Vittorio Matteo Corcos Conversation in the Jardin du Luxembourg 1892
Obviously, there are tensions between Europe and the US. Just as obviously, these tensions are blamed on, who else, Donald Trump. European Council President Donald Tusk recently said: “With friends like Trump, who needs enemies?” EU Commission chair Jean-Claude Juncker even proclaimed that “Europe must take America’s place as global leader”.
These European ‘leaders’ love the big words. They think they make them look good, strong. In reality, they are merely messenger boys for Berlin and Paris. Who have infinitely more say than Brussels. Problem is, Berlin and Paris are not united at all. Macron wants more Europe, especially in finance, but Merkel knows she can’t sell that at home.
So what are those big words worth when the whip comes down? It’s amusing to see how different people reach wholly different conclusions about that. Instructive and entertaining. First, Alex Gorka at The Strategic Culture Foundation, who likes the big words too: “..a landmark event that will go down in history as the day Europe united to openly defy the US.” and “May 17 is the day the revolt started and there is no going back. Europe has said goodbye to trans-Atlantic unity. It looks like it has had enough.
The May 16-17 EU-Western Balkans summit did address the problems of integration, but it was eclipsed by another issue. The meeting turned out to be a landmark event that will go down in history as the day Europe united to openly defy the US. The EU will neither review the Iran nuclear deal (JPCOA) nor join the sanctions against Tehran that have been reintroduced and even intensified by America.
Washington’s unilateral withdrawal from the JPCOA was the last straw, forcing the collapse of Western unity. The Europeans found themselves up against a wall. There is no point in discussing further integration or any other matter if the EU cannot protect its own members. But now it can.
[..] As European Council President Donald Tusk put it, “With friends like Trump, who needs enemies?” According to him, the US president has “rid Europe of all illusions.” Mr. Tusk wants Europe to “stick to our guns” against new US policies. Jean-Claude Juncker, the head of the EU Commission, believes that “Europe must take America’s place as global leader” because Washington has turned its back on its allies.
Washington “no longer wants to cooperate.” It is turning away from friendly relations “with ferocity.” Mr. Juncker thinks the time is ripe for Europe “to replace the United States, which as an international actor has lost vigor.” It would have been unthinkable not long ago for a top EU official to say such things and challenge the US global leadership. Now the unthinkable has become reality.
[..] Sandra Oudkirk, US Deputy Assistant Secretary of State for Energy, has just threatened to sanction the Europeans if they continue with the Nord Stream 2 pipeline project to bring gas in from Russia across the Baltic Sea.
[..] President Donald Trump has just instructed Secretary of State Mike Pompeo to prepare a list of new sanctions against the Russian Federation for its alleged violations of the 1987 Intermediate-Range Nuclear Forces (INF) Treaty. [..] But nobody in Europe has announced that they want US nuclear-tipped intermediate- range weapons on their territory that will be a target for a potential retaliatory strike by Russia.
[..] The time is ripe for Brussels to stop this sanctions-counter-sanctions mayhem and stake out its own independent policies on Russia, Iran, defense, and other issues, that will protect European, not US, national interests. May 17 is the day the revolt started and there is no going back. Europe has said goodbye to trans-Atlantic unity. It looks like it has had enough.
As for placing new nukes in Europe, that will be a hard sell. But the US will probably find countries that say yes, provided they are compensated well. Just don’t try it in Holland, Germany or France. But also don’t forget the amount of nukes already on the continent: just call it an upgrade.
Nord Stream 2 is tricky, but mostly an economic issue: Trump wants to sell American gas to Europe, and uses the bad bad Putin narrative to make that happen. Still, the pipeline has been in the pipeline for a long time, and a lot of time and money has been spent on it. It’ll be hard for the US to cut it off at this late stage.
When it comes to claiming the EU will not review the Iran nuclear deal, isn’t that exactly what they are indeed doing? Reuters:
Under the 2015 deal, Iran agreed to curb its nuclear program in return for the lifting of most Western sanctions. One of the main complaints of the Trump administration was that the accord did not cover Iran’s missile program or its support for armed groups in the Middle East which the West considers terrorists.
Concluding a new agreement that would maintain the nuclear provisions and curb ballistic missile development efforts and Tehran’s activities in the region could help convince Trump to lift sanctions against Iran, the paper said. “We have to get away from the name ‘Vienna nuclear agreement’ and add in a few additional elements. Only that will convince President Trump to agree and lift sanctions again,” the paper quoted a senior EU diplomat as saying.
All in all, Mr. Gorka doesn’t convince me. Europe doesn’t speak with one voice, and we wouldn’t even know which voice speaks for it. Just that it isn’t Juncker or Tusk, they’re handpuppets. Moreover, Europe has so many internal issues to deal with that it has a hard time speaking at all. A landmark event in US-EU relations may happen one day, but May 17 wasn’t it.
What I find more interesting is the account of academic John Laughland, ‘a historian and specialist in international affairs’, at RT:
Donald Tusk may say “Europe must be united economically, politically and also militarily like never before … either we are together or we are not at all” but Europe is indeed not “together” at all. The Brussels commission is hounding Poland and Hungary on what are clearly internal political matters beyond the Commission’s remit; the EU is about to lose one of its most important member states; and a new government is going to take power in Rome whose economic policies (a flat tax at 15%) will blow the eurozone’s borrowing rules out of the water and perhaps cause Italy to leave the euro.
The Italian 5-Star/League government also wants an end to the EU sanctions against Russia; these are voted by a unanimity which, although fragile, has held until now but which, if the new power in Rome keeps its word, will shortly collapse. In other words, what Trump has done is to make the Europeans look like the fools they are. In circumstances in which the EU has placed all its eggs in one basket, a basket which Trump has now overturned, it will be impossible for it to come together. On the contrary, it is falling apart.
[..] the EU draws its entire legitimacy from the belief that by pooling sovereignty and by merging its states into one entity, it has advanced beyond the age when international relations were decided by force. It believes that it embodies instead a new international system based on rules and agreements, and that any other system leads to war. It is impossible to exaggerate the importance of this belief for European leaders; yet Donald Trump has just driven a coach and horses through it.
The angry statements by European leaders might lead one to think that we are on the cusp of a major reappraisal of trans-Atlantic relations. However, the reality is that the EU and its leaders have painted themselves into a corner from which it will be very difficult, perhaps impossible, to extricate themselves.
Like I said, completely different conclusions based on the exact same events. The EU risks what might turn into an existential crisis with Beppe Grillo effectively holding the reins of power in Rome. The new government may have dropped the demand for a €260 billion debt relief, but the basic income plan is still there, and so is dropping Russian sanctions.
The new guys can’t divert from their election promises much further, they need to maintain their credibility. But for a lot of their promises it is not at all clear how they could possible fit into the present EU structure. Try their demand for a mechanism to leave the EU.
Italy is so large that Brussels cannot be too aggressive against it. The ECB cannot stop buying Italian bonds, as it did with Greek ones. And at some point the debt relief demand will return too.
But Laughland has a lot more cold water to pour on the alleged but toothless European revolt. In the shape of NATO. This is scary for every European:
[..] the links between the EU and the US are not only very long-standing, they are also set in stone. NATO and the EU are in reality Siamese twins, two bodies born at the same time which are joined at the hip. The first European community was created with overt and covert US support in 1950 in order to militarize Western Europe and to prepare it to fight a land war against the Soviet Union; NATO acquired its integrated command structure a few months later and its Supreme Commander is always an American.
Today the two organizations are legally inseparable because the consolidated Treaty on European Union, in the form adopted at Lisbon in 2009, states that EU foreign policy “shall respect” the obligations of NATO member states and that it shall “be compatible” with NATO policy. In other words, the constitutional charter of the EU subordinates it to NATO, which the USA dominates legally and structurally. In such circumstances, European states can only liberate themselves from US hegemony, as Donald Tusk said they should, by leaving the EU. It is obvious that they are not prepared to do that.
Anything else about those dreams of standing up to Trump? Have the past and present leaders in Brussels, and in Berlin and Paris and Rome, betrayed their own citizens? Sold them out? How far removed is this from treason? And does this perhaps indicate that it’s high time for a complete and utter overhaul of the European Union?
It sure sounds a lot more realistic than Europe replacing America as the global leader.
The bullish run in the Dow Jones industrial average — which celebrates its ninth birthday Friday — is the longest ever and the greatest percentage gain since World War II, according to Leuthold Group. The corresponding run by the S&P 500, notes LPL Financial, is that benchmark’s second-largest and second-longest bull market ever, with only the 1990s stock market run led by technology stocks in the way. Despite a more than 10% correction in equities last month following a burst of bullish activity, Leuthold’s Doug Ramsey doesn’t think the bull is done yet. “Assuming the Dow Jones industrial average can exceed its late-January high on March 9th or thereafter, this cyclical bull market will become the first one ever to last nine years,” said Ramsey, his firm’s chief investment officer.
“Historically, cycle momentum highs are usually followed by a push to even higher price highs over the next several months.” The Dow hit an all-time high of 26,616.71 on Jan. 26, the same day the S&P 500 clinched its own record of 2,872.87. The major indexes are off their record highs 6.4% and 4.6% respectively. This chart from Leuthold Group shows where the Dow bull market stacks up since 1900. It’s far and away the longest in modern financial times. In terms of percentage gains, it’s third behind two bull markets pre-WWII.
South Korea says it has not received a response from Pyongyang on a summit between North Korean leader Kim Jong-un and US President Donald Trump. In a surprise development, Mr Trump on Friday accepted North Korea’s invitation to direct talks. South Korean officials said Mr Kim was prepared to give up his nuclear weapons. Details on the planned talks remain vague, with no agreement yet on the location or agenda. Analysts are sceptical about what can be achieved through talks given the complexity of the issues involved. “We have not seen nor received an official response from the North Korean regime regarding the North Korea-US summit,” a spokesman for the South Korean Ministry of Unification said on Monday. “I feel they’re approaching this matter with caution and they need time to organise their stance.” South Korean officials who spoke to Trump are now on the way to China and Japan to brief the leaders of each country on the upcoming talks.
Kim Jong Un wants to sign a peace treaty after meeting with U.S. President Donald Trump, South Korean media reported, reviving a long-held goal of the North Korean regime. Kim is likely to raise the possibility of a peace treaty, along with establishing diplomatic relations and nuclear disarmament, during a meeting with the U.S. leader, the Dong-A Ilbo newspaper said Monday, citing an unidentified senior official in South Korea’s presidential office. Trump last week agreed to meet Kim, although key details of the summit have yet to be decided. Koh Yu-hwan, who teaches North Korean studies at Dongguk University in Seoul, said the regime has long sought a peace treaty to end the more than 60-year-old ceasefire between the two sides and help guarantee its safety.
“There were agreements between the U.S. and North Korea to open up discussion on a peace treaty, but they never materialized,” Koh said, saying the conditions were key. “The U.S. wants a peace treaty at the end of the denuclearization process, while for the North, it’s the precondition for its denuclearization.” Signing a peace treaty would require addressing issues regarding the U.S. military’s presence in South Korea and its transfer of wartime operational control to South Korea and United Nations forces in South Korea, Koh said.
China, Canada and Hong Kong are among the economies most at risk of a banking crisis, according to early-warning indicators compiled by the Bank for International Settlements. Canada – whose economy grew last year at the fastest pace since 2011 – was flagged thanks to its households’ maxed-out credit cards and high debt levels in the wider economy. Household borrowing is also seen as a risk factor for China and Hong Kong, according to the study. “The indicators currently point to the build-up of risks in several economies,” analysts Inaki Aldasoro, Claudio Borio and Mathias Drehmann wrote in the BIS’s latest Quarterly Review published on Sunday. The study offered some surprising results: for example, Italy wasn’t shown as being at risk, despite its struggles with a slow-growing economy and banks that are mired in bad debts.
While China was flagged, a key warning indicator known as the credit-to-gross domestic product “gap” showed an improvement, said the BIS, known as the central bank for central banks. This may suggest the government is making progress in its push to reduce financial-sector risk. The gap is the difference between the credit-to-GDP ratio and its long-term trend. A blow-out in the number can signal that credit growth is excessive and a financial bust may be looming. In China, the gap fell to 16.7% in the third quarter of 2017, down from a peak of 28.9% in March 2016 and the lowest since 2012, the study showed.
The belief in an “implicit guarantee” from the Chinese government on debt is a big problem, said a finance professor on Monday. “I’m concerned with what a lot of people believe, [that] the government is going to take care of investment losses. Under that impression, they are going to take up lot of leverage because they believe they will be bailed out if something does not work out,” said Zhu Ning, a professor of finance at Tsinghua University in Beijing. China has been battling high debt levels for years, but debt-to-GDP ratio is still about 260%, according to the Bank of International Settlements. While that absolute number is not alarming in itself, it is eyebrow-raising for the speed in rising to such levels, particularly in the last five years, Zhu said.
Since China’s economy is far bigger than two decades ago, the country has the size and resilience to overcome issues in the financial system, but Beijing is concerned about systemic risks that may roil the world’s second-largest economy. The key to solving any potential fallout from the ballooning debt is to remove the perception that Beijing will help solve any problems from a debt blowup, said Zhu. “This is a mentality that has taken decades to form so the government would have to do something aggressive and persistent to gradually remove this sense of implicit guarantee,” Zhu said. The Chinese government has been coming down hard on reining in systemic risks, using strong-arm tactics such as the recent state takeover of Anbang Insurance, which was aggressively expanding internationally.
Asia’s big developers are “more vulnerable” to shocks after their profitability waned from the boom years at the start of the decade, the Bank for International Settlements warned. The “sector’s deteriorating fundamentals give reason for concern,” said the Basel, Switzerland-based institution, which watches over global financial stability. Many firms’ returns on assets are below their costs of debt, the BIS said in a quarterly review, citing a study of developers in China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand.
Higher interest rates, sinking property prices or falling currencies are shocks that could worsen developers’ financial health, with the potential for significant economic repercussions, according to the organization known as the central banks’ central bank. Even without external jolts, falling returns on assets and declining interest coverage ratios “could pose problems” for the firms, it said. While easy money drove property booms worldwide after the global financial crisis, the BIS argues a tightening in the years ahead could force developers to sell off inventory – driving down prices – and lay off workers.
A spiralling cronyism scandal linked to the Japanese prime minister and his wife has reached fever pitch after the finance ministry admitted to tampering with records to remove references to the first lady. Shinzo Abe has previously said he would resign if he or his wife were shown to be involved in heavily cutting the price of public land sold to a right-wing school operator in Osaka. The finance ministry admitted on Monday that it had altered official documents surrounding the decision to provide an 85% discount on the appraised value of the land. One document originally quoted the educational group Moritomo Gakuen as saying that Abe’s wife Akie had recommended the primary school project “move forward because it is a good plot of land”. However, this was removed in a version submitted to lawmakers investigating the sale. Kyodo News reported that the submitted papers also omitted an article in which Akie described being “moved to tears by the school’s education policy”.
Moritomo Gakuen’s existing kindergarten attracted attention for requiring its young pupils to bow before portraits of the imperial family, sing the national anthem daily, and learn the 1890 imperial rescript on education, which emphasises sacrifice for country. Akie was set to serve as honorary principal for the new primary school, but stepped down in February last year when questions were raised over the land deal. The government has previously denied claims that the first lady gave the school operator an envelope containing 1m yen (£6,775) on behalf of the prime minister during a visit she made to the existing kindergarten. The controversy fuelled a steep decline in Abe’s popularity last year but heappeared to ride out the scandal and won a snap lower house election in October. However, the forgery revelations have intensified political pressure on Abe and his long-serving finance minister, Taro Aso.
[..] my former boss from my Goldman Sachs days—Gary Cohn—just resigned from his White House post as chief economic adviser to the Chaos Producer in Chief. This was ostensibly in protest against the president’s announcement about imposing steel and aluminum tariffs. The next day, Trump signed the order sealing that deal, citing his actions as a “matter of necessity for our security.” Along the way, he said there would be no exemptions to the tariffs, then said there would be—for Canada and Mexico. Trump glowed in the light of his new-found power grab over trade agreements, leaving himself room to decide which countries would be “in” and “out” with respect to these and other tariffs in the future. And that was the week that was in Trump World.
The timing of Cohn’s departure certainly put a wrench in his plans to convene executives dependent on steel and present their case against steel tariffs to Trump. Instead, Trump signed the tariffs order flanked by steel and aluminum workers supporting it. Speaking of steel, Cohn’s nerves were seemingly made of that metal. At Goldman, he was the man who regularly waded through deals without losing his cool (unlike Trump). On 9/11, I witnessed him directing traders to keep trading oil as shreds of debris and billows of smoke engulfed the windows of the Goldman trading floor, only a few blocks away from the World Trade Center. He became president (or number two) at Goldman, continually handling the less “cool” behavior of chairman and CEO Lloyd Blankfein, who remained above him in the pecking order for decades.
Cohn commanded daily activities at Goldman that led to the firm’s creation of shady financial instruments that were later at the core of the financial crisis. Under Cohn, Goldman was bailed out by U.S. taxpayers. The firm morphed, for government subsidy purposes, into a bank holding company, though it handled scant deposits from regular people. It did this to retain access to Federal Reserve support, as it has done, over the past decade. Cohn was also at Goldman when it reached a $5 billion settlement with the Department of Justice over its consistent misconduct regarding mortgage-related securities from 2005 to 2007. That type of conflict-meets-crisis readied him for his government service. When Cohn came up against Trump, the president’s flavor-of-the-minute trade policy hawk, Peter Navarro, met “Globalist Gary” head on. Then Cohn’s Trump administration career was over.
House prices in parts of London that were once at the epicentre of the UK property boom have fallen as much as 15% over the past year in fresh evidence of the impact of the EU referendum. Figures from Your Move, one of the UK’s biggest estate agency chains, reveal that the average home in Wandsworth – which includes much of Clapham, Balham and Putney – fell by more than £100,000 in value over the last 12 months. But property prices have surged in the north-west of England, with Blackburn recording the highest growth rates in the UK. Homes in the London borough of Wandsworth were fetching an average of £805,000 in January 2017 but this has now fallen to £685,000.
The current President of the EU Council has a good reputation in the EU circles, but not in Poland: he had to flee from his home country to Brussels, completely compromised. After all, his government was a catastrophe: mass emigration of young Poles, tampering with the coffers of future pensioners, corruption and benefit scandals, the Amber Gold affair, the all-pervasive nepotism in his Civic Platform (PO) party, numerous sins of omission crowned by Nord Stream. Young unemployed people can light the torch of a revolution. If you want to secure your position in politics, you leave salaries low and open the borders. The discontented young unemployed emigrate and only those who have less motivation to take to the streets remain. In 2005 Donald Tusk made this trick, this intervention on his nation. He threw Poland into the arms of the EU: since then the population has fallen significantly due to the emigration of many young Poles.
Nigel Farage aptly commented on this when he turned to Tusk in the European Parliament: “Your debate is about emigration, and time and again you’ve promised the Polish voters that young poles would return to Poland, and at the same time Mr Cameron has promised the British people that fewer Poles would come to us. Well, it turns out that you’ve both been wrong and your country has been depopulated by 2 million people since you joined the European Union and the reason is obvious: it’s money, isn’t it? And you yourself prove the point. You are the newest Polish emigre and you’ve gone from a salary of 6,000 euros a year to a salary of 30,000 euros a year. So congratulations! You’ve hit the EU jackpot!”
Nearly half of US arms exports over the past five years have gone to the war-stricken Middle East, with Saudi Arabia consolidating its place as the world’s second biggest importer, a report has shown. The Stockholm International Peace Research Institute (Sipri) said on Monday that global transfer of major weapons systems between 2013 and 2017 rose by 10% compared with the five-year period before that, in a continuation of an upward trend that began two decades ago. The US, which is the world’s biggest exporter, increased its sales between those two periods by 25%. It supplied arms to as many as 98 states worldwide, accounting for more than a third of global exports. Russia, the world’s second biggest exporter, saw a decrease of 7.1% in its overall volume of arms exports; US exports were 58% higher than those of Russia. France, Germany and China were also among the top five exporters. The UK is the sixth biggest weapons exporter.
“Based on deals signed during the Obama administration, US arms deliveries in 2013–17 reached their highest level since the late 1990s,” said Dr Aude Fleurant, the director of the Sipri’s arms and military expenditure programme. “These deals and further major contracts signed in 2017 will ensure that the USA remains the largest arms exporter in the coming years.” The Middle East, a region where in the past five years most countries have been involved in conflict, accounted for 32% of global imports of weapons. Arms imports to the region doubled between 2013 and 2017 and in the five-year period before that. The US, the UK, and France were the main supplier of arms to the region, while Saudi Arabia, Egypt and the UAE were the main recipient countries.
The UK, which rolled out a red carpet for the Saudi crown prince on his visit to London last week, exported nearly half of its arms to the Saudi Arabia, which has increased its imports by 225%. Sipri’s report noted that Saudi Arabia uses its imported weapons in large-scale combat operations, particularly in Yemen. The Saudi-led military intervention in Yemen, which has cost hundreds of civilian lives, was launched in 2015, aiming to counter the advances of Iran-backed Houthi rebels controlling the capital, Sana’a. Saudi Arabia’s shopping list included 78 combat aircraft, 72 combat helicopters and 328 tanks. “Widespread violent conflict in the Middle East and concerns about human rights have led to political debate in western Europe and North America about restricting arms sales,” said Pieter Wezeman, senior researcher at Sipri. Yet the USA and European states remain the main arms exporters to the region and supplied over 98% of weapons imported by Saudi Arabia.”
Sir Tim Berners-Lee, inventor of the world wide web, has called for large technology firms to be regulated to prevent the web from being “weaponised at scale”. “In recent years, we’ve seen conspiracy theories trend on social media platforms, fake Twitter and Facebook accounts stoke social tensions, external actors interfere in elections, and criminals steal troves of personal data,” Berners-Lee wrote in an open letter marking the 29th anniversary of his invention. These problems have proliferated because of the concentration of power in the hands of a few platforms – including Facebook, Google, and Twitter – which “control which ideas and opinions are seen and shared”. “What was once a rich selection of blogs and websites has been compressed under the powerful weight of a few dominant platforms,” said the 62-year-old British computer scientist.
These online gatekeepers can lock in their power by acquiring smaller rivals, buying up new innovations and hiring the industry’s top talent, making it harder for others to compete, he said. Google now accounts for about 87% of online searches worldwide. Facebook has more than 2.2 billion monthly active users – more than 20 times more than MySpace at its peak. Together, the two companies (including their subsidiaries Instagram and YouTube) slurp up more than 60% of digital advertising spend worldwide. Although the companies are aware of the problems and have made efforts to fix them – developing systems to tackle fake news, bots and influence operations – they have been built to “maximise profit more than maximise social good”. “A legal or regulatory framework that accounts for social objectives may help ease those tensions,” he said.
Aligning the incentives of the technology sector with those of users and society at large, he argued, will require consulting a diverse group of people from business, government, civil society, academia and the arts. Berners-Lee warned of “two myths” that “limit our collective imagination” when looking for solutions to the problems facing the web: “The myth that advertising is the only possible business model for online companies, and the myth that it’s too late to change the way platforms operate. On both points we need to be a little more creative,” he said. “I want the web to reflect our hopes and fulfil our dreams, rather than magnify our fears and deepen our divisions,” he said.
Despite all the smoke and mirrors, most Americans seem to see where the stenographers of corporate capitalism are taking us. A recent Gallup poll found that while 84% of Americans see media as “critical” or “very important” to democracy, only 28% see the corporatist mainstream news media (MSM) as actually supporting democracy. They’re right on both counts of course. The quality of a democracy is only as good as the information people have to make informed judgements about public policy and politicians. Even as the mainstream news media continue to lose street cred, they persist in a rumor-saturated full court press against the “Trump-Putin presidency,” which only further exposes their lack of professionalism and increasing vulgarity.
MSM management and their boardroom bosses have long understood that as long as they spice up their “nothing burger” news, ratings and advertising rates will keep them in business and please their commercial and government clients. Tabloid journalism, which can describe most American mainstream media these days, even when wrapped up as “all the news that’s fit to print,” is in constant search of sensation, scandal, gossip, and profit – and only occasionally in public-oriented investigative integrity. [..] 65% of Americans consider the so-called “free press” biased, obsessed with scandal, and full of “fake news” and therefore cannot be trusted. [..] trust in American institutions in general, that is, the government, business, NGOs, and the MSM, is going through the worst crisis in recorded history, according to the marketing firm Edelman in 2018.
[..] On January 27, 2018, the Washington Post editorial board issued this statement: “A foreign power interfered in the 2016 presidential election. U.S. law enforcement is trying to get to the bottom of that story. Congress should be doing everything possible to make sure the investigation can take place.” Obviously referring to Russia, the Post’s declaration, as the late investigative journalist Robert Parry and many other independent and respected writers have pointed out, was and remains without a shred of evidence. It’s WMD time all over again, only this time the propaganda is being trumpeted mainly by the Democrats. It would better serve the cause of democracy to investigate the Post for its covert coalition and collusion with the deep state and the Clinton (right) wing of the Democratic Party. The Post and the rest of their pack have constructed a wicked Russia foil in order to undermine Moscow’s presumed ally Trump and boost bigger Pentagon budgets.
“History,” Winston Churchill said, “will be kind to me, for I intend to write it myself.” He needn’t have bothered. He was one of the great mass murderers of the 20th century, yet is the only one, unlike Hitler and Stalin, to have escaped historical odium in the West. He has been crowned with a Nobel Prize (for literature, no less), and now, an actor portraying him (Gary Oldman) has been awarded an Oscar. As Hollywood confirms, Churchill’s reputation (as what Harold Evans has called “the British Lionheart on the ramparts of civilization”) rests almost entirely on his stirring rhetoric and his talent for a fine phrase during World War II. “We shall not flag nor fail. We shall go on to the end. … We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets. … We shall never surrender.” (The revisionist British historian John Charmley dismissed this as “sublime nonsense.”)
Words, in the end, are all that Churchill admirers can point to. His actions are another matter altogether. During World War II, Churchill declared himself in favor of “terror bombing.” He wrote that he wanted “absolutely devastating, exterminating attacks by very heavy bombers.” Horrors such as the firebombing of Dresden were the result. In the fight for Irish independence, Churchill, in his capacity as secretary of state for war and air, was one of the few British officials in favor of bombing Irish protesters, suggesting in 1920 that airplanes should use “machine-gun fire or bombs” to scatter them. Dealing with unrest in Mesopotamia in 1921, as secretary of state for the colonies, Churchill acted as a war criminal: “I am strongly in favour of using poisoned gas against the uncivilised tribes; it would spread a lively terror.” He ordered large-scale bombing of Mesopotamia, with an entire village wiped out in 45 minutes.
In Afghanistan, Churchill declared that the Pashtuns “needed to recognise the superiority of [the British] race” and that “all who resist will be killed without quarter.” He wrote: “We proceeded systematically, village by village, and we destroyed the houses, filled up the wells, blew down the towers, cut down the great shady trees, burned the crops and broke the reservoirs in punitive devastation. … Every tribesman caught was speared or cut down at once.” In Kenya, Churchill either directed or was complicit in policies involving the forced relocation of local people from the fertile highlands to make way for white colonial settlers and the forcing of more than 150,000 people into concentration camps. Rape, castration, lit cigarettes on tender spots, and electric shocks were all used by the British authorities to torture Kenyans under Churchill’s rule.
But the principal victims of Winston Churchill were the Indians — “a beastly people with a beastly religion,” as he charmingly called them. He wanted to use chemical weapons in India but was shot down by his cabinet colleagues, whom he criticized for their “squeamishness,” declaring that “the objections of the India Office to the use of gas against natives are unreasonable.” [..] Thanks to Churchill, some 4 million Bengalis starved to death in a 1943 famine. Churchill ordered the diversion of food from starving Indian civilians to well-supplied British soldiers and even to top up European stockpiles in Greece and elsewhere. When reminded of the suffering of his Indian victims, his response was that the famine was their own fault, he said, for “breeding like rabbits.”
The head of the US central bank is busy preparing America, its new president, and indeed the world, for rising interest rates – and for a new economic era. The story of US interest rates this decade is simple to the point of tedium. The key fed funds rate has been dragging along just above zero ever since the banking crash. In December 2015, it was nudged up by a quarter of a%age point by Ms Yellen and her colleagues at the Federal Reserve. A whole year later, they nudged it up again, which means that seven years after the notional end of the US recession it stands at mere 0.75%. That is set to change. Over the past few weeks, rate setters at the Fed have dropped broader and broader hints that interest rates will go up as soon as next Wednesday – and will keep going up.
Last Friday was the turn of Ms Yellen. Speaking in Chicago, she said: “We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect.” That is about as straightforward as you get in central-bank speak. Nor is that likely to be the end of the rises: according to the Fed’s charts, committee members now forecast three interest-rate rises this year alone, and more in 2018. There are geopolitical reasons to hold off making too early a move. Next month, France’s presidential election, in which rightwing, anti-euro candidate Marine Le Pen is leading the polls, kicks off. Last year, the Fed held off in June before the Brexit vote. While the timing is still moot, there are few betting that rates won’t rise.
Considering this, three observations can be made. First, even while all this briefing has been going on, US asset markets have remained remarkably buoyant. That is very different from the nerves exhibited by investors in US Treasury bonds in 2013, when Ms Yellen’s predecessor, Ben Bernanke, dared to suggest he might turn off the tap marked “easy money”. Even with a much more volatile figure in the White House, financial markets seem far more confident on the prospects for the US. Second, by raising rates now the Fed is giving itself vital room for manoeuvre ahead of the next downturn. The old rule of thumb is that recessions come around every seven years – which would mean, going by the National Bureau of Economic Research, that the next bust is not far away.
Make no mistake. Unlike most in the markets, I remain a secular bond bull and do not think this 35 year long bull bond market is over. I believe the US Fed has created another massive credit bubble that will, when it bursts, lay the global economy very low indeed. Combine this with the problems of a Chinese economy dependent on increasingly ineffective injections of credit to produce increasingly pedestrian GDP growth and you have a right global mess. The 2007/8 Global Financial Crisis will look like a soft-landing when the Fed blows this sucker sky high. The seeds for that debacle have already been sown with the Fed having presided over one of the biggest corporate credit bubbles in US history. All that is needed now is for the Fed to sprinkle life-giving rate hikes onto these, as yet dormant, seeds of destruction.
Accelerated Fed rate hikes will cause tremors in the Treasury bond markets, forcing rates up, most especially in the 2 year – just like 1994. But as yet another central bank-inspired global recession unfolds, I believe US 10y bond yields will ultimately converge with Japanese and European yields well below zero – in other words, buy 10y bonds on weakness! [..] For those few of us in the markets of a certain age, Orange County conjures up only one thing: 1994 goes down in infamy as one of the biggest ever bond market bloodbaths in history culminating at the end of the year with Orange County in California going bankrupt (younger clients in their late 20s will only know the OC as the mid-2000s teen programme based in Newport Beach, which I watched religiously with my then teenage son and daughter).
I remember the 1994 period as if it were yesterday (unlike yesterday itself). Despite the Fed telegraphing the series of rate hikes and market participants forecasting multiple hikes, it was most curious how the market went into total convulsion. I was chatting to my ‘similarly young’ colleague Kit Juckes about this and he reminded me that the whole yield curve gapped up some 50bp immediately! It was a bloodbath, especially for 2y paper.
Remember Nicole talking about multiple claims to underlying real wealth: “Our highly levered financial system is like a truckload of nitro glycerin on a bumpy road,” Gross says. “One mistake can set off a credit implosion where holders of stocks, high yield bonds, and yes, subprime mortgages all rush to the bank to claim its one and only dollar in the vault.”
Bill Gross has never been one to mince words – and his March investment outlook is no anomaly in his oeuvre of outspoken manifestos. In his latest investor letter, out Thursday morning, Janus Capital’s billionaire bond guru warns against putting too much faith in the market exuberance inspired by President Trump and his agenda. “‘Don’t lose it’ is my first and most important conceptual lesson for [my kids] despite the Trump bull market and the current ‘animal spirits’ that encourage risk, as opposed to the preservation of capital,” Gross writes. (Though more a matter of coincidence, the reference to animal spirits is a canny turn of phrase: JPMorgan chief Jamie Dimon said in an interview Thursday morning that business and consumer confidence has “skyrocketed” because Trump has “woken up the animal spirits.”)
Gross goes on: “Don’t be allured by the Trump mirage of 3-4% growth and the magical benefits of tax cuts and deregulation. The U.S. and indeed the global economy is walking a fine line due to increasing leverage and the potential for too high (or too low) interest rates to wreak havoc on an increasingly stressed financial system. Be more concerned about the return of your money than the return on your money in 2017 and beyond.” This not the first time Gross has gone after Trump: he levied criticism in November (“I write in amazed, almost amused bewilderment at what American voters have done to themselves,” he said at the time) and again in December (“investors must consider the negatives of Trump’s anti-globalization ideas”). But the rationale in his latest investor letter is different from his prior notes, centering less on Trump’s policies and more on the global credit situation.
The world economy, Gross says, currently holds more credit relative to GDP than it did at the beginning of the 2008 financial crisis. In the U.S., credit is 350% of annual GDP, “and the ratio is rising,” he says. In China, that ratio sits close to 300%. Gross acknowledges that capitalism depends on credit expansion, but says that credit creation has its limits, and interest rates must be carefully monitored so that borrowers can repay their debts. But if rates are too low, “the system breaks down,” because savers and pension funds can’t earn a high enough rate of return to service those debts. “Our highly levered financial system is like a truckload of nitro glycerin on a bumpy road,” Gross says. “One mistake can set off a credit implosion where holders of stocks, high yield bonds, and yes, subprime mortgages all rush to the bank to claim its one and only dollar in the vault.”
The US cognitive linguist George Lakoff characterises politics as a clash between two opposing models of parenting. Rightwingers subscribe to the strict, responsible parent with a firm grip on the purse strings, while leftwingers prefer the nurturing, providing version. Everyone is currently in thrall to the strict-parent model. Politicians and supposedly impartial broadcasters are constantly noting that, of course, “times are tight”. The beneficent state is a luxury we can no longer afford. “We can’t go back to 1945,” government ministers intone wearily, as if explaining to a child, before blithely announcing a return to other mid-century relics – such as grammar schools. Despite being thoroughly discredited by economists, and despite Theresa May’s promised investment programme, the zombie creed of austerity staggers on.
On what basis, exactly, do we live in straitened times? Yes, there’s the cost and uncertainty of Brexit. But a year or two ago, it was something else – the fallout from the recession, or turbulence in the eurozone. This is opportunistic shock doctrine stuff, where any bungling failure or general sense of global adversity can lend partisan political choices the air of necessity. The annual ritual of the budget reanimates the pernicious myth that the economy is like a household budget. Since we have our own currency, we actually enjoy capacious fiscal elasticity. The “strict” parent is really a mean parent. The “fairer funding formula”, by which the government is proposing to take money from some schools to give to supposedly more deserving ones, is a pointless zero-sum game. Instead of making children fight over measly slivers of cake, why not just bake a bigger one?
There are extraordinary funds in private hands, if only we conceived of them as part of our common wealth. A report last week by property consultants Knight Frank predicted that the number of UK-based ultra-high-net-worth individuals (those with more than £24m in assets) will rise by 30% over the next decade. There is more than £10trn squirrelled away in the UK. The NHS costs £110bn a year; total government spending on education is £85bn a year. We are being schooled in an extraordinary cognitive dissonance, with luxury housing developments springing up in plain sight across the capital. If you question the basis on which we deem these evident riches untouchable, you are dismissed as hopelessly naive. There’s something doubly infantilising about this reaction: aren’t you aware that belts need to be tightened? And don’t you know the difference between public and private money?
The U.S. government must get a grip on the massive opening that the CIA, through its misfeasance, nonfeasance and malfeasance, has created. If Tuesday’s WikiLeaks document dump is authentic, as it appears to be, then the agency left open electronic gateways that make all Americans vulnerable to spying, eavesdropping and technological manipulation that could bring genuine harm. That the CIA has reached into the lives of all Americans through its wholesale gathering of the nation’s “haystack” of information has already been reported. It is bad enough that the government spies on its own people. It is equally bad that the CIA, through its incompetence, has opened the cyberdoor to anyone with the technological skills and connections to spy on anyone else.
The constant erosion of privacy at the hands of the government and corporations has annihilated the concept of a “right to privacy,” which is embedded in the rationale of the First, Third, Fourth, Ninth and Fourteenth Amendments to the U.S. Constitution. It is becoming increasingly clear that we are sliding down the slippery slope toward totalitarianism, where private lives do not exist. We have entered a condition of constitutional crisis that requires a full-throated response from the American people. I have repeatedly warned about the dangers of the Patriot Act and its successive iterations, the execrable national security letters that turn every FBI agent into a star chamberlain, the dangers of fear-based security policies eroding our republic. We have crossed the threshold of a cowardly new world, and it’s time we tell the government and the corporations who have intruded to stop it.
WikiLeaks founder Julian Assange on Thursday accused the CIA of “devastating incompetence” for failing to protect its hacking secrets and said he would work with tech companies to develop fixes for them. “This is a historic act of devastating incompetence, to have created such an arsenal and then stored it all in one place,” Assange said. “It is impossible to keep effective control of cyber weapons… If you build them, eventually you will lose them,” Assange said. Assange was speaking in a press conference streamed live from Ecuador’s embassy in London, where he has been living as a fugitive from justice since 2012. He said his anti-secrecy website had “a lot more information” about the Central Intelligence Agency’s hacking operation but would hold off on publishing it until WikiLeaks had spoken to tech manufacturers.
“We have decided to work with them to give them some exclusive access to the additional technical details we have so fixes can be developed and then pushed out. “Once this material is effectively disarmed by us we will publish additional details about what has been occurring,” he added. [..] WikiLeaks itself said the documents, hacking tools and code came from an archive that had circulated among US government hackers and private contractors. “The CIA has been so careless to produce this material. So do various cyber mafia already have it? Do foreign intelligence agencies already have it? It’s quite possible numerous people already might have it,” Assange said.
China expressed concern on Thursday over revelations in a trove of data released by Wikileaks purporting to show that the CIA can hack all manner of devices, including those made by Chinese companies. Dozens of firms rushed to contain the damage from possible security weak points following the anti-secrecy organization’s revelations, although some said they needed more details of what the U.S. intelligence agency was up to. Widely-used routers from Silicon Valley-based Cisco were listed as targets, as were those supplied by Chinese vendors Huawei and ZTE and Taiwan supplier Zyxel for their devices used in China and Pakistan.
Chinese Foreign Ministry spokesman Geng Shuang said China expressed concern about the reports and reiterated its opposition to all forms of hacking. “We urge the U.S. side to stop listening in, monitoring, stealing secrets and internet hacking against China and other countries,” Geng told a daily news briefing. China is frequently accused by the United States and other countries of hacking attacks, which it always denies. The Chinese government has its own sophisticated domestic surveillance program and keeps tight control of the internet at home, saying such measures are needed to protect national security and maintain stability.
Unfortunately it was only in hindsight that Truman came to see the “Iron Law of Oligarchy” at work, which posits that all organizations – particularly government bureaucracies – eventually fall under the control of an elite few. That elite, he came to understand, did not include the president or his cabinet:
Truman: I think [creation of the CIA] was a mistake. And if I’d know what was going to happen, I never would have done it. [..] But it got out of hand. The fella … the one that was in the White House after me never paid any attention to it, and it got out of hand. Why, they’ve got an organization over there in Virginia now that is practically the equal of the Pentagon in many ways. And I think I’ve told you, one Pentagon is one too many. Now, as nearly as I can make out, those fellows in the CIA don’t just report on wars and the like, they go out and make their own, and there’s nobody to keep track of what they’re up to. They spend billions of dollars on stirring up trouble so they’ll have something to report on. They’ve become … it’s become a government all of its own and all secret. They don’t have to account to anybody.
That’s a very dangerous thing in a democratic society, and it’s got to be put a stop to. The people have got a right to know what those birds are up to. And if I was back in the White House, people would know. You see, the way a free government works, there’s got to be a housecleaning every now and again, and I don’t care what branch of the government is involved. Somebody has to keep an eye on things. And when you can’t do any housecleaning because everything that goes on is a damn secret, why, then we’re on our way to something the Founding Fathers didn’t have in mind. Secrecy and a free, democratic government don’t mix. And if what happened at the Bay of Pigs doesn’t prove that, I don’t know what does. You have got to keep an eye on the military at all times, and it doesn’t matter whether it’s the birds in the Pentagon or the birds in the CIA.
“..by the time he was assassinated, Kennedy was at full war against the U.S. national-security establishment. He was challenging all of their Cold War assumptions. He was proposing peaceful coexistence with what the CIA and the military had said was an implacable foe that was determined to take over America. And he was doing the unthinkable — making friends with the Soviet Union (i.e., Russia), Cuba, and the communist world.”
Kennedy came into office as a standard cold warrior. That is, like most Americans in the 1950s and 1960s, he had bought into the notion that had been inculcated into the American people since the end of World War II — that America’s wartime partner and ally, the Soviet Union (i.e., Russia), was coming to get us and subject the American people to communism. To combat what was billed as an international communist conspiracy based in Moscow, Americans were told, it would be necessary to adopt the same type of governmental structure that existed in Russia — a national-security apparatus grafted onto America’s original limited-government structure that had been established by the Constitution. That apparatus included a giant, permanent, and ever-growing military establishment, or what President Eisenhower would later call “the military-industrial complex.”
It also consisted of a secretive agency called the CIA, which would come to wield omnipotent powers within what continued to be billed as a “limited government.” Such powers would include assassination, regime-change operations, foreign coups, kidnapping, torture, rendition, involuntary medical experimentation (e.g., MKULTRA), spying and surveillance of Americans — the types of things that characterized the KGB and even the Hitler’s Gestapo. Kennedy believed in this apparatus. Even though it had been adopted without a constitutional amendment, he believed it was necessary to keep America free and safe from the Reds, who, it was said, were coming to get us. He experienced his first dose of reality a few months after being sworn into office, when the CIA presented its secret plan to invade Cuba and effect regime change there.
The plan called for using CIA-trained Cuban exiles to do the invading, with the U.S. government denying any role in the operation. Kennedy’s job, under the CIA plan, would be to lie about U.S. involvement in the invasion, thereby making him America’s liar-in-chief (and indirectly subjecting him to blackmail by the CIA). The CIA assured Kennedy that the invasion could succeed without U.S. air support, and JFK made it clear that no air support would be furnished. The CIA lied. In fact, they knew that there was no way that the operation could succeed without air support. But they figured that once the invasion got underway, Kennedy would have no effective choice but to change his mind and provide the needed air support. It was a classic CIA set up of a newly elected president.
When the invasion started to fail, the CIA urged the president to change his mind. He refused to do so, and the invasion force was easily defeated. The CIA considered Kennedy’s action to be a grave betrayal of America and the CIA’s Cuban “freedom fighters.” Kennedy publicly took responsibility for the debacle but privately he was outraged. He knew that the CIA had set him up, with the aim of maneuvering him into intervening with air support. He fired the much-revered and much-respected CIA Director Allen Dulles (who, in a classic conflict of interest, would later be appointed to the Warren Commission). Reflecting his disdain for the CIA, Kennedy promised to “splinter the CIA into a thousand pieces and scatter it to the winds.”
China lashed out at the United States for its “terrible human rights problems” in a report on Thursday, adding to recent international criticism of Washington on issues ranging from violence inflicted on minorities to U.S. immigration policies. The U.S. State Department’s annual report on rights in nearly 200 countries last week accused China of torture, executions without due process, repression of political rights and persecution of ethnic minorities, among other issues. In an annual Chinese response to the U.S. report, China’s State Council, or cabinet, said the United States suffered from rampant gun violence and high levels of incarceration. U.S. airstrikes in Iraq and Syria had caused thousands of civilian deaths, according to the report, which was carried by the state-run Xinhua news agency.
“With the gunshots lingering in people’s ears behind the Statue of Liberty, worsening racial discrimination and the election farce dominated by money politics, the self-proclaimed human rights defender has exposed its human rights ‘myth’ with its own deeds,” the State Council said. “The United States repeatedly trampled on human rights in other countries and wilfully slaughtered innocent victims,” it said, referring to deaths in U.S. drone strikes. On Wednesday, the U.N. High Commissioner for Human Rights, Zeid Ra’ad al-Hussein, said U.S. President Donald Trump’s comments about migrants, Mexicans and Muslims were “harmful and fuel xenophobic abuses” and that his immigration policies could lead to breaches of international law. Trump’s derogatory campaign rhetoric against Muslims and Mexican immigrants won enthusiastic backing from prominent white supremacists who embrace anti-Jewish, anti-black and anti-Muslim ideologies, though the president has disavowed their support.
One way to gauge China’s longer term intentions is to assess what Chinese leaders are saying today. President Xi Jinping has articulated a vision for China over the next few decades. This vision has been termed the “Chinese Dream” or the “great rejuvenation of the Chinese nation.” These slogans capture goals, milestones, and timelines. In terms of timeframe, the Chinese refer to the “two one hundreds”: i) the centenary of the founding of the Chinese Communist Party in 2021; and ii) the centenary of the founding of the People’s Republic of China in 2049. By 2021 China hopes to become what the Chinese call a “moderately well-off society.” By mid-century China hopes to be on par with other developed countries.
Most measures for tracking China’s progress are socio-economic in nature: disposable income, socioeconomic equality, access to higher education, access to healthcare and so forth. To achieve these objectives, China still hews to the basic principle laid out by paramount leader Deng Xiaoping, namely, peace and development. The concept of peace and development derives from the notion that China needs a peaceful external environment to develop economically. But there are also external components to China’s long term goals, particularly China’s relations with the rest of the world. President Xi Jinping offers some hints. He has discussed the prospects for “democratizing” the international system. This is code for a transition from a unipolar world dominated by the United States to a multipolar world.
As China rises, China envisions the emergence of a new global configuration in which China is a great power among other coequal great powers, including the European Union, India, and Russia, in the international system. This aligns with the “rise of the rest” hypothesis. As China gets very strong, it would also seek to amend the rules that have governed the current international order in ways that accommodates China’s interests as a great power. China’s rise thus raises a series of important questions about the implications for Asia. What does China want in East Asia as it rises? Would China seek to become the dominant power in East Asia? Would it seek a dramatically reduced role for the United States? More troubling, would China seek a Sino-centric regional order in which many of its neighbors, including Japan, must acquiesce to its strategic prerogatives?
“..German industrial new orders dropping by 7.4% on the month in January – the biggest monthly fall since 2009 [..] January figures showed a drop of 10.5% in domestic demand and a contraction of 4.9% in foreign orders.”
Germany is often described as the “powerhouse” of Europe, but the health of the world’s fourth largest economy is not as rosy as most people think, according to one economist. “The crack in Germany’s economy has become most evident in consumer spending. Retail sales volumes have slowed consistently since growth rates peaked in mid-2015. They have crashed in the last six monthly reports,” Carl Weinberg, chief economist at High Frequency Economics, said in a note earlier this week. Hard data shows that Germany’s economy has been facing problems for at least the past six months, despite an uptick in growth at the end of last year. At the same time, income has been slowing dramatically and the reasons behind this are far from clear.
“As domestic demand is imploding, so is foreign demand,” Weinberg added. “Exports are flat year-on-year. This is not to say that net exports are not rising. However, the flat gross exports mean industrial output to make goods for export is not growing.” “Without growth of either exports or domestic consumer spending, industrial production has stalled,” Weinberg said. On Tuesday, data showed German industrial new orders dropping by 7.4% on the month in January – the biggest monthly fall since 2009. According to Reuters, a breakdown of the January figures showed a drop of 10.5% in domestic demand and a contraction of 4.9% in foreign orders.
In this episode of the Keiser Report, Max and Stacy discuss why neoliberalism didn’t make us richer. In the second half, Max interviews professor Steve Keen about Quantitative easing (QE) and its role in financial crisis.
Home prices in 31% of the U.K.’s local authority districts have risen more than the total average take-home pay of workers in the area over the past two years, according to Halifax. While homeowners would have to sell their houses to realize those gains, it illustrates how quickly prices have risen, as well as how hard it is for new buyers to get on the property ladder. Rising house prices have helped underpin consumption, the backbone of Britain’s economy, even as wage increases have been more modest. Still, the distribution of gains highlight regional disparities. More than 90% of the areas were in London, the South and East of England, the report published Friday said.
The biggest gap was in Haringey, a borough in the north of the capital city, where house prices increased by an average of 139,803 pounds ($169,805), exceeding average take-home earnings by 91,450 pounds or 3,810 pounds per month. “While it’s no longer unusual for houses to ‘earn’ more than the people living in them in some places, there are clearly local impacts,” said economist Martin Ellis. “Homeowners in these areas can build up large levels of equity quickly, but for potential buyers whose wages have failed to keep pace, the cost of buying a home has become more unaffordable.” The only areas where earnings exceeded house price increases were the North East, Scotland and Northern Ireland.
Donald Tusk has won a second term as European council president, overcoming bitter opposition from Poland that has left the country isolated in Europe. Tusk, a former Polish prime minister, was re-elected on Thursday with overwhelming support to lead the council, the body that organises EU leaders’ meetings, for a second term lasting two and a half years. His reappointment until the end of 2019 means he will play a crucial role in Britain’s negotiations to leave the EU. The Pole, from the pro-European centre-right Civic Platform party, overcame strong resistance from his own government, led by the Eurosceptic Law and Justice party (PiS). The outcome was never in doubt, but is a blow for the Warsaw government, which responded with fury. “We know now that it [the EU] is a union under Berlin’s diktat,” the Polish foreign minister, Witold Waszczykowski, told Polish media, echoing persistent claims by PiS that the EU is controlled by Berlin.
Despite its anger, however, Poland was left isolated as other countries including traditional central European allies lined up to back Tusk, a popular choice to guide the EU through difficult Brexit talks and tense debates on migration. News of his re-election was broken by Belgium’s prime minister, Charles Michel, who tweeted his congratulations less than two hours after the meeting had started. In a rare formal vote, 27 of the EU’s 28 governments supported Tusk. The Polish prime minister, Beata Szydlo, confirmed that Poland would retaliate by blocking the EU summit communique, a statement summarising EU policy on economic growth, migration and the western Balkans. But the document can still be approved in a different procedure, a manoeuvre likely to deepen the wedge between Warsaw and other EU capitals.
Around one in six U.K. households had “great difficulty” or “difficulty” in making ends meet in 2015, according to Eurostat. While that’s below the estimated average of 26% across the European Union, it’s more than triple the proportion of struggling Swedes and about double the%age in Germany. With inflation forecast to accelerate this year and grocers such as Wm Morrison Supermarkets Plc warning price increases will soon hit, British consumers look set to face a further squeeze on living standards this year.
Sterling completed its best January against the dollar in six years after Donald Trump and a key adviser renewed an attack on countries that “exploit” their weak currencies. The value of the pound climbed as high as $1.2593 against the dollar after the US president heavily criticised China and Japan for “play[ing] the money market”. His comments followed a meeting with pharmaceutical executives in which he pledged to bring back drug manufacturing to the US. The rise in sterling’s value on Tuesday rounded off its best January performance against the dollar since 2011 and its first positive start to the year in half a decade. It came as Mr Trump’s trade chief put the US on a collision course with Germany after he accused Berlin of using a “grossly undervalued” euro to “exploit” the US and the rest of the EU.
Peter Navarro, who heads the US president’s new National Trade Council, described the single currency as an “implicit Deutsche Mark” that gave Germany a competitive advantage over its trade partners. The economics professor also said Germany was the main obstacle to a trade deal between the US and European bloc as he dismissed a revival of TTIP talks. “A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an ‘implicit Deutsche Mark’ that is grossly undervalued,” Mr Navarro said. “The German structural imbalance in trade with the rest of the EU and the US underscores the economic heterogeneity within the EU — ergo, this is a multilateral deal in bilateral dress.”
Mr Trump has highlighted a preference for “one-on-one” trade deals. He pulled the US out of the TPP with 11 Pacific Rim nations on his first full day in office. Mr Navarro told the Financial Times the UK’s decision to leave the EU had “killed” a similar trade deal between the US and Europe. Mr Trump has signalled that the US will engage in trade talks with the UK. Angela Merkel, Germany’s chancellor, said the country had no influence over the euro exchange rate. “I neither want to nor can I do something to change the situation,” she told reporters in Stockholm. Mario Draghi, the ECB’s president, has warned that the country’s persistent current account surplus has contributed to imbalances and hindered growth in the eurozone. Analysis by the OECD suggests the euro is trading below its “fair value”. Data published by the think-tank shows the the euro is the most undervalued currency among the dollar’s major peers.
To repeat for a 1000th time: inflation numbers are meaningless unless money velocity is considered. And velocity is certainly not rising in southern Europe. That in turn would mean if it is rising in Germany – something I haven’t seen any proof of but let’s say it is -, what we see here is a huge threat to the eurozone. Because what is good for Germany is not good for others, and the others will have had enough of it.
The eurozone has reached its inflation target for the first time in four years, but ECB chief Mario Draghi has no time to rest on his laurels: He must now brace for renewed attacks on his easy-money policy in Germany. Overall inflation for the 19 countries that use the euro in January came in at a preliminary 1.8% – within a whisper of the ECB’s official target of “below, but close to, 2%,” but core inflation, which strips out volatile food and energy prices, was unchanged from December at 0.9%, making any immediate change in policy unlikely. However, with German elections looming this September, and top-selling tabloid Bild featuring a “horror curve” showing that despite the spike in inflation –which was even higher in Germany, at 1.9% in January – savers are still earning nothing thanks to the policy of negative rates to spur spending elsewhere in the eurozone, Draghi’s problems are more political than economic.
“Someone has to put a stop to Draghi,” said Jörg Meuthen from the far-right, Euroskeptic Alternative for Germany (AfD), which has high hopes of entering the Bundestag (lower house of parliament) for the first time in September. The party is keen to play on the collective German memory of hyperinflation in the first decades of the 20th century. Other inflation hawks, including mainstream figure like Bavarian Finance Minister Markus Söder, are frustrated with Draghi’s insistence that he cannot tailor monetary policy for the eurozone to the needs of the Germany economy, which is growing much more robustly than neighboring countries who still need the ECB’s support.
With Euroskeptic populists challenging the established order in elections this year in Germany, France and the Netherlands, the ECB will come under increasing pressure to explain why it is doing what it’s doing, said Anatoli Annenkov, economist at Société Générale. While he assumes a slow recovery in core inflation, “we had years and years of downside surprises and now that it is going up, we might also see upside surprises,” he said. Beyond Brexit and fears of protectionist policies from the new U.S. administration, the ECB is bracing for internal pressure from the largest economy in the eurozone. In his most recent press conference, Draghi attempted to project unity among the ECB’s governing council in support of the €2.3 trillion bond-buying program designed to stimulate the eurozone economy.
But that façade crumbled just days later when German executive board member Sabine Lautenschläger suggested it might be time to bring the policy to an end. “All preconditions for a stable rise in inflation exist. I am thus optimistic that we can soon turn to the question of an exit,” she said in a speech last week. Her former boss, Bundesbank President Jens Weidmann, has also signaled that the ECB should let economic data — rather than its previous commitment to keeping quantitative easing running until the end of 2017 — dictate its policy in the coming months.
Japan has rejected Donald Trump’s claims that Tokyo was deliberately weakening the yen to gain an unfair trade advantage over the US. Trump told a meeting of pharmaceutical companies on Tuesday that Japan, along with China and Germany, were guilty of “global freeloading” for using regulation and currency devaluation in their trade dealings with the US. The president’s trade adviser, Peter Navarro, also accused Germany of using a “grossly undervalued” euro to gain an unfair advantage over the US and other EU countries. In unusually frank comments, Japan’s chief cabinet secretary, Yoshihide Suga, said Trump’s criticism “completely misses the mark”. Suga added that the Bank of Japan’s pursuit of monetary easing was intended to boost inflation, not weaken the yen against the dollar.
Japan’s policy was in line with G7 and G20 agreements, he said, adding that Tokyo would continue to respond to “one-sided” currency moves by other countries. Vowing to end the emasculation of US trade, Trump’s said: “You look at what China’s doing, you look at what Japan has done over the years. … they play the money market, they play the devaluation market and we sit there like a bunch of dummies.” According to a transcript of Tuesday’s meeting, Trump said other countries “live on devaluation”. Trump’s outburst, which suggests he could backtrack on his wish to see higher US interest rates, came at the end of the worst January for the dollar for three decades. But that follows a huge rise in the dollar on the back of his election win in November when promises of a huge stimulus for the US economy sent the greenback to 14-year highs.
Donald Trump has joined Russia, China and radical Islam as a threat to the European Union, EU leaders were told on Tuesday by the man chairing a summit where they will debate relations with the United States. European Council President Donald Tusk, a conservative former premier of Poland, wrote to EU national leaders to lay out themes for discussion when they meet in Malta on Friday to discuss the future of their Union as Britain prepares to leave. In vivid language that reflects deep concern in Europe at the new U.S. president’s support for Brexit, as well as his ban on refugees and people from several Muslim countries, Tusk called on Europeans to rally against eurosceptic nationalists at home and take “spectacular steps” to deepen the continent’s integration.
Saying the EU faced the biggest challenges of its 60-year history, Tusk named an “assertive China”, “Russia’s aggressive policy” toward its neighbors and “radical Islam” fuelling anarchy in the Middle East and Africa as key external threats. These, “as well as worrying declarations by the new American administration, all make our future highly unpredictable,” he said. Laying out issues leaders may address in a 60th anniversary declaration at Rome in March, Tusk said the EU unity built after World War Two and the Cold War was needed “to avoid another historic catastrophe”. He also said Americans should not weaken Transatlantic ties fundamental to “global order and peace”.
“The disintegration of the EU will not lead to the restoration of some mythical, full sovereignty of its member states, but to their real and factual dependence on the great superpowers: the United States, Russia and China,” Tusk wrote to the EU leaders. “Only together can we be fully independent.” Senior officials discussed a possible EU response to Trump at a meeting in Brussels on Monday where some governments stressed that Europeans should not be hasty to alienate a key ally, diplomats said. “We don’t want to get fired,” one senior EU diplomat said in reference to Trump’s reality TV catchphrase. Another said that because the full U.S. administration was not yet in place, Europeans should be cautious: “No government in Europe can respond in a coherent manner to this series of orders and tweets,” the diplomat said.
Following a plunge of over 200 points in the Dow Jones Industrial Average yesterday, Trump pivoted to something he thought would please his financial backers on Wall Street. He called the Dodd-Frank financial reform legislation passed in 2010 by the Obama administration a “disaster” and promised to “do a big number” on it soon. The Dow closed down 122 points — now wary of Trump’s fire-ready-aim leadership on complex matters. The legitimate fear across Wall Street right now is that Trump’s zero-vetting approach to rule-by-Executive-Order could leave Wall Street in the same chaotic state as the airports experienced from his ham-fisted approach to immigration. But it’s not just Trump that Wall Street needs to fear: it’s Goldman Sachs as well. Trump has stuffed his administration with so many Goldman Sachs progeny that his administration is now regularly referred to as Government Sachs.
Goldman Sachs has a unique vested interest in repealing chunks of Dodd-Frank while making sure that the Glass-Steagall Act is not reinstated. That’s because when it comes to derivatives, Goldman Sachs is keeping a lot of secrets. The Office of the Comptroller of the Currency (OCC) is the regulator of national banks. Each quarter it publishes a report on the derivative holdings of the biggest Wall Street banks and their holding companies. Its most recent report shows that as of September 30, 2016 Goldman Sachs Bank USA (a taxpayer-backstopped, FDIC insured bank where it holds its derivatives) had “credit exposure to risk-based capital” of 433%. That figure was more than double that of JPMorgan Chase (216%) and six times that of Bank of America (68%).
There’s another big problem with Goldman Sachs: it has a miniscule asset base compared to the big guns on Wall Street but it’s attempting to play in the big leagues in terms of derivatives. As the chart above shows, Goldman Sachs is the third largest holder of derivatives on Wall Street with $45.48 trillion in notionals (face amount). (As of 2015, the entire GDP of the United States was only $18 trillion.) But Goldman only has $880 billion in assets. That ratio compares to JPMorgan Chase with $2.5 trillion in assets and $50.6 trillion in derivatives and Citigroup with $1.8 trillion in assets and $51.78 trillion in derivatives. The amount of these derivatives is insane on all levels but, clearly, Goldman stands out starkly in its ratios.
There’s another highly disturbing aspect of Goldman’s derivatives. Dodd-Frank legislation mandated that derivatives at the big Wall Street banks move into the sunshine by moving out of over-the-counter contracts whose details are known only to the buyer and seller and onto some type of centrally cleared platform. Dodd-Frank was signed into law on July 21, 2010. It’s almost six years later and yet the OCC’s report of September 30, 2016 shows that of the total derivatives held by Goldman Sachs only 24% are centrally cleared versus 76% at Goldman that remain over-the-counter. Again, that’s a far higher %age of over-the-counter contracts than at its peer banks on Wall Street.
Theresa May has set a target date of launching the formal Brexit process on March 9. The Government is aiming to push through its EU Bill through Parliament by March 7, which would allow the Prime Minister to trigger Article 50 at a summit of European leaders on March 9 and 10. MPs will start debating the crucial Brexit legislation today and fiery clashes are expected in the commons chamber as the SNP, Lib Dems and dozens of Labour MPs say they will defy June’s vote to leave the EU and vote against triggering Article 50. Ministers told the House of Lords yesterday that it hopes to have the European Union (Notification of Withdrawal) Bill approved by March 7. The following day – March 8 – is the Budget, before Mrs May travels to Brussels for the long-awaited Brexit showdown with her EU counterparts.
The PM has promised to trigger Article 50, the formal mechanism for quitting the EU, by the end of March. But she does not want to get off on the wrong foot with EU leaders by clashing with the 60th anniversary of the Treaty of Rome, which effectively gave birth to the EU. She could tell her European counterparts of her timetable at a meeting in Malta on Friday. The timetable could be knocked off course if the Lords initiate what is known as parliamentary ‘ping-pong’ by sending the bill back to the Commons with a series of amendments. And in a sign of the trouble ahead for Mrs May, a senior Tory told the Independent: ‘What we are seeing now is a huge raft of amendments being tabled. ‘There are cross party talks going on about this. It’s not going to be plain sailing for the Prime Minster.’
MPs are to vote later on whether to give Theresa May the power to get Brexit negotiations under way. The government is expected to win, with most Conservative and Labour MPs set to back its European Union Bill. But Labour leader Jeremy Corbyn faces a rebellion by some on his side, while the SNP and Liberal Democrats are also promising to oppose ministers. The vote, which will follow two days of parliamentary debate, is expected at about 19:00 GMT. On Monday, politicians made impassioned speeches for and against the bill, which, if passed, will allow Mrs May to trigger Article 50 of the Lisbon Treaty by her own deadline of 31 March. This would get formal Brexit negotiations with the EU started, with the UK expected to leave the 28-member group in 2019.
Brexit Secretary David Davis said MPs had to implement a decision made by the people in last June’s referendum, which the Leave campaign won by 51.9% to 48.1%. Doing otherwise would be viewed “dimly”, he warned. Mr Corbyn has imposed a three-line whip – the strongest possible sanction – on his MPs to back the bill, which is only two lines long. Shadow Brexit secretary Sir Keir Starmer called the vote a “difficult decision” for Labour – most of whose MPs supported Remain in the referendum – but it had to “accept the result”. Two shadow ministers have quit Labour’s front bench in order to oppose the bill, while MPs Stephen Timms and Lyn Brown told the Commons they would also vote against it. A government source said up to 30 Labour MPs were expected to defy Mr Corbyn.
Pressure on the government to help struggling Britons has intensified after a leading thinktank warned that falling living standards for the poor threatened the biggest rise in inequality since Margaret Thatcher was prime minister. The Resolution Foundation said Theresa May would need to make good on her pledge to support “just about managing” households as it released a report showing that rising inflation and an end to recent strong jobs growth would hit the least well-off hardest. Its warnings chime with other forecasts for a squeeze on family budgets on the back of sluggish wage growth, welfare cuts, rising global oil prices and the pound’s sharp fall since the Brexit vote. The drop in sterling has made imports more expensive and there are already signs that is being passed on to consumers, with inflation hitting its highest level for more than two years in December.
The Resolution Foundation’s study found that the current parliament would be the worst for living standards for the poorest half of households since comparable records began in the mid-1960s and the worst since the early years of Thatcher’s 1979-90 premiership for inequality. Since its sharp increase in the early 1980s – a period of high unemployment, factory closures and a cut in the top rate of tax from 83% to 60% – inequality has broadly remained flat. But the Resolution Foundation forecast that between 2015 and the next general election in 2020 incomes for the poorest half of households will fall by 2%. That compares with a rise of 4% during the last parliament and 1% between 2005 and 2010 – the five-year period that included the deepest recession since the 1930s.
Torsten Bell, director of the Resolution Foundation, said: “Britain has enjoyed a welcome mini-boom in living standards in recent years. But that boom is slowing rapidly as inflation rises, productivity flatlines and employment growth slows. “The squeeze in the wake of the financial crisis tended to hit richer households the most. But this time around it’s low- and middle-income families with kids who are set to be worst affected. “This could leave Britain with the worst of both worlds on living standards – the weak income growth of the last parliament and rising inequality from the time Margaret Thatcher was in Downing Street.
A Syrian diplomatic source underlined that the visit by 130 US figures, including three former secretaries and congresspersons, is a “good omen” in the relations between Damascus and Washington. According to the source, Rep. Tulsi Gabbard who had last week said that she met with Syrian President Bashar Assad during a recent trip to the war-torn country, stressed during the meeting that “affairs are going on in a way that an unprecedented opening is seen in the relations between the two sides in different fields”. Referring to three existing scenarios on Syria, she said that the first option is continued war which doesn’t benefit any sides and the US administration will likely oppose it; the second option is the victory of dissidents which is opposed by Trump and he even dismisses interactions with them.
The third option is Assad’s continued ruling over Syria as the best person to manage the country provided that certain considerations will receive attention in the formation of the government, the Syrian source said. According to the source, Gabbard has indirectly spoken about a US plan to pave the ground for Trump’s showoff by annihilation of the ISIS in Raqqa like what was done by former US President Barack Obama. “Raqqa city is a political card important for the world since it is considered as the ISIS’s first base; meantime, ending the war is Raqqa militarily is easy since there are no tunnels and tall buildings in there which facilitates any military measure to annihilate terrorism,” the Syrian diplomatic source said. Back from a weeklong trip to Syria [she] defended her meeting with the war-torn country’s president, saying there’s no possibility of a viable peace agreement unless Bashar Assad is part of the conversation.
Rep. Tulsi Gabbard of Hawaii said she originally had no intention of sitting down with Assad, according to a statement issued by her office detailing her travels. But she changed her mind when the opportunity arose. “I think we should be ready to meet with anyone if there’s a chance it can help bring about an end to this war, which is causing the Syrian people so much suffering,” Gabbard said. Gabbard said that the U.S. has “waged wars of regime change” in Iraq, Libya and Syria. Yet each has resulted “in unimaginable suffering, devastating loss of life, and the strengthening of groups like al-Qaeda” and the Islamic State group, she said. “My visit to Syria has made it abundantly clear,” Gabbard said. “Our counterproductive regime change war does not serve America’s interest, and it certainly isn’t in the interest of the Syrian people.”
Germany began sending tanks and other equipment to Lithuania on Tuesday as part of a NATO mission to beef up the defense of eastern Europe and send a signal of resolve to Russia, which has denounced the build-up as an act of aggression. The German army command said it was sending about 200 vehicles, including 30 tanks, by train to Lithuania along with 450 troops, the first of whom arrived last week. The transports would continue until late February. Seven decades after the end of World War Two, the movement of German troops to eastern Europe, even on a NATO mission, remains a sensitive issue both in Germany and the region. On Monday the U.S. military deployed thousands of soldiers and heavy weaponry to Poland, the Baltic states and southeastern Europe in its biggest build-up since the Cold War.
The movements are part of a strategy agreed by NATO leaders last July to reassure member states that were once part of the Soviet bloc and have been alarmed by Russia’s seizure of the Crimean peninsula from Ukraine in 2014. The 28-nation Western alliance decided to move four battalions totaling 3,000 to 4,000 troops into northeastern Europe on a rotating basis to display its readiness to defend eastern members against any Russian aggression. The deployments focus on Poland and the Baltic states of Estonia, Latvia and Lithuania, which fear Moscow could try to destabilize them by cyber attacks, territorial incursions or other means. Russia denies such intentions and has described NATO’s behavior as aggressive and threatening.
We’re often told that the state and the market have entirely different roles. But meet any number of the people paying the price for Britain’s crash, and you’ll see that they play almost identical parts using similar language and similar bureaucracy. And far from protecting low-paid workers from the depredations of the market, the state wants to hurl more people into it under the pretence that they are shirkers. None of this fits with how social democrats view the state. Having attended my fair share of Labour and other leftwing political meetings, I know that a staple feature is that some grey-haired man in a jumper will leap up towards the end and launch into a good-hearted defence of the state. Public investment, social security, industrial strategy: all will circle back to the state; all will be met with murmurs of approval. And all are a million miles away from the experiences I regularly hear while reporting.
[..] At the end of 2015, a team of academics held a series of two-day discussions with small groups of members of the public across Europe. They were asked only one big question: what should the government do for your children’s generation? Of all the countries, the British were easily the most pessimistic about what could be done – behind even Slovenia. The British liked the NHS and pensions, but thought both would be gone in a generation. They didn’t talk about the good things that could be done by government. Trade unions came up just once in the entire two days. “I found it quite shocking,” recalls Peter Taylor-Gooby, of the University of Kent. “Of all the groups we interviewed, the British had this mood of resigned, reluctant individualism.”
Thirty years ago, Ronald Reagan claimed the nine most terrifying in the English language were: “I’m from the government and I’m here to help.” He said it was a joke; it turned out to be a prophecy. Three decades of both right and left privatising, outsourcing and deregulating have shrunk the public imagination about what their representatives in government can achieve. Put that alongside the shattering of the working class, the smashing of trade unions, and the diminishment of so many other social institutions. The need for the state and collective action hasn’t diminished, but the public belief in it has gone. The state is now either invisible or hostile. This has happened without the pundits and politicians noticing, but its consequences could shape politics for decades.
Editorial in Kathemerini bytThe new British ambassador in Athens, who wastes not one word on what has happened to Greece courtesy of the EU. Not one word! No compassion for the people of Greece, no understanding, not consolation, no hope. Not one word on what Britain intends to do to help Greece. No, the UK wants Greek help. She either doesn’t know what’s going on, or she chooses to blindly ignore it. In both cases, she should not be where she is. She talks about Britain only, as if Britain is the main victim here. Me, me, me. Well, f**king stay home then. Athens now has this dimwit and Victoria Nuland lackey Geoffrey Platt as US ambassador.
As the new British ambassador in Athens, I begin my mission in Greece at a challenging time. I’ve been struck by the anxiety and even sadness expressed by many Greeks about Britain’s withdrawal from the European Union. Much of that is based in uncertainty about what this means for the future of Europe, and for the relationship between the United Kingdom and Greece. That’s understandable. And that was why Prime Minister Theresa May’s speech last week sought to provide as much clarity as possible for our partners about what the United Kingdom is seeking from the forthcoming negotiations and beyond. Above all, we intend to remain the best friend and neighbor possible to our European partners. We are not seeking to undermine the European Union. Indeed it is in the best interests of the UK that the EU should succeed.
A prosperous, stable Greece is a critical element in that, and I believe Greece has a strong interest in the specific outcomes to which the prime minister committed the UK government to pursue on 23 January. First – the prime minister said repeatedly in her speech that our cooperation with all European partners on defense, security and foreign policy, including intelligence sharing, will continue. The security of our citizens is not negotiable. With Greece, that means the highly valued collaboration we have with partners in the Greek armed forces, police, coast guard and customs on migration, counterterrorism, and organized crime will remain a priority. Second, our aim of a bold and ambitious free-trade agreement, which gives British and European companies the maximum freedom to trade across our markets, can only be of benefit to Greece.
The United Kingdom is the second biggest export market for Greece’s pharmaceutical products, and third largest for agricultural products; while the freedom for the British financial and professional services to continue to trade across borders will benefit both the City of London and the Greek shipping sector, one of its most important customers. Third: There is much concern about the status of EU nationals in the UK after Brexit. Britain values very highly the contribution of Greeks who live and work and study in the UK – for example the hugely talented Greek clinical staff in, for example, the National Health Service – as well as the 10,000 Greek students in our universities. The rights and benefits of current students, and those starting in academic year 17/18, are secure to the end of their courses. And we want to guarantee the rights of all EU citizens already living in Britain, as well as the rights of British nationals in other member-states, as early as we can. Greece’s support on this would be very welcome.