Apr 252017
 
 April 25, 2017  Posted by at 7:59 am Finance Tagged with: , , , , , , , , , ,  No Responses »
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Pablo Picasso Self portrait 1972

 


Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)
Trump Summons Entire Senate To White House Briefing On North Korea (G.)
Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)
The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)
Canadians’ Confidence In Housing Hits Record High (HPoC)
Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)
Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)
Rising Defaults In China Reveal Hidden Debt (BBG)
China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)
Naked Selfies Used As Collateral For Chinese Loans (AFP)
Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)
Ontario To Pay Guaranteed Incomes To The Poor (AFP)
Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)
At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

 

 

They’ve been doing this forever: “..the fight is the “longest-running battle since the Trojan War.”

Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)

U.S. President Donald Trump intensified a trade dispute with Canada, slapping tariffs of up to 24% on imported softwood lumber in a move that drew swift criticism from the Canadian government, which vowed to sue if needed. Trump announced the new tariff at a White House gathering of conservative journalists, shortly before the Commerce Department said it would impose countervailing duties ranging from 3% to 24.1% on Canadian lumber producers including West Fraser Timber. “We’re going to be putting a 20% tax on softwood lumber coming in – tariff on softwood coming into the United States from Canada,” Trump said Monday, according to a tweet by Charlie Spiering at Breitbart News. A White House official confirmed the comment.

The step escalates an economic battle among neighboring countries that normally have one of the friendliest international relationships in the world. U.S. Commerce Secretary Wilbur Ross amplified Trump’s remarks in a statement afterward that also referenced a fight over a new Canadian milk policy that U.S. producers say violates Nafta. “It has been a bad week for U.S.-Canada trade relations,” Ross said, adding “it became apparent that Canada intends to effectively cut off the last dairy products being exported from the United States.” He said the Commerce Department “determined a need” because of unfair Canadian subsidies to the lumber industry to impose “countervailing duties of roughly one billion dollars.” In a dig at NAFTA, which Trump has said he wants to renegotiate, Ross added, “This is not our idea of a properly functioning Free Trade Agreement.”

[..] The so-called countervailing duties, which counter what the U.S. considers Canadian subsidies, came in below some analyst expectations. CIBC analyst Hamir Patel forecast the initial combined countervailing and anti-dumping duties could reach 45 to 55%, he said in an April 23 note. The U.S. may also apply anti-dumping duties if it determines Canadian firms are selling for below costs. That decision is expected in June. “It definitely could’ve been a heck of a lot worse,” Kevin Mason at ERA Forest Products Research said by phone. “I think a lot of people were bracing for a higher duty.”

[..] Most of the softwood in Canada is owned by provincial governments, which set prices to cut trees on their land, while in the U.S. it’s generally harvested from private property. The fees charged by Canadian governments are below market rates, creating an unfair advantage, U.S. producers say. Canada disputes that. Robert Lighthizer, Trump’s nominee to be the next U.S. Trade Representative, said at his confirmation hearing last month that he views the lumber dispute as the top trade issue between the U.S. and Canada. Oregon Democratic Senator Ron Wyden told Lighthizer the fight is the “longest-running battle since the Trojan War.”

Read more …

Huffin’-and-a-puffin’.

Trump Summons Entire Senate To White House Briefing On North Korea (G.)

The entire US Senate will go to the White House on Wednesday to be briefed by senior administration officials about the brewing confrontation with North Korea. The unusual briefing underlines the urgency with which the Trump administration is treating the threat posed by Pyongyang’s continuing development of nuclear weapons and missile technology. It follows a lunch meeting Trump held with ambassadors from UN member states on the security council on Monday where he emphasised US resolve to stop North Korea’s progress. “The status quo in North Korea is unacceptable and the council must be prepared to impose additional and stronger sanctions on North Korean nuclear and ballistic missile programs,” Trump said at the meeting. “North Korea is a big world problem, and it’s a problem we have to finally solve.”

On Friday the US secretary of state, Rex Tillerson, is due to chair a security council foreign ministers’ meeting on the issue in New York, at which the state department said he would call once more for the full implementation of existing UN sanctions or new measures in the event of further nuclear or missile tests. “This meeting will give the security council the opportunity to discuss ways to maximise the impact of existing security council measures and to show their resolve to response further provocations with appropriate new measures,” said Mark Toner, state department spokesman. Senators are to be briefed by the defence secretary, James Mattis, and Tillerson on Wednesday. Such briefings for the entire senate are not unprecedented but it is very rare for them to take place in the White House, which does not have large secure facilities for such classified sessions as Congress.

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Not going to be easy. Trump’s too desperate to get a deal done.

Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)

President Donald Trump will call for cutting taxes for individuals and lowering the corporate rate to 15% to fulfill a promise he made during his campaign, according to a White House official. The president on Wednesday plans to make public the broad outlines of what he wants to change in the tax code, though the details likely will be left until later negotiations among congressional leaders and officials from Treasury. Trump’s top economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin will brief House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and the leaders of congressional tax-writing committees – House Ways and Means Committee Chairman Kevin Brady and Senate Finance Committee Chairman Orrin Hatch.

While Trump and Ryan broadly agree on sharply cutting individual income and corporate taxes, there are areas of disagreement between the two. On the campaign, Trump called for a corporate tax rate of 15%; Ryan wants 20%, and he has warned that cutting it an additional 5 percentage points could prevent the ultimate tax plan from being revenue neutral. Without Democratic support, a plan would have to be revenue neutral to meet the criteria set by lawmakers to make tax changes permanent. “I’m not sure he’s going to be able to get away with that,” Hatch told reporters Monday. “You can’t very well balance the budget that way.”

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Demand goes down because people have less money to spend. All the rest is humbug.

The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)

Lackluster gasoline demand is once again raising concerns that the oil market won’t be able to escape the doldrums. Demand for U.S. gasoline has recovered since January, but remained below 2016 levels throughout much of this year. Now, analysts are worried weak consumption will cause gasoline stockpiles to keep building and eventually result in weaker crude oil demand and pricing. U.S. gasoline futures were down more than 1% on Monday, reflecting demand concerns as refiners emerge from the winter maintenance season and prepare to turn out more fuel. Meanwhile, U.S. crude settled 39 cents lower at $49.23, extending last week’s deep losses. “As gas prices drop, that creates an undertow for the entire crude oil market,” said Tom Kloza, global head of energy analysis at Oil Price Information Service.

Part of the problem is a tough comparison with extraordinarily low gasoline prices last year. The national average gasoline price on Monday was nearly 28 cents above last year’s level, according to GasBuddy.com. “I’m in the camp that says last year was a little bit of the anomaly,” Kloza said. “Gas was so cheap that we drove a little bit more almost capriciously. This year, I just don’t think it’s going to happen.” In a troubling sign, the nation’s gasoline station operators have reported at industry conferences that their sales are down 1.5 to 2% this year, according to Andy Lipow, president of Lipow Oil Associates. “When you hear retailers telling you that their demand is down you’ve got to be a believer,” he told CNBC. Lipow said he fears that trend will carry through for the balance of 2017. Demand is certain to rise as the summer driving season ramps up, but Lipow sees stockpiles remaining relatively high.

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Stark raving madness. A housing market that is rising at ‘only’ 9.5% per year is labeled ‘rational’.

Canadians’ Confidence In Housing Hits Record High (HPoC)

The experts are getting louder in their warnings that a housing bubble has formed in some parts of Canada, but Canadians don’t seem worried. In fact, confidence in the housing market hit a record high in the latest weekly Bloomberg-Nanos index — even as respondents turned negative on their own personal finances. The survey found 48.5% of Canadians expect house prices to rise in the next six months, the highest level recorded in the survey since 2008. Fewer than 11% expect to see house prices decrease. “Bullish sentiment on real estate in Canada continues to drive consumer confidence,” pollster Nik Nanos said in a statement. “Household expectations have improved by roughly 10% since the start of the year as the effects of the oil price shock have stabilized and the focus has moved toward rising property values,” Bloomberg economist Robert Lawrie said.

“In recent weeks, however, consumer sentiment regarding personal finances began drifting lower, with extended household balance sheets perhaps the next focus of concern for policymakers.” High debt levels are precisely why many market observers are growing concerned about Canada’s priciest housing markets, namely the Toronto and Vancouver regions. House prices in Toronto jumped 33% in March from a year earlier, to an average of $916,567. While Vancouver’s house prices have moderated over the past six months, they remain elevated, with the benchmark price at $919,300 in March.

National Bank of Canada, which co-publishes the Teranet house price index, warned recently that “irrational exuberance” may be setting into some Canadian housing markets, noting that more than half of Canada’s regional markets are seeing price growth above 10% annually. With mortgages ballooning, Canadian household debt has repeatedly hit record highs in recent years, and now stands at $1.67 of debt for every dollar of disposable income. Those elevated debt levels are the main reason one why the Bank for International Settlements (BIS), a Geneva-based “central bank of central banks,” warned recently that Canada has the second-highest risk of a financial crisis, behind only China.

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Essential and repeated here a 1000 times: “Bubbles have a habit of overshooting on the downside when they finally burst.”

Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)

A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class. Take a quick look at the Case-Shiller Home Price Index charts for San Francisco, Seattle and Portland, OR. Each now exceeds its previous Housing Bubble #1 peak:

It seems housing bubbles take about 5 to 6 years to reach their bubble peaks, and about half that time to retrace much or all of the gains. Bubbles have a habit of overshooting on the downside when they finally burst. The Federal Reserve acted quickly in 2009-10 to re-inflate the housing bubble by lowering interest rates to near-zero and buying over $1 trillion of mortgage-backed securities. When bubbles are followed by echo-bubbles, the bursting of the second bubble tends to signal the end of the speculative cycle in that asset class. There is no fundamental reason why housing could not round-trip to levels below the 2011 post-bubble #1 trough.

Consider the fundamentals of China’s remarkable housing bubble. The consensus view is: sure, China’s housing prices could fall modestly, but since Chinese households buy homes with cash or large down payments, this decline won’t trigger a banking crisis like America’s housing bubble did in 2008. The problem isn’t a banking crisis; it’s a loss of household wealth, the reversal of the wealth effect and the decimation of local government budgets and the construction sector. China is uniquely dependent on housing and real estate development. This makes it uniquely vulnerable to any slowdown in construction and sales of new housing. About 15% of China’s GDP is housing-related. This is extraordinarily high. In the 2003-08 housing bubble, housing’s share of U.S. GDP barely cracked 5%. Of even greater concern, local governments in China depend on land development sales for roughly 2/3 of their revenues.

If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble. Oops, did I say bubble? I meant “normal market in action.”

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“..we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops.”

Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)

Between autumn 1977 and Christmas 1979, interest rates rose from 5% to 17%. If you were a young boomer whose biggest cost was a variable rate mortgage, that would have hurt. In 2009, by contrast, interest rates were cut to a record low of 0.5%, and stayed there for the better part of a decade. When eventually they did move again, it was down. You don’t know you’re born. Except, of course, you do – because, if you’re reading this and you’re under 40, there’s a pretty good chance you’re still stuck paying rent. Yes, interest rates are low; no, this is not particularly helpful. Even if you do have a mortgage, it’s probably a fixed rate one because, let’s be honest, those rates are going up again one day. But not, it seems, today. The Yorkshire Building Society has just launched a new mortgage that charges an interest rate of just 0.89%. “We are very pleased to offer borrowers the lowest mortgage rate ever available,” said a spokesman.

“The cost of funding has fallen in recent weeks and, as a financially strong building society with no external shareholders to satisfy, we have the ability to pass this on to borrowers.” (“We used to dream of mortgages at under 1%,” say the boomers.) So does that means that owning a home is now cheaper than it’s ever been? Well, no, of course not. For one thing, this isn’t a fixed rate deal. It’s actually a (bear with me on this) two-year-long discount of 3.85% to the standard variable rate (SVR) of 4.74%. That means it’s very, very unfixed indeed: a normal tracker mortgage moves in response to Bank of England rates; an SVR one moves in response to the lender’s whims. Accepting this mortgage means placing a bet that the Yorkshire Building Society will be nice to you. It also comes with an unusually high arrangement fee of £1,495, but this shouldn’t bother you, because you probably can’t get that rate anyway. To even be considered, you need a deposit worth 35% of the value of your home.

[..] But there’s another, more sinister, reading of the recent rash of ultra-low mortgage rates: it suggests we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops. But bubbles tend to burst. Prices can’t rise forever: one day, interest rates must surely rise. When the inevitable happens, there is a danger that those who took advantage of this deal may find their equity wiped out – and the rate they’re paying will shoot through the roof.

That would obviously be very sad for those who are affected; for those shut out of home ownership, though, it may be no bad thing. That’s because nine years of record-low interest rates have probably contributed to the fact that house prices have soared out of reach; and higher prices have meant increasingly unattainable deposits. A rise in interest rates could, paradoxically, make housing more affordable.

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Companies guaranteeing each other’s crappy debt. What could go wrong? Problem is, Beijing had let them do it for years.

Rising Defaults In China Reveal Hidden Debt (BBG)

Rising defaults in China are unearthing hidden debt at companies across the country. Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains. China’s banking regulator has ordered checks of such cross-guaranteed loans, Caixin reported Friday. Scrutiny is mounting after a corn oil producer in the eastern province of Shandong said last month it had guaranteed debt of a neighboring aluminum product manufacturer which is now stuck in a cash crunch.

Just days before that, a local government financing vehicle in China’s southwest had to repay an auto parts maker’s loans it had guaranteed after the latter defaulted. “Disclosure of such guarantees isn’t timely,” said Qiu Xinhong at Shenzhen-based First State Cinda. “Sometimes, it’s like a buried mine and you don’t know when the risks will explode.” This debt minefield could be big. The amount of loan guarantees at privately held firms in China is equivalent to 11% of their equity, and at LGFVs is 18%, according to Citic Securities. The load is even heavier at weaker borrowers. About 44% of issuers rated lower than AA- have a ratio of more than 30%, according to Everbright Securities. The phenomenon is less common in the U.S. because banks don’t require such guarantees to offer loans, according to Fitch Ratings.

“If companies in the same region offer a huge amount of guarantees for each other’s debt, it would form a guarantee web and deepen interconnections among the companies,” said Gang Meng, director of rating at Golden Credit Rating International Co. in Beijing. “If one company has to repay debt for its guaranteed company, risks would quickly ripple to other companies in the web, which will result in a butterfly effect.” [..] Guarantors don’t mark the pledges on their balance sheets and often disclose them only on an annual basis. Such shadow debts pose rising risks after central bank tightening pushed up onshore corporate bond yields to two-year highs and defaults on local notes surged to a record.

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The distinction between state banks and shadows has become very murky.

China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)

A $1.7 trillion source of inflows into Chinese markets has suddenly switched into reverse, roiling the nation’s money management industry and sending local bonds and stocks to their biggest losses of the year. The turbulence has centered on so-called entrusted investments – funds that Chinese banks farm out to external asset managers. After years of funneling money into such investments, banks are now pulling back in response to a series of regulatory guidelines over the past three weeks that put a spotlight on the risks. Critics have blamed entrusted managers for adding leverage to China’s financial system and reducing transparency.

The banks’ withdrawals helped erase $315 billion of stock market value over the past six days and sent bond yields to the highest level in nearly two years, highlighting the challenge for Chinese authorities as they try to rein in shadow banking activity without destabilizing financial markets. While the government has plenty of firepower to prop up asset prices if it wants to, forecasters at Australia & New Zealand Banking predict the selloff will deepen this year. “We are seeing an exodus of funds,” said He Qian at HFT Investment Management, which oversaw about 189 billion yuan ($27.5 billion) as of last year. He was one of about half-a-dozen asset managers and analysts who said banks have started scaling back their entrusted investments.

The arrangements have become an important part of China’s shadow finance system. When banks sell wealth-management products – the ubiquitous savings vehicles that offer higher yields than deposits – the firms sometimes farm out client money to entrusted managers such as hedge funds and mutual funds. The managers invest the cash in bonds, stocks and other securities, hoping to generate enough income to cover the banks’ promised returns to WMP clients – plus some extra for themselves.

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You better look good than feel good.

Naked Selfies Used As Collateral For Chinese Loans (AFP)

Hundreds of photos and videos of naked women used as collateral for loans on a Chinese online lending service have leaked onto the web, highlighting regulatory problems in the fast-growing peer-to-peer marketplace. A 10-gigabyte file posted on the internet exposed the personal details of more than 160 young women who were asked to provide the explicit material to secure money through online lending platform Jiedaibao. Launched by JD Capital in 2015, Jiedaibao allows lenders to operate anonymously but requires borrowers to reveal their real names when making transactions. Loan amounts and interest rates can be customised to meet the needs of users – often people who have a hard time accessing loans through more traditional financial institutions, like banks.

Interest on the “nude loans” reached an astonishing 30% a week, according to the Global Times newspaper. Lenders told female borrowers that if they failed to repay the loans, their nude photos would be sent to their families and friends, whose information was also required for some transactions, the article said. Material in the file put on the web last Wednesday showed some borrowers also promised to repay loans with sexual favours, according to screen captures posted on social media websites. In a statement on its official Twitter-like Weibo account, Jiedaibao said it had tracked down the accounts of several borrowers through photos and ID information circulated online and had frozen the suspected lenders’ accounts. “The ‘nude loans’ deals were mainly initiated and completed offline, and Jiedaibao only played the role of a money transfer platform in the deals,” the statement said.

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Derivatives used this way are instruments of massive wealth destruction. Why use different rates for each side of the deal? “..the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate..”

Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)

Derivatives burdened Italy’s public debt again last year for a record amount of €8.3 billion ($9 billion), making the country the biggest swaps loser in the euro region. Losses related to swaps held by the nation added €4.25 billion to the country’s debt while net liabilities’ burden totaled €4.07 billion, based on data released Monday by EU statistics office Eurostat. In the 2012-2016 period, the burden totaled €29.6 billion, also a euro-area record. Italy’s derivative-related losses and net liabilities were higher than those for the whole euro region combined both in 2016 and in the five-year period as some countries actually saw the swaps helping to alleviate their debts. Governments across the euro region have used derivatives to manage their debt-financing costs and to hedge against sudden changes in rates and excessive exchange-rate volatility.

Those deals have sometimes backfired with the effect of pushing nations’ debts even higher. In the existing interest-rate swaps the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate,” the government said earlier this month in an annex to its annual Economic and Financial Document. Since starting from November 2015, the Euribor stayed negative and the impact on the flow indexed to that rate was that the Treasury had to pay money to its counterparts, instead of being paid by them, the document also said. Italy’s public debt rose last year to €2.2 trillion, or 132.6% of the country’s GDP, Eurostat said in a separate report on Monday.

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it’s important to get it right.

Ontario To Pay Guaranteed Incomes To The Poor (AFP)

Ontario has launched a pilot program to provide a guaranteed basic income to a few thousand people to test its effects on recipients and public finances, the Canadian province announced on Monday. Provincial premier Kathleen Wynne said the program would provide a “basic income” for three years to 4,000 people living under the poverty line. “We want to find out whether a basic income makes a positive impact in people’s lives,” Ms Wynne said, adding that “everyone should benefit from Ontario’s economic growth.” Income support payments will be as high as Can$16,989 (£9,800) a year for an individual, or Can$24,027 for a couple, plus an additional Can$6,000 for the disabled.

The figures will be reduced for those holding part-time jobs – they will receive 50 cents less for each dollar earned. As a concrete example, a single person with a yearly salary of Can$10,000 will receive an additional payment of Can$11,989. The 4,000 participants, aged 18 to 65, have been chosen at random in three cities: Hamilton and Lindsay in the Toronto suburbs and Thunder Bay in the province’s west. The province estimates the cost of the program at Can$50 million a year. Ontario is the most heavily populated Canadian province, with 38% of the country’s 36.5 million inhabitants. 13% of Ontario residents live below the poverty line, according to Statistics Canada.

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What the FBI did has already been declared illegal in New Zealand courts.

Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)

FBI Director James Comey is currently in New Zealand and if Kim Dotcom has his way, Comey could find himself being questioned by the New Zealand police. The internet entrepreneur, who is wanted by the United States on multiple charges including fraud and copyright infringement, filed a complaint with the police Tuesday against the FBI director for what Dotcom called theft of his data by the agency. The alleged theft happened when the police raided Dotcom’s home Jan. 20, 2012, as part of investigations instigated by the U.S. The charges against him are based on the now-defunct website Megaupload that he operated, where users could share content with each other.

Some of that content was illegal to share, but according to New Zealand laws, internet service providers are not held responsible for the actions of their users. In his complaint Tuesday, Dotcom’s lawyer urged the police to urgently question Comey, who is in New Zealand for a conference. The grounds for the complaint are that the FBI received copies of data that was taken from Dotcom’s home during the 2012 raid, an act which courts in the country have held to be illegal, according to the complaint.

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The value you put on someone else’s life inevitably becomes the value of your own life.

At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

At least 16 people, including two children, drowned after an inflatable boat carrying refugees and migrants sank off Greece’s Lesbos island, authorities said on Monday. They are believed to be the first confirmed deaths in Greek waters this year of migrants or refugees making the short but dangerous crossing from Turkey on overcrowded rubber dinghies. Nine bodies were recovered in Greek territory and another seven in Turkish waters, Greek and Turkish coastguard officials said. Two survivors have been rescued. The two women, one of whom is pregnant, told the United Nations refugee agency UNHCR that 20 to 25 people were on board when the dinghy capsized around 1900 GMT on Sunday. The women are from Cameroon and the Democratic Republic of Congo.

Though fewer than 10 nautical miles separate Lesbos from Turkish shores, hundreds of people have drowned trying to make the crossing since Europe’s refugee crisis began in 2015. In that year, Lesbos was the main gateway into the European Union for nearly a million Syrians, Iraqis and Afghans. But a deal in March 2016 between the EU and Ankara has largely closed that route. Just over 4,800 people have crossed to Greece from Turkey this year, according to UNHCR data. An average of 20 arrive on Greek islands each day. “The number of people crossing the Aegean to Greece has dropped drastically over the past year, but this tragic incident shows that the dangers and the risk of losing one’s life remains very real,” said Philippe Leclerc, UNHCR Greece representative.

Read more …

Apr 202017
 
 April 20, 2017  Posted by at 9:04 am Finance Tagged with: , , , , , , , ,  5 Responses »
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Fra Filippo Lippi 1406-1469 The Virgin Mary

 


The IMF Says Austerity Is Over (Tel.)
Reflation Trades of 2016 Deflate With Remarkable Speed (R.)
IMF Warns High US Corporate Leverage Could Threaten Financial Stability (WSJ)
Securities-Based Loans Are Scaring Fiscal Experts (NYP)
Telling the Truth: (P + G) – M = I (MarkGB)
You’re Hired! A Guaranteed Job For Anyone Who Wants One (DJ)
Japan’s Middle-Aged ‘Parasite Singles’ Face Uncertain Future (R.)
The EU’s Collapse Is Now “Imminent” (Doug Casey)
Greece Needs To Start Having Babies Again or Face Financial Oblivion (Ind.)
40% of Spanish Children Live in Poverty (EurA)
Ontario Set to Unveil Its Plan to Cool Toronto Housing (BBG)
Feds Knew of 700 Wells Fargo Whistleblower Cases in 2010 (CNN)
So It Goes (Oliver Stone)
A Melting Arctic Changes Everything (BBG)

 

 

Yeah, sure, just come look in Greece. Where the IMF itself demands ever more austerity. While claiming austerity is over.

The IMF Says Austerity Is Over (Tel.)

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor. “Their aggregate fiscal stance is expected to remain broadly neutral in 2017 as well as in the following years.” The British Government is still trying to reduce the deficit but at a slower pace, as Philip Hammond, the Chancellor, wanted to ease spending cuts following the vote for Brexit last year.

Although extra spending may be welcomed by those who want funds for specific projects or public services, the IMF is worried that governments are still heavily indebted and need to be careful with their budgets. The US government, for instance, should use the current economic growth spurt as a chance to get its finances under control. “In the United States, where the economy is close to full employment, fiscal consolidation could start next year to put debt firmly on a downward path,” the IMF said. That contrasts heavily with President Donald Trump’s plans to spend more on infrastructure and defence while cutting taxes, a combination that risks ramping up the budget deficit. “These policies are expected to generate rising deficits over the medium term.

As a result, the US debt ratio is projected to increase continuously over the five-year forecast horizon,” the IMF warned. Overall the IMF believes government debts “should stabilise in the medium term, averaging more than 100pc of GDP, rather than decline as previously expected.” With debts that high, governments have to walk a fine line to use fiscal policy to support sustainable economic growth, but avoid dangerous over-indebtedness. “Fiscal policy is generally seen as a powerful tool for promoting inclusive growth and can contribute to stabilising the economy, particularly during deep recessions and when monetary policy has become less effective,” said the IMF.

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How can anyone get this right if they can’t even properly define inflation?

Reflation Trades of 2016 Deflate With Remarkable Speed (R.)

Stocks, bond yields and the dollar are all falling, yield curves are flattening and sterling is marching higher. The “reflation” trades of 2016 that were supposed to mark a turning point in global markets are fading. Fast. The question for investors is whether this is the play book for the rest of the year, or whether the trends of 2016 will resume in the second half of the year. What is clear is that much of the conviction with which investors went into 2017 has been lost. This week, Goldman Sachs ditched its long-standing bullish call on the U.S. dollar, and Deutsche Bank did likewise with their gloomy sterling outlook. Following the developed world’s two most seismic events last year – the U.S. presidential election and Brexit – investors around the world had positioned for a broad-based reflation trade.

Trump’s surprise election victory was supposed to unleash a wave of tax cuts, banking deregulation and fiscal largesse that would lift U.S. – and global – growth. Meanwhile, sterling’s 20% plunge after the Brexit vote was supposed to pave the way for a surge in UK equities and inflation. This, indeed, is how it played out as 2017 got underway. The Federal Reserve raised interest rates twice, the dollar reached a 14-year peak, Wall Street hit record highs, and government bond yield curves around the world steepened to the benefit of banks and financial stocks. But it is now unraveling, in large part due to a clear slowdown in U.S. growth and signs that global inflation is leveling off. Flatter yield curves where short- and long-term bond yields are close to each other suggest economic uncertainty.

[..] Citi’s economic surprises indexes for most of the world’s major economies have been heading south for the past month. The U.S. index has suddenly tumbled to lows not seen since November, and is below all its peers apart from Japan’s. And inflation expectations are showing signs of peaking too. The dollar is now down 2.5% year-to-date (but still up 2% since the U.S. election; U.S. bank stocks are down 10% from their February peak (but still up 20% from the election); and sterling is down 13% against the dollar since the Brexit vote last June (but it has been down as much as 20%). Estimates of first quarter U.S. growth have been slashed in recent weeks, with the Atlanta Fed’s closely-watched GDPNow model pointing to just 0.5% compared with around 2.5% less than two months ago.

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All it takes is a few rate hikes.

IMF Warns High US Corporate Leverage Could Threaten Financial Stability (WSJ)

U.S. corporate debt has ballooned on cheap credit to levels exceeding those prevailing just before the 2008 financial crisis, a potential threat to financial stability, the IMF warned in its latest review of the top threats to markets and banks. High corporate leverage could become problematic as the Federal Reserve raises short-term interest rates, the IMF warned, since higher borrowing costs could hinder the ability of firms to service debts. While borrowing costs remain low, debt servicing as a proportion of income has risen to its highest level since 2010, raising questions over firms’ ability to service their debts, according to the IMF’s study of nearly 4,000 U.S. firms accounting for about half of the economywide corporate sector balance sheet.

Companies have added $7.8 trillion of debt and other liabilities since 2010, while issuing $3 trillion of equity, net of buybacks, according to the IMF. The IMF’s message stands in contrast to the one being sent by the corporate bond market, which has been rallying for more than a year now. In early March, the average spread between junk-rated corporate bond yields and U.S. Treasury yields reached 3.44 percentage points, its lowest point since July 2014, according to Bloomberg Barclays data. It was most recently at 3.92 percentage points, still a very low level by historical standards, indicating that investors don’t see the debt as very risky.

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So you buy mortgage backed securities, and then use them as collateral for a loan that lets you buy more securities. The serpent and the tail.

Securities-Based Loans Are Scaring Fiscal Experts (NYP)

Forget subprime mortgages – one of Wall Street’s biggest risks doesn’t even show up on most banks’ balance sheets. Financial insiders are getting increasingly worried over the popularity of securities-based loans, or SBLs – a risky form of debt marketed to wealthy investors who typically use it to buy big assets like houses. The loans, which are taken against pools of stocks and bonds, offer borrowers cheap money fast without having to sell their underlying securities – an attractive option when the Dow is rising. But if markets crash, brokers can unload their clients’ holdings at fire-sale prices – and go after the house to cover the the vig. Fears of such ugly scenarios are growing as the Fed hikes interest rates, stocks are hitting all-time highs, and high-net-worth individuals are using this form of “shadow margin” to borrow more against stocks and bonds in their portfolios than ever before.

It’s not clear how much debt has been taken out in the form of SBLs, and a lack of regulatory oversight is partly to blame. Finra, the brokerage regulator, doesn’t track it, nor does the Securities and Exchange Commission — even though both have warned investors about the risks. However, several advisers surveyed by The Post estimated there is between $100 billion and $250 billion in outstanding SBLs among all brokerages. At least one concerned financial executive is in talks with lawyers to file a whistleblower case over the issue against a major bank with the Securities and Exchange Commission, The Post has learned. “When the market does turn, and it will at some point, it will be a major disaster,” said the exec, who requested confidentiality in exchange for speaking on the issue with The Post.

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Here’s what I think will lead to UBI: poor old people. I skipped all the examples and links provided here. Do read them. “Where ‘P’ is pensions, ‘G’ is ‘government intervention’, ‘M’ is media oversight, and ‘I’ is insolvency.”

Telling the truth: (P + G) – M = I (MarkGB)

Telling the truth has never been popular with politicians. They believe that it would prevent them from getting elected. Making new promises that will never be kept, and covering up the unaffordability of old promises…is how politicians get elected. The pattern is well worn and predictable: they use promises to ‘bribe’ people to vote for them, then they fail to deliver, then they blame someone else, then they change the subject…rinse and repeat…meanwhile the really important stuff get’s brushed under the carpet or kicked down the road…choose your own metaphor. There are few greater examples of this than the approaching crisis in pensions: A tale that has been decades in the telling, the climax will be a calamity that the corporate media doesn’t want to look at, and politicians never mention or acknowledge. Short of being strapped to a metal chair and entertained with an electrical massage they never will…which is a nice thought but regrettably still illegal, at least on the mainland.

[..] Despite the dark pleasure it would give me to label our political and economic elites: ‘as thick as two short planks’…the truth is that many of them are not. It’s far worse than that I’m afraid. They are ‘liars’. The politicians, central bankers, economists and journalists who understand the situation we face, but do nothing to address it, are discrediting the positions of responsibility that they hold…by lying through omission, by obfuscation, through denial, by issuing false and/or misleading information, and via the good old fashioned ‘art’ of bull$hitting straight to camera. Finally, and on a slightly lighter note, for anyone reading this who has been brainwashed with the idea that any theory or observation that can’t be reduced to an equation, is not real ‘economics’…here is an equation for you (but don’t expect your professor to like it):

(P + G) – M = I

Where ‘P’ is pensions, ‘G’ is ‘government intervention’, ‘M’ is media oversight, and ‘I’ is insolvency. Throughout recorded history, this equation has never failed to balance eventually…ask any legionnaire.

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Another -more palatable?!- way of phrasing UBI.

You’re Hired! A Guaranteed Job For Anyone Who Wants One (DJ)

Democrats have begun the presidency of Donald Trump exiled to the political wilderness. They’ve lost the White House, both houses of Congress, a shocking number of state governments, while the “blue state” vote has turned out to be really just the “blue city” vote. The party has cast about for solutions, battling it out over identity politics, the proper opposition strategy, and more. But Democrats might consider taking a cue from Trump himself. Namely, his relentless promises to bring back good-paying American jobs. “It’s the first and most consistent thing he discusses,” observed Mike Konczal, a fellow at the Roosevelt Institute, after reviewing Trump’s speeches. The President understands, as The New York Times’s Josh Barro noted, that most Americans think the purpose of private business is to provide good jobs, not merely turn a profit.

Even Trump’s xenophobia and white nationalism are not totally separate from this: Kicking out all the immigrants and rolling foreign competitors are critical components of how he would restore jobs. Democrats tend to treat jobs as the happy by-product of other goals like infrastructure revitalization or green energy projects. Or they treat deindustrialization and job dislocation as regrettable inevitabilities, offering training, unemployment insurance, health care, and so on to ameliorate their effects. All these policies are worthy. But a job is not merely a delivery mechanism for income that can be replaced by an alternative source. It’s a fundamental way that people assert their dignity, stake their claim in society, and understand their mutual obligations to one another. There’s pretty clear evidence that losing this social identity matters as much as the loss of financial security.

The damage done by long-term joblessness to mental and physical health is rivaled only by the death of a spouse. It wreaks havoc on marriages, families, mortality rates, alcoholism rates, and more. The 2008 crisis drove long-term unemployment into the stratosphere, and today it remains near a historic high. Trump went right at this problem, telling Michigan in October of 2016: “I am going to bring back your jobs.” Period. Democrats should consider making the same moon shot promise. But unlike Trump, they should back it up with a policy plan. And there’s an idea that could do the trick. It emerges naturally from progressive values. It’s big, bold, and could fit on a bumper sticker. It’s generally called the “job guarantee” or the “employer of last resort.” In a nutshell: Have the federal government guarantee employment, with benefits and a living wage, to every American willing and able to work.

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More pension troubles. Today Japan, tomorrow your neck of the woods.

Japan’s Middle-Aged ‘Parasite Singles’ Face Uncertain Future (R.)

Their youth long gone, members of Japan’s generation of “parasite singles” face a precarious future, wondering how to survive once the parents many depended on for years pass away. Some 4.5 million Japanese aged between 35 and 54 were living with their parents in 2016, according to a researcher at the Statistical Research and Training Institute on a demographic phenomena that emerged two decades ago, when youthful singles made headlines for mooching off parents to lead carefree lives. Now, without pensions or savings of their own, these middle-aged stay-at-homes threaten to place an extra burden on a social welfare system that is already creaking under pressure from Japan’s aging population and shrinking workforce.

Hiromi Tanaka once sang backup for pop groups, and epitomized the optimism of youth. “I got used to living in an unstable situation and figured somehow it would work out,” Tanaka told Reuters as she sat at the piano in a small parlor of an old house connected to her elderly mother’s next door. Now aged 54, Tanaka relies on income from giving private singing lessons to a dwindling number of students, and her mother’s pension to make ends meet. She has no pension plan of her own, and has used up most of her savings. “My father died last year so pension income was halved,” she said. “If things go on like this, my mother and I will fall together.” Tanaka is one of the growing ranks of “life-time singles,” whose numbers hit a record in 2015, according to data released this month that showed that among 50-year-olds, 1 in 4 men and 1 in 7 women were unmarried.

“During the ‘bubble economy’ until the mid-1990s, the 20-somethings were happily amusing themselves. They thought by the time they were in their 30s, they’d be married,” said Masahiro Yamada, a Chuo University sociologist who coined the term “parasite singles” in 1997. “But one-third never married and are now around age 50,” Yamada said. The trend is not only a factor behind Japan’s low birthrate and shrinking population. It also puts an extra damper on consumption since new household formation is a key driver of private spending. And since about 20% of the middle-aged stay-at-home singles rely on parents for support, they also threaten to weigh on social safety nets. “Once they use up inherited assets and savings, when nothing is left, they will go on the dole,” Yamada said.

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Casey gets lots of things spectacularly wrong. The EU did need trade pacts etc., to enhance, guarantee quality control. The EU did a lot of good things. But it got taken over by the shit that floats to the top: “The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C. beltway.”

The EU’s Collapse Is Now “Imminent” (Doug Casey)

A free trade pact between different governments is unnecessary for free trade. An individual country interested in prosperity and freedom only needs to eliminate all import and export duties, and all import and export quotas. When a country has duties or quotas, it’s essentially putting itself under embargo, shooting its economy in the foot. Businesses should trade with whomever they want for their own advantage. But that wasn’t the way the Europeans did it. The Eurocrats, instead, created a treaty the size of a New York telephone book, regulating everything. This is the problem with the EU. They say it is about free trade, but really it’s about somebody’s arbitrary idea of “fair trade,” which amounts to regulating everything. In addition to its disastrous economic consequences, it creates misunderstandings and confusion in the mind of the average person.

Brussels has become another layer of bureaucracy on top of all the national layers and local layers for the average European to deal with. The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C. beltway. The EU was built upon a foundation of sand, doomed to failure from the very start. The idea was ill-fated because the Swedes and the Sicilians are as different from each other as the Poles and the Irish. There are linguistic, religious, and cultural differences, and big differences in the standard of living. Artificial political constructs never last. The EU is great for the “elites” in Brussels; not so much for the average citizen.

Meanwhile, there’s a centrifugal force even within these European countries. In Spain, the Basques and the Catalans want to split off, and in the UK, the Scots want to make the United Kingdom quite a bit less united. You’ve got to remember that before Garibaldi, Italy was scores of little dukedoms and principalities that all spoke their own variations of the Italian language. And the same was true in what’s now Germany before Bismarck in 1871. In Italy 89% of the Venetians voted to separate a couple of years ago. The Italian South Tyrol region, where 70% of the people speak German, has a strong independence movement. There are movements in Corsica and a half dozen other departments in France. Even in Belgium, the home of the EU, the chances are excellent that Flanders will separate at some point.

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Another feature brought to you by the Troika.

Greece Needs To Start Having Babies Again or Face Financial Oblivion (Ind.)

People in Greece can’t afford to have more than one child, and many are opting to have none at all. Fertility doctor Minas Mastrominas tells the New York Times that some women have decided not to conceive, and single-child parents have been asking him to destroy their remaining embryos. He said: “After eight years of economic stagnation, they’re giving up on their dreams.” It isn’t just Greece suffering low birth rates. In fact the trend spreads to most of Europe, with Spain, Portugal and Italy also reporting dangerously low rates. Unemployment continues to be a serious issue in Greece. Rates are slightly lower than in 2016 when they were 23.9%, but are still very high at 23.5%. The slump has affected women more, with unemployment rates at 27% compared to 20% of men.

Child tax breaks and subsidies for large families have decreased, and the country stands at having to lowest budget in the EU for family and child benefits. During the height of the crisis, women postponed childbirth in favour of working. As the years dragged on, the rate of fertility decreased, making it biologically more difficult to conceive. Additionally, gender equality came to a standstill, and many women of ‘childbearing age’ were denied employment, or had their contract changed to part time involuntarily, as soon as they got pregnant. One of the most prominent areas that will be detrimentally affected is pensions and the welfare system. Additionally, according to Eurostat, such low birth rates – under 2.1 – could create a demographic disaster. This will have a knock-on effect on pensions, with fewer young people working.

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And the children we do have, we treat like this. No wonder there are fewer of them.

40% of Spanish Children Live in Poverty (EurA)

Spain has the EU’s third highest rate of child poverty, after Romania and Greece. EURACTIV Spain reports. After the economic crisis and years of austerity, child poverty is on the rise in wealthy countries, according to Unicef. In Spain, the proportion of children living below the poverty line increased by 9 percentage points between 2008 and 2014, to reach almost 40%. While child poverty in general rose significantly, the sharpest increase (56%) was among households of four people (two adults and two children) living on less than €700 per month, or €8,400 per year. Spain has the third widest gap in the EU, behind Latvia and Cyprus, between the levels of social protection offered to children and people over 65. During the crisis, Spain’s oldest citizens were much better protected than its youngest.

According to the Spanish Statistical Office, cited by Unicef, investment in the social protection of families fell by €11.5 billion between 2009 and 2015. Unicef also highlighted that families with children, large families, single-parent families and teenagers suffered the most from the effects of poverty. As for Madrid’s response to the crisis, the UN’s agency for children criticised its failure to contain child poverty. “Social protection policies are very fragmented and very unequal, with little focus on children,” Unicef said. For the organisation, this is due, among other causes, to the strong link between social security and workers’ contributions, and the fact that many of the state’s family aid programmes take the form of tax credits, which have little impact on low earners.

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They’ll get it awfully wrong. It’s too late in the game.

Ontario Set to Unveil Its Plan to Cool Toronto Housing (BBG)

Ontario is expected to impose a tax on “non-resident speculators” when it announces new measures Thursday to cool the red-hot housing market in Toronto, according to people familiar with the plans. The measures are intended to improve housing affordability, and address both supply and demand, the people said, speaking on condition of anonymity because the plans are not yet public. The measures are also said to include a new tax aimed at curbing purchases from non-resident speculators. [..] Home prices in the Toronto area climbed 6.2% last month, the biggest one-month gain on record, according to a benchmark price index by the Canadian Real Estate Association, and are up almost 30% in the past 12 months. Bank of Canada Governor Stephen Poloz said last week the price gains are “divorced” from the typical measures of demand, such as income growth and demographics, and said they are unsustainable.

“The focus has to be on runaway prices, more so than affordability per se,” Robert Hogue, a senior economist at Royal Bank of Canada, said in a phone interview. “The risk now is about expectations in the market, or market psychology, as you have both sellers and buyers expecting much higher prices.” The Toronto Star reported earlier, without saying where it got the information, that Sousa will announce some 10 measures ranging from rent controls to a new tax on speculators. The move comes a week before the province tables its budget on April 27, and two days after Sousa said the government recognizes that “now” is the time to address runaway home prices. Sousa on Tuesday met Canadian Finance Minister Bill Morneau and Toronto Mayor John Tory, who said that possible steps include taxing homes left empty for speculative purposes. Rent increases on newer buildings may be limited to about 1.5% above the inflation rate, which was at 2% in February, the Star reported.

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Daddy, please tell the story again of why we have regulators!

Feds Knew of 700 Wells Fargo Whistleblower Cases in 2010 (CNN)

America’s chief federal banking regulator admits it failed to act on numerous “red flags” at Wells Fargo that could have stopped the fake account scandal years earlier. One particularly alarming red flag that went unheeded: In January 2010, the regulator was aware of “700 cases of whistleblower complaints” about Wells Fargo’s sales tactics. An internal review published on Wednesday by the Office of the Comptroller of the Currency found that the regulator didn’t live up to its responsibilities. The report found that oversight of Wells Fargo was “untimely and ineffective” and federal examiners overseeing the bank “missed” several opportunities to uncover the problems that led to the creation of millions of fake accounts. The review painted a damning picture of the OCC’s ability to spot what in retrospect should have been obvious problems at one of the nation’s biggest banks.

The OCC did confront Carrie Tolstedt, then head of Wells Fargo’s community bank, about the stunning number of whistleblower claims. However, there are no records that show that federal inspectors “investigated the root cause,” or force Wells Fargo to probe it. It’s now clear that root cause of Wells Fargo’s problems – both the creation of fake accounts and the related 5,300 firings – was the notoriously aggressive sales goals targets set by senior management. At one point, rank and file bankers were asked to open as many as eight accounts per customer. That’s why the bank has eliminated them. From top management to Wells Fargo’s board of directors, everyone turned a blind eye to these issues. There’s evidence now that some of this was flagged as early as 2004 to management.

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Stone states the obvious.

So It Goes (Oliver Stone)

I confess I really had hopes for some conscience from Trump about America’s wars, but I was wrong – fooled again! – as I had been by the early Reagan, and less so by Bush 43. Reagan found his mantra with the “evil empire” rhetoric against Russia, which almost kicked off a nuclear war in 1983 – and Bush found his ‘us against the world’ crusade at 9/11, in which of course we’re still mired. It seems that Trump really has no ‘there’ there, far less a conscience, as he’s taken off the handcuffs on our war machine and turned it over to his glorified Generals – and he’s being praised for it by our ‘liberal’ media who continue to play at war so recklessly. What a tortured bind we’re in. There are intelligent people in Washington/New York, but they’ve lost their minds as they’ve been stampeded into a Syrian-Russian groupthink, a consensus without asking – ‘Who benefits from this latest gas attack?’

Certainly neither Assad nor Putin. The only benefits go to the terrorists who initiated the action to stave off their military defeat. It was a desperate gamble, but it worked because the Western media immediately got behind it with crude propagandizing about murdered babies, etc. No real investigation or time for a UN chemical unit to establish what happened, much less find a motive. Why would Assad do something so stupid when he’s clearly winning the civil war? No, I believe America has decided somewhere, in the crises of the Trump administration, that we will get into this war at any cost, under any circumstances – to, once again, change the secular regime in Syria, which has been, from the Bush era on, one of the top goals – next to Iran – of the neoconservatives. At the very least, we will cut out a chunk of northeastern Syria and call it a State.

Abetted by the Clintonites, they’ve done a wonderful job throwing America into chaos with probes into Russia’s alleged hacking of our election and Trump being their proxy candidate (now clearly disproved by his bombing attack) – and sadly, worst of all in some ways, admitting no memory of the same false flag incident in 2013, for which again Assad was blamed (see Seymour Hersh’s fascinating deconstruction of this US propaganda, ‘London Review of Books’ December 19, 2013, “Whose sarin?”). No memory, no history, no rules – or rather ‘American rules.’ No, this isn’t an accident or a one-off affair. This is the State deliberately misinforming the public through its corporate media and leads us to believe, as Mike Whitney points out in his brilliant analyses, “Will Washington Risk WW3” and “Syria: Where the Rubber Meets the Road,” that something far more sinister waits in the background.

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BBG can’t even run a story on climate anymore without adding “..the emerging risk of an emboldened and growing Russian empire..”, and more of such useful hints.

A Melting Arctic Changes Everything (BBG)

The story of the Arctic begins with temperature but it’s so much more—this is a tale about oil and economics, about humanity and science, about politics and borders and the emerging risk of an emboldened and growing Russian empire. The world as a whole has warmed about 0.9 degrees Celsius (1.7 degrees Fahrenheit) since 1880. Arctic temperatures have risen twice that amount during the same time period. The most recent year analyzed, October 2015 to September 2016, was 3.5C warmer than the early 1900s, according to the 2016 Arctic Report Card. Northern Canada, Svalbard, Norway and Russia’s Kara Sea reached an astounding 14C (25F) higher than normal last fall. Scientists refer to these dramatic physical changes as “Arctic amplification,” or positive feedback loops. It’s a little bit like compound interest.

A small change snowballs, and Arctic conditions become much less Arctic, much more quickly. “After studying the Arctic and its climate for three-and-a-half decades,” Mark Serreze, director of the National Snow and Ice Data center, wrote recently. “I have concluded that what has happened over the last year goes beyond even the extreme.” The heat is making quick work of its natural prey: ice. Scientists track the number of “freezing-degree days,” a running seasonal tally of the amount of time it’s been cold enough for water to freeze. The 2016-2017 winter season has seen a dramatic shortfall in coldness—more than 20% below the average, a record. Sea ice has diminished much faster than scientists and climate models anticipated. Last month set a new low for March, out-melting 2015 by 23,000 square miles.

Compared with the 1981-2010 baseline, the average September sea-ice minimum has been dropping by more than 13% per decade. A recent study in Nature Climate Change estimated that from 30-50% of sea ice loss is due to climate variability, while the rest occurs because of human activity. Receding ice decreases the Earth’s overall reflectivity, making the Arctic darker and therefore absorbing even more heat. The ice is not all the same age or thickness, although it has become somewhat more uniform. In 1985, about 45% of Arctic sea ice was made up of older and thicker multi-year ice. By 2016, that number shrank to 22%.

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Mar 062017
 
 March 6, 2017  Posted by at 10:03 am Finance Tagged with: , , , , , , , , , ,  8 Responses »
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Dorothea Lange Negro woman who has never been out of Mississippi July 1936

 


The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)
In Praise Of Cash (Aeon)
Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)
Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)
China’s Credit Target Implies Adding Entire German GDP This Year (BBG)
Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)
Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)
Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)
Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)
The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)
Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)
Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)
US Asks Ankara For Steps To Ease Aegean Tension (K.)
Greece Desperate For Growth Strategy As Public Mood Darkens (G.)
Polluted Environments Kill 1.7 Million Children A Year (R.)

 

 

From Australia, but applicable worldwide. Mortgages in housing bubbles are the main engine of money (credit) creation in our economies. Boith governments and banks depend on them for profit, taxes and ultimately survival. Imagine if housing prices halved, the entire construct would collapse. They’ll do anything to keep the game going. And then they will fail.

The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)

The federal government’s problem with making housing more affordable is that it becomes, by definition, cheaper. And that’s not something that the federal government wants to see happen for some very understandable reasons. Back in the Howard era Australians were encouraged to invest in housing as a form of wealth creation, partially as a way of addressing rental strain and mainly as a way to ensure people had assets and therefore didn’t go selfishly claiming pensions later on. That’s when the negative gearing and capital gains exemptions were introduced that made buying property such a sweet deal. So now there are a lot of Australians who have put their retirement eggs in the basket marked “leveraging the hell out of my mortgage to buy more investment properties” for the last couple of decades and who will be therefore disadvantaged if the value of housing drops.

And then there’s pure self interest at work too, since between a third and half of all our representatives have investment properties – the PM himself owns seven properties, for example. How keen would you say that our parliamentary representatives are to make their portfolios drop in value, especially for something as stupid as the greater good? Also, as well we know thanks to the efforts of the NSW Independent Commission Against Corruption, the NSW Liberals are so beloved by property developers that the party went to some effort to find a way of accepting donations from them despite those donations being completely illegal. If they suddenly become the party that makes property less lucrative, there’d be no donations to justify the creation of opaque entities like the Free Enterprise Foundation.

[..] Will housing become more affordable in Australia? Absolutely! And it could happen one of two ways. This complex web of legislation can be gently and strategically unpicked via careful bipartisan cooperation across our different spheres of government in concert with the private sector in an effort to create a sane, universally beneficial housing system at all levels. Alternatively, we can choose to leave things be until the housing bubble bursts and plunges Australia into a crippling recession. And since this is politics in 2017, we can assume that Plan A is already off the table.

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Using cash is fast becoming a revilutionary act.

In Praise Of Cash (Aeon)

The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge. The first is the banking industry, which controls the core digital fiat money system that our public system of cash currently competes with. It irritates banks that people do indeed act upon their right to convert their bank deposits into state money. It forces them to keep the ATM network running. The cashless society, in their eyes, is a utopia where money cannot leave – or even exist – outside the banking system, but can only be transferred from bank to bank.

The second is the private payments industry – the likes of Mastercard – that profits from running the infrastructure that services that bank system, streamlining the process via which we transfer digital money between bank accounts. They have self-serving reasons to push for the removal of the cash option. Cash transactions are peer-to-peer, requiring no intermediary, and are thus transactions that Visa cannot skim a cut off. The third – perhaps ironically – is the state, and quasi-state entities such as central banks. They are united with the financial industry in forcing everyone to buy into this privatised bank-payments society for reasons of monitoring and control. The bank-money system forms a panopticon that enables – in theory – all transactions to be recorded, watched and analysed, good or bad. Furthermore, cash’s ‘offline’ nature means it cannot be remotely altered or frozen.

This hampers central banks in implementing ‘innovative’ monetary policies, such as setting negative interest rates that slowly edit away bank deposits in order to coerce people into spending. Governments don’t really mention that monetary policy agenda. It isn’t catchy enough. Rather, the key weapons used by the alliance are more classic shock-and-awe scare tactics. Cash is used by criminals! People buy drugs with cash! It’s the black economy! It supports tax evasion! The ability to present control as protection relies on constant calls to imagine an external enemy, the terrorist or Mafiosi. These cries of moral panic are set in contrast to the glossy smiling adverts about digital payment. The emerging cashless society looms like a futuristic sunrise, cleansing us of these dangerous filthy notes with rays of hygienic, convenient, digital salvation.

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From Thomas Paine to Henry George, the reason for UBI has long been known. Call it ‘ground rent’ or ‘land value tax’. Tax the ownership class, not the workers. ‘Birthright’ may sound strange today, but is it really?

Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)

Every student learns about Magna Carta, the ancient scroll that enshrined the rights of barons against the arbitrary authority of England’s monarchs. But most have never heard of its arguably more important twin, the Charter of the Forest, issued two years later in 1217. This short but powerful document guaranteed the rights of commoners to common lands, which they could use for farming, grazing, water and wood. It gave official recognition to a right that humans nearly everywhere had long just presupposed: that no one should be debarred from the resources necessary for livelihood. But this right – the right of habitation – came under brutal attack beginning in the 15th century, when wealthy nobles began fencing off common lands for their own profit.

[..] the success of basic income – in both the north and south – all depends on how we frame it. Will it be cast as a form of charity by the rich? Or will it be cast as a right for all? Thomas Paine was among the first to argue that a basic income should be introduced as a kind of compensation for dispossession. In his brilliant 1797 pamphlet Agrarian Justice, he pointed out that “the earth, in its natural, uncultivated state was, and ever would have continued to be, the common property of the human race”. It was unfair that a few should enclose it for their own benefit, leaving the vast majority without their rightful inheritance. As far as Paine was concerned, this violated the most basic principles of justice.

Knowing that land reform would be politically impossible (for it would “derange any present possessors”), Paine proposed that those with property should pay a “ground rent” – a small tax on the yields of their land – into a fund that would then be distributed to everyone as an unconditional basic income. For Paine, this would be a right: “justice, not charity”. It was a powerful idea, and it gained traction in the 19th century when American philosopher Henry George proposed a “land value tax” that would fund an annual dividend for every citizen. The beauty of this approach is that it functions as a kind of de-enclosure. It’s like bringing back the ancient Charter of the Forest and the right of access to the commons. It restores the right to livelihood – the right of habitation.

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Yeah, output cuts. Sure.

Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)

Oil prices fell in Asian trade on Monday, wiping out some of the gains of the previous session amid worries lower growth targets in China could cut oil demand and ongoing concern over Russia’s compliance with a global deal to cut oil output. But worries over escalating violence in the Middle East put a floor under prices. Brent crude futures dropped 29 cents, or 0.5%, to $55.61 a barrel as of 0638 GMT after settling 1.5% higher in the previous session. U.S. West Texas Intermediate (WTI) crude futures fell 30 cents, or 0.6%, to $53.03 a barrel after closing the previous session up 1.4%. “The main drag affecting markets today is the lowering of growth targets by China and tighter regulatory controls which implies less demand for oil and commodities in general,” said Jeffrey Halley at Oanda brokerage in Singapore.

China aims to expand its economy by around 6.5% this year, Premier Li Keqiang said in his work report at the opening of the annual meeting of parliament on Sunday. That is lower than the 6.7% growth achieved last year. China also plans to cut steel and coal output this year in an effort to tackle pollution, its top economic planner said on Sunday, while China’s newly appointed banking regulator vowed on to strengthen supervision of the lending sector. Meanwhile, figures by Russia’s energy ministry released last week showed February oil output was unchanged from January at 11.11 million barrels per day (bpd), casting doubt on Russia’s moves to rein in output as part of a pact with oil producers last year. That came as oil prices rose on Friday as the dollar weakened modestly after a speech by Fed Chair Janet Yellen, which suggested a rate increase would come at the end of its two-day meeting on March 15.

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“China’s great ball of money.”

China’s Credit Target Implies Adding Entire German GDP This Year (BBG)

China’s credit engine will keep humming this year, adding the rough equivalent of Germany’s annual economic output to its already massive stock of total social financing (TSF), according to estimates derived from the nation’s 2017 targets. Adding higher equity market financing and about 5 trillion yuan ($725 billion) worth of local government bond swaps to the official credit growth target of 12%, analysts at UBS see TSF expansion of 14.8% this year. They calculate that’s equal to a whopping 23 trillion yuan, or $3.3 trillion, addition to the amount of total credit already swishing around the world’s second-largest economy. “China’s pace of leverage increase will be slowing, albeit not by that much,” economists led by Hong Kong-based Wang Tao wrote in a report.

“The government’s intention for a still strong pace of credit growth and recent notable tightening in China’s money market and bond market attest to the difficulties facing the PBC in balancing monetary policy.” China’s great ball of money creates a constant headache for policy makers as money flows from asset class to asset class, creating bubbles along the way. It’s a particular dilemma for the People’s Bank of China because it needs new credit to generate the kind of growth its leaders desire – around 6.5% or higher if possible this year. The M2 money supply target was cut to 12% this year from 13% in 2016, while still higher than the 11.3% actual expansion last year.

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So wrong so many times, and still taken serious. You’d almost admire them for it.

Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)

Federal Reserve officials say their decisions on interest rate policy hinge on the ebb and flow of economic data, not the whims of financial markets. They have repeatedly downplayed the effect of short-term market fluctuations in their policy moves, aimed at maintaining a strong labor market and 2% inflation over the medium term. But the thing about markets is, they don’t really matter until they suddenly do. That may be the case at the moment, with Fed officials suddenly signaling in unison, without major changes in the economic data, that an increase in interest rates is coming this month. Investors accordingly shifted from considering a March hike as rather a long shot to seeing it as a near sure possibility in just two weeks. What changed? The stock market continued to set new records without much underlying economic impetus.

When the Fed released minutes from its end of January meeting, they showed members “expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty attending the outlook.” The Fed comments on the broad health of the financial markets all the time, but that kind of focus on stock volatility is less common. Fed Chair Janet Yellen and her Vice Chair Stanley Fischer, both speaking on March 3, appeared to seal the deal for a rate increase at the Fed’s upcoming March 14-15 meeting — with Yellen indicating that a hike is coming barring a drastic disappointment in next week’s February jobs report. Fischer was also was fairly unequivocal. “If there has been a conscious effort to move up our hike expectations I am going to join it,” he told a monetary policy conference in New York, sponsored by the University of Chicago’s Booth School of Business.

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Carswell is the only MP for Ukip. Farage hates him now. But he has some points: “Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve. “

Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)

What is Nigel Farage so cross about? We won the EU referendum, for goodness sake. Since 23 June, I’ve been walking on sunshine. My mood has been a state of Zen-like bliss. Alongside Boris Johnson, David Owen, Gisela Stuart and all of those involved in the official Vote Leave campaign, I spent the referendum arguing that leaving the EU would be an opportunity to make Britain more open, outward-looking and globally competitive. It is becoming increasingly clear to me that this is where Brexit is going to take us. [..] Brexit is often bracketed alongside the election of Donald Trump and the rise of the new radical populist movements in many western countries. But to me the EU referendum result was a safety valve. Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve.

Throughout history oligarchy has emerged in societies in which power was previously dispersed: in the late Roman republic, and in early modern times in the Venetian and then the Dutch republics. Each time, the emergence of oligarchy was always accompanied by an anti-oligarch insurgent reaction.Many of today’s new radical movements aren’t oligarchs, but an anti-oligarchy insurgency. Trump is no American Caesar about to cross some constitutional Rubicon. Yet such insurgents often ended up unwittingly assisting the oligarchs. In Rome the Gracchi brothers, with their Trump-like concern about cheap migrant labour, caused so much civil strife that an all-powerful emperor seemed a better bet. In Venice, the anti-oligarch rebel Bajamonte launched an unsuccessful coup – and in doing so gave the elite a pretext to create a new, superpowerful executive arm of government, the Council of Ten.

Created to respond to the crisis for six weeks, it ran the republic for the next 600 years. The Dutch anti-oligarch De Witt was so inept, he paved the way for the return of a strong stadtholder, or king. So, too, today. If chaotic, angry insurgents such as France’s Marine Le Pen and the rightwing populist Alternative for Germany party are the alternative, then being governed by remote, unaccountable elites sitting in central banks and Brussels doesn’t seem so unattractive after all. But Brexit isn’t anything like that. It is the beginning of a liberal insurgency. Brexit means that we take back control from the supranational elite. Power can be dispersed outward and downwards. Those who make public policy might once more answer to the public. Cheer up – it might even mean that there is less space for anger in our politics too.

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“Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015…”

Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)

Deutsche Bank CEO John Cryan tore up his own turnaround plan in an admission that the 17-month-old effort flopped. Germany’s largest bank late Sunday approved measures – most crucially, plans to raise about $8.5 billion in a share sale – that effectively restart what has already been the most turbulent transformation in its recent history. Among the moves: naming two deputy CEOs who may now be positioned to succeed Cryan; selling a piece of the asset-management business and abandoning the sale of the consumer-banking unit, which was the linchpin of the blueprint he scrapped. Speaking on Monday, Cryan said the deputies were installed at his request as the company will focus more on the German market with the reintegration of Postbank, which he said reflects a strong performance by the unit and a changed environment for banks.

Yet the developments underscore how, almost two years after he took over, Deutsche Bank has been unable to plot a course to a more profitable future while seeking to eliminate 9,000 jobs. “We want to move back into modest growth mode, controlled growth,” Cryan said in the interview. “The operating environment in the U.S. but also increasingly in the euro zone and especially in Germany looks strong. And so I’m reasonably confident about the future.” Deutsche Bank fell 5.4% at 9:16 a.m. in Frankfurt trading, the biggest drop more than four weeks. Before today, the shares had rallied 44% in the past six months. Even though they’re being tapped for a capital infusion for the fourth time since 2010, some investors welcomed the developments as a way to end questions about the firm’s financial strength. S

elling a minority stake in the asset-management unit within the next two years and unloading some assets at the investment bank will help raise another 2 billion euros ($2.1 billion) of capital. Deutsche Bank’s last three capital increases raised about €21.7 billion – compared to the current market value of €26.4 billion. Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015. “The shareholder dilution is enormous,” said Michael Huenseler, an investor at Assenagon Asset Management, which holds a stake in Deutsche Bank. “But at the same time, this package should end what has been hurting Deutsche Bank for so long: the discussion about the capital situation. Now the bank has to prove that it can be profitable.”

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A boiling cauldron that will keep festering a for a while longer. Italy has a long-standing ownership class that won’t give up easily. Corruption, the mob, the church, secret lodges.

Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)

Matteo Renzi’s comeback risks being undermined by a judicial investigation into the father of the Italian former prime minister and a government minister. Rome prosecutors on Friday were due to question Tiziano Renzi, 65, over an accusation of influence-peddling, his lawyer said. The elder Renzi is alleged to have obtained promises of monthly sums of money from Alfredo Romeo, a Naples entrepreneur, in return for mediating on his behalf for public works contracts, Italian news agency Ansa reported. The ex-premier’s father has denied any wrongdoing. [..] “If the investigation goes ahead, it will surely hurt Matteo Renzi’s prospects even if he has nothing to do with it,” said Sergio Fabbrini, director of the school of government at Luiss University in Rome. “This is the most critical moment of his political career, he has to find a new strategy.”

Tiziano Renzi’s lawyer Federico Bagattini said in a telephone interview that his client had done nothing illicit. “We deny that he ever asked for anything, that he ever promised he would intervene, and that he ever received any money or any other benefit,” Bagattini said. Tiziano Renzi said Thursday he had nothing to hide. “I have never asked for money. I never took any. Never,” he said in a statement reported by Ansa. [..] The anti-establishment Five Star Movement, which has made denunciations of political corruption one of its main platforms, has seized on the case. It submitted on Thursday a parliamentary vote of no confidence against Sports Minister Luca Lotti, a close ally of Matteo Renzi, which will test the government’s majority.

Lotti is also under investigation in the case for allegedly revealing confidential information, according to Italian news media, a charge he denied in a post on Facebook on Thursday. Five Star “talks of kick-backs, arrests, contracts – all things which I have nothing to do with,” Lotti wrote. The office of Franco Coppi, Lotti’s lawyer, did not respond to an emailed request for comment on Friday. The case is “an atomic bomb on Italian politics,” Five Star co-founder Beppe Grillo, who wants a referendum on Italy’s membership of the euro, wrote on his blog. “When it explodes, no one will be able to find shelter. Today more than ever we need honesty in institutions.”

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It didn’t start yesterday. Western media have been killing off their own credibility for propaganda reasons, for many years.

The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)

[..] with trust in the establishment at an all time low, the institutional heft of traditional media companies becomes a liability rather than an asset, enabling Trump to successfully turn the “fake news” label onto his opponents. Much of that goes back to Iraq. “The period of time between 9/11 and the invasion of Iraq represents one of the greatest collapses in the history of the American media,” says Gary Kamiya. “Every branch of the media failed, from daily newspapers, magazines and websites to television networks, cable channels and radio. “Bush administration lies and distortions went unchallenged, or were actively promoted. Fundamental and problematic assumptions about terrorism and the ‘war on terror’ were rarely debated or even discussed. Vital historical context was almost never provided. And it wasn’t just a failure of analysis. With some honourable exceptions, good old-fashioned reporting was also absent.”

Let’s look at the most famous example of how the media was used to make the Iraq war happen. On September 8 2002, the New York Times published a major story by Michael R Gordon and Judith Miller asserting that Iraq had “stepped up its quest for nuclear weapons and … embarked on a worldwide hunt for materials to make an atomic bomb”. The piece cited no named sources whatsoever. Rather, it attributed all its significant claims simply to anonymous US officials – and, by so doing, it helped launder the Bush administration’s talking points, lending a liberal imprimatur to unverified (and totally untrue) claims. When the key members of the Bush administration launched a publicity blitz to make the war happen, they were able to quote the New York Times as evidence: in effect, reacting to newspaper revelations for which they themselves were responsible.

For instance, during a CNN appearance, Condoleeza Rice urged the public to support an invasion on the basis that “we don’t want the smoking gun to be a mushroom cloud”. She’d lifted the phrase directly from Gordon and Miller – who’d taken it from the administration. Elsewhere, Gordon and Miller referred to Iraq’s supposed interest in acquiring high-strength aluminium tubes as an illustration of its nuclear ambitions. Again, the claims came from Bush officials. But when, at the UN General Assembly, Bush told the story, he sounded as if he were repeating a New York Times scoop. A similar circularity defined the propaganda campaign conducted in other countries.

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In case you were still wondering why an entire country and its people are being obliterated.

Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)

“63% of Yemen’s crude production is being stolen by Saudi Arabia in cooperation with Mansour Hadi, the fugitive Yemeni president, and his mercenaries,” Mohammad Abdolrahman Sharafeddin told FNA on Tuesday. “Saudi Arabia has set up an oil base in collaboration with the French Total company in the Southern parts of Kharkhir region near the Saudi border province of Najran and is exploiting oil from the wells in the region,” he added. Sharafeddin said that Riyadh is purchasing arms and weapons with the petro dollars stolen from the Yemeni people and supplies them to its mercenaries to kill the Yemenis. Late in last year, another economic expert said Washington and Riyadh had bribed the former Yemeni government to refrain from oil drilling and exploration activities, adding that Yemen has more oil reserves than the entire Persian Gulf region.

“Saudi Arabia has signed a secret agreement with the US to prevent Yemen from utilizing its oil reserves over the past 30 years,” Hassan Ali al-Sanaeri told FNA. “The scientific research and assessments conducted by international drilling companies show that Yemen’s oil reserves are more than the combined reserves of all the Persian Gulf states,” he added. Al-Sanaeri added that Yemen has abundant oil reserves in Ma’rib, al-Jawf, Shabwah and Hadhramaut regions. He noted that a series of secret documents by Wikileaks disclosed that the Riyadh government had set up a committee presided by former Saudi Defense Minister Crown Prince Sultan bin Abdel Aziz. “Former Saudi Foreign Minister Saud al-Faisal and the kingdom’s intelligence chief were also the committee’s members.”

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“If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet..”

Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)

Turkish President Tayyip Erdogan accused Germany on Sunday of “fascist actions” reminiscent of Nazi times in a growing row over the cancellation of political rallies aimed at drumming up support for him among 1.5 million Turkish citizens in Germany. German politicians reacted with shock and anger. German Justice Minister Heiko Maas told broadcaster ARD that Erdogan’s comments were “absurd, disgraceful and outlandish” and designed to provoke a reaction from Berlin. But he cautioned against banning Erdogan from visiting Germany or breaking off diplomatic ties, saying that such moves would push Ankara “straight into the arms of (Russian President Vladmir) Putin, which no one wants”.

The deputy leader of Chancellor Angela Merkel’s Christian Democratic Union (CDU) party said the Turkish president was “reacting like a wilful child that cannot have his way”, while a top leader of the CDU’s Bavarian sister party described Erdogan as the “despot of the Bosphorus” and demanded an apology. German authorities withdrew permission last week for two rallies by Turkish citizens in German cities at which Turkish ministers were to urge a “Yes” vote in a referendum next month on granting Erdogan sweeping new presidential powers. Berlin says the rallies were canceled on security grounds. However, Turkish Economy Minister Nihat Zeybekci spoke at large events in Leverkusen and Cologne on Sunday while protesters stood outside.

The row has further soured relations between the two NATO members amid mounting public outrage in Germany over the arrest in Turkey of a Turkish-German journalist. It has also spurred growing demands for Merkel to produce a more forceful response to Erdogan’s words and actions. A poll conducted for the Bild am Sonntag newspaper showed that 81% of Germans believe that Merkel’s government has been too accommodating with Ankara. Germany, under an agreement signed last year, relies on Turkey to prevent a further flood of migrants from pouring into Europe. The lead article in German news magazine Der Spiegel on Sunday urged Merkel to free herself from the “handcuffs of the migrant deal”.

[..] A defiant Erdogan said he could travel to Germany himself to rally support for the constitutional changes to grant him greater power. “Germany, you have no relation whatsoever to democracy and you should know that your current actions are no different to those of the Nazi period,” Erdogan said at a rally in Istanbul. “If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet,” he told a separate event.

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And Erdogan will want something in return.

US Asks Ankara For Steps To Ease Aegean Tension (K.)

American officials have urged Ankara to refrain from action that would further escalate tension with fellow NATO member Greece in the Aegean Sea, Kathimerini understands, adding that the issue was raised during the Munich Security Conference last month, as well as during private contacts in Ankara. Sources told Kathimerini that US Secretary of State Rex Tillerson raised the topic with Turkish Foreign Minister Mevlut Cavusoglu on the sidelines of the Munich gathering last month. Assistant Secretary of State John Heffern reportedly asked Turkish officials for steps that will help reduce the recent spike in tensions with Greece.

A few days later, the same sources said, US Ambassador to Ankara John Bass met with Turkey’s Foreign Ministry Undersecretary Umit Yalcin to put pressure in the same direction. Yalcin is said to have attributed the standoffish behavior of the Turkish military to the army’s damaged morale by developments following July’s failed coup attempt. Analysts however say that any autonomy of the Turkish armed forces has been heavily compromised in the wake of the coup. Greek Foreign Minister Nikos Kotzias is expected to travel to Washington for a meeting with Tillerson in the coming days. Talks are to be followed by a telephone conversation between Prime Minister Alexis Tsipras and US President Donald Trump.

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Growth is not possible in Greece today. The entire austerity edifice would have to be reversed.

Greece Desperate For Growth Strategy As Public Mood Darkens (G.)

In navigating the country’s economic collapse, every one of Athens’ post-crisis governments has at some point attempted to change the narrative by diverting attention to development and growth. But the latest shift comes amid evidence that prime minister Alexis Tsipras’s two-party administration has gone a step further, approaching the World Bank for a €3bn loan to finance employment policies and programmes.

The move would highlight the desperation of a government tackling ever-growing poverty rates. Last week, the Cologne Institute for Economic Research said poverty in thrice-bailed out Greece had jumped 40% between 2008 and 2015, by far the biggest leap of any European country. Tsipras has been told he will have to enforce labour market reforms and further pension and income tax cuts if Greece is to realistically achieve a primary surplus of 3.5% – before interest payments are taken into account – once its current rescue programme expires in August 2018. The country faces debt repayments of over €7bn in July and with its coffers near empty would be unable to avert default – and inevitable euro exit – if additional loans weren’t forthcoming.

The prospect of more cuts, when pensions have already been slashed 12 times and some retirees are surviving on little more than €300 a month, has exacerbated the sense of gloom in the eurozone’s weakest member state. “We will have to compromise,” Dragasakis admitted. “Even if such demands are totally irrational,” he said, adding that Greece’s real problem was that it was primarily caught up in an ugly dispute between its lenders over what to do with a debt load close to 180% of GDP. The IMF has projected the pile will reach an “explosive” 275% of output if not relieved – a move that Germany, the biggest provider of bailout funds, refuses steadfastly to agree to. “It is why we have not completed the review,” said Dragasakis of the progress report Athens must conclude to secure further assistance.

The Greek government has been accused of deliberately delaying implementation of reforms. “This government won’t deliver reforms because it doesn’t believe in them,” said the centre-right main opposition leader Kyriakos Mitsotakis at the Delphi forum. As in antiquity, when kings, warriors and philosophers descended on Delphi at times of uncertainty to consult the Pythia, or prophetess, about their future, politicians, policy gurus, economists and academics gather annually at the place once regarded as the centre of the world to debate Greece’s plight. “What we need is a masterplan and a vision to get out of this crisis,” said Nikos Xydakis, the former European affairs minister who is now parliamentary spokesman for the ruling Syriza party. “A masterplan in financial terms but also a vision for a new identity of Greeks once this crisis ends.”

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How mankind gets rid of itself, and can’t help doing it.

Polluted Environments Kill 1.7 Million Children A Year (R.)

A quarter of all global deaths of children under five are due to unhealthy or polluted environments including dirty water and air, second-hand smoke and a lack or adequate hygiene, the World Health Organization (WHO) said on Monday. Such unsanitary and polluted environments can lead to fatal cases of diarrhea, malaria and pneumonia, the WHO said in a report, and kill 1.7 million children a year. “A polluted environment is a deadly one – particularly for young children,” WHO Director-General Margaret Chan said in a statement. “Their developing organs and immune systems, and smaller bodies and airways, make them especially vulnerable to dirty air and water.” In the report – “Inheriting a sustainable world: Atlas on children’s health and the environment” – the WHO said harmful exposure can start in the womb, and then continue if infants and toddlers are exposed to indoor and outdoor air pollution and second-hand smoke.

This increases their childhood risk of pneumonia as well as their lifelong risk of chronic respiratory diseases such as asthma. Air pollution also increases the lifelong risk of heart disease, stroke and cancer, the report said. The report also noted that in households without access to safe water and sanitation, or that are polluted with smoke from unclean fuels such as coal or dung for cooking and heating, children are at higher risk of diarrhea and pneumonia. Children are also exposed to harmful chemicals through food, water, air and products around them, it said. Maria Neira, a WHO expert on public health, said this was a heavy toll, both in terms of deaths and long-term illness and disease rates. She urged governments to do more to make all places safe for children. “Investing in the removal of environmental risks to health, such as improving water quality or using cleaner fuels, will result in massive health benefits,” she said.

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Mar 052017
 
 March 5, 2017  Posted by at 10:40 am Finance Tagged with: , , , , , , , , ,  8 Responses »
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Near The Hermitage, SaintPetersburg, Russia 1930

 


The Rich Already Have a UBI (Jacobin)
The Next Market To Break *Should* Be Stocks (MA)
America’s Miserable 21st Century (CM)
China Cuts GDP Growth Target to 6.5%, Targets Reforms, De-Leveraging (CNBC)
China Signals Slower Increase In Defense Spending (BBG)
The Priced-In Risk of Marine Le Pen’s Victory (BBG)
Self-Fulfilling Pessimism (Vox)
Only The Rich Are Poisoned (Taleb)
Austrian Chancellor Calls For EU-Wide Ban On Turkish Campaigning (R.)
Greece, Getting Smaller (Maria Katsounaki)
Canada: No Plans To Clamp Down At Border To Deter Migrants (R.)
America’s Millions Of Undocumented Mexicans Live In Fear Of Deportation (G.)
Mexico Opens Legal Aid Centers At US Consulates To Defend Migrants (R.)
Stranded Refugees Denied UK Asylum Face ‘Life In Limbo (O.)

 

 

Time to overhaul taxation. Away from income tax. Inevitable.

The Rich Already Have a UBI (Jacobin)

The universal basic income -a cash payment made to every individual in the country- has been critiqued recently by some commentators. Among other things, these writers dislike the fact that a UBI would deliver individuals income in a way that is divorced from working. Such an income arrangement would, it is argued, lead to meaninglessness, social dysfunction, and resentment. One obvious problem with this analysis is that passive income -income divorced from work- already exists. It is called capital income. It flows out to various individuals in society in the form of interest, rents, and dividends. According to Piketty, Saez, and Zucman (PSZ), around 30% of all the income produced in the nation is paid out as capital income. If passive income is so destructive, then you would think that centuries of dedicating one-third of national income to it would have burned society to the ground by now.

In 2015, according to PSZ, the richest 1% of people in America received 20.2% of all the income in the nation. Ten points of that 20.2% came from equity income, net interest, housing rents, and the capital component of mixed income. Which is to say, 10% of all national income is paid out to the 1% as capital income. Let me reiterate: one in ten dollars of income produced in this country is paid out to the richest 1% without them having to work for it. Even if you exclude the capital component of mixed income (since it is connected to work even if the income is not from labor) and housing rents (since these are imputed to homeowners rather than paid to them as cash), that still means that, from equity income and interest alone, the top 1% receives 7.5% of the national income without having to work for it. Put another way: the average person in the top 1% receives a UBI equal to 7.5 times the average income in the country.

If passive income is so destructive, then the income situation of the 1% surely is a national emergency! Where does the 1% get its meaning with all of that free cash flowing in? The fact is that capitalist societies already dedicate a large portion of their economic outputs to paying out money to people who have not worked for it. The UBI does not invent passive income. It merely doles it out evenly to everyone in society, rather than in very concentrated amounts to the richest people in society. The idea of capturing the 30% of national income that flows passively to capital every year and handing it out to everyone in society in equal chunks has been around since at least Oskar Lange wrote about it in the early parts of the last century. This is, to me, the best way to do a UBI, both practically and ideologically. Don’t tax labor to give money out to UBI “loafers.” Instead, snag society’s capital income, which is already paid out to people without regard to whether they work, and pay it out to everyone.

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Looks scary.

The Next Market To Break *Should* Be Stocks (MA)

From an intermarket perspective – and in the wake of the major breakdown in Treasuries that manifested last summer akin to 87′, we would argue that the move in equities is likely much more mature than the echo of the record January 1987 sounding that some have recently pointed to for more bullish intermediate bearings. Their reasonings being, that although the markets may be near-term extended, like in January 1987, they still gained another 30% over the following 8 months. The old market adage applied – overbought can still become more overbought. That said, what the data mining ignores here is similar to the benevolent rotation out of bonds and into equities that supported the reflationary blowoff that began after Treasuries broke down in the Spring of 1987, stocks have been under this same strong reflationary momentum since last summer.

What’s happened this week of note, and which has helped firm our own near-term expectations, is that several Fed presidents have more than candidly implied that the March meeting is very much in play for another rate hike. And although we had recently suspected that more hawkish posturing would adversely impact precious metals over the short-term, long-term Treasuries now again look vulnerable as well, which would closer resemble the final leg lower in Treasuries in 1987 and the curtain call for equities that fall.

In 1987, the initial breakdown leg in the 30-year Treasury bond registered a decline of ~14%. After remaining in a trading range for another 3 months, bond prices fell roughly another 10%, before finding a low as the equity markets broke down. Through the end of last year, the 30-year Treasury bond had fallen ~16% from its highs last summer. Although we still believe long-term Treasuries offer good relative value to investors as the limits of the US’s mature economic expansion become increasingly visible this year, the more than 2 month trading range now appears susceptible to further near-term weakness, akin to the final leg lower in 1987.

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Nice find from Tyler.

America’s Miserable 21st Century (CM)

Yes, things are very different indeed these days in the “real America” outside the bubble. In fact, things have been going badly wrong in America since the beginning of the 21st century. It turns out that the year 2000 marks a grim historical milestone of sorts for our nation. For whatever reasons, the Great American Escalator, which had lifted successive generations of Americans to ever higher standards of living and levels of social well-being, broke down around then—and broke down very badly. The warning lights have been flashing, and the klaxons sounding, for more than a decade and a half. But our pundits and prognosticators and professors and policymakers, ensconced as they generally are deep within the bubble, were for the most part too distant from the distress of the general population to see or hear it.

[..] In some circles people still widely believe, as one recent New York Times business-section article cluelessly insisted before the inauguration, that “Mr. Trump will inherit an economy that is fundamentally solid.” But this is patent nonsense. By now it should be painfully obvious that the U.S. economy has been in the grip of deep dysfunction since the dawn of the new century. And in retrospect, it should also be apparent that America’s strange new economic maladies were almost perfectly designed to set the stage for a populist storm. Ever since 2000, basic indicators have offered oddly inconsistent readings on America’s economic performance and prospects. It is curious and highly uncharacteristic to find such measures so very far out of alignment with one another.

We are witnessing an ominous and growing divergence between three trends that should ordinarily move in tandem: wealth, output, and employment. Depending upon which of these three indicators you choose, America looks to be heading up, down, or more or less nowhere. From the standpoint of wealth creation, the 21st century is off to a roaring start. By this yardstick, it looks as if Americans have never had it so good and as if the future is full of promise. Between early 2000 and late 2016, the estimated net worth of American households and nonprofit institutions more than doubled, from $44 trillion to $90 trillion. (SEE FIGURE 1.)

Although that wealth is not evenly distributed, it is still a fantastic sum of money—an average of over a million dollars for every notional family of four. This upsurge of wealth took place despite the crash of 2008—indeed, private wealth holdings are over $20 trillion higher now than they were at their pre-crash apogee. The value of American real-estate assets is near or at all-time highs, and America’s businesses appear to be thriving. Even before the “Trump rally” of late 2016 and early 2017, U.S. equities markets were hitting new highs—and since stock prices are strongly shaped by expectations of future profits, investors evidently are counting on the continuation of the current happy days for U.S. asset holders for some time to come.

A rather less cheering picture, though, emerges if we look instead at real trends for the macro-economy. Here, performance since the start of the century might charitably be described as mediocre, and prospects today are no better than guarded. The recovery from the crash of 2008—which unleashed the worst recession since the Great Depression—has been singularly slow and weak. According to the Bureau of Economic Analysis (BEA), it took nearly four years for America’s GDP to re-attain its late 2007 level. As of late 2016, total value added to the U.S. economy was just 12% higher than in 2007. (SEE FIGURE 2.) The situation is even more sobering if we consider per capita growth. It took America six and a half years—until mid-2014—to get back to its late 2007 per capita production levels. And in late 2016, per capita output was just 4% higher than in late 2007—nine years earlier. By this reckoning, the American economy looks to have suffered something close to a lost decade.

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It all means very little without new debt data. Are they still trying to borrow growth? You bet.

China Cuts GDP Growth Target to 6.5%, Targets Reforms, De-Leveraging (CNBC)

China is aiming to expand its economy by around 6.5% in 2017 as it continues to implement a proactive fiscal policy and maintain a prudent monetary policy, Premier Li Keqiang said on Sunday. Top leaders at the National People’s Congress are tolerating slightly slower economic growth this year to give them more room to push through reforms to deal with a build-up in debt. A lending binge and increased government spending last year have fueled worries about high debt levels and an overheating housing market. GDP officially grew 6.7% in 2016, the slowest in 26 years, but within the government’s target range of 6.5 to 7%. That 6.5% growth target is “needed to achieve the employment objective,” Li said in his prepared remarks.

The government announced ambitious jobs plans, including to ensure that every family has at least one breadwinner, which is key as jobs are cut in major state-owned enterprises. As the government moves away from manufacturing-led growth, Beijing is tasked with quickly finding new employment for millions of workers, or risk the possibility of social unrest as unemployment looms China says it expects 11 million new urban jobs will be created this year, but that still wont keep pace with the 15 million new workers the government estimates will enter the market, according to prepared remarks. The government will continue to focus on the coal and steel sectors, with plans in place to cut steel production capacity. But experts were skeptical of the idea that certain economic growth levels would be “needed” for employment reasons.

“There is not now nor has there ever been any magical connection between GDP and jobs. You can have capital-intensive 6.5% GDP growth and not create enough jobs and you can have 3.5% labor-intensive GDP growth and create more than enough jobs,” said Derek Scissors, a resident scholar at the American Enterprise Institute and chief economist of the China Beige Book. “The Chinese government’s position for the past 20 years has been that the nutrition content of food doesn’t matter at all, only the number of calories.” This doesn’t make any sense economically, but it’s perfectly clearly politically,” he said, noting that China had said it needed greater GDP growth when its labor force was actually expanding, as opposed to its current contraction.

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Becoming unaffordable?

China Signals Slower Increase In Defense Spending (BBG)

China indicated a continued slowdown in defense spending growth this year, as President Xi Jinping presses ahead with a sweeping military overhaul. The defense budget will rise “about 7%,” National People’s Congress spokeswoman Fu Ying told a briefing ahead of China’s annual legislative session in Beijing. An actual spending target wasn’t expected until Sunday, when the Ministry of Finance releases its 2017 budget at the start of the 11-day legislative gathering. Last year, the country budgeted a 7.6% uptick in military spending to 954.4 billion yuan (equal to $147 billion at the time), the slowest increase since a 7.3% rise in 2010. Seven% would be the slowest expansion in more than a decade, tracking the broader trend in the country’s economy.

The increase consolidates China’s lead as the world’s second-largest military spender, accounting for more than 10% of the global arms total, said Siemon Wezeman, a senior researcher with the Stockholm International Peace Research Institute. More than two decades of expansion have helped China build a modern military capable of projecting force further from its coasts, while spurring anxious neighbors to upgrade their own defenses. Fu said China was committed to peace and described tensions in the South China Sea, where the country’s land reclamation campaign has been criticized by the U.S. and rival claimants, as “easing.” “We advocate dialogue and peaceful solutions to disputes of sovereignty and maritime rights,” said Fu, a former vice foreign minister and ex-ambassador to the U.K. “Meanwhile, we should possess the capacity to protect our sovereignty and interests.”

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Don’t count her out.

The Priced-In Risk of Marine Le Pen’s Victory (BBG)

Markets trade in the probability of certain events happening. In case an event has high risk, a “tail” is priced in. Those tail risks typically show up in certain corners of the markets. Today, tail risks are priced in for a potential unexpected outcome in the French elections. That tail risk is on the rise now that polls of the second round of voting indicate a tight race between center candidate Emmanuel Macron and the far-right candidate Marine Le Pen. Tail risks can be viewed in a linear way. For example, the German 2-year bond (“Schatze”) reached an all-time negative yield of -92 basis points when Le Pen recently gained in the polls.

As a result, the German 2-year yield became negatively correlated with the price of French bonds and stocks. A generic view is that German bonds are a reflection of the “tail risk” that Le Pen is victorious. However, there are technical reasons to explain the fall of German 2-year bonds. Those technicalities are a scarcity of German bond collateral in the repurchase market and the ECB’s purchase of German bonds yielding less than the deposit rate. This is what makes the 2-year German bond “overvalued” and therefore not as accurate a reflection of the true tail risk in France. There are other areas in markets that provide a better idea of how much of a Le Pen win is priced in.

Tail risks can be seen in currency options. The options market use a measure called “skew.” This is the difference between the implied volatility of puts and calls. A negative skew means currency markets price euro puts with higher implied volatility than the currency’s calls. In the case of negative skew, the currency market thinks the risk for depreciation of a currency is large. The skew of the euro currency has been on a steady decline since President Donald Trump was elected in November, as seen in Fig. 1. On the other hand, the French bond market has seen a surge in yields discounted to the second round of the presidential election, on May 7. Rising yields are a sign of uncertainty about the outcome of the election. Fig. 1 shows how markets are pricing a “tail risk” of an adverse election outcome. And this tail risk seems to be increasing by the day.

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I like Blanchard’s notion that “the reason unemployment is decreasing is productivity growth is so low.” But I don’t get that he overlooks, when saying “why is demand growth not stronger?”, that so many people have simply lost the means to spend. That seems to be a curious blind spot for an IMF economist. it’s not about pessimism, it’s about not having any money.

Self-Fulfilling Pessimism (Vox)

Why is it that demand growth is not stronger? In this video, Olivier Blanchard discusses his research on long-run forecasts and unexpected decreases in consumption. This video was recorded at the American Economic Association in Chicago in January 2017.

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“..one is more likely to be drinking poison in a golden cup than an ordinary one.”

Only The Rich Are Poisoned (Taleb)

When people get rich, they shed their skin-in-the game driven experiential mechanism. They lose control of their preferences, substituting constructed preferences to their own, complicating their lives unnecessarily, triggering their own misery. And these are of course the preferences of those who want to sell them something. This is a skin-in-the-game problem as the choices of the rich are dictated by others who have something to gain, and no side effects, from the sale. And given that they are rich, and their exploiters not often so, nobody would shout victim. I once had dinner in a Michelin-starred restaurant with a fellow who insisted on eating there instead of my selection of a casual Greek taverna with a friendly owner operator, his second cousin as a manager and his third cousin once removed as a receptionist.

The other customers seemed, as we say in Mediterranean languages, to have a cork plugged in their behind obstructing proper ventilation, causing the vapors to build on the inside of the gastrointestinal walls, leading to the irritable type of decorum you only notice in the educated upper classes. I note that, in addition to the plugged corks, all men wore ties. Dinner consisted in a succession of complicated small things, with microscopic ingredients and contrasting tastes that forced you to concentrate as if you were taking some type of exam. You were not eating, rather visiting some type of museum with an affected English major lecturing you on some artistic dimension you would have never considered on your own. There was so little that was familiar and so little that fit my taste buds: once something on the occasion tasted like something real, there was no chance to have more as we moved on to the next dish.

Trudging through the dishes and listening to some b***t by the sommelier about the paired wine, I was afraid of losing concentration. I costs a lot of energy to fake that I was not bored. In fact I discovered an optimization in the wrong place: the only thing I cared about, bread, was not warm. It appears that this is not a Michelin requirement. I left the place starving. Now if I had a choice I would have had some time-tested recipe (say a pizza with very fresh ingredients, or a juicy hamburger) in a lively place –for a twentieth of the price. But because the fellow dinner partner could afford the expensive restaurant, we ended up the victims of some complicated experiments by a chef judged by some Michelin bureaucrat. It would fail the Lindy effect: food does better through minute variations from Sicilian grandmother to Sicilian grandmother. It hit me that the rich people were natural targets; as the eponymous Thyestes shouts in Seneca’s tragedy, thieves do not enter impecunious homes, and one is more likely to be drinking poison in a golden cup than an ordinary one.

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The Turkish foreign minister claims the right to campaign among Turkish residents in Germany and Holland. Nobody wants that. Imagine if Mexico would take its political campaigns to US streets.

Austrian Chancellor Calls For EU-Wide Ban On Turkish Campaigning (R.)

Austrian Chancellor Christian Kern on Sunday called for a European Union-wide ban on campaign appearances by Turkish politicians to avoid having individual member countries like Germany come under pressure from Ankara. Turkey said on Saturday it would defy opposition from authorities in Germany and the Netherlands and continue holding rallies in both countries to urge Turks living there to back an April 16 referendum to boost President Tayyip Erdogan’s powers. Turkish Foreign Minister Mevlut Cavusoglu criticized German and Dutch restrictions on such gatherings as undemocratic, and said Turkey would press on with them in the run-up to the vote. Kern, in an interview published in the Welt am Sonntag newspaper, said the measure would weaken the rule of law in Turkey, limit the separation of powers, and violate the values of the EU.

He also called for the EU to end discussions with Turkey about membership in the bloc and scrap or restrict €4.5 billion in aid planned for Turkey through 2020. “We should reorient relations with Turkey without the illusion of EU membership,” Kern told the newspaper. “Turkey has moved further and further away from Europe in the past few years. Human rights and democratic values are being trampled. Press freedom is a foreign word,” he said. Kern criticized Ankara’s arrest of German-Turkish journalist Deniz Yucel, a correspondent for Die Welt newspaper, and many other journalists, academics and civil servants, and called for Yucel’s immediate release. At the same time, he said, Turkey remained an important partner in issues of security, migration and economic cooperation, and said Ankara had lived up to its obligations under the migrant deal struck with the EU.

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The demise of a nation.

Greece, Getting Smaller (Maria Katsounaki)

“Instead of ‘Little Greece’ we need a serious Greece,” former Prime Minister Costas Simitis told the Delphi Economic Forum on Friday. As he spoke, Athens was suffocating again because of a mass transit strike, “unknown persons” were destroying ticket validating machines on buses, Eurostat’s figures showed that Greece is the consistent champion in unemployment, at 23% (with the next country, Spain, at 18.2% and the eurozone average at 9.6%), while a report from the Cologne Institute for Economic Research (IW) named Greece the leader in the percentage rise of poverty. The talks between the Greek government and its creditors show more differences than convergence, while Politico reported that the government has asked the World Bank for technical and financial assistance…

Each of the issues we mentioned has a past, present and future. They are not the same – some are tied to the economic crisis, other are not. One could argue that putting them together is aimed at making an impression. But let’s ask ourselves how the destruction of ticket validating machines was allowed to become a hobby. How have illegality and criminality become normal? How will unemployment and poverty be reduced when every investment crashes against denial, suspicion and compulsive behavior? When the only thing that grows is the amount of taxes and social security fees that we must pay? Let us ask ourselves this: When did the discussion that for a strike to be held “50% plus 1” of employees must agree, so as to put an end to the impunity of minorities?

Why has union leadership that is allied to political parties become “the right to strike” whereas any effort at reform serves the interests of the “economic oligarchy”? How can anyone trust a government that, while “negotiating hard” at the same time declares “the crisis is over,” while behaving as if this were a Third World country? Every day we are further gone in our illness and further from recovery. Little Greece is neither honest nor serious. It is not size that makes her lack credibility, but the ever-deeper national autism, the constant repetition of the performance “we are fighting for solutions” while caring nothing for solutions.

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Got to keep that border open.

Canada: No Plans To Clamp Down At Border To Deter Migrants (R.)

Canada will not tighten its border to deter migrants crossing illegally from the United States in the wake of a U.S. immigration crackdown because the numbers are not big enough to cause alarm, a government minister said on Saturday. Public Safety Minister Ralph Goodale said the issue had not risen to a scale that required hindering the flow of goods and people moving across the world’s longest undefended border. Hundreds of people, mainly from Africa and the Middle East, have defied winter conditions and walked across the border, seeking asylum. They are fleeing President Donald Trump’s immigration crackdown, migrants and refugee agencies say.

It is not common to have so many asylum seekers in the United States looking for refuge in Canada over such a short period. The influx poses a political risk for Prime Minister Justin Trudeau, who faces pressure from the left, which wants more let in, and from the right, which fears an increased security risk. “We are concerned and we will deal properly with the extra hundreds (crossing illegally),” Goodale told reporters at a televised news conference in Emerson, Manitoba. “But the full border deals with 400,000 people moving in both directions every day. It also handles C$2.5 billion in trade every day. “It is critically important for us to make sure that it is strong and secure. At the same time, it needs to be efficient and expeditious.”

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Since it’s impossible to deport millions of people, clearer heads are called for.

America’s Millions Of Undocumented Mexicans Live In Fear Of Deportation (G.)

The queue starts outside the consulate gate soon after dawn and stretches up Park View street. The visitors speak in low murmurs, exchanging the latest rumours. A dragnet in Glendale. Checkpoints in Highland Park. People deported for jaywalking. For speaking Spanish. Some visitors say they have sold their furniture to create an emergency fund. Others wonder if they should stop going to work and pull their kids from school. Overreactions? Wise precautions? No one knows. They’ve come here for answers. Inside the gate hulks a nondescript, cream-coloured office block. Lights flicker into life on a pale winter day and by 7am all is aglow: the consulate general of Mexico in Los Angeles is open for business. It is a lighthouse, of sorts, for undocumented Mexicans caught in the political maelstrom that is Hurricane Trump.

“I’m here to make a plan,” said Juana Sanchez, 53, a seamstress who has stitched and sewed in LA’s fashion district for 29 years. A plan for what? She managed a tight smile. “Deportation.” The immigration policies gusting out of the White House have chilled the US’s estimated 11 million undocumented people, half of whom are Mexican. The new president has vastly widened the numbers deemed priorities for expulsion. “As we speak tonight we are removing gang members, drug dealers that threaten our communities and prey on our very innocent citizens,” he told a joint session of Congress last week. “Bad ones are going out as I speak and as I promised throughout the campaign.”

The Mexicans who flock to the LA consulate say that in reality Immigration and Customs Enforcement (ICE) is sweeping up caretakers, students, mothers – anyone who entered the US illegally, and is thus a law-breaker. “Trump is the world’s worst terrorist. He has the Latino community terrorised,” said Rosa Palacios, a careworker with a nine-year-old granddaughter who weeps in fear at losing relatives. The hostility outdid previous anti-immigrant crackdowns, she said. “It is worse than when they thought we were infected.”

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Mexico may well come out of this a stronger country.

Mexico Opens Legal Aid Centers At US Consulates To Defend Migrants (R.)

Mexico opened legal aid centers at its 50 consulates across the United States on Saturday to defend its citizens, the Mexican government said, amid worries of a crackdown on illegal immigration under U.S. President Donald Trump. Foreign Minister Luis Videgaray exhorted the U.S. government to respect the rights of Mexicans and called for the United States to allow a path to legality for undocumented migrants. “We are not promoting illegality,” Videgaray said, according to a video of an event at the Mexican consulate in New York provided by the foreign ministry, saying that Mexico supported following the law, but that means respecting human rights. Trump has issued orders to initiate tougher deportation procedures during his first month in office, following up on campaign vows to fight illegal immigration and to build a wall on the U.S.-Mexico border.

“Today we are facing a situation that can paradoxically represent an opportunity, when suddenly a government wants to apply the law more severely,” Videgaray said. “It is becoming more than evident that to apply the law, which is the obligation of any state, would also imply a real economic damage to this country which highlights the need for immigration reform, an immigration reform that resolves once and for all the legal status of the people,” Videgaray said. The Pew Research Center estimates there are nearly 6 million undocumented Mexicans living in the United States. Late last month, Videgaray expressed “worry and irritation” about Trump’s new policies to U.S. Secretary of State Rex Tillerson and Homeland Security chief John Kelly when they visited Mexico for talks on immigration and security.

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There is so much international law concerning the rights of refugees, written especially after wars, but none of it seems to matter much.

Stranded Refugees Denied UK Asylum Face ‘Life In Limbo (O.)

Almost half of the refused asylum seekers who are unable to leave the UK have considered committing suicide, according to new research that criticises government rules for forcing individuals into destitution and a life in limbo. Interviews with asylum seekers refused permission to remain, in the UK but who cannot go home because they lack a passport, their nationality is disputed or there is no viable route back to their country, also found that half have considered or are applying for statelessness. The British Red Cross charity said such individuals should be allowed temporary leave to remain and work if they meet Home Office requirements, sparing people from years living in penury.

The charity said it knew of cases where women trapped in this situation had resorted to paying for a place to sleep with sex. It cited one Algerian who has been in the UK for 17 years who wassleeping on the streets and warned that those stuck in such limbo frequently suffer periods of homelessness alongside debilitating mental health issues, and that survival depended on the goodwill of friends and charities. Analysis by the Guardian last week revealed that Britain is one of the worst destinations in western Europe for people seeking asylum. Based on in-depth interviews with 15 people, the British Red Cross report found chronic stress, insomnia, anxiety and depression, with one refused asylum seeker from Sudan, a victim of torture, describing that he self-harms by banging his head against the wall.

No conclusive figures exist on the numbers of people who cannot leave the UK, although a freedom of information response from the Home Office reveals that 1,096 people lodged an application for statelessness in the UK after being refused asylum, following the introduction of new guidance in April 2013.

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Feb 222017
 
 February 22, 2017  Posted by at 9:45 am Finance Tagged with: , , , , , , , ,  4 Responses »
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DPC Launch of battleship Georgia, Bath, Maine, Oct 1904

 


Finance as Warfare: IMF Lent to Greece Knowing It Could Never Pay Back (CP)
Will EU and IMF Finally Offer Light At The End Of The Greek Debt Tunnel? (G.)
France Exiting The Euro Would Be Largest Sovereign Default In History (CNBC)
EU Tax Chief Admits Le Pen Win Would Be The End Of The European Project (CNBC)
Marine Le Pen’s Party’s Headquarters Raided Over ‘Fake Jobs’ Scandal (AFP)
Revised Trump Travel Ban Will Face Legal Hurdles, Too (BBG)
The Cognitive Bias President Trump Understands Better Than You (Wired)
US Car Loans, Delinquencies Hit Record Levels (Q.)
‘Trapped Wealth’ Drives Toronto’s Speculative Real Estate Dilemma
China’s Central Bank To Shine Regulatory Light On Shadow Banking (SCMP)
Tech CEOs Back Call For Basic Income (CNBC)
Monsanto and Bayer’s Chemical Romance: Heroin, Nerve Gas and Agent Orange (AN)
Canada Will Not Halt Illegal Border Crossing Despite Opposition – Trudeau (R.)
Canada To Welcome 1,200 Yezidi Refugees From Iraq (AFP)
Europe Wrote The Book On Demonising Refugees, Long Before Trump Read It (G.)
Bodies Of At Least 74 Migrants Wash Ashore In Western Libya (G.)

 

 

Michael Hudson speaking. “..when Greece fails, that’s a success for the foreign investors that want to buy the Greek railroads. They want to take over the ports. They want to take over the land. They want the tourist sites.”

Finance as Warfare: IMF Lent to Greece Knowing It Could Never Pay Back (CP)

I take issue with one thing that you said. You said the lenders expect Greece to grow. That is not so. There is no way in which the lenders expected Greece to grow. In fact, the IMF was the main lender. It said that Greece cannot grow, under the circumstances that it has now. What do you do in a case where you make a loan to a country, and the entire staff says that there is no way this country can repay the loan? That is what the IMF staff said in 2015. It made the loan anyway – not to Greece, but to pay French banks, German banks and a few other bondholders – not a penny actually went to Greece. The junk economics they used claimed to have a program to make sure the IMF would help manage the Greek economy to enable it to repay. Unfortunately, their secret ingredient was austerity.

Sharmini, for the last 50 years, every austerity program that the IMF has made has shrunk the victim economy. No austerity program has ever helped an economy grow. No budget surplus has ever helped an economy grow, because a budget surplus sucks money out of the economy. As for the conditionalities, the so-called reforms, they are an Orwellian term for anti-reform, for cutting back pensions and rolling back the progress that the labor movement has made in the last half century. So, the lenders knew very well that Greece would not grow, and that it would shrink. So, the question is, why does this junk economics continue, decade after decade? The reason is that the loans are made to Greece precisely because Greece couldn’t pay.

When a country can’t pay, the rules at the IMF and EU and the German bankers behind it say, don’t worry, we will simply insist that you sell off your public domain. Sell off your land, your transportation, your ports, your electric utilities. This is by now a program that has gone on and on, decade after decade. Now, surprisingly enough, America’s ambassador to the EU, Ted Malloch, has gone on Bloomberg and also on Greek TV telling the Greeks to leave the euro and go it alone. You have Trump’s nominee for the ambassador to the EU saying that the EU zone is dead zone. It’s going to shrink. If Greece continues to repay the loan, if it does not withdraw from the euro, then it is going to be in a permanent depression, as far as the eye can see. Greece is suffering the result of these bad loans. It is already in a longer depression today, a deeper depression, than it was in the 1930s.

[..] when Greece fails, that’s a success for the foreign investors that want to buy the Greek railroads. They want to take over the ports. They want to take over the land. They want the tourist sites. But most of all, they want to set an example of Greece, to show that France, the Netherlands or other countries that may think of withdrawing from the euro – withdraw and decide they would rather grow than be impoverished – that the IMF and EU will do to them just what they’re doing to Greece. So they’re making an example of Greece. They’re going to show that finance rules, and in fact that is why both Trump and Ted Malloch have come up in support of the separatist movement in France. They’re supporting Marine Le Pen, just as Putin is supporting Marine Le Pen. There’s a perception throughout the world that finance really is a mode of warfare.

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Suggestion: lock them up until they have an agreement. Then let Greeks vote on that.

Will EU and IMF Finally Offer Light At The End Of The Greek Debt Tunnel? (G.)

Simon Tilford, deputy director of the Centre for European Reform, a thinktank, said he believed the IMF and eurozone would find a compromise, whereby the fund signed up to the 3.5% target for a limited period of time, as the price of stabilising the eurozone in an election year. “My feeling is they will largely settle for a fig leaf. It will be made to look as if the pace of austerity has been eased, ie that the eurozone will agree that the size of the primary budget surplus will be reassessed at some specified point in the future.” “All we are going to see us another round of extend and pretend.” He added that this would not do anything “significant to alleviate the pressure we see on Greece”. He pointed out that even a primary budget surplus of 1.5% (favoured by the IMF) “would still mean ongoing austerity in Greece”. The IMF’s reforms may also prove politically difficult to sell to a population reeling from nearly eight years in the EU’s bailout regime.

One of the IMF’s key demands is an overhaul of the Greek tax system to ensure more middle-class professionals pay their dues. More than 50% of Greek wage earners do not pay income tax, compared with 8% in the rest of the eurozone. But the low tax take partly reflects the economic collapse that has pushed down wages and squeezed people out of regular work. Reforming pensions, another IMF priority, may also run into trouble. The fund wants to rein in “extremely generous” Greek pensions that absorb 11% of national income. But Greek pensions have already been slashed since 2010, with 43% of pensioners living on €660 a month, compared with an average annual income of €20,000 for over-65s in other eurozone countries, according to government figures. Many Greek pensioners are also supporting unemployed children and grandchildren, as other benefits have been cut. With these politically tough reforms ahead, the light at the end of tunnel looks dim and distant. “Greeks are facing ongoing austerity into the foreseeable future,” Tilford says.

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Sorry, but fearmongering no longer works.

France Exiting The Euro Would Be Largest Sovereign Default In History (CNBC)

A few days ago, David Rachline of the far-right National Front party in France said that “the debt of France is about €2 trillion, about €1.7 trillion are issued under French law, which means that it can be re-denominated.” The economic program of the National Front specifically calls for the exit of the euro and the creation of a new currency, the French franc, which would be “closely” linked to the euro while allowing the government to undertake “competitive devaluations” making the transition in an “orderly way”. There is only one problem. It does not work. There is no “orderly exit” from the euro. It is an oxymoron. This would be the largest credit event in history and would create a massive contagion effect throughout the euro zone. The euro, obviously, would suffer from the break-up risk, so the fallacy of the “closely linked” second currency is simply a joke.

Both would collapse in tandem. The risk is already evident. The French-German yield spread has reached the highest level since 2012 despite the ECB’s massive quantitative easing. The ECB has bought more than €255 billion of French bonds. This mirage of an “orderly exit” ignores that the French financial system, which carries assets more than three times the size of France´s GDP, would be severely damaged from the impact of the credit event. A financial system that already suffers from weak net income margins and more than 160 billion euros in non-performing loans, would collapse as these bad loans escalate and the losses in the banks’ bond portfolios eat away their core capital. This would inevitably lead to Greek-style capital controls and bank runs as the entities would lose liquidity support from the ECB.

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“I think the rise of Le Pen is a result of the disappointment in other candidates..” Eh, no, it’s disappointment in the EU.

EU Tax Chief Admits Le Pen Win Would Be The End Of The European Project (CNBC)

A win for far-right presidential candidate Marine Le Pen would spell the end of the EU – but the French are not crazy enough to let that happen, insists European Commissioner Pierre Moscovici. “I’m confident. I know my citizens and my compatriots well and know they are not going to elect a candidate who is proposing France exiting (Europe). That would be the end of the European project,” Moscovici, who is European Commissioner for Economic and Financial Affairs, told CNBC Monday. In a clear nod to the rising populist movements in Europe, the election of U.S. President Donald Trump and the U.K.’s EU referendum, Moscovici, said he believes common sense will prevail as France goes to the polls in the two-round election this year. “I cannot imagine 50% of the French are crazy enough to vote for her,” he said.

“I’m quite convinced that she cannot win … she never even ever won a regional election in France – never ever.” Moscovici appealed, however, to the other presidential candidates, who include Independent Emmanuel Macron and Republican Francois Fillon, to prove themselves to the electorate and, ultimately, make a stronger case for remaining in the EU. “The other candidates need to have a stronger campaign and show that they are credible to propose a future that is likeable for the French. “I think the rise of Le Pen is a result of the disappointment in other candidates, so I urge them to make a strong proposal for France, and as well for Europe, and for France in Europe.”

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It’s amazing that they haven’t tried more of these tactics to make her look bad (they will, though). “For the second time, a raid took place at the same offices, over the same allegations, which confirms that the first raid amounted to nothing..”

Marine Le Pen’s Party’s Headquarters Raided Over ‘Fake Jobs’ Scandal (AFP)

French investigators probing an alleged fake jobs scam by the far-right National Front (FN) raided the group’s headquarters outside Paris on Monday, the party said. The raid is the second in a year by investigators trying to determine whether the FN used European Parliament funds to pay for 20 assistants presented as parliamentary aides while continuing to work for the party elsewhere. “For the second time, a raid took place at the same offices, over the same allegations, which confirms that the first raid amounted to nothing,” the party said in a statement. The group accused investigators acting for the Paris prosecutor’s office of a “media operation” designed to disrupt the presidential campaign of FN leader Marine Le Pen. Le Pen, who has led the anti-EU party since 2011, is a member of the European Parliament which accuses her of defrauding it of nearly €340,000.

She is riding high in polls ahead of the two-stage presidential election on April 23 and May 7 election, and has denied the claims, describing the investigation as a vendetta against her. According to a report by the EU’s anti-fraud office OLAF, leaked last week, the parliament paid out 41,554 euros towards a contract for Le Pen’s bodyguard Thierry Legier who was falsely presented as a parliamentary assistant. The allegations against Le Pen have been drowned out by a fake jobs scandal engulfing her conservative rival Francois Fillon. Fillon’s campaign has been adrift since it emerged that his wife netted at least 680,000 euros for a suspected fake job as a parliamentary assistant over a period spanning 15 years. He has denied the allegations. Polls currently show Le Pen winning the first round of the election, but failing to garner the more than 50% of voters needed for victory in the second round.

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I still think it’s a good thing the US is having this conversation. But the upcoming ugliness is terrible. You need to always take care of individual people first.

Revised Trump Travel Ban Will Face Legal Hurdles, Too (BBG)

President Donald Trump is poised to announce a redrafted executive order on immigration from seven majority-Muslim countries. Will it pass legal muster? Or will the courts once again thwart the president’s will? Early reports suggest that the new order will be drafted to avoid many of the legal problems that were posed by the earlier version, and to make judicial review harder to obtain. But the crucial question is whether the courts will consider the political context in which the order was drafted to conclude that it is still a Muslim ban under another name. Whether the court should do so turns out to be a close legal question. But Supreme Court precedent suggests that it should – in which case the new order could well be blocked like the original. The expected fixes in the new order would improve the administration’s legal position.

For one thing, the new order is expected to exclude legal permanent residents with green cards, who were included in the original order according to the administration’s early guidance, then excluded by a later interpretation. In its decision upholding a temporary restraining order by a federal judge in Seattle against enforcement of the first travel ban, the U.S. Court of Appeals for the Ninth Circuit treated the executive order as covering green card holders. That mattered because, as the court said, green card holders have a stronger constitutional claim to be covered by the due-process clause of the Constitution than do other visa holders. By excluding green card holders, the new order would force plaintiffs to identify different people who are harmed by the order.

Another smart revision would be to omit the provision that said religious minorities in the seven countries – which is to say, almost certainly Christians – would be given preferential treatment when refugees are once again let into the U.S. That provision was the only part of the text that could be used to suggest that the order unconstitutionally favored one religion, Christianity, over another, Islam. The Trump administration would also be smart to phase in the new order to avoid trapping visa holders who are in transit, which creates sympathetic plaintiffs detained at the airports. But that’s not the end of the game, constitutionally speaking. Even if due process is omitted from the case entirely, plaintiffs could still allege once more that the order discriminates on the basis of religion in violation of the free-exercise and establishment clauses of the First Amendment.

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Paint a strong picture of something that’s not the norm.

The Cognitive Bias President Trump Understands Better Than You (Wired)

Americans born in the United States are more murderous than undocumented immigrants. Fighting words, I know. But why? After all, that’s just what the numbers say. Still, be honest: you wouldn’t linger over a story with that headline. It’s “dog bites man.” It’s the norm. And norms aren’t news. Instead, you’ll see two dozen reporters flock to a single burning trash can during an Inauguration protest. The aberrant occurrence is the story you’ll read and the picture you’ll see. It’s news because it’s new. The problem here is not just that this singling out creates a distorted, fish-eye lens version of what’s really happening. It’s that the human psyche is predisposed to take an aberration—what linguist George Lakoff has called the “salient exemplar”—and conflate it with the norm.

This cognitive bias itself isn’t new. But in a media environment driven by clicks, where politicians can bypass journalistic filters entirely to deliver themselves straight to citizens, it’s newly exploitable. You know who else isn’t as likely to commit murders in the US as native-born citizens? Refugees. Or immigrants from the seven countries singled out in President Trump’s shot-down travel ban. Or for that matter, immigrants at all. According to numerous studies, increased immigration correlates with lower violent crime rates in a community. Yet next week, Trump is promising a revised travel ban in the name of safety. In the past, the president has also promised to publish a weekly list of crimes committed by undocumented immigrants. What he hasn’t promised to publish is a list of crimes committed by Americans. That’s not news.

But his list is likely to create the false impression that undocumented immigrants are especially prone to commit violent crimes—an impression in which the human brain is complicit. Lakoff, a University of California, Berkeley linguist and well-known Democratic activist, cites Ronald Reagan’s “welfare queen” as the signature “salient exemplar.” Reagan’s straw woman—a minority mother who uses her government money on fancy bling rather than on food for her family—became an effective rhetorical bludgeon to curb public assistance programs even though the vast majority of recipients didn’t abuse the system in that way. The image became iconic, even though it was the exception rather than the rule. Psychologists call this bias the “availability heuristic,” an effect Trump has sought to exploit since the launch of his presidential campaign, when he referred to undocumented Mexican immigrants as rapists.

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Slaves.

US Car Loans, Delinquencies Hit Record Levels (Q.)

Last year, Americans bought more new cars than ever before. Given that auto sales make up around a fifth of all retail spending, 2016’s banner year is being hailed as a sign of burgeoning consumer confidence across the country. But something else is revving up, too: auto loans. The US closed out 2016 with just shy of $1.2 trillion in outstanding auto loan debt, a rise of 9% from the previous year and 13% above the pre-crisis peak in 2005, in inflation-adjusted terms. The number of cars and trucks on the road, meanwhile, rose by only 1.5% last year, and 9% since 2005, according to US transportation department data.

Total household debt levels are now a hair under their 2008 peak, with some of the fastest growth in recent years down to auto loans. If America’s car-buying bonanza is being fueled by cheap credit, is consumer sentiment really as robust as it might seem? And is it sustainable? There are reasons to wonder. While car purchases and financing have leapt since 2009, wages have picked up only slightly over the same period. Meanwhile, the average loan taken out to buy a new car has risen steadily.

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TO learned nothing from Vancouver.

‘Trapped Wealth’ Drives Toronto’s Speculative Real Estate Dilemma

Toronto’s housing boom is unrelenting. Prices in Canada’s largest city surged more than 20% over the past year, the fastest pace in three decades, data released last week show. Some of the city’s neighboring towns are posting even bigger gains. It’s become a matter of considerable alarm. Stability is one concern: if the market tumbles, so will Canada’s economy. Pricier real estate also drives away less-affluent, younger people and boosts the cost of doing business, eroding competitiveness. “I don’t think anybody is cheering,” said Doug Porter, the Toronto-based chief economist of Bank of Montreal, who used the dreaded “bubble” word last week to describe the market. “I don’t see who benefits other than real estate agents. It’s trapped wealth.”

So, what’s driving the boom? The housing industry – builders and brokers – claim lack of supply is the main culprit. Others, Porter included, see demand as the problem. Lately, evidence is mounting that speculation is behind the jump. Builders say they are being held back by everything from regulations to prohibitive taxes and land restrictions. Ontario’s greenbelt region around Toronto is one example. This is no doubt true for one segment of the market: single-detached homes. Just over one-quarter of the 176,000 homes built in Toronto over the past five years were single-detached. That’s well down from the 1990s, when they accounted for almost half of all construction. Supply constraints don’t explain the price gains for condominiums, which have seen a flood of new completions. The average sale price of a condo is up 15% year-over-year. That’s after builders completed more than 54,000 apartment units over the past two years, easily a record supply for Toronto.

Canada’s recent census results, released this month, also provide some evidence against the shortage argument. Occupied private dwellings have risen by 7.2% in Toronto over the past five years, faster than population growth. The census, however, doesn’t say what type of homes are being built. Plus, there is also the recent puzzle of disappearing listings. New listings in Toronto fell 17% in January from a month earlier, the biggest one-month decline since 2002. Sales as a share of new listings rose above 90%, smashing the record. Is this a sign of a bubble? Are sellers holding off putting their homes on the market to see where prices settle? Has supply become so tight that potential sellers are pulling out of the market altogether since they have nowhere to move to? “The market is thinning out basically, you know what that means,” said David Madani, an economist at Capital Economics in Toronto, said in a telephone interview.

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They keep on announcing this. And the shadow system keeps growing, rapidly.

China’s Central Bank To Shine Regulatory Light On Shadow Banking (SCMP)

China’s financial watchdogs are considering casting a huge new regulatory net over the country’s vast shadow banking sector. The central bank has spearheaded the drafting of new regulations to tame China’s 60 trillion yuan “asset management” industry. According to people who have seen the draft regulations, the rules would bring the various kinds of asset management products and investment schemes offered by all kinds of financial institutions under the one regulatory umbrella. Oversight for the flourishing sector is now split between the securities, banking and insurance regulators. China Minsheng Banking chief analyst Wen Bin said regulatory standards differed between watchdogs and a unified system would help regulators cut systemic risks and financial leverage.

“China’s financial innovation has grown quickly in the past few years and the blending of financial operations through asset management products has challenged the fragmented regulatory system,” Wen said. Mainland financial institutions, including banks, mutual fund firms, brokerages and insurance companies, have rushed to set up asset management schemes, raising funds from clients and then investing in a range of markets and projects. These schemes are usually beyond the watch of regulators and harbour growing risks for the country’s financial stability, something the leadership is determined to eliminate ahead of a big power reshuffle due late this year. If rolled out, the rules would ban financial institutions from promising clients a minimum or fixed return from their products. Institutions would have to contribute 10% of their management fees to a risk reserve fund, and funds in one “asset management product” could not be used in another, except in authorised cases.

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These people really think they will rule the world. But what happens when the economy collapses? When the S&P falls 50%+? Are robots going to grow your food?

Tech CEOs Back Call For Basic Income (CNBC)

It’s 2067 and robots have wiped out millions of jobs, AI is rampant, and unemployment is on the rise. Technology companies and CEOs have become public enemy number one. This portrayal of the future is one tech executives are keen to avoid and has driven a growing chorus to support the idea of a universal basic income (UBI). “There is going to be backlash when it comes to jobs,” Sayantan Ghosal, an economics professor at the University of Glasgow who has written about UBI, told CNBC by phone. U.S. technology firms have been investing heavily in research and development of AI. Tesla with driverless cars, Amazon with workerless shops, and the likes of Google developing smarter-than-human software. Even Sergey Brin, the co-founder of Google, recently stated that he was “surprised” by the pace of AI developments.

Over the past few months, major technology executives have come out in support of a UBI. In an interview with CNBC in November, Tesla Chief Executive Elon Musk backed the idea. “There is a pretty good chance we end up with a universal basic income, or something like that, due to automation,” Musk said. He reiterated his thoughts last week at the World Government Summit in Dubai, in which he said a UBI would be “necessary”. Marc Benioff, chief executive of Salesforce, warned of AI creating “digital refugees”. At the World Economic Forum (WEF) in Davos in January, Benioff said there was “no clear path forward” on how to deal with the job displacement that will occur. Other tech executives talked up the industry’s responsibility. “We should do our very best to train people for the jobs of the future,” Microsoft CEO Satya Nadella said at Davos.

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The dark side of the man.

Monsanto and Bayer’s Chemical Romance: Heroin, Nerve Gas and Agent Orange (AN)

Fifty years ago, the Monsanto and Bayer corporations were forced to separate in order to avoid violating basic antitrust regulations. U.S. courts declared that the two chemical giants, when operating together under the name Mobay, stymied market competition and comprised a monopoly that could not stand. But that was then. Today, under a much different regulatory climate that all but rubberstamps such corporate monopolies, the Germany-based Bayer’s $66 billion offer to purchase Monsanto is being fast-tracked by U.S. regulators. The proposed mega-merger, or re-marriage, will result in nearly 30% of all worldwide pesticide and seed sales being controlled by the new partnership. The merger faces federal antitrust scrutiny before it can be finalized, a process currently underway.

It already passed its first test in January when it got the blessings of President-elect Donald Trump, who held an exclusive meeting with the CEOs of both corporations and emerged—not surprisingly—with his thumbs up. Trump’s exclusive meeting with these corporate titans came well before he had even bothered to name his selection to lead the U.S. Department of Agriculture, a not-so-subtle acknowledgement of where the true power lies when it comes to the politics of food. In addition to market control, Bayer’s proposed purchase is aimed at steadying a reeling Monsanto, which is mired in turmoil from a long list of objectionable activities involving toxic pesticides and its increasingly unpopular genetically-modified organisms.

Ironically, given its own sullied past that includes Nazi sympathizing and marketing heroin-laced cough syrup for children, Bayer is being portrayed as the one riding to the rescue of Monsanto’s poor public image. If anything, it’s a sign of just how low the Monsanto brand and reputation has plummeted, forcing it to try and improve its image by sidling up to Bayer, a participant in some of the cruelest crimes in human history. While these types of mergers are nothing new to the agribusiness sector, where consolidation has been king for decades, last year’s proposed mega-mergers shattered the record for such deals. There were $125 billion worth of proposed agri-chemical mergers in 2016, nearly doubling the previous record of $65 billion in 2010. In addition to the proposed Bayer/Monsanto deal, there are also pending mergers between Dow and DuPont as well as Syngenta and the Chinese National Chemical Corporation.

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Canada continues to set the standard. But protests begin.

Canada Will Not Halt Illegal Border Crossing Despite Opposition – Trudeau (R.)

Canada will continue to accept asylum seekers crossing illegally from the United States but will ensure security measures are taken to keep Canadians safe, Canadian Prime Minister Justin Trudeau said on Tuesday. The number of would-be refugees crossing into Canada at isolated and unguarded border crossings has increased in recent weeks amid fears that U.S. President Donald Trump will crack down on illegal immigrants, and photos of smiling Canadian police greeting the migrants have gone viral. Opposition Conservatives want Trudeau’s center-left Liberal government to stem the flow of asylum seekers from the United States because of security fears and a lack of resources to deal with them.

“One of the reasons why Canada remains an open country is Canadians trust our immigration system and the integrity of our borders and the help we provide people who are looking for safety,” Trudeau told parliament. “We will continue to strike that balance between a rigorous system and accepting people who need help.” Immigration Minister Ahmed Hussen also said Canada would continue to honor the Canada-U.S. Safe Third Country Agreement, which requires it to turn back refugees if they make asylum claims at Canadian border crossings with the United States. Refugee advocates have argued this drives asylum seekers to cross illegally at isolated locations, risking their lives in frigid weather. Amnesty International and other groups are pressuring the Canadian government to abandon the agreement, arguing the United States is not safe for refugees.

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Very smart move. They will contribute a lot to the country. Stong, hardened, intelligent and grateful.

Canada To Welcome 1,200 Yezidi Refugees From Iraq (AFP)

Canada will resettle 1,200 Yezidi refugees who faced persecution by the Islamic State group, the immigration minister said Tuesday. Some 400 have already been airlifted to this country. “Our operation is under way and individual survivors of Daesh have been arriving in Canada for resettlement in the last number of months and this began on October 25, 2016,” Immigration Minister Ahmed Hussen, using an Arabic name for the Islamic State. “Our government will resettle approximately 1,200 highly vulnerable survivors of Daesh and their family members in Canada,” he added. The initiative follows Parliament’s resolution last fall to take in Yezidis facing “genocide” in Iraq at the hands of the Islamic extremist IS group.

The original aim was to bring over women and girls at risk, but Hussen told a news conference that Ottawa had learned that “Daesh has also deliberately targeted boys and as such we are helping to resettle all child survivors of Daesh.” Hussen said the migrants are arriving on commercial flights at a “controlled pace” to avoid overwhelming Canada’s refugee system. The operation is expected to cost Can$28 million (US$21 million). Since coming to power in late 2015, Prime Minister Justin Trudeau’s government has resettled 40,000 Syrian refugees. The Yezidis taken in have been subjected to comprehensive security checks and medical examinations, Hussen said. Yezidis are a Kurdish-speaking minority with a pre-Islamic religion thought partly to have its origin in the Zoroastrianism of ancient Persia. They are neither Arab nor Muslim and IS considers them polytheistic heretics.

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And don’t you forget it.

Europe Wrote The Book On Demonising Refugees, Long Before Trump Read It (G.)

It has become an article of faith among liberals that Donald Trump is the world’s biggest enemy to refugees and Muslims, while the EU somehow offers them a safe harbour. After all, with the words “We can do it” Angela Merkel invited a million Syrian refugees into Germany, while Trump’s travel ban has slammed shut America’s door to some of the world’s most vulnerable displaced people. In today’s liberal mindset, it is Brexit that has stirred up hostility against migrants, while the EU is a bulwark of civilised values, protecting refugees from the threat of a resurgent far right. If you were a migrant in a leaking boat approaching Lesbos, however, the treatment you would receive from Frontex, the EU’s border patrol, would be no less hostile than anything Trump could inflict.

In Tunis last week a video showed Tunisian border police whipping cowering migrants from elsewhere in north Africa. This brutality was EU-sponsored. Like Libya, Morocco, Turkey and Egypt, Tunisia receives funding and training from Brussels through the European neighbourhood policy (ENP). Under a broader framework of “development” and “reforms”, these ENP countries serve as a buffer zone, making sure that refugees are intercepted and turned back – or, in Libya, locked up and tortured in refugees’ prisons – before these desperate people can reach the EU’s shores. The idea that the Europe of Merkel and Theresa May is more welcoming to refugees than Trump’s America simply isn’t borne out by the facts. The EU’s deal with Turkey, condemned by humanitarian agencies, ensures that refugees arriving in Greece – regardless of their point of departure – will be sent to Turkey.

Turkey now has the largest refugee population in the world, at about 3 million people. This month Britain reneged on its promise to admit 3,000 unaccompanied child refugees. Concerned that the Balkan route is a weak link into Europe, Austria has mobilised aspiring EU members including Macedonia, Serbia and Kosovo into a Balkan frontier defence project to fortify the refugee entry points of the “Balkan corridor”. Last year Macedonian police used tear gas, grenades and stun guns against Iraqis and Syrians attempting to get through a razor-wire fence and into the country.

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“..traffickers came and removed the engine from the boat and left the craft adrift..”

Bodies Of At Least 74 Migrants Wash Ashore In Western Libya (G.)

The bodies of at least 74 people, believed to be migrants, have washed ashore on the Libyan coast in the latest tragedy at sea for people fleeing to Europe to escape war and poverty. The Libyan Red Crescent said on Tuesday the bodies had been found the previous morning on the coast of the city of Zawiya, and aid workers had spent six hours recovering them, with more dead believed to be in the vicinity. A spokesman for the organisation, Mohammed al-Misrati, told the Associated Press that a torn rubber boat was found nearby and it was likely that more migrants had drowned in the incident, as such vessels usually carry about 120 people.

The Zawiya coastguard later posted a video that showed the migrants’ boat with no engine. Joel Millman, a spokesman for the International Organization for Migration (IOM), told Reuters a local staff member had reported that “traffickers came and removed the engine from the boat and left the craft adrift”. “This is not a only horrible number of deaths in one incident but it strikes us as something that we haven’t really seen much of, which is either deliberate punishment or murder of migrants,” Millman said.

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Feb 112017
 
 February 11, 2017  Posted by at 10:26 am Finance Tagged with: , , , , , , , , , , ,  Comments Off on Debt Rattle February 11 2017
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Dorothea Lange Play street for children. Sixth Street and Avenue C, NYC 1936

 


Trump ‘May’ Not Appeal Travel Ban Ruling To Supreme Court (ZH)
What’s Really Behind Trump’s Bungling Of The Immigration-Ban Order? (MW)
White House: Cohn-Led Tax Plan Is Real and It’s Phenomenal
Daniel Tarullo, Federal Reserve Regulatory Point Man, to Resign (WSJ)
Foreigners Dump Debt, Offering Up a Test for Rates (WSJ)
Russia’s Exile From World Markets May Soon Be Over (BBG)
EU Foreign Policy Chief Tells Trump Not To Interfere In Europe’s Politics (G.)
EU In Disintegration Mode (Martin Armstrong)
Eurozone, IMF Agree On A Common Stance On Greece (R.)
Greek Bailout Talks Set to Drag Past February Amid Standoff (BBG)
Universal Basic Income ‘Useless’, Says Finland’s Biggest Union (Ind.)
Snowden Claims Report Russia May ‘Gift’ Him To Trump Proves He’s No Spy (G.)
‘We Are Silently Dying’: Refugees In Greek Camp Slip Into Despair (MEE)

 

 

Keep ’em guessing.

Trump ‘May’ Not Appeal Travel Ban Ruling To Supreme Court (ZH)

Update: In the latest moment of confusion for the new administration, chief of staff Reince Priebus said the administration was still considering an appeal to the Supreme Court after a lower court soundly rejected its request to reinstate the order. Priebus’s statement came one hour after a White House official said it was not planning to challenge the Ninth Circuit Court of Appeals ruling upholding a temporary restraining order (TRO) blocking the ban, while Trump himself has said a new order on security could come next week. Priebus told The Washington Post that “every single court option is on the table, including an appeal of the Ninth Circuit decision on the TRO to the Supreme Court. In short, the situation remains fluid.

What a difference a day makes. Less than 24 hours after an angry Trump tweeted “SEE YOU IN COURT, THE SECURITY OF OUR NATION IS AT STAKE!” in the aftermath of yesterday’s adverse Appeals Court ruling… … the President has changed his mind and has decided not to see anyone in court – if only for the time being – because according to Reuters, his administration is not currently planning to appeal the temporary hold on his travel ban to the Supreme Court, a White House official said Friday according to multiple media sources. The official noted, however, that the White House said it will forge ahead on the broader battle against a lawsuit challenging the executive order, if out of court. Which means, that as per the steps we laid out last night, the administration will now prepare a brand new immigration order.

Trump hinted as much earlier in the day when during his press conference with Abe, he said: “We’ll be doing something very rapidly having to do with additional security for our country; you’ll be seeing that sometime next week,” Trump said with Abe by his side. He offered no specifics. He then added “we are going to keep our country safe,” he said on Friday. “We are going to do whatever’s necessary to keep our country safe.” He added he would continue to fight for the travel ban in courts, and that “ultimately, I have no doubt we will win that particular case.” Trump later told reporters aboard Air Force One that he would likely wait until next week to respond with legal action. “Perhaps Monday or Tuesday,” he said.

Trump earlier Friday hinted a new order could be in the works, but he declined to detail what it would look like. And so, while his travel ban is held up in court, Trump said he is considering ordering his staff to draft a new executive order that will have an easier time clearing legal hurdles. “We also have a lot of other options, including just filing a brand new order,” he told reporters on the presidential aircraft.

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“The justices were very unlikely to second-guess a president’s national security intelligence. They don’t consider that to be their job, they don’t want to do it, and they know how dangerous that could be – for the country and, indeed, for the standing of the courts. Legal precedent strongly suggests that they’d support the president so long as he could reassure them he had a rational basis for his action. But that’s not what Trump’s lawyer did.”

What’s Really Behind Trump’s Bungling Of The Immigration-Ban Order? (MW)

What on Earth is wrong with Donald Trump? Did he actually set out to lose his immigration ban in the appeals court deliberately, so that he could whip up his base into ever more fury at the “elites”? Contrary to what you may hear, the U.S. Court of Appeals for the 9th Circuit on Thursday did not — repeat: did not — repudiate Trump’s legal right to suspend selective immigration. It just repudiated the bungling incompetence with which his administration made the case. Yes, the three justices ruled: “Courts owe substantial deference to the immigration and national security policy determinations” of the president and Congress. That is “an uncontroversial principle that is well-grounded in our jurisprudence.” Indeed, as I pointed out earlier this week, it is well established that the president has very broad discretion to suspend immigration where he deems it necessary.

But that was not what the Trump administration claimed. Instead, they argued that they were actually above the law, the Constitution or legal review. “The Government has taken the position that the President’s decisions about immigration policy, particularly when motivated by national security concerns, are unreviewable, even if those actions potentially contravene constitutional rights and protections,” the justices wrote with disbelief. They added: “There is no precedent to support this claimed unreviewability, which runs contrary to the fundamental structure of our constitutional democracy.” You couldn’t make this up. Trump is now raging at the judges. But the blame for this fiasco lies entirely with him, and no one else. All the administration had to tell the appeals court was that it had rational reasons for suspending immigration from the seven specific countries.

Even with national security details “redacted,” the president’s lawyer could have laid out a simple case. Call it Iraq War II. “Intelligence sources say .. intelligence sources warn .. We have received intelligence ..” And so on. He could have kept it vague and menacing. He could have made it up. So long as he offered something. All the courts needed was an excuse. Cue our old friend “Curveball.” The justices were very unlikely to second-guess a president’s national security intelligence. They don’t consider that to be their job, they don’t want to do it, and they know how dangerous that could be – for the country and, indeed, for the standing of the courts. Legal precedent strongly suggests that they’d support the president so long as he could reassure them he had a rational basis for his action. But that’s not what Trump’s lawyer did.

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Having Goldman do your tax policies can backfire in seconds.

White House: Cohn-Led Tax Plan Is Real and It’s Phenomenal

Former Goldman Sachs president Gary Cohn is leading the effort to craft President Donald Trump’s plan to overhaul taxes that will be released within weeks, a White House official said. Unnamed congressional leaders have been consulted on the blueprint, the official said. It’s separate from Trump’s proposed budget, the official said, requesting anonymity because the plan is still under development. During a meeting at the White House with U.S. airline executives Thursday, Trump said he had a “phenomenal” plan to revamp business taxes that would be revealed within the next two or three weeks, without offering details. White House Press Secretary Sean Spicer told reporters later that day that specifics would emerge only in the coming weeks.

Still, he said the White House is at work on an outline of the most comprehensive business and individual tax overhaul since 1986. Cohn, 56, stepped down as Goldman’s president and COO in December after agreeing to lead Trump’s National Economic Council, an influential panel that helps coordinate and develop the president’s economic program. He was long seen as the heir apparent to the bank’s CEO Lloyd Blankfein. During a news conference Friday with Japanese Prime Minister Shinzo Abe, Trump said he was working with House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell on the tax measure, which would be guided by an “incentive-based policy” and released “over the next short period of time.”

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3 seats now, Yellen’s in a year. Politicians deciding where a by law independent central bank will turn.

Daniel Tarullo, Federal Reserve Regulatory Point Man, to Resign (WSJ)

The Federal Reserve’s lead architect of postcrisis financial regulations plans to resign this spring, giving President Donald Trump more freedom to remake the central bank and to accelerate a deregulatory agenda by putting his own appointees in charge of overseeing Wall Street. Daniel Tarullo, a 64-year-old Fed governor and the government’s most influential overseer of the American banking system, wrote to Mr. Trump on Friday saying he would resign “on or about” April 5. The move had been expected, and will remove from the policy-making debate one of the strongest voices for imposing safeguards on big banks and nonbanks to protect against another meltdown. Mr. Trump and many of his advisers have criticized those rules as hampering economic growth, and have suggested they will fill vacancies with officials who will handle banking policy with a lighter touch.

Stock prices for megabanks jumped on the news of Mr. Tarullo’s imminent departure, with shares in Bank of America and Citigroup rising almost 1% in the half-hour following the announcement. Mr. Tarullo’s resignation will also give the Trump administration broad discretion to put its own stamp on the central bank at a time when critics—including top Republicans in Congress—have accused the institution of lacking transparency and accountability. The departure could leave vacant three of the seven slots on the Fed’s board of governors. In addition, Janet Yellen’s term as chairwoman expires early next year. Filling those vacancies would also give the new president the chance to redirect the course of monetary policy, though it is unclear whether he would seek officials who would alter Ms. Yellen’s current course of cautious rate increases.

Mr. Tarullo’s announcement came exactly a week after Mr. Trump signed an executive order instructing regulators to review the rules implemented since the 2010 Dodd-Frank financial overhaul, and as Republican lawmakers intensify their plans to rewrite that landmark law. But partisan gridlock on Capitol Hill makes it unlikely Congress can make big changes, leaving it to the regulators Mr. Trump nominates to change the way rules are written, implemented and enforced.

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I’m going with Tim Duy’s tweet on this one: “I would say “Foreigners back away from US Treasury, proving they aren’t necessary to finance deficits.”

Foreigners Dump Debt, Offering Up a Test for Rates (WSJ)

Foreign buyers, led by China, are taking a smaller slice of the debt issued by the U.S. and other major economies, a change that may test the long-held belief that overseas money has kept interest rates low in the developed world. For much of this century, the world’s money increasingly sought the harbors of the bond markets of big, Western nations, principally the U.S. but also Germany and Britain. During that period those countries, and their citizens and companies, borrowed money at remarkably low interest rates. The receding foreign tide comes amid other momentous changes for the global economy and interest rates, including a turn in many political corners away from the free-trading ethos that has defined modern capitalism and glimmers of inflation that are encouraging major central banks to pare back their unprecedented economic stimulus measures.

Foreigners are steadily pulling back: As of November, for the first time since 2009, less than 30% of the $20 trillion market for U.S. government debt was held overseas, according to the latest official data, released in January, from the Treasury Department and Federal Reserve. In the U.K., it is now 27%, compared with a record of 36% in 2008. In Germany, it is 49%, down from a peak of 57% in 2014. The consequences from this shift are uncertain. Strong demand helps push up prices, and lower yields, of government bonds, at least in the short term. And buyers such as the Chinese state have been ravenous sources of demand.

Between 2000 and 2014, Chinese authorities built up a $4 trillion currency reserve, mainly through buying Treasurys to keep the yuan weak and help the country’s exporters. In January, its reserves fell below $3 trillion, the lowest level in almost six years. China is now trying to boost its currency, and its Treasury holdings fell by about $200 billion between May and November. “You create an environment where yields are manipulated lower by captive investors,” said Paul Donovan, chief economist at UBS Wealth Management. “There is now a shift going on here, which is most significant for the U.S.”

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Russia did so well under the sanctions, perhaps it’s better for them to keep doing what they were.

Russia’s Exile From World Markets May Soon Be Over (BBG)

As Donald Trump edges the U.S. closer to a thaw in relations with Vladimir Putin’s Russia, commodity investors are already jumping in. A plan by United Co. Rusal, the biggest Russian aluminum maker, for a London sale of shares valued at about $1.7 billion is the latest sign that Russia’s exile from world markets is over for the nation’s metal and mining giants. It’s a turnaround from years in which slumping raw-materials prices, a weak economy and sanctions imposed by then-U.S. President Barack Obama over the annexation of Crimea punished valuations and drove away foreign investors. Share sales by Russian mining companies have been rare since 2010. Until two months ago, PhosAgro’s offering in April 2013 was the last major sale by a non-state Russian mining company.

The fertilizer miner and processor is among those that have returned since December. Offerings from Novolipetsk Steel and TMK bring the total raised by mining and metals producers since then to about $575 million. Others weighing offers include En+ Group and Polyus. Magnitogorsk Iron & Steel, also known as MMK, is also considering selling a small stake to the market, people familiar said on Friday. Billionaire Mikhail Prokhorov’s Onexim may offer up to 5% of Rusal to investors soon, people said late Thursday. It’s not just plain equities. In a sign of investor appetite, steelmaker Severstal sold $250 million of convertible bonds on Thursday paying a zero coupon. “Investors see less risk in Russian companies now as the geopolitical situation has eased,” Rusal Deputy Chief Executive Officer Oleg Mukhamedshin said in an interview in Moscow last week following a company sale of eurobonds. “That affects demand for both bonds and equities.”

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Brussels trembles ahead of multiple national elections. But faking your great achievements and position of strength doesn’t actually make you look strong.

EU Foreign Policy Chief Tells Trump Not To Interfere In Europe’s Politics (G.)

The EU foreign policy chief, Federica Mogherini, has warned the Trump administration not to interfere in European politics, advising it to “deal with America first”. Speaking during a two-day visit to Washington, Mogherini did not make specific accusations but said that she sometimes heard voices in the new administration “saying the European Union is not necessarily a good idea. Inviting us to dismantle what we have managed to build and which has brought us not only peace, but also economic strength.” “It’s not for me or another European to speak about domestic political choices or decisions in the US. The same goes with Europe – no interference,” Mogherini said, speaking at the Atlantic Council thinktank. “Maybe America first means also that you have to deal with America first.”

Mogherini’s tone echoed the increasing alarm in Brussels over the new administration’s attitudes. Donald Tusk, the head of the European Council, has listed the new US administration and its “worrying declarations” as one of the leading global threats to the EU. Trump has not missed a chance to deride the EU, going out of his way to praise Brexit, and in an interview just before taking office, he depicted the continent as being dominated by Germany and on the brink of collapse. “President Trump believes that dealing bilaterally with different European countries is in US interests, that we could have a stronger relationship with the countries individually,” said Ted Malloch, the man tipped to be Donald Trump’s nominee as ambassador to the EU. He also accused Europe of “blatant anti-Americanism”.

She also took the opportunity to remind the administration, which hosted the UK prime minister, Theresa May, as the president’s first foreign guest, and promised her a favourable trade deal, that Britain did not have the right to negotiate independently until it was outside the EU, which was two years away at least. “The strength of the EU and the unity of the EU I believe is more evident today than it was a few months ago. This has to be clearly understood here,” Mogherini said. “This also means respect for the EU not simply as an institution. It is a union of 28 member states.”

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“..the Trump Administration [..] fail to grasp that talking the dollar down will just not work if the political structure of the EU is breaking up.”

EU In Disintegration Mode (Martin Armstrong)

The EU leadership is really trying to make Great Britain pay dearly for voting to exit the Community. Like the socialists in America, it’s our way or no way. The left may call the right the “deplorables” but the left are the “intolerables” who refuse to ever consider they might be wrong. The EU thinks that if they can make it so bad for Britain, nobody else will leave. They refuse to examine why there is rising discontent within Europe. They refuse to let go of this dream of a federalized Europe to eradicate national identities along with sovereign rights. [..] Britain is not willing to surrender all domestic law to that of the EU. Indeed, EU law is no longer to be applied in Britain. Here we have the EU demanding Ireland retroactively charge Apple taxes simply because their tax rate is less that the highest EU member.

That is surrendering everything sovereign to Brussels. Laws are only to be decided by the British parliament – not Brussels. Jurisprudence is a matter for the British courts not the European Court. Britain is to leave the EU internal market and the EU Customs Union and seeks a free trade agreement to be concluded between the EU and Great Britain. The EU seeks to punish Britain for rejecting its dream. The EU forgets that Trump is now in and a trade deal with Britain will no longer be at the back of the queue as was the case under Obama. Free movement of people, together with the free movement of goods, free movement of services and the free movement of capital, are the four fundamental freedoms which are regarded as the foundation of the EU. The free movement of persons justifies the right of all EU citizens to settle in the Union and to accept work. However, this has not worked as smoothly as presumed.

The cost of living is significantly different throughout the EU. Eastern Europeans, mainly from Poland, have infiltrated Britain working for less money creating competition for domestic workers while foreign companies use cheaper labor in the East to undercut domestic companies on their home-turf. As the economy turns down and deflation prevails, the threat of foreign jobs is being addressed throughout Europe. Add to this the refugee crisis and you have a powder keg throughout Europe waiting to go off. In view of the high unemployment in almost all countries, domestic citizens have ALWAYS turned against foreign workers as the easy scapegoats for the economic decline. This only merges with the high taxes reducing disposable income.

The EU leaders [..] have no clear statement to challenge what is going on. The regulatory nightmare and outright rage that is rising among the people is simply ignored by Brussels. The legal uncertainty with the British exit on the banking system is something nobody even wants to speculate about. How do bail-ins work in Europe if abandoned in Britain? So while the EU thinks by punishing Britain they will discourage others from leaving, they are seriously mistaken. The dream of the EU is dead. It should have remained just a trade union – that was it. What the Trump Administration is clueless about is the ability of the EU to hold it together, they fail to grasp that talking the dollar down will just not work if the political structure of the EU is breaking up.

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All that’s left is emptiness.

Eurozone, IMF Agree On A Common Stance On Greece (R.)

Euro zone lenders and the International Monetary Fund have reached agreed between themselves to present a common stance to Greece later on Friday in talks on reforms and the fiscal path Athens must take, euro zone officials said. Such a united stance would be a breakthrough because the two groups have differed for months on the size of the primary surplus Greece should reach in 2018 and maintain for years later as well as the issue of debt relief. Those differences have hindered efforts to unlock further funding for Greece under its latest euro zone bailout program. “There is agreement to present a united front to the Greeks,” a senior euro zone official said, adding that the outcome of Friday’s meeting with the Greeks was still unclear and it was unclear if Athens would accept the proposals. “What comes out of it, we will see,” the official said. Financial markets took heart from the news, however.

Greece’s two-year bond yield fell almost 50 basis points to 9.55%. It hit the 10% mark on Thursday as worries about the bailout drove away buyers. The chairman of euro zone finance ministers, Jeroen Dijsselbloem, said in The Hague that Friday’s meeting, in which Greek Finance Minister Euclid Tsakalotos will take part, was to discuss the size of Greece’s primary surplus. The euro zone wants Greece to reach a primary surplus – which excludes interest repayments on debt – of 3.5% of GDP and keep it there for many years. But the IMF believes that with reforms in place now Greece will reach only 1.5% next year and in the following years and has therefore been pushing for Athens to legislate new measures that would safeguard the agreed euro zone targets. Officials said the lenders would ask Greece to take €1.8 billion worth of new measures until 2018 and another €1.8 billion after 2018, focused on broadening the tax base and on pension cutbacks.

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What a surprise.

Greek Bailout Talks Set to Drag Past February Amid Standoff (BBG)

Greece probably won’t complete its bailout review by the time the euro area’s finance ministers next meet, on Feb. 20, setting the stage for potentially thorny negotiations in the midst of next month’s bitter electoral campaign in the Netherlands. “We will take stock of the further progress of the second review during the next Eurogroup,” Dutch Finance Minister Jeroen Dijsselbloem said in a statement after a meeting with his Greek counterpart, Euclid Tsakalotos, in Brussels on Friday. “There is a clear understanding that a timely finalization of the second review is in everybody’s interest,” Dijsselbloem said after the meeting, in which representatives of creditor institutions also participated.

Greece is locked in talks with the European Commission, the ECB, the European Stability Mechanism and the IMF over the conditions attached to its latest bailout. During Friday’s meeting, bailout auditors asked the government to legislate additional fiscal cuts equal to about 2% of GDP if the country fails to meet certain budget targets, a person familiar with the matter said after the talks. These contingent measures are the basis for further discussions, the person said, asking not to be named as the matter is sensitive. While progress was made in the meeting, unreasonable demands from the IMF make a resumption of staff-level talks difficult, a Greek government official said in a text message, asking not to be named in line with policy.

The Greek government has been resisting calls to preemptively legislate contingent belt-tightening for 2018 and beyond, arguing that measures already in place should suffice to meet an agreed goal for a budget surplus – before interest payments – equal to 3.5% of GDP. Among the measures the IMF is demanding is pension cuts and a lowering of the threshold at which income tax is paid. Both are red lines the government says it’s not willing to cross. “Although we expect that the Greek government will implement the required measures, the risk of early elections is increasing given the rising political cost to the government and its slim majority in the parliament,” Moody’s analyst Kathrin Muehlbronner said. “Early elections might bring a new and more reform-minded conservative government, but Greece’s economy would be hit again by prolonged uncertainty, after having just started to record positive growth.”

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This must be the dumbest thing I’ve heard in a long time. And that’s saying something these days. The UBI trial started just weeks ago, and they already know it will fail?

Universal Basic Income ‘Useless’, Says Finland’s Biggest Union (Ind.)

Finland’s basic income experiment is unworkable, uneconomical and ultimately useless. Plus, it will only encourage some people to work less. That’s not the view of a hard core Thatcherite, but of the country’s biggest trade union. The labour group says the results of the two-year pilot program will fail to sway its opposition to a welfare-policy idea that’s gaining traction among those looking for an alternative in the post-industrial age. “We think it takes social policy in the wrong direction,” said Ilkka Kaukoranta, chief economist of the Central Organisation of Finnish Trade Unions (SAK), which has nearly 1 million members. Since January, a group of unemployed Finns aged between 25 and 58 have been receiving a stipend of €560 per month. The amount isn’t means-tested and is paid regardless of whether the recipient finds a job, starts a business or returns to school.

Popular in the 1960s, the idea of a guaranteed minimum income for everyone is gaining more proponents again amid resurgent populism. French Socialist candidate Benoit Hamon has made it a policy platform in his presidential campaign. A universal — or unconditional — basic income (UBI), which would replace means-tested welfare payments, has its share of supporters on both the left and the right of the political spectrum. Advocates say it eliminates poverty traps and redistributes income while empowering the individual and reducing paperwork. In Finland, which like other Nordic nations is seen as a trendsetter when it comes to the welfare state, the idea is being explored by a center-right government headed by a former businessman and self-made millionaire.

While limited in scope (it’s conditional on the beneficiary having received some form of unemployment support in November 2016) and size (it’s based on a randomly-selected sample of 2,000 jobless people), the Finnish trial may help answer questions like: “Does it work”? “Is it worth it”? And the most fundamental of all: “Does it incite laboriousness or laziness?”

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“Speak not because it is safe, but because it is right.”

Snowden Claims Report Russia May ‘Gift’ Him To Trump Proves He’s No Spy (G.)

Whistleblower Edward Snowden has seized on a report that Russia is considering sending him back to the US as a “gift” to Donald Trump, saying that the story vindicates him of charges that he is a spy. “Finally: irrefutable evidence that I never cooperated with Russian intel,” he said on Twitter. “No country trades away spies, as the rest would fear they’re next.” Snowden was responding to a report by NBC which stated that US intelligence had collected information that Russia wanted to hand Snowden over in order to “curry favor” with Trump, who has said that the former NSA contractor is a “traitor” and a “spy” who deserves to be executed. The report – based on two sources in the intelligence community – said the intelligence had been gathered since Trump’s inauguration.

Snowden’s ACLU lawyer, Ben Wizner, told NBC News he was unaware of any plan to return his client to the US. “Team Snowden has received no such signals and has no new reason for concern,” Wizner said. Russia granted Snowden asylum in 2013 and a three-year residency in 2014. Snowden has been living in exile in Moscow, facing charges in the US including violations of the US Espionage Act for leaking documents about secret mass surveillance programs. Speaking at a GOP candidate debate in March 2016, Trump said of Snowden: “I said he was a spy and we should get him back. And if Russia respected our country, they would have sent him back immediately, but he was a spy. It didn’t take me a long time to figure that one out.” The Kremlin publicly dismissed these claims.

Snowden offered a longer explanation of his feelings of vindication when he was interviewed by Katie Couric in December 2016, when rumours of a Russian handover first started circulating. He described the suggestion as vindication that he was“independent”. He added: “The fact that I’ve always worked on behalf of the United States and the fact that Russia doesn’t own me. In fact the Russian government may see me as a sort of liability.” Snowden suggested that a reason why Russia might want to return him was his recent criticism of the Kremlin’s human rights record and his suggestions that its officials had hacked US security networks. Previously Snowden has said that Moscow had “gone very far, in ways that are completely unnecessary, costly and corrosive to individual and collective rights” in monitoring citizens online.

When Couric asked if Snowden would mind being extradited, he replied: “That would obviously be something that would be a threat to my liberty and to my life. “But what I’m saying here is you can’t have it both ways. You can’t say this guy’s a bad guy – a Russian tool or something like that – at the same time you say he’s going to be traded away.” After reiterating his sense of vindication on Friday, Snowden posted again to Twitter: “Speak not because it is safe, but because it is right.”

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Incredible.

‘We Are Silently Dying’: Refugees In Greek Camp Slip Into Despair (MEE)

Poor living conditions, a sudden spate of deaths and a “complete loss of hope” are exacerbating mental health issues and leading to suicide attempts and self-harm in the Moria refugee camp on the Greek island of Lesvos, NGOs and refugees have warned. “More and more what we are seeing is people with severe depression linked to the conditions in which they are in and to the complete loss of hope,” said Louise Roland-Gosselin, an advocacy manager for the medical NGO, Doctors Without Borders (MSF). “[Refugees] in Moria are absolutely crushed and we hear more and more about how people are self-mutilating, how they want to commit suicide and we are aware of cases of suicide and attempted suicide, not only on Lesbos but also on other islands,” she added.

[..] For many of the camp’s residents the long and backlogged process of applying for asylum and the lack of activities in the camp has heightened their despair. “It’s still quite a depressing sight,” explained Roland-Gosselin. “You still have hundreds of people who are sleeping in tents, there is little access to water, hygiene conditions are not acceptable, there’s still hundreds of people without heating and they have absolutely no activity, they have nothing to do all day. So it’s an incredibly depressing place.” Some are turning to self-harm as a result of the situation. Cutting is common in the camp according to refugees MEE spoke to. “People here die inside, so when they die inside they either hurt someone else or they hurt themselves, that’s why they do it, to get the pain out. So they cut themselves. I’ve seen it happen to my friend. He’d cut himself, we’d bandage his arm and then he’d do it again the second day,” explained al-Anny.

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Feb 082017
 
 February 8, 2017  Posted by at 9:21 am Finance Tagged with: , , , , , , , , , ,  5 Responses »
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Dorothea Lange Rear window tenement dwelling, 133 Avenue D, NYC 1936


This Is How Out-Of-Whack US Trade Relationships Really Are (WS)
John Kelly, Homeland Security Chief, Says Travel Ban Rolled Out Too Quickly (WSJ)
Trump Travel Ban: Judges Skeptical About Arguments On Executive Order (G.)
‘Trump Makes Sense To A Grocery Store Owner’ – Taleb (Hindu)
Do Not Let Elliott Abrams Anywhere Near The State Department (Rand Paul)
EU Faces Crisis As IMF Warns Greek Debts Are On ‘Explosive’ Path (Tel.)
Greece’s Debt Costs Rise Sharply As Worries Grow Over IMF Role (G.)
Don’t Sell the Euro Short. It’s Here to Stay. (Eichengreen)
Money Is Pouring Out Of China, And The Government Can’t Stop It (R.)
China’s Reserves Approach Breaking Point As Another Devaluation Looms (BBG)
Russia Shows Why China Should Just Stop Burning Up Its Reserves (BBG)
Cracks Are Appearing In Australia’s Trillion-Dollar Property Debt Pile (BBG)
Putin Orders Russian Air Force To Prepare For ‘Time Of War’ (Ind.)
Controversial Dakota Pipeline To Go Ahead After Army Approval (R.)
Why Should A Libertarian Take Universal Basic Income Seriously? (Dolan)

 

 

“It never was a big deal because growing imports were portrayed as healthy demand in the US. The world loved it.”

This Is How Out-Of-Whack US Trade Relationships Really Are (WS)

2016 marked another banner year for US trade, a banner year largely for other countries that at the initiative of Corporate America, whose supply chains weave all over the world, managed to load the US up with their merchandise. According to the Commerce Department’s report today, the US trade deficit in goods and services rose to $502.3 billion in 2016, the highest in four years. Exports of goods and services fell $52 billion in 2016 year-over-year to $2.21 trillion, and imports fell $50 billion to $2.71 trillion. That both exports and imports fell is a sign of weakening world trade, lackluster demand globally, and lousy economic growth in the US, where GDP in 2016 inched up by a miserable 1.6%, matching the growth rate of 2011, both having been the lowest growth rates since 2009.

Exports add to the economy and to GDP; imports subtract from GDP. And it’s a big number: the trade deficit in 2016 amounted to 2.7% of GDP. In overly simplified, scribbled-on-a-napkin-after-the-third-beer math: had trade been balanced, with imports about equal to exports, GDP growth would have been 2.7 percentage points higher in 2016. So 4.3%! OK, we’re dreaming. But that’s how a massive trade deficit whacks the economy. The overall trade balance is composed of trade in goods and services. It used to be years ago when the trade deficit in goods began to balloon that it was no big deal because America was exporting innovative services, such as complex financial services, and they would make up for the deficit in old-fashioned goods.

They did lessen the pain for a little while, and then they didn’t. And soon, even the overall US trade deficit ballooned, but it was no big deal because soaring imports showed that the US economy was healthy and brimming with consumer demand. Year after year, we heard this from economists and politicians. Beyond that, apathy was palpable. No one cared. It’s just the way it is. Dreaming of balanced trade was like so 1980s or whatever. Meanwhile, Corporate America was fine-tuning its game of offshoring production and importing from cheaper countries. The entire business model of Wal-Mart depends on it. US supply chains wind all over the globe, in search of the lowest production costs, whether it’s consumer gadgets or automotive components. It never was a big deal because growing imports were portrayed as healthy demand in the US. The world loved it.

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Kelly’s a straight shooter. Wonder how long he can last.

John Kelly, Homeland Security Chief, Says Travel Ban Rolled Out Too Quickly (WSJ)

Homeland Security Secretary John Kelly told Congress the Trump administration should have taken more time to inform Congress before implementing its controversial executive order temporarily blocking entry of people from seven nations. “The thinking was to get it out quick so potentially people coming here to harm us would not take advantage” of a delay, Mr. Kelly told the House Homeland Security Committee on Tuesday. In his first congressional appearance as a cabinet member, Mr. Kelly offered a forceful defense of the order, saying it wasn’t a ban on Muslims as critics have charged, but a “temporary pause” on immigrants and visitors from countries about whose residents the U.S. can’t access solid information. He sought to take responsibility for the chaotic rollout, saying the confusion was “all on me.”

“Going forward, I would have certainly taken some time to inform the Congress and certainly that’s something I’ll do in the future,” he said. The Wall Street Journal and others have reported that Mr. Kelly had little input in the order or its rollout, which was directed by the White House. The order, issued on the afternoon of Friday, Jan. 27, resulted in initial confusion and confrontation at airports around the country, as some travelers were detained for hours or sent away and protesters gathered at terminals to denounce the new rules. A federal court in Seattle temporarily put the order on hold on Friday, citing potential legal concerns. That action prompted President Donald Trump to question the judge’s credentials and say he could be to blame in the event of a terrorist attack. Mr. Kelly waded into that debate on Tuesday, likening judges to academics removed from on-the-ground realities.

“I have nothing but respect for judges, but in their world it’s a very academic, very almost in-a-vacuum discussion, and of course, in their courtrooms, they are protected by people like me, so they can have those discussions,” he said. “They live in a different world than I do. I’m paid to worst-case it, he’s paid to, in a very academic environment, make a call.” [..] Committee chairman Rep. Michael McCaul (R., Texas) said he backed the executive order, which a court order has put on hold. But he said it was poorly implemented. He said some U.S. permanent residents who are citizens of the targeted countries were initially not allowed to return to the country, while foreigners who aided the U.S. military and students attending American schools were “trapped overseas.”

“I applaud you for quickly correcting what I consider errors,” Mr. McCaul said. The congressman said he had suggested the approach President Donald Trump took when Mr. Trump was a candidate. His goal, Mr. McCaul said, was to help reframe the proposal from what Mr. Trump initially described as a Muslim ban, an approach he thought would have been unconstitutional.

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It’s great to have the courts discuss this. That’s where it belongs. If Trump can win, we will know just how broad US presidents’ power had become, before Trump. And we can judge whether we like things that way. He either has the authority, or he doesn’t. That should be clear from the law, not a matter of taste or preference.

Trump Travel Ban: Judges Skeptical About Arguments On Executive Order (G.)

A lawyer seeking to reinstate Donald Trump’s travel ban was grilled by a panel of three judges on Tuesday, facing questions over the president’s inflammatory campaign promise to close America’s borders to Muslims. August Flentje, of the Department of Justice, was put on the spot over why seven Muslim-majority countries had been targeted in Trump’s executive order, as well as past statements made by the president and his ally Rudy Giuliani. The hour-long hearing before the San Francisco-based ninth circuit court of appeals was the most significant legal battle yet over the ban. The judges said they would try to deliver a ruling as soon as possible but gave no indication of when. Flentje, reportedly called up for the hearing at short notice, asked the judges for a stay on the temporary restraining order placed on Trump’s travel ban by district court judge James Robart last week.

[..] During a hearing conducted by telephone between various locations, Flentje described the ban as putting a “temporary pause” on travelers from countries that “pose special risk”. He said the seven countries targeted had “significant terrorist presence” or were “safe havens for terrorism”. Trump’s actions were “plainly constitutional”, Flentje argued, as the president sought to strike a balance between welcoming visitors and securing the nation of the risk of terrorism. “The president has struck that balance,” he said. “The district court order upset that balance.” Flentje argued that the district court restraining order was too broad, giving rights to people “who have never been to the United States” and “really needs to be narrowed”. Judge Michelle Friedland asked: “Are you arguing then that the president’s decision in the regard is unreviewable?”

Flentje replied: “Yes, there are obviously constitutional limitations.” But Judge William Canby pointed out that people from the seven countries already could not come into the country without a visa and were subject to “the usual investigations”. How many of these people had committed terrorist attacks in the US, he wondered, before pointing out it was none. Flentje pointed to Congress’s determination that they were countries of concern, an argument that Judge Richard Clifton dismissed as “pretty abstract”. Trying to regain ground, the lawyer said: “Well, I was just about to at least mention a few examples. There have been a number of people from Somalia connected to al-Shabaab [an Islamist militant group] who have been convicted in the United States.” Friedland, who was appointed by Barack Obama, interjected: “Is that in the record? Can you point us to what, where in the record you are referring?” Flentje admitted: “It is not in the record.”

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“..if you went to the local souk [bazaar] in Aleppo and brought one of the retail shop owners, he would do the same thing Trump is doing. Like making a call to Boeing and asking why are we paying so much..”

‘Trump Makes Sense To A Grocery Store Owner’ – Taleb (Hindu)

In Skin in the Game, you seem to build on theories from The Black Swan that give a sense of foreboding about the world economy. Do you see another crisis coming? Oh, absolutely! The last crisis [2008] hasn’t ended yet because they just delayed it. [Barack] Obama is an actor. He looks good, he raises good children, he is respectable. But he didn’t fix the economic system, he put novocaine [local anaesthetic] in the system. He delayed the problem by working with the bankers whom he should have prosecuted. And now we have double the deficit, adjusted for GDP, to create six million jobs, with a massive debt and the system isn’t cured. We retained zero interest rates, and that hasn’t helped. Basically we shifted the problem from the private corporates to the government in the U.S. So, the system remains very fragile.

You say Obama put novocaine in the system. How will the Trump administration be able to address this? Of course. The whole mandate he got was because he understood the economic problems. People don’t realise that Obama created inequalities when he distorted the system. You can only get rich if you have assets. What Trump is doing is put some kind of business sense in the system. You don’t have to be a genius to see what’s wrong. Instead of Trump being elected, if you went to the local souk [bazaar] in Aleppo and brought one of the retail shop owners, he would do the same thing Trump is doing. Like making a call to Boeing and asking why are we paying so much.

You’re seen as something of an oracle, given that you saw the 2008 economic crash coming, you predicted the Brexit vote, the outcome of the Syrian crisis. You said the Islamic State would benefit if Bashar al-Assad was pushed out and you predicted Trump’s win. How do you explain it? Not the Islamic State, but al-Qaeda at the time, and I said the U.S. administration was helping fund them. See, you have to have courage to say things others don’t. I was lucky financially in life, that I didn’t need to work for a living and can spend all my time thinking. When Trump was running for election, I said what he says makes sense to a grocery store owner. Because the grocery guy can say Trump is wrong because he can see where he is wrong. But with Obama, he can’t understand what he’s saying, so the grocery man doesn’t know where he is wrong.

Is it a choice between dumbing down versus over-intellectualisation, then? Exactly. Trump never ran for archbishop, so you never saw anything in his behaviour that was saintly, and that was fine. Whereas Obama behaved like the Archbishop of Canterbury, and was going to do good but people didn’t feel their lives were better. As I said, if it was a shopkeeper from Aleppo, or a grocery store owner in Mumbai, people would have liked them as much as Trump. What he says makes common sense, asking why are we paying so much for this rubbish or why do we need these complex taxes, or why do we want lobbyists. You can call Trump’s plain-speaking what you like. But the way intellectuals treat people who don’t agree with them isn’t good either. I remember I had an academic friend who supported Brexit, and he said he knew what it meant to be a leper in the U.K. It was the same with supporting Trump in the U.S.

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Amen to that.

Do Not Let Elliott Abrams Anywhere Near The State Department (Rand Paul)

I hope against hope that the rumors are wrong and that President Donald Trump will not open the State Department door to the neocons. Crack the door to admit Elliott Abrams and the neocons will scurry in by the hundreds. Neoconservative interventionists have had us at perpetual war for 25 years. While President Trump has repeatedly stated his belief that the Iraq War was a mistake, the neocons (all of them Never-Trumpers) continue to maintain that the Iraq and Libyan Wars were brilliant ideas. These are the same people who think we must blow up half the Middle East, then rebuild it and police it for decades. They’re wrong and they should not be given a voice in this administration.

One of the things I like most about President Trump is his acknowledgement that nation building does not work and actually works against the nation building we need to do here at home. With a $20 trillion debt, we don’t have the money to do both. I urge him to keep that in mind this week when he meets with Elliott Abrams, the rumored pick for second in command to the Secretary of State. Abrams would be a terrible appointment for countless reasons. He doesn’t agree with the president in so many areas of foreign policy and he has said so repeatedly; he is a loud voice for nation building and when asked about the president’s opposition to nation building, Abrams said that Trump was absolutely wrong; and during the election he was unequivocal in his opposition to Donald Trump, going so far as to say, “the chair in which Washington and Lincoln sat, he is not fit to sit.”

Why then would the president trust him with the second most powerful position in the State Department? Abrams was equally dismissive throughout Trump’s entire candidacy. As a Never-Trumper, he repeatedly said he would neither vote for Clinton nor Trump. He likened the choice to the one the nation faced of McGovern vs. Nixon. I voted for Rex Tillerson for secretary of state because I believe him to have a balanced approach to foreign policy. My hope is that he will put forward a realist approach. I don’t see Abrams as part of any type of foreign policy realism. Elliott Abrams is a neoconservative too long in the tooth to change his spots, and the president should have no reason to trust that he would carry out a Trump agenda rather than a neocon agenda. But just as importantly, Congress has good reason not to trust him – he was convicted of lying to Congress in his previous job.

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It’s not only a broken record, it’s a really bad song too.

EU Faces Crisis As IMF Warns Greek Debts Are On ‘Explosive’ Path (Tel.)

The EU faces a looming crisis which could threaten the sustainability of the eurozone as the IMF has warned Greece’s debts are on an “explosive” path despite years of attempted austerity and economic reforms. Global financiers at the IMF are increasingly unwilling to fund endless bailouts for the eurozone’s most troubled country, passing more of the burden onto the EU – at a time when Germany does not want to keep sending cash to Athens. The assessment opens up a fresh split with Europe over how to handle Greece’s massive public debts, as the IMF called on Europe to provide “significant debt relief” to Greece – despite Greece’s EU creditors ruling out any further relief before the current rescue programme expires in 2018. Jeroen Dijsselbloem, the Eurogroup President repeated that position last night, saying there would be no Greek debt forgiveness and dismissing the IMF assessment of Greece’s growth prospects as overly pessimistic.

“It’s surprising because Greece is already doing better than that report describes,” said Mr Dijsselbloem, who chairs meetings of eurozone finance ministers, adding that Greece was on track for a “pretty good recovery at the moment”. The renewed divisions over how to handle the Greek debt crisis has raised fresh questions over whether the IMF will be a full participant in the next phase of the Greek rescue – a key condition for backing from the German and Dutch parliaments. As Angela Merkel, the German chancellor, fights a tough reelection battle, Germany is particularly reluctant to send funds directly to Greece, with populist parties in Germany arguing that the payments amount to an unfair bailout from hard-working Germans to less deserving Greeks.

The IMF split came as Mrs May last night comfortably defeated a Brexit rebellion in the Commons as MPs rejected Labour plans to give Parliament a “meaningful” vote on the terms of a final deal. Despite suggestions that up to 30 Tory MPs could defy their party whip and back the Labour amendment just seven chose to do so. Mrs May stemmed the rebellion after the Government pledged to hold a vote in Parliament on the deal before it is sent to the European Parliament. However ministers said that MPs would have to “take or leave it”, meaning that Mrs May is prepared to walk away from Europe without a deal if Parliament rejects it. A fresh crisis over Greek debt could be triggered as soon as in July when Greece is due to repay some €7bn to its creditors – money the country cannot pay without a fresh injection of bailout cash.

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As they do the same thing again and again, things only get worse. And then they have to do it again.

Greece’s Debt Costs Rise Sharply As Worries Grow Over IMF Role (G.)

Fresh worries over Greece’s debts have pushed the country’s borrowing costs sharply higher amid renewed insistence from Athens it will not swallow further austerity demands from international lenders. The yields on two-year government bonds jumped to their highest level since last June and went above 10% to reflect growing anxiety on financial markets over Greece’s ability to keep up to date with debt repayments. Yields on 10-year government bonds were also higher at above 7.8%, the highest close since November. The renewed focus on Greece’s debts came as the International Monetary Fund revealed its board was split over how far spending cuts in the country should go, raising fresh doubts over its participation in rescue plans for the struggling Greek economy.

The fund has made repeated warnings that Greece’s debt burden of about €330bn is unsustainable despite the government pushing through spending cuts and tax increases that have badly hit popularity ratings for the government of prime minister Alexis Tsipras. The IMF declined to join other international lenders – the ECB and the EU – in funding the country’s third bailout, agreed in August 2015, and it is currently deciding whether to take part in a new chunk of rescue funds needed by mid-2018. Germany has warned the IMF’s involvement is crucial if support for Greece is to continue. News of a split on the IMF board raised new questions over whether Germany will see its wish granted for the fund joining the next rescue. In its latest annual review of the Greek economy, the IMF revealed that its board members were in disagreement over whether Athens should enforce even more austerity to satisfy its lenders.

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Barry Eichengreen basically says the euro will stay because of fear (of the consequences of leaving). That doesn’t seem a very stable foundation.

Don’t Sell the Euro Short. It’s Here to Stay. (Eichengreen)

Two forms of glue hold the euro together. First, the economic costs of break-up would be great. The minute investors heard that Greece was seriously contemplating reintroducing the drachma with the purpose of depreciating it against the euro, or against a “new Deutsche mark,” they would wire all their money to Frankfurt. Greece would experience the mother of all banking crises. The “new Deutsche mark” would then shoot through the roof, destroying Germany’s export industry. More generally, those predicting, or advocating, the euro’s demise tend to underestimate the technical difficulties of reintroducing national currencies. They suggest briefly imposing capital controls to prevent holders of euros from fleeing while the new money, electronic or other, is quickly put in place.

This ignores the complexity of actually removing controls once they are adopted. Recall the experiences of Iceland and Cyprus, which required years, not days, to completely remove their “temporary” controls. The proponents advocate quickly restructuring the debts of banks, firms and households with euro-denominated liabilities, without realizing that one person’s debt is another’s asset. Moreover, because borrowing and lending occurs across borders, agreement on debt restructuring will require lengthy negotiation between countries if the country abandoning the euro is to avoid harsh retaliatory measures. This process would make the U.K.’s Brexit negotiations look like a stroll in the park.

For southern European countries, there is an additional complication. They would have a massive bill to the ECB, and by implication to the other member states that are shareholders in the ECB, in settlement of their so-called Target2 balances, liabilities incurred as a result of cross-border payments in central bank money. ECB President Mario Draghi recently made clear that countries abandoning the euro would be presented with this bill. For Italy, to pick a case not entirely at random, those balances currently stand at €360 billion ($383 billion), or approximately €6,000 for every man, woman and child. That’s about 10 times on a per capita basis what the U.K. likely owes the EU as alimony for its divorce. And if a country like Italy chooses to default on its Target2 obligations, it will be unceremoniously kicked out of the EU.

This brings us to the second form of glue: namely that European countries, Britain aside, still attach very considerable value to EU membership. That membership matters even more now that that President Trump has cast NATO into doubt and the United States is no longer seen as a reliable ally. The example of U.K. Prime Minister Theresa May, reduced to cozying up to Mr. Trump and Turkish Prime Minister Recep Tayyip Erdogan, is not one that many other European politicians care to follow. In a 2007 article, I too made a bet — namely that the euro, while flawed, wasn’t going away. I argued that it is the roach motel of currencies. Like the Hotel California of the song: you can check in, but you can’t check out. For 10 years I’ve been right. To be sure, past performance is no guarantee of future returns, as any prudent investor knows. Even so, unlike ambassador-in-waiting Malloch, I continue to think that shorting the euro is bad advice.

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And this is before Trump.

Money Is Pouring Out Of China, And The Government Can’t Stop It (R.)

China’s foreign exchange reserves unexpectedly fell below the closely watched $3 trillion level in January for the first time in nearly six years, even as authorities tried to curb outflows by tightening capital controls. Reserves fell by $12.3 billion in January to $2.998 trillion, compared with a drop of $41 billion drop in December. Economists polled by Reuters had forecast forex reserves would fall by about $10.5 billion to $3 trillion. While the $3 trillion mark is not seen as a firm “line in the sand” for Beijing, concerns are swirling in global financial markets over the speed at which the country is depleting its ammunition to defend the currency and staunch capital outflows.

Some analysts fear a heavy and sustained drain on reserves could prompt Beijing to devalue the currency. The yuan fell 6.6% against the rising dollar in 2016, its biggest annual drop since 1994. For 2016 as a whole, China burned through nearly $320 billion of reserves, on top of a record drop of $513 billion in 2015. The yuan has found some respite in recent weeks as the dollar retreated, helped also by recent steps to curb capital outflows. But analysts expect downward pressure on the yuan to resume, especially if the U.S. continues to raise interest rates, which would likely trigger fresh capital outflows from emerging economies such as China and test its enhanced capital controls.

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“What was presented as a gradual depreciation of the yuan last year was in reality a significant 6% weakening of the currency versus the dollar as China’s domestic woes mounted. A collapse of the crawling peg could lead to yuan depreciation that is three times as large.”

China’s Reserves Approach Breaking Point As Another Devaluation Looms (BBG)

In his first few weeks in office, President Donald Trump has ordered the U.S. to withdraw from the Trans-Pacific Partnership and confirmed his intention to renegotiate the North American Free Trade Agreement. The consensus is that it won’t be long before he turns his focus to China, which he calls a currency manipulator. China can weather such criticism, for now. But if Trump’s threats of trade sanctions and 45% tariffs become real, the economic impact for the world’s second-biggest economy would be meaningful and could upend financial markets, potentially leading to a global recession. With economic growth already slowing and capital fleeing the nation, China’s $11 trillion economy is operating from a position of weakness.

Here’s how it plays out: As the world’s dominant reserve currency, the dollar has no peer. IMF data show that the greenback accounts for 63.3% of global foreign-exchange reserves, with the euro next at 20.3%, followed by the British pound and Japanese yen, both at 4.5%. That means that in times of crisis, the dollar benefits from global investors seeking a haven, even if the strife and the the uncertainty emanates from the U.S. It’s possible that a trade war would drive flows into the dollar, putting upward pressure on the currency at the expense of other exchange rates. That would be on top of the natural demand for the greenback created by the anticipation of significant fiscal stimulus floated by the Trump administration and a faster pace of interest-rate increases by the Federal Reserve.

In terms of China, it’s important to remember that the yuan’s external value is managed by authorities in a way that isn’t compatible with a sharp appreciation pressure of the dollar vis-à-vis all other currencies. The currency is managed to achieve a stable, effective, trade-weighted exchange rate and to foster a gently crawling peg relative to the dollar. That peg would be threatened if a trade war weakened China’s economy at a faster rate than forecast. What was presented as a gradual depreciation of the yuan last year was in reality a significant 6% weakening of the currency versus the dollar as China’s domestic woes mounted. A collapse of the crawling peg could lead to yuan depreciation that is three times as large.

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The ruble lost 50% vs the USD. A similar path for the yuan would be catastrophic.

Russia Shows Why China Should Just Stop Burning Up Its Reserves (BBG)

China has wiped out about a quarter of the world’s heftiest foreign-currency stockpile over the past 18 months in its quest to keep the yuan stable. According to Commerzbank, such intervention is futile. Data Tuesday showed China’s foreign reserves slipped below $3 trillion in January, the first time they’ve breached that psychologically potent level in almost six years. Yet the experiences of some fellow BRICs show that drawing down the stockpile will probably have little effect on the currency’s long-term fate, Hao Zhou, Commerzbank’s Singapore-based senior emerging-markets economist, wrote in a research note late Tuesday.

While efforts by Russia and Brazil in recent years might have cushioned the blow of currency declines, they couldn’t change the market’s dynamics. In Russia’s case, a collapse in oil prices and the imposition of economic sanctions over the Crimea crisis proved more powerful drivers than the sale of a third of the country’s foreign-currency hoard between April 2013 and March 2015. The ruble fell more than 50% versus the dollar in the period.

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Get out while you can.

Cracks Are Appearing In Australia’s Trillion-Dollar Property Debt Pile (BBG)

The Reserve Bank of Australia frequently seeks feedback on the health of the economy. It might want to call the debt counsellors soon. Homeowners, consumers and property investors around Australia are making more calls to financial helplines as three warning signs back up the spike in demand: mortgage arrears are creeping up, lenders’ bad debt provisions have increased and personal insolvencies are near an all-time high. “It’s steadily out of control – I don’t know of too many financial counselling services where demand doesn’t exceed supply,” said Fiona Guthrie, chief executive officer of Financial Counselling Australia, who says the biggest increase in calls is from people suffering mortgage stress. “There are more people who have got mortgages that they can’t afford to pay.”

Australia’s households are among the world’s most-indebted after bingeing on more than $1 trillion of mortgages amid a housing boom that’s fizzled out in parts of the country, but still roaring in Sydney and Melbourne. While most are capably servicing their debts, a worsening of credit metrics has seen executives and analysts take a more cautious tone. It’s also a key factor in the central bank’s rate decisions this year, as RBA governor Philip Lowe places financial stability at the forefront of monetary policy. The concerns are understandable. Australians’ private debt has soared to 187% of their income, from about 70% in the early 1990s, encouraged by low interest rates. In a November speech, Lowe said that while most households are managing these levels of debt, many feel they are closer to their borrowing capacity than they once were.

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Odd that this reaches the press.

Putin Orders Russian Air Force To Prepare For ‘Time Of War’ (Ind.)

Russia’s air force has been ordered to prepare for a “time of war”. President Vladimir Putin has ordered a “snap check” of the country’s armed forces, accoording to defense minister Sergey Shoigu. As well as checking whether agencies and troops are ready for battle, the same order will ensure that systems are ready to fight, according to state news agency TASS. Those preparations have already begun, according to Russian ministers. “In accordance with the decision by the Armed Forces Supreme Commander, a snap check of the Aerospace Forces began to evaluate readiness of the control agencies and troops to carry out combat training tasks,” he said, according to TASS.

“Special attention should be paid to combat alert, deployment of air defense systems for a time of war and air groupings’ readiness to repel the aggression,” Shoigu added. The preparations come amid increasing concern about tensions between Russia and many of the world’s largest superpowers. Donald Trump has both condemned Russia’s military campaigns and been criticised for being too close to the country’s leaders, and Russia itself is standing in an increasingly tense relationship with some Nato countries. The country has been increasing movement of its military including the launch of the biggest Arctic military push since the fall of the Soviet Union, last month. It has also revealed plans to expand its military over 2017, including a huge boost in the number of tanks, armoured vehicles and aircraft controlled by the company.

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Really? Trump is willing to strongarm veterans and Native Americans? Bad PR.

Controversial Dakota Pipeline To Go Ahead After Army Approval (R.)

The U.S. Army will grant the final permit for the controversial Dakota Access oil pipeline after an order from President Donald Trump to expedite the project despite opposition from Native American tribes and climate activists. In a court filing on Tuesday, the Army said that it would allow the final section of the line to tunnel under North Dakota’s Lake Oahe, part of the Missouri River system. This could enable the $3.8 billion pipeline to begin operation as soon as June. Energy Transfer Partners is building the 1,170-mile (1,885 km) line to help move crude from the shale oilfields of North Dakota to Illinois en route to the Gulf of Mexico, where many U.S. refineries are located. Protests against the project last year drew drew thousands of people to the North Dakota plains including Native American tribes and environmental activists, and protest camps sprung up.

The movement attracted high-profile political and celebrity supporters. The permit was the last bureaucratic hurdle to the pipeline’s completion, and Tuesday’s decision drew praise from supporters of the project and outrage from activists, including promises of a legal challenge from the Standing Rock Sioux tribe. “It’s great to see this new administration following through on their promises and letting projects go forward to the benefit of American consumers and workers,” said John Stoody, spokesman for the Association of Oil Pipe Lines. The Standing Rock Sioux, which contends the pipeline would desecrate sacred sites and potentially pollute its water source, vowed to shut pipeline operations down if construction is completed, without elaborating how it would do so.

The tribe called on its supporters to protest in Washington on March 10 rather than return to North Dakota. “As Native peoples, we have been knocked down again, but we will get back up,” the tribe said in the statement. “We will rise above the greed and corruption that has plagued our peoples since first contact. We call on the Native Nations of the United States to stand together, unite and fight back.” Less than two weeks after Trump ordered a review of the permit request, the Army said in a filing in District Court in Washington D.C. it would cancel that study. The final permit, known as an easement, could come in as little as a day, according to the filing. There was no need for the environmental study as there was already enough information on the potential impact of the pipeline to grant the permit, Robert Speer, acting secretary of the U.S. Army, said in a statement.

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The case is not that hard to make. You just need to erase the ideological resistance.

Why Should A Libertarian Take Universal Basic Income Seriously? (Dolan)

In a recent post on EconLog, Bryan Caplan writes, “I’m baffled that anyone with libertarian sympathies takes the UBI [universal basic income] seriously.” I love a challenge. Let me try to un-baffle you, Bryan, and the many others who might be as puzzled as you are. Here are three kinds of libertarians who might take a UBI very seriously indeed. Philosophical issues aside, what galls many libertarians most about government is the failure of many policies to produce their intended results. Poverty policy is Exhibit A. By some calculations, the government already spends enough on poverty programs to raise all low-income families to the official poverty level, even though the poverty rate barely budges from year to year. Wouldn’t it be better to spend that money in a way that helps poor people more effectively?

A UBI would help by ending the way benefit reductions and “welfare cliffs” in current programs undermine work incentives. When you add together the effects of SNAP, TANF, CHIP, EITC and the rest of the alphabet soup, and account for work-related expenses like transportation and child care, a worker from a poor household can end up taking home nothing, even from a full-time job. A UBI has no benefit reductions. You get it whether you work or not, so you keep every added dollar you earn (income and payroll taxes excepted, and these are low for the poor). But, wait, you might say. Why would I work at all if you gave me a UBI? That might be a problem if you got your UBI on top of existing programs, but if it replaced those programs, work incentives would be strengthened, not weakened.

In which situation would you be more likely to take a job: one where you get $800 a month as a UBI plus a chance to earn another $800 from a job, all of which you can keep, or one where your get $800 a month in food stamps and housing vouchers, and anything extra you earn is taken away in benefit reductions? Or, you might say, a UBI might be fine for the poor, but wouldn’t it be unaffordable to give it to the middle class and the rich as well? Yes, if you added it on top of all the middle-class welfare and tax loopholes for the rich that we have now. No, if the UBI replaced existing tax preferences and other programs that we now lavish on middle- and upper-income households. Done properly, a UBI would streamline the entire system of federal taxes and transfers without any aggregate impact on the federal budget.

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Jan 042017
 
 January 4, 2017  Posted by at 10:29 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Readers browse bomb-damaged library of Holland House, London 1940


The Wrong Things Are Being Forecast (Morgan)
China Calls US ‘A Shooting Star In The Ample Sky Of History’ (G.)
China’s New Year Currency Moves Won’t Make Donald Trump Happy (CNBC)
Banks Create Money From Nothing. And It Gets Worse (ND)
India Government Set To Endorse Universal Basic Income (BI)
US Banks Gear Up To Fight Dodd-Frank Act’s Volcker Rule (R.)
Wall Street Banks Have $2 Trillion European Exposure (Martens)
How to Make America Great Again with Other People’s Money (Orlov)
The Trump Effect Will Accentuate Unrest (Nomi Prins)
Anti-Surveillance Clothing Aims To Hide Wearers From Facial Recognition (G.)
Guardian Report On Ailing Greek Health System Sparks Ugly Row (Kath.)
The Necessity of Maintaining Borders (Kath.)

 

 

If all ‘growth’ is borrowed anyway, and then some, as in every dollar of ‘growth’ takes $10 of debt, maybe you should stop calling it growth?!

The Wrong Things Are Being Forecast (Morgan)

It is customary to use the start of the year to set out some forecasts. Though I’ve not previously done this, I’ve decided to make an exception this time – mainly because I’m convinced that the wrong things are being forecast. Central forecasts tend to focus on real GDP, but in so doing they miss at least three critical parameters. The first is the relationship between growth and borrowing. The second is the absolute scale of debt, and our ability to manage it. The third is the impact of a tightening resource set on the real value of global economic output. Most commentators produce projections for growth in GDP, and mine are for global real growth of around 2.3% between 2017 and 2020. I expect growth to slow, but to remain positive, in countries such as the United States, Britain and China.

It’s worth noting, in passing, that these growth numbers do not do much to boost the prosperity of the individual, since they correspond to very modest per capita improvements once population growth is taken into account. Moreover, the cost of household essentials is likely to grow more rapidly than general inflation through the forecast period. What is more intriguing than straightforward growth projections, and surely more important too, is the trajectory of indebtedness accompanying these growth estimates. Between 2000 and 2015, and expressed at constant 2015 dollar values, global real GDP expanded by $27 trillion – but this came at the expense of $87 trillion in additional indebtedness (a number which excludes the inter-bank or “financial” sector). This meant that, in inflation-adjusted terms, each growth dollar cost $3.25 in net new debt.

If anything, this borrowing-to-growth number may worsen as we look forward, my projection being that the world will add almost $3.60 of new debt for each $1 of reported real growth between now and 2020. On this basis, the world should be taking on about $5.8 trillion of net new debt annually, but preliminary indications are that net borrowing substantially exceeded this number in 2016. China has clearly caught the borrowing bug, whilst big business continues to take on cheap debt and use it to buy back stock. Incredible though it may seem, the shock of 2008-09 appears already to be receding from the collective memory, rebuilding pre-2008 attitudes to debt. On my forecast basis, global real “growth” of $8.2 trillion between now and 2020 is likely to come at a cost of $29 trillion in new debt. If correct, this would lift the global debt-to-GDP ratio to 235% in 2020, compared with 221% in 2015 and 155% in 2000.

Adding everything together, the world would be $116 trillion more indebted in 2020 than in 2000, whilst real GDP would have increased by $35 trillion. Altogether, what we are witnessing is a Ponzi-style financial economy heading for end-game, for four main reasons. First, we have made growth dependent on borrowing, which was never a sustainable model. Second, the ratio of efficiency with which we turn borrowing into growth is getting steadily worse. Third, the demands being made on us by the deterioration of the resource scarcity equation are worsening. Fourth, the ageing of the population is adding further strains to a system that is already nearing over-stretch. One thing seems certain – we cannot, for much longer, carry on as we are. y

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This calls for the poet in Trump to respond.

China Calls US ‘A Shooting Star In The Ample Sky Of History’ (G.)

Donald Trump has doubled down on his plans to transform US trade policy, picking a longtime China critic and protectionist to be America’s next chief trade negotiator. Robert Lighthizer, 69, has advocated for increasing tariffs and repeatedly criticised China for failing to adhere to international trade practices, saying tougher methods were needed to change the system. The move is likely to further alarm Beijing, where state-controlled media said on Wednesday “Trump is just fixated on trade” and warned the president elect “not try to boss China around” on economic and security issues. “May the arrogant Americans realise that the United States of America is perhaps just a shooting star in the ample sky of history,” said an editorial in the Communist party-affiliated Global Times newspaper.

It follows the selection by Trump last month of Peter Navarro to lead a new presidential office for US trade and industrial policy. Navarro has previously described China’s government as a “despicable, parasitic, brutal, brass-knuckled, crass, callous, amoral, ruthless and totally totalitarian imperialist power”. Trump has packed his cabinet with tycoons, vowed to renegotiate trade deals and crack down on what he says are China’s unfair policies. Lighthizer is a former Reagan-era trade official and had a previous stint in the Office of the US Trade Representative, where he travelled the world negotiating deals to curb steel imports. He then went on to a career as a trade lawyer, representing giants such as US Steel Corp working to fend off foreign imports.

In 2011, he wrote in an opinion piece for the Washington Times: “How does allowing China to constantly rig trade in its favour advance the core conservative goal of making markets more efficient? Markets do not run better when manufacturing shifts to China largely because of the actions of its government.” While less prone to bombast than Navarro, he and Lighthizer share the view that China’s economic policies are fundamentally flawed. Years of passivity and drift among US policymakers have allowed the US-China trade deficit to grow to the point where it is widely recognised as a major threat to our economy, Lighthizer wrote. Going forward, US policymakers should take these problems more seriously, and should take a much more aggressive approach in dealing with China.

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Excuse me? “China has put a new chip on the table to counter trade adventurism by the Trump administration.” Other than that, the new capital controls seem to work so far, to an extent.

China’s New Year Currency Moves Won’t Make Donald Trump Happy (CNBC)

Call it a New Year’s greeting from the Chinese government to the incoming administration of Donald Trump. As the president-elect rang in 2017 entertaining guests at his opulent Mar-a-Lago estate, China quietly ushered in a series of measures aimed at better controlling the value of its local currency, the yuan. Throughout his campaign, Trump accused China of “manipulating” the yuan to make Chinese exports more competitive in global markets. China’s latest announcement will likely add fuel to that debate. Unlike countries that mostly let markets determine the value of their currencies, Beijing tries to peg the yuan to a basket of other currencies. Starting Jan. 1, the Chinese State Administration of Foreign Exchange will use a new, broader basket of global currencies to benchmark the yuan’s value.

The change will have the effect of reducing the impact of the U.S. dollar on the official valuation. “This is unambiguously bad news for the United States,” High Frequency Economics Chief Economist Carl Weinberg said in a note to clients Tuesday. “China has put a new chip on the table to counter trade adventurism by the Trump administration.” While China has sought to dampen the value of its currency in the past, the People’s Bank of China has more recently been scrambling to support the yuan. Beijing is deeply concerned that the weakening yuan is encouraging Chinese to shift their wealth out of the country into stronger currencies or other, more stable holdings. China needs a lot of capital in the country in order to continue to fund its growth, which is very heavily reliant on borrowing.

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I was thinking about exactly this, the other day. That a basic income scheme may be a Trojan horse AND a wolf in sheep’s clothing if it comes entirely digitized.

Banks Create Money From Nothing. And It Gets Worse (ND)

Richard Werner, the German professor famous for inventing the term ‘quantitative easing’, says the world is finally waking up to the fact that “banks create money out of nothing” – but warns this realisation has given rise to a new “Orwellian” threat. In an exclusive interview with The New Daily, Professor Werner says the recent campaigns around the world, including in India and Australia, to get rid of cash are coordinated attempts by central bankers to monopolise money creation. “This sudden global talk by the usual suspects about the ‘need to get rid of cash’, ostensibly to fight tax evasion etc, has been so coordinated that it cannot but be part of another plan by central bankers, this time to stay in charge of any emerging reform agenda, by trying to control, and themselves run, the ‘opposition’,” he says.

“Essentially, the Bank of England and others are saying: okay, we admit it, you guys were right, banks create money out of nothing. So now we need to make sure that you guys will not be able to set the agenda of what happens in terms of reforms.” [..] The main point is that the banks do not lend existing money, but add to deposits and the money supply when they ‘lend’. And when those loans are repaid, money is removed from circulation. Thus, the supply of money is constantly being expanded and contracted by banks – which may explain why the ‘credit crunch’ of the global financial crisis was so devastating. Banks weren’t lending, so there was a shortage of money. By some estimates, the banks create upwards of 97% of money, in the form of electronic funds stored in online accounts. Banknotes and coins? They are just tokens of value, printed to represent the money already created by banks.

Professor Werner is pleased the world is waking up to the truth of how money is created, but is very displeased with what he sees as the central bankers’ reaction: the death of cash and the rise of central bank-controlled digital currency. This will further centralise what he describes as the “already excessive and unaccountable powers” of centrals banks, which he argues has been responsible for the bulk of the more than 100 banking crises and boom-bust cycles in the past half-century. “To appear active reformers, they will push the agenda to get rid of bank credit creation. This suits them anyway, as long as they can fix the policy recommendation of any such reform, to be … that the central banks should be the sole issuers of money.”

The professor also fears the global push for ‘basic income’, which is being trialled in parts of Europe and widely discussed in the media, will form part of the central bankers’ attempt to kill off cash. ‘Basic income’ is a popular idea that can be traced back to Sydney and Beatrice Webb, founders of the London School of Economics. It proposes we abolish all welfare payments and replace them with a single ‘basic income’ that everyone, from billionaires to unemployed single mothers, receives. Either we accept the digital currency issued by central banks, or we miss out on basic income payments. That is Professor Werner’s theory of what might happen. His solution to this “Orwellian” future is decentralisation, in the form of lots of non-profit community banks, as exist in his native Germany.

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That same basc income danger of course looms large in India.

India Government Set To Endorse Universal Basic Income (BI)

The Indian government is set to endorse Universal Basic Income, according to one of the leading advocates of the scheme. Professor Guy Standing, an economist who co-founded advocate group Basic Income Earth Network (BIEN) in 1986, told Business Insider that the Indian government will release a report in January which says the idea is “feasible” and “basically the way forward.” The idea behind universal basic income is simple: a regular state payment made to all citizens (one variation specifies adults), regardless of working status. Advocates say it would provide a vital safety net for all citizens and remove inefficient benefit systems currently in place; critics say it would remove the incentive for citizens to work and prove to be wildly expensive.

It has, however, attracted a growing amount of attention across the world, in both rich and developing countries. Standing, professor of development at the School for African and Oriental Studies, is considered one of the leading proponents of UBI. He has advised on numerous UBI pilot schemes, and recently returned from California, where he consulted on a $20 million trial set to launch in California this year. He was closely involved with three major pilot schemes in India — two in Madhya Pradesh, and a smaller one in West Delhi. The pilots in Madhya Pradesh launched in 2010, and provided every man, woman, and child across eight villages with a modest basic income for 18 months. Standing reports that welfare improved dramatically in the villages, “particularly in nutrition among the children, healthcare, sanitation, and school attendance and performance.”

He also says the scheme also turned out some unexpected results. “The most striking thing which we hadn’t actually anticipated is that the emancipatory effect was greater than the monetary effect. It enabled people to have a sense of control. They pooled some of the money to pay down their debts, they increased decisions on escaping from debt bondage. The women developed their own capacity to make their own decision about their own lives. The general tenor of all those communities has been remarkably positive,” he said. “As a consequence of this, the Indian government is coming out with a big report in January. As you can imagine that makes me very excited. It will basically say this is the way forward.”

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No, someone at Reuters really wrote this: “The Obama administration’s regulators and enforcement agencies have been tough on banks..” And then they printed it.

US Banks Gear Up To Fight Dodd-Frank Act’s Volcker Rule (R.)

Big U.S. banks are set on getting Congress this year to loosen or eliminate the Volcker rule against using depositors’ funds for speculative bets on the bank’s own account, a test case of whether Wall Street can flex its muscle in Washington again. In interviews over the past several weeks, half a dozen industry lobbyists said they began meeting with legislative staff after the U.S. election in November to discuss matters including a rollback of Volcker, part of the Dodd-Frank financial reform that Congress enacted after the financial crisis and bank bailouts. Lobbyists said they plan to present evidence to congressional leaders that the Volcker rule is actually bad for companies, investors and the U.S. economy. Big banks have been making such arguments for years, but the industry’s influence waned significantly in Washington after the financial crisis.

The Obama administration’s regulators and enforcement agencies have been tough on banks, while lawmakers from both parties have seized opportunities to slam Wall Street to score political points. Banks now see opportunities to unravel reforms under President-Elect Donald Trump’s administration and the incoming Republican-led Congress, which appear more business-friendly, lobbyists said. While an outright repeal of the Volcker rule may not be possible, small but meaningful changes tucked into other legislation would still be a big win, they said. “I don’t think there will be a big, ambitious rollback,” said one big-bank lobbyist who was not authorized to discuss strategy publicly. “There will be four years of regulatory evolution.” Proponents of the Volcker rule say lenders that benefit from government support like deposit insurance should not be gambling with their balance sheets. They also argue such proprietary bets worsened the crisis and drove greedy, unethical behavior across Wall Street.

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Darn Europeans. The US would be fine without them.

Wall Street Banks Have $2 Trillion European Exposure (Martens)

Just 17 days from today, Donald Trump will be sworn in as the nation’s 45th President and deliver his inaugural address. Trump is expected to announce priorities in the areas of education, infrastructure, border security, the economy and curtailing the outsourcing of jobs. But Trump’s agenda will be derailed on all fronts if the big Wall Street banks blow up again as they did in 2008, dragging the U.S. economy into the ditch and requiring another massive taxpayer bailout from a nation already deeply in debt from the last banking crisis. According to a report quietly released by the U.S. Treasury’s Office of Financial Research less than two weeks before Christmas, another financial implosion on Wall Street can’t be ruled out.The Office of Financial Research (OFR), a unit of the U.S. Treasury, was created under the Dodd-Frank financial reform legislation of 2010.

It says its role is to: “shine a light in the dark corners of the financial system to see where risks are going, assess how much of a threat they might pose, and provide policymakers with financial analysis, information, and evaluation of policy tools to mitigate them.” Its 2016 Financial Stability Report, released on December 13, indicates that Wall Street banks have been allowed by their “regulators” to take on unfathomable risks and that dark corners remain in the U.S. financial system that are impenetrable to even this Federal agency that has been tasked with peering into them. At a time when international business headlines are filled with reports of a massive banking bailout in Italy and the potential for systemic risks from Germany’s struggling giant, Deutsche Bank, the OFR report delivers this chilling statement:

“U.S. global systemically important banks (G-SIBs) have more than $2 trillion in total exposures to Europe. Roughly half of those exposures are off-balance-sheet…U.S. G-SIBs have sold more than $800 billion notional in credit derivatives referencing entities domiciled in the EU.”

When a Wall Street bank buys a credit derivative, it is buying protection against a default on its debts by the referenced entity like a European bank or European corporation. But when a Wall Street bank sells credit derivative protection, it is on the hook for the losses if the referenced entity defaults. Regulators will not release to the public the specifics on which Wall Street banks are selling protection on which European banks but just the idea that regulators would allow this buildup of systemic risk in banks holding trillions of dollars in insured deposits after the cataclysmic results of similar hubris in 2008 shows just how little has been accomplished in terms of meaningful U.S. financial reform.

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“What’s a poor bankrupt former superpower to do?” Lovely from Dmitry. Go after Saudi Arabia.

How to Make America Great Again with Other People’s Money (Orlov)

1. It all started when the US decided to leave the British Empire. This event is often portrayed as a tax revolt by rich landholders, but there is more to it than that: it allowed the former colonies to loot and plunder British holdings by funding and outfitting “privateers”—pirates, that is. This went on for quite some time.

2. Another major boost resulted from the Civil War, which destroyed the agrarian economy of the south and by so doing provided cheap labor and feedstocks to industries in the north. Plenty of people in the south are still in psychological recovery from this event, some 15 decades later. It was the first war to be fought on an industrial scale, and a fratricidal war at that. Clearly, Americans are not above turning on their own if there’s a buck or two to be made.

3. Early in the 20th century, World War I provided the US with a rich source of plunder in the form of German reparations. Not only did this fuel the so-called “roaring twenties,” but it also pushed Germany toward embracing fascism in furtherance of the long-term goal of creating a proxy to use against the USSR.

4. When in 1941 this plan came to fruition and Hitler invaded the USSR, the US hoped for a quick Soviet surrender, only joining the fray once it became clear that the Germans would be defeated. In the aftermath of that conflict, the US reaped a gigantic windfall in the form of Jewish money and gold, which fled Europe for the US. It was able to repurpose its wartime industrial production to make civilian products, which had little competition because many industrial centers of production outside of the US had been destroyed during the war.

5. After the USSR collapsed in late 1991, the US sent in consultants who organized a campaign of wholesale looting, with much of the wealth expropriated from the public and shipped overseas. This was the last time the Americans were able to run off with a fantastic amount of other people’s money, giving the US yet another temporary lease on life.

But after that the takings have thinned out. Still, the Americans have kept working at it. They destroyed Iraq, killed Saddam Hussein and ran off with quite a bit of Iraqi gold and treasure. They destroyed Libya, killed Muammar Qaddafy and ran off with Libya’s gold. After organizing the putsch in the Ukraine in 2014, shooting up a crowd using foreign snipers and forcing Viktor Yanukovich into exile, they loaded Ukrainian gold onto a plane under the cover of darkness and took that too. They hoped to do the same in Syria by training and equipping a plucky band of terrorists, but we all know how badly that has turned out for them. But these are all small fry, and the loot from them is too meager to fuel even a temporary, purely notional rekindling of erstwhile American greatness. What’s a poor bankrupt former superpower to do?

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Only point 10 of 10 in Nomi’s “My Political-Financial Road Map for 2017”. But it fits my format quite well. DO read the whole thing.

The Trump Effect Will Accentuate Unrest (Nomi Prins)

Trump is assembling the richest cabinet in the world to conduct the business of the United States, from a political position. The problem with that is several fold. First, there is a woeful lack of public office experience amongst his administration. His supporters may think that means the Washington swamp has been drained to make room for less bureaucratic decisions. But, the swamp has only been clogged. Instead of political elite, it continues business elite, equally ill-suited to put the needs of the everyday American before the needs of their private colleagues and portfolios.

Second, running the US is not like running a business. Other countries are free to do their business apart from the US. If Trump’s doctrine slaps tariffs on imports for instance, it burdens US companies that would need to pay more for required products or materials, putting a strain on the US economy. Playing hard ball with other nations spurs them to engage more closely with each other.That would make the dollar less attractive. This will likely happen during the second half of the year, once it becomes clear the Fed isn’t on a rate hike rampage and Trump isn’t as adept at the economy as he is prevalent on Twitter. Third, an overly aggressive Trump administration, combined with its ample conflicts of interest could render Trump’s and his cohorts’ businesses the target of more terrorism, and could unleash more violence and chaos globally.

Fourth, his doctrine is deregulatory, particularly for the banking sector. Consider that the biggest US banks remain bigger than before the financial crisis. Deregulating them by striking elements of the already tepid Dodd-Frank Act could fall hard on everyone. When the system crashes, it doesn’t care about Republican or Democrat politics. The last time a deregulation and protectionist businessmen filled the US presidential cabinet was in the 1920s. That led to the Crash of 1929 and Great Depression. Today, the only thing keeping a lid on financial calamity is epic amounts of artisanal money. Deregulating an inherently corrupt and coddled banking industry, already floating on said capital assistance, would inevitably cause another crisis during Trump’s first term.

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Nice.

Anti-Surveillance Clothing Aims To Hide Wearers From Facial Recognition (G.)

The use of facial recognition software for commercial purposes is becoming more common, but, as Amazon scans faces in its physical shop and Facebook searches photos of users to add tags to, those concerned about their privacy are fighting back. Berlin-based artist and technologist Adam Harvey aims to overwhelm and confuse these systems by presenting them with thousands of false hits so they can’t tell which faces are real. The Hyperface project involves printing patterns on to clothing or textiles, which then appear to have eyes, mouths and other features that a computer can interpret as a face. This is not the first time Harvey has tried to confuse facial recognition software. During a previous project, CV Dazzle, he attempted to create an aesthetic of makeup and hairstyling that would cause machines to be unable to detect a face.

Speaking at the Chaos Communications Congress hacking conference in Hamburg, Harvey said: “As I’ve looked at in an earlier project, you can change the way you appear, but, in camouflage you can think of the figure and the ground relationship. There’s also an opportunity to modify the ‘ground’, the things that appear next to you, around you, and that can also modify the computer vision confidence score.” Harvey’s Hyperface project aims to do just that, he says, “overloading an algorithm with what it wants, oversaturating an area with faces to divert the gaze of the computer vision algorithm.” The resultant patterns, which Harvey created in conjunction with international interaction studio Hyphen-Labs, can be worn or used to blanket an area. “It can be used to modify the environment around you, whether it’s someone next to you, whether you’re wearing it, maybe around your head or in a new way.”

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“The lives of patients that are lost are considered collateral damage in the conservation of power.”

Guardian Report On Ailing Greek Health System Sparks Ugly Row (Kath.)

A report by The Guardian on Sunday on the problems faced by Greece’s ailing public healthcare system has sparked an ugly war of words between Alternate Health Minister Pavlos Polakis and unionists. The row started with a social media post made by Polakis on Tuesday, in which he accuses the head of the Panhellenic Federation of Public Hospital Employees (POEDIN), Michalis Giannakos, who is extensively quoted in the report, of “despicable lies.” Polakis went on to say that Giannakos’s comments to Guardian reporter Helena Smith were “slandering to the country and the SYRIZA government, which cut off access to the chow trough and special favors,” and called the unionist a “louse.” In the same post, Polakis also suggested that local media quoting Giannakos’s “vomit-inspiring interview” were lashing out at the leftist-government for cutting advertising revenues from the Center of Disease Prevention and Control (KEELPNO).

“No one who works in a public hospital believes you anymore, just your posse of friends,” Polakis said in his comments, which were directed at Giannakos, adding that the data the unionist cited was from 2012 and no longer valid. “Your time has finished, your place is on history’s trash heap,” Polakis said. His comments prompted an equally vehement response from POEDIN on Tuesday, calling Polakis a “political miasma” and accusing Prime Minister Alexis Tsipras of appointing him “to do the dirty work.” “With his latest misspelt, badly written and delusional post on Facebook against the president of POEDIN, Mr. Polakis has once more confirmed that he is the political miasma of the country’s civil and social life,” the union said in its statement.

In the interview, Giannakos suggested that cutbacks are putting patients’ lives at risk by over-taxing dwindling staff and curbing hospitals’ access to basic necessities and equipment. “The interview in The Guardian underscores the collapse of the public health system and public hospitals. Why doesn’t the government use the publication as an opportunity in its negotiations with the lenders to exempt healthcare from the memorandums? It is clear from its reaction that the government intends to achieve high primary surpluses by the continued reduction of public healthcare spending,” POEDIN said. “The lives of patients that are lost are considered collateral damage in the conservation of power.” The union also said that it is planning to take legal action against Polakis, accusing the health official of using “degrading, insulting and wholly inappropriate” language in his post.

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Erdogan makes Greeks nervous. And mainatining your borders, like maintaining your culture, is not a bad thing. Nor will it lead to war. Quite the opposite.

The Necessity of Maintaining Borders (Kath.)

Since the failed coup in Turkey on July 15, I have been rather surprised by the silence of the country’s intellectuals, who up until recently had been very talkative. Whether they kept silent out of fear or discomfort, we should respect it. Nevertheless, Orhan Pamuk’s silence, for instance, cannot go unnoticed. The point is not to carry out direct political interventions, but to bare the essential transformations that Turkish society has gone through in the nearly 15 years that Recep Tayyip Erdogan’s Justice and Development Party (AKP) has been in power – changes that are obvious even to non-Turkish experts like myself. The mere presence (2002-17) of the same party in government for so long makes you wonder about the nature of our neighboring democracy.

I read in Monday’s Corriere della Sera that prior to the attack on Istanbul’s Reina nightclub, Turkey’s director for religious affairs, who represents the state, had accused those preparing to celebrate New Year’s Eve of being “infidels.” Meanwhile, author Burhan Sonmez told the same paper that similar complaints, regarding both Christmas and New Year’s Eve, were made by several leading AKP officials. While Turkey officially condemned the attack, on social media and elsewhere online, many defended the assassin in the name of religion. In a statement claiming responsibility for yet another mass murder, the slaughterers’ group referred to the “apostate Turkish government.” These are the same people Erdogan helped in the past but was forced to drop when he started reaching an understanding with Russia’s Vladimir Putin, abandoning the US, which is helping the Kurds and which forced him to move away from his friend Bashar al-Assad.

There is something wrong with the sultan of democracy. He now claims that Kurdish terrorism is equal to Islamic terrorism. The result of the equation is weekly massacres. How can social cohesion be maintained faced with weekly attacks on civilians from Diyarbakir to Istanbul? How much can you trust a leader who does not hide his autocratic tendencies, who has changed his country’s allies on numerous occasions in the last decade and who undermines his own military and secret service forces? Given that Greece and Europe have based their entire management of the refugee-migrant crisis on Erdogan’s word, should we start worrying? Instead of looking for frigates invading our islets, should we be looking out for dinghies flooding our cities with human despair? Until the world becomes paradise, you need borders, even those at sea.

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Jan 032017
 
 January 3, 2017  Posted by at 9:59 am Finance Tagged with: , , , , , , , ,  4 Responses »
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Robert Doisneau Françoise Gilot et Pablo Picasso 1952


Fears Of ‘Massive’ Global Property Price Fall In ‘Dangerous’ Conditions (Tel.)
Is Trump About to Debunk the Media’s ‘Putin-gate’ Conspiracy Theory? (AntiWar)
Assange: Obama Admin Trying To ‘Delegitimize’ Trump (Hill)
Trump Says US Safe From North Korean Nuclear Strike – No Thanks To China (G.)
China Needs To Let Companies Go Bust To Support The System – Xie (CNBC)
Holes in China’s Currency Wall (BBG)
China Starts 7,500 Mile Freight Train to London as Xi Boosts Trade Ties (BBG)
Finland Trials Basic Income For Unemployed (AP)
US Special Operations Numbers Surge In Africa’s Shadow Wars (I’Cept)

 

 

“..raising the risk of massive price falls if markets overheat, according to the OECD..” Pretty sure they are overheated.

Fears Of ‘Massive’ Global Property Price Fall In ‘Dangerous’ Conditions (Tel.)

Property prices have climbed to dangerous levels in several advanced economies, raising the risk of massive price falls if markets overheat, according to the OECD. Catherine Mann, the OECD’s chief economist, said the think-tank was monitoring “vulnerabilities in asset markets” closely amid predictions of higher inflation and the prospect of diverging monetary policies next year. Ms Mann said a “number of countries”, including Canada and Sweden, had “very high” commercial and residential property prices that were “not consistent with a stable real estate market”. She also said property price falls in Britain following the vote to leave the EU could “be good for the UK” if the adjustment is borne mainly by foreign investors.“We’ve already started to see some changes in real estate prices in the UK, [particularly in] the London market,” said Ms Mann.

“[What’s] interesting in terms of the implications for the UK economy is who bears the burden – who bears the adjustment cost. If it’s a non-resident then lower house prices could actually be good for the UK.” The warning comes as research by Countrywide reveals that the number of homes sold in the UK for more than the asking price has tumbled in the last year. In January 2016, 41.5pc of homes for sale in London were sold above the asking price. But this fell to just 23pc in November. Nationally, the fall was less steep: from 29.8pc in March to 23.1pc in November. The data suggest that the UK housing market could be at an inflection point with activity slowing throughout 2016, particularly in the capital, as sellers accepted lower offers while buyers deserted the market amid uncertainty over Brexit.

While prices did not fall across the country last year, there was a slowdown in activity as people chose not to buy a home. Johnny Morris, head of research at Countrywide, said: “There isn’t the same level of competition in the market now.” The Royal Institution of Surveyors reported that the number of new buyer inquiries has been at very low levels in the second half of the year. The number of new properties on the market has also been at record lows, helping to prop up prices. Mr Morris added: “We expect prices to fall next year as this slowdown works through the system. Generally the first thing to change will be the number of transactions, and then after the gap between what people will pay and how much people will accept opens up quickly and takes a while to close. Sales slow, and then there is a price adjustment.”

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Yeah, please, end this B movie.

Is Trump About to Debunk the Media’s ‘Putin-gate’ Conspiracy Theory? (AntiWar)

“It wouldn’t be a bad opening for a Tom Clancy novel about the Cold War” – that’s how the Los Angeles Times described the sequence of events leading up to the expulsion of 35 Russian diplomats (“spies”) and the latest face-off between Washington and Moscow. Indeed the whole episode of has about it a fictional aura, which is, after all, only appropriate, since the entire basis of this latest cold war drama is pure invention. The Russian “spy nest” had supposedly been in use since 1972 – but our Keystone Kops were just now getting around to dismantling it. Oh well, better late than never! It’s a 45-acre compound on the Maryland shore, about 60 miles from Washington, a place where Russian diplomats went to relax with their families.

Neighbors said they never saw anything the least bit off, and that the Labor Day picnics to which they were invited featured plenty of really good vodka. The head of the town council, a retired Marine, told the Los Angeles Times: “They’re good neighbors, and have been the whole time they’ve been there.” On New York’s Long Island a similar scenario unfolded: an estate long the site of Russian diplomats relaxing with their families is raided by the feds, and impounded, while baffled locals look on. It’s all part of the security theater performed by Obama’s dead-enders, as they do their best to cast a long shadow over the incoming Trump administration. And like any performance, it comes with a little booklet explaining the provenance of the piece, in this case a “report” reiterating in a most unconvincing manner the assertions we’ve been hearing since Election Day: that Trump’s victory was the culmination of an elaborate Russian conspiracy, a remake of “The Manchurian Candidate,” only this time with computers.

And just to add a little extra frisson to the mix, as the clock ticked toward 2017 the Washington Post ran a story alleging that those omnipotent Russkies had hacked into Vermont’s electricity grid – and were about to turn out the lights! Except they didn’t, they weren’t, and it was all a bit of that “fake news” WaPo has been warning us about. The “Russian malware” was found on a laptop that wasn’t even connected to the internet. And it wasn’t Russian malware, it was Ukrainian. Oh, the drama! Except there wasn’t any – at least, not enough for a Tom Clancy novel. [..] Is Trump about to blow this whole phony “Put did it” scam wide open? It wouldn’t surprise me in the least. What we are seeing playing out is the reaction of the swamp creatures as Trump proceeds to drain their natural habitat. That screeching roaring sound you hear is their collective outrage as the implications of Trump’s triumph become apparent.

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Don’t think Assange ever figured he was going to end up defending Trump.

Assange: Obama Admin Trying To ‘Delegitimize’ Trump (Hill)

WikiLeaks founder Julian Assange says there’s an “obvious” reason the Obama administration has focused on Russia’s alleged role in Democratic hacks leading up to Donald Trump’s electoral win. “They’re trying to delegitimize the Trump administration as it goes into the White House,” Assange said during an interview with Fox News’s Sean Hannity airing Tuesday night, according to a transcript of excerpts from the network. “They are trying to say that President-elect Trump is not a legitimate president,” Assange said during the interview, which was conducted at the Ecuadorian embassy in London where he has been staying. “Our publications had wide uptake by the American people, they’re all true,” Assange continued. “But that’s not the allegation that’s being presented by the Obama White House.”

Assange reiterated the group’s denial that Russia was the source of the Democratic documents released over the summer. “Our source is not a state party, so the answer for our interactions is no,” he said. In December, Assange told Hannity that the documents the anti-secrecy group received looked “very much like they’re from the Russians” but said his source was not them. When asked if he thought WikiLeaks influenced the 2016 election, Assange pointed to private comments from members of the Democratic National Committee (DNC) and Hillary Clinton’s campaign in documents published by the group. “Did [WikiLeaks] change the outcome of the election? Who knows, it’s impossible to tell,” Assange said. “But if it did, the accusation is that the true statements of Hillary Clinton and her campaign manager, John Podesta, and the DNC head Debbie Wasserman Schultz, their true statements is what changed the election.”

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“He has described Kim as a “maniac”, but suggested in June 2015 that he would be willing to invite Kim to Washington for talks over hamburgers.”

Trump Says US Safe From North Korean Nuclear Strike – No Thanks To China (G.)

Donald Trump has said no North Korean nuclear bomb will reach the US mainland, a day after the regime in Pyongyang claimed it was close to test-launching an intercontinental ballistic missile (ICBM). The president-elect – who has yet to articulate his incoming administration’s approach to North Korea’s nuclear weapons programme – also took another swipe at China, accusing Beijing of failing to rein in the North’s nuclear ambitions. “North Korea just stated that it is in the final stages of developing a nuclear weapon capable of reaching parts of the US. It won’t happen!” Trump tweeted. It was not clear what Trump meant: whether he believed North Korea was incapable of developing a reliable ICBM, or that the US would prevent it doing so.

He went on to reignite his verbal tit-for-tat with Beijing, this time linking trade to what he called China’s unwillingness to exert pressure on Pyongyang over its nuclear weapons programme. “China has been taking out massive amounts of money and wealth from the US in totally one-sided trade, but won’t help with North Korea. Nice!” [..] Since winning the US presidential election, Trump has not indicated he will abandon the Obama administration’s policy of isolating North Korea. He has described Kim as a “maniac”, but suggested in June 2015 that he would be willing to invite Kim to Washington for talks over hamburgers. North Korea is thought to be some way off developing a nuclear warhead capable of reaching the US, but some experts said Kim’s ICBM claims should be taken seriously, citing the progress that has been made since he became leader in late 2011.

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Zombie country.

China Needs To Let Companies Go Bust To Support The System – Xie (CNBC)

China posted positive manufacturing numbers this week, but there are more problems that need to be fixed in the system that is acknowledged, an economist said Tuesday. “(You cannot just) focus on overcapacity and not focus on the government policy of subsidizing production or the financial system, that is, basically rolling over non-performing loans to make it look like they are still performing,” said independent economist Andy Xie. “China has been stretching the cycle and trying to roll over all the loans so nobody goes bankrupt,” he told CNBC’s Squawk Box.

The Chinese government, he said, needs to stop boosting industry by subsidizing investment as this will further contribute to over-capacity—which is in turn funded by households invested in the property bubble. “This is destroying household sector demand and you get into a vicious cycle. The industry sector can never become healthy,” he said. Xie’s comments come on the back of the release of China Caixin’s December manufacturing Purchasing Managers’ Index (PMI) which marked its fastest rate of improvement in three years.

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“.. the history of such endeavors shows that people care much more about preserving their wealth than observing the letter of the law…”

Holes in China’s Currency Wall (BBG)

China’s latest great wall against capital outflows is likely to be as effective at stemming overseas real estate purchases as the real thing was at keeping out invaders.The country’s foreign-exchange regulator is requiring citizens who want to move money abroad to provide extra information on bank forms introduced Jan. 1, including a pledge that the funds won’t be used to purchase property.Beijing has made several attempts in recent months to rein in the nation’s voracious appetite for overseas bricks and mortar. In November, the government imposed a ban on foreign property purchases worth $1 billion or more by state-owned enterprises. Now, even the $50,000 that every individual is allowed to convert each calendar year can henceforth be used only for non-investment purposes such as travel or medical services.

[..] Unofficial conduits for moving money out of China abound. The continued demand for dollar-denominated insurance policies in Hong Kong — even after the use of China UnionPay Co. credit and debit cards was outlawed for such purchases — is evidence enough of that.One popular tactic is known as “smurfing” – breaking sums down into small increments that avoid official scrutiny, named after the little blue cartoon characters who as small individuals constitute a larger whole. People needing to move large amounts out of China can recruit friends and relatives to help carry the load in this way.Offshore trading companies – with the cover of export and import invoicing — have more leeway to move money in and out of the country, offering another route that can be used to finance overseas property purchases.

China has acknowledged a problem with fake invoicing. Still, a more stringent clampdown would risk disrupting trade at a time of weak growth.This is the rub for China’s foreign-exchange regulators. Capital controls are inevitably porous, especially for a country that’s as plugged into the global trade and economic system as China. And the demand for offshore property remains seemingly insatiable.Rich Chinese aim to have at least a third of their wealth outside the country and real estate is their most popular overseas investment, according to the Hurun Research Institute. About 60 percent of individuals surveyed said they plan to buy offshore property in the next three years, the wealth researcher said in an October report.

The reasons for the exodus are well known. China’s economy is slowing, domestic real estate is becoming increasingly unaffordable and the yuan is depreciating. In these circumstances, foreign property promises capital preservation. Until these fundamental factors turn around, Chinese authorities will be pushing against the tide.The greatest value of the latest controls may be in the signal they send to the general population: China is serious about reining in outflows, and those who are caught abusing the system will be dealt with severely. That may give some buyers pause. But the history of such endeavors shows that people care much more about preserving their wealth than observing the letter of the law. This is another clampdown that will fail.

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That’s just hilarious. Marco Polo here we come.

China Starts 7,500 Mile Freight Train to London as Xi Boosts Trade Ties (BBG)

China started a freight train to London as part of President Xi Jinping’s efforts to strengthen trade ties with Europe, Xinhua reported, citing state-owned China Railway Corp. The train, departing from Yiwu in eastern Zhejiang province, will cover more than 12,000 kilometers (7,500 miles) in about 18 days before reaching the British city, carrying goods such as garments, bags and suitcases among other items, Xinhua said Monday. The freighter will pass through Kazakhstan, Russia, Belarus, Poland, Germany, Belgium and France.

London is the 15th city in Europe to be added to China’s freight train services to the continent as Xi seeks to reinforce commercial links with markets across Asia, Africa, the Middle East and Europe. In 2013, Xi unveiled his so-called Belt-and-Road initiative, making transport lines the centerpiece of his efforts to create a modern Silk Road. China has initially set aside about $40 billion in a fund to finance roads and railways abroad under the plan, while the nation’s trade with countries along the routes could reach $2.5 trillion in about a decade, Yao Gang, the then vice chairman of China Securities Regulatory Commission, said in 2015.

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It’s misleading to call this basic income. It leads away from the real thing.

Finland Trials Basic Income For Unemployed (AP)

Finland has become the first country in Europe to pay its unemployed citizens a basic monthly income, amounting to €560 (£477/US$587), in a unique social experiment that is hoped to cut government red tape, reduce poverty and boost employment. Olli Kangas from the Finnish government agency KELA, which is responsible for the country’s social benefits, said on Monday that the two-year trial with 2,000 randomly picked citizens receiving unemployment benefits began on 1 January. Those chosen will receive €560 every month, with no reporting requirements on how they spend it. The amount will be deducted from any benefits they already receive. The average private sector income in Finland is €3,500 per month, according to official data.

Kangas said the scheme’s idea was to abolish the “disincentive problem” among the unemployed. The trial aimed to discouraged people’s fears “of losing out something”, he said, adding that the selected persons would continue to receive the €560 even after receiving a job. A jobless person may currently refuse a low-income or short-term job in the fear of having his financial benefits reduced drastically under Finland’s generous and complex social security system. “It’s highly interesting to see how it makes people behave,” Kangas said. “Will this lead them to boldly experiment with different kinds of jobs? Or, as some critics claim, make them lazier with the knowledge of getting a basic income without doing anything?”

The unemployment rate of Finland, a nation of 5.5 million, stood at 8.1% in November with some 213,000 people without a job – unchanged from the previous year. The scheme is part of the measures by the centre-right government of Finland’s prime minister, Juha Sipila, to tackle unemployment. Kangas said the basic income experiment may be expanded later to other low-income groups such as freelancers, small-scale entrepreneurs and part-time workers.

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Obama’s legacy is not what it seems.

US Special Operations Numbers Surge In Africa’s Shadow Wars (I’Cept)

Africa has seen the most dramatic growth in the deployment of America’s elite troops of any region of the globe over the past decade, according to newly released numbers. In 2006, just 1% of commandos sent overseas were deployed in the U.S. Africa Command area of operations. In 2016, 17.26% of all U.S. Special Operations forces – Navy SEALs and Green Berets among them – deployed abroad were sent to Africa, according to data supplied to The Intercept by U.S. Special Operations Command. That total ranks second only to the Greater Middle East where the U.S. is waging war against enemies in Afghanistan, Iraq, Syria, and Yemen. “In Africa, we are not the kinetic solution,” Brigadier General Donald Bolduc, the chief of U.S. Special Operations Command Africa, told African Defense, a U.S. trade publication, early this fall. “We are not at war in Africa – but our African partners certainly are.”

That statement stands in stark contrast to this year’s missions in Somalia where, for example, U.S. Special Operations forces assisted local commandos in killing several members of the militant group, al-Shabab and Libya, where they supported local fighters battling members of the Islamic State. These missions also speak to the exponential growth of special operations on the continent. As recently as 2014, there were reportedly only about 700 U.S. commandos deployed in Africa on any given day. Today, according to Bolduc, “there are approximately 1,700 [Special Operations forces] and enablers deployed… at any given time. This team is active in 20 nations in support of seven major named operations.” Using data provided by Special Operations Command and open source information, The Intercept found that U.S. special operators were actually deployed in at least 33 African nations, more than 60% of the 54 countries on the continent, in 2016.

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Jan 012017
 
 January 1, 2017  Posted by at 11:29 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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Claude Monet The Japanese Bridge 7 1924


Trump Leaves Open Possible Taiwan Meet, Questions Russia Hacking (R.)
Was Claim by DHS and FBI About Russian Hacking Fake News? (Spring)
Is the “Trump Trade” Already Unwinding? (WS)
Senator McCain Says US Stands With Ukraine Against Russia (R.)
Here’s How Much Each EU Nation Puts In And Takes Out Of The EU Budget (BI)
Universal Basic Income Trials Being Considered In Scotland (G.)
China’s Xi Offers Populist Message In New Year’s Eve Address (AP)
Narendra Modi Just Dug Himself a Great Big Hole (Varadarajan)
Turkish Policy Sets Syria On New Path (Sayigh)
Humanity May Self-Destruct, But The Universe Can Cope Perfectly Without Us (G.)

 

 

Trump’s been -partially- briefed: ”I also know things that other people don’t know so we cannot be sure..”. And he’s obviously not convinced, to say the least.

Trump Leaves Open Possible Taiwan Meet, Questions Russia Hacking (R.)

U.S. President-elect Donald Trump on Saturday left open the possibility of meeting with Taiwan’s president if she visits the United States after he is sworn in on Jan. 20 and also expressed continued skepticism over whether Russia was responsible for computer hacks of Democratic Party officials. In remarks to reporters upon entering a New Year’s Eve celebration at his Mar-a-Lago estate, Trump said, “We’ll see,” when pressed on whether he would meet Tsai Ing-wen, Taiwan’s president if she were to be in the United States at any point after he becomes president. Taiwan’s president will be in transit in Houston on Jan. 7 and again will be in transit in San Francisco on Jan. 13. Beijing bristled when Trump, shortly after his Nov. 8 victory, accepted a congratulatory telephone call from the Taiwan leader and has warned against steps that would upset the “one-China” policy China and the United States have maintained for decades.

Talk of a stop-over in the United States by the Taiwan president has further rattled Washington-Beijing relations. On another foreign policy matter, Trump warned against being quick to pin the blame on Russia for the hacking of U.S. emails. The Washington Post also reported on Friday that Moscow could be behind intrusion into a laptop owned by a Vermont electric utility. U.S. intelligence officials have said that they are confident Russia was behind the hacks, which could have played a role in Trump’s defeat over Democratic presidential candidate Hillary Clinton. “I think it’s unfair if we don’t know. It could be somebody else. I also know things that other people don’t know so we cannot be sure,” Trump said. Asked what that information included, the Republican President-elect said, “You will find out on Tuesday or Wednesday.” He did not elaborate.

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Seems to depend on who reports on it.

Was Claim by DHS and FBI About Russian Hacking Fake News? (Spring)

An important research principle is to follow the money. People around the world need to ask themselves who has the money and technical ability to be running hundreds and perhaps thousands of real servers and real IP addresses from fake corporations using fake websites in fake locations in more than 40 nations around the world? What agency has already been proven to be running mass surveillance on billions of people in more than 40 nations all around the world? Whose military cyber budget is more than 10 times larger than the cyber warfare budget of the rest of the world combined? There is certainly an elephant in the room – but it is not a Russian elephant. At a televised press conference in April 2016, former NSA agent Edward Snowden asked the Russian leader Vladimir Putin if the Russian government engaged in mass surveillance of millions of people in a manner similar to the NSA.

Putin replied that Russian law prohibited the Russian government from engaging in mass surveillance. Putin then pointed out that the Russian military budget was less than 10% of the US military budget. So even if they wanted to engage in mass surveillance, they simply did not have the money. People also need to ask themselves why the FBI/DHS chose to place their evidence in a CSV file and XML file rather than a normal document or spreadsheet. If this were real evidence, it would have been placed directly in the PDF report for everyone to read – not hidden away in a file the general public has little ability to read. Finally, for the FBI or the DHS to claim that the XML-CSV file contains evidence or even indicators of Russian hacking is simply a false statement. It is a perfect example of fake news. Any news agency promoting this claim without doing even the most basic of research that would easily confirm it is false should be listed as a fake news agency.

The real question that we should all be asking is why the DHS and FBI would destroy their reputation by posting such a fake report? Several years ago, our CIA claimed that Iraq had weapons of mass destruction. We now know that Iraq had no weapons of mass destruction – meaning that we went to war and spent over a trillion dollars on a fake report. Is this new fake report a pretext for launching a cyber war against Russia? Is it intended to justify increasing US military spending? It is hard to say what the real purpose of this fake DHS-FBI report is. But the fact that this silly list of IP addresses was the best evidence they could provide should be a strong indication that there really is no evidence of Russian hacking. Instead, it is more likely that Wikileaks is telling the truth in stating that they got the emails from a disgruntled Democratic Party insider.

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There’s so much downside there it’s scary.

Is the “Trump Trade” Already Unwinding? (WS)

The S&P 500, after having ended 2015 down 0.7%, ended 2016 up 9.5%, including a big swoon early in the year. From February 11, when it bottomed out at 1,810, it has surged 23.6%. And bonds went on a wild ride. The 10-year Treasury yield ended 2016 at 2.445% up from 2.273% at end of 2015. It hit 2.57% at peak Trump Trade, up over a full percentage point from the summer. Over the fourth quarter, the yield jumped 84 basis points, the largest quarterly jump since 1994. And prices, which move inverse to yields, clobbered bondholders. But note the decline in yield since December 20:

And stocks partied. Since the election, financials surged, bringing the gain for the year to 29.1%, the best-performing sector in the S&P 500. Goldman Sachs, whose ex-executives are now heavily represented in the Trump administration, shot up 36% since the election and 51% since the beginning of October when Trump’s victory became more than just a possibility. GS was one of the best Trump Trades out there. Alas, it too has started to peter out. GS is now down 2.5% from peak Trump-Trade, and other banks have followed. Insiders at the banks were preparing for it, it seems, because on December 9, just before bank stocks started losing ground, we found…

Mortgage rates have soared from around 3.4% for much of the summer to 4.32%, according to Freddie Mac. This is now reverberating through the housing market in multiple ways, with some people rushing to buy to lock in the rates before they go even higher, and others waiting for rates to come down and not buying, and still others being completely priced out by mortgage rates that are nearly a percentage point higher than they’d been a few months ago, and the first red flags on home sales are now cropping up:

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Oh, go away!

Senator McCain Says US Stands With Ukraine Against Russia (R.)

Republican U.S. Senator John McCain promised on Saturday continued support for Kiev in the face of aggression from Moscow, as he spent New Year’s Eve on the front line in Ukraine’s eastern conflict zone. McCain was one of a bipartisan group of 27 U.S. senators who sent a letter to President-elect Donald Trump in December, urging him to take a tough line against Russia over what they termed its “military land grab” in Ukraine. “I send the message from the American people – we are with you, your fight is our fight and we will win together,” McCain was quoted as saying by Ukrainian President Poroshenko’s press service. “In 2017 we will defeat the invaders and send them back where they came from. To Vladimir Putin – you will never defeat the Ukrainian people and deprive them of their independence and freedom,” McCain said after a visit to a military base in the southeastern town of Shyrokyne.

Trump signaled during his campaign that he might take a softer line in dealings with Moscow, repeatedly praising Russian President Putin’s leadership. Trump’s election caused jitters in Ukraine but officials in Kiev hope that the incoming president’s policies, influenced by Republican hawks and a Republican-voting Ukrainian diaspora, will be friendlier towards Ukraine than his campaign rhetoric might have suggested. Ukraine has relied on Western support and economic aid since street protests in 2014 which toppled a Kremlin-backed president and were followed by a war with pro-Russian separatists and Russia’s annexation of the Crimea peninsula from Ukraine.

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The enormous amounts going to France, Spain, Italy, Belgium are something to be very concerned about.

Here’s How Much Each EU Nation Puts In And Takes Out Of The EU Budget (BI)

One of the biggest political stories of 2016 has been Brexit and much of the debate both before and after June’s vote to leave the EU has focused around whether Britain will be financially better or worse off after leaving the EU. The “Vote Leave” campaign famously emblazoned their battle bus with a figure of £350 million, claiming that was what the UK sent to Brussels each week and that sum could be spent on the NHS instead. The figure was subsequently discredited, as it was a gross sum and didn’t take into account the fact that Britain also benefits from EU grants and funding. However, a recent House of Commons briefing paper on the UK’s funding from the EU shows that Britain does, in fact, put more into the EU budget than it takes out.

The UK has averaged around €12 billion in EU funding each year between 2011-15 but over that same period made an average net contribution of €15 billion. Britain is one of nine EU members that are net contributors to the European Union’s budget (meaning they put in more money than they take out.) Here’s the House of Commons chart showing each member states net contributions against their EU funding:EU funding House of Commons Briefing Paper The fact that Britain is a net contributor means that, in theory, the UK could stand to gain money after it leaves the EU. However, this does not account for any potential economic fluctuations as a result of Brexit — if the economy suffers then any gains from not paying into the budget could easily be wiped out by falling tax receipts.

There is also a very real possibility that the UK may have to keep paying into the EU budget if it wants to maintain access to the EU Single Market. The UK will also have to continue paying into the EU budget until it formally leaves the EU and senior European negotiators have signalled they will try and make Britain pay up to €60 billion to leave, to cover previous budget commitments, pension liabilities, and other costs. In other words, while on paper it might look like leaving the EU will give Britain more money for inward investment, Brexit could end up costing the UK just as much as EU membership — or worse, more.

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I’m all for a good basic income trial. But I’m very afraid that none of them will be adequate, and that this will be used to discredit the entire idea. And please don’t use the term universal for small scale experiments, it’s misleading.

Universal Basic Income Trials Being Considered In Scotland (G.)

Scotland looks set to be the first part of the UK to pilot a basic income for every citizen, as councils in Fife and Glasgow investigate trial schemes in 2017. The councillor Matt Kerr has been championing the idea through the ornate halls of Glasgow City Chambers, and is frank about the challenges it poses. “Like a lot of people, I was interested in the idea but never completely convinced,” he said. But working as Labour’s anti-poverty lead on the council, Kerr says that he “kept coming back to the basic income”. Kerr sees the basic income as a way of simplifying the UK’s byzantine welfare system. “But it is also about solidarity: it says that everyone is valued and the government will support you. It changes the relationship between the individual and the state.”

The concept of a universal basic income revolves around the idea of offering every individual, regardless of existing welfare benefits or earned income, a non-conditional flat-rate payment, with any income earned above that taxed progressively. The intention is to provide a basic economic platform on which people can build their lives, whether they choose to earn, learn, care or set up a business. The shadow chancellor, John McDonnell, has suggested that it is likely to appear in his party’s next manifesto, while there has been a groundswell of interest among anti-poverty groups who see it as a means of changing not only the relationship between people and the state, but between workers and increasingly insecure employment in the gig economy.

Kerr accepts that, while he is hopeful of cross-party support in Glasgow, there are “months of work ahead”, including first arranging a feasibility study in order to present a strong enough evidence base for a pilot. “But if there is ever a case to be made then you need to test it in a place like Glasgow, with the sheers numbers and levels of health inequality. If you can make it work here then it can work anywhere.”

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Now Xi is designated populist too, because he said: “On this new year, I am most concerned about the difficulties of the masses: how they eat, how they live, whether they can have a good New Year, or a good Spring Festival..” And I thought when incumbents say these things, that’s not populist. I may never understand.

China’s Xi Offers Populist Message In New Year’s Eve Address (AP)

Chinese President Xi Jinping said Saturday that his government would continue to focus on poverty alleviation at home and resolutely defending China’s territorial rights on the foreign front. Xi made the televised remarks in his annual New Year’s Eve address, in which he touted China’s scientific accomplishments, highlighting its large new radio telescope and space missions, and the country’s growing role as a leader in global affairs. Standing before a mural of the Great Wall, Xi said his administration successfully hosted a G-20 summit, pushed forward with China’s “One Belt One Road” pan-Eurasian infrastructure project and established the Asian Infrastructure Investment Bank.

China has upheld its peaceful development while resolutely defending its territorial sovereignty and maritime rights, Xi said, making a reference to an international tribunal ruling last summer against China’s claims in the contested South China Sea. “If anyone makes this an issue of question, the Chinese people will never agree!” he said, one of the few points in his 10-minute address when his voice rose noticeably. For most of his address, Xi struck a populist tone, saying he was above all concerned about the living conditions of the people and vowed that improving employment, education, housing and health care would be a responsibility that his ruling Communist Party would never shirk from. China lifted 10 million people out of poverty in 2016, Xi said.

“On this new year, I am most concerned about the difficulties of the masses: how they eat, how they live, whether they can have a good New Year, or a good Spring Festival,” Xi said, as the television broadcast cut to footage of his visits this year to impoverished rural areas. Xi also promised to shore up Communist Party discipline and “unwaveringly” maintain his anticorruption campaign against high- and low-ranking officials alike. He said that “supply-side” economic reforms were making progress and that the party would continue to push reform and rule by law during the 19th National Congress, scheduled for late 2017. “As long as the party forever stands with the people, we will be able to walk the long march of our generation,” he said.

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A Lakh is one hundred thousand. Still confusing as f**k.

Narendra Modi Just Dug Himself a Great Big Hole (Varadarajan)

It was a speech of not just shifting goalposts but vanishing playing fields, and yet Narendra Modi couldn’t resist making a rhetorical point about black money that might well prove costly for him by the time 2019 comes around. “I wish to share some information with you, which will either make you laugh, or make you angry,” he said, with a flourish half-way through his speech. This was the point where everyone expected him to reveal how many old Rs 500 and 1000 notes had become ‘worthless paper’ thanks to demonetisation but he had another number in mind: “According to information with the government, there are only 24 lakh people in India who accept that their annual income is more than 10 lakh rupees. Can we digest this? Look at the big bungalows and big cars around you… If we look at any big city, it would have lakhs of people with annual income of more than 10 lakh.”

Until then, the prime minister had sought to sweep the growing public concerns about the effects of his demonetisation decision under a fraying carpet of nationalism. But by drawing attention to a stark statistic in an attempt to provide some justification for the chaos he has unleashed in the lives of hundreds of millions of poor Indians, Modi has unwittingly laid down a new metric by which the success or failure of his supposed drive against black money must be judged: will he manage to add the “lakhs of people” who have an income of more than Rs 10 lakh to the list of those who pay income tax? If he doesn’t, then what was the point of subjecting the whole country to so much disruption and pain? Finance minister Arun Jaitley initially claimed that a certain proportion of the demonetised notes would remain outside the banking system and get extinguished, thus providing a blow to the black economy and a fiscal boost to the government.

When they realised there was unlikely to be significant extinguishing and that most of the high denomination notes in circulation would probably end up getting deposited, Modi and Jaitley claimed the income tax authorities would be able to track down the owners of black money since their funds had entered the banking system. Now that it is apparent the IT department will not find it that easy to undertake such a massive exercise – its inefficiency is the reason the list of those with official incomes of Rs 10 lakh and over is just 24 lakh to begin with and is unlikely to grow – Modi has tried to sell another bizarre idea to the public about why the cashless hardship they are putting up with is in the national interest.

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Putin is tightening his grip on Erdogan. Who held a speech yesterday proclaiming that Turkey is in the first independence war in 93 years, or something like that. But that’s strictly for domestic use.

Turkish Policy Sets Syria On New Path (Sayigh)

Turkish policy has been evolving at a quickening pace. The decision to lean on the opposition to allow thousands of its fighters to abandon the effort to lift the regime siege of eastern Aleppo in order to spearhead a Turkish-backed push against Kurdish-held areas to the north last August ensured the fall of one of the most important opposition strongholds in Syria four months later. Remaining opposition forces in the northwest have significant stockpiles of weapons and ammunition, but are wholly dependent on Turkey for further military resupply and for the flow of trade and international humanitarian assistance. Turkey has not abandoned the opposition completely, but it is clearly working to a new set of policy assumptions and objectives in Syria.

That these include a strategic decision to abandon the effort to force Assad from power is already plain. Talk of setting up a safe zone in northern Syria has never been credible, despite considerable bluster. Moscow insiders claim Turkish President Recep Tayyip Erdogan is also abandoning his categorical rejection of significant Kurdish autonomy in northern Syria, so long as he can block the same thing in Turkey. With President-Elect Donald Trump about to take office in the US, there is little reason for Turkey to expect to counter-balance Russian policy proposals on Syria. These calculations prompted Turkey to accept the fate of Aleppo – which it had long presented as a “red line” that the Assad regime should not cross – and then to broker a ceasefire with Russia immediately after its fall.

The alacrity with which the main political and military opposition groupings have announced their support for the latest ceasefire is the surest measure of the extent of the shift in Turkey’s policy and of its determination to enforce compliance, whatever the provocations from the government side. The real question, then, is not whether the latest ceasefire will hold, but how far Turkey will go in making the Syrian opposition accept what comes next, should the peace talks jointly sponsored by Russia and Turkey take place within the next month as officially scheduled. Indeed, even if the ceasefire fails or if the talks are unsuccessful – or not held at all – Turkish policy towards Syria is set on a new path.

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Destruction as a religious comfort zone. Oh well, people go for what feels good.

Humanity May Self-Destruct, But The Universe Can Cope Perfectly Without Us (G.)

In a Scandinavian hotel a few years ago, I came across a documentary I didn’t expect to watch for more than a minute or two, but at least it was in English. It was past time to go to bed, but I ended up watching the whole thing. Aftermath: Population Zero imagines that overnight humanity vanishes from the planet. You may have seen it. The immediate effects of human departure are sentimentally saddening: pets die, no longer competent to fend for themselves. Some livestock fares poorly, though other domesticated animals romp happily into the wild. Water cooling fuel rods of nuclear power plants evaporate, and you’d think that would be the end of everything – but it isn’t. Radioactivity subsides. Mankind’s monuments to itself decay, until every last skyscraper has rusted and returned to dirt.

Animals proliferate, flora thrive, forests rise. Bounty, abundance and beauty abound. Antelopes leap from wafting golden grasses. It was all very exhilarating, really. I went to sleep that night with a lightened heart. Ever since, that wafting grasses image has been a comforting touchstone. We speak often of “destroying the planet” when what we mean is destroying its habitability for humans. The humblingly immense else-ness of what is, in which our species is collectively a speck, extant for an eye blink, lets us off the hook. Global warming, Syrian civil war, domestic violence, Donald Trump? This too shall pass.

I’m not a religious person. Chances are that the universe neither treasures nor regrets us. It permits us, with a marvellous neutrality, and later it may permit artificial intelligence, humanity 2.0, or a lot more bugs instead. We can’t comprehend all that phantasmagorical stuff out there, but we also can’t kill it. That gives me hope. Although we’re a remarkably successful biological manifestation – and so is mould – our aptitude for annihilation is largely limited to wiping ourselves out. The gift of self-destruction is a minor, not to mention stupid, power, and apparently humanity’s suicide would be relatively safe, like a controlled explosion. The universe would get on perfectly well without us once we’d gone.

I strongly associate the notion of aftermath with TC Boyle’s short story Chicxulub. While relating the intimate, personal account of learning that his teenage daughter has been hit, perhaps fatally, by a car, the narrator digresses to explain the shockingly high likelihood that our planet will be hit by an asteroid large enough to extinguish our species. For the narrator, his daughter’s death and the end of the world are indistinguishable. The text is shot through with a piercing sorrow, over all our pending losses – of children, of the world we’ve made together as a race. This, too, gives me hope – that I’m not a misanthrope after all. I would miss my brother, my husband; with all our shortcomings, I would also miss the family of man. The capacity for grief, the flipside of love, consoles me as much as the detached long view of aftermath.

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