributor” sums it all up too nicely to ignore:

Trump’s Adherence To American Values Demonstrates His Commitment To Protecting Us

In the wake of Tuesday’s Syrian chemical weapons attack on innocent civilians, President Barack Obama will be remembered as America’s modern day Neville Chamberlain, the infamous United Kingdom Prime Minister who appeased Nazi Germany in 1938 by signing the Munich Agreement, setting the stage for the holocaust. Contrast Obama’s negligence with President Donald Trump’s decisive action a mere two days following the Syrian violation of international law. The Syrian government used chemicals to brutalize its citizens in Khan Sheikhoun.

President Trump immediately denounced the attacks, labeling them, “An affront to humanity.” Less than 72 hours later he ordered the launch of 60 cruise missiles to destroy the airfield from which the bomb delivering airplanes departed. If Obama’s passivity in the face of weapons of mass destruction (WMD) deployed in Syria in 2013 lends to Chamberlain comparisons, President Donald Trump’s military action against Syria this week compares favorably to Winston Churchill, Chamberlain’s effective wartime successor.

Just as Chamberlain and Churchill viewed Nazi Germany differently, how could two modern day American presidents see essentially the same horrifying pictures of chemical weapons attack victims and come to two decidedly different conclusions about their terror and an effective response?

Jarring images of Tuesday’s sarin nerve agent attack on its citizens that circulated the world this week were similar to those that went viral in 2013: bodies torqued in gruesome death poses, patients oozing bodily fluids from their mouths and noses, and children running blind through the streets. In 2013, an unimpressed President Obama found a passive, ineffective diplomatic solution relying on unreliable Russian oversight. Syria obviously maintained and built its weapons of mass destruction stockpiles. The United Nations was even in on the deal, declaring that there were no more chemical weapons in Syria.

There’s so much stupidity and mendacity in that, you really have to take some time out to let it sink in. But it’s also very representative of American media these days. CNN, WaPo, NYT, they’re all full of people who by now must feel really shortchanged because Trump hasn’t dropped many more bombs on Syria, and they’re more than willing not to show us the pictures of the children those bombs would maim and kill. After all, how many pictures have you seen of Yemen’s death and famine?

When Trump told Maria Bartiromo that “we’re not going into Syria”, you can bet your buttocks lots of executives behind the desks there were thinking of one thing only: how do we get him to do it anyway? They still have hope there’ll be a major war soon, I guarantee you that.

But Putin is not going to move an inch, not on Syria and not on anything else. He knows the US army can do a lot of damage, but it can’t win. It hasn’t won an actual war in many decades, and it won’t win this one either if whoever’s in Washington decides to start it.

Before I started writing this I was thinking about Rip van Winkle rather than Groundhog Day. The whole media 180, and the war cries, are exactly like they were in 2003. Now, Rip van Winkle allegedly slept for 20 years, not 14, but hey, details. The cute thing about the Rip van Winkle story is also in the details:

When he awakens, Van Winkle discovers shocking changes: his musket is rotting and rusty, his beard is a foot long, and his dog is nowhere to be found. He returns to his village, where he recognizes no one. Van Winkle returns just after an election, and people are asking how he voted. (Wikipedia)

That election thing is priceless. But Rip woke up to find his entire world completely changed. Whereas today’s hollow US war talk is something we’ve seen before, and many times. That’s more Groundhog Day style. There must be a way to connect the two stories in a way that fits today’s reality. Whoever finds it is in Hollywood blockbuster territory.

War is far too popular in America. It’s scary. Not least of all because the US has zero chance of winning. For the same reasons, by the by, that it can’t fix its health care system.

America as a country, a society, is not effective enough anymore to win anything, there’s no chance of a concerted effort, it’s too inward looking and distracted by TV-shaped reality and ‘social’ media, and its entire society is aimed only at maximizing profit at the expense of one’s own neighbors. America has turned into cats in a sack.

But yes, these are often the most dangerous times in the existence of an empire. The waning days. The downward slope. The swans that will pop up in that are definitely black; there’s no predicting those graceful beauties.

Apr 122017
 
 April 12, 2017  Posted by at 9:09 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »
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Elliott Erwitt Trocadero, Paris 1950

 

The Tesla Ponzi Is Not ‘Inexplicable’ At All (WS)
Millennials Are Abandoning Postwar Engines of Growth: Suburbs and Autos (CHS)
Slowdown in US Borrowing Defies Easy Explanation (WSJ)
US Companies Now Have $1.6 Trillion Stashed In Tax Havens (Ind.)
Trump Declines To Endorse Bannon, Says US ‘Not Going Into Syria’ (MW)
Beware The Dogs Of War: Is The American Empire On The Verge Of Collapse? (JW)
A Breakthrough Alternative To Growth Economics – The Doughnut (G.)
The Commodification of Education (Steve Keen)
The Fed Could Use Less Book Learning and More Street Smarts (Ricketts)
Spectre Of Russian Influence Looms Large Over French Election (G.)
Moment Of Reckoning In Turkey As Alleged Coup Plotters Go On Trial (G.)
Greece: Cash and Apartments for Refugees with UNHCR Aid (GR)
Why The Human Race Is Heading For The Fire (G.)

 

 

People tend to forget that there are no functioning asset markets left. But there really aren’t.

The Tesla Ponzi Is Not ‘Inexplicable’ At All (WS)

Electric cars have been around for longer than internal combustion engines. When they first appeared in the 1800s, they competed with steam-powered cars and horses. What Tesla has done is put them on the map. That was a huge feat. Now every global automaker has electric cars. They all, including Teslas, still have the same problem they had in the 1800s: the battery. But those problems – costs, weight or range, and time it takes to charge – are getting smaller as the technology advances. And the competition from the giants, once batteries are ready for prime-time, will be huge, and global. So in March, Tesla sold 4,050 new vehicles in the US, according to Autodata. All automakers combined sold 1.56 million new vehicles in the US.

This gave Tesla a record high market share of an invisibly small 0.26%. Volume-wise, it’s in the same ballpark as Porsche. GM sold 256,007 new vehicles in March, for a market share of 16.5%. In other words, GM sold 63 times as many new vehicles as Tesla did. For percent-lovers, that’s 6,221% more. Even if Tesla quadruples its sales in the US, it still will not amount to a significant market share. Then there is Tesla’s financial performance. It lost money in every one of its 10 years of existence. Here are the “profits” – um, net losses – Tesla racked up, in total $2.9 billion:

We constantly hear the old saw that stock prices reflect future earnings and/or cash flows, and that looking back ten years has no meaning for the future. Alas, after 10 years of producing losses, Tesla shows no signs of making money in the future. It might instead continue burning through investor cash by the billions. Based on the logic that stock prices reflect future earnings, its shares should be at about zero. This chart compares Tesla’s net losses (red bars) and GM’s net income (green bars), in millions of dollars. Over those eight years going back to 2010, Tesla lost $2.7 billion; GM earned $47.1 billion:

[..] In comparison with GM, Tesla is ludicrously overvalued. But it’s not “inexplicable.” It’s perfectly explicable by the wondrously Fed-engineered stock market that has long ago abandoned any pretext of valuing companies on a rational basis. And it’s explicable by the hype – the “research” – issued by Wall Street investment banks that hope to get fat fees from Tesla’s next offerings of shares or convertible debt. The amounts are huge, going back ten years: Last month, Tesla raised another $1.2 billion, after having raised $1.5 billion in May 2016. There will be more. Tesla is burning a lot of cash. Investment banks get rich on these deals. The bonuses are huge. So it’s OK to hype Tesla’s stock and sell it to their clients. Everybody wins in this scenario – except for a few despised short sellers who’re hung up on their silly notion of reality.

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They simply can’t afford it.

Millennials Are Abandoning Postwar Engines of Growth: Suburbs and Autos (CHS)

If anything defined the postwar economy between 1946 and 1999, it was the exodus of the middle class from cities to suburbs and the glorification of what Jim Kunstler calls Happy Motoring: freeways, cars and trucks, ten lanes of private vehicles, the vast majority of which are transporting one person. The build-out of suburbia drove growth for decades: millions of new suburban homes, miles of new freeways, sprawling shopping malls, and tens of millions of new autos, trucks, and SUVs, transforming one-car households into three vehicle households. Then there was all the furnishings for those expansive new homes, and the credit necessary to fund the homes, vehicles, furnishings, etc. Now the Millennial generation is turning its back on both of these bedrock engines of growth.

As various metrics reveal, the Millennials are fine with taking Uber to work, buying their shoes from Zappos (return them if they don’t fit, no problem), and making whatever tradeoffs are necessary to live in urban cores. Simply put, the natural progression of this generation is away from suburban malls, suburban home ownership and the car-centric commuter lifestyle that goes with suburban homeownership. Saddled with insanely high student debt loads imposed by the rapaciously predatory higher education cartel, Millennials avoid additional debt like the plague. Millennials have relatively high savings rates. As for a lifetime of penury to service debt–hey, they already have that, thanks to their “I borrowed $100,000 and all I got was this worthless college degree” student loans.

Consider the secondary effects of these trend changes. If Millennials are earning less and already carrying heavy debt loads, who is going to buy the Baby Boom’s millions of pricey suburban McMansions? The answer might be “no one.” If vehicle sales decline, all the secondary auto-related sales decline, too. Auto insurance, for example. Furnishing a small expensive urban flat requires a lot less furnishings than a 3,000 square foot suburban house. What happens to sales of big dining sets and backyard furniture? As retail malls die, property taxes, sales taxes and payroll taxes decline, too. Many cheerlead the notion of repurposed commercial space, but uses such as community college classes pay a lot less per square foot than retail did, and generate little in the way of sales and payroll taxes. Financial losses will also mount. Valuations and property taxes will decline, and commercial real estate loans based on nose-bleed valuations and high retail lease rates will go south, triggering significant financial-sector losses.

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I’d think it couldn’t be easier.

Slowdown in US Borrowing Defies Easy Explanation (WSJ)

One of the great mysteries and biggest concerns in the economy right now is the slowing growth in bank lending. Economists are searching for answers but none are entirely satisfying. Total loans and leases extended by commercial banks in the U.S. this year were up just 3.8% from a year earlier as of March 29, according to the latest Federal Reserve data. That compares with 6.4% growth in all of last year, and a 7.6% pace as of late October. The slowdown is more surprising given the rise in business and consumer confidence since the election. And it is worrisome because the lack of business investment is considered an important reason why economic growth has remained weak. Loans to businesses have slowed most sharply, with the latest data showing commercial and industrial loans up just 2.8% from a year earlier, compared with 8.9% growth in late October.

Economists at Goldman Sachs estimate the slowdown in commercial and industrial lending alone equates to a $100 billion shortfall in loans. Investors may start to get more clarity on what is causing the slowdown when banks start reporting first-quarter earnings on Thursday. One explanation is that many companies have been tapping corporate bond markets to lock in low rates, and in some cases to pay down more expensive bank debt. In the first quarter of this year, corporate bond issuance rose by 18% from a year earlier, according to the Securities Industry and Financial Markets Association. But one reason for the increase is that the first quarter of 2016 was dismal because of market turmoil. The rise isn’t enough to explain the entire shortfall in lending.

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The Trump tax plan is way off schedule.

US Companies Now Have $1.6 Trillion Stashed In Tax Havens (Ind.)

The 50 biggest US companies stashed another $200bn of profits in offshore tax havens in 2015 alone, taking the total to approximately $1.6 trillion, according to new analysis. Donald Trump’s plans to slash taxes for corporations and wealthy individuals and impose a border tax will harm average consumers further, Oxfam said in a report published on Tuesday. The 50 largest companies disclosed use of 1,751 subsidiaries in countries classed as tax havens by the OECD and the US National Bureau of Economic Research, an increase of 143 on a year earlier, the charity found. The true number may be far higher as only “significant” subsidiaries have to be disclosed. Big multinationals such as Google, Amazon and Apple have come under fire for routing sales through countries such as Bermuda, Ireland and Luxembourg, which offer them low tax rates.

While this is legal, critics say it does not reflect where the firms actually do business. The top rate of US corporate tax is 35% – one of the highest rates in the world, incentivising many companies to hold billions offshore. Mr Trump has pledged to reduce this to 15% and a one-off rate of 10% for money currently held abroad. That will hand a $328bn tax break to the 50 biggest companies, with Apple, Pfizer and Microsoft the biggest gainers, accounting for 40% of the total, Oxfam estimated. While some have welcomed the move as a sensible way to bring profits of US companies back to the country, Oxfam warns that it risks accelerating a race to the bottom that will harm consumers in America as well as the world’s poor as global tax rates plummet.

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Scott Adams forecast three phases for opinion of Trump. First people would call him Hitler, then incompetent, then ‘competent but I don’t like it’. Is he on track?

Trump Declines To Endorse Bannon, Says US ‘Not Going Into Syria’ (MW)

President Donald Trump declined to give top adviser Steve Bannon a vote of confidence during a New York Post interview published Tuesday, in which he also said the U.S. was not headed toward a ground war in Syria. There have been reports of discord among Trump’s top White House advisers, and rumors that controversial chief strategist Bannon may be on the way out. Last week, Bannon and Trump’s son-in-law, Jared Kushner, were reportedly told to iron out their differences. When asked Monday by Post columnist Michael Goodwin if he still had confidence in Bannon, Trump didn’t exactly give a ringing endorsement: “I like Steve, but you have to remember he was not involved in my campaign until very late. I had already beaten all the senators and all the governors, and I didn’t know Steve.”

“I’m my own strategist and it wasn’t like I was going to change strategies because I was facing crooked Hillary.” “Steve is a good guy, but I told them to straighten it out or I will,” Trump said. In the same interview, Trump told Goodwin that, despite last week’s airstrike, U.S. policy toward Syria has not changed. “We’re not going into Syria,” Trump said. “Our policy is the same — it hasn’t changed. We’re not going into Syria.” Trump also acknowledged a growing rift with Russia — “We’re not exactly on the same wavelength with Russia, to put it mildly” — again called the nuclear deal with Iran “the single worst deal ever,” and said of the worsening nuclear situation with North Korea: “I knew I was left a mess, but it’s worse than I thought.”

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Cue Rome.

Beware The Dogs Of War: Is The American Empire On The Verge Of Collapse? (JW)

Waging endless wars abroad (in Iraq, Afghanistan, Pakistan and now Syria) isn’t making America—or the rest of the world—any safer, it’s certainly not making America great again, and it’s undeniably digging the U.S. deeper into debt. In fact, it’s a wonder the economy hasn’t collapsed yet. Indeed, even if we were to put an end to all of the government’s military meddling and bring all of the troops home today, it would take decades to pay down the price of these wars and get the government’s creditors off our backs. Even then, government spending would have to be slashed dramatically and taxes raised.

You do the math.
• The government is $19 trillion in debt.
• The Pentagon’s annual budget consumes almost 100% of individual income tax revenue.
• The government has spent $4.8 trillion on wars abroad since 9/11, with $7.9 trillion in interest. As the Atlantic points out, we’re fighting terrorism with a credit card.
• The government lost more than $160 billion to waste and fraud by the military and defense contractors.
• Taxpayers are being forced to pay $1.4 million per hour to provide U.S. weapons to countries that can’t afford them.
• The U.S. government spends more on wars (and military occupations) abroad every year than all 50 states combined spend on health, education, welfare, and safety.
• Now President Trump wants to increase military spending by $54 billion.
• Add in the cost of waging war in Syria, and the burden on taxpayers soars to more than $11.5 million a day. Ironically, while presidential candidate Trump was vehemently opposed to the U.S. use of force in Syria, and warned that fighting Syria would signal the start of World War III against a united Syria, Russia and Iran, he wasted no time launching air strikes against Syria.

Clearly, war has become a huge money-making venture, and the U.S. government, with its vast military empire, is one of its best buyers and sellers. Yet what most Americans—brainwashed into believing that patriotism means supporting the war machine—fail to recognize is that these ongoing wars have little to do with keeping the country safe and everything to do with enriching the military industrial complex at taxpayer expense. The rationale may keep changing for why American military forces are in Afghanistan, Iraq, Pakistan and now Syria. However, the one that remains constant is that those who run the government—including the current president—are feeding the appetite of the military industrial complex and fattening the bank accounts of its investors.

Case in point: President Trump plans to “beef up” military spending while slashing funding for the environment, civil rights protections, the arts, minority-owned businesses, public broadcasting, Amtrak, rural airports and interstates. In other words, in order to fund this burgeoning military empire that polices the globe, the U.S. government is prepared to bankrupt the nation, jeopardize our servicemen and women, increase the chances of terrorism and blowback domestically, and push the nation that much closer to eventual collapse. Obviously, our national priorities are in desperate need of an overhauling.

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Interesting but hardly a breakthrough. It’s not all that hard.

A Breakthrough Alternative To Growth Economics – The Doughnut (G.)

Raworth begins by redrawing the economy. She embeds it in the Earth’s systems and in society, showing how it depends on the flow of materials and energy, and reminding us that we are more than just workers, consumers and owners of capital. This recognition of inconvenient realities then leads to her breakthrough: a graphic representation of the world we want to create. Like all the best ideas, her doughnut model seems so simple and obvious that you wonder why you didn’t think of it yourself. But achieving this clarity and concision requires years of thought: a great decluttering of the myths and misrepresentations in which we have been schooled. The diagram consists of two rings. The inner ring of the doughnut represents a sufficiency of the resources we need to lead a good life: food, clean water, housing, sanitation, energy, education, healthcare, democracy.

Anyone living within that ring, in the hole in the middle of the doughnut, is in a state of deprivation. The outer ring of the doughnut consists of the Earth’s environmental limits, beyond which we inflict dangerous levels of climate change, ozone depletion, water pollution, loss of species and other assaults on the living world. The area between the two rings – the doughnut itself – is the “ecologically safe and socially just space” in which humanity should strive to live. The purpose of economics should be to help us enter that space and stay there. As well as describing a better world, this model allows us to see, in immediate and comprehensible terms, the state in which we now find ourselves. At the moment we transgress both lines. Billions of people still live in the hole in the middle. We have breached the outer boundary in several places.

An economics that helps us to live within the doughnut would seek to reduce inequalities in wealth and income. Wealth arising from the gifts of nature would be widely shared. Money, markets, taxation and public investment would be designed to conserve and regenerate resources rather than squander them. State-owned banks would invest in projects that transform our relationship with the living world, such as zero-carbon public transport and community energy schemes. New metrics would measure genuine prosperity, rather than the speed with which we degrade our long-term prospects.

Such proposals are familiar; but without a new framework of thought, piecemeal solutions are unlikely to succeed. By rethinking economics from first principles, Raworth allows us to integrate our specific propositions into a coherent programme, and then to measure the extent to which it is realised. I see her as the John Maynard Keynes of the 21st century: by reframing the economy, she allows us to change our view of who we are, where we stand, and what we want to be. Now we need to turn her ideas into policy. Read her book, then demand that those who wield power start working towards its objectives: human prosperity within a thriving living world.

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Hungry for knowledge, or hungry for a paycheck? Our education systems are a giant failure.

The Commodification of Education (Steve Keen)

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A real life consequence of Commodification of Education. Intellectual Yet Idiot.

The Fed Could Use Less Book Learning and More Street Smarts (Ricketts)

I’ll bet pundits and pollsters will forever ponder how Donald Trump got elected. For me, it’s straightforward: The American people—or at least enough of them to propel Mr. Trump into office—wanted to infuse practical business experience into the government. To borrow a phrase from my friend, the economist Larry Lindsey, voters rejected the political ruling class in favor of real-world experience. Which brings me to the Federal Reserve. In 2012 Jim Grant, the longtime financial journalist, delivered a speech at the Federal Reserve Bank of New York. “In the not quite 100 years since the founding of your institution,” he said, “America has exchanged central banking for a kind of central planning and the gold standard for what I will call the Ph.D. standard.” Central banking, in other words, is now dominated by academics. And while I don’t blame them for it, academics by their nature come to decision-making with a distinctly—you guessed it—academic perspective.

The shift described by Mr. Grant has had consequences. For one thing, simplicity based on age-old practice has been replaced by complexity based on econometric theory. Big Data has played an increasingly prominent role in how the Fed operates, even as the Fed’s role in the economy has deepened and widened. Rather than enlisting business leaders and bankers to fulfill the Fed’s increasingly complex mission, the nation’s political and monetary authorities turned primarily to the world’s most brilliant economists, who can be thought of more and more as monetary scientists. “Central bankers have invited politicians to abdicate leadership authority to an inbred society of PhD academics who are infected to their core with groupthink, or as I prefer to think of it: ‘groupstink,’” argues former Dallas Fed analyst Danielle DiMartino Booth in a new book.

Ten of the 17 current Fed governors and regional bank presidents have doctorates in economics. Few have much experience in the private economy. Most have spent the bulk of their careers at the classroom lectern or in Washington. This is a sea change. In past decades, Fed members and governors frequently had experience in banking, industry and agriculture. Do the results indicate that our pursuit of intellectual horsepower has produced a stronger economy? Today’s labor-force participation rate is lower than at any time since the late 1970s; an oven from Sears that cost $160 in 1975 would cost more than $400 today; and despite unprecedented intervention in the economy, America has experienced its worst recovery since the Great Depression.Given the cumulative genius of the leaders of the Federal Reserve System, and the highly sophisticated quantitative tools and policies the Fed has developed under their direction, why aren’t we doing better?

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Just one example of how deluded the UK, like the US, has fast become when it comes to Russia. ‘Putin Did It’ is very much alive. It’s getting mighty tiresome.

Spectre Of Russian Influence Looms Large Over French Election (G.)

The golden domes of one of Vladimir Putin’s foreign projects, the recently built Russian Holy Trinity cathedral in the heart of Paris, rise up not far from the Elysée palace, the seat of the French presidency. Dubbed “Putin’s cathedral” or “Saint-Vladimir”, it stands out as a symbol of the many connections the French elite has long nurtured with Russia, and which the Kremlin is actively seeking to capitalise on in the run-up to the French presidential election. France is an important target for Russia’s soft power and networks of influence. The country is a key pillar of the European Union, an important Nato member and home to Europe’s largest far-right party, the Front National, whose leader, Marine Le Pen, is expected to reach the 7 May run-off in the presidential vote and has benefited from Russian financing.

Le Pen took the extraordinary step of travelling to Moscow to meet Putin in March, just a month before the French vote, to boost her international profile and showcase her closeness to the Russian president’s worldview – including his virulent hostility towards the EU and his vision of a “civilisational” clash with radical Islam. Yet she is far from being the only presidential candidate to favour warmer relations with Russia, nor to reflect a certain French fascination with the Kremlin strongman. [..] Russian meddling in elections has become a hot political topic in the US, and there has been much speculation about Russia’s attempts to favour Brexit as well as anti-EU parties in the Netherlands and Germany. But France is now widely seen as the key country where Russia has a strategic interest in encouraging illiberal forces and seeking to drive wedges between western democracies.

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One shudders to imagine what happens if Erdogan loses the Sunday April 16 referendum. And also what happens if he wins.

Moment Of Reckoning In Turkey As Alleged Coup Plotters Go On Trial (G.)

Turkish prosecutors are laying the groundwork for large-scale trials of hundreds of people accused of participating in a coup attempt last July, an undertaking that is already transforming society and will be a reckoning of sorts for a nation that has endured much upheaval in recent years. Authorities say the trials will shed light on alleged links between the accused and Fethullah Gülen, an exiled US-based preacher with a vast grassroots network. The onset of the trials has refocused attention on the large-scale purges of Turkey’s government, media and academia after the coup attempt, in which tens of thousands of people – many with no known links to the Gülenists – were dismissed or jailed. Meanwhile, Turkey is preparing for a referendum on Sunday on greater presidential powers, which could prove the most significant political development in the history of the republic.

“What happened on 15 July [the day of the attempted coup] and what is now happening for months is completely transformative for Turkey,” said a journalist who worked for a Gülen-affiliated media outlet and requested anonymity for fear of reprisals. “One big part of society has been subjected to extreme demonisation in a process that cost them their jobs, reputation, freedom or ultimately their lives. Another part of the society has been filled with anger and radically politicised. “Nothing can be the same as before 15 July any longer – ever,” he added. Turkish courts have already begun several parallel trials over the coup attempt. Last month prosecutors demanded life sentences for 47 people accused of attempting to assassinate the president, Recep Tayyip Erdogan, on the night of the putsch, and the largest trial yet opened on 28 February in a specially built courtroom outside Ankara filled with more than 300 suspects accused of murder and attempting to overthrow the government.

About 270 suspects, including Gülen, went on trial in absentia in Izmir in January, and an indictment issued in late February alleges that Gülenists infiltrated the state and charges 31 members of the military with attempting to overthrow the constitutional order. The state intelligence agency, the National Intelligence Service (MIT), has sent prosecutors in Ankara a list of 122,000 individuals who allegedly used a secure messaging app, ByLock, which security officials say was widely used by the Gülen network for communications.

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Handing out money and housing to refugees while Greeks themselves are hungry and homeless. Great plan.

Greece: Cash and Apartments for Refugees with UNHCR Aid (GR)

Migration Deputy Minister Yiannis Mouzalas announced on Monday that refugees will be getting cash instead of free meals and will be staying in rented apartments in order to decongest migrant camps. In a joint press conference with the participation of Representative of the United Nations High Commissioner for Refugees (UNHCR) in Greece Philippe Leclerc, President of Union of Municipalities of Thesssaly Giorgos Kotsos and Larissa Mayor Apostolos Kaloyiannis, Mouzalas explained the project of decongestion of migrant camps and relocation of refugees in urban centers and smaller municipalities. Mouzalas said that refugees will be getting cash in hand for their meals instead of rations and will be staying in apartments under the UNHCR program, so that they will be getting primary care. The program applies for 10,000 asylum seekers in 2017 and another 10,000 in 2018.

The deputy minister clarified that the apartments will be rented by owners under free market conditions and the municipalities will assist the implementation of the program. This way, he said, local communities will benefit financially. The program will apply provided that the EU-Turkey agreement for refugee returns will continue to apply. This way, Mouzalas continued, the 40 camps across Greece that host 40,000 asylum seekers will be reduced to 17-20 with a maximum of 500 people each for 2017. In 2018, another 10,000 asylum seekers will be relocated under the program. The project will start with 500 refugees leaving the Koutsohera camp and moving to Larissa, a municipality that expressed interest in the program. As the program progresses, the camps in Thessaly (Koutsohera, Volos and Trikala) will eventually close and refugees will relocate in municipalities.

“The UN will help in the expansion of the hospitality program for refugees in apartments to improve their living conditions,” Leclerc said. The program has already been implemented in Athens, Thessaloniki and Livadia. The president of the Union of Municipalities of Thesssaly underlined that the program gives municipalities the opportunity to inject money to local communities through the leasing of the apartments and the cash the refugees would spend on food. The Larissa Mayor said that “The municipality of Larissa will work in this direction. Previously there was pressure to accommodate migrants in apartments, but it was too early. Today we are not afraid to do it.”

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The green movement condemns itself by offering only half solutions. Saving the planet would require drastic changes to everyone’s lifestyle and comfort. Instead we get CON21.

Why The Human Race Is Heading For The Fire (G.)

The future for humanity and many other life forms is grim. The crisis gathers force. Melting ice caps, rising seas, vanishing topsoil, felled rainforests, dwindling animal and plant species, a human population forever growing and gobbling and using everything up. What’s to be done? Paul Kingsnorth thinks nothing very much. We have to suck it up. He writes in a typical sentence: “This is bigger than anything there has ever been for as long as humans have existed, and we have done it, and now we are going to have to live through it, if we can.” Hope finds very little room in this enjoyable, sometimes annoying and mystical collection of essays. Kingsnorth despises the word’s false promise; it comforts us with a lie, when the truth is that we have created an “all-consuming global industrial system” which is “effectively unstoppable; it will run on until it runs out”.

To imagine otherwise – to believe that our actions can make the future less dire, even ever so slightly – means that we probably belong to the group of “highly politicised people, whose values and self-image are predicated on being activists”. According to Kingsnorth, such people find it hard to be honest with themselves. He was once one of them. “We might tell ourselves that The People are ignorant of The Facts and that if we enlighten them they will Act. We might believe that the right treaty has yet to be signed, or the right technology yet to be found, or that the problem is not too much growth and science and progress but too little of it. Or we might choose to believe that a Movement is needed to expose the lies being told to The People by the Bad Men in Power who are preventing The People from doing the rising up they will all want to do when they learn The Truth.”

He says this is where “the greens are today”. Environmentalism has become “a consolation prize for a gaggle of washed-up Trots”. As a characterisation of the green movement, this outbreak of adolescent satire seems unfair. To suggest that its followers become activists only because their “values and self-image” depend on it implies that there is no terror in their hearts, no love of the natural world, nothing real other than their need for a hobby.

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Apr 032017
 
 April 3, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , ,  1 Response »
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Paul Wolff Frankfurt Opera House 1934

 

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

 

 

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

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

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

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

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

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Get out while you can.

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

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

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

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

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

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

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

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Too much uncertainty to unleash it.

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

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

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

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America turns on the mall.

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

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

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

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

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

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But the French love the euro. Hard sell.

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

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

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

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Draghi slays austerity?

ECB Leads The Cure For Euro-Pessimism (CNBC)

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

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

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

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It should be investigating British war crimes.

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

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

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

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

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Austerity kills people and economies.

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

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

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

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

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Yes, it can still get worse.

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

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

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

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Apr 022017
 
 April 2, 2017  Posted by at 9:30 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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DPC Gillender Building, corner of Nassau and Wall Streets, built 1897, wrecked 1910 1900

 

Why Trump Won’t Cut Taxes (Stockman)
Collapse In Demand (Fear)
Iceland’s Jailed Bankers Say They Were Scapegoats For Financial Crisis (AFP)
Blaming Russia for Everything (Robert Parry)
EU Offers Spain Veto Right Over Gibraltar After Brexit Talks (R.)
The European Union Lays Out A Greek Trap For The United Kingdom (Coppola)
Theresa May May Have Miscalculated (Varoufakis)
The Demise of the Anatolian Tiger – Turkey on Verge of Bankruptcy (Spiegel)
The Pentagon Doesn’t Want Turkey’s Help In Syria (WE)
Salmon Farming In Crisis: ‘A Chemical Arms Race In The Seas’ (G.)
Italy Praised For Giving Lone Child Refugees Legal Protection (Week)
Europe Keeps Its Rescue Ships Far From Where Refugees Drown (I’Cept)

 

 

Stockman won’t let go.

Why Trump Won’t Cut Taxes (Stockman)

[..] even the money printers have made it clear in no uncertain terms that they are done for this cycle, anyway, and that they will be belatedly but consistently raising interest rates for what ought to be a truly scary reason. That is, the denizens of the Eccles Building have finally realized that they have not outlawed the business cycle after all and need to raise rates toward 2-3% so that they have headroom to “cut” the next time the economy slides into the ditch. In effect, the Fed is saying to Wall Street: “Price in” a recession because we are! After all, our monetary central planners are not reluctantly allowing interest rates to lift off the zero bound because they have become converts to the cause of honest price discovery – nor are they fixing to liberate money rates, debt yields, and the prices of stocks and other financial assets to clear on the free market.

Instead, they are merely storing up monetary ammo for the next downturn. But the Wall Street mules keep buying the dips anyway because they are under the preposterous delusion that one source of “stimulus” is just as good as the next. And since the gamblers have now decreed that the “stimulus” baton be handed off to fiscal policy, it only remains for Congress and the White House to shape up and get the job done with all deliberate speed. But they won’t. Not in a million years. The massive Trump tax cut and infrastructure stimulus is DOA because Uncle Sam is broke and the U.S. economy has slithered into moribund old age.

In that context, it’s not remotely the same as the 12 members of the FOMC sitting behind closed doors for two days jawing about the short-term economic weather; and then at the conclusion of their gabfest, ordering the New York Fed’s open market desk to flood the canyons of Wall Street with cash by buying another $80 billion of bonds with digital credits conjured from thin air. Au contraire. Fiscal policy is inherently an exercise in herding cats and an especially impossible one when the cupboards are bare. [..] what lies directly ahead, therefore, is another bumbling attempt by the White House and Congressional Republicans to hammer out an FY 2018 budget resolution and what amounts to a 10-year fiscal plan. And it is there where the whole fantasy of the Trump Stimulus comes a cropper. There are not remotely 218 GOP votes for what would be a $12 -13 trillion add to the national debt with the Trump Stimulus program over the next decade – even with all the “dynamic” scoring and revenue “reflows” that are imaginable.

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How the sytem works (and then doesn’t): “..workers take on debt that fuels the profits of the corporates that dominate the consumer supply chains. However this rise in corporate profits has not been recycled back into the real economy via workers wages. There will come a point where the workers can no longer take on more debt. When this happens consumer demand will fall, wages will fall and unemployment will rise.”

Collapse In Demand (Fear)

John Maynard Keynes said that, a fall in bank lending leads to a fall in consumer demand creating recession. He was right, a fall in bank lending does create a fall in consumer demand, it also creates recession and in extreme cases can cause a complete meltdown of the entire economy as in 2008. So the question is, why does bank lending fall? A rise in interest rates can make new borrowing too expensive, it can also lead to existing borrowers defaulting on their loans. This was the catalyst for the 2007 subprime crash in the United States. The graph below shows that US interest rates went from 1% to 5% in the run up to the subprime crash.

Interest rate rises can accelerate a fall in borrowing and a fall in demand, but interest rate rises are not the cause of these falls. Borrowing would eventually, slowly fall over time even if interest rates had remained low. Most of us are now aware that banks create new deposits when they loan, they don’t lend other peoples deposits. How they do it is not important, accepting that they do, is fundamental to understanding the problem. See graph.

The bank creation of money via lending and debt is nothing new, what has changed is the amount of money creation and the ability to recycle this new money back to the debtors. The large increase in debt over the last 30 to 40 years has funded a massive increase in consumerism, consumerism is no longer constrained by wages but rather by how much debt people can accumulate. The graph below shows the result.

Basically we have a trickle up effect, workers take on debt that fuels the profits of the corporates that dominate the consumer supply chains. However this rise in corporate profits has not been recycled back into the real economy via workers wages. There will come a point where the workers can no longer take on more debt. When this happens consumer demand will fall, wages will fall and unemployment will rise. Existing loans made by workers will fall into default, creating another banking crisis. If the banks are not saved by government or central bank intervention the credit created by the banks will become worthless. So, it is in the interests of the wealthy elite to protect the banking system whatever the cost to the rest of society. In the end the wealthy elite will themselves, destroy the financial system by taking so much of it that demand collapses.

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Well, it’s true they were the only ones to go to jail…

Iceland’s Jailed Bankers Say They Were Scapegoats For Financial Crisis (AFP)

Once reviled symbols of rogue capitalism, Iceland’s ex-bankers now say they were scapegoats: jailed for their roles in the 2008 financial crisis, they’re taking their cases to the European Court of Human Rights. In 2008, after Iceland’s inflated financial system imploded, the three main banks Kaupthing, Glitnir, and Landsbanki collapsed. The government urgently nationalised them, then asked the IMF for an emergency bailout, a first for a western European country in 25 years. The crisis brought to light the bankers’ questionable practices, often involving artificially inflating the value of the banks’ assets by providing cheap loans to shareholders to buy even more shares in the bank. Without realising it, thousands of Icelanders had thus placed their life savings in a house of cards.

Since then, dozens of so-called “banksters” have been convicted, about 20 of them to prison, for manipulating the market. Some of them now claim they didn’t get fair trials, and have turned to the European Court of Human Rights. Sentenced by an Icelandic appeals court to four years in prison, Sigurdur Einarsson, the former chairman of the board of Kaupthing, spent one year behind bars before being released. He is critical of what he dubs Iceland’s “scapegoat” justice system, which he claims turned a blind eye to unlawful proceedings during his trial. “Some of the judges were partial … because they had lost a lot of money during the economic crisis,” Einarsson told AFP. “This was not a just and fair trial. (This is) very important because Iceland praises itself for being a Western democratic country, and one of the key issues for that is having fair trials for everyone.”

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Good topic for Parry to delve into.

Blaming Russia for Everything (Robert Parry)

When Sen. Marco Rubio’s presidential campaign fails seemingly because he was a wet-behind-the-ears candidate who performed like a robot during debates repeating the same talking points over and over, you might have cited those shortcomings to explain why “Little Marco” flamed out. However, if you did, that would make you a Russian “useful idiot”! The “real” reason for his failure, as we learned from Thursday’s Senate Intelligence Committee hearing, was Russia! When Americans turned against President Obama’s Pacific trade deals, you might have thought that it was because people across the country had grown sick and tired of these neoliberal agreements that have left large swaths of the country deindustrialized and former blue-collar workers turning to opioids and alcohol. But if you did think that, that would mean you are a dupe of the clever Russkies, as ex-British spy Christopher Steele made clear in one of his “oppo” research reports against Donald Trump.

As Steele’s dossier explained, the rejection of Obama’s TPP and TTIP trade deals resulted from Russian propaganda! When Hillary Clinton boots a presidential election that was literally hers to lose, you might have thought that she lost because she insisted on channeling her State Department emails through a private server that endangered national security; that she gave paid speeches to Wall Street and tried to hide the contents from the voters; that she called half of Donald Trump’s supporters “deplorables”; that she was a widely disliked establishment candidate in an anti-establishment year; that she was shoved down the throats of progressive Democrats by a Democratic Party hierarchy that made her nomination “inevitable” via the undemocratic use of unelected “super-delegates”; that some of her State Department emails were found on the laptop of suspected sex offender Anthony Weiner (the husband of Clinton’s close aide Huma Abedin); and that the laptop discovery caused FBI Director James Comey to briefly reopen the investigation of Clinton’s private email server in the last days of the campaign.

You might even recall that Clinton herself blamed her late collapse in the polls on Comey’s announcement, as did other liberal luminaries such as New York Times columnist Paul Krugman. But if you thought those thoughts or remembered those memories, that is just more proof that you are a “Russian mole”! As we all should know in our properly restructured memory banks and our rearranged sense of reality, it was all Russia’s fault! Russia did it by undermining our democratic process through the clever means of releasing truthful information via WikiLeaks that provided evidence of how the Democratic National Committee rigged the nomination process against Sen. Bernie Sanders, revealed the contents of Clinton’s hidden Wall Street speeches, and exposed pay-to-play features of the Clinton Foundation in its dealings with foreign entities.

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Weird games. That’s Brussels for you.

EU Offers Spain Veto Right Over Gibraltar After Brexit Talks (R.)

The European Union on Friday offered Spain a right of veto over the future relationship between Gibraltar and the EU after Britain leaves the bloc, a move that could smooth Brexit talks but also dash Gibraltar’s hopes of winning a special status. The future of Gibraltar, a rocky British enclave on Spain’s southern tip, is set to be a major point of contention in the exit talks along with issues relating to Britain’s access to the EU’s single market or the future rights of EU citizens in the U.K. and of Britons living in Europe. Rows between Spain and Britain over Gibraltar have held up entire EU deals in the past – including current legislation governing air travel – and Brussels is keen to avoid a new bilateral dispute getting in the way of an orderly Brexit.

“This seems intended to give Spain something so they don’t try to hold the whole withdrawal treaty hostage over it,” one senior EU diplomat said in Brussels. According to the EU’s draft joint position on the exit talks, which the remaining members are due to approve on April 29, “after the United Kingdom leaves the Union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom.” In essence, it offers Madrid a special share of power over Gibraltar’s fate, but only once the territory is no longer an internal EU problem. A spokesman for the Spanish government said Madrid was satisfied with the decision.

“It is what we wanted and what we have said from the beginning… The recognition by the European Union of the legal and political situation that Spain has defended fully satisfies us,” Inigo Mendez de Vigo told a news conference following the weekly cabinet meeting. The Government of Gibraltar issued a statement on Friday evening saying that the draft suggested Spain was trying to get away with mortgaging the future relationship between the EU and Gibraltar. “This is a disgraceful attempt by Spain to manipulate the European Council for its own, narrow, political interests (…) a clear manifestation of the predictably predatory attitude that we anticipated Spain would seek to abusively impose on its partners,” the Chief Minister of Gibraltar, Fabian Picardo, said in an e-mailed statement.

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And you should wish to be part of a Union that does such things? I don’t get that. What is that, Stockholm Syndrome?

The European Union Lays Out A Greek Trap For The United Kingdom (Coppola)

Following the UK’s formal resignation on Wednesday March 29th 2017, the European Union has now laid out its approach to negotiating the United Kingdom’s exit from the bloc. At first glance, the draft negotiation guidelines appear friendly and reasonable. But don’t be fooled. They contain a trap with which followers of the Greek bailout negotiations should be all too familiar. At this point, Brexit supporters will no doubt scream “The UK is not like Greece!”. Of course it isn’t. It is one of the largest economies in Europe, and its departure will leave a gaping wound in the EU which will take some time to heal. A smooth, orderly exit is in everyone’s interests, to minimize damage on both sides and promote healing. And this is what both the UK and the EU say they want. So why do I say there is a trap?

The essence of the Greek negotiations is that the debt relief that Greece so desperately needs is conditional on Greece meeting all the EU creditors’ conditions, in full. The EU will not even discuss debt relief until sufficient progress has been made on everything else. Every time Greece draws nearer to debt relief it is snatched away, either by adding new conditions or by finding reasons to doubt that conditions have really been met. Of course, the UK is not looking for debt relief. It is after another prize. Theresa May’s letter outlined what the UK wants “Agreeing a high-level approach to the issues arising from our withdrawal will of course be an early priority. But we also propose a bold and ambitious Free Trade Agreement between the United Kingdom and the European Union. This should be of greater scope and ambition than any such agreement before it so that it covers sectors crucial to our linked economies such as financial services and network industries.”

Wonderful. Not only does the UK want a free trade agreement to be agreed before it leaves the bloc, it apparently wants that agreement to give it better terms than any trade agreement the EU has with any other country. I don’t know who constructed this flight of fancy, but it has about as much chance of seeing the light of day as a bottom-feeder in the Marianas Trench.

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“Request a Norway-like agreement for an interim period – something that they cannot refuse..”

Theresa May May Have Miscalculated (Varoufakis)

Prime Minister May is keen to avoid a defeat at the hands of EU negotiators determined to do to the UK that which they did to Greece in 2015. Correctly, she has set out to arm herself with a credible threat. The problem is that she may have miscalculated her optimal strategy. By making a hard Brexit the default of the negotiations’ process, Mrs May has secured its credibility. However, a credible threat can still produce an undesirable outcome. London’s greatest miscalculation would be to assume that the EU’s negotiators are committed to the bloc’s economic interests. Whilst negotiating Greece’s debt to the EU with them, I realised in horror that they cared very little about getting their money back and a great deal more about shoring up their relative positions in the games they play with one another – even if this sacrificed large economic gains. Mrs May will encounter this mindset soon in Berlin, Brussels and Paris.

If my experiences are anything to go by, a frustrating two years await British negotiators. They are faced with the EU’s favourite tactics: The EU Run-Around (as Brussels refers them to Berlin and vice versa), the Swedish National Anthem Routine (the feeling that whether you have outlined a sensible proposal or sung Sweden’s national anthem they react the same way), the All-Or-Nothing Ruse (refusing to discuss any issue unless all issues are simultaneously discussed) and the Blame Game (censuring you for THEIR recalcitrance). Nothing good, for Britain or for the EU, will come out of this process. It is why I recommend a strategy that robs Brussels of all room to manoeuvre. That is: Request a Norway-like agreement for an interim period – something that they cannot refuse – and empower the next UK parliament to design and pursue Britain’s long-term relationship with the EU.

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“Observers fear that Turkey could take other countries along with it. The country holds $270 billion of debt with international banks, with $87 billion of that total in Spain, $42 billion in France and $15 billion in Germany.”

The Demise of the Anatolian Tiger – Turkey on Verge of Bankruptcy (Spiegel)

[..] the aftermath of the coup attempt — the mass arrests of opposition activists and the confiscation of companies – has scared investors off. The rating agencies Moody’s and Standard & Poor’s have slashed Turkey’s credit rating to junk status and foreign investment plunged by over 40% last year. Yigit says that he can hardly find anyone anymore who is interested in doing business in Turkey. “The risk is simply too high for investors,” he says. Meanwhile, clients who have been economically involved in the country for years are now pulling their money out. The capital flight has triggered a downward spiral that has been particularly noticeable in the construction industry.

Turkey’s high growth rates in recent years were fueled primarily by infrastructure projects, with Erdogan pouring money into the construction of highways, hospitals and airports. Now, though, there is insufficient foreign capital available and growth is stagnating. Furthermore, political instability has led to a steep drop in tourism revenues, with a plunge of roughly one-third last year. There are hundreds of hotels up for sale on the Turkish Riviera, on the country’s southwest coast, and some 600 of 2,000 shops in Istanbul’s Grand Bazaar have been forced to close since last summer, according to the bazaar’s merchant association. Turkish Airlines has taken 30 planes out of service.

The consequences of the struggling economy can be seen in day-to-day life: Companies have been forced to lay off workers and cut salaries; people have less money. Domestic consumption, which made up 60% of the country’s GDP last year, has shrunk. At the same time, the Turkish currency, the lira, has rapidly lost value and inflation stands at 10%. “We are heading toward the worst-case scenario: economic stagnation combined with persistent inflation,” says Istanbul-based economic writer Mustafa Sönmez. “Turkey is on the verge of bankruptcy.” Observers fear that Turkey could take other countries along with it. The country holds $270 billion of debt with international banks, with $87 billion of that total in Spain, $42 billion in France and $15 billion in Germany. Should the country default or partially default, Sönmez believes, it could trigger another financial crisis in Europe.

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Turkey’s army has gotten even weaker after Erdogan fired tens of thousands, among them many officers.

The Pentagon Doesn’t Want Turkey’s Help In Syria (WE)

Like a marriage held together for the sake of the kids, the U.S. and Turkey keep saying nice things in public, while privately fuming and slowly drifting apart. The growing rift between the two countries stems from the intractable dispute over the U.S. plan to liberate Raqqa with a loose coalition of Syrian fighters comprising roughly 40% Kurdish YPG militia members, who Turkey considers terrorists. Turkish President Recep Tayyip Erdogan has offered his military to drive the Islamic State out of its self-proclaimed capital in Raqqa, if only the U.S. will quit the Kurds. Turkey regards the Kurdish Popular Protection Units, or YPG, as an extension of the banned Kurdistan Workers’ Party or PKK, which has been declared a terrorist group by both Turkey and the U.S. But the Pentagon says the Kurds have proven to be the most battle-hardened and combat-effective force fighting ISIS in Syria, and it has no plans to abandon them now.

Publicly the U.S. says it’s still working with its NATO ally Turkey to find a role for it in the upcoming Raqqa offensive, but here’s the unspoken truth: The U.S. has also judged that the Turkish military is not up to the task, based on its performance in northern Syria. On Aug. 24, Turkey launched “Operation Euphrates Shield,” sending tank and troops into Syria with the stated objective of pushing ISIS back 60 miles from its shared border, and the unstated goal of keeping Kurdish forces from controlling an unbroken swath of land stretching back into Iraq. This past week, Turkey declared Euphrates Shield a success and ended the mission, a move Pentagon sources say was in fact largely because the U.S., Russia and Syria stymied the Turkish offensive from any further gains. The Turks did take the northern Syrian towns of Jarablus, Dabiq and al-Bab from ISIS, but their plan to move against the Kurds in Manbij was foiled when the U.S. positioned Army Rangers just outside the city and declared Manbij was in no further need of liberation.

And the Turkish forces had also suffered heavy losses in the fight against ISIS in al-Bab, or as one Pentagon official put it, “They got their asses kicked.” Meanwhile, Syrian and Russian forces have advanced across the Turkish forces’ southern flank in Syria, effectively blocking any movement south to Raqqa. Essentially hemmed in with nowhere to go, the Turkish forces called it a day and declared mission accomplished. Several Pentagon officials, who talked the Washington Examiner on condition of anonymity because they are not authorized to discuss war planning publicly, said the major U.S. takeaway is that Turkish troops lack the training, logistics and weaponry to successfully launch the siege of a fortified and well-defended city. Consider that across the border in Iraq, 100,000 Iraqi troops have all they can handle trying to finish off fewer than 1,000 ISIS fighters in west Mosul.

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Yeah, we’re so smart.

Salmon Farming In Crisis: ‘A Chemical Arms Race In The Seas’ (G.)

Every day, salmon farmers across the world walk into steel cages – in the seas off Scotland or Norway or Iceland – and throw in food. Lots of food; they must feed tens of thousands of fish before the day is over. They must also check if there are problems, and there is one particular problem they are coming across more and more often. Six months ago, I met one of these salmon farmers, on the Isle of Skye. He looked at me and held out a palm – in it was a small, ugly-looking creature, all articulated shell and tentacles: a sea louse. He could crush it between his fingers, but said he was impressed that this parasite, which lives by attaching itself to a fish and eating its blood and skin, was threatening not just his own job, but could potentially wipe out a global multibillion-dollar industry that feeds millions of people.

“For a wee creature, it is impressive. But what can we do?” he asks. “Sometimes it seems nature is against us and we are fighting a losing battle. They are everywhere now, and just a few can kill a fish. When I started in fish farming 30 years ago, there were barely any. Now they are causing great problems.” Lepeophtheirus salmonis, or the common salmon louse, now infests nearly half of Scotland’s salmon farms. Last year lice killed thousands of tonnes of farmed fish, caused skin lesions and secondary infections in millions more, and cost the Scottish industry alone around £300m in trying to control them. Scotland has some of the worst lice infestations in the world, and last year saw production fall for the first time in years.

But in the past few weeks it has become clear that the lice problem is growing worldwide and is far more resistant than the industry thought. Norway produced 60,000 tonnes less than expected last year because of lice, and Canada and a dozen other countries were all hit badly. Together, it is estimated that companies across the world must spend more than £1bn a year on trying to eradicate lice, and the viruses and diseases they bring. As a result of the lice infestations, the global price of salmon has soared, and world production fallen. Earlier this year freedom of information [FoI] requests of the Scottish government showed that 45 lochs had been badly polluted by the antibiotics and pesticides used to control lice – and that more and more toxic chemicals were being used.

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You can’t let children pay the price.

Italy Praised For Giving Lone Child Refugees Legal Protection (Week)

Italy has become Europe’s first country to pass a law giving comprehensive protection to lone child migrants. Known as the Zampa law, the legislation sets minimum standards of care, such as reducing the time children can be kept in migrant reception centres, guaranteeing access to healthcare and setting a ten-day window for authorities to confirm their identities. It also prohibits turning unaccompanied and separated children away at the border or if it could cause them harm, AP reports. Unicef, the UN’s children agency praised the move and said it was the first of its kind in Europe. Afshan Khan, Unicef’s special coordinator for the refugee and migrant crisis in Europe, said: “While across Europe we have seen fences going up, children detained and pledges unmet, the Italian parliamentarians have shown their compassion and duty to young refugees and migrants.

“This new law serves not only to give refugee and migrant children a sense of predictability in their uncertain lives after risking so much to get to Europe, it serves as a model for how other European countries could put in place a legislative framework that supports protection.” The number of unaccompanied child migrants arriving in Italy is believed to still be on the increase, says the charity. In 2016, around 26,000 children arrived in the country without their families, the majority crossing the Mediterranean in unsafe boats from North Africa. In the first two months of 2017, 2,000 arrived, the majority aged between 14 and 17. Italy’s move is in stark contrast to the UK, where MPs earlier this month chose not to continue a scheme to accept more lone child refugees from Europe.

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Just lovely.

Europe Keeps Its Rescue Ships Far From Where Refugees Drown (I’Cept)

An average of 3,500 people have died each year while trying to make the journey to Italy from North Africa since 2014. Their vessels are overcrowded, unseaworthy, and have a near-nothing chance of making it to Europe. Most of the boats sink just 20 to 40 miles from the Libyan coast. These are preventable deaths. Since 2014, the European Union has deliberately chosen to keep their coast guard patrol boats far from where the shipwrecks happen, a decision detailed in an internal letter obtained by The Intercept and other leaked documents. Saving more lives, the logic goes, will only encourage more refugees to come. The result is that rescue boats are kept away from where rescues are actually needed.

The Italian navy used to run patrols near the Libyan coast. Their operation, called Mare Nostrum – “our sea” in Latin – involved a large mobilization of ships, planes, and helicopters in international waters close to Libya, where boats carrying refugees regularly capsized and sank. Mare Nostrum was enormously successful — in the year it ran, it saved over 150,000 people. Still, on October 31, 2014, Italy announced it would phase out the program. The following day, Frontex, the European Union’s border agency, took over with an operation called Triton. In a press release at the time, Frontex said its operation followed in the wake of Mare Nostrum and was intended to support the Italian authorities. There was one key difference from Mare Nostrum, however: Frontex would limit its patrols to just 30 miles off Italy’s coast, which was about 130 miles from Libya — at least a 12-hour sail. Frontex was deliberately not patrolling the area where most of the shipwrecks occurred.

What’s more, according to an internal letter obtained by The Intercept, the director of operations at Frontex privately told Italian authorities that his ships should not be called on to immediately respond to distress calls from outside their 30-mile patrol area. “Frontex is concerned about the engagement of Frontex deployed assets in the activities happening significantly outside the operational area,” Frontex’s director, Klaus Roesler, wrote to the head of Italy’s Immigration and Border Police, Giovanni Pinto, on November 25, 2014. The letter has been referenced in Italian newspapers and released with redactions that covered detailed descriptions of how Frontex coordinated its assistance with rescue efforts. The Intercept is publishing the letter in full for the first time.

Like any other vessels at sea, Frontex ships are obligated under maritime law to respond to distress calls when ordered by the relevant national authorities. For the Italians, an overloaded boat with an untrained captain was a distress situation by default. Typically, someone calls the Maritime Rescue Coordination Center in Rome by satellite phone from a boat or from the Libyan coast, and Italy initiates search and rescue. But for Frontex, at the time, that was not enough proof. [..] Frontex knew it had to respond to emergency calls. But it was deliberately patrolling in the wrong area and quibbling with definitions of distress, meaning that its ships would almost certainly arrive late, if at all.

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Mar 282017
 
 March 28, 2017  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle March 28 2017
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Dorothea Lange Abandoned cafe in Carey, Texas 1937

 

A Nation of Landowners – But For How Long? (M.)
Middle-Class, Even Wealthy Americans Sliding Inexorably Into The Red (MW)
Italy’s Monte Paschi Bailout Has Some ECB Supervisors Grumbling
NY Fed: “Oil Prices Fell Due To Weakening Demand” (ZH)
Why Did Preet Bharara Refuse to Drain the Wall Street Swamp? (Bill Black)
A Detailed “Roadmap” For Meeting The Paris Climate Goals (Vox)
In UK Access To Justice Is No Longer A Right, But A Luxury (G.)
The Curse of the Thinking Class (Jim Kunstler)
Tensions Flare As Greece Tells Turkey It Is Ready To Answer Any Provocation (G.)
Erdogan Races Against the Dollar in Campaign for Unrivaled Power (BBG)
Tillerson Will Not Meet Turkey Opposition In Ankara Visit This Week (R.)
Troika Pushes Greece To Sell Up To 40% Of State-Controlled Power Utility (R.)
Fraport Greece Signs Funding Deal With 5 Lenders (K.)
Contraction Of Credit Continues Unabated In Greece (K.)
Mikis Theodorakis: ‘In Tough Times, Greeks Become Heroes or Slaves’ (GR)
Nearly 1,200 Migrants Picked Up Off Libya, Heading To Italy (R.)
Italy Calls For Investigation Of NGO Supported Migrant Fleet (Dm.)

 

 

“To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.”

A Nation of Landowners – But For How Long? (M.)

Land occupies a unique position in the economy because it is essential for any activity and, given its fixed supply, an increase in demand for it can only increase its price. Meanwhile finance, which facilitates that demand, has been available in ever-greater abundance since the deregulation of mortgage lending in the 1970s and 1980s. The interaction between the inelastic supply of land and the highly elastic supply of mortgage lending lies at the heart of the house price boom over the past few decades. But while the finance part of the story is relatively new (before the 1970s mortgages were harder to get and lending restricted by the conservative practices of the building societies), the land question has been around for centuries.

Ever since Henry VIII seized the monastery lands in the early 16th century a market has been evolving in land as a privately-owned tradable commodity. What is crucial to the contemporary housing debate, and what this book illustrates brilliantly, is how the control of land is, or has at least been allowed to become, fundamental to economic and political power relations. Because land is permanent and immovable, those who own the exclusive rights to its use are able to siphon off the value of any economic output that is dependent on it. The value of a piece of land therefore reflects the level of activity conducted on or around it, as well as any speculation arising from expectations about its potential future use. This price does not reflect the efforts or ingenuity of its owner, and so it does not reward productive activity but rather penalises it in the form of rent.

This ability of landowners to extract economic rent from productive activity, or the unearned increment, was once at the centre of political discourse. It was an issue that troubled classical economists ranging from Adam Smith to Karl Marx. As the industrial revolution advanced in the 18th and 19th centuries, productivity levels improved, and so the owners of land began to enjoy the fruits of the community’s labour. A land reform movement gathered momentum towards the late 19th century and the writings of the American economist Henry George advocating a land value tax attracted a following. In 1909, a young Winston Churchill (then 35, and a Liberal) decried the land monopolist’s free ride in what remains one of the best descriptions of the dilemma:

“Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.”

Churchill was careful to stress that it was the system he was attacking not the landowner himself (‘We do not want to punish the landlord. We want to alter the law’). But the law was as it was because landowners controlled parliament and indeed the Liberals’ plan for a land value tax in the People’s Budget, in support of which Churchill had been speaking, was thrown out by the House of Lords.

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How to kill a city part 832.

Middle-Class, Even Wealthy Americans Sliding Inexorably Into The Red (MW)

Not even a high six-figure salary is enough to keep New York City families out of the red. But spare a thought for the average American family, whose costs easily outpace the average income. A recent analysis from Sam Dogen at his personal finance website Financial Samurai showed how difficult it is for high earners to escape the rat race in New York City, one of the priciest places to live in the world. He analyzed a mock budget for an imaginary family of four in which the two 35-year-old breadwinners each make $250,000 a year. After factoring in taxes, 401(k)contributions, home and child care costs, the family was left with just $7,300 for the year — as if they were living “paycheck to paycheck.”

Perhaps nobody is crying for lawyers making $500,000 a year or even $250,000, but the analysis shows just how easy it is for spending habits to take a high salary and turn it into table scraps. Dogen said pressure from peers to spend more is a big contributing factor, adding “everywhere I go, and I’ve been all over the world, high income earners are secretly feeling the same squeeze.” “They are unhappy, getting divorces, and always comparing themselves to wealthier and wealthier people,” he said. “Heck, even a friend who is worth over $200 million after founding and taking public a company feels like he needs to continue working because he has to ‘keep up with the Zuckerbergs.’”

So how would the average American family fare by the same lifestyle? MarketWatch crunched the numbers and found they would be racking up approximately $27,000 in debt a year if they spent the average of what Americans spend on the same activities. This vast difference in economic stability comes even after adjusting for cheaper housing costs and lowering the number of vacations to one a year — the average in the U.S.

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Beware of any central bank announcements made the day after Christmas.

Italy’s Monte Paschi Bailout Has Some ECB Supervisors Grumbling

When the European Central Bank declared Banca Monte dei Paschi di Siena solvent last December, the first step toward a state-funded rescue, some members of the 19-nation Supervisory Board weren’t fully on board. Confronted with what they saw as a political agreement to bail out the world’s oldest lender, dissenters went along with the consensus despite their concerns about the bank’s health…[..] To make sense of the Monte Paschi debate, you have to start with a 2014 law known as the Bank Recovery and Resolution Directive, which sets out the EU’s bank-failure rules. The law assumes that if a firm needs “extraordinary public financial support,” this indicates that it’s failing and should be wound down. In that process, investors including senior bondholders can be forced to take losses.

An exception, known as a precautionary recapitalization, is allowed for solvent banks if a long list of conditions is met. As the name suggests, this tool isn’t intended to clear up a bank’s existing problems, such as Monte Paschi’s mountain of soured loans. This temporary aid is allowed to address a capital shortfall identified in a stress test. Daniele Nouy, head of the ECB Supervisory Board, reiterated in an interview on Monday that Monte Paschi and other Italian banks in line for a bailout are “not insolvent, otherwise we would not be talking about precautionary recapitalization.” Not everyone is convinced the bank, whose woes date back many years, qualifies for this special treatment.

“It is unclear if Monte Paschi meets the BRRD’s exemption criteria, and their use has the appearance of promoting national political concerns over a stricter reading of the newly established European rules,” said Simon Ainsworth at Moody’s. “The plan could risk damaging the credibility of the resolution framework, especially given that it would mark its first major test case.” The ECB’s decision on Monte Paschi’s solvency and capital gap was announced by the lender the day after Christmas. The ECB published an explanation of the precautionary recapitalization process a day later, but said little else publicly. On Dec. 29, the Bank of Italy issued a statement that broke down the €8.8 billion rescue into its parts. Solvency in the case of a precautionary recapitalization is determined based on two criteria, the ECB said: the bank meets its legal minimum capital requirements, and it has no shortfall in the baseline scenario of the relevant stress test.

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I’ve been talking about falling oil demand for so long that when other bring it up now it seems all new again.

NY Fed: “Oil Prices Fell Due To Weakening Demand” (ZH)

[..] one aspect of price formation that is rarely mentioned is demand, which is generally assumed to be unwavering and trending higher with barely a hiccup. The reason for this somewhat myopic take is that while OPEC has control over supply, demand is a function of global economic growth and trade (or lack thereof) over which oil producers have little, if any control. And yet, according to the latest oil price dynamics report issued by the Fed, it was declining global demand that pushed prices lower in the most recent, volatile period. As the New York Fed report in its March 27 report, “Oil prices fell owing to weakening demand” and explains as follows: “A decline in demand expectations together with a decreasing residual drove oil prices down over the past week.”

While there was some good news, namely that “in 2016:Q4, oil prices increased on net as a consequence of steadily contracting supply and strengthening, albeit volatile, global demand” offsetting the “modest decline in oil prices during 2016:Q3 caused by weakening global demand expectations and loosening supply conditions,” the Fed’s troubling finding is that the big move lower since 2014 has been a function of rising supply as well as declining demand: Overall, since the end of 2014:Q2, both lower global demand expectations and looser supply have held oil prices down. And while this trend appeared to have reversed in 2016:Q2 and 2016:Q4, recent indications suggest that demand may once again be slowing, which in turn has pressured oil prices back to levels last seen shortly after OPEC’s Vienna deal.

It is curious that according to the NY Fed, at a time when OPEC vows it is cutting production, the Fed has instead found “loose” supply to be among the biggest contributors to the latest decline in oil prices. But what may be concering to oil bulls is that as the decomposition chart below shows, while oil demand was solidly in the green ever since Trump’s election victory, in recent weeks it appears to have also tapered off along with the supply contribution to declining oil prices. This seems to suggest that along with most other “animal spirits” that were ignited following the Trump victory, only to gradually fade, oil demand, and thus price, may be the next to take another leg lower unless of course Trump manages to reignite the Trumpflation trade which, however, over the past month appears to have completely faded.

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“Indeed, Bharara never mustered the courtesy to respond to Bowen’s offers to aid his office.”

Why Did Preet Bharara Refuse to Drain the Wall Street Swamp? (Bill Black)

The New York Times’ editorial board published an editorial on March 12, 2017, praising Preet Bharara as the “Prosecutor Who Knew How to Drain a Swamp.” I agree with the title. At all times when he was the U.S. Attorney for the Southern District of New York (which includes Wall Street) Bharara knew how to drain the swamp. Further, he had the authority, the jurisdiction, the resources, and the testimony from whistleblowers like Richard Bowen (a co-founder of Bank Whistleblowers United (BWU)) to drain the Wall Street swamp. Bowen personally contacted Bharara beginning in 2005.

“You were quoted in The Nation magazine as saying that if a whistleblower comes forward with evidence of wrongdoing, then you would be the first to prosecute [elite bankers]. I am writing this email to inform you that there is a body of evidence concerning wrongdoing, which the Department of Justice has refused to act on in order to determine whether criminal charges should be pursued.” Bowen explained that he was a whistleblower about Citigroup’s senior managers and that he was (again) coming forward to aid Bharara to prosecute. Bowen tried repeatedly to interest Bharara in draining the Citigroup swamp. Bharara refused to respond to Bowen’s blowing of the whistle on the massive frauds led by Citigroup’s senior officers.

Bharara knew how to drain the Wall Street swamp and was positioned to do so because he had federal prosecutorial jurisdiction over Wall Street crimes. Whistleblowers like Bowen, who lacked any meaningful power, sacrificed their careers and repeatedly demonstrated courage to ensure that Bharara would have the testimony and documents essential to prosecute successfully some of Wall Street’s most elite felons. Bharara never mustered the courage to prosecute those elites. Indeed, Bharara never mustered the courtesy to respond to Bowen’s offers to aid his office. [..] Bharara knew how to drain the Wall Street swamp. He had the facts, the staff, and the jurisdiction to drain the Wall Street swamp. Bharara refused to do so.

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We all realize that this is never ever going to happen, right?!

A Detailed “Roadmap” For Meeting The Paris Climate Goals (Vox)

To hit the Paris climate goals without geoengineering, the world has to do three broad (and incredibly ambitious) things: 1) Global CO2 emissions from energy and industry have to fall in half each decade. That is, in the 2020s, the world cuts emissions in half. Then we do it again in the 2030s. Then we do it again in the 2040s. They dub this a “carbon law.” Lead author Johan Rockström told me they were thinking of an analogy to Moore’s law for transistors; we’ll see why. 2) Net emissions from land use — i.e., from agriculture and deforestation – have to fall steadily to zero by 2050. This would need to happen even as the world population grows and we’re feeding ever more people. 3) Technologies to suck carbon dioxide out of the atmosphere have to start scaling up massively, until we’re artificially pulling 5 gigatons of CO2 per year out of the atmosphere by 2050 — nearly double what all the world’s trees and soils already do.

“It’s way more than adding solar or wind,” says Rockström. “It’s rapid decarbonization, plus a revolution in food production, plus a sustainability revolution, plus a massive engineering scale-up [for carbon removal].” So, uh, how do we cut CO2 emissions in half, then half again, then half again? Here, the authors lay out a sample “roadmap” of what specific actions the world would have to take each decade, based on current research. This isn’t the only path for making big CO2 cuts, but it gives a sense of the sheer scale and speed required:

2017-2020: All countries would prepare for the herculean task ahead by laying vital policy groundwork. Like: scrapping the $500 billion per year in global fossil fuel subsidies. Zeroing out investments in any new coal plants, even in countries like India and Indonesia. All major nations commit to going carbon-neutral by 2050 and put in place policies — like carbon pricing or clean electricity standards — that point down that path. “By 2020,” the paper adds, “all cities and major corporations in the industrialized world should have decarbonization strategies in place.”

2020-2030: Now the hard stuff begins! In this decade, carbon pricing would expand to cover most aspects of the global economy, averaging around $50 per ton (far higher than seen almost anywhere today) and rising. Aggressive energy efficiency programs ramp up. Coal power is phased out in rich countries by the end of the decade and is declining sharply elsewhere. Leading cities like Copenhagen are going totally fossil fuel free. Wealthy countries no longer sell new combustion engine cars by 2030, and transportation gets widely electrified, with many short-haul flights replaced by rail.

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Brexit hardly seems Britain’s biggest problem. It’s the gutting of an entire society that is.

In UK Access To Justice Is No Longer A Right, But A Luxury (G.)

Laws that cost too much to enforce are phoney laws. A civil right that people can’t afford to use is no right at all. And a society that turns justice into a luxury good is one no longer ruled by law, but by money and power. This week the highest court in the land will decide whether Britain will become such a society. There are plenty of signs that we have already gone too far. Listen to the country’s top judge, Lord Thomas of Cwmgiedd, who admits that “our justice system has become unaffordable to most”. Look at our legal-aid system, slashed so heavily by David Cameron and Theresa May that the poor must act as their own trial lawyers, ready to be skittled by barristers in the pay of their moneyed opponents. The latest case will be heard by seven supreme court judges and will pit the government against the trade union Unison. It will be the climax of a four-year legal battle over one of the most fundamental rights of all: the right of workers to stand up against their bosses.

In 2013, Cameron stripped workers of the right to access the employment tribunal system. Whether a pregnant woman forced out of her job, a Bangladeshi-origin guy battling racism at work, or a young graduate with disabilities getting aggro from a boss, all would now have to pay £1,200 for a chance of redress. The number of cases taken to tribunal promptly fell off a cliff – down by 70% within a year. Citizens Advice, employment lawyers and academics practically queued up to warn that workers – especially poor workers – were getting priced out of justice. But for Conservative ministers, all was fine. Loyal flacks such as Matthew Hancock (then employment minister) claimed those deterred by the fees were merely “unscrupulous” try-ons, intent on “bullying bosses”. Follow Hancock’s logic, and with all those time-wasters weeded out, you’d expect the number of successful tribunal claims to jump. They’ve actually dropped.

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“Do they covet our Chick-fil-A chains and Waffle Houses? Our tattoo artists? Would they like to induce the Kardashians to live in Moscow? Is it Nascar they’re really after?”

The Curse of the Thinking Class (Jim Kunstler)

Let’s suppose there really is such a thing as The Thinking Class in this country, if it’s not too politically incorrect to say so — since it implies that there is another class, perhaps larger, that operates only on some limbic lizard-brain level of impulse and emotion. Personally, I believe there is such a Thinking Class, or at least I have dim memories of something like it. The farfetched phenomenon of Trumpism has sent that bunch on a journey to a strange land of the intellect, a place like the lost island of Kong, where one monster after another rises out of the swampy murk to threaten the frail human adventurers. No one back home would believe the things they’re tangling with: giant spiders, reptiles the size of front-end loaders, malevolent aborigines! Will any of the delicate humans survive or make it back home?

This is the feeling I get listening to arguments in the public arena these days, but especially from the quarters formerly identified as left-of-center, especially the faction organized around the Democratic Party, which I aligned with long ago (alas, no more). The main question seems to be: who is responsible for all the unrest in this land. Their answer since halfway back in 2016: the Russians. I’m not comfortable with this hypothesis. Russia has a GDP smaller than Texas. If they are able to project so much influence over what happens in the USA, they must have some supernatural mojo-of-the-mind — and perhaps they do — but it raises the question of motive. What might Russia realistically get from the USA if Vladimir Putin was the master hypnotist that Democrats make him out to be?

Do we suppose Putin wants more living space for Russia’s people? Hmmmm. Russia’s population these days, around 145 million, is less than half the USA’s and it’s rattling around in the geographically largest nation in the world. Do they want our oil? Maybe, but Russia being the world’s top oil producer suggests they’ve already got their hands full with their own operations? Do they want Hollywood? The video game industry? The US porn empire? Do they covet our Chick-fil-A chains and Waffle Houses? Our tattoo artists? Would they like to induce the Kardashians to live in Moscow? Is it Nascar they’re really after?

My hypothesis is that Russia would most of all like to be left alone. Watching NATO move tanks and German troops into Lithuania in January probably makes the Russians nervous, and no doubt that is the very objective of the NATO move — but let’s not forget that most of all NATO is an arm of American foreign policy. If there are any remnants of the American Thinking Class left at the State Department, they might recall that Russia lost 20 million people in the dust-up known as the Second World War against whom…? Oh, Germany.

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“The Turkish nationalist opposition leader, Devlet Bahçeli, has gone even further, claiming that several Greek islands are under occupation and reacting furiously when Kammenos visited the far-flung isle of Oinousses. “Someone must explain to this spoiled brat not to try our patience,” he railed. “If they [the Greeks] want to fall into the sea again, if they want to be hunted down, they are welcome, the Turkish army is ready. Someone must explain to the Greek government what happened in 1922. If there is no one to explain it to them, we can come like a bullet across the Aegean and teach them history all over again.”

Tensions Flare As Greece Tells Turkey It Is Ready To Answer Any Provocation (G.)

Fears of tensions mounting in the Aegean and eastern Mediterranean Seas reignited after the Turkish president raised the prospect of a referendum on accession talks with the EU and the Greek defence minister said the country was ready for any provocation. Relations between Ankara and European capitals have worsened before the highly charged vote on 16 April on expanding the powers of the Turkish president, Recep Tayyip Erdogan. Western allies have argued that a vote endorsing the proposed constitutional change would invest him with unparalleled authority and limit checks and balances at a time when they fear the Turkish leader is exhibiting worrying signs of authoritarianism. Erdogan has been enraged by recent bans on visiting Turkish officials rallying “yes” supporters in Germany and the Netherlands.

Highlighting growing friction between Ankara and the bloc, he raised the spectre of a public vote on EU membership at the weekend. “We have a referendum on 16 April. After that we may hold a Brexit-like referendum on the [EU] negotiations,” he told a Turkish-UK forum attended by the British foreign secretary, Boris Johnson. “No matter what our nation decides we will obey it. It should be known that our patience, tested in the face of attitudes displayed by some European countries, has limits.” The animus – reinforced last week when the leader said he would continue labelling European politicians “Nazis” if they continued calling him a dictator – has also animated tensions between Greece and Turkey, and Erdogan’s comments came hours after the Greek defence minister said armed forces were ready to respond in the event of the country’s sovereignty and territorial integrity being threatened.

“The Greek armed forces are ready to answer any provocation,” Panos Kammenos declared at a military parade marking the 196th anniversary of Greece’s war of liberation against Ottoman Turkish rule. “We are ready because that is how we defend peace.” Although Nato allies, the two neighbours clashed over Cyprus in 1974 and almost came to war over an uninhabited Aegean isle in 1996. Hostility has been rising in both areas, with the Greek Cypriot leader Nicos Anastasiades recently voicing fears of Turkey sparking a “hot incident” in the run-up to the referendum. “I fear the period from now until the referendum in Turkey, as well as the effort to create a climate of fanaticism within Turkish society,” he told CNN Greece. Turkey’s EU negotiations have long been hindered by Cyprus, and talks aimed at reuniting its estranged Greek and Turkish communities are at a critical juncture but have stalled and are unlikely to move until after the referendum.

But it is in the Aegean where tensions, matched by an increasingly ugly war of words, have been at their worst. After a tense standoff over eight military officers who escaped to Greece after the abortive coup against Erdogan last July – an impasse exacerbated when the Greek supreme court rejected a request for their extradition – hostility has been measured in almost daily dogfights between armed jets and naval incursions of Greek waters by Turkish research vessels. Both have prompted diplomats and defence experts to express fears of an accident at a time when experienced staff officers and pilots have been sidelined in the purges that have taken place since the attempted coup. The shaky migration deal signed between the EU and Turkey to thwart the flow of refugees into the continent has only added to the pressure.

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The falling dollar is setting up Turkey for dictatorship. The world will come to regret this.

Erdogan Races Against the Dollar in Campaign for Unrivaled Power (BBG)

Turkish President Recep Tayyip Erdogan has lambasted friend and foe alike in a campaign for vast new powers, but his political fate may hang on the one thing he’s stopped carping about: the price of money. With the April 16 vote on strengthening the presidency too close for pollsters to call, Erdogan is no longer berating the central bank and commercial lenders over borrowing costs they’ve pushed to a five-year high. He’s betting any measures taken to arrest the lira’s plunge will pay off at the ballot box. The lira’s value versus the dollar is more than just a pocketbook issue in Turkey, where millions of voters still remember the abrupt devaluations that ravaged their livelihoods in past decades and view the exchange rate as the most important indicator of the nation’s economic health.

Turkey’s trade deficit is the biggest of all top 50 economies relative to output and most of its imports and foreign debt are priced in dollars, so sharp declines in the lira can be ruinous for legions of entrepreneurs like Ramazan Saglam, who owns a print shop in a working-class neighborhood of Ankara. “I bitterly recall when the dollar jumped in 1994 and 2001 – my business collapsed both times,” Saglam said. “I’m supporting the new presidential system wholeheartedly because I don’t want to go bankrupt again.” Saglam nodded at the big red banner billowing from his second-story window to illustrate his point. The Chinese cloth and South Korean ink he used to make it were all bought with dollars, as was the American printer that produced Erdogan’s image and the slogan, “Yes. For my country and my future.”

Given the choice between paying more for credit to buy supplies and keeping the lira in check, he said he’d choose sound money every time. Supporters of the proposed constitutional changes say handing Erdogan sweeping new authority is the only way to achieve the stability that society craves and businesses need to thrive. But opponents say approving the referendum is an invitation to dictatorship, particularly since Erdogan, already the most dominant leader in eight decades, jailed or fired more than 100,000 perceived enemies after rogue army officers attempted a coup in July. “Everybody on the street tracks the exchange rate on a daily basis and Erdogan wins support as long as Turkey can keep the lira stable,” said Wolfango Piccoli, the London-based co-president of Teneo Intelligence, a political risk advisory firm. “But the challenge here is the external backdrop. They can’t really predict what’s coming.”

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The US must cease labeling the PKK a terrorist organization. Or stop backing the Kurds in Syria. Can’t have both.

Tillerson Will Not Meet Turkey Opposition In Ankara Visit This Week (R.)

U.S. Secretary of State Rex Tillerson will not meet members of Turkish opposition groups during a one-day visit to Ankara this week where talks with President Tayyip Erdogan will focus on the war in Syria, senior U.S. officials said on Monday. Thursday’s visit comes at a politically sensitive time in Turkey as the country prepares for a referendum on April 16 that proposes to change the constitution to give Erdogan new powers. A senior State Department official said Tillerson will meet with Erdogan and government ministers involved in the fight against Islamic State in Syria. “It is certainly something we are very acutely aware of and the secretary will be mindful of while he is there,” one State Department official told a conference call with reporters, referring to political sensitivities ahead of the referendum.

American officials expect Erdogan and others to raise the case of U.S.-based cleric Fethullah Gulen, whom the government accuses of orchestrating a failed coup last July. The focus of the Ankara talks is the U.S.-led offensive to retake Raqqa from Islamic State and to stabilize areas in which militants have been forced out, allowing refugees to return home, officials said. A major sticking point between the United States and Turkey is U.S. backing for the Syrian Kurdish YPG militia, which Turkey considers part of the Kurdistan Workers’ Party that has been fighting an insurgency for three decades in Turkey. But the United States has long viewed Kurdish fighters as key to retaking Raqqa alongside Arab fighters in the U.S.-backed Syrian Democratic Forces (SDF). “We are very mindful of Turkey’s concerns and it is something that will continue to be a topic of conversation,” a second U.S. official said.

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Fire sale. The minister actually called these practices ‘cannibalistic’, and rightly so. And that’s not even the best of it. A Greek paper details how a Greek bank, Alpha Bank, lends the money to German investors to buy up Greece’s Public Power Corp. That is about as close to cannibalism as you can get. Economic warfare 101.

Troika Pushes Greece To Sell Up To 40% Of State-Controlled Power Utility (R.)

A Greek minister on Monday accused international lenders of reneging on a 2015 bailout deal by trying to force a fire-sale of its main electricity utility PPC to serve “domestic and foreign business interests.” Under terms of a 2015 bailout deal for Greece worth up to €86 billion, Public Power Corp. (PPC) is obliged to cut its dominance in the Greek market to below 50% by 2020. Although it is not clearly specified in the deal, lenders want Greece to sell some of PPC’s assets. PPC, which is 51% owned by the state, now controls about 90% of the country’s retail electricity market and 60% of its wholesale market. Greece last year launched power auctions to private operators as a temporary mechanism and has proposed that PPC team up with private companies to help achieve this target. But lenders doubt the effectiveness of the measure.

“What they want is that power production infrastructure of up to 40% – PPC’s coal-fired production- is sold. This is what they want right know, which is beyond the (2015) deal,” Interior Minister Panos Skourletis, a former energy minister, told Greek state television. Skourletis on Monday accused the lenders pressing the country to sell-off PPC units at a very low price to serve European and domestic competitors. “It is an assault which has set its sights on PPC’s assets to pass it on to specific European and domestic business interests at a humiliating price,” Skourletis said in an Op-Ed penned for the Efimerida Ton Syntakton daily.

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More warfare, more cannibalism. Airports also ‘privatized’, ‘reformed’. Alpha Bank is also the largest lender in this case. Nice partners too: “..the International Finance Corporation (€154.1 million), a member of the World Bank Group [..] is also the sole provider of euro interest rate hedging swaps..”

Fraport Greece Signs Funding Deal With 5 Lenders (K.)

Five leading financial institutions have signed a long-term financing agreement with German-Greek consortium Fraport Greece, which will soon be managing, operating, upgrading and maintaining 14 regional Greek airports under a 40-year concession contract. The agreement is for total financing of 968.4 million euros. The lenders are Alpha Bank (participating with €284.7 million), the Black Sea Trade & Development Bank (€62.5 million), the European Bank for Reconstruction & Development (€186.7 million), the European Investment Bank (€280.4 million), and the International Finance Corporation (€154.1 million), a member of the World Bank Group.

IFC is also the sole provider of euro interest rate hedging swaps to help Fraport Greece hedge potential fluctuations in interest rates through the term of the loan. Over two-thirds of the total amount (€688 million) will be used to cover the upfront payment (of €1.234 billion) due to state sell-off fund TAIPED upon the airports’ delivery, while €280.4 million will be used to finance upgrading work at the 14 airports. Meanwhile, Fraport Greece recently announced a capital increase raising the company’s total capital to €650 million, most of which will go toward the upfront payment.

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But domestic credit is still collapsing. And so is the economy, of course.

Contraction Of Credit Continues Unabated In Greece (K.)

Bank of Greece figures revealed on Monday a further contraction in the financing of the Greek economy last month, a result of the general uncertainty hanging over the economy and the drop deposits at the country’s banks. The total funding of the economy was down 2% YOY in February, from -1.5% in January, while the monthly net flow of total financing was negative by €801 million, against a negative flow of €1.261 billion in January. The main factor in that decline was the drop in funding to the state, as the annual rate concerning the general government sector posted a 3.7% contraction in February against a 0.1% increase in January. In the private sector it was negative by 1.6% as funding shrank by a net €101 million. The image was somewhat different for enterprises as there was an €82 million monthly increase in the net flow of funding last month, compared with a €643 million decline in January. However, the flow of credit to private clients and nonprofit organizations dipped by €153 million or 2.7% in February.

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Wise old genius. “As soon as three Greeks get together, they start talking of who’s going to be the leader..”

Mikis Theodorakis: ‘In Tough Times, Greeks Become Heroes or Slaves’ (GR)

“During tough times, a Greek can become a hero or a slave,” said legendary Greek composer Mikis Theodorakis in an interview published in Proto Thema Sunday newspaper. The 92-year-old musician, who is also an emblematic figure of the Greek Left, spoke about Greece’s current state, the leftist government, the main opposition party and the bailout agreements. Theodorakis said that he is not shocked about the current condition Greece is in because, historically, the country has been through turmoil several times. He said the Greek spirit, like a light, shines through at the end because Greeks have an inner harmony that prevails. However, Theodorakis said, this is a hard period for Greece and this time he is afraid for the future of the country: “When the Greek is with his back against the wall, he becomes a hero or a slave.”

When asked to compare the current state of the nation with the times of the German Occupation, Theodorakis said that what Greece is going through now is worse: “I don’t remember people going through the trash to find food. I don’t remember elderly people waiting in line to get a cabbage.” Theodorakis spoke in length about the time (2012) opposition leader Alexis Tsipras and leftist legend Manolis Glezos approached him and asked him to join SYRIZA and win the upcoming elections. He said he refused to join because the young candidate did not have a plan on how to get Greece going without supervision and financial aid from the EU and the IMF. He described Greece as a train rolling on tracks laid by the EU and the IMF.

“I told him ‘if you’re planning to come to power without having a plan to change the tracks and provide Greek people with what they need, then you are opportunists and you will only succeed in destroying the country and humiliating the Greek Left’,” the composer said about Tsipras. “With great sadness, I believe that the current plight of the country confirms exactly what I said to Alexis Tsipras, here in my house, in the meeting that I mentioned earlier,” Theodorakis said. The composer said that Greeks have a lust for power: “As soon as three Greeks get together, they start talking of who’s going to be the leader,” he said characteristically.

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A new issue has come to light: where are the NGOs picking up the refugees?

Nearly 1,200 Migrants Picked Up Off Libya, Heading To Italy (R.)

Humanitarian ships rescued almost 1,200 migrants who were crossing the Mediterranean Sea at the weekend on an array of small, tightly packed boats, Doctors Without Borders said on Sunday. A young woman was found unconscious on one of the vessels and later died, the group said. Some 412 people were crammed onto a single wooden boat, while the others were picked up from huge inflatable dinghies, which had set sail from the coast of Libya. The weekend rescues mean that about 22,000 mainly African migrants have been picked up heading to Italy so far this year, while around 520 have died trying to make the crossing.

An Italian prosecutor said last week that humanitarian ships operating off Libya were undermining the fight against people smugglers and opening a corridor that is ultimately leading to more migrant deaths. The chief prosecutor of the Sicilian port city of Catania, Carmelo Zuccaro, said he also suspected that there may be direct communication between Libya-based smugglers and members of charity-operated rescue vessels. NGOs deny any wrongdoing, saying they are simply looking to save lives, but they are facing criticism in Italy, which has taken in about half a million migrants since the start of 2014.

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Italy thinks George Soros is sponsoring this.

Italy Calls For Investigation Of NGO Supported Migrant Fleet (Dm.)

Italian authorities are calling for monitoring of the funding of an NGO fleet bussing migrants into the EU from the North African coast after a report released the European Border and Coast Guard Agency has determined that the members of the fleet are acting as accomplices to people smugglers and directly contributing to the risk of death migrants face when attempting to enter the EU. The report from regulatory agency Frontex suggests that NGOs sponsoring ships in the fleet are now acting as veritable accomplices to people smugglers due to their service which, in effect, provides a reliable shuttle service for migrants from North Africa to Italy. The fleet lowers smugglers’ costs, as it all but eliminates the need to procure seaworthy vessels capable making a full voyage across the Mediterranean to the European coastline.

Traffickers are also able to operate with much less risk of arrest by European law enforcement officers. Frontex specifically noted that traffickers have intentionally sought to alter their strategy, sending their vessels to ships run by the NGO fleet rather than the Italian and EU military. On March 25th, 2017, Italian news source Il Giornale carried remarks from Carmelo Zuccaro, the chief prosecutor of Catania (Sicily) calling for monitoring of the funding behind the NGO groups engaged in operating the migrant fleet. He stated that “the facilitation of illegal immigration is a punishable offense regardless of the intention.” While it is not a crime to enter the waters of a foreign country and pick them migrants, NGOs are supposed to land them at the nearest port of call, which would have been somewhere along the North African coast instead of in Italy.

The chief prosecutor also noted that Italy is investigating Islamic radicalization occurring in prisons and camps where immigrants are hired off the books. Italy has for some months been reeling under the pressure of massive numbers of migrants who have been moving from North Africa into the southern states of the European Union. In December 2016, The Express cited comments made by Virginia Raggi, the mayor of Vatican City, stating that Rome was on the verge of a “war” between migrants and poor Italians. The wave of migrants has also caused issues in southern Italy, where the Sicilian Cosa Nostra has declared a “war on migrants” last year amid reports that the Italian mafia had begun fighting with North African crime gangs who entered the EU among migrant populations.

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Mar 222017
 
 March 22, 2017  Posted by at 9:00 am Finance Tagged with: , , , , , , , ,  4 Responses »
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Ray K. Metzker Philadelphia 1963

 

Vancouver Won’t Have A Middle Class Left In The Future (CBC)
Nomi Prins: Financial System Worse Now Than 2007 (EIR)
Kashkari: “A Market Drop Is Unlikely To Trigger A Crisis” (ZH)
Dijsselbloem Says Southern Europe Blew Cash On ‘Drinks And Women’ (Tel.)
Dijsselbloem Not Fit To Be Eurogroup President – Socialist MEP Leader (Pol.)
Dijsselbloem ‘Mail Bomb Target’ (AFP)
Greece Won’t Last In Eurozone In Long Run, Says Bavarian FinMin (R.)
IMF Wants Greek Opposition To Also Commit To Fiscal Targets, Measures (Naft.)
As Bailout Talks Drag, Greece Says May Not Sign EU Rome Treaty (K.)
Fresh Increase In Registered Greek Unemployed (K.)
Italy’s Populist ‘Mad Man’ Extremely Worrying For Eurozone Stability (CNBC)
Germany Rejects Arms Exports To Turkey (Kom)
Turkey Says EU Refugee Deal Near Collapse (BBG)
The Mechanical Turn in Economics and Its Consequences (Inet)
The Kagans Are Back; Wars to Follow (Robert Parry)
Ganges and Yamuna Rivers Granted Same Legal Rights As Human Beings (G.)
More Than 100 Chinese Cities Now Above 1 Million People (G.)
Access To Nature Reduces Depression And Obesity (G.)
The Man Who Planted A Tree And Grew A Whole Family Of Forests (G.)

 

 

How to Kill a City part 831. I should write the article I’ve long had in my head. But this is the trendline. Which will break, but then you have untold millions of ‘homeowners’ with properties worth much less than their mortgages -and a low interest rate is but a detail-, and a banking system threatening to topple. Again.

Vancouver Won’t Have A Middle Class Left In The Future (CBC)

A former city planner warns if Vancouver doesn’t start protecting dedicated housing for middle-income residents, there won’t be a middle class left in the city in the future. “The estimates are by 2030, if you’re a Millennial household with about $72,000 to $75,000 in your income, you won’t be able to be in this housing market at all. In fact, it would take all of your income to buy a very modest place,” explained Larry Beasley, who is currently a professor with the University of British Columbia’s School of Community and Regional Planning. Beasley says the solution to the problem is to create secure middle income housing. “We have a low-income sector that’s all owned by government and it’s basically rental and we have a market sector for all the rest,” he said.

“We need to protect a middle income sector of housing … It would be protected from being in the open market where it could sell at any price and rent at any price … It would be delivered, either rented or sold, time and time again to middle income people.” Although some middle income people get help from their parents, buy further away or buy smaller places, he said, this cushion won’t last forever and eventually middle income residents will be completely shut out of the city’s real estate market. “It doesn’t matter how much you save and it doesn’t matter how much you borrow from government, you still won’t be able to get into the market. People will face some pretty stark choices.” [..] “If you rule out the middle class, you rule out the potential of creativity. You rule out the people who are doing the jobs everyday and you rule out the people who are driving the day-to-day economy.”

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Private debt is much higher than 10 years ago, in far too many places, because of the housing bubbles.

Nomi Prins: Financial System Worse Now Than 2007 (EIR)

Financial analyst, Author and fmr. Goldman Sachs Managing Director, Nomi Prins sits down with EIR’s Paul Gallagher to discuss just how rotten the current financial system is, making a sobering case that we are far worse off today than we were before the 2007-08 crisis. Prins refers to her political and financial road map for 2017, (nomiprins.com) and discusses the important, combined role China and Japan can play in bringing the US back from the brink and into the new paradigm of investment in the real economy.

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Contradictions, Watson?

Kashkari: “A Market Drop Is Unlikely To Trigger A Crisis” (ZH)

Former Goldmanite and current Minneapolis Fed president, Neel Kashkari, conducted another #AskNeel session on Twitter where the dovish FOMC voter (he was the only one to dissent in last week’s rate hike decision) received numerous question. Among them was the following one from Zero Hedge:

His response:

At this point we would like to “timestamp” Kashkari’s claim that a “stock market drop is unlikely to trigger a crisis” It was not clear just how the Fed president separates a market crash from “financial instability”, but Kashkari’s response that the Fed is not concerned about the level of the S&P500, and instead is more focused on comprehensive market stability, is not being taken well by the market which has continued to sell off as Kashkari responds to further questions, among which the following exchanges:

In response to a question about rising inflation, Kashkari said he would tolerate 2.3% inflation for as long as U.S. has had below-target inflation, “if we really believe 2% is a target. That is what a target means” and adds that “Not sure if my colleagues wld really buy into that however.” We wonder how that question would look like if instead 2.3% inflation one used 3.6%, which is the current true level of inflation according to PriceStats. At least the Fed has been polite enough to advise America it will tolerate a material “overshoot” in its inflation target.

When asked about the two latest rate increases, he said that “data didn’t support a hike. Data basically hasn’t changed. Moving sideways rather than toward dual mandate.” He also said that he would like to see plan on balance sheet normalization soon, adding: “I would prefer to see it before we increase the federal funds rate again” and added that the balance sheet “needs to grow as economy and demand for dollars grows. We will shrink but not to 2006 levels.”

In short, Kashkarhi – who allegedly does not care about the level of the  S&P500 – is willing to risk a market crash and a Fed balance sheet-driven bond tantrum. Or, to paraphrase Richard Breslow, “The Fed Is Making This Up As They Go Along“”

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What a douche.

Dijsselbloem Says Southern Europe Blew Cash On ‘Drinks And Women’ (Tel.)

The head of the eurozone’s finance ministers has been criticised for stating that southern European countries blew their money on “drinks and women”. Jeroen Dijsselbloem, the Dutch finance minister who leads the group, made the comments in an interview on Monday with German newspaper Frankfurter Allgemeine Zeitung (FAZ). “During the crisis of the euro, the countries of the north have shown solidarity with countries affected by the crisis,” he said.“As a Social Democrat, I attribute exceptional importance to solidarity. “But you also have obligations. “You cannot spend all the money on drinks and women and then ask for help.” Inside the European parliament, MEPs turned on Mr Dijsselbloem on Tuesday, calling his remarks “insulting” and “vulgar”.

Gabriel Mato, a Spanish MEP, said the remarks were “absolutely unacceptable” and an “insult” to southern member states – claiming he had lost his neutrality as finance chief. Ernest Urtasun, another Spanish MEP, said: “Maybe this is funny for you, but I don’t think it is. I would like to know if this is your first statement as a candidate to renew your post as president of the eurogroup.” Mr Dijsselbloem’s term ends next year, and he is believed to be considering running for re-election. He attempted to brush off the criticism, telling the MEPs: “Don’t be offended.” He continued: “It is not about one country, but about all our countries.” He then attempted to dig himself out of the hole by saying all countries had failed to uphold the financial rules set by the EU. “The Netherlands also failed a number of years ago to comply with what was agreed,” he said. “I don’t see a conflict between regions of the eurogroup.”


If the money was spent on drinks and women, it wasn’t the Greeks

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He never was, because “..it was “not the first time” that Dijsselbloem has expressed opinions “which are openly in contradiction with the line of the European progressive family.”

MEP=Member of European Parliament.

Dijsselbloem Not Fit To Be Eurogroup President – Socialist MEP Leader (Pol.)

Jeroen Dijsselbloem is “not fit to be president of the Eurogroup,” Socialist MEP leader Gianni Pittella said Tuesday, accusing the Dutch finance minister of making “discriminatory comments” about southern EU countries in German media. Without naming names, Dijsselbloem told the Frankfurter Allgemeine on Monday that “countries in crisis” should stick to the deficit targets set by the European Commission and show the same solidarity as northern eurozone states during the financial crisis. “As a social democrat, for me solidarity is extremely important,” Djisselbloem said. “But those who call for it (solidarity) also have duties. I cannot spend all my money on liquor and women and plead for your support afterwards. This principle applies on the personal, local, national and also European level.” On Tuesday, Pittella described these comments as “shameful and shocking.”

“Dijsselbloem went far beyond by using discriminatory arguments against the countries of southern Europe,” he said. “There is no excuse or reason for using such language, especially from someone who is supposed to be a progressive.” Dijsselbloem has been Eurogroup president since January 2013 and was re-elected for a second term in July 2015. However, his Dutch Labor Party (PvdA) did badly in last week’s election and he will almost certainly not stay on as finance minister. Pittella said it was “not the first time” that Dijsselbloem has expressed opinions “which are openly in contradiction with the line of the European progressive family.” “I truly wonder whether a person who has these beliefs can still be considered fit to be president of the Eurogroup,” he added. Portuguese Foreign minister Augusto Santos Silva joined in the criticism, saying Dijsselbloem should not be able “to remain at the head of the Eurogroup and the Portuguese government shares this opinion.”

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Only surprise: What took them so long?

Dijsselbloem ‘Mail Bomb Target’ (AFP)

Eurogroup chief Jeroen Dijsselbloem was targeted by a mail bomb which had been “intercepted,” his spokesman said Tuesday, a day after Greek police found eight “suspect” packages addressed to European officials. “I can confirm that Minister Dijsselbloem was the target of a mail bomb,” Coen Gelinck told AFP. “It was however intercepted,” said Gelinck, declining to give any further information or to confirm whether it was one of the packages found in Athens. Police in the Greek capital found eight packages Monday at the postal service’s main sorting centre north of Athens. The news came after a domestic militant group last week sent mail bombs to the IMF and the German finance ministry.

Monday’s packages were intended for “officials at European countries,” Greek police said. A police source later said the packages were intended for officials at the Eurogroup and other global institutions. Last week, a mail bomb sent to the IMF’s offices in Paris exploded and injured a secretary. A second bomb sent to the German finance ministry was intercepted by security. The investigation so far suggests that both the IMF and the German finance ministry bombs were sent by a far-left group called the Conspiracy of Fire Nuclei, which police thought they had mostly dismantled in 2011.

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Why stay one day longer, then?

Greece Won’t Last In Eurozone In Long Run, Says Bavarian FinMin (R.)

Greece will not last in the eurozone in the long run and officials working on a review of its bailout package should prepare for such a possibility, a senior member of the Bavarian sister party of Chancellor Angela Merkel’s conservatives said. Greece has lost a quarter of its national output since it first sought financial aid in 2010. Its current bailout package is the third in seven years. “Greece is unlikely to survive in the eurozone over the long term,” Bavarian Finance Minister Markus Soeder told the Handelsblatt newspaper in an interview published on Tuesday. Soeder urged officials working on the bailout review to develop a “Plan B” or alternative plan. “We’ll see if Greece meets the conditions. I’m very skeptical,” Soeder said, adding that the participation of the International Monetary Fund was essential.

Soeder’s Christian Social Union is the Bavarian sister party of Merkel’s Christian Democrats and has long accused Greece of failing to implement reforms promised under its bailout packages. Germany faces national elections in September and the anti-euro Alternative for Germany party (AfD), which has been particularly critical of eurozone bailouts, is expected to perform well. Greek Finance Minister Euclid Tsakalotos said on Monday he planned to stay in Brussels for further consultations with his country’s creditors towards finalizing the latest bailout review. He said he hoped for a preliminary deal by April 7. Greece and its international lenders are still at odds over pension, labor and energy market reforms that are needed before new loans can be disbursed to Athens. The IMF has yet to decide whether to participate in Greece’s €86 billion bailout, expressing deep concerns over debt sustainability in the crisis-hit nation.

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And their grandchildren too, while we’re at it?!

IMF Wants Greek Opposition To Also Commit To Fiscal Targets, Measures (Naft.)

The IMF wants Greece’s political opposition to also approve any new agreement for fiscal measures and targets after 2019, French Finance Minister Michel Sapin maintained on Tuesday, an abrupt revelation that would further complicate ongoing negotiations between Athens and its institutional creditors if proved true. The French minister also expressed his surprise over the Fund’s latest demand vis-a-vis the Greek program. “Can you image if they asked us, the French, to ask for the opposition’s commitment,” he said, adding that such a demand is unrealistic. Moreover, he referred to the IMF’s “obsessions” with labor market liberalization and social security reform.

With fiscal targets dictating an annual primary budget surplus of 3.5% (as a percentage of GDP) in the “medium term” after 2019, the IMF has pressed for – and European creditors have accepted – that austerity measures are enacted now in order to ensure that targets are achieved after the third bailout ends in mid 2018. Sapin made the statement in Brussels, a day after yet another Eurogroup meeting ended without a staff-level agreement between creditors and the increasingly embattled leftist-rightist government in Athens. Finally, he said all parties should assume their responsibilities in concluding the now utterly delayed second review of the Greek program, which he said will have repercussions on others, and not just the Greek economy.

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Let’s see you do it, Alexis.

As Bailout Talks Drag, Greece Says May Not Sign EU Rome Treaty (K.)

With Greece’s international creditors indicating that insufficient progress has been achieved for bailout monitors to return to Athens, government sources have threatened to block the Rome Declaration, Kathimerini understands, connecting it to the negotiations on the second review. According to sources, the Greek official participating in preparatory talks ahead of the drafting of a common statement that EU leaders are expected to sign at a summit in Rome on Saturday, regarding the bloc’s common values and principles, told his interlocutors that Greece cannot agree to such a text while being pressed to implement unrealistic demands of the IMF.

Sources said that Greek officials aim to ensure that the joint declaration includes a paragraph referring to European regulations protecting citizens’ labor rights. It is the issue of labor rights — and the IMF’s demands for further liberalization of the sector — that has become the major sticking point in talks between Greece and its lenders. On Monday, finance ministers discussing Greek bailout negotiations deemed that inadequate progress had been achieved for foreign auditors to return to Athens. Finance Minister Euclid Tsakalotos commented that he and other Greek ministers would remain in Brussels for further negotiations in a bid to establish enough common ground for bailout monitors to return to the Greek capital and resume talks.

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Inevitable. All the recovery claims are bogus. The Greek economy CANNOT recover under present conditions.

Fresh Increase In Registered Greek Unemployed (K.)

The number of people registered as unemployed at Greece’s Manpower Organization (OAED) rose by about 6,000 in February to almost 1.1 million at the end of the month, a dramatic rate which is expected to continue until at least the end of 2017. This trend corresponds with the rise seen in the quarterly jobless rate late last year. The sum of OAED-registered unemployed who are seeking work amounted to 936,110 people, with more than half of them (503,431 people or 53.78%) having been registered for at least 12 months. There is a significant difference between men and women, as they break down into 576,491 women (61.58%) and 359,619 men (38.42%). Another 159,756 people were registered who are not seeking work, of whom 32,897 or 20.59% had been on the register for at least a year. The number of unemployment benefit recipients came to 178,105 people last month, of whom 73,205 (41.1%) were seasonal workers in the tourism industry.

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Shoddy journalism. The Party is named M5S, not 5SM. Common knowledge. (Corrected)

And you can’t claim that “Europe should be strong enough to manage a “mad man” like Grillo becoming Italy’s Prime Minister”, because Beppe is not a candidate -for any office-, and won’t be.

Italy’s Populist ‘Mad Man’ Extremely Worrying For Eurozone Stability (CNBC)

Italy’s anti-establishment and anti-euro party Five Star Movement (M5S) represent the greatest threat to euro area stability, analysts told CNBC on Tuesday, as the populist party surged ahead of its political rivals in the latest opinion poll, putting it on course to be the biggest party if elections were called. M5S leader Beppe Grillo has enjoyed a recent, and remarkable, uptick in support, buoyed in part by the divisions in the ruling Democratic Party (PD) as former Prime Minister Matteo Renzi attempts to regain support. Grillo, who has campaigned for Italy to hold a referendum on the single currency if elected, has overseen M5S’s support grow to 32.3%, according to an Ipsos poll published in daily newspaper Correa della Sera on Tuesday.

“If Five Star Movement could secure 30 or 40% of the vote then of course that would be extremely worrying for the euro area’s stability. Whether they can gain an absolute majority… we’ll have to wait and see,” Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics told CNBC via telephone. Italy is due to hold its next national election by early 2018 and, although Europe’s heavy political calendar has pushed the thought of Italy to the back of most investors’ minds, Deutsche Bank analysts argued it is Rome that poses the greatest threat to the euro area’s stability. The German lender suggested its base case scenario is for Renzi’s PD party, currently second in the polls, to fracture as a result of internal feuds. If this were to happen, it would then leave M5S in the driving seat ahead of the country’s general election.

[..] At the moment, parties in Italy are still looking to draw up a new electoral law, which most observers expect to result in a form of proportional representation that could reward a stable majority government to any party that can secure over 40% of the vote. M5S are significantly below the 40% threshold and have ruled out any desire to form a coalition government. However, Vistesen and Stringa both suggested with some confidence that Italy could expect weak economic growth throughout 2017 and therefore it would be conceivable for Grillo’s M5S to enjoy even greater support in the run up to a vote. Both France and Germany are due to elect new premiers before Italy and Vistesen concluded that, so long as the political favorites are able to win in each country, then Europe should be strong enough to manage a “mad man” like Grillo becoming Italy’s Prime Minister.

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The US will fill in. Or Britain, France.

Germany Rejects Arms Exports To Turkey (Kom)

Germany has rejected more requests for arms exports to Turkey during the past 5 months than in five years between 2010 and 2015, German newspaper Sueddeutsche Zeitung reported on Tuesday. The sharp increase in rejections, mainly handguns, ammunition and parts needed in weapons production, is due to “the risk of a deployment in the context of internal repression or the Kurdish conflict,” according to a written response by State Secretary Matthias Machnig to a question posed by lawmaker Jan van Aken. “Respect for human rights is a matter of particular importance for arms export decisions,” the answer from Machnig of the Federal Ministry for Economic Affairs and Energy also outlined.

“This is a first step,” van Aken told Sueddeutsche Zeitung, “And the next must be that Turkey does not get any weapons from Germany,” the Left Party (Die Linke) law maker said, adding that the Turkish government is waging a war both within its own borders and in Syria while fast becoming a dictatorship. Relations between Germany and Turkey are strained. Turkey’s plans to campaign in Germany ahead of the referendum were refused on several occasions and Turkish politicians, including President Recep Tayyip Erdogan, accused Germany of Nazi measures.

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EU membership is now linked to the death penalty?!

Turkey Says EU Refugee Deal Near Collapse (BBG)

Turkey’s agreement with the European Union to help stem the largest flow of refugees since World War II is inching closer to collapse, according to Turkey’s minister in charge of EU integration. By hosting about 3 million refugees – the most of any nation – and halting their migration to Europe, Turkey has saved the EU from a “racist” backlash that threatens the bloc’s democratic character, Omer Celik said in an interview on Tuesday in Ankara. Describing the deal as one-sided, he said Turkey is under no obligation to continue implementing it, adding that his country’s commitment to seeking EU membership wasn’t unconditional. “We won’t abandon these people to their deaths, but an agreement has two sides and if one side doesn’t abide by its obligations, neither will the other,” Celik said. “If the refugee agreement collapses, what we foresee is clear: we won’t cooperate with any mechanisms acting on behalf of the EU.”

The prospects of Turkey joining the union are dissipating as politicians lash out ahead of a series of votes that could define relations for decades. In Europe, populists are campaigning on anti-Muslim and anti-immigration sentiment, while in Turkey, President Recep Tayyip Erdogan has been appealing to nationalists ahead of an April referendum on endowing his office with full executive authority. European officials have voiced their disapproval of the plebiscite, saying it would undermine democracy in the NATO member. [..] While support in Turkey for EU membership remains high, belief that it will happen has collapsed, Celik said. Ultimately, the issue could be put to the public as part of a referendum on reintroducing the death penalty, he said. “This issue depends on whether relations with the EU are maintained or not.” he said. “It is up to the Turkish people whether to keep the EU process or halt it.”

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I’ve had this sitting in a tab for a while. It’s good that people are now picking it up, but it always seems weird that these things need to be explained this way. Economics truly is a blind field. Nature? Nature of man? Nah..

The Mechanical Turn in Economics and Its Consequences (Inet)

With Adam Smith, and hints before in Ricardo and others, economics took the path of treating the economy as a natural object that should not be interfered with by the state. This fit the Newtonian ethos of the age: science was great, science was mathematics; science was true, right and good. But along the way the discussion in, for example, Montaigne and Machiavelli — about the powers of imagination, myth, emotions, sentiment, human relations and community — was abandoned by the economists. (Adam Smith had written his Theory of Moral Sentiments 20 years earlier and sort of left it behind, though the Wealth of Nations is still concerned with human well-being.) Gibbon’s Decline and Fall of the Roman Empire was published in 1776, the same year as Smith’s Wealth, but hardly read today by most economists.

In philosophy and the arts (romanticism among others) there was great engagement in these issues economics was trying to avoid. But that philosophy and art criticism have not been widely read for many years. The effect of ignoring the human side of lives was to undermine the social perspective of the “political,” by merging it with the individually focused “interest.” So, instead of exploring the inner structure of interest (or later utility or preference), or community feeling and the impact of culture, these were assumed to be irrelevant to the mechanics of the market. Politics, having to do with interest groups and power arrangements, is more vague and harder to model than economic activity. Those who wanted economics to be a science were motivated by the perception that “being scientific” was appreciated by the society of the time, and was the path to rock-solid truth.

But the move towards economics as a science also happened to align with a view of the landed and the wealthy that the economy was working for them, so don’t touch it. We get the equation, embracing science = conservative. This is still with us because of the implication that the market is made by god or nature rather than being socially constructed. Since economics is the attempt at a description of the economy, it was more or less locked in to the naturalist approach, which ignores things like class and ownership and treated capital as part of economic flow rather than as a possession that was useable for social and political power. Even now, economics still continues as if it were part of the age of Descartes and avoids most social, historical and philosophical thought about the nature of man and society. Names like Shaftesbury and Puffendorf, very much read in their time, are far less known now than Hobbes, Descartes, Ricardo, Mill and Keynes.

Karl Polanyi is much less well known than Hayek. We do not learn of the social history such as the complex interplay in Viennese society among those who were classmates and colleagues such as Hayek, Gombrich, Popper and Drucker. The impact of Viennese culture is not known to many economists. The result is an economics that supports an economy that is out of control because the feedback loops through society and its impact of the quality of life – and resentment – are not recognized in a dehumanized economics, and so can’t have a feedback correcting effect. The solution, however, is not to look for simplicity, but to embrace a kind of complexity that honors nature, humans, politics, and the way they are dealt with in philosophy, arts, investigative reporting, anthropology and history. Because the way forward cannot be a simple projection of the past. We are in more danger than that.

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Parry is an authorative voice.

The Kagans Are Back; Wars to Follow (Robert Parry)

Back pontificating on prominent op-ed pages, the Family Kagan now is pushing for an expanded U.S. military invasion of Syria and baiting Republicans for not joining more enthusiastically in the anti-Russian witch hunt over Moscow’s alleged help in electing Donald Trump. In a Washington Post op-ed on March 7, Robert Kagan, a co-founder of the Project for the New American Century and a key architect of the Iraq War, jabbed at Republicans for serving as “Russia’s accomplices after the fact” by not investigating more aggressively. Then, Frederick Kagan, director of the Critical Threats Project at the neocon American Enterprise Institute, and his wife, Kimberly Kagan, president of her own think tank, Institute for the Study of War, touted the idea of a bigger U.S. invasion of Syria in a Wall Street Journal op-ed on March 15.

Yet, as much standing as the Kagans retain in Official Washington’s world of think tanks and op-ed placements, they remain mostly outside the new Trump-era power centers looking in, although they seem to have detected a door being forced open. Still, a year ago, their prospects looked much brighter. They could pick from a large field of neocon-oriented Republican presidential contenders or – like Robert Kagan – they could support the establishment Democratic candidate, Hillary Clinton, whose “liberal interventionism” matched closely with neoconservatism, differing only slightly in the rationalizations used for justifying wars and more wars. There was also hope that a President Hillary Clinton would recognize how sympatico the liberal hawks and the neocons were by promoting Robert Kagan’s neocon wife, Victoria Nuland, from Assistant Secretary of State for European Affairs to Secretary of State.

Then, there would have been a powerful momentum for both increasing the U.S. military intervention in Syria and escalating the New Cold War with Russia, putting “regime change” back on the agenda for those two countries. So, early last year, the possibilities seemed endless for the Family Kagan to flex their muscles and make lots of money. As I noted two years ago in an article entitled “A Family Business of Perpetual War”: “Neoconservative pundit Robert Kagan and his wife, Assistant Secretary of State Victoria Nuland, run a remarkable family business: she has sparked a hot war in Ukraine and helped launch Cold War II with Russia and he steps in to demand that Congress jack up military spending so America can meet these new security threats.

[..] But things didn’t quite turn out as the Kagans had drawn them up. The neocon Republicans stumbled through the GOP primaries losing out to Donald Trump and then – after Hillary Clinton muscled aside Sen. Bernie Sanders to claim the Democratic nomination – she fumbled away the general election to Trump. After his surprising victory, Trump – for all his many shortcomings – recognized that the neocons were not his friends and mostly left them out in the cold. Nuland not only lost her politically appointed job as Assistant Secretary but resigned from the Foreign Service, too. With Trump in the White House, Official Washington’s neocon-dominated foreign policy establishment was down but far from out. The neocons were tossed a lifeline by Democrats and liberals who detested Trump so much that they were happy to pick up Nuland’s fallen banner of the New Cold War with Russia.

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How about the Colorado river, or the Rhine? Can you see it happening?

Ganges and Yamuna Rivers Granted Same Legal Rights As Human Beings (G.)

The Ganges river, considered sacred by more than 1 billion Indians, has become the first non-human entity in India to be granted the same legal rights as people. A court in the northern Indian state of Uttarakhand ordered on Monday that the Ganges and its main tributary, the Yamuna, be accorded the status of living human entities. The decision, which was welcomed by environmentalists, means that polluting or damaging the rivers will be legally equivalent to harming a person. The judges cited the example of the Whanganui river, revered by the indigenous Maori people. people, which was declared a living entity with full legal rights by the New Zealand government last week. Judges Rajeev Sharma and Alok Singh said the Ganges and Yamuna rivers and their tributaries would be “legal and living entities having the status of a legal person with all corresponding rights, duties and liabilities”.

The court in the Himalayan resort town of Nainital appointed three officials to act as legal custodians responsible for conserving and protecting the rivers and their tributaries. It ordered that a management board be established within three months. The case arose after officials complained that the state governments of Uttarakhand and neighbouring Uttar Pradesh were not cooperating with federal government efforts to set up a panel to protect the Ganges. Himanshu Thakkar, an engineer who coordinates the South Asia Network on Dams, Rivers and People, said the practical implications of the decision were not clear. “There are already 1.5bn litres of untreated sewage entering the river each day, and 500m litres of industrial waste,” he said. “All of this will become illegal with immediate effect, but you can’t stop the discharge immediately. So how this decision pans out in terms of practical reality is very unclear.”

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I see slums in your future.

More Than 100 Chinese Cities Now Above 1 Million People (G.)

China now has more than 100 cities of over 1 million residents, a number that is likely to double in the next decade. According to the Demographia research group, the world’s most populous country boasts 102 cities bigger than 1 million people, many of which are little known outside the country – or even within its borders. Quanzhou, for example, on the south-east coast of China, was one of the most cosmopolitan cities in the world a millennium ago, when it served as a hub for traders from across Asia and the Middle East. It is now home to more than 7 million people, nearly 800,000 more than Madrid. But while Madrid is a cultural powerhouse and the centre of Spanish politics, Quanzhou, with its 1,000-year-old mosque and charming cafes, is rarely discussed even within Chinese media, whereas Beijing, Shanghai and Hong Kong continue to get most of the headlines.

Outside China, meanwhile, few will even have heard of Kaifeng, a former imperial capital that was once a terminus on the Silk Road, or Weihai, both cities bigger than Liverpool (estimated population of urban area 880,000). The scale of China’s urban ambitions is staggering: it now has 119 cities bigger than Liverpool. By 2025, according to a report by the McKinsey Global Institute, that number is predicted to have more than doubled. One reason is that the government is actively encouraging rural residents to urbanise. China aims to have 60% of its people living in cities by 2020, up from 56.1% currently, and the World Bank estimates a billion people – or 70% of the country’s population – will be living in cities by 2030. Thousands of government officials have campaigned across the country to convince farmers to move to newly built urban districts, turning centuries-old villages into ghost towns.

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Poorly argued but still true. The Chinese had better plant a zillion trees in those cities of them.

Access To Nature Reduces Depression And Obesity (G.)

People living close to trees and green spaces are less likely to be obese, inactive, or dependent on anti-depressants, according to a new report. Middle-aged Scottish men with homes in deprived but verdant areas were found to have a death rate 16% lower than their more urban counterparts. Pregnant women also received a health boost from a greener environment, recording lower blood pressures and giving birth to larger babies, research in Bradford found. Overall, nature is an under-recognised healer, the paper says, offering multiple health benefits from allergy reductions to increases in self-esteem and mental wellbeing.

A study team of 11 researchers at the Institute for European environmental policy (IEEP) spent a year reviewing more than 200 academic studies for the report, which is the most wide-ranging probe yet into the dynamics of health, nature and wellbeing. The project first appeared as an unpublicised 280-page European commission literature review last autumn, before being augmented for Friends of the Earth Europe with analysis of the links between nature-related health outcomes and deprivation. “The evidence is strong and growing that people and communities can only thrive when they have access to nature,” said Robbie Blake, a nature campaigner for Friends of the Earth Europe, which commissioned the analysis.

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Talking about planting trees:

This is a great story, which should have many people follow the example, for if we would all plant just one tree every day, we would never have a lack of trees again.

And of course I can’t post this without adding a famous French 1953 story by Jean Giono, The Man Who Planted Trees, which inspired Québec’s Frédérick Back to make his 1987 Oscar winning animation. What a masterpiece it still is. Please watch. It’ll make you feel so much better.

The Man Who Planted A Tree And Grew A Whole Family Of Forests (G.)

When Antonio Vicente bought a patch of land in São Paulo state and said he wanted to use it to plant a forest, people called him crazy. It was 1973 and forests were seen by many as an obstacle to progress and profit. Brazil’s then military government encouraged wealthy landowners to expand by offering them generously subsidised credit to invest in modern farming techniques, a move the ruling generals hoped would boost national agriculture. But water, or an impending lack of it, was Vicente’s concern as he worriedly watched the expansion of cattle grazing and industry, the destruction of local forests, and the growth of the population and the rapid urbanisation of the state. One of 14 children, Vicente grew up on a farm where his father worked. He’d watched him cut down the trees at the owners’ orders, for use in charcoal production and to clear more land for grazing cattle.

Eventually the farm’s water springs dried up and never returned. Maintaining forests are essential for water supplies because trees absorb and retain water in their roots and help to prevent soil erosion. So with some donkeys and a small team, he worked on his little patch – 31 hectares (77 acres) of land that had been razed for grazing cattle – and set about regenerating. “The area was totally stripped,” he says, demonstrating by pointing to a painting of the treeless land in 1976. “The water supplies had nearly dried up.” His neighbours, who were cattle and dairy farmers, used to tell him: “You are dumb. Planting trees is a waste of land. You won’t have income. If it’s full of trees, you won’t have room for cows or crops.” But what started off as a weekend gig has now become a full-time way of life. More than 40 years later, Vicente – now 84 – estimates he has replanted 50,000 trees on his 31 hectare Serra da Mantiqueira mountain range property.

“If you ask me who my family are, I would say all this right here, each one of these that I planted from a seed,” he says. [..] Vicente has seen first-hand the devastating effects of mass deforestation. He travelled at one point to Rondonia, now one of Brazil’s most deforested Amazon states, in 1986 during a drive by the Brazilian government to settle the region which proved disastrous as following mass deforestation, the land yielded poor results. “The government were giving the land away for cheap, but the land didn’t serve for anything,” he says. “People cut down the trees but after 3 to 4 years, the soil turned into sand and nothing grows.” Speaking of his own project in the Mantiqueira mountain range: “I didn’t do it for money, I did it because when I die, what’s here will remain for everyone.” He adds: “People don’t call me crazy any more.”

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