Jun 142017
 
 June 14, 2017  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , ,  17 Responses »
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Fred Lyon San Francisco cable car turnaround 1946

 

A Record 60% Of Americans Disapprove Of President Trump (ZH)
Age Is The New Dividing Line In British Politics (YouGov)
UK Low Income Families Forced To Walk ‘Relentless Financial Tightrope’ (G.)
Gundlach Says DC Establishment Wants to ‘Wait Trump Out’ (BBG)
Trump Administration Welshes on “Repeal Dodd Frank” Promise (NC)
Tillerson Says Allies Pleading With US To ‘Improve Russia Relations’ (RT)
Are Public Pensions A Thing Of The Past? (CNN)
Death Of The Human Investor: Just 10% Of Trading Is Regular Stock Picking (C.)
OPEC Oil Production Jumps In May Despite Output Cuts Deal (CNBC)
China Defaults Feared as Firms Confront Short Debt Addiction (BBG)
Greeks Promised Economic Boost Despair of Ever Seeing Debt Deal (BBG)
Schaeuble Promises Greece Deal With Lenders On Thursday (R.)
Foreign Buyers Snap Up Greek Property (K.)
State Of Emergency Declared On Lesvos As 800 Left Homeless (AP)
‘Impossible And Risky To Take In More Migrants’ – Rome’s Mayor (RT)

 

 

A nation divided.

A Record 60% Of Americans Disapprove Of President Trump (ZH)

Despite record high stock prices, 43-year lows in jobless claims, and near record-high optimism among small business owners, Gallup reports the percentage of Americans who disapprove of the job President Trump has risen to a record 60% this week. As Gallup details, despite the president’s claim on Monday at a Cabinet meeting that “Never has there been a president, with few exceptions – in the case of F.D.R. he had a major Depression to handle – who’s passed more legislation, who’s done more things than what we’ve done,” his administration has been roiled by controversies. Most recently, Trump ran into a buzz saw of criticism with his decision, announced June 1, to withdraw the U.S. from participation in the Paris climate accord.

He has also been under significant political scrutiny over the June 8 testimony of former FBI Director James Comey before the Senate Intelligence Committee. Those events coincided with the lower averages seen in the past two weeks. But, given that his averages were almost as low in the weeks leading up to them, it is difficult to establish direct causality between specific events and the president’s ratings.

The highly polarized nature of Americans’ views of Trump (and Obama before him) have been well-documented, and that pattern continues: Trump’s 8% average approval rating among Democrats last week is right at his 9% average to date; His 83% approval among Republicans is three points lower than his average among that group; Among independents, his approval is 31%, five points lower than his average among that group; Notably the spread between Republican ‘confidence’ and Democrat ‘confidence’ (via Bloomberg) has not been this wide since before Barack Obama was elected…

Trump’s job approval ratings are the worst of his administration so far, and Trump continues to have the lowest ratings for a newly elected president in Gallup’s history of approval ratings. The previous low first-year approval rating in June for an elected president was Bill Clinton, with a 37% approval June 5-6, 1993. The approval ratings of all other presidents since 1953 in June (May in the case of Eisenhower) of their first year after being elected were above 50%.

Read more …

Another nation divided, but not along the same lines. Older people, especially pensioners, vote Conservative, and a much higher percentage of them actually vote.

Age Is The New Dividing Line In British Politics (YouGov)

Since last week’s election result YouGov has interview over 50,000 British adults to gather more information on how Britain voted. This is part of one of the biggest surveys ever undertaken into British voting behaviour, and is the largest yet that asks people how they actually cast their ballots in the 2017 election. The bigger sample size allows us to break the results down to a much more granular level and see how different groups and demographics voted on Thursday. In electoral terms, age seems to be the new dividing line in British politics. The starkest way to show this is to note that, amongst first time voters (those aged 18 and 19), Labour was forty seven percentage points ahead. Amongst those aged over 70, the Conservatives had a lead of fifty percentage points.

In fact, for every 10 years older a voter is, their chance of voting Tory increases by around nine points and the chance of them voting Labour decreases by nine points. The tipping point, that is the age at which a voter is more likely to have voted Conservative than Labour, is now 47 – up from 34 at the start of the campaign.

Despite an increase in in youth turnout, young people are still noticeably less likely to vote than older people. While 57% of 18 and 19 year-olds voted last week, for those aged 70+ the figure was 84%.

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Corbyn growth territory.

UK Low Income Families Forced To Walk ‘Relentless Financial Tightrope’ (G.)

Low-income families are going without beds, cookers, meals, new clothes and other essential items as they struggle to cope with huge debts run up to pay domestic bills, according to a survey highlighting the cost-of-living crisis experienced by the UK’s poorest households. Clients of the debt charity Christians Against Poverty (CAP) had run up an average of £4,500 in debts on rent or utility bills, forcing them on to what the charity described as a “relentless financial tightrope” juggling repayments and basic living costs, leaving many acutely stressed and in deteriorating health. The pressure of coping with low income and debt frequently triggered mental illness or exacerbated existing conditions, with more than a third of clients reporting that they had considered suicide and three-quarters visiting a GP for debt-related problems.

More than half were subsequently prescribed medication or therapy. “The crippling reality of living in poverty and debt is still unashamedly evident in every home we visit, and year on year we see financial difficulty taking a tighter grip,” said Matt Barlow, the UK chief executive of CAP. Experts said the survey highlighted the extreme hardship faced by the “new destitute” – people on low incomes who might in the past have been able to rely on a welfare safety net to help them through financial shocks but who now were forced to go into debt to survive, leaving them struggling to afford even the basics. Debt had a crushing effect on living standards, the CAP survey found, with one in 10 clients unable to afford to buy or repair a bed, washing machine, TV, sofa or fridge. Roughly the same proportion could afford to acquire furniture only on punitive rent-to-buy terms, for example paying £6 a week to acquire a bed and mattress over a set three-year period.

The impact on family life was severe, with a quarter of clients saying debt caused relationship breakdowns, and more than two-thirds saying they felt unable to cater for their children’s needs. A sixth said they could not afford to feed their children three meals a day. A third feared eviction. A tiny handful of clients – predominantly single mothers – reported that they had turned to prostitution to make ends meet. Prof Suzanne Fitzpatrick, of Heriot Watt University, the co-author of groundbreaking research into destitution, told the Guardian: “The new destitute are citizens who would previously have managed to avoid absolute destitution with the help of the welfare safety net. But the level of working age benefits is now so low that people barely managing to get by can easily find themselves in a position where they can’t afford even the basic essentials to eat, stay warm and dry, and keep clean.”

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“If you’re a trader or a speculator, I think you should be raising cash today, literally today..”

Gundlach Says DC Establishment Wants to ‘Wait Trump Out’ (BBG)

DoubleLine Capital’s Jeffrey Gundlach said the establishment in Washington is trying to undermine President Donald Trump by running out the clock on his administration. “They’re really just trying to wait Trump out, trying to obstruct his agenda as much as possible,” Gundlach, one of the few money managers to predict Trump’s election, said during a webcast Tuesday. “Small change is what they’re looking for.” Gundlach, manager of the $53.9 billion DoubleLine Total Return Bond Fund, spoke during televised Senate testimony by Attorney General Jeff Sessions, which the money manager called “a sideshow or entertainment.” He called the U.S. political conflict “rope-a-dope,” a strategy used by boxer Muhammad Ali to wear out opponents.

Among Gundlach’s other observations:
• There’s a low probability of a recession.
• The days of low volatility markets are probably numbered.
• Expect higher bond yields and lower stock prices this summer.
• Yields on 10-year Treasuries are likely to end 2017 roughly in the 2.7% to 2.8% range, from about 2.2% currently.

The Dow Jones Industrial Average and the S&P 500 Index closed at record highs Tuesday prior to Gundlach’s talk. Futures trading implies a 98% probability the Federal Reserve will raise interest rates by 0.25% when it meets Wednesday. “If you’re a trader or a speculator, I think you should be raising cash today, literally today,” Gundlach said. “If you’re an investor, I think you can sit through a seasonally weak period.” The Total Return fund was up 2.7% this year through June 12, beating 84% of its peers, according to data compiled by Bloomberg.

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Yves Smith’s piece is too long and comprehensive to do justice here. Click the link.

Trump Administration Welshes on “Repeal Dodd Frank” Promise (NC)

After having promised banks to get rid of Dodd Frank, which was never a strong enough bill to have a significant impact on profits or industry structure, Trump didn’t even back the House version of the bill to crimp Dodd Frank. But you’d never know that from the cheerleading from bank lobbyists upon the release of a 147 page document by the Treasury yesterday, the first of a series describing the gimmies that the Administration seeks to lavish on banks. As we’ll touch on below, the document repeatedly asserts that limited bank lending post crisis to noble causes like small businesses was due to oppressive regulations. We wrote extensively at the time that small business surveys showed that small businesses then overwhelmingly weren’t interested in borrowing and hiring. Businessmen don’t expand operations because money is cheap, they expand because they see a commercial opportunity.

But the even bigger lie at the heart of this effort is the idea that the US will benefit from giving more breaks to its financial sector. As we’ve written, over the last few years, more and more economists have engaged in studies with different methodologies that come to the same conclusion: an oversized financial sector is bad for growth, and pretty much all advanced economies suffer from this condition. The IMF found that the optimal level of financial development was roughly that of Poland. The IMF said countries might get away with having a bigger banking sector and pay no growth cost if it was regulated well. Needless to say, with the banking sector already so heavily subsidized that it cannot properly be considered to be a private business, deregulating with an eye to increasing its profits is driving hard in the wrong direction.

[..] So if it wasn’t Dodd Frank, what was led the banks to focus so much on high FICO score borrowers? It was mortgage servicing reforms, which made it hard to foreclose due to stopping abuses, like dual tracking (continuing to foreclose even when supposedly considering a mortgage modification). To look at the bigger picture, it’s hard to take bank complaints about oppressive regulation seriously in light of this:

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But the domestic echo chamber makes that hard to do.

Tillerson Says Allies Pleading With US To ‘Improve Russia Relations’ (RT)

All of America’s allies and partners have been calling on Washington to improve its relations with Russia, Secretary of State Rex Tillerson acknowledged after the US Senate reached a bipartisan deal to boost sanctions against Moscow. “I have yet to have a bilateral, one-on-one, a poolside conversation with a single counterpart in any country: in Europe, Middle East, even South-East Asia, that has not said to me: please, address your relationship with Russia, it has to be improved,” Tillerson said on Tuesday during testimony before the Senate Appropriations Committee on Foreign Operations. Tillerson added that the countries urging the US to review its Russian policy “believe worsening this relationship will ultimately worsen theirsituation.” He added: “People have been imploring me to engage and try to improve the situation, so, that was our approach anyway.”

Earlier, Tillerson warned that the US Senate’s bipartisan deal on new set of restrictive measures against Moscow might further worsen relations with Russia and hinder existing efforts on joint US-Russia progress to fight terrorism in Syria. “There are efforts under way in Syria specifically, those are, I would say, progressing in a positive way,” America’s top diplomat said on Tuesday during testimony to the Senate Foreign Relations Committee. Despite the relationship between US and Russia being “at an all-time low,” according to Tillerson, the “objective is to stabilize that” rather than deteriorate it further. Washington is “engaged” and working with Moscow “in a couple of areas,” including on such issues of international importance as the Ukrainian and Syrian crises. “We have some channels that are open, where we are starting to talk, and I think what I wouldn’t want to do is close the channels off,” Tillerson told the Senate committee, warning that to establish “something new… will take time.”

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Yes, they are.

Are Public Pensions A Thing Of The Past? (CNN)

New teachers and state workers will no longer get a traditional pension in Pennsylvania. Governor Tom Wolf signed a bill Monday, making it the ninth state to replace the pension with a “hybrid” retirement plan. It goes into effect in 2019. The new plan combines elements of a traditional pension and a 401(k)-style account. Overall, new workers will contribute more of their salary, work longer, and likely receive a smaller payout in retirement than under the current system, according to a report from the state’s Independent Fiscal Office. But Pennsylvania’s pension system is currently one of the most underfunded in the country and is in need of reform. The bill had bipartisan support. “It’s a win for Pennsylvania taxpayers and fair to Pennsylvania’s workforce,” Wolf said at a press conference Monday.

The reform will build upon previous legislation to help fully fund the pension system and preserve a path to retirement for public workers, said Greg Mennis, a director at Pew Charitable Trusts. “Our research indicates that this would be one of the most – if not the most – comprehensive and impactful reforms any state has implemented,” he wrote in a letter urging state lawmakers to pass the bill. Over the past 10 years, Rhode Island, Virginia, Tennessee and Georgia have created plans similar to Pennsylvania’s. They require workers to contribute some of their salary to a pension-like plan that guarantees a certain payout based on their salary. Workers also contribute to a 401(k)-style plan that they can take with them if they leave public service. The state will make contributions to both plans on their behalf.

In Pennsylvania, workers will be defaulted into a hybrid plan, but there will be two other versions they could opt into. Under the default, workers will have to contribute a total of 8.25% of their salary. (Teachers currently contribute 7.5% and other public workers pay 6.25%.) Most will have to work until 67, instead of 65, in order to get their full payout in retirement. A state employee who works for 35 years and earns a final salary of $60,000, currently receives an estimated $40,000 a year in retirement. Under the reformed system, that same worker would receive $34,1048, according to the Independent Fiscal Office report. [..] Like pension plans in other states, Pennsylvania’s was badly hurt by the Great Recession. It also took a hit because of retroactive benefit increases made before the market took a dive. The pension fund went from a nearly $20 billion surplus in 2000 to a $70 billion deficit in 2015.

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ZIRP machines have taken over.

Death Of The Human Investor: Just 10% Of Trading Is Regular Stock Picking (C.)

Quantitative investing based on computer formulas and trading by machines directly are leaving the traditional stock picker in the dust and now dominating the equity markets, according to a new report from JPMorgan. “While fundamental narratives explaining the price action abound, the majority of equity investors today don’t buy or sell stocks based on stock specific fundamentals,” Marko Kolanovic, global head of quantitative and derivatives research at JPMorgan, said in a Tuesday note to clients. Kolanovic estimates “fundamental discretionary traders” account for only about 10% of trading volume in stocks. Passive and quantitative investing accounts for about 60%, more than double the share a decade ago, he said.

In fact, Kolanovic’s analysis attributes the sudden drop in big technology stocks between Friday and Monday to changing strategies by the quants, or the traders using computer algorithms. In the weeks heading into May 17, Kolanovic said funds bought bonds and bond proxies, sending low volatility stocks and large growth stocks higher. Value, high beta and smaller stocks began falling in a rotation labeled “an unwind of the ‘Trump reflation’ trade,” Kolanovic said. “Upward pressure on Low Vol and Growth, and downward pressure on Value and High Vol peaked in the first days of June (monthly rebalances), and then quickly snapped back, pulling down FANG stocks” — Facebook, Amazon.com, Netflix and Google parent Alphabet, the report said.

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Told you those output cuts wouldn’t go anywhere.

OPEC Oil Production Jumps In May Despite Output Cuts Deal (CNBC)

OPEC’s oil production jumped in May, despite the exporter group agreeing last month to extend its six-month deal to cap output into 2018. Production across OPEC rose by about 336,100 barrels per day to 32.1 million bpd, according to secondary sources, led by increases from Libya and Nigeria, which are exempt from the deal, and Iraq. Output from Libya surged by more than 178,000 bpd to 730,000 bpd as the country’s rival factions moved toward reconciliation, and supplies disrupted throughout years of conflict remained on line. In Nigeria, production was up more than 174,000 bpd to 1.68 million bpd as supplies sidelined by militant attacks on energy infrastructure last year came back into operation. With the gain, Nigeria reclaimed the title of largest African producer in OPEC from Angola, where output fell by 54,000 bpd, the biggest drop among the 13 members in May.

Iraq, OPEC’s second-largest producer, contributed the third-biggest increase with a more than 44,000 bpd jump. Baghdad has yet to cut deeply enough to hit its quota of 4.35 million bpd under the output cut deal. In May, it produced 4.42 million bpd. Only four countries were producing at or below the levels they agreed to in November: Saudi Arabia, Angola, Kuwait, and Qatar. Last month, OPEC and other exporters extended an agreement to remove 1.8 million barrels a day from the market in order to shrink brimming global stockpiles of crude oil. In May, inventories in the OECD, a group of mostly wealthy countries, remained 251 million barrels above the five-year average.

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More ground for shadow banks to take over.

China Defaults Feared as Firms Confront Short Debt Addiction (BBG)

China’s leverage crackdown is forcing local companies to confront their addiction to short-term bond sales that they use to roll over debt. The shock therapy is worsening the outlook for corporate defaults in the second half of this year after borrowing costs jumped to a two-year high. With yields surging, Chinese non-banking firms sold 131 billion yuan ($19.3 billion) of bonds with a maturity of one year or less in May, the least since January 2014 and less than half of the same month last year, according to data compiled by Bloomberg. About 87% of the short note sales last month will be used for refinancing, according to Bloomberg data.

The habit of relying on borrowing short-term money to repay maturing debt has pushed up such liabilities to a total of 5.2 trillion yuan on China’s listed non-financial companies’ balance sheets as of March 31, the highest on record, according to data compiled by Bloomberg. With no sign of an end to the government’s campaign against leverage, the average coupon rate for bonds maturing in one year or less rose to 5.5% in June, deterring issuers from raising money to roll over debt. “Small issuance of short-term bonds will be a normal phenomenon in the coming six months because cash supply will probably remain tight,” said Ma Quansheng at Fullgoal Fund Management. “Both default risks and the number of corporate bond defaults may increase.”

The loose funding environment last year helped Chinese companies raise enough money to withstand repayment pressure so far in 2017. There have been 13 onshore defaults in the public bond market in 2017, compared with 16 in the same period of 2016. The yield on one-year AAA rated company bonds averaged 4.19% this year, up from 2.97% in 2016. HFT Investment Management said more note defaults may come as the economy doesn’t look good. In the second half of this year, Chinese non-banking firms must repay 2.36 trillion yuan of bonds. “The current rising borrowing costs may have a big impact on companies’ operations and finance,” said Lu Congfan at HFT Investment Management. “What can you do when you must refinance to repay maturing debt while facing such high borrowing costs? That would be a question challenging many local companies in the second half or next year.”

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Well, well… Let’s see it.

Schaeuble Promises Greece Deal With Lenders On Thursday (R.)

German Finance Minister Wolfgang Schaeuble said on Tuesday he was confident that Greece and its international lenders will reach a compromise deal this week, a step that would unleash more loans for Athens. “We’ll manage it on Thursday. You’ll see,” Schaeuble said during a panel discussion in Berlin. Officials have said eurozone finance ministers and the IMF are likely to strike a compromise on Greece on Thursday, paving the way for new loans for Athens while leaving the contentious debt relief issue for later. IMF head Christine Lagarde suggested a plan last week under which the Fund would join the Greek bailout now, because Athens is delivering on agreed reforms, but would not disburse any IMF money until the euro zone clarifies what debt relief it can offer Greece.

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Greeks don’t believe you, Wolfie…

Greeks Promised Economic Boost Despair of Ever Seeing Debt Deal (BBG)

Alexis Tsipras has spent nearly two years telling Greeks that a debt deal and inclusion in the ECB’s quantitative-easing program will unleash an investment boom that salves the pain of austerity. The prime minister’s message hasn’t convinced Panagiotis Kouinis, a 60-year-old civil engineer in Corinth who says business has steadily dwindled through all of Greece’s eight-year crisis and has now ground almost to a halt. “What I know is they tell you pensions will be cut another 20%, wages down, and what is quantitative easing?” Kouinis said in an interview in his office near the city center. “Do we have to be economists so we can understand what they’re saying?” Across the country in places like Corinth, an industrial hub 80 kilometers west of Athens, Greeks have spent years treading water as news bulletins bombard them daily with reports of meetings and decisions in Brussels and Frankfurt that will determine their economic future.

In the meantime, as the ECB’s stimulus measures – including its asset-purchase program – buoy the rest of the euro-area economy, Greece’s output has been stagnant, leaving its people the most pessimistic in the region. Yet the ECB remains unlikely to include Greek bonds in its QE program in the foreseeable future, according to a person familiar with the matter. That’s because a meeting on Thursday of euro-area finance ministers, whose electorates are leery of debt relief, looks like delivering another fudge. There may be agreement to disburse more bailout loans but without easing repayment terms enough to satisfy the ECB and IMF. That would leave Tsipras high and dry.

[..] Despite some signs of an improvement in industrial output, Greece has been heavily reliant on consumers and a booming tourist sector to keep GDP – which shrank by a quarter in the early years of the crisis – from continuing its slide. While the economy hasn’t been in a recession since 2015, and grew 0.4% at the start of the year, it hasn’t strung together more than two quarters of consecutive expansion in more than a decade. Accountancy firm PWC said in March that infrastructure investment plunged during the crisis, leaving a backlog of planned and in-progress projects amounting to more than 21 billion euros. Near Corinth, that includes rail, waste management, road and marina developments. “With taxation what it is, not only will no-one come to invest here, but they’d need to be mad to,” said Kouinis, the civil engineer. “Growth needs to start from public works, because the private sector has been killed.”

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Foreigners buy apartments in Athens to rent out to other foreigners on Airbnb. So wrong in so many ways.

Foreign Buyers Snap Up Greek Property (K.)

Property buyers from abroad are this year growing at the fastest pace in a decade, as booming Greek tourism has had a positive impact on the property market too. According to the latest data from the Bank of Greece, in the first quarter of the year the inflow of capital from abroad for real estate acquisitions increased by 61.7% on an annual basis. The March figures have signaled a further improvement, since in the first couple of months the yearly rise had come to 56.7%. If the existing growth rate is sustained throughout 2017, it is likely that by the end of the year more than 430 million euros will have been invested the Greek property market from other countries. The equivalent figure for the whole of 2016 had amounted to 270 million euros, up 45.3% on the 2015 inflow of 186 million euros.

The only time a similar growth rate had been recorded before was in the first quarter of 2007, when foreign investors spent 66.5% more money on property acquisitions than a year earlier. Real estate professionals say this uptick in foreign funds entering the local property market is particularly positive because it came during a period when transactions are usually sparse: Expressions of buying interest this year started in the winter months, not in the summer when demand typically peaks. This has bolstered optimism about an even better summer in terms of transactions, which may reach their high for the entire period since the outbreak of the financial crisis.

The major rise in inflows this year is due to the increase in demand for apartments in Athens, primarily in the city center and the southern suburbs. This mainly concerns flats eligible for short-term leasing through Internet platforms such as HomeAway, Airbnb and FlipKey. It also concerns luxury mansions that would fit the bill for the same type of online platforms as well as for the purpose of getting a Golden Visas (for buys of properties worth 250,000 euros or more by investors from outside the European Union). Besides those buyers aiming for the five-year residence permits, considerable buying interest is also coming from Italy, France, Switzerland, Germany and the Scandinavian countries.

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It’s a miracle there are not many more victims.

State Of Emergency Declared On Lesbos As 800 Left Homeless (AP)

Authorities in Greece have declared a state of emergency on the island of Lesvos after an earthquake left one woman dead and more than 800 people displaced. The 6.1 magnitude undersea quake on Monday occurred south of Lesvos but was felt as far as Istanbul, Turkey. Officials from the island’s regional government on Tuesday said homes in 12 villages in southern Lesvos had been seriously damaged or destroyed. The mostly elderly residents affected were being housed with relatives, in hotels or at an army-run shelter. The earthquake marked the second crisis to hit the island in the last two years, after hundreds of thousands of migrants and refugees, including many fleeing war in Syria and Iraq, crossed to Lesvos on boats from Turkey as they headed to Europe.

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Brussels should be forced to take in 100,000. In their new swanky buildings.

‘Impossible And Risky To Take In More Migrants’ – Rome’s Mayor (RT)

Rome Mayor Virginia Raggi has asked the Italian Interior Ministry for stricter measures to be taken toward the influx of foreigners into the capital. A letter outlining the need for a “moratorium” on “the continued influx of foreign citizens” was sent by Raggi to Roman prefect Paola Basilone. “I find it impossible, as well as risky, to think up further accommodation structures,” she wrote in the letter, as quoted by La Repubblica on Tuesday. “This administration, given the high flows of unregistered migrants, hopes the assessments of new facilities take into account the evident migrant pressure on Roma Capitale [the City of Rome] and the possible devastating consequences in terms of social costs as well as for the protection of the beneficiaries themselves.”

In May, Raggi told RT that she was working to help accommodate refugees and asylum seekers in Rome, but also that she also has a responsibility to her constituents and other countries in the EU must do their part. “Let’s put it this way – Rome would be better off if European states didn’t build walls along their borders, but rather followed through on their obligations and respected the migrant quotas agreed upon by the EU,” she told RT’s Sophie Shevardnadze. “According to the law, the city of Rome must accept migrants, as Mayor – I have to follow the law and do everything in my power to make sure that people are granted a safe place to stay here. But if other European countries decide to finally follow through on their obligations, we will welcome that decision.” “As mayor of Rome, I have to accommodate migrants, but I am also responsible for the security of my city and its residents. We cannot ignore either issue.”

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Jun 092017
 
 June 9, 2017  Posted by at 9:27 am Finance Tagged with: , , , , , , , , , , ,  5 Responses »
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Labour Campaign Poster 1922

 

Trump Accuses Comey Of Lying About Leaked Memo (ZH)
Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)
Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)
This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)
UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)
The Myth of “Cash on The Sidelines” (Roberts)
US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)
Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)
Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)
Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)
European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)
The Shield of Law and Humanism (K.)

 

 

I know the echo chamber won’t agree, but after watching quite a bit of it, four things stood out for me in the Comey testimony, other than the somewhat too loud remarks about how the entire White House lied about him and the FBI:

1) He admitted to leaking information of his private talk with Trump in the Oval Office. Comey said he didn’t understand why Trump asked everyone to leave the room, but, well, perhaps it’s this: that if anything leaked, it would be clear whodunnit. And leaking info about a private talk with your president is not an obvious thing to do. Illegal? Borderline? Comey stated that he did it because he thought it would lead to a special counsel being appointed. But who is he to ‘promote’ such a thing?

2) He finally said in public that Trump himself had not been under investigation, something the president had asked him to do on three occasions. There was some excuse about not doing it because he might have to walk that back later, but the fact remains: no Trump investigation, and despite all other leaks, no public acknowledgement of that.

3) Comey insisted in no uncertain terms that the entire US intelligence community is convinced that Russia interfered in the 2016 elections, and Russia here means the Kremlin, re: Putin. Well, let’s finally see the proof.

4) He recounted how then-AG Loretta Lynch pushed him to relabel the criminal investigation into the Clinton server as a “matter”, a term the Clinton campaign used. But why would an AG do it too, and push the FBI to do the same? Very odd. And then Comey added that this was a reason to call the press conference in which he advised the Department of Justice not to indict Clinton.

Trump Accuses Comey Of Lying About Leaked Memo (ZH)

As we detailed earlier, during his testimony today, former FBI Director Comey testified that he only leaked the memo about his contact with the President AFTER he saw President Trump’s tweet…
COMEY: I asked — the president tweeted on Friday after I got fired that I better hope there’s not tapes. I woke up in the middle of the night on Monday night because it didn’t dawn on me originally, that there might be corroboration for our conversation. There might a tape. My judgement was, I need to get that out into the public square. I asked a friend of mine to share the content of the memo with a reporter. Didn’t do it myself for a variety of reasons. I asked him to because I thought that might prompt the appointment of a special counsel. I asked a close friend to do it. [..] A close friend who is a professor at Columbia law school.

Pretty clear – it was a response to a tweet. But, as President Trump’s personal lawyer Marc Kasowitz states: “Today, Mr. Comey admitted that he unilaterally and surreptitiously made unauthorized disclosures to the press of privileged communications with the President. The leaks of this privileged information began no later than March 2017 when friends of Mr. Comey have stated he disclosed to them the conversations he had with the President during their January 27, 2017 dinner and February 14, 2017 White House meeting. Today, Mr. Comey admitted that he leaked to friends his purported memos of these privileged conversations, one of which he testified was classified.

He also testified that immediately after he was terminated he authorized his friends to leak the contents of these memos to the press in order to “prompt the appointment of a special counsel.” Although Mr. Comey testified he only leaked the memos in response to a tweet, the public record reveals that the New York Times was quoting from these memos the day before the referenced tweet, which belies Mr. Comey’s excuse for this unauthorized disclosure of privileged information and appears to entirely retaliatory. We will leave it the appropriate authorities to determine whether this leak should be investigated along with all those others being investigated”

So the question is – having called President Trump a liar, did Comey just get caught in an even bigger lie… ?

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At least on his personal involvement.

Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)

If you count yourself among the die-hard, disaffected Hillary supporters still holding out hope that President Trump will be impeached for conspiring with Russian spies to stage a coup in the United States, then you may want to sit down because earlier today one of your biggest cheerleaders just threw in the towel on that whole narrative. Yes, MSNBC’s very own Chris Matthews, the same man who confessed he “got a thrill up his leg” from simply watching Obama speak, admitted today that Comey’s testimony pretty much confirmed that “there’s no ‘there’ there” when it comes to Trump colluding with the Russians.

“The assumption of the critics of the President, of his pursuers, you might say, is that somewhere along the line in the last year is the President had something to do with colluding with the Russians … to affect the election in some way. Some conversation he had with Michael Flynn or Pual Manafort or somewhere.” “And yet what came apart this morning was that theory in two regards…the President said, according to the written testimony of Mr. Comey, go ahead and get any satellites of my operation and nail them. I’m with you on that…” “And then also, Comey said that basically Flynn wasn’t central to the Russian investigation.” “And I’ve always assumed that what Trump was afraid of was that he had said something to Flynn and Flynn could be flipped on that and Flynn would testify against the President that he’d had some conversation with Flynn in terms of dealing with the Russians affirmatively.” “And if that’s not the case, where’s the there-there?”

And when Chris Matthews throws in the towel on a liberal narrative, you know the gig is up. Oh, and by the way, this probably doesn’t help your case either… Burr: “Director Comey, did the President at any time ask you to stop the FBI investigation into Russian involvement in the 2016 U.S. elections?” Comey: “Not to my understanding, no.” Burr: “Did any individual working for this administration, including the Justice Department, ask you to stop the Russian investigation?” Comey: “No.”

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Theresa May can stay until the Tories throw her out; she’s proven to be an awful liability, not a leader. Far too risky. How much would she lose next time around? Their problem is there’s no-one else who’s obvious, there must be dirty fights in dark and rainy alleys first.

So: Tories will throw out May, while Corbyn will have to throw the Blairites out of Labour who made his position a living hell.

Most likely seems Corbyn as PM of a minority government. But that’s a big risk going into Brexit talks.

Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)

The UK faces the prospect of a hung parliament with the Conservatives as the largest party after the general election produced no overall winner. With nearly all results in, Theresa May faces having fewer seats than when she called the election. The Tories are projected to get 318 seats, Labour 261 and the SNP 35. Jeremy Corbyn has urged the PM to resign but the BBC understands she has no intention of doing so at this stage and will try to form a government. The prime minister has said the country needs stability after the inconclusive election result and the BBC’s political editor Laura Kuenssberg said Mrs May intended to try and govern on the basis that her party had won the largest number of votes and seats.

Labour is set to make 29 gains with the Tories losing 13 seats – and the SNP down by 22 seats in a bad night for Nicola Sturgeon, with her party losing seats to the Tories, Labour and Lib Dems. The Conservatives are forecast to win 42% of the vote, Labour 40%, the Lib Dems 7%, UKIP 2% and the Greens 2%. Turnout so far is 68.7% – up 2% up on 2015 – but it has been a return two party politics in many parts of the country, with Labour and the Conservatives both piling up votes in numbers not seen since the 1990s. UKIP’s vote slumped dramatically but rather than moving en masse to the Tories, as they had expected, their voters also switched to Labour.

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New elections? One positive for the former Empire: the threat of Scottish independence was wiped out.

This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)

Despite a lot of the good news streaming out of counts everywhere right now, make no mistake: this is going to be chaos. A deep and growing sense of frustration is about to ripple through the country, because what May has essentially done in her arrogance is take a gamble that could cost us decades of stability and prosperity. It is likely that what awaits us over the next few weeks is, to put it bluntly, a mess. Hung parliament. No clear majority. No willingness to form a coalition. A possible resignation from the Prime Minister (whether she’s pushed or jumps is yet to be seen) and then yet another leadership contest. Boris Johnson is said on the Westminster grapevine to already be positioning himself as a candidate, yet his reputation has turned increasingly sour over the last few years.

Many now regard him as a cynical power-grabber without much regard for the people he claims to represent. The Tories have spent the last two years playing Russian roulette with the electorate in the hope of cementing their credibility, and causing utter shambles along the way. Having barely recovered from a referendum result which caused deep divisions and painful rifts within our society, and as Europe watches us scramble for any sort of political legitimacy, who will now head into the talks that will determine our economic and political future? Theresa May has now shoved us off a cliff into political unknowns just when what we actually needed was, ironically enough, some strong and stable leadership.

Any reassurance from Westminster that the lives of ordinary people in this country mattered more than political point-scoring would be welcome. What we’ll get instead, despite the Labour surge, is yet another election, whether that be in two months’ or two years’ time. It feels inspiring and hopeful that we have so many progressive and wonderful MPs back in the Commons. But until we have a government and a plan of how to get ourselves through this, that hope is limited to a symbolic step in the right direction. In the words of one particularly concise campaign poster: strong and stable, my arse.

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It’s going to get terrible no matter what. But for now the EU has no-one to talk to. They’re not going to sit down with May if she may last only a few more weeks.

UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)

The EU will force a humiliated Theresa May to explain her intentions at a face-to-face meeting in Brussels as senior diplomats and politicians warned that the hung parliament resulting from the UK election was a “disaster” that hugely increases the chance of a breakdown in the Brexit negotiations. The result is likely to delay the point at which Michel Barnier, the EU’s chief negotiator, has someone with whom to negotiate. Sources said a meeting of the European council on 22 June was the deadline by which time the EU27 would want to know the prime minister’s plans. Guenther Oettinger, the German member of the European commission, said: “We need a government that can act. With a weak negotiating partner, there’s the danger than the negotiations will turn out badly for both sides … I expect more more uncertainty now.”

It had been hoped that officials from both sides would have informal talks next week over the logistics of the negotiations, before formal talks began on the week starting 19 June. With the prime minister needing to both seek to form a minority or coalition government, as well as potentially revise her goals for the talks in the light of the election result, the original timetable seems unrealistic to officials in Brussels. The EU had, until now, believed it understood that May wanted to take the UK out of both the single market and the customs union, but in the early hours of Friday morning the Brexit secretary, David Davis, had suggested the election result could prompt a rethink.

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All on red.

The Myth of “Cash on The Sidelines” (Roberts)

[..] despite 8-years of a bull market advance, one of the prevailing myths that seeming will not die is that of “cash on the sidelines.” To wit: “Underpinning gains in both stocks and bonds is $5 trillion of capital that is sitting on the sidelines and serving as a reservoir for buying on weakness. This excess cash acts as a backstop for financial assets, both bonds and equities, because any correction is quickly reversed by investors deploying their excess cash to buy the dip,” Nikolaos Panigirtzoglou, the managing director of global market strategy at JPMorgan, wrote in a client note. This is the age old excuse why the current “bull market” rally is set to continue into the indefinite future. The ongoing belief is that at any moment investors are suddenly going to empty bank accounts and pour it into the markets.

However, the reality is if they haven’t done it by now after 3-consecutive rounds of Q.E. in the U.S., a 200% advance in the markets, and ongoing global Q.E., exactly what will that catalyst be? However, Clifford Asness previously wrote: “There are no sidelines. Those saying this seem to envision a seller of stocks moving her money to cash and awaiting a chance to return. But they always ignore that this seller sold to somebody, who presumably moved a precisely equal amount of cash off the sidelines.” Every transaction in the market requires both a buyer and a seller with the only differentiating factor being at what PRICE the transaction occurs. Since this must be the case for there to be equilibrium to the markets there can be no “sidelines.”

Each month, the Investment Company Institute releases information related to the mutual fund industry. Included in this data is the total amount of assets invested in mutual funds, ETFs and money market funds. As a rough measure of investor sentiment, this indicator looks at the total assets invested in equity mutual funds and ETFs, and compares it to the total assets invested in the safety of money market funds. The higher the ratio, the more comfortable investors have become holding stocks; the lower the ratio, the more uncertainty there is in the market. Currently, with the ratio at the highest level on record there is little fear of holding stocks. Negative free cash balances also suggest the same as investors have piled on the highest levels of leverage in market history.

Furthermore, with investors once again “fully invested” in equities, it is not surprising to see cash and bond allocations near historic lows. Cash on the sidelines? Not really. Everyone “all in the boat?” Absolutely. Historical outcomes from such situations? Not Great.

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The No Price Discovery Bubble.

US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)

In the Fed’s latest Flow of Funds report, today the Fed released the latest snapshot of the US “household” sector as of March 31, 2017. What it revealed is that with $110.0 trillion in assets and a modest $15.2 trillion in liabilities, the net worth of the average US household rose to a new all time high of $94.835 trillion, up $2.4 trillion as a result of an estimated $500 billion increase in real estate values, but mostly $1.78 trillion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds, as the stock market continued to soar to all time highs . At the same time, household borrowing rose by only $36 billion from $15.1 trillion to $15.2 trillion, the bulk of which was $9.8 trillion in home mortgages.

And the historical change of the US household balance sheet.

And while it would be great news if wealth across America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans. As a reminder, from the CBO’s latest Trends in Family Wealth analysis, here is a breakdown of the above chart by wealth group, which sadly shows how the “average” American wealth is anything but.

While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits. Here is how the CBO recently explained the wealth is distributed: In 2013, families in the top 10% of the wealth distribution held 76% of all family wealth, families in the 51st to the 90thpercentiles held 23%, and those in the bottom half of the distribution held 1%. Average wealth was about $4 million for families in the top 10% of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt In other words, roughly three-quarter of the $2.4 trillion increase in assets went to benefit just 10% of the population, who also account for roughly 76% of America’s financial net worth,

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Trump and Congress had better go out and do something.

Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)

The opioid crisis that is ravaging urban and suburban communities across the US claimed an unprecedented 59,000 lives last year, according to preliminary data gathered by the New York Times. If accurate, that’s equivalent to a roughly 19% increase over the approximately 52,000 overdose deaths recorded in 2015, the NYT reported last year. Overdoses, made increasingly common by the introduction of fentanyl and other powerful synthetic opioids into the heroin supply, are now the leading cause of death for Americans under 50. And all evidence suggests the problem has continued to worsen in 2017. One coroner in Western Pennsylvania told a local newspaper that his office is literally running out of room to store the bodies, and that it was recently forced to buy a larger freezer. The initial data points to large increases in these types of deaths in states along the East Coast, particularly Maryland, Florida, Pennsylvania and Maine.

In Ohio, which filed a lawsuit last week accusing five drug companies of abetting the opioid epidemic, the Times estimated that overdose deaths increased by more than 25% in 2016. In some Ohio counties, deaths from heroin have virtually disappeared. Instead, the primary culprit is fentanyl or one of its many analogues. In Montgomery County, home to Dayton, of the 100 drug overdose deaths recorded in January and February, only three people tested positive for heroin; 97 tested positive for fentanyl or another analogue. In some states in the western half of the US, data suggest deaths may have leveled off for the time being – or even begun to decline. Experts believe that the heroin supply west of the Mississippi River, traditionally dominated by a variant of the drug known as black tar which is smuggled over the border from Mexico, isn’t as easily adulterated with lethal analogues as the powder that’s common on the East Coast.

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Fake News.

Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)

That $110 billion arms deal President Donald Trump signed with Saudi Arabia isn’t much of a deal at all, according to reports which found the majority of the agreement was based on memos, rather than contracts. On May 20, Trump negotiated an arms deal with Riyadh. The State Department said it was worth nearly $110 billion to support “the long-term security of Saudi Arabia and the Gulf region in the face of malign Iranian influence and Iranian related threat.” White House Press Secretary Sean Spicer hailed it the “largest single arms deal in US history.” The State Department then released a general list of the weapons that were included in the deal. However, many experts have said that most of the arms sales had not been cleared by the State Department, Congress or even the industries themselves.

On Thursday, Defense News released a more detailed list of the weapons included in the deal, according to documents they obtained from the White House. The ‘deal’ lists $84.8 billion under memos of intent (MOI) “to be offered at visit,” and $12.5 billion under letters of agreement (LOA), rather than contracts. NPR also obtained a list of commercial deals from a White House spokeswoman and found that it added up to $267 billion, but said most of the deals were listed as “memoranda of understanding” (MOU). “There is no $110 billion deal,” Brookings Institution Senior Fellow Bruce Riedel wrote in blog post Monday. “Instead, there are a bunch of letters of interest or intent, but not contracts,” Riedel said. “Even then the numbers don’t add up. It’s fake news.”

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So what did they do to prove that?

Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)

Washington is Greece’s only true international ally, Defense Minister Panos Kammenos insisted on Thursday, and accused the country’s European partners of showing a lack of respect. “The Greek people are well aware that the United States has been the country’s only genuine ally,” Kammenos said. “The others are allies, but they are [allies] only in the form of creditors, without [any sense of] respect and this is because some of them will never forget that they lost World War II to this country,” Kammenos, who is also leader of junior coalition partner Independent Greeks, added during a speech marking the 70th anniversary of the US Office of Defense Cooperation in Athens yesterday. “For this reason, we welcome US support at this very difficult moment for our country,” said Kammenos, who also called for the strengthening of the Hellenic Navy with US help so “that it can operate from Crete to the Suez.”

Bolstering the navy and the country’s military aviation capabilities are necessary, he said, to intercept the flow of drugs, weapons and fuel through which terrorism is funded. He also said that Greece is positively inclined to extend the time frame of the defense agreement between the two countries, adding that Prime Minister Alexis Tsipras and his government are working in that direction. He also referred to the latest developments in the Gulf states and stressed that he supports describing the Muslim Brotherhood as a terrorist organization. Aiming his fire at Turkey, he said that each country must choose “whose side they want to be on.” It is certain, he said, that “Greece will be on the side of the US.” For his part, US Ambassador to Greece Geoffrey Pyatt praised relations between Athens and Washington, adding that as Greece’s economy stabilizes, it will become even more active in its role as a bridge between countries of the region.

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Nobody cares unless you hold their feet to the fire.

European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)

Any countries in the European Union receiving asylum requests from refugees have an obligation to process them irrespective of where the applicants first entered into the bloc, an advocate general at the European Court of Justice said on Thursday. Eleanor Sharpston said in a non-binding opinion that under the “exceptional circumstances” of the refugee crisis, member states should not be bound by the Dublin Regulation’s requirement that first-entry states handle all asylum applications, even after a refugee or migrant has moved on to a different country. “The words ‘irregular crossing’ in the Dublin III Regulation do not cover a situation where, as a result of the mass inflow of people into border member states, those countries allowed third-country nationals to enter and transit through their territory in order to reach other member states,” she wrote.

Sharpston referred to the case of a Syrian national who traveled to Slovenia via Croatia and that of an Afghan family that entered Europe in Greece and then made its way to Austria. Slovenia and Austria should be responsible for examining their asylum applications, she said. “If border member states… are deemed to be responsible for accepting and processing exceptionally high numbers of asylum seekers, there is a real risk that they will simply be unable to cope with the situation,” Sharpston wrote. “This in turn could place member states in a position where they are unable to comply with their obligations under EU and international law,” she added.

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The last thing Greece has left is rumored to be on the way out.

The Shield of Law and Humanism (K.)

It is difficult to believe that after Greece’s judiciary offered protection to eight members of the Turkish military, rejecting Ankara’s request for their extradition, the government would agree to the illegal, secret and inhuman expulsion of people who requested asylum here. Yet unease grows. On Wednesday the government spokesman stated, “The Greek government does not engage in pushbacks.” Let us hope that is so. The Hellenic League for Human Rights cites two instances where groups of Turkish citizens who requested asylum in Greece appear to have been handed over illegally to Turkish authorities. The Council of Europe’s commissioner for human rights, Nils Muiznieks, the UN High Commissioner for Refugees and the head of the Alliance of Liberals and Democrats in the European Parliament, Guy Verhofstadt, have expressed concern at the possibility.

There is also the strange story of three Turkish military men who where arrested in Edirne last month, accused of being part of a group that intended to kidnap President Recep Tayyip Erdogan during the failed coup last July. Turkish media said the men were arrested while on their way to Greece; some Greek lawyers, however, claim that the three had crossed into Greece when they disappeared, only to turn up in Turkish custody. The Citizens’ Protection Ministry in Greece scoffed that the claims were “fairy tales.” The case of the eight servicemen who arrived in Alexandroupoli in a helicopter the day after the coup attempt shows how difficult it is for any country to withstand Ankara’s pressure. It is understandable that no government would like to open a new front with a neighbor who can cause problems at will. But it is of paramount importance that Greece withstand such pressures.

In the past few years, among our country’s very few victories were the welcome provided to refugees and the institutional way in which it dealt with the “Eight.” Our great wound, though, is the lack of strategy, of method, of goals – of follow-up. On the refugee issue, government incompetence undermined the initial, heroic efforts of citizens. In the case of Turkish asylum seekers, the difficulties of handling the case of the Eight should not lead to cynicism, to injustice, to the violation of international conventions. Greece has a responsibility toward its own people and toward the Turkish people, to serve the principles of humanism, to abide by the law. Strenuous defense of these principles is part of the identity we aspire to but also our shield. And it is the best thing that we can offer our neighbors – the hope that there is something better than that which they are now enduring.

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Feb 122017
 
 February 12, 2017  Posted by at 10:47 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Model wearing Dior on the banks of the Seine, Paris 1948

 

Does UK’s Lucrative Arms Trade Come At The Cost Of Political Repression? (G.)
UK Journalists Who Obtain Leaked Official Material Could Face Jail (Tel.)
Women And Children ‘Raped, Beaten And Abused’ In Dunkirk’s Refugee Camp (G.)
Bank For International Settlements Warns Of Looming Debt Bubble (F.)
Trump Regime Was Manufactured By A War Inside The Deep State (Nafeez Ahmed)
Banking, Credit & Norway (Steve Keen)
Greece Says Bailout Deal Close, But Will Not Accept ‘Illogical’ Demands (G.)
Greece 2017: Numbers And Facts About 8 Years Of Recession (AthensLive)
Tsipras Warns IMF, Germany To Stop ‘Playing With Fire’ Over Greek Debt (AFP)
Yanis Varoufakis: Grexit ‘Never Went Away’ (AlJ)
Why Falling Home Prices Could Be a Good Thing (NYT)
Army Veterans Return To Standing Rock To Form Human Shield Against Police (G.)
France’s Bumbling Search for a Candidate to Stop Le Pen (Spiegel)
A $500 Billion Plan To Refreeze The Arctic Before The Ice Melts (G.)

 

 

Look, Guardian, this is a good piece. But your editor destroys it by adding a headline with a question mark. Reality is, Britain is nothing but a front for a criminal racket. Its arms sales -both abroad and to its own forces- are responsible for the misery of countless deaths and maimed and refugees each and every year. Which your PM phrases as “..the UK will be at the forefront of a wider western effort to step up our defence and security partnership.” But you as a paper don’t have to play that game. Just tell your readers what is happening, and what has happened for decades. You live by blood and destruction.

Does UK’s Lucrative Arms Trade Come At The Cost Of Political Repression? (G.)

On 24 January 2015 a private jet touched down in Saudi Arabia’s capital, Riyadh. On board were a handful of Foreign Office officials, security personnel and the then prime minister, David Cameron, who was visiting the kingdom to pay his condolences following the death of King Abdullah bin Abdulaziz. The decision to charter the jet – at a cost to the taxpayer of £101,792 – raised eyebrows among Whitehall mandarins. But when it comes to Saudi Arabia, normal UK rules don’t seem to apply. For decades the two kingdoms have quietly enjoyed a symbiotic relationship centred on the exchange of oil for weapons. Analysis of HM Revenue and Customs figures by Greenpeace EnergyDesk shows that in 2015 83% of UK arms exports – almost £900m – went to Saudi Arabia. Over the same period, the UK imported £900m of oil from the kingdom.

Now this relationship has come under scrutiny as a result of a judicial review brought by the Campaign Against Arms Trade (CAAT), which has sent alarm bells ringing in Whitehall. The case follows concerns that a coalition of Saudi-led forces may have been using UK-manufactured weapons in violation of international humanitarian law during their ongoing bombardment of Yemen, targeting Iranian-backed Houthi forces loyal to the country’s former president. The legal challenge comes at a crucial time for the UK’s defence industry, which makes about 20% of arms exported globally. In recent years Ministry of Defence cutbacks have led to the sector looking abroad for new sales, and the government, with one eye on the post-Brexit landscape, is keen on the strategy. Last month Theresa May heralded a £100m deal involving the UK defence giant BAE and the Turkish military, and many defence experts see this as a sign of things to come.

But the policy – as the Saudi case makes clear – is controversial. Many of the UK’s biggest customers have questionable human rights records and there are concerns exported weapons are used for repression or against non-military targets. Thousands have died in the Yemen campaign, with the Saudis accused of targeting civilians. Four-fifths of the population is in need of aid, and famine is gripping the country. But despite this, and protests from human rights groups and the United Nations, the UK has continued to arm the Saudi regime, licensing about £3.3bn of weapons to the kingdom since the bombing of Yemen began in March 2015.

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Orwell meets Samuel Beckett.

UK Journalists Who Obtain Leaked Official Material Could Face Jail (Tel.)

Campaigners have expressed outrage at new proposals that could lead to journalists being jailed for up to 14 years for obtaining leaked official documents. The major overhaul of the Official Secrets Act – to be replaced by an updated Espionage Act – would give courts the power to increase jail terms against journalists receiving official material. The new law, should it get approval, would see documents containing “sensitive information” about the economy fall foul of national security laws for the first time. In theory a journalist leaked Brexit documents deemed harmful to the UK economy could be jailed as a consequence. One legal expert said the new changes would see the maximum jail sentence increase from two years to 14 years; make it an offence to “obtain or gather” rather than simply share official secrets; and to extend the scope of the law to cover information that damages “economic well-being”.

John Cooper QC, a leading criminal and human rights barrister who has served on two law commission working parties, added: “These reforms would potentially undermine some of the most important principles of an open democracy.” Jodie Ginsberg, chief executive of Index on Censorship, said: “The proposed changes are frightening and have no place in a democracy, which relies on having mechanisms to hold the powerful to account. “It is unthinkable that whistle blowers and those to whom they reveal their information should face jail for leaking and receiving information that is in the public interest.” Her organisation has accused the Law Commission, the Government’s statutory legal advisers, of failing to consult fully with journalists before making its recommendations in a 326-page consultation published earlier this month. “It is shocking that so few organisations were consulted on these proposed changes given the huge implications for public interest journalism in this country,” said Ms Ginsberg.

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And this, too, is Britain, in 2017. And way before that too.

Women And Children ‘Raped, Beaten And Abused’ In Dunkirk’s Refugee Camp (G.)

Children and women are being raped by traffickers inside a refugee camp in northern France, according to detailed testimony gathered ahead of fresh legal action against the UK government’s approach to the welfare of unaccompanied minors. Corroborating accounts from volunteers, medics, refugees and security officials reveal that sexual abuse is common within the large camp at Dunkirk and that children and women are forced to have sex by traffickers in return for blankets or food or the offer of passage to the UK. Legal proceedings will be issued by London-based Bindmans against the Home Office, which is accused of acting unfairly and irrationally by electing to settle only minors from the vast Calais camp that closed last October, ignoring the child refugees gathered in Dunkirk, 40 miles away along the coast.

The legal action, brought on behalf of the Dunkirk Legal Support Team and funded by a crowd justice scheme, says the Home Office’s approach was arbitrary and mean-spirited. On Wednesday the government’s approach to child refugees provoked widespread indignation when the home secretary, Amber Rudd, announced the decision to end the “Dubs scheme”, having allowed just 350 children to enter the UK, 10% of the number most MPs and aid organisations had been led to believe could enter. [..] On Friday the archbishop of Canterbury said the government’s decision meant that child refugees would be at risk of being trafficked and even killed. Justin Welby’s warnings of what could happen if child refugees were denied the opportunity of safe passage are graphically articulated in the testimonies gathered over several months by the Observer.

Accounts from those at the camp, which currently holds up to 2,000 refugees, of whom an estimated 100 are unaccompanied minors, portray a squalid site with inadequate security and atrocious living conditions. The Dunkirk Legal Support Team says the failure of the authorities to guard the site has allowed the smugglers to take control. One volunteer coordinator, who has worked at the camp’s women’s centre since October 2016, said: “Sexual assault, violence and rape are all far too common. Minors are assaulted and women are raped and forced to pay for smuggling with their bodies.” Testifying on condition of anonymity, she added: “Although the showers are meant to be locked at night, particularly dangerous individuals in the camp have keys and are able to take the women to the showers in the night to force themselves on them. This has happened to women I know very well.”

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Looming, right?

Bank For International Settlements Warns Of Looming Debt Bubble (F.)

So you thought the world was deleveraging after the housing and derivatives bubble of 2008, hey? Well…fooled you! Global debt-to-GDP is now at a comfortable record high and the Bank for International Settlements, aka the central bank of central banks, noted on Friday that over the last 16 years, debts of governments, households and corporations has gone up…everywhere. In the U.S., debt is up 63%. The Eurozone, Japan, U.K., Canada and Australia average around 52%. And emerging markets, led by China, leverage is up 85%. In some important emerging economies like Brazil major cities are on the verge of bankruptcy. Rio is CCC credit thanks to mismanagement of a deep sea oil bonanza and over spending on the FIFA World Cup and the 2016 Olympics.

“The next financial crisis is likely to revolve around how this debt burden is managed,” warns Neil MacKinnon, an economist with VTB Capital in London. “In the U.K., most crises are related to boom and busts in the housing market, where there is an approximate 18-year cycle suggesting that the next bust will be in 2025.” That’s quite a ways away. And for London real estate, they always have the Saudis, the Russians and the Chinese to save them. But further south, in countries like France and Italy, credit downgrades are expected. And guess which southern European country is back to give us all headaches again? Greece! Greece is making headlines once more for its inability to work out a debt deal with its lenders. There is now a rift between the EU and the IMF over Greek debt sustainability.

Most of the debt is with the European Commission itself, so German policy makers are basically the lenders and so far are not willing to take a haircut on bond prices. The IMF predicts that the Greek debt-GDP ratio, now at 180%, will soar to 275% all the while primary fiscal surplus is currently at zero. That means Greece’s debt to GDP is like Japan, only without the power of the Japanese economy to back it up. Greece is broke. “Greece is caught in a debt-trap which has shrunk the Greek economy by 25%,” notes MacKinnon. They owe Europe around €7 billion in July. Good luck with that. Jaime Caruana, General Manager for the Bank for International Settlements hinted in a speech in Brussels on Monday that the core central banks might not know what they’re in for.

“We need to escape the popular models that prevent us from recognizing the build-up of vulnerabilities,” Caruana said. “Getting all the right dots in front of you does not really help if you do not connect the dots. Right now, I worry that even though we have data on aggregate debt, we are not properly connecting the dots and we are underestimating the risks, particularly when the high levels of debt are aggravated by weak productivity growth in many countries. The standard of evidence for precautionary action has to be the preponderance of evidence, not evidence beyond a shadow of doubt. Waiting for fully compelling evidence is to act too late.”

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Long and deep from Nafeez.

Trump Regime Was Manufactured By A War Inside The Deep State (Nafeez Ahmed)

President Donald Trump is not fighting a war on the establishment: he’s fighting a war to protect the establishment from itself, and the rest of us. At first glance, this isn’t obvious. Among his first actions upon taking office, Trump vetoed the Trans Pacific Partnership, the controversial free trade agreement which critics rightly said would lead to US job losses while giving transnational corporations massive power over national state policies on health, education and other issues. Trump further plans to ditch the TTIP between the EU and US, which would have diluted key state regulations on the activities of transnational corporates on issues like food safety, the environment and banking; and to renegotiate NAFTA, potentially heightening tensions with Canada. Trump appears to be in conflict with the bulk of the US intelligence community, and is actively seeking to restructure the government to minimize checks and balances, and thus consolidate his executive power.

His chief strategist, Steve Bannon, has completely restructured the National Security Council under unilateral presidential authority. While Bannon and his Chief of Staff Richard ‘Reince’ Priebus now have permanent seats on the NSC’s Principals’ Committee, the Director of National Intelligence and the Chairman of the Joint Chiefs of Staff are barred from meetings except when requested for their expertise. The Secretary of Energy and US ambassador to the UN have been expelled entirely. Trump’s White House has purged almost the entire senior staff of the State Department, and tested the loyalty of the Department of Homeland Security with its new ‘Muslim ban’ order. So what is going on? One approach to framing the Trump movement comes from Jordan Greenhall, who sees it as a conservative (“Red Religion”) Insurgency against the liberal (“Blue Church”) Globalist establishment (the “Deep State”).

Greenhall suggests, essentially, that Trump is leading a nationalist coup against corporate neoliberal globalization using new tactics of “collective intelligence” by which to outsmart and outspeed his liberal establishment opponents. But at best this is an extremely partial picture. In reality, Trump has ushered in something far more dangerous: The Trump regime is not operating outside the Deep State, but mobilizing elements within it to dominate and strengthen it for a new mission. The Trump regime is not acting to overturn the establishment, but to consolidate it against a perceived crisis of a wider transnational Deep System. The Trump regime is not a conservative insurgency against the liberal establishment, but an act of ideologically constructing the current crisis as a conservative-liberal battleground, led by a particularly radicalized white nationalist faction of a global elite.

The act is a direct product of a global systemic crisis, but is a short-sighted and ill-conceived reaction, pre-occupied with surface symptoms of that crisis. Unfortunately, those hoping to resist the Trump reaction also fail to understand the system dynamics of the crisis.

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If you want to know what ails us, it doesn’t get much clearer than this.

Banking, Credit & Norway (Steve Keen)

This was an invited talk during Oslo University’s “Week of Current Affairs”, so though my talk covered the global issues of credit and economic cycles, I paid particular attention to Norway, which is one of the 9 countries I have identified as very likely to experience a credit crunch in the next few years.

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But illogical demans are all there is.

Greece Says Bailout Deal Close, But Will Not Accept ‘Illogical’ Demands (G.)

Greek PM Alexis Tsipras said on Saturday he believed the country’s drawn-out bailout review would be completed positively but repeated that Athens would not accept “illogical” demands by its lenders. He warned all sides to “be more careful towards a country that has been pillaged and people who have made, and are continuing to make, so many sacrifices in the name of Europe”. Greece and its international lenders made clear progress on Friday toward bridging differences over its fiscal path in coming years, moving closer to a deal that would secure new loan disbursements and save the country from default. “(The review) will be completed, and it will be completed positively, without concessions in matters of principle,” Tsipras told a meeting of his leftist Syriza party. Reaching agreement would release another tranche of funds from it latest €86 billion bailout, and facilitate Greece making a major €7.2 billion debt repayment this summer.

European and IMF lenders want Greece to make €1.8 billion – or 1% of GDP – worth of new reforms by 2018 and another €1.8 billion after then and the measures would be focused on broadening the tax base and on pension cutbacks. But further cutbacks, particularly to pensions which have already gone through 11 cuts since the start of the crisis in 2010, are hard to sell to a public worn down after years of austerity. Representatives of Greece’s lenders are expected to return to Athens this week to report on whether Greece has complied with a second batch of reforms agreed under the current bailout, its third. “We are ready to discuss anything within the framework of the (bailout) agreement and within reason, but not things beyond the framework of the agreement and beyond reason,” Tsipras said. “We will not discuss demands which are not backed up by logic and by numbers,” he said.

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One minute of devastating numbers.

Greece 2017: Numbers And Facts About 8 Years Of Recession (AthensLive)

While Greece is back in the headlines, we got together some numbers and facts about eight years of economic recession.

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Well, they won’t stop.

Tsipras Warns IMF, Germany To Stop ‘Playing With Fire’ Over Greek Debt (AFP)

Greek PM Alexis Tsipras on Saturday warned the IMF and German Finance Minister Wolfgang Schaeuble to “stop playing with fire” in the handling of his country’s debt. Opening a meeting of his Syriza party, Tsipras said he was confident a solution would be found, a day after talks between Greece and its creditors ended in Brussels with no breakthrough. He urged a change of course from the IMF. “We expect as soon as possible that the IMF revise its forecast.. so that discussions can continue at the technical level.” Referring to Schaeuble, Tsipras also called for German Chancellor Angela Merkel to “encourage her finance minister to end his permanent aggressiveness” towards Greece. Months of feuding with the IMF has raised fears of a new debt crisis.

Greece is embroiled in a row with its eurozone paymasters and the IMF over debt relief and budget targets that has rattled markets and revived talk of its place in the euro. Eurogroup chief Jeroen Dijsselbloem said progress had been made in the Brussels talks with Greek Finance Minister Euclid Tsakalotos and other EU and IMF officials. But he provided few details. The Athens government faces debt repayments of €7.0 billion this summer that it cannot afford without defusing the feud that is holding up new loans from Greece’s €86 billion bailout. Breaking the stalemate in the coming weeks is seen as paramount with elections in the Netherlands on March 15 and France in April through June threatening to make a resolution even more difficult.

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Mostly rehashing Yanis’ time as FinMin. That’s a shame, because his views on today are much more interesting.

Yanis Varoufakis: Grexit ‘Never Went Away’ (AlJ)

With the UK on the cusp of leaving the European Union and Greece increasingly facing the same fate, is it over for the beleaguered body? An “epidemic” washing over other European countries may see the end of the EU, warns Yanis Varoufakis, Greece’s former finance minister. “The right question is: Is there going to be a eurozone and the European Union in one or two years’ time?” asks Varoufakis, who served as finance minister for five months under the Syriza government. Italy is already on the way out, Varoufakis tells UpFront. “When you allow an epidemic to start spreading from a place like Greece to Spain … to Ireland, then eventually it gets to a place like Italy,” says Varoufakis. “As we speak, only one political party in Italy wants to keep Italy in the eurozone.”

When asked about his failure to pull Greece out of its debt crisis during his tenure as finance minister, Varoufakis blamed the so-called troika – the IMF, the EU Commission and the European Central Bank – by intentionally sabotaging any debt-repayment agreement. “They were only interested in crushing our government, making sure that there would be no such mutually advantageous agreement,” says Varoufakis, who claims Greece was being used as a “morality tale” to scare voters in other European countries away from defying the troika. “The only reason why we keep talking about Greece … is because it is symptomatic of the architectural design faults and crisis of the eurozone.”

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To pop the bubble? To allow people to live where their families do?

Why Falling Home Prices Could Be a Good Thing (NYT)

Suppose there were a way to pump up the economy, reduce inequality and put an end to destructive housing bubbles like the one that contributed to the Great Recession. The idea would be simple, but not easy, requiring a wholesale reframing of the United States economy and housing market. The solution: Americans, together and all at once, would have to stop thinking about their homes as an investment. The virtues of homeownership are so ingrained in the American psyche that we often forget that housing is also a source of economic stress. Rising milk prices are regarded as a household tragedy for some, and spiking gas prices stoke national outrage. But whenever home prices go up, it’s “a recovery,” even though that recovery also means millions of people can no longer afford to buy.

Homes are the largest asset for all but the richest households, but shelter is also a basic necessity, like food. We have a variety of state and federal programs devised to make housing cheaper and more accessible, and a maze of local land-use laws that make housing scarcer and more expensive by doing things like prohibiting in-law units, regulating how small lots can be, and capping the number of unrelated people who can live together. Another big problem: High rent and home prices prevent Americans from moving to cities where jobs and wages are booming. That hampers economic growth, makes income inequality worse and keeps people from pursuing their dreams. So instead of looking at homes as investments, what if we regarded them like a TV or a car or any other consumer good? People might expect home prices to go down instead of up.

Homebuilders would probably spend more time talking about technology and design than financing options. Politicians might start talking about their plans to lower home prices further, as they often do with fuel prices. In this thought experiment, housing prices would probably adjust. They would be somewhat cheaper in most places, where population is growing slowly. But they would be profoundly cheaper in places like super-expensive San Francisco. That was the conclusion of a recent paper by the economists Ed Glaeser of Harvard and Joe Gyourko at the Wharton School of the University of Pennsylvania. The paper uses construction industry data to determine how much a house should cost to build if land-use regulation were drastically cut back. Since the cost of erecting a home varies little from state to state — land is the main variable in housing costs — their measure is the closest thing we have to a national home price.

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Hope they get their media organized so news can get out. If it does it could be the worst PR disaster ever.

Army Veterans Return To Standing Rock To Form Human Shield Against Police (G.)

US veterans are returning to Standing Rock and pledging to shield indigenous activists from attacks by a militarized police force, another sign that the fight against the Dakota Access pipeline is far from over. Army veterans from across the country have arrived in Cannon Ball, North Dakota, or are currently en route after the news that Donald Trump’s administration has allowed the oil corporation to finish drilling across the Missouri river. The growing group of military veterans could make it harder for police and government officials to try to remove hundreds of activists who remain camped near the construction site and, some hope, could limit use of excessive force by law enforcement during demonstrations. “We are prepared to put our bodies between Native elders and a privatized military force,” said Elizabeth Williams, a 34-year-old Air Force veteran, who arrived at Standing Rock with a group of vets late Friday.

“We’ve stood in the face of fire before. We feel a responsibility to use the skills we have.” It is unclear how many vets may arrive to Standing Rock; some organizers estimate a few dozen are on their way, while other activists are pledging that hundreds could show up in the coming weeks. An estimated 1,000 veterans traveled to Standing Rock in December just as the Obama administration announced it was denying a key permit for the oil company, a huge victory for the tribe. The massive turnout – including a ceremony in which veterans apologized to indigenous people for the long history of US violence against Native Americans – served as a powerful symbol against the $3.7bn pipeline. Since last fall, police have made roughly 700 arrests, at times deploying water cannons, Mace, rubber bullets, teargas, pepper spray and other less-than-lethal weapons.

Private guards for the pipeline have also been accused of violent tactics. “We have the experience of standing in the face of adverse conditions – militarization, hostility, intimidation,” said Julius Page, a 61-year-old veteran staying at the vets camp. Dan Luker, a 66-year-old veteran who visited Standing Rock in December and returned this month, said that for many who fought in Vietnam or the Middle East it was “healing” to help water protectors.“This is the right war, right side,” said Luker, a Vietnam vet from Boston. “Finally, it’s the US military coming on to Sioux land to help, for the first time in history, instead of coming on to Sioux land to kill natives.” Luker said he was prepared to be hit by police ammunition if necessary: “I don’t want to see a 20-something, 30-something untrained person killed by the United States government.”

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Good overview of what is only 2 months away and could change Europe dramatically. Opinionated, but then that’s Der Spiegel.

France’s Bumbling Search for a Candidate to Stop Le Pen (Spiegel)

[..] even if Fillon survives as a candidate, he will be so damaged that he has virtually no chance of winning. Last week, in fact, his own party began discussing a “Plan B” so openly that it was almost disrespectful. Juppé is one possible replacement candidate being discussed, but the names of some young conservatives have also been circulating. Regardless, none of these alternatives would be as capable of taking voters away from Marine Le Pen and her project “Marine 2017” as the pre-scandal Fillon would have been. This, of course, is welcome news for Marine Le Pen, who transformed the fascist clique surrounding her father into a modern party, the right-wing populist Front National, with her at the center. Over the weekend, she introduced “140 proposals for France” as she launched the main segment of her campaign.

Yet even as she hits the stump, she is comfortably secure in the knowledge that she has the support of at least one-quarter of the country’s voters no matter what she says and no matter what others might say about her. She has been accused of having systematically misappropriated EU funds for party purposes in the European Parliament. She is no longer able to hide the fact that she is sparring over the direction of the party with her own niece, Marion Maréchal-Le Pen. But it doesn’t matter: Her polling numbers have remained constant at 25%, indicating that it is very likely she will attract enough voters to make it into the second round of voting in the presidential election. The only question is who will be her challenger? Who will become the “lesser of two evils” of this campaign?

Will it be Socialist candidate Hamon, with his foolhardy plan of introducing an unconditional basic income for all French, starting at €600 and later rising to €750? The plan would likely lead to €380 billion in additional annual spending for the French government. Or will it be Emmanuel Macron? There is no doubt that he has the charisma of a leader, but he also has some weaknesses that make him prone to attack, including two that could become particularly dangerous. The first is a resume that is hardly consistent with the image of a young hero shaking up an ossified political system. Macron studied at France’s elite École nationale d’administration (ENA), he’s a wealthy former banker who worked at Rothschild before becoming an adviser to François Hollande. He has long been part of the elite on which he has declared war.

Then there’s Macron’s second problem: With the exception of a relatively refreshing and clear commitment to the EU, at least for a Frenchman, he doesn’t have much of a platform. He has said he will announce his plans in late February, once his movement’s hundreds of thousands of volunteers, organized in working groups across the country, assemble policy proposals on diverse issues. If this operation is successful and Macron does indeed produce a coherent political platform, it will represent yet another grassroots miracle for France. But is such a thing even possible? Can a new political course -neither left nor right, but simply correct and good- really be formulated by the masses? There is plenty of hope surrounding Macron, but mockery is never far away. A French comedian could be heard last week on the radio, still an important opinion-shaping media in France, saying that washing machines have more programs than Macron.

Recent polls showed him pulling in 23% of the vote. Leftist Jean-Luc Mélenchon, a man who thinks quite highly of himself and his ideas, stands at around 10%. Mélenchon is promising to allow people to retire at the age of 60 and draw full pension benefits and is calling for a monthly minimum wage of 1,300 euros. He wants France and the European Union to recognize Palestine as a state, he is calling for France to withdraw from NATO and is demanding the renegotiation of the EU treaties. Next.

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Someday some fool will actually execute some of these schemes. Why stop the causes if you can play God?

A $500 Billion Plan To Refreeze The Arctic Before The Ice Melts (G.)

Physicist Steven Desch has come up with a novel solution to the problems that now beset the Arctic. He and a team of colleagues from Arizona State University want to replenish the region’s shrinking sea ice – by building 10 million wind-powered pumps over the Arctic ice cap. In winter, these would be used to pump water to the surface of the ice where it would freeze, thickening the cap. The pumps could add an extra metre of sea ice to the Arctic’s current layer, Desch argues. The current cap rarely exceeds 2-3 metres in thickness and is being eroded constantly as the planet succumbs to climate change. “Thicker ice would mean longer-lasting ice. In turn, that would mean the danger of all sea ice disappearing from the Arctic in summer would be reduced significantly,” Desch told the Observer.

Desch and his team have put forward the scheme in a paper that has just been published in Earth’s Future, the journal of the American Geophysical Union, and have worked out a price tag for the project: $500bn. It is an astonishing sum. However, it is the kind of outlay that may become necessary if we want to halt the calamity that faces the Arctic, says Desch, who, like many other scientists, has become alarmed at temperature change in the region. They say that it is now warming twice as fast as their climate models predicted only a few years ago and argue that the 2015 Paris agreement to limit global warming will be insufficient to prevent the region’s sea ice disappearing completely in summer, possibly by 2030. “Our only strategy at present seems to be to tell people to stop burning fossil fuels,” says Desch. “It’s a good idea but it is going to need a lot more than that to stop the Arctic’s sea ice from disappearing.”

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Aug 042016
 
 August 4, 2016  Posted by at 9:22 am Finance Tagged with: , , , , , , ,  5 Responses »
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Howard Hollem George Lane April 1942
“George Lane, served in the last war with the British Army from Vimy Ridge to the Occupation. Two of his sons are in the American Army, one with the Air Corps in Australia. His daughter volunteered for the Women’s Army Auxiliary Corps. Seven of his nephews are in the British Army”

 

 

With the Bank of England about to announce its latest set of desperate measures today, the first since the Brexit, I accidentally stumbled upon an article I wrote on January 16 2012, well over 4 1/2 years ago, in the Automatic Earth’s last days at Blogger. Posting it again here seems appropriate 5 weeks after the Brexit, because the article shows you that the referendum result did not come out of nowhere, no matter what many people claim. The British economy was already doing very poorly, and already failing millions of people, going into 2012.

Note: of course not all predictions made back then played out the way they were made, but I’m more interested in the overall picture. For instance, unemployment numbers are not as dire as forecast, but that hides the deterioration in the quality of jobs, and what they actually pay, much as that happens in the US. Bubbles in stocks and housing hide a lot too. David Cameron’s rule has been hard on the poorer British people, and it will take a long time for that to be corrected. I changed the coding just a little bit (Blogger vs WordPress), nothing big, so it looks a bit different. Here’s from early 2012, happy time travel:

 

 

Ilargi: There is a relative silence in the international financial press when it comes to Britain. The economic situation of continental Europe gets almost all the attention. Every now and then someone in France or Germany states that Britain, too, should be downgraded, like when S&P cut the ratings of 9 European countries, but such statements attract hardly any interest at all. This might not be overly wise, though.

At the end of last year, Tyler Durden at ZeroHedge published a graph from Haver Analytics/Morgan Stanley that should probably have sounded alarm bells quite a bit louder than it did.

Still, this graph would seem to indicate that the only core issue in the UK is its outsize financial sector with its outsize debt. From time to time, however, news articles pop up that seem to indicate there’s more going on than trouble in the City of London.

I found this one alarmingly interesting, for instance, from James Hall in the Telegraph on January 4:

One million people take out emergency loans to pay mortgage

Almost one million Britons have taken out an emergency ‘payday’ loan to help pay their rent or mortgage in the last year, according to Shelter, the housing charity.

The high degree of borrowing highlights the ‘spiral of debt’ that people are falling into to keep a roof over their head, Shelter said. The charity also found that seven million Britons are relying on some form of credit to help pay their housing costs.

Campbell Robb, Shelter’s chief executive, said: ‘These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home.’

Ilargi: Payday loans to pay off your mortgage? Sounds like perhaps Britain has a substantial hidden real estate problem, a pre-shadow inventory one that could spiral out of control at a rapid clip.

On January 9, the same James Hall had this follow-up:

Six million households have only five days’ savings

Around six million households would be unable to survive for more than five days if they stopped being paid, such are the low levels of savings among Britons, new research shows.

A new report from First Direct, the bank, warns that one in three UK households have less than £250 in accessible savings. A fifth of all households have no savings at all.

The bank said that £250 is the equivalent of three days’ average monthly household take-home pay. With average monthly outgoing currently at £1,536, these savings would last just five days.

Ilargi: Obviously, the two groups, those that take out loanshark payday loans to keep a roof over their head, and those that live paycheck to paycheck, overlap each other to a large extent.

Still, what makes it striking is the sheer number of people affected. One million people need emergency loans to keep their families in their homes, while six million households have nothing whatsoever saved for a rainy day.

If we put the average household size at 2.5 people, that means that, out of 60 million living in Britain, 2.5 million are on the verge of losing their homes, and 15 million, or 25% of the population, risk having to cut on their basic needs, food and heating, if they hit even the slightest speedbump.

And what are the chances this situation will improve any time soon? It doesn’t look good; in fact it looks set to worsen. While there’s no lack of denial, an increasing number of voices admit that the British economy has already slipped back into recession. This is from the BBC this morning:

UK in recession say Item Club economic forecasters

The UK may have already slipped back into recession, economic forecaster the [Ernst&Young] Item Club has warned. The think tank said gross domestic product shrank in the final quarter of last year and would contract again in the current three-month period.

It said that even if the eurozone could resolve its problems the UK economy would grow by just 0.2% this year. It also predicted unemployment would rise by a further 300,000 to just below three million people. [..]

Meanwhile, the Chartered Institute of Personnel and Development said unemployment would stay above 2.5 million until at least 2016, peaking at 2.9 million next year. Chief economic adviser John Philpott said the jobless rate would rise to 8.8% at the end of next year. [..]

Another forecast from the Centre for Economics and Business Research said the UK would actually shrink this year by 0.4% and by a full 1% if the eurozone broke up.

Ilargi: Nor is it hard to find an ironic twist in all this. In what depicts a fast growing chain of events, Zoe Wood reports for the Guardian:

Royal Bank of Scotland pulls out of deal to rescue Peacocks

More than 13,000 retail jobs are on the line at value fashion group Peacocks after Royal Bank of Scotland walked away from restructuring talks at the heavily indebted retail chain.

Peacocks may have to appoint administrators after the state-backed lender had an abrupt change of heart about a deal to refinance the retailer’s £600m debt pile, which would have involved risking more money in the business. RBS and Barclays were in the driving seat of the complex debt-for-equity negotiations – which were said to involve 18 funds and lenders – as they are owed the most. Both banks are owed more than £100m.

Peacocks’ advisers have been trying to put together a rescue deal for months, but talks broke down at the weekend, leaving the future of the store, which has 550 branches and employs around 10,000 staff, hanging in the balance. [..] “It’s quite a complex deal,” said one insider. “It was all going well until RBS walked away last week. There are still conversations going on.” [..]

RBS is facing a series of tough decisions this year as a number of struggling high-street chains, including HMV and Clinton Cards, are reliant on its largesse. “Each company restructure is judged on its own merits, but clearly the difficult conditions that retailers face is an important factor,” said an RBS spokesman. [..]

A string of high-street chains including La Senza, Blacks Leisure and Barratts Priceless have called in administrators in recent weeks as trading failed to produce enough cash to cover costs such as rent and interest payments on loans.

Ilargi: With the country in a recession, but hardly anyone willing to concede that to date, least of all its government, it’s no wonder that things like this happen, mostly hidden from sight.

The ironic twist to it is provided by that fact that RBS is 70% owned by the British government, which has poured billions of pounds into the bank, and then lets it make decisions that cost 10’s of 1000’s of jobs.

I don’t want to get into a political debate about this; however, protecting banks with taxpayer funds, but not jobs, is a decision that is of course as political as it is ironic. Letting bailed out bank executives make decisions that cut all these jobs and at the same time pay themselves multi-million dollar bonuses is way beyond ironic.

But all of the above is just today’s prologue. I received an article yesterday that outdoes it all, and then some.

John Ross, Visiting Professor at Antai College of Economics and Management at Jiao Tong University in Shanghai writes a real stunner on his blog Key Trends in Globalisation:

The incredible shrinking UK economy

The magnitude of the blow suffered by the UK economy since the beginning of the financial crisis is very considerably minimized by not presenting it in terms of a common international yardstick. Gauged by decline in GDP, using a common international purchasing measure, dollars, no other economy in the world has shrunk even remotely as much as the UK.

As most countries produce only annualized GDP data it will be necessary to wait before a comprehensive global comparison can be made for 2011. However it is clear no substantial growth in dollar terms took place in the UK economy during that year – GDP at national current prices rose only 1.4 per cent between the 1st and 3rd quarters and the change in the pound’s exchange rate against the dollar during the year was a marginal 0.3 per cent.

Therefore there will have been no significant recovery from the UK data set out in Table 1 below, and the gap between the UK and other European economies, which form the next worst performing major group, is too great to have been qualitatively affected by changes in the Euro’s exchange rate – the Euro declined against the pound by only 3.3 per cent in 2011.

Table 1 shows that the fall in UK GDP in 2007-2010 was $562 billion compared to the next worst performing national economy, Italy, with a decline of $65 billion – i.e. the decline in UK GDP in the common measuring yardstick of dollars was more than 8 times that of the next worst performing national economy. Table 1 shows the 10 national economies suffering the greatest declines in dollar GDP.

It is also extremely striking that the UK’s decline was more than two and a half times that of the entire Eurozone.

The UK accounted for a somewhat astonishing 77% of the EU’s decline.

Expressed in percentage terms the situation is no better. Of all economies for which World Bank data is available only Iceland, with a decline in dollar GDP of 38.4%, suffered a worst percentage fall than the UK – even bail out economy Ireland, with a fall of 18.4%, outperformed the UK economy.

Two trends intersected for the UK’s performance to be so much worse than that of any other economy. First, contrary to the government’s anti-European rhetoric, UK economic performance in constant price national currency terms has been significantly worse than the Eurozone during the financial crisis (Figure 2). [..]

… between the beginning of 2008 and the beginning of 2012, the pound’s exchange rate has fallen by 21.0% against the dollar compared to the Euro’s 11.4% drop in the same period. The multiplicative effect of the severity of the relative drop in constant price GDP and the fall in the pound’s exchange rate accounts for the unequalled decline in UK GDP in dollars.

As at present the UK economy shows no substantial sign of recovery, the present UK government, which maintains a steadfastly ostrich like attitude towards Europe in particular, and most other countries in general, may argue that a measure in terms of dollars at current exchange rates is irrelevant – the UK currency is the pound and what counts is constant price shifts. Such an argument is false and an attempt to disguise the true scale of the decline of the UK economy.

The internationally unmatched decline in UK dollar GDP is a huge fall in real international purchasing ability. The far higher than targeted inflation in the UK during the last two years, which has substantially eroded the population’s living standards, is itself in part a reflection of the decline in the UK’s exchange rate and consequent raising of import prices. In short, the decline in the international purchasing power of the UK’s economy translates into a direct fall in real incomes.

It may also be seen that the government’s claim that the UK is outperforming Europe and the Eurozone is entirely without foundation even in constant price national currency terms. But when measured in terms of real international comparisons, i.e. in dollars, the UK’s performance is incomparably worse than Europe’s.

It appears extremely unlikely that the UK’s economy will escape from this circle of decline in the next period. The austerity policies pursued by the present UK government have substantially slowed the economic recovery that was taking place in 2009 and the first part of 2010 – between the 3rd quarter of 2010 and the 3rd quarter of 2011 the UK economy grew by only 0.5%. [..]

Even if any partial recovery takes place, for example by some increase in the exchange rate of the pound against the Euro, the sheer magnitude of the decline in the UK economy makes it implausible that this could be on a scale sufficient to reverse the fall in its relative international position.

Ilargi: Britain lost 20% of GDP from 2007 – 2011. Against this backdrop, and don’t let’s forget the over-600% debt to GDP ratio just for Britain’s financial sector, which will inevitably lead to more – calls for – bailouts, what is the Cameron government’s response?

First of all, austerity measures. Which will hit those people very hard who are in the bottom 25% or so who already have no savings, no nothing, to fall back on. And which will also lead to a rise in unemployment, which in turn will exacerbate the vicious problem circle.

Cameron also distances himself, and his country, from continental Europe, even though that is Britain’s main export destination. How smart is that?

Britain is a country of relatively large regional disparities as well as wealth disparities. The already rich center increasingly sucks up the remaining wealth of the periphery of society. There is then only one possible outcome of those one million people paying their rents and mortgages with payday loans: the British housing bubble will burst sooner rather than later.

Tax revenue has only one way to go as well. Down. So what will Cameron use to support the banks? How will he attempt to prevent a large scale repeat of last year’s Tottenham riots?

Looking at all this, we also need to wonder how much longer, and why in the first place, Britain is perceived as a safe haven, with its sovereign bonds – gilts – much sought after. Sure, Britain has its own currency and central bank, it can “print”, it can do QE 1001, but it’s not as if it hasn’t already tried that route. And still lost 20% of GDP.

Whatever it decides to do, it seems safe to presume that Britain might well steal some of the limelight away from Greece and Italy in the not too distant future.

 

 

Me in 2016 again for a moment: after reading this -I wrote it 55(!) months ago-, does the Brexit still surprise you?

 

 

Jul 312016
 
 July 31, 2016  Posted by at 10:13 pm Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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Vincent van Gogh Branches Of An Almond Tree In Blossom in Red 1890

Think about it for a second: If America -and UK, France- were to announce today that they would immediately cease bombing Syria, Iraq, Libya, Afghanistan, would the US be any less safe? Would Europe?

How about if we’d promise to spend all the billions saved by not throwing bombs on them, to help rebuild these countries? Would that make us less safe, from terrorists, from anyone at all? Do you think ‘they’ would ‘hate’ us for that?

It becomes a pretty stupid non-discussion pretty fast, doesn’t it?

 

 

Jul 052016
 
 July 5, 2016  Posted by at 8:06 am Finance Tagged with: , , , , , , , , ,  1 Response »
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Jack Allison “Utopia Children’s House, Harlem, New York.” 1938

Don’t Panic. Britain’s Economy Can Survive Just Fine Outside The EU (Mody)
The UK Desperately Needs A Lower Pound (Steen Jakobsen)
Brexit Accelerates the British Pound’s 100 Years of Debasement (BBG)
Meanwhile At The Most Systemically Dangerous Bank In The World… (ZH)
Standard Life Shuts Property Fund Amid Rush Of Brexit Withdrawals (G.)
EU Authority Fraying In Reaction To Brexit Vote (R.)
Draghi Should Have Done More To Help Italian Banks In 90’S, Says PM Renzi (R.)
Did a Fear of Slave Revolts Drive American Independence? (NY Times)
The Statue Of Liberty Was Built To Welcome Immigrants (Eggers)
The Elites Hate Momentum and The Corbynites – I’ll Tell You Why (Graeber)
In New Jersey Student Loan Program, Even Death May Not Bring a Reprieve (NYT)
Sydney Home Prices Just Keep On Rising (BBG)
How Australia Is Sold Into Waging War In Ukraine (Helmer)
US Economist Galbraith Sheds Light On Varoufakis ‘Plan X’ (Kath.)
Wikileaks Publishes More Than 1,000 Hillary Clinton War Emails (Ind.)
Who The F**k Is Charlotte? (Jim Kunstler)

 

 

“Between 2000 and 2014, the share of British exports to Europe fell from 60 to 45%.”

Don’t Panic. Britain’s Economy Can Survive Just Fine Outside The EU (Mody

The European Union was not the principal reason why many felt economically and politically powerless, but its bureaucratic creep became a potent symbol of the overpowering force of globalization. The outgoing Prime Minister of Britain David Cameron, who likes to think of himself as modern-day Winston Churchill, had little understanding of these historical forces. Indeed, even Churchill had his historical blind spots. He petulantly called Gandhi a “half-naked fakir” and vehemently opposed Indian independence. But Cameron, seeking his petty political victories, was largely clueless about the larger stakes he ended up playing for. Tactical gains can lead to strategic advance only when guided by a larger vision. All Cameron wanted was greater hold over his party.

But once he let the genie out of the bottle, Cameron misjudged again by making an economic case for remaining in the European Union rather than attempting a serious political argument for Europe—one based on shared values. Perhaps there was no political argument to be made, but the effort to present an economic calculus for a political decision was bound to backfire. The economic numbers to make the case for Britain remaining in Europe were fanciful, however many economists and international organizations joined to endorse them.

Following Brexit, productive British trade with the European Union will survive just fine wherever it is based on long-lasting economic gains and social relationships. At the same time, the shift toward trade with the faster-growing United States and Asia will continue. Between 2000 and 2014, the share of British exports to Europe fell from 60 to 45%. Almost all new British trade is being created outside of Europe. The new tougher trade regime could even spur productivity growth. As the British economy inevitably disengages from Europe, empathy for European Union will decline further. A referendum five years from now will produce an even clearer decision to say out.

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“The UK’s problem remains their double deficit. The chronic budget and the current account deficits.”

The UK Desperately Needs A Lower Pound (Steen Jakobsen)

I am writing this chronicle from South Africa which is almost as far away from Europe and the constant and never ending Brexit talk as you can come. It’s hard even here to avoid the turbulence and never ending ‘need’ for investors and media to understand what comes next. The best analogy I can use is one from my extensive travels: When you arrive at an airport to check in, you have to pass security control when two options are at hand: The fast track or the slow version (economy class). Using the fast track gets you quicker to the gate and allows you pre-boarding, but what really should matter is that the actual flight time and route is the same for everyone in business and in economy. We arrive at EXACTLY the same time.

The point? What is now transpiring in an economic sense is that we have entered the fast track courtesy of Brexit, the selloff in GBP, the lowering of growth projections and in some places talk about reform and change which would have happened with or without the Leave vote. The UK’s problem remains their double deficit. The chronic budget and the current account deficits. The last time the UK ran a surplus on the current account was the year Italy won the World Cup in Spain and the top scorer was Paolo Rossi. you guessed it — 1982. The UK also has the lowest productivity of the G7 countries together with Japan.

Yes, the UK needs a lower GBP and desperately so and if the ERM crisis of 1992 is any guideline, what comes next for UK is more employment and a stronger GDP as seen in this chart from the excellent research done by Societe Generale. It would be naive to anticipate only positive changes from the increased political uncertainty but do realise that the slowdown in the UK but also Europe was happening before the surprise ‘Leave’ result.

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Loss of empire.

Brexit Accelerates the British Pound’s 100 Years of Debasement (BBG)

There have been few better ways to chart Britain’s decline from empire than its currency. Historians, economists and foreign-policy specialists point to the more-than 10% plunge since the June 23 referendum as signaling another downward leg in the U.K.’s global role and influence. “The history of the pound against the dollar over the last century is essentially a downward ladder with big permanent steps,” according to Rui Pedro Esteves, an associate professor in economics at Oxford University. The world’s oldest currency — sterling is derived from the old German “ster” for strong or stable – bought almost $5 during World War I. The day of the EU referendum, it traded at $1.50. It was at $1.3330 as of 4:33 p.m. on Monday.

HSBC analysts are among those forecasting $1.20 as a likely destination. Billionaire investor George Soros suggests $1.15, the equivalent of about a euro – about 60 cents below its average since 1971. “A country’s economic size measured in other currencies – for the U.K., measured say in dollars – is an indicator of its capacity to project power and influence internationally,” said Barry Eichengreen, a professor of economics at the University of California Berkeley. While some economists, including former BOE Governor Mervyn King, see the weaker currency as leading to more export competitiveness, others see the threat of recession and lower interest rates – combined with more insular politics and withdrawal from the world’s largest trading bloc – as undermining appetite for U.K. assets.

“If you look at the U.K. now, certainly part of what is going on is a result of the exchange rate’s adjustment to growth expectations,” said Maurice Obstfeld, chief economist at the IMF. The pound has been in steady decline, spurred on by a series of financial jolts, for most of the past century – just as Britain’s prominence on the international stage has diminished.

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Correlation AND causation.

Meanwhile At The Most Systemically Dangerous Bank In The World… (ZH)

Another day, another fresh record low in Deutsche Bank’s stock price… For comparison’s sake, Deutsche Bank is analogically equivalent to where Lehman was in August 2008… when the stock soared 16% on chatter of a Korean Development Bank bailout… which then was denied, crashing the stock and ending the party…

Shares in Lehman Brothers rose substantially Friday as investors renewed hopes that the troubled investment bank was moving closer to raising capital to buffer it against a deteriorating economic environment. Capping a volatile week, the stock soared 16% on a report that the state-run Korea Development Bank was considering buying the bank, an idea that a spokesman for the South Korean firm said was “erroneous.” Lehman’s stock closed the day up 5% at $14.41.

The spokesman for Korea Development Bank told The New York Times that the bank was in the process of being privatized and was looking at various acquisitions. But he denied that buying Lehman was an option. “We have various thoughts for our future, but we don’t have any specific institutions in mind,” said the spokesman, who declined to be named, citing company policy. Lehman’s suddenly soaring stock underscores the volatility surrounding the firm as it scrambles to assess its options in the face of an abysmal third quarter. Only days ago, its shares tumbled more than 13%.

We wait for chatter of a Deutsche Bank ‘offer’ rumor any day now. We are sure it’s nothing. How can it be a problem given that US equities are so strong? right?

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Can’t be just one fund that has these problems.

Standard Life Shuts Property Fund Amid Rush Of Brexit Withdrawals (G.)

Investors in Standard Life’s property funds have been told that they cannot withdraw their money, after the firm acted to stop a rush of withdrawals following the UK’s decision to leave the EU. The firm halted trading on its Standard Life Investments UK Real Estate Fund and associated funds at midday on Monday, citing “exceptional market circumstances” for the decision. It said the suspension would remain in place until it is “practicable” to lift it, and that it would review the decision at least every 28 days. The £2.9bn fund, which invests in commercial properties including shopping centres, warehouses and offices, is thought to be the first UK property fund to suspend trading since the 2007-2009 financial crisis, when some of the biggest names in investment management stopped withdrawals because they did not have the money to repay investors.

Standard Life’s decision is the latest in a line of moves by investment firms to stem flows out of their property funds. Standard Life last week, together with rivals Henderson, Aberdeen and M&G, reduced the amount investors cashing in holdings would get back by up to 5%. In a statement, Standard Life said the decision followed an increase in redemption requests from investors. “The suspension was requested to protect the interests of all investors in the fund and to avoid compromising investment returns from the range, mix and quality of assets within the portfolio,” the company said.

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Juncker’s days are definitely numbered. But nobody seems to either know nor agree what should be next.

EU Authority Fraying In Reaction To Brexit Vote (R.)

[..] Italian Prime Minister Matteo Renzi, who has fought to bend EU budget deficit rules and now seeks to pump billions of euros into his country’s ailing banks if needed to shore them up, said on Monday the EU was run by “a technocracy with no soul”. He also opposed sanctions against fellow southern members Spain and Portugal for violating the EU’s deficit limits last year – a step the Commission is due to consider on Tuesday in a German-backed drive to uphold the much-abused budget rules. Italy’s banks are saddled with €360 billion in bad loans and their share prices plunged after last month’s Brexit vote. Rome is in talks with the EU Commission to devise a plan to recapitalize its lenders with public money limiting losses for bank investors.

Dutch and German ministers have attacked a Commission decision that the European Parliament can approve a trade pact with Canada without referring it to national parliaments. The Dutch parliament was assured it would have a chance to weigh in on the treaty. But perhaps most worryingly for the EU, senior ministers in Germany, the bloc’s reluctant hegemon, are advocating shrinking the executive Commission, trimming its powers, and bypassing common European institutions to take more decisions by intergovernmental agreement. A call from veteran German Finance Minister Wolfgang Schaeuble, long an advocate of closer integration, to shift more policy decision-making to governments for expediency’s sake was among the most striking indicators of the mood around Europe.

“If the Commission doesn’t get involved, then we should take the matter into our own hands and solve problems between governments,” Schaeuble told Welt am Sonntag newspaper, saying now was a time for pragmatism. “This intergovernmental approach proved successful during the euro zone crisis,” he added.

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Renzi, in trying to save his career, becomes a danger to Brussels.

Draghi Should Have Done More To Help Italian Banks In 90’S, Says PM Renzi (R.)

Italian Prime Minister Matteo Renzi criticized ECB Governor Mario Draghi for not having done more to resolve Italy’s banking woes when he held a key Treasury job in Rome in the 1990s. Renzi’s rare public criticism of Draghi came on the day Italy’s third-largest lender, Banca Monte dei Paschi di Siena (BMPS.MI), said that the ECB had asked it to cut its bad debts by 40% within three years, heaping more pressure on Rome to stabilize its banking system. After taking power in 2014, Renzi’s government introduced reforms aimed at strengthening the country’s cooperative banks, but several are struggling to stay afloat and a bailout fund took control of Veneto Banca last week after the ECB said it had to raise capital or close.

“If the measures concerning the cooperatives had not been taken by us but by the centre-left government that first put them forward, but was not strong enough to enact them in 1998 … then we would not have this problem,” Renzi said. The prime minister said that Draghi was director general of the Treasury at that time, with Carlo Azeglio Ciampi serving as economy minister. “And if people had the strength and intelligence to keep politics out of the banking system a bit before we did it … we would not have had cases like Monte dei Paschi di Siena,” Renzi told a meeting of his centre-left Democratic Party (PD).

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How things are seldom what they seem. Or people, for that matter.

Did a Fear of Slave Revolts Drive American Independence? (NY Times)

For more than two centuries, we have been reading the Declaration of Independence wrong. Or rather, we’ve been celebrating the Declaration as people in the 19th and 20th centuries have told us we should, but not the Declaration as Thomas Jefferson, Benjamin Franklin and John Adams wrote it. To them, separation from Britain was as much, if not more, about racial fear and exclusion as it was about inalienable rights. The Declaration’s beautiful preamble distracts us from the heart of the document, the 27 accusations against King George III over which its authors wrangled and debated, trying to get the wording just right. The very last one — the ultimate deal-breaker — was the most important for them, and it is for us:

“He has excited domestic insurrections amongst us, and has endeavored to bring on the inhabitants of our frontiers, the merciless Indian savages, whose known rule of warfare is an undistinguished destruction of all ages, sexes and conditions.” In the context of the 18th century, “domestic insurrections” refers to rebellious slaves. “Merciless Indian savages” doesn’t need much explanation. In fact, Jefferson had originally included an extended attack on the king for forcing slavery upon unwitting colonists. Had it stood, it would have been the patriots’ most powerful critique of slavery. The Continental Congress cut out all references to slavery as “piratical warfare” and an “assemblage of horrors,” and left only the sentiment that King George was “now exciting those very people to rise in arms among us.”

The Declaration could have been what we yearn for it to be, a statement of universal rights, but it wasn’t. What became the official version was one marked by division. Upon hearing the news that the Congress had just declared American independence, a group of people gathered in the tiny village of Huntington, N.Y., to observe the occasion by creating an effigy of King George. But before torching the tyrant, the Long Islanders did something odd, at least to us. According to a report in a New York City newspaper, first they blackened his face, and then, alongside his wooden crown, they stuck his head “full of feathers” like “savages,” wrapped his body in the Union Jack, lined it with gunpowder and then set it ablaze.

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Reflecting on Lady Liberty’s right foot.

The Statue Of Liberty Was Built To Welcome Immigrants (Eggers)

Though she is the most recognisable symbol of the American experiment, there is something about the Statue of Liberty that goes largely unnoticed. And that is that she is moving. The torch in her right hand, symbolising enlightenment, cannot be ignored and is never overlooked. The book in her left hand, with 4 July carved in roman numerals, is not likely to be missed. Nor are the seven spikes of her crown, matching the world’s seven continents and seven seas. And though, if pressed, we remember that she is wearing sandals, we forget, if we ever knew, that the Statue of Liberty is on the go. Take the ferry to Liberty Island. As your boat rises and falls on the rough waters of New York Harbor, you will see, with undeniable clarity, that her right foot is striding forward.

And around her feet are chains, broken, which sculptor Frédéric Auguste Bartholdi meant to symbolise the breaking of the chains of bondage and tyranny. She is caught, forever, in the moment of becoming free. The 305ft statue is a marvel of artistry and engineering, and there are many details to admire, but none is more important than her right leg, which is stepping forward, and stepping forward not casually but with great striding purpose. This right foot, though largely unheralded, might be its most important feature. For what would it mean if the symbol of liberty were standing still? That would imply that freedom is static, that once established, it’s a settled thing. But freedom is not a settled thing.

It would imply that once the first few million immigrants arrived on American shores, fleeing religious bigotry or political violence or ethnic persecution, then the United States should or could close its gates. It would imply that the welcoming of new arrivals, the poor and tired and struggling to be free, was a temporary thing, that the welcoming of the world’s oppressed was a thing of the past. But the welcoming of the world’s oppressed is not a thing of the past. We live in a moment when shrill voices tell us that not only should immigration be stifled, but that millions of current residents should be deported, returned to their country of origin, no matter the consequences for their souls or our consciences. These fearful voices put forth a direct repudiation of the origin and elemental purpose of this country, and to the meaning of the statue that we accept as our talisman.

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The coup against Corbyn is also linked to Tony Blair’s possible indictment, and the risks that brings for those in the party who are linked to him.

The Elites Hate Momentum and The Corbynites – I’ll Tell You Why (Graeber)

As the rolling catastrophe of what’s already being called the “chicken coup” against the Labour leadership winds down, pretty much all the commentary has focused on the personal qualities, real or imagined, of the principal players. Yet such an approach misses out on almost everything that’s really at stake here. The real battle is not over the personality of one man, or even a couple of hundred politicians. If the opposition to Jeremy Corbyn for the past nine months has been so fierce, and so bitter, it is because his existence as head of a major political party is an assault on the very notion that politics should be primarily about the personal qualities of politicians. It’s an attempt to change the rules of the game, and those who object most violently to the Labour leadership are precisely those who would lose the most personal power were it to be successful: sitting politicians and political commentators.

If you talk to Corbyn’s most ardent supporters, it’s not the man himself but the project of democratising the party that really sets their eyes alight. The Labour party, they emphasise, was founded not by politicians but by a social movement. Over the past century it has gradually become like all the other political parties – personality (and of course, money) based, but the Corbyn project is first and foremost to make the party a voice for social movements once again, dedicated to popular democracy (as trades unions themselves once were). This is the immediate aim. The ultimate aim is the democratisation not just of the party but of local government, workplaces, society itself.

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In a nutshell: “..One reason for the aggressive tactics is that the state depends on Wall Street investors to finance student loans..”

In New Jersey Student Loan Program, Even Death May Not Bring a Reprieve (NYT)

New Jersey’s loans, which currently total $1.9 billion, are unlike those of any other government lending program for students in the country. They come with extraordinarily stringent rules that can easily lead to financial ruin. Repayments cannot be adjusted based on income, and borrowers who are unemployed or facing other financial hardships are given few breaks. The loans also carry higher interest rates than similar federal programs. Most significant, New Jersey’s loans come with a cudgel that even the most predatory for-profit players cannot wield: the power of the state. New Jersey can garnish wages, rescind state income tax refunds, revoke professional licenses, even take away lottery winnings — all without having to get court approval.

“It’s state-sanctioned loan-sharking,” Daniel Frischberg, a bankruptcy lawyer, said. “The New Jersey program is set up so that you fail.” The authority, which boasts in brochures that its “singular focus has always been to benefit the students we serve,” has become even more aggressive in recent years. Interviews with dozens of borrowers, who were among the tens of thousands who have turned to the program, show how the loans have unraveled lives. The program’s regulations have destroyed families’ credit and forced them to forfeit their salaries. One college graduate declared bankruptcy at age 26 after struggling to repay his debt. The agency filed four simultaneous lawsuits against a 31-year-old paralegal after she fell behind on her payments.

Another borrower, Chris Gonzalez, could not keep up with his loans after he got non-Hodgkin’s lymphoma and was laid off by Goldman Sachs. While the federal government allowed him to suspend his payments because of hardship, New Jersey sued him, seeking $266,000 in payments, and seized a state tax refund he was owed. One reason for the aggressive tactics is that the state depends on Wall Street investors to finance student loans through tax-exempt bonds and needs to satisfy those investors by keeping losses to a minimum. Loan revenues also cover about half of the agency’s administrative budget.

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How to kill a city.

Sydney Home Prices Just Keep On Rising (BBG)

Sydney home prices resumed their upward march as dwindling supply outweighs tighter loan approvals by lenders. Dwelling values climbed 1.2% in June, taking gains for the second quarter to 6.8%, according to data from CoreLogic. The market is getting a leg up after a slowdown at the end of last year in Australia’s largest city, as new listings fell more than 16% from a year earlier to the lowest in five months in June, according to the data.

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How to kill a country: “..it is financed by grants from the Australian Department of Defence, the Australian Army, the Australian Federal Police, the Dutch Foreign Ministry, and the Japanese Government; plus Raytheon, Northrup Grumman, Lockheed Martin, and Boeing..

How Australia Is Sold Into Waging War In Ukraine (Helmer)

Among Turnbull’s last-minute ploys to attract votes, one was the leak last month of Australian cabinet plans for an Australian Army force to fight in eastern Ukraine, alongside Dutch and other NATO units, to destroy the Donetsk and Lugansk rebellion against the regime in Kiev. Turnbull’s leak had suggested that Tony Abbott, the prime minister Turnbull had pushed aside to take the job, dreamed up the plan of Australian war at the Russian frontier by himself. The new report by Dibb now corroborates the idea of an Australian military expedition against Russia, in exchange for improved American commitments to defend Australia from the Chinese closer to home, in the Pacific.

“How things work out in Europe,” Dibb claims, “will affect Washington’s ability to reassure allies and partners everywhere, including those in our region who must contend with increasing coercion by China.” Unless Australia does more fighting with the Americans on the Russian front, he concludes, “China will take advantage of this, and allies and partners of the US in the region -including Australia- would be subject to further uncertainty about American military commitments to Asia.” Combating “Russia’s aggressive military behaviour “is necessary because, otherwise, “both Moscow and Beijing will be seen as getting away with it.” The 40-page Dibb report is entitled “Why Russia is a threat to the international order”. Read it in full. The publisher is a think-tank headquartered in Sydney called the Australian Strategic Policy Institute (ASPI).

It says “ASPI was established, and is partially funded, by the Australian Government as an independent, non-partisan policy institute.” The institute’s financial reports reveal it is financed by grants from the Australian Department of Defence, the Australian Army, the Australian Federal Police, the Dutch Foreign Ministry, and the Japanese Government; plus Raytheon, Northrup Grumman, Lockheed Martin, and Boeing — the leading arms-exporting corporations of the US. European arms builders also funding ASPI include the European missile-maker MBDA, BAE Systems, ThyssenKrupp Marine Systems, Rheinmetall, Airbus, and Navantia, the Spanish state shipbuilder. When Australians march into the field against the Russians, these suppliers aim to provide the best kit Australian money can buy.

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Tsipras might have done well to pay some more attention.

US Economist Galbraith Sheds Light On Varoufakis ‘Plan X’ (Kath.)

The Plan B for Greece that was drafted by former Greek Finance Minister Yanis Varoufakis foresaw the declaring of a state of emergency, the immediate nationalization of the Bank of Greece, the transformation of bank deposits into a New Drachma and emergency public order measures, according to a book by American economist James Galbraith, Varoufakis’s chief coordinator for the plan. In the book, “Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe,” which has been translated into Greek, Galbraith describes in detail Varoufakis’s plan for moving Greece to a parallel banking system last year.

Those privy to the Plan B – or Plan X as Varoufakis is said to have called it – would meet in conditions of high secrecy involving secure communications and the depositing of cell phones in hotel refrigerators. According to Galbraith, during the transition phase, the ministries of Defense and the Interior would have been responsible for public order, fuel supplies would be controlled, while employees at important public institutions (schools, hospitals, police) would be mobilized. Even though there was a high-level meeting about the plan, Galbraith said the prime minister did not ask to be briefed, so work on the endeavor ended with the submission of an extensive memo in May.

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At some point, indictment or not, enough people will realize that Clinton is too much of a risk for the credibility of the entire American political system.

Wikileaks Publishes More Than 1,000 Hillary Clinton War Emails (Ind.)

WikiLeaks, the anti-secrecy website, has released more than 1,000 emails from Hillary Clinton’s private email server pertaining to the Iraq War. The website tweeted a link to 1,258 emails on Monday that Clinton sent during her time as secretary of state. According to the release, the emails were obtained from the US State Department after they issued a Freedom of Information Act request. However, it’s unclear if any of the information is classified. WikiLeaks founder Julian Assange previously claimed that his website obtained enough proof for the FBI to indict the presumptive Democratic nominee for president.

“We could proceed to an indictment, but if Loretta Lynch is the head of the DOJ in the United States, she’s not going to indict Hillary Clinton,” Assange told ITV. “That’s not possible that could happen.” The newly released information will likely only serve as political fodder for the presumptive Republican nominee Donald Trump, as Clinton met with FBI investigators over the weekend wrapping up the lengthy investigation. Sources close to the probe recently told CNN that the bureau will announce no charges against Clinton in the weeks to come.

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Ha! Funny! But I think Lynch’s involvement is far more insidious than this.

Who The F**k Is Charlotte? (Jim Kunstler)

The mighty Shakespeare in his direst night sweats could not have conjured up the Clinton family in all their sharp angles and dark corners, but we can try to reconstruct the scene last week on Loretta Lynch’s plane out on the Phoenix airport tarmac.

Former president Bill steps aboard:
• Loretta: What the fuck are you doing here?
• Bill: I just had to tell you what Charlotte did last week.
• Loretta: Who the fuck is Charlotte?
• Bill: Our grand-kid. She’s turning into a good little earner.
• Loretta: We can’t meet like this. We’re about to depose your wife.
• Bill: Charlotte gave a speech to the whole Citibank C-suite.
• Loretta: I don’t give a fuck. Get off my plane right now!
• Bill: Well, I don’t know if ‘speech’ is the right word. She gurgles nice.
• Loretta: I guess you didn’t hear me.
• Bill: She pulled in fifty grand for that. Of course it was 100% remitted to the foundation. Well, bye now. (Exits plane).

I have a theory about the Clinton family dynamic. Bill does not want Hillary to win because he doesn’t want to live in the White House again. For sure he does not want to live with The Flying Reptile, but he especially doesn’t want to be on display in that fishbowl where folks pretty much can see what you’re up to 24/7. For one thing, “The Energizer” can’t discreetly come and go. But he certainly doesn’t want to concern himself as “First Husband” or “First Gentleman” (title TBD) with deciding which fabric to choose in replacing the East Room draperies. So Bill decided to fix things for sure with that innocent visit to the US Attorney General’s airplane to talk about grand-kids.

It seems to be working. If there was any question that Loretta Lynch could just sit on her hands about Hillary’s email investigation through the November election, it went up in a vapor last week. It also left the FBI director on the hot seat because now he will have to either cough up a referral to Justice Department prosecutors, or he’ll have some ‘splainin to do in the heat of a presidential election campaign. If you thought Watergate was a ripe peach, this one is beginning to look like a stinking durian (Durio zibethinus).

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Mar 162016
 
 March 16, 2016  Posted by at 9:53 am Finance Tagged with: , , , , , , ,  Comments Off on Debt Rattle March 16 2016
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William Henry Jackson Camp wagon on a Texas roundup 1901

Chinese PM Li Keqiang Says It Is ‘Impossible’ to Miss Economic Targets (WSJ)
Chinese Buying In US Rekindles Memories Of Japan’s 1980s Merger Mania (Forbes)
China Mixes Cash, Coercion to Ease Labor Unrest (WSJ)
China To Target Shadow Lending For Housing Down-Payments (BBG)
Asia Hedge Funds Had Worst-Ever Start to Year (BBG)
Retirement Is Impossible With Negative Rates (Mauldin)
JP Morgan Brings Back Mortgage-Backed Securities (WSJ)
Despair Fatigue (Graeber)
Disaster Capitalists Fan Flames Of War In Syria (II)
EU Approves Refugee Support Mechanism For Greece (Kath.)
FYROM Accuses Greece Over the “Exodus” of Refugees (PP)
FYROM Dumps Refugees Back In Greece As EU-Turkey Deal Falters (Reuters)
Refugees On Lesbos Offered Sanctuary Thanks To Brit Couple (Mirror)
UNHCR To Ask World To Take In 400,000 Syrian Refugees (A.)

Not a smart thing to say.

Chinese PM Li Keqiang Says It Is ‘Impossible’ to Miss Economic Targets (WSJ)

Chinese Premier Li Keqiang said it would be “impossible” for China to fall short in meeting its relatively high economic-growth targets even as it pushes ahead with structural reforms. Speaking to reporters at the conclusion of China’s annual legislative session, Mr. Li said China won’t suffer a “hard landing,” or sharp downturn, and can achieve growth and reform simultaneously. “Reform and development aren’t contradictory,” he said. “We should be able to stimulate market vitality and support economic development via structural reforms.” At the opening of the National People’s Congress earlier this month, China set growth targets of 6.5% to 7% for this year and an average benchmark of at least 6.5% from now until 2020.

Economists say this relatively high growth target at a time when the economy is losing momentum suggests China is favoring growth over structural reform, which could prevent massive job losses and social instability but set back the shift of China’s economy from investment and manufacturing to consumption and services. The real test will be in whether tough restructuring steps are implemented, Commerzbank economist Zhou Hao said in a report following Mr. Li’s comments. “China needs to proceed with the deleveraging more decisively, and should prevent the leverage ratio from soaring again,” he wrote. “At the end of the day, policy execution is crucial to restore the market confidence.”

Mr. Li said capital-adequacy ratios at China’s financial institutions are sound, bad loans are well covered by reserves and the nation is making progress in cutting corporate debt using debt-for-equity swaps. Mr. Li signaled that China will do what it takes to maintain its growth targets and that it has a “good reserve” of policy instruments in the event that growth falls outside an acceptable range, He said China will employ “innovative measures” to ensure steady economic progress.

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What could go wrong?

Chinese Buying In US Rekindles Memories Of Japan’s 1980s Merger Mania (Forbes)

Nearly three decades ago, Japanese corporations flooded the United States with a boom of takeover deals, much of it focused on prime U.S. real estate. They snapped up properties like Rockefeller Center and The Plaza Hotel, in addition to Columbia Pictures, causing consternation among those in the U.S. who wondered when, or if, the buying boom would ever end. “If you don’t want Japan to buy it.. don’t sell it,” Akio Morita, founder of Sony , famously said when bidding for Columbia. The buying stopped when a 1980s stock market bubble in Japan popped, depleting the dealmaking currency and animal spirits of overseas acquirers. Within years, targets like Rock Center and The Plaza were in the hands of new ownership and a quarter century later, Japanese corporations are still trying to dig out from under the bubble.

Now, it appears there’s a new foreign buyer rushing into U.S. markets and exhibiting similarities to the heady, 1980s Japanese M&A binge. Chinese corporations have opened 2016 with an unprecedented surge in overseas dealmaking and this frenzy of activity is no coincidence. It comes as China’s currency is in the process of readjusting to account for it slowing economic growth, causing hundreds of billions of dollars in capital outflows. Roughly half a trillion dollars poured out of China in 2015 according to the Institute for International Finance and that pace continues this year. Capital leaving China has found its way into single and multifamily real estate properties in North America – in addition to financial assets like stocks, bonds and currencies.

Now, the money is rushing directly towards large domestic corporations through takeover deals. Just two and a half months into the year, Chinese overseas corporate M&A activity is roughly in line with the $108 billion in outbound M&A conducted all of last year, according to Dealogic. If Chinese corporates are beginning to exhibit similar symptoms to the Japanese merger mania, a set of deals in the works this weekend cements the comparison. Anbang Insurance Group, which is run by Deng Xiaoping’s grandson-in-law, is trying to negotiate what looks to be an unprecedented bonanza of real estate acquisitions, targeted at famous U.S. properties. Anbang ponied up $2 billion to buy the Waldorf-Astoria Hotel from Blackstone-controlled Hilton Hotels in late 2014, and the group is back at it with two deals that would increase its buying by many multiples.

The insurer is reportedly offering to buy Strategic Hotels and Resorts (SH&R) — the owner of properties including Essex House and Hotel del Coronado — from Blackstone. That offer comes just months after the ink dried on the PE giant’s $4 billion takeover of SH&R in September. And Anbang is leading a consortium of investors who are challenging Marriott International’s $12 billion takeover of Starwood Hotels, operator of upscale hotel brands including Westin, W Hotels and Le Meridien.

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How China keeps its zombies alive.

China Mixes Cash, Coercion to Ease Labor Unrest (WSJ)

A protest by Chinese coal workers over unpaid wages drew a swift, expected response: payoffs to get them off the streets and threats of police action if they don’t. The effort underscores the government’s long-standing worries about labor strife and its newly cautious approach to restructuring unprofitable state firms. Unrest in the northeastern city of Shuangyashan appeared to ease as Longmay Mining Holding, a huge employer, started disbursing some back pay on Monday, workers said. Hundreds took to the streets there last week, drawing a large police presence, after the provincial governor said Longmay didn’t owe its miners wages.

The response by Longmay and Heilongjiang province Gov. Lu Hao, who later said he had misspoken about the wage arrears, mirrored past efforts by Chinese officials to ease labor unrest with a mix of cash, coercion and pledges of redress. Chinese call the strategy “buying stability,” part of the government’s well-worn playbook for defusing public anger. Beyond being a troubled coal company, Longmay is a test case for government resolve in carrying out a key economic initiative—the restructuring of uncompetitive state industries whose drain on resources is impeding a transition to an economy driven more by services and consumers. Many Longmay workers in Shuangyashan are among the 1.8 million steel and coal workers Beijing plans to lay off over the next five years.

The retrenchment, and the allocation of 100 billion yuan ($15.4 billion) in restructuring funds to pay for workers’ severance, retraining and relocation, are part of a five-year economic program Chinese lawmakers are set to adopt at the end of their annual session in Beijing on Wednesday. Economists have said China needs deeper cuts to shed excess industrial capacity and divert labor and capital to more productive industries. Instead, the government is encouraging businesses to keep workers on the payrolls, often at reduced hours and pay, avoiding fueling a continuing surge in labor unrest but at the cost of dragging out an economic transition. Some ailing enterprises can expect official support to stay in business, including in Longmay’s case tax cuts and cash incentives that Fitch Ratings says allowed the mining company to avoid defaulting on bonds.

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“His property agent offered him a zero-interest loan, funded entirely online by peer-to-peer lenders, that covered almost half his deposit..”

China To Target Shadow Lending For Housing Down-Payments (BBG)

When Fu Songtao found his ideal home in the suburbs of Shanghai, he faced the typical problem of would-be homebuyers: Coming up with enough cash for a down payment. So Fu turned to an online solution. His property agent offered him a zero-interest loan, funded entirely online by peer-to-peer lenders, that covered almost half his deposit. “Everybody I know took out these loans,” said Fu, a 29-year-old employee of a state-owned enterprise, who borrowed 380,000 yuan ($58,000) a year ago, with interest payments to lenders subsidized by the property agent, for his 3 million yuan apartment, and has seen its value increase to 3.3 million yuan since. “If you can borrow like that, why not?” The lending platform of his real estate agency, E-House China, is one of China’s hundreds of P2P lenders allowing home buyers to seek down-payment loans online.

Total P2P borrowing for home deposits reached 924 million yuan in January, more than three times the level of last July, according to data provider Yingcan. Lending for property down payments, a phenomenon all but unheard of a year ago, has now prompted plans by the government to halt such borrowing. The response underscores the stakes as shadow-banking leverage creeps into China’s housing market – a development similar to the margin financing that fueled last year’s stock market bubble, but with potentially more damaging consequences. “Down-payment financing would definitely cause risks to the financial system, similar to the subprime crisis in the U.S.,” said Hu Xingdou, an economics professor at the Beijing Institute of Technology.

“China has learned a lesson from the U.S. subprime crisis. The Chinese government understands that they have to solve problems like housing and overcapacity. At the same time, they can’t bring further risks to the financial system, as the banks already have a lot of bad debt.” People’s Bank of China Deputy Governor Pan Gongsheng said at a press conference on Saturday that down-payment loans offered by developers, real estate agents, and P2P lenders not only raised leverage of home buyers, they also undermined effectiveness of macroeconomic policies and increased risks to the financial system and property markets. The central bank together with other government departments will soon start a campaign to clean up such activities, he said. New rules being drafted by the central bank, the China Banking Regulatory Commission and other bodies would bar developers, peer-to-peer networks and other non-banks from offering down-payment loans

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Casino’s on steroids.

Asia Hedge Funds Had Worst-Ever Start to Year (BBG)

Hedge funds in Asia, which beat counterparts in the U.S. and Europe in 2015, are off to their worst annual start on record this year, as the region’s stock markets have plunged amid a dimming outlook for growth. Asia hedge funds, excluding those that invest in Japan, fell 1.5% in February, bringing their loss for the first two months of 2016 to 6.6%, according to Singapore-based data provider Eurekahedge. Apart from being the biggest drop ever for the first two months of the year, that’s also the worst start among the world’s major regions, Eurekahedge said. Hedge funds including those from Greenwoods Asset Management and Zeal Asset Management extended declines they suffered in January.

After successfully navigating turbulent markets in 2015, hedge funds in Asia are seeing a reversal this year as worries about a global slowdown have deepened. The Shanghai Composite Index has tumbled 19% this year to rank among the worst-performing equity markets in the world, and most of the region’s benchmarks have been whipsawed by volatility amid scant signs of global growth. “Hedge fund managers in the region, especially those focusing on long-short strategies, had been stung by volatility in underlying markets,” said Mohammad Hassan at Eurekahedge. As it becomes more difficult to post consistent returns, investors are increasingly shifting their money to the largest or most promising managers, prompting many smaller-scale firms to exit the business or return money to investors.

That’s creating a bifurcation in Asia’s hedge fund industry. The losses for hedge funds investing in Asia ex-Japan compares with a decline of 3.2% in Europe through the end of February and a decrease of 1.7% in North America, according to the Eurekahedge website. Last year, Asia ex-Japan hedge funds rose 7.5%, beating rivals in other parts of the world. Greenwoods Asset’s Golden China Fund fell 3.7% in February, bringing its losses to 14.4% so far this year, according to Joseph Zeng, a Hong Kong-based partner at the hedge fund firm. The fund, which managed $1.7 billion as of January, was one of the top performers last year, posting gains of almost 22%.

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“This situation would wreak havoc on every pension fund—but that’s not even the worst part.”

Retirement Is Impossible With Negative Rates (Mauldin)

Since 2008, the Fed has relied on near-zero interest rates to stimulate economic growth, and they still sincerely believe that low interest rates will do the job they’re supposed to. However, the hard evidence of the past few years is that ultra-low rates, combined with quantitative easing, haven’t stimulated much growth. Unemployment has fallen, which is good—but probably not as good as the numbers suggest because people have gone back to work for lower pay and are now even deeper in debt. Personal income growth has stagnated, too. Are we better off now than we were five years ago? The answer is a qualified yes. But it is not entirely clear, at least to your humble analyst, that the halting economic recovery is the result of low interest rates and not other less manipulable factors such as entrepreneurial initiative and good old muddling through.

In fact, an ultra-easy monetary policy may be part of the reason we’ve been stuck with low growth. Witness Japan and Europe. Just saying… Seriously, no one fully understands how all the moving parts influence each other. Years of ZIRP did help businesses and consumers reduce their debt burdens. ZIRP and multiple rounds of QE have also done wonders for stock prices… but not much for the kind of business expansion that creates jobs and GDP growth. If year upon year of ultra-low rates were enough to create an economic boom, Japan would be the world’s strongest economy right now. It obviously isn’t—which says something about ZIRP’s efficacy as a stimulus tool. What isn’t a mystery, however, is that ZIRP has created a massive problem for retirement savers and pension fund managers.

If ZIRP is bad, NIRP will be far worse for retirement planning. Bond-return assumptions will have to be even lower and potentially below zero. This situation would wreak havoc on every pension fund—but that’s not even the worst part. Most asset allocations are generally in the ballpark of 60% equities and 40% bonds, so that is the standard portfolio we will be discussing. Other allocations will make some differences, but not change the general direction. In other words, “your mileage may vary,” but probably not by much. In an ideal world—which is the world that pension consultants live in—equities will return 10% nominal and bonds will return 5%. A 60/40 portfolio blend will then yield an 8% overall return after fees, expenses, and management costs.

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“J.P. Morgan is using the Federal Deposit Insurance Corp.’s safe harbor, which isolates them from the assets and protects investors if the mortgages go bad.”

JP Morgan Brings Back Mortgage-Backed Securities (WSJ)

J.P. Morgan Chase & Co. is trying to sell new securities that would pass along most of the credit risk on $1.9 billion in mortgages, in an attempt to revive a debt market that has been largely left to the government since the financial crisis. The largest U.S. bank by assets is expected to price the residential mortgage-backed deal over the next two weeks. J.P. Morgan would hold 90% of the deal by keeping the safest parts, or the most senior tranches, and plans to sell off the riskier pieces to investors. Government-sponsored entities Fannie Mae and Freddie Mac have dominated the market in their absence. The two companies have recently been selling new securities that use derivatives to unload the risk of default on the mortgages they guarantee.

The new deal is J.P. Morgan’s first “house transaction” since the financial crisis, meaning it is entirely backed by mortgages the bank owns. The pool includes a mix of more than 6,000 mortgages, both newer and refinancings, around 75% of them conforming with the underwriting standards set by Fannie and Freddie. J.P. Morgan could have sold those loans directly to Fannie and Freddie, so the deal indicates it thinks it can get a better deal with private investors or holding parts on its balance sheet.

The New York bank hopes this new method could offer more competitive pricing and help broaden the market for such deals, people familiar with the matter said. J.P. Morgan is using the Federal Deposit Insurance Corp.’s safe harbor, which isolates them from the assets and protects investors if the mortgages go bad. The deal is the first of its kind to be issued by a major bank, according to Fitch Ratings, which gave the securities mostly investment-grade credit ratings. “This is an important step to bring private capital back into the mortgage market,” J.P. Morgan Chief Operating Officer Matt Zames said.

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“.. the historical defeat and humiliation of the British working classes is now the island’s primary export product.”

Despair Fatigue (Graeber)

In the United Kingdom, “finance” is based above all in real estate, and the real estate bubble that sustains the City is itself sustained by the fact that pretty much every billionaire in the world feels they have to maintain at least a flat, and more often a townhouse, in a fashionable part of London. Why? There are plenty of other well-appointed modern cities in the world, most of which have a decidedly more appealing climate. Yet even more than, say, New York or San Francisco, London real estate has become something like U.S. treasury bonds, a basic currency of the international rich. It’s when one asks questions like these that economics and politics become indistinguishable. Those who have investigated the situation find that London’s appeal—and by extension, Britain’s—rests on two factors.

First of all, Russian oligarchs or Saudi princesses know they can get pretty much anything they want in London, from antique candelabras and high-tech spy devices, to Mary Poppins–style nannies for their children, fresh lobsters delivered by bicycle in the wee hours, and every conceivable variety of exotic sexual service, music, and food. What’s more, the boodles will be delivered by a cheerful, creative, and subservient working-class population who, drawing on centuries of tradition, know exactly how to be butlers. The second factor is security. If one is a nouveau riche construction magnate or diamond trader from Hong Kong, Delhi, or Bahrain, one is keenly aware that at home, something could still go terribly wrong: revolution, a sudden U-turn of government policy, expropriation, violent unrest. None of this could possibly happen in Notting Hill or Chelsea.

Any political change that would significantly affect the most wealthy was effectively taken off the table with the Glorious Revolution of 1688. In other words, the historical defeat and humiliation of the British working classes is now the island’s primary export product. By organizing the entire economy around the resultant housing bubble, the Tories have ensured that the bulk of the British population is aware, at least on some tacit level, that it is precisely the global appeal of the English class system, up to and including the contemptuous sneer of the Oxbridge graduates in Parliament chuckling over the impending removal of housing benefits, that is also keeping affordable track shoes, beer, and consumer electronics flowing into the country. It’s an impossible dilemma.

It’s hardly surprising, then, that so many turn to cynical right-wing populists like UKIP, who manipulate the resulting indignation by fomenting rage against Polish construction workers instead of Russian oligarchs, Bangladeshi drivers instead of Qatari princes, and West Indian porters instead of Brazilian steel tycoons. This marketing of class subservience is the essence of Tory economic strategy. Industry may be trounced and the university system turned (back) into a playground for the rich, but even if this leads to a collapse of technology and the knowledge economy, the end result will only seal in more firmly the class system that produces Tory politicians: England will literally have nothing else to sell.

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Lest we forget. Good read, lots of details.

Disaster Capitalists Fan Flames Of War In Syria (II)

If Naomi Klein were to rewrite The Shock Doctrine now, I hope she d agree that the situation in Syria is playing out as a textbook example of her terrifying concept because I believe that’s what we are witnessing. To understand the actions of each nation involved in Syria, you first have to recognise their motivation. It is, as always, fossil fuels and the dollar with human life at a lowly position down the pecking order. The crux of the matter is that Bashar al-Assad put paid to the construction of an oil and gas pipeline, which would have ended Europe s reliance on Russia for its natural gas, by refusing to sign an agreement with Qatar. Instead, he opted for a partnership with Iran (after which the civil war in Syria intensified). While the construction of the pipeline had previously been put on hold, it was quietly announced last July that Iran was forging ahead with a trunkline (IGAT6) to supply Iraq with natural gas; in theory, this could be the beginning of an Iran-Iraq-Syria pipeline or one that goes direct to Turkey.

The Iranian pipeline would be unacceptable to both Washington and Brussels, as it would mean energy co-ordination from Iran, Iraq, Syria and Russia (putting pressure on their Sunni-led cohorts in the region), and also because the product from such would be traded in a basket of currencies not exclusively the petrodollar. Moreover, with Iran now emerging from sanctions (and forecast to produce 3.1mbpd), its gas fields, the second largest reserves on the planet, are up for grabs to exporters. There is, in Syria and across the spectrum of corporate interests of the countries involved, everything to play for and the disaster capitalists are piling into the game, full throttle.

The refugee crisis ostensibly splintering the governments of the EU is set to balloon. Already this year, 133,549 people have reached Europe by sea up more than 10 fold from 2015. The demographic has altered drastically as well: whereas last year, the breakdown of migrants/refugees by gender was 62% male, 16% women and 22% children, so far this year it has been 47%, 20% and 34% respectively. The chaotic propaganda surrounding the refugee crisis continues unabated, each country pointing fingers at the other, for instance, when a NATO general accused Russia and Syria of weaponising the refugee crisis (while simultaneously characterising the people fleeing war as a hotbed of ISIS recruits).

Meanwhile, Greece, in the midst of its own economic turmoil, is left to accommodate 122,000 souls under the UNHCR’s warning of an ‘imminent humanitarian disaster’ unless other EU countries begin to take in these refugees. In effect, the intentional bottleneck in Greece functions as yet another form of shock inflicted by the EU and Troika on an already flailing Syriza administration and its embattled leader Tsipras. With its third bailout looking unsteady amidst mutterings of the IMF pulling out of the deal, the Greek administration has no chips to bargain with, and holds minimal leverage within the EU.

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More disgrace. Greece spends €600 million alone, EU ‘approves’ €300 million in support of the entire ‘refugee effort’.

EU Approves Refugee Support Mechanism For Greece (Kath.)

The presidency of the European Council on Tuesday announced that it has approved a new support mechanism for Greece and other European countries struggling with the bloc’s biggest immigration crisis since World War II. “This Council decision shows that the EU stands by Greece at this difficult time. The Netherlands presidency will do all it can to ensure that the necessary EU funds are mobilized as quickly as possible,” said Dutch Foreign Minister Bert Koenders, whose country holds the six-month rotating presidency of the EU. The European Commission estimates that the refugee effort will require €300 million this year and an additional €200 million each in 2017 and 2018.

The help that will be provided under the new mechanism includes food, shelter, water, medicine and other basic necessities. It will be delivered by the Commission itself or by partner organizations selected in cooperation with Greek authorities. Tuesday’s statement put the number of migrants and refugees currently trapped in Greece due to border closures at 35,000. Government sources estimate that number to be closer to 44,000. The Bank of Greece, meanwhile, on Monday said the cost of the handling the refugee crisis for Greece alone will likely exceed a previous estimate of €600 million.

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Sour and bitter relations. The Greeks say ‘Skopje’. Rumors say accidentally calling the country Macedonia forced the Greek migration minister to resign today.

FYROM Accuses Greece Over the “Exodus” of Refugees (PP)

The Minister of foreign affairs of FYROM, Nikola Poposki, stated that Greece is responsible for the “organised push” of several hundreds of migrants who attempted to cross over yesterday In a series of tweets, Poposki claimed that the growing numbers of migrants at the borders between Greece and FYROM intensifies smuggling while it worsens the human treatment of those living in the refugee camps. He claims that only a united and humane EU reaction will be able to provide a solution for both migrants as well as the involved countries. Those statements came after the effort, on Monday, of almost a thousand refugees to cross the river of Axios and attempt to get into FYROM via an opening in the fence separating the two countries.

While three people were drowned, the rest managed to enter FYROM where they were intercepted by FYROM army and were captured. The refugees decided to make that desperate “exodus” towards FYROM after a flyer was distributed between them, describing in English and Arabic where, and how they could pass over to FYROM. The incident creates further confusion and difficulties in what is already a complex situation between the countries involved. In any case it is not a development which aids Greece, or in fact the efforts of the refugees as it allows those countries which have decided to seal their borders to claim that Greece is not able to control the waves of migrants.

The Greek chief of the Administration for the migrant problem stated that, should FYROM make a petition for the re-entrance of the refugees back to Greece, the Greek side will evaluate and decide on it. It should be noted that there is no formal agreement between FYROM and Greece for the re-acceptance of migrants. At the same time, the Greek government is beckoning to NGOs as well as volunteering organizations to be in close contact with the authorities in order to avoid cases of misinformation. On Monday afternoon the Prime Minister presided over a meeting with all concerned authorities regarding those latest developments.

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That is illegal.

FYROM Dumps Refugees Back In Greece As EU-Turkey Deal Falters (Reuters)

Macedonia dumped about 1,500 migrants and refugees back into Greece overnight after they forced their way across the border, as European nations continued to pass the buck in a migration crisis that risks tearing the European Union apart. The police action was part of a drive by Western Balkans states to shut down a migration route from Greece to Germany used by nearly a million people fleeing war and poverty in the Middle East and Asia over the last year in Europe’s biggest refugee influx since World War Two. EU efforts to conclude a deal with Turkey to halt the human tide in return for political and economic rewards hit a setback on Tuesday when EU member Cyprus vowed to block efforts to speed up Ankara’s EU accession talks unless Turkey meets its obligations to recognize its nationhood.

European Council President Donald Tusk, who will chair an EU summit with Turkey on Thursday and Friday, was flying on to Ankara to discuss the fraying pact with Turkish leaders after tough talks with Cypriot President Nicos Anastasiades. Tusk acknowledged to reporters that the tentative deal put together last week by German Chancellor Angela Merkel and Dutch Prime Minister Mark Rutte with Turkish Prime Minister Ahmet Davutoglu raised legal problems and needed to be “rebalanced” to win acceptance from all 28 EU members. The European Commission meanwhile postponed proposals to reform the bloc’s flawed asylum system, which puts the onus on the state where migrants first arrive, in an attempt to avoid further controversy before the Turkey deal is finalised. Some 43,000 migrants are bottled up in Greece, overstraining the economically shattered euro zone country’s capacity to cope, and more continue to cross the Aegean daily from Turkey despite new NATO sea patrols.

An estimated 1,500 people marched out of a squalid transit camp near the northern Greek town of Idomeni on Monday, hiked for hours along muddy paths and forded a rain-swollen river to get around the border fence. Most were picked up by Macedonian security forces, put into trucks and driven back over the border into Greece late Monday or overnight, a Macedonian police official said. Greek authorities said they could not confirm the return as there had been no official contact from the Macedonian side. Ties between the two neighbors are fraught because of Greece’s long-standing refusal to recognize Macedonia’s name, which is the same as that of a northern Greek province. A second group of about 600 migrants was prevented from crossing into Macedonia and many of them spent the night camping in the Greek mountains.

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The Kempsons are fabulous. But where’s the rest of Britain?

Refugees On Lesbos Offered Sanctuary Thanks To Brit Couple (Mirror)

Many British couples dream of leaving Blighty behind and opening a hotel on an island in the sun. It was no different for Eric and Philippa Kempson when they thought about their future together. But it was the global refugee crisis which pushed them to buy their seafront guest house on the Greek island of Lesbos. And rather than welcoming British tourists, they have opened their doors to the hundreds of fleeing refugees who land on its shores each month. Now, as Turkey and the EU agree their “one in, one out” policy in response to the migrant crisis, Philippa says: “I’m absolutely speechless about these latest measures -they’re farcical. Labels like “irregular migration” are meaningless.” “We need to remember these are human beings fleeing horrific circumstances.

Hotel Elpis, on tranquil Eftalou Beach, gives desperate refugees shelter, somewhere to wash and a meal when they land on Lesbos. The 20-room hotel welcomed its first 110 residents two weeks ago. “In Greek Elpis is the goddess of hope, so it seemed fitting that we called the hotel the Hope Centre“ says Philippa, 43. First and foremost that’s what we provide these people with: hope. We are trying to give the families a few hours of dignity and somewhere where they are treated as people, not as refugees. We hadn’t planned to open our doors so early, as we are still waiting for our health and safety licenses. But last week one of the aid agencies begged us to help 110 people who had just arrived on boats. Every facility on the island was full. Philippa and Eric, 60, got involved in the crisis last summer, when they started handing out water to refugees.

Philippa explains: “We thought bigger agencies would come to help, but when none did, we thought, we have to help these people ourselves”. It was then that they decided to open the hotel. “We ve used our own savings and are working on the project 24/7”, she says. Tourists have been kind enough to leave money at supermarkets so we can buy supplies to hand out. The couple have also been given help with the hotel’s rent by Glasgow housing charity PAIH. Philippa adds: “Eric is an artist and makes oak products we sell. But last summer he didn’t have the time to do that because of our work with refugees. So I don t know how we are going to survive ourselves financially this year, but we will deal with those issues when they come.”

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Good luck.

UNHCR To Ask World To Take In 400,000 Syrian Refugees (A.)

The United Nations High Commissioner for Refugees said on Tuesday he will ask countries to step forward and agree to take in another 400,000 Syrian refugees. On his first visit to Washington since being appointed to head the UN refugee effort, Filippo Grandi said the world must do more to end the crisis. “On March 30, I’m going to chair a meeting in Geneva at which I ask the international community to take 10% of all the Syrian refugees,” he said. “10% is a lot of people. It’s more than 400,000 people,” he told reporters on the fifth anniversary of Syria’s bloody civil war. More than four million Syrians have fled their war-torn country since the conflict erupted, and more than six million are displaced within its borders. Neighboring Turkey, Lebanon and Jordan are struggling to cope with the exodus and the onward flow has created a political and humanitarian crisis in Europe.

Canada and Germany have been praised for stepping up to welcome tens of thousands as refugees, but others, including the United States have been criticized. Historically the United States has been by far the world’s leading host of refugees and it still is for those fleeing many other conflicts around the world. But amid a bitter atmosphere in the run up to November’s presidential election, Washington has struggled to offer new homes to desperate Syrians. US President Barack Obama ordered that 10,000 be admitted during the 2016 fiscal year, but half-way through the period only 1,115 have been processed. Grandi was careful not to criticize his hosts in Washington, praising the leading US role in hosting refugees of other nationalities.

But he lamented the tone of the debate in both the US and Europe, where anti-immigration politicians have claimed that terrorists hide among Muslim refugees. Grandi complained that on a visit to the European parliament he had heard “language we haven’t heard since the 30s” from opponents of resettlement. But he added that the new 400,000 target figure could be met in part by means short of the full resettlement package that the United States offers. Rather than providing Syrian refugees with new lives and permanent residence, some countries may offer temporary jobs, scholarships or humanitarian visas. For this, he said, his office would work with private firms and universities in partnership with states, to try to reduce the pressure on Syria’s neighbors.

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Nov 242015
 
 November 24, 2015  Posted by at 7:52 am Finance Tagged with: , , , , , , , ,  1 Response »
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Kostas Tzioumakas Constantinos Polychronopoulos 2015

That’s right, I am at last able to come back to Athens, starting today. Alas, without Nicole Foss, who was supposed to join me in the city earlier this year but is back in New Zealand now. Why that plan never materialized, and why I couldn’t return myself, is all about the illness and subsequent passing of my mother, a process I write about in Eulogy for Johanna.

And there are still too many things to do to mention here in Holland, but I don’t feel good sitting on money that our readers have donated for Greece in our Automatic Earth for Athens fund. So that has to be a priority now, in my view. Your generosity, beyond my wildest dreams, combined with my caution in spending that generosity and my ignorance of the inner workings of the city, have resulted in an open ledger of over $8000 (!) US that will have to find its way to the proper goals.

First, you can (re)read my earlier exploits in a series of articles I wrote on the topic this year:

The Automatic Earth Moves To Athens (June 16)

Update: Automatic Earth for Athens Fund (June 19)

Off to Greece, and an Update on our Athens Fund (June 25)

Automatic Earth Fund for Athens Makes First Donation (July 8)

• AE for Athens Fund 2nd Donation: The Man Who Cooks In The Street (July 11)

• AE Fund for Athens: Update no. 3: Peristeri (July 22)

Then, as I’m thinking about this, the first thing that strikes me is the extent to, and the way in, which the Athens problems seem to have changed and switched. In late June and early July, there were refugees, but the main issue was the Greeks themselves. Varoufakis was still finance minister, and the idea was still alive that Greece would stand up to the Troika.

There was hope and excitement in the air, even though the banks were forced shut. There was the big OXI vote early July. But it all went downhill from there, Yanis left, Tsipras gave in to Schäuble, but most of all the refugee numbers on for instance Lesvos went from 200 a day to 5-6-7000 a day. It feels like a 180º change. But then again, it’s not really.

The Greek population is still -and things keep getting worse each day- being dragged down by the EU ordered policies, which are certain to kill off the entire economy. If people have nothing left to spend, nobody can sell them anything either, so unemployment just gets worse. There are tons of Greeks who still have jobs, and they’re the lucky ones, but who’ve seen their pay cut by 25%, 50%. Nothing out of the ordinary.

To wit: Greek rental prices are down 40%, but 40% of the population can’t even afford those prices anymore. The economy simply gets squeezed more and more, and every day sees its chances of recuperating diminish. Asphyxiation by decree.

The Cameron government is doing the exact same thing to Britain at the moment, even if, unlike Greece, the pretense is that the economy is doing well there. It’ll be a spectacle to watch. Once you start killing off your care systems, you get what I saw in Athens – and will again. And I’m not at all sure that the Brits can do what the Greeks can when it comes to humanity and solidarity.

It’s still those same strangled yet amazing Greeks who will go out of their way to help the refugees, who increasingly threaten to flood the country as one razor wire fence after another is erected on the Balkans. There’s a serious risk this winter of refugees, and their children in particular, freezing and/or contracting severe illnesses while getting stuck on the country’s northern borders.

And the EU keeps doing what it does best: make things worse. Why even Varoufakis keeps defending the EU, and just thinks it should be ‘reformed’ and democratized’, I can’t fathom. The EU’s problems are not ones of degree, but of substance, of its very make-up.

With France having thrown out any allegiance to the EU Stability Pact budget deals, and borders being closed all over the place, either with razor wire or with soldiers, the very ideas and ideals that are the foundation of the Union are fast eroding already. And what legitimacy will be left for the Brussels apparatus is entirely up in the air.

But okay, Athens first. There must be an overwhelming number of people and causes that I can help with your money. It’ll just be a matter of finding the most needy and deserving. In June/July I donated €1000 euros each to two volunteer clinics, in Piraeus and Peristeri, and to the man you see pictured above, Kostas Polychronopoulos, aka ‘the man who cooks in the street’.

I know through the grapevine that Kostas has been very active feeding refugees on Lesvos, and I’ll be sure to try and find him, wherever he may be, see how he sees the situation. My idea is I’ll play it by ear, I’m for instance not sure Lesvos needs my presence too, and besides you donated the money for the Greeks, but I’ll certainly listen to the people on the ground.

You can of course still donate to the Automatic Earth for Athens Fund, by all means I beg you, your money will find a good place, I’ll guarantee that. Here’s, once again, how I put it at the very beginning:

Now, I don’t think I can go to Athens and not try to see if there’s something I can do to alleviate some of the misery in my own small way. But since that way would be extremely small given where the Automatic Earth’s financial situation and funding stand at the moment, I thought of something.

I’m hereby setting up an “Automatic Earth for Athens” fund (big word), and I’m asking you, our readership, to donate to that fund. I will make sure the revenues will go to clinics and food banks, to the worthiest causes I can find. To not mix up donations for Athens with those for the Automatic Earth, which are also badly needed, I suggest I take any donation that ends with 99 cents, as in $25.99, and single those out for Greece. Does that sound reasonable? Let me know if it doesn’t, please.

You can also donate bitcoin at this address: 1HYLLUR2JFs24X1zTS4XbNJidGo2XNHiTT.

I’ll be back tomorrow from Athens.

Nov 242015
 
 November 24, 2015  Posted by at 7:06 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Russell Lee Proprietor of small store in market square, Waco, Texas Nov 1939

Negative Interest, the War on Cash and the $10 Trillion Bail-In (Ellen Brown)
Sub-Zero Debt Increases To $2 Trillion In Eurozone On Draghi (Bloomberg)
Soaring Global Debt – The Reality Check in Numbers (O’Byrne)
The Closing Of The Global Economy (Calhoun)
Harmless Commodity Crash Accelerates As Dollar Soars (AEP)
Ireland Is Backing Itself (David McWilliams)
Greek Home Rental Costs 40% Less Since 2011 (Kath.)
Four In 10 Greeks ‘Overburdened’ By Housing Costs (Kath.)
Greek Shipping Currency Inflows Drop 53% In September (Kath.)
Inadequate Dirty Money Regulation ‘Leaves UK Open To Terror Funds’ (Reuters)
Cameron Has Guns, Bombs And A Plane – And Not One Good Idea (Hitchens)
Scale Of Osborne’s Cuts To Police, Education, Councils ‘Unprecedented’ (Mirror)
Austeria – A Nation Robs Its Poor To Pay For The Next Big Crash (Chakrabortty)
Richard Russell, Publisher of Dow Theory Letters, Dies at 91 (Bloomberg)
VW Admits Second Illegal Device In 85,000 Audi Engines (FT)
Average House In Fort McMurray Lost $117,000, 20% Of Its Value In 1 Year (CH)
This Is The Worst Time For Society To Go On Psychopathic Autopilot (F. Boyle)
Varoufakis: Closing Borders To Muslim Refugees Only Fuels Terrorism (Guardian)
Average Stay Is 17 Years: Refugee Camps Are The “Cities Of Tomorrow” (Dezeen)
Canada To Turn Away Single Men As Part Of Syrian Refugee Resettlement Plan (AFP)
Stranded Migrants Block Railway, Call Hunger Strike (Reuters)

“..central banks have already pushed the prime rate to zero, and still their economies are languishing. To the uninitiated observer, that means the theory is wrong and needs to be scrapped.”

Negative Interest, the War on Cash and the $10 Trillion Bail-In (Ellen Brown)

Remember those old ads showing a senior couple lounging on a warm beach, captioned “Let your money work for you”? Or the scene in Mary Poppins where young Michael is being advised to put his tuppence in the bank, so that it can compound into “all manner of private enterprise,” including “bonds, chattels, dividends, shares, shipyards, amalgamations . . . .”? That may still work if you’re a Wall Street banker, but if you’re an ordinary saver with your money in the bank, you may soon be paying the bank to hold your funds rather than the reverse. Four European central banks – the European Central Bank, the Swiss National Bank, Sweden’s Riksbank, and Denmark’s Nationalbank – have now imposed negative interest rates on the reserves they hold for commercial banks; and discussion has turned to whether it’s time to pass those costs on to consumers.

The Bank of Japan and the Federal Reserve are still at ZIRP (Zero Interest Rate Policy), but several Fed officials have also begun calling for NIRP (negative rates). The stated justification for this move is to stimulate “demand” by forcing consumers to withdraw their money and go shopping with it. When an economy is struggling, it is standard practice for a central bank to cut interest rates, making saving less attractive. This is supposed to boost spending and kick-start an economic recovery. That is the theory, but central banks have already pushed the prime rate to zero, and still their economies are languishing. To the uninitiated observer, that means the theory is wrong and needs to be scrapped. But not to our intrepid central bankers, who are now experimenting with pushing rates below zero.

The problem with imposing negative interest on savers, as explained in the UK Telegraph, is that “there’s a limit, what economists called the ‘zero lower bound’. Cut rates too deeply, and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash. This could slow, rather than boost, the economy.” Again, to the ordinary observer, this would seem to signal that negative interest rates won’t work and the approach needs to be abandoned. But not to our undaunted central bankers, who have chosen instead to plug this hole in their leaky theory by moving to eliminate cash as an option. If your only choice is to keep your money in a digital account in a bank and spend it with a bank card or credit card or checks, negative interest can be imposed with impunity. This is already happening in Sweden, and other countries are close behind.

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His understanding of what he’s doing is sub-zero too.

Sub-Zero Debt Increases To $2 Trillion In Eurozone On Draghi (Bloomberg)

Investor expectations of expanded monetary easing from ECB President Mario Draghi have pushed the amount of euro-area government securities that yield below zero to more than $2 trillion. Bonds across the region climbed last week when Draghi said the institution will do what’s necessary to rapidly accelerate inflation. The statement recalled the language of his 2012 pledge to do “whatever it takes” to preserve the euro and it solidified investor bets on further stimulus at the ECB’s Dec. 3 meeting. While 10-year bonds fell Monday, the two-year note yields of Germany, Austria and the Netherlands all dropped to records. “The ECB is doing little to counter this market speculation,” said Christoph Rieger at Commerzbank in Frankfurt. “Should they not deliver now it would clearly cause a huge backlash with regards to the euro and overall valuations.”

The anticipation of greater easing has also undercut the euro. The single currency weakened to a seven-month low on Monday after futures traders added to bearish bets. A 10 basis- point cut in the deposit rate is now fully priced in, according to futures data compiled by Bloomberg, while banks from Citigroup to Goldman Sachs, are predicting an expansion or extension of the ECB’s €1.1 trillion quantitative-easing plan. Negative-yielding securities now comprise about one-third of the $6.4 trillion Bloomberg Eurozone Sovereign Bond Index. The amount compares with $1.38 trillion before Draghi’s Oct. 22 press conference, where he pledged to re-examine stimulus at the institution’s December meeting.

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“Indeed, not only does war lead to debt, but high levels of debt lead to more war.”

Soaring Global Debt – The Reality Check in Numbers (O’Byrne)

The fact that global debt is growing throughout the world is widely acknowledged and well documented. However, when faced with the numbers, the magnitude of the problem is still quite shocking to read. An article last week in Washington’s blog gives us a stark and timely reminder of those facts. The volatile geo-political environment we are entering into, coupled with this growth-stifling debt, makes for a dangerous economic combination.

“The debt to GDP ratio for the entire world is 286%. In other words, global debt is almost 3 times the size of the world economy. Both public and private debt are exploding and – despite what mainstream economists think – 141 years of history shows that excessive private debt can cause depressions”.

These global debt figures cannot be ignored. Indeed, many erudite economic commentators have been highlighting the reckless monetary policies being pursued by governments around the world that is feeding our debt crisis.

“The underlying cause of this debt glut is the $12 trillion of free or cheap money created by central banks since 2009, combined with near-zero interest rates. When the real price of money is close to zero, people borrow and worry about the consequences later.” Paul Mason.

Similiarly, Jeremy Warner’s recent warnings about our imminent slide into fiscal crisis in “Europe is sliding towards the abyss, and the terrorists know it” reminds us of the vast expense of going to war. A decision that has very long-term repercussions economically and is a situation over which it would appear we have little or no control over, if the threat of terrorism is to be contained. “Indeed, not only does war lead to debt, but high levels of debt lead to more war.”

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Borders, protectionism, the fiancial crisis makes them inevitable. And now it gets help.

The Closing Of The Global Economy (Calhoun)

I don’t often write about global geopolitics because I think, in general, investors spend too much time worrying about things they can’t control or aren’t going to happen or wouldn’t matter much if they did. The best example is the Middle East which has been a mess my entire life and long before it for that matter. Changing your investments based on the latest threat in or from the Levant is a recipe for constant chaos. The only accurate prediction about the Middle East will always be that the various factions that have been fighting for centuries will continue to fight. And that no matter who is in charge they will have to sell oil to make ends meet. And make no mistake oil is the only economic reason we care about the region.

The recent Paris attacks, though, have me thinking more about how global geopolitics is affecting the global economy. The terrorist attacks Europe has experienced in Madrid, London, Paris and other locales are raising old barriers across the continent. Borders where goods, people and capital have crossed freely for the last few decades are now manned and monitored again. Capital largely continues to flow freely but people and goods are starting to be restricted; you can’t restrict the flow of people without also obstructing the flow of goods. For now, the people and goods continue to flow, just more slowly. One can’t help but think though that if the borders become literal barriers again it won’t be long before the metaphoric ones – protectionist policies – return as well.

If one also considers the antipathy toward Germany that permeates most of Europe and the perception – and reality to some degree – that the EU and especially the EMU are much more favorable for the Teutonic members than the Latin ones, then one begins to see how the fragile union might devolve into its former squabbling, fractured self. The feared break up of Europe and the Euro has until now been based on economic considerations but physical security would seem a larger concern at this point. If the EU can’t guarantee physical security and has already failed at providing economic security, it’s raison d’etre is….what exactly? To provide employment for feckless bureaucrats?

The desire for physical security isn’t confined to Europe obviously; the Paris attacks have amped up the political debate in the US over immigration, with Syrian refugees and physical security now replacing Latin Americans and economic security as the targets. The emergence of Donald Trump as a right wing populist to challenge the near universally populist Democrats means that both parties are now pandering to the population’s baser instincts of fear and greed. That isn’t to say that their fears aren’t real or legitimate just that the solutions offered by populist politicians are simplistic and unlikely to achieve the intended results. Indeed, history says that walling ourselves off from the world is more likely to create less security, physical and economic, rather than more.

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A curious attempt at denial by Ambrose:”..the expected revival of Chinese metal demand disappoints yet again.”

Harmless Commodity Crash Accelerates As Dollar Soars (AEP)

Copper prices have crashed to their lowest level since the Lehman Brothers crisis and industrial metals have slumped across the board as a flood of supply overwhelms the market. The violent sell-off came as the US dollar surged to a 12-year high on expectations of an interest rate rise by the US Federal Reserve next month. The closely-watched dollar index rose to within a whisker of 100, and has itself become a key force pushing down commodities on the derivatives markets. Copper prices fell below $4,500 a tonne on the London Metal Exchange for the first time since May 2009, hit by rising inventories in China and warnings from brokers in Shanghai. Prices have fallen 32pc this year, and 55pc from their peak in 2011 when China’s housing boom was on fire.

Known to traders as Dr Copper, the metal is tracked as a barometer of health for the world economy but has increasingly become a rogue indicator. China consumes 45pc of the world’s supply, distorting the picture. Beijing is deliberately winding down its “old economy” of heavy industry and break-neck construction, switching to a new growth model that is less commodity-intensive. “Dr Copper should be struck off the list,” said Julian Jessop, from Capital Economics. “He is telling us a lot about China and the massive over-supply of copper on the market, but he is not telling us anything much about the economy in the US, Europe or the rest of the world.” The CPB index in the Netherlands shows that global trade began to recover four months ago after contracting earlier in the year, and the JP Morgan global PMI index for manufacturing has risen since then to 51.3 – well above the boom-bust line.

The trigger for the latest plunge in copper prices was a decision last week by the Chilean group Codelco to slash its premium for Chinese customers by 26pc, effectively launchng a price war for global market share. “We’re trying to lower costs. We’re not cutting production,” said the group’s chief executive, Nelson Pizarro. Glencore has already said it will suspend output in Zambia and the Congo for two years until new equipment is installed, and others are doing likewise. But Codelco is the key player. Kevin Norrish, at Barclays Capital, said Codelco is in effect copying Saudi Arabia’s tactics in the oil market: using its position as the copper industry’s low-cost giant with a 10pc global share to flush out the weakest rivals. The price war comes as the expected revival of Chinese metal demand disappoints yet again.

Warehouse stocks in Shanghai have risen to their highest in five years, though LME inventories have been falling since September. Views are starkly divided over the outlook for copper, as it is for the whole nexus of commodities. Goldman Sachs says the demise of China’s “old economy” will lead to a near permanent glut through to the end of the decade. Natasha Kaneva, from JP Morgan, said it would take another one to two years to touch the bottom of the mining cycle, predicting further price falls of 12pc-28pc. “We remain bearish on all the base metals,” she said. But the International Copper Study Group is sticking to its guns, insisting that there will be a global copper shortage of 130,000 tonnes next year.

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“..everyone knows that a balance sheet with too much debt, like Ireland’s, is made more robust by less debt, not more debt. The bailouts mean the opposite.”

Ireland Is Backing Itself (David McWilliams)

On the fifth anniversary of the troika’s arrival, let’s be clear on what has actually helped us recover Six years after its inaugural outing, the atmosphere at the Global Irish Economic Forum on Friday in Dublin Castle couldn’t have been more different. Back then, there was a palpable sense of panic and many reasons to be fearful; this time, there was a sense of a steadied ship and many reasons to be optimistic. This weekend also happens to be the fifth anniversary of the bailout. That was the weekend that the IMF rocked into town and nailed their demands to the door of the Department of Finance. One of the more galling episodes in the run-up to this anniversary has been watching the IMF’s chief negotiators pointing the finger of blame at the ECB about Frankfurt forcing successive Irish governments to take on odious bank debts rather than burning bondholders.

It’s a pity they were not so vocal on the issue of odious debt at the time, and it underscores just how pointless this institution now is, in Europe at least. Let’s remember what the bailout was in reality. The bailout wasn’t so much a bailout, which at least visually conjures up the image of a friend in a canoe bailing out water to keep the canoe afloat. These European bailouts were really a response to the financial markets declining to lend to the stricken states. Once the private sector refused to lend, the public sector had to, or the economies would have imploded. This is where the IMF and the EU came in. They lent to us, and we committed to do certain things – and this public commitment, and the troika’s oversight, coaxed the markets to lend to our government again.

But everyone knows that a balance sheet with too much debt, like Ireland’s, is made more robust by less debt, not more debt. The bailouts mean the opposite. A balance sheet that was laid low by too much debt was forced to take on more debt. However, as the ECB undertook to buy all this debt if necessary, the risk premium of this debt fell – the rate of interest fell. Is a country with more debt less or more risky? Traditionally, you would say more risky, but with the ECB backstopping the government bond market, the opposite has occurred. However, in terms of what prompted the Irish recovery, while Italy, Portugal and Greece remain in the doldrums, this bailout doesn’t explain things adequately.

For example, the chief baiter of debtor countries, Finland, is now in recession, so it’s clear that the state of the public finances isn’t sufficient to explain the recovery for the man on the street. If public finances alone were sufficient, Finland would be booming. What affects the man on the street are the employment opportunities around him in the real economy. The government’s narrative is that the recovery – which is still fitful – was due to some European confidence fairy which magically spread confidence dust all over Ireland after the bailout. But the bailout only replaced private creditors with public creditors. We are still debtors, just to different creditors. I don’t buy the government’s story – not because I don’t want to, but because I can’t, as a trained economist, see how this eurozone transmission mechanism might work.

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Yes, you can rent an apartment in Athens for €200.

Greek Home Rental Costs 40% Less Since 2011 (Kath.)

The price of rentals has declined considerably since the start of the financial crisis across all categories, with house rents costing an average of 40% less than in 2011, when the drop began. This decline has all but offset the rate growth recorded over the 11-year period from 2000 to 2011, estimated at 43% on average. The drop is even bigger in Attica, where, according to data collected by estate agents, rates have fallen by 7 to 8% in the last 12 months alone, despite an increase in demand for rented property. In Athens city center, rates for apartments have dropped by 50% or more since 2011, as this mostly concerns older flats covering a surface of 60-70 square meters.

This means that a one-bedroom flat will set a renter back by €150-200 a month, depending on the area and the condition of the property. Sector professionals stress that as long as citizens’ purchasing power declines, rental rates will continue to shrink. Most landlords, they say, would rather shave their asking price to ensure they will at least collect the rent due than insist on a higher rate they may never collect. Alpha Bank, however, reports a slowdown in the decline of rental rates in the second quarter of 2015.

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Real Greece: rental costs down 40%, but 40% of Greeks still can’t afford them.

Four In 10 Greeks ‘Overburdened’ By Housing Costs (Kath.)

Four in 10 Greeks spend more than 40% of their disposable income on housing costs, more than double the European Union average, according to a new study by Eurostat, the European Commission’s statistics service. On average, 11.4% of households in the 28-member EU spent more than 40% of their disposable income in 2014 on housing, a rate that that the Commission considers a housing cost “overburden.” Greece ranks first, with households spending 40.7% of their disposable income on housing, followed by Germany with 15.9%, the Netherlands with 15.4% and Romania with 14.9%. At the lower end of the scale are Malta and Cyprus, with 1.6% and 4% respectively, followed by France and Finland, both with 5.1%.

The continual reduction of household income in Greece since the crisis struck in 2010 – wages have been slashed and pensions cut several times – has been accompanied by higher electricity prices, higher value-added tax on food and more property taxes. According to figures presented over the weekend by the Panhellenic Federation of Property Owners (POMIDA), Greek households will be called upon to pay eight times more in property taxes next year than they did in 2010.

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Greece can’t catch a break: it also gets hit by the global demise of shipping.

Greek Shipping Currency Inflows Drop 53% In September (Kath.)

The drop in foreign currency inflows from shipping, which started in July following the introduction of capital controls in late June, has picked up again, with the reduction in September coming to 53%, on the back of a 46% decline in August and 60% in July, according to Bank of Greece figures. When one considers that the lion’s share of foreign currency in the sector comes from oceangoing shipping, it becomes clear that the capital controls have had a sinking effect on the foreign account balance and the cash flow of banks. In the first half of the year the inflow has posted an annual increase. The foreign currency inflow from shipping dropped to €598.2 million in September against €1.274 billion in the same month last year. In August it had amounted to €570.7 million (from €1.069 billion in August 2014) and in July it had come to €470.7 million from €1.172 billion in July 2014.

This means that the inflow declined by a total of €1.7 billion in the third quarter of the year. The decline is even greater considering that the exchange rate of the euro has fallen significantly from last year and the above amounts given in euros concern dollar payments. The decline is mainly attributed to the capital controls and the fact that a notable number of shipping firms, often under pressure from foreign shareholders, were forced to redirect their revenues from chartering and ship transactions to other countries so that they could meet their international obligations. Another factor is the fall in global dry-bulk market rates, which have reached historic lows. As most of the Greek-owned fleet comprises dry-bulk carriers – and not tankers whose rates are showing very good yields – it is estimated that the current, last quarter of the year will see a further decline in the foreign currency inflows from shipping.

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This is by design. Invariably is.

Inadequate Dirty Money Regulation ‘Leaves UK Open To Terror Funds’ (Reuters)

Britain’s “woefully inadequate” anti-money laundering system has left the country wide open to corrupt money and terrorism funds and needs radical overhaul, a leading anti-corruption group said on Monday. Each year billions of pounds of dirty money flow through Britain, but the system for identifying it is too fragmented and unaccountable to be effective, according to a report by Transparency International UK (TI-UK). “The UK supervision system which should be protecting the country from criminal and terrorist funding is not fit for purpose,” said TI-UK’s Head of Advocacy and Research Nick Maxwell. “Those vulnerabilities can be exploited by sophisticated terrorist organizations as well as the corrupt.” Penalties for professionals such as lawyers and estate agents who fail to comply with anti-money laundering regulations are also too small to act as a deterrent, the report said.

Money laundering is the process of disguising the origins of money obtained from crime and corruption by hiding it within legitimate economic activities. The government’s 2015 money laundering and terrorist financing national risk assessment said there was “evidence of terrorist financing activity in the UK” which uses the same methods as criminal money laundering and “poses a significant threat to the UK’s national security.” Money laundering is also pushing up London property prices because money commonly ends up in high-value physical assets such as real estate and art. Britain’s National Crime Agency’s economic crime director told The Times newspaper this year that London property prices were being artificially driven up by overseas criminals wanting to hide their assets.

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“..if grand personages like him had to shuffle through the security screens, belts off, shoes off, shampoo humourlessly confiscated, like the rest of us, these daft and illogical rules would have been reviewed long ago.”

Cameron Has Guns, Bombs And A Plane – And Not One Good Idea (Hitchens)

So far there is little sign of serious thought about the Paris atrocities. We are to have more spooks, though spooks failed to see it coming, and failed to see most of the other outrages coming, and the new ones will be no more clairvoyant than the old ones. France and Belgium are reaching for emergency laws, surveillance, pre-trial detention, more humiliation of innocent travellers and all the other rubbish that has never worked in the past and won’t work again. David Cameron (in a nifty bit of news management) takes the opportunity to announce that he will henceforth be spared from flying like a normal human being, in an ego-stroking Blaircraft paid for by you and me. Austerity must have been having a day off. Actually, if grand personages like him had to shuffle through the security screens, belts off, shoes off, shampoo humourlessly confiscated, like the rest of us, these daft and illogical rules would have been reviewed long ago.

British police officers dress up like Starship Troopers, something they’ve obviously been itching to do for ages and now have an excuse to do, the masked women involved looking oddly like Muslim women in niquabs. It’s not the police’s job to do this. If things are so bad that we need armed people on the streets, then we have an Army and should deploy it. If not, then spare us these theatricals, which must delight the leaders of ISIS, who long for us to panic and wreck our own societies in fear of them. Next comes the growing demand for us to bomb Syria. Well, if you want to. Only a couple of weeks ago all the establishment experts were saying that the Russian Airbus massacre was obviously the result of Vladimir Putin’s bombing of Syria. Now the same experts say it’s ridiculous to suggest that our planned bombing of Syria might bring murder to the streets of London or to a British aircraft.

Perhaps it’s relevant to this that Pierre Janaszak, a radio presenter who survived the Bataclan massacre in Paris, said he heard one fanatic in the theatre say to his victims, ‘It’s the fault of Hollande, it’s the fault of your President, he should not have intervened in Syria.’ There may be (I personally doubt it) a good case for what’s left of the RAF to drop what’s left of our bombs on Syria. It may be so good that it justifies risking a retaliation in our capital, and that we should brace ourselves for such a war. But I think those who support such bombing should accept that there might be such a connection, and explain to the British people why it is worth it. I am wholly confused by the Cameron government’s position on Syria.

It presents its desire to bomb that country as a rerun of the Parliamentary vote it lost in 2013. But in 2013, Mr Cameron wanted (wrongly, as it turned out) to bomb President Assad’s forces and installations, to help the Islamist sectarian fanatics who are fighting to overthrow the secular Assad state. This is more or less the exact opposite of what he seems to want now. Far from being a rerun, it is one of the most embarrassing diplomatic U-turns in modern British history.

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“People die this way and governments fall.”

Scale Of Osborne’s Cuts To Police, Education, Councils ‘Unprecedented’ (Mirror)

Chancellor George Osborne will this week take the axe to police, councils and welfare as he unleashes the most brutal cuts in history. He will brush aside warnings from police chiefs by pressing ahead with the reductions to their budgets when he unveils his spending review on Wednesday. Funding to local government, transport and higher education will also be slashed – and experts said the scale of the cuts was unprecedented. “We have never had anything like it,” said Paul Johnson of the Institute for Fiscal Studies economic think-tank. Mr Osborne is pushing on with the measures despite being told they may put services such as social care and child protection at risk – and also undermine the fight against terrorism . The Chancellor, when challenged, did not deny that police numbers could be reduced , saying: “Every public service has to make sure it is spending its money well.”

Senior police figures, including former Scotland Yard Commissioner Ian Blair, have warned that axing community support officers (PCSOs) will be a disaster because they work with Muslim youngsters who are being radicalised. Lord Blair said: “National security depends on neighbourhood security and the link between the local and the national is about to be badly damaged.” He added: “This is the most perilous terrorist threat in our history. “With their long, successful track record in counter-terrorism, police have adapted well to the changing circumstances and, at the last moment, the very best defences they have built, the neighbourhood teams and the fast and accurate response to multi-site concurrent attacks, are being degraded. “People die this way and governments fall.”

Mr Osborne revealed all departments had now signed up to the spending review which will see them have to make cuts of around 30% on average. The Chancellor is also likely to hit further education and welfare, including housing benefit and the universal credit, in his determination to have a budget surplus by the end of the decade. Council chiefs warned they would struggle to provide services such as care for the elderly, bin collections, street lighting, social work and pothole repairs. Town hall spending on key services has already fallen by up to a quarter since David Cameron became Prime Minister in 2010, while expenditure on roads and transport services has dropped 20% in the last five years and education budgets have fallen by 24%.

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“Osborne proudly promises a “permanent change” and “a new settlement” for the UK.“

Austeria – A Nation Robs Its Poor To Pay For The Next Big Crash (Chakrabortty)

A familiar dance begins on Wednesday, as soon as George Osborne reveals his blueprint for Britain. The analysts immediately begin poring over his plans for the next five years. They tell us how deep are the cuts in neighbourhood policing, how tight the squeeze for your local school – and the knock-on effect for the Tory leadership hopes of George and Theresa and Boris. But many will miss the backdrop forming right behind them. Britain is now halfway through a transformative decade: staggering out of a historic crash, reeling through the sharpest spending cuts since the 1920s, and being driven by David Cameron towards a smaller state than Margaret Thatcher ever managed. None of this is accidental. While much commentary still treats the Tories as merely muddling through a mess they inherited, Osborne proudly promises a “permanent change” and “a new settlement” for the UK.

The chancellor has the ambition, the power and the time – 10, perhaps 15 years in office – to do exactly that. Between 1979 and 1990 Thatcher permanently altered Britain and, going by what we already know, Osborne is on course to engineer a similar shift. I think of the country we are morphing into as Austeria. It has three defining characteristics: it is shockingly unequal, as a deliberate choice of its rulers; it looks back to the past rather than investing in its future; and it has shrunk its public services for the benefit of its distended, crisis-prone banking sector. Let’s start with the unfairness. Remember Osborne’s promise, “we’re all in it together”? He is ensuring the opposite.

Wanting to make massive cuts without rendering his party unelectable, the chancellor is deliberately targeting austerity at those sections of society where he calculates he can get away with it. That means slashing local council funding, hoping angry voters will turn on their town halls rather than Whitehall. It means running down prisons. What may be clever Tory politics is desperately unfair policy. The Centre for Welfare Reform calculates Osborne’s austerity programme has so far hit disabled Britons nine times harder than the average, while those with severe disabilities were 19 times worse off. Watch for them to be punished again on Wednesday, as the government looks to cut welfare and local government again.

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Icon.

Richard Russell, Publisher of Dow Theory Letters, Dies at 91 (Bloomberg)

Richard Russell, who shared his technical analysis with subscribers through the influential Dow Theory Letters since 1958, has died. He was 91. He died Nov. 21 at his home in La Jolla, California, his family said in a message to subscribers on the publication’s website. He had entered a hospital a week earlier and was diagnosed with blood clots in his leg and lungs “and other untreatable ailments,” his family said. He returned home under hospice care. An adherent of the investing principles of Charles Dow, founder of the Wall Street Journal, Russell published his newsletter continuously from 1958, never missing an issue in more than half a century. In his last column, published Nov. 16, Russell wrote: “I read 10 newspapers a day, but the news is getting increasingly difficult to digest down to something understandable, and the vast array of news sources becomes more and more complex. I can only imagine what the newspapers will look like in 10 years.”

Stock analyst Robert Prechter wrote in his 1997 book: “Russell has made many exceptional market calls. He recommended gold stocks in 1960, called the top of the great bull market in stocks in 1966 and announced the end of the great bear market in December 1974.” In 1969 Russell devised the Primary Trend Index, composed of eight market indicators that he never publicly divulged – his own secret recipe. When his index outperformed an 89-day moving average, it was time to buy. When it underperformed the 89-day moving average, a bear market was at hand. “The PTI is a lot smarter than I am,” Russell said. The benchmark is unrelated to the Russell 2000 and other indexes maintained by Seattle-based Russell Investments.

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How much crazier can it get? They’re lying about something or the other new every single day.

VW Admits Second Illegal Device In 85,000 Audi Engines (FT)

Audi has conceded that the engines in a further 85,000 cars from the Volkswagen group contained an illegal defeat device, raising questions of how systematic the cheating was at the German carmaker. The luxury car brand of the VW group said it estimated that correcting the engine management software used in Audi, VW and Porsche models would cost in the mid-double-digit millions of euros. It admitted that the software was in all three-litre V6 diesel engines manufactured by Audi and sold from 2009 until this year. The admission further undermines VW’s insistence that the cheating in the two-month-old emissions scandal was limited to a rogue group of engineers. The German carmaker has already admitted installing a defeat device in 11m diesel cars worldwide.

It is also facing a third emissions problem after disclosing that 800,000 cars, including some with petrol engines, had been sold with the stated carbon dioxide levels as too low and the fuel efficiency too high. Audi sent its chief executive and engineers to meet the US Environmental Protection Agency last week. Late on Monday night, it sent out a statement saying that it had failed to disclose three auxiliary emissions control devices (AECDs) to regulators. Without disclosure and subsequent approval from regulators, AECDs are not legal. Audi added: “One of them is regarded as a defeat device according to applicable US law. Specifically, this is the software for the temperature conditioning of the exhaust-gas cleaning system.” The admission causes significant embarrassment to VW, which appeared set for a confrontation with the EPA over the issue. When the EPA first disclosed in early November that it had found a defeat device in the three-litre engines, VW sent out a terse statement, saying that it would co-operate with the EPA.

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Will the tar sands ever be cleaned up? Who would pay for that?

Average House In Fort McMurray Lost $117,000, 20% Of Its Value In 1 Year (CH)

The slumping oilpatch in Alberta continues to take its toll on the Fort McMurray housing market, as the average MLS sale price of a home in that northern community plunged by more than $117,000 in October. Data obtained from the Canadian Real Estate Association indicates that the average sale price for the month of $468,199 was down 20% from $585,438 in October 2014. Sales also plunged by 41% to 85 from 144 a year ago. Year-to-date, MLS sales in Fort McMurray are down by 44.8%. In October, Lloydminster saw MLS sales dip by 54.3%, falling to 43 transactions from 94 last year while the Alberta West area experienced a decline of 52.7%, dropping to 70 from 148 a year ago.

Year-to-date MLS sales in Alberta are down 21.1% from last year. Besides Fort McMurray, the CREA statistics show the hardest hit areas in the province are Lloydminster (down 34.1%); South Central Alberta (down 31.6%) and Calgary, (down 28.9%). Calgary’s resale housing market led the country in October — in a negative way. MLS sales in the Calgary region were 1,810 for the month, down 36.4% from a year ago. The rate of decline was the highest among Canada’s major housing markets, according to a report by the Canadian Real Estate Association. In Alberta, sales fell 28.9% to 4,327 transactions. Across the country, however, MLS sales were up 0.1% to 41,653. CREA said national activity stood near the peak recorded earlier this year and reached the second highest monthly level in almost six years.

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“Abdelhamid Abaaoud? ..they’d have got him even if they just went through lists of terrorists alphabetically.”

This Is The Worst Time For Society To Go On Psychopathic Autopilot (F. Boyle)

There were a lot of tributes after the horror in Paris. It has to be said that Trafalgar Square is an odd choice of venue to show solidarity with France; presumably Waterloo was too busy. One of the most appropriate tributes was Adele dedicating Hometown Glory to Paris, just as the raids on St-Denis started. A song about south London where, 10 years ago, armed police decided to hysterically blow the face off a man just because he was a bit beige. In times of crisis, we are made to feel we should scrutinise our government’s actions less closely, when surely that’s when we should pay closest attention. There’s a feeling that after an atrocity history and context become less relevant, when surely these are actually the worst times for a society to go on psychopathic autopilot. Our attitudes are fostered by a society built on ideas of dominance, where the solution to crises are force and action, rather than reflection and compromise.

If that sounds unbearably drippy, just humour me for a second and imagine a country where the response to Paris involved an urgent debate about how to make public spaces safer and marginalised groups less vulnerable to radicalisation. Do you honestly feel safer with a debate centred around when we can turn some desert town 3,000 miles away into a sheet of glass? Of course, it’s not as if the west hasn’t learned any lessons from Iraq and Afghanistan. This time round, no one’s said out loud that we’re going to win. People seem concerned to make sure that Islam gets its full share of the blame, so we get the unedifying circus of neocons invoking God as much as the killers. “Well, Isis say they’re motivated by God.” Yes, and people who have sex with their pets say they’re motivated by love, but most of us don’t really believe them. Not that I’m any friend of religion – let’s blame religion for whatever we can.

Let’s blame anyone who invokes the name of any deity just because they want to ruin our weekend, starting with TGI Friday’s. The ringleader, Abdelhamid Abaaoud, evaded detection by security services by having a name too long to fit into one tweet. How could the most stringent surveillance in the world not have picked up Abdelhamid Abaaoud before? I mean, they’d have got him even if they just went through lists of terrorists alphabetically. We’re always dealing with terror in retrospect – like stocking up on Imodium rather than reading the cooking instructions on your mini kievs. The truth is that modern governments sit at the head of a well-funded security apparatus. They are told that foreign military adventures put domestic populations at risk and they give them the thumbs up anyway.

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“..if somebody knocks on your door at three in the morning, and they’re wet, they’re bleeding, they’ve been shot at, and they’re frightened, what do you do?”

Varoufakis: Closing Borders To Muslim Refugees Only Fuels Terrorism (Guardian)

Europe must not close its borders to refugees in the wake of the Paris terrorist attacks, Greece’s former finance minister Yanis Varoufakis has cautioned, saying rising intolerance towards Muslim refugees would only fuel further violence. Speaking on the Q&A program on Australia’s ABC, Varoufakis said he was proud of the Greek people’s response to the refugee crisis, despite the country being gripped by economic crises. “We have two [thousand], three [thousand], 5,000, 10,000 people being washed up on our shores, on the Aegean Islands, every day. In a nation, by the way, that is buffeted by a great depression, where families, on those islands in particular, are finding it very hard to put food on the table for their children at night.

“And these people in their crushing majority, I’m proud to report, opened their doors to these wretched refugees. And the thought comes to my mind very simply: if somebody knocks on your door at three in the morning, and they’re wet, they’re bleeding, they’ve been shot at, and they’re frightened, what do you do? I think there’s only one answer: you open the door, and you give them shelter, independently of the cost-benefit analysis, independently of the chance that they may harm you.” [..] Varoufakis said while Europe was struggling to cope with both the refugee crisis and Paris attacks, it was a mistake to read one as the cause of the other. “There’s no doubt that when you have a massive exodus of refugees that there may very well be a couple of insurgents that infiltrate [that population], but it’s neither here nor there.”

“Both the terrorist attacks and the refugee influx are symptoms of the same problem. But one doesn’t cause the other.“ The vast majority of the people who exploded bombs, and blew themselves up, and took AK47s to mow people down, these were people who were born in France, in Belgium. Think of the bombings in London. Britain doesn’t have free movement [over its borders] it is not part of the Schengen treaty. So the notion that we’re going to overcome this problem by erecting fences, electrifying them, and shooting people who try to scale them … the only people who benefit from that are the traffickers, because their price goes up … and Isis. They are the only beneficiaries.”

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Good point.

Average Stay Is 17 Years: Refugee Camps Are The “Cities Of Tomorrow” (Dezeen)

Governments should stop thinking about refugee camps as temporary places, says Kilian Kleinschmidt, one of the world’s leading authorities on humanitarian aid (+ interview). “These are the cities of tomorrow,” said Kleinschmidt of Europe’s rapidly expanding refugee camps. “The average stay today in a camp is 17 years. That’s a generation.” “In the Middle East, we were building camps: storage facilities for people. But the refugees were building a city,” he told Dezeen. Kleinschmidt said a lack of willingness to recognise that camps had become a permanent fixture around the world and a failure to provide proper infrastructure was leading to unnecessarily poor conditions and leaving residents vulnerable to “crooks”. “I think we have reached the dead end almost where the humanitarian agencies cannot cope with the crisis,” he said.

“We’re doing humanitarian aid as we did 70 years ago after the second world war. Nothing has changed.” Kleinschmidt, 53, worked for 25 years for the United Nations and the United Nations High Commission for Refugees in various camps and operations worldwide. He was most recently stationed in Zaatari in Jordan, the world’s second largest refugee camp – before leaving to start his own aid consultancy, Switxboard. He believes that migrants coming into Europe could help repopulate parts of Spain and Italy that have been abandoned as people gravitate increasingly towards major cities. “Many places in Europe are totally deserted because the people have moved to other places,” he said.

“You could put in a new population, set up opportunities to develop and trade and work. You could see them as special development zones which are actually used as a trigger for an otherwise impoverished neglected area.” Refugees could also stimulate the economy in Germany, which has 600,000 job vacancies and requires tens of thousands of new apartments to house workers, he said. “Germany is very interesting, because it is actually seeing this as the beginning of a big economic boost,” he explained. “Building 300,000 affordable apartments a year: the building industry is dreaming of this!” “It creates tons of jobs, even for those who are coming in now. Germany will come out of this crisis.”

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Bit of a weird compromise?!

Canada To Turn Away Single Men As Part Of Syrian Refugee Resettlement Plan (AFP)

Canada will accept only whole families, lone women or children in its mass resettlement of Syrian refugees while unaccompanied men – considered a security risk – will be turned away. Since the Paris attacks launched by Syria-linked jihadis, a plan by the new prime minister, Justin Trudeau, to fast-track the intake of 25,000 refugees by year’s end has faced growing criticism in Canada. Details of the plan will be announced Tuesday but Canada’s ambassador to Jordan confirmed that refugees from camps in Jordan, Lebanon and Turkey will be flown to Canada from Jordan starting 1 December. Speaking in Jordan on Monday, ambassador Bruno Saccomani said the operation would cost an estimated C$1.2bn (US$900m), the official Petra news agency reported.

According to Canadian public broadcaster CBC, the resettlement plan will not extend to unaccompanied men. Québec premier Philippe Couillard seemed to corroborate that report ahead of a meeting with Trudeau and Canada’s provincial leaders where the refugee plan was high on the agenda. “All these refugees are vulnerable but some are more vulnerable than others, for example women, families and also members of religious minorities who are oppressed,” he said, although he rejected the notion of “exclusion” of single men. Faisal Alazem of the Syrian Canadian Council, a nonprofit group in talks with the government to sponsor refugees, told Radio-Canada of the plans: “It’s a compromise.”

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Sweet Jesus.

Stranded Migrants Block Railway, Call Hunger Strike (Reuters)


Migrant with his mouth sewn shut at Greek/Macedonian border Nov 23, 2015 (Reuters/Ognen Teofilovski)

Moroccans, Iranians and Pakistanis on Greece’s northern border with Macedonia blocked rail traffic and demanded passage to western Europe on Monday, stranded by a policy of filtering migrants in the Balkans that has raised human rights concerns. One Iranian man, declaring a hunger strike, stripped to the waist, sewed his lips together with nylon and sat down in front of lines of Macedonian riot police. Asked by Reuters where he wanted to go, the man, a 34-year-old electrical engineer named Hamid, said: “To any free country in the world. I cannot go back. I will be hanged.” Hundreds of thousands of migrants, many of them Syrians fleeing war, have made the trek across the Balkan peninsula having arrived by boat and dinghy to Greece from Turkey, heading for the more affluent countries of northern and western Europe, mainly Germany and Sweden.

Last week, however, Slovenia, a member of Europe’s Schengen zone of passport-free travel, declared it would only grant passage to those fleeing conflict in Syria, Iraq and Afghanistan, and that all others deemed “economic migrants” would be sent back. That prompted others on the route – Croatia, Serbia and Macedonia – to do the same, leaving growing numbers stranded in tents and around camp fires on Balkan borders with winter approaching. Rights groups have questioned the policy, warning asylum should be granted on merit, not on the basis of nationality.

“To classify a whole nation as economic migrants is not a principle recognized in international law,” said Rados Djurovic, director of the Belgrade-based Asylum Protection Center. “We risk violating human rights and asylum law,” he told Serbian state television.On the Macedonian-Greek border, crowds of Moroccans, Iranians and others blocked the railway line running between the two countries, halting at least one train that tried to cross, a Reuters photographer said. A group of Bangladeshis had stripped to the waist and written slogans on their chests in red paint. “Shoot us, we never go back,” read one. “Shoot us or save us,” read another.

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Nov 012015
 
 November 1, 2015  Posted by at 10:52 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle November 1 2015
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Unknown Drowned baby boy, Lesbos Oct 25 2015

New Tragedy In The Aegean, Sinking 11 Dead, 4 Babies (In.gr)
‘So Many Of Them Were Babies. We Saw At Least 30 Bodies In The Water’ (HRW)
Crunch Talks For Merkel On Refugee Crisis As Thousands More Arrive (Reuters)
Greek Banks Need Extra €14 Billion To Survive Dire Economic Downturn (Guardian)
Greek Bad Debt Rises Above 50% For The First Time, ECB Admits (Zero Hedge)
Cash Crisis ‘Could Close 50% Of UK Care Homes’ (Observer)
Crisis In UK Care Homes Set To ‘Dwarf The Steel Industry’s Problems’ (Observer)
China Bad Loans Estimated At 20% Or Higher vs Official 1.5% (Bloomberg)
China’s Official Factory Gauge Signals Contraction Continues (Bloomberg)
‘Lipstick’-ing The GDP Pig Amid An Epochal Global Deflationary Swoon (Stockman)
Fed Admits: ‘Something’s Going On Here That We Maybe Don’t Understand’ (ZH)
Fed Looks At Way To Shift Big-Bank Losses To Investors (AP)
Australia Should ‘Tell The Story Of The Pacific To The World’ (Guardian)

At dawn Sunday: “five are women, two are children and four infants..” Four more deaths reported since… (Google translation)

New Tragedy In The Aegean, Sinking 11 Dead (In.gr)

Without end continues the refugee drama in the Aegean Sea. This time 11 refugees died when the six meter plastic boat, which was carrying them sank while approaching rocky area in Samos Blue, in the six meters from the shore, just before they occupants disembark. From the dead five are women, two are children and four infants. Most of the dead were trapped in the cabin of plastic boat. The new wreck occurred at dawn Sunday. From the new wreck rescued 15 people. The point is boat of the Coast, volunteer groups and divers.

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Deaths of single often go unreported: “The ultimate death toll is no doubt even higher, since only families with surviving members were able to report their missing to the coast guard..”

‘So Many Of Them Were Babies. We Saw At Least 30 Bodies In The Water’ (HRW)

On Wednesday off the Greek island of Lesbos, a large Turkish fishing boat carrying some 300 people trying to reach Europe sank, causing at least seven to drown, including four children, with at least 34 still missing. The needless loss of life should be enough to outrage us all. But just as outrageous is the reality that months into Europe’s refugee crisis, Europe’s leaders still have not taken the steps necessary to help prevent such unnecessary tragedies, let alone adopt policies that could provide people fleeing war and repression with legal and safe alternatives to seek asylum in Western Europe. Turkish smugglers taking advantage of those desperately fleeing the horrors of war in Syria, Afghanistan, and Iraq promised the victims that the trip aboard a “yacht” would be safer than the more common trips in overloaded rubber dinghies.

They then packed the 300 people like sardines on both decks of the aging fishing vessel. Disaster unfolded as the boat hit rough seas and high winds at about 4 in the afternoon. Suddenly, the sheer weight of those packed on the upper deck caused it to collapse, crashing everyone down onto the lower deck. Spanish volunteer life guards, working on the beaches of Lesbos to bring in the boats safely, watched the tragedy unfold through their binoculars from a beachhead on the Greek island. A Syrian man who survived told one of the doctors who treated the survivors that the collapse of the upper deck injured many people and created a large hole in the bottom of the boat, which began filling with water. The Turkish smuggler driving the boat called his fellow smugglers, and a speedboat came to evacuate him, its occupants firing several times in the air to warn off the panicking people on the boat.

As it evacuated the skipper, the speedboat hit the fishing boat, causing it to sink almost immediately. “Suddenly, we just saw hundreds of lifejackets in the sea,” Gerard, one of the Spanish volunteer lifeguards, told me over the phone. “We rushed down to get our jet skis, and we were in the water in minutes.” For more than four hours, until long after nightfall, three Spanish lifeguards tried to rescue as many of the people in the water as they could, using only their jetskis in the rough water many kilometers offshore. They performed CPR on some right on their jetskis. Several local fishing boats also came to join the rescue efforts, pulling survivors out of the water until their decks were packed with shivering, traumatized survivors.

Both the Greek coast guard and boats under the coordination of FRONTEX, the EU’s external borders agency, joined the effort as well, but their large boats sitting high out of the water made it difficult to hoist survivors unto their decks in the rough seas. The Spanish lifeguards had to risk their lives to scramble onto the Greek coast guard ship to perform CPR on those who had lost consciousness, including a tiny baby. Their jetskis were damaged in the process. Long after nightfall, the Spanish volunteers returned to shore, themselves so chilled to the bone that they were risking hypothermia. “We passed so many lifeless bodies floating in the sea as we left the rescue area,” Gerard said, his voice still shaking a day later.

“So many of them were babies. We saw at least 30 bodies at the scene in the water.” By Thursday, 242 people had been rescued, and the Greek coast guard confirmed that at least 34 people remained missing, in addition to the seven bodies recovered from the water the evening before. The ultimate death toll is no doubt even higher, since only families with surviving members were able to report their missing to the coast guard.

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WIll Merkel pull to the right with her country?

Crunch Talks For Merkel On Refugee Crisis As Thousands More Arrive (Reuters)

Nearly 10,000 refugees continued to arrive in Germany daily, police said on Saturday, highlighting the scale of the challenge facing the country’s stretched border staff ahead of a crunch meeting between Angela Merkel and a Bavarian ally on the crisis. Chancellor Merkel will discuss refugee policy on Saturday evening with Bavarian premier Horst Seehofer, head of the Christian Social Union (CSU) and who has criticized her asylum policy and handling of the crisis. The CSU, sister party to Merkel’s Christian Democratic Union (CDU), has been outspoken about her “open doors” policy towards refugees, in part because its home state of Bavaria is the entry point for virtually all of the migrants arriving in Germany.

Berlin expects between 800,000 and a million refugees and migrants to arrive in Germany this year, twice as many as in any prior year. The huge numbers have fueled anti-immigration sentiment, with support for Merkel’s conservatives dropping to its lowest level in more than three years. There have also been a spate of right-wing attacks on shelters: police in Dresden reported two more arson attacks on Friday night on a hotel and a container, both of which were planned to house refugees and asylum seekers. On Sunday, Merkel and Seehofer will hold talks with Sigmar Gabriel, who leads the other party in her “grand coalition”, the Social Democrats (SPD).

Conservative officials believe it is likely Seehofer will come away from this weekend’s meetings with Merkel with a deal to introduce so-called ‘transit zones’ at border crossings to process refugees’ asylum requests. SPD politicians have rejected that idea, instead calling for faster registration and processing of asylum applications. The crisis has also prompted squabbling among EU states over how best to deal with the influx. European leaders last weekend agreed to cooperate to manage migrants crossing the Balkans but offered no quick fix. German Defence Minister Ursula von der Leyen said Europe needed to work together to come up with a solution to the crisis but that Germany would continue to welcome refugees. “We will not slam the door in the face of the refugees,” she said at a security conference in Bahrain.

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A lot less than was prviously announced.

Greek Banks Need Extra €14 Billion To Survive Dire Economic Downturn (Guardian)

Greece’s four main banks need to find another €14bn of reserves to ensure they could withstand an economic downturn, the ECB said on Saturday. The four banks – Alpha Bank, Eurobank, NBG and Piraeus Bank – have until 6 November to say how they intend to make up that shortfall, the ECB said. The money could come from private investors or from EU bailout funds. An ECB stress test known as a “comprehensive assessment” identified a capital shortfall of €4.4bn under a best-case scenario and €14.4bn in a worst-case situation. The shortfall is smaller than originally feared, with the most recent bailout deal setting aside up to €25bn to prop up Greece’s banks.

The ECB audit examined the quality of the banks’ assets and considered the “specific recapitalisation needs” of each institution under Greece’s EU bailout. “Overall, the stress test identified a capital shortfall across the four participating banks of €4.4bn under the baseline scenario and €14.4bn under the adverse scenario,” the ECB said. “The four banks will have to submit capital plans explaining how they intend to cover their shortfalls by 6 November. This will start a recapitalisation process under the economic adjustment programme that must conclude before the end of the year.” Increasing the banks’ capital reserves would “improve the resilience of their balance sheets and their capacity to withstand potential adverse macroeconomic shock”, the central bank added.

In August, eurozone finance ministers released €26bn of the €86bn in bailout funds that went to recapitalising Greece’s stricken banking sector and make a debt payment to the ECB. Greek banks have already been bailed out under earlier deals for the country. They suffered further losses as Greece headed towards a third bailout earlier this year. Depositors pulled billions out of the country fearing that Greece would be forced to leave the euro. Limits on withdrawals and transfers imposed in June to prevent Greek banks from collapsing remain in place, although they have been loosened.

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Now that’s a real ugly number. And austerity assures the number will get worse. What does that spell for Greek banks?

Greek Bad Debt Rises Above 50% For The First Time, ECB Admits (Zero Hedge)

According to the FT, “the bill states that bank rescue fund HFSF will have full voting rights on any shares it acquires from banks in exchange for providing state aid. Under the bill the bank rescue fund will have a more active role, assessing bank managements.

The exact mix of shares and contingent convertible bonds the HFSF will buy from banks in exchange for any fresh funds it will provide will be decided by the cabinet. The capital hole has emerged chiefly due to the rising number of Greeks unable or unwilling to repay their debt.

And therein lies the rub, because in the span of three months, Greek NPLs have risen from 47.6% of total to 51%: an increase of just over 1% in bad debt every month. Which means that whether or not the latest attempt to boost confidence by the ECB, ESM, and the Greek parliament succeeds is moot. Yes, a few hedge funds may invest funds alongside the ESM, but in the end, as the NPLs keep rising and as long as Greek debtors refuse – or simply are unable – to pay their debt or interest, the next Greek crisis is inevitable. The biggest wildcard is whether or not the Greek population will accept this latest promise of stability in its banking sector at face value: a banking sector which since July is operating under draconian capital controls.

Granted, we should point out that in the past two months the deposit outflow from banks has stopped, and even reversed modestly adding about €900 million in deposits in the past two months, although that is mostly due to the inability of households and corporations to withdraw any sizable amount of funds. The real answer whether Greek banks have been “saved” will wait until the shape of the final bank recapitalization takes place, even as NPLs continue to mount. Remember: Greek lenders are currently kept afloat only by the ECB’s ELA but there is a rush to get the recapitalization finished. If it is not done by the end of the year, new EU rules mean large depositors such as companies may have to take a hit in their accounts.

If the proposed recap is insufficient – and it will be since under the surface the Greek economy continues to collapse and NPLs continue to mount – and a bank bail-in of depositors takes place (a bail-in which took place immediately in the case of Cyprus back in 2013 when Russian oligarch savings were “sacrificed” to bail out the local insolvent banking system), the next leg in the Greek bank crisis will promptly unveil itself, only this time Greece will have some 200% in debt/GDP to show for its most recent, third, bailout. Finally, the real question is: having read all of the above, dear Greek readers, will you hand over what little cash you have stuffed in your mattress to your friendly, neighborhood, soon to be recapitalized bank?

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The entire western world get bogged down under this pressure.

Cash Crisis ‘Could Close 50% Of UK Care Homes’ (Observer)

Ministers are under mounting pressure to pump more money into care for the elderly as investigations by the Observer reveal how some of the largest providers may have to pull out of supplying services because of an escalating financial crisis. Before chancellor George Osborne’s autumn statement on 25 November, Sarah Wollaston, the Conservative chair of the all-party Commons select committee on health, is calling for the government to act, saying that social care providers are reeling from rising costs and declining fees from cash-strapped local authorities. Meanwhile, the head of Care England, which represents independent care providers, claims that the care home sector is heading for a bigger crisis than the steel industry, while Chai Patel, the boss of one of Britain’s largest care home operators, HC-One, says half of Britain’s care homes could go bust.

The warnings come as residents in the 470 homes and specialist centres run by leading provider Four Seasons face uncertainty about the future of the company. Four Seasons has to make a £26m interest payment in December, but is losing money under the weight of £500m of debt. Four Seasons has insisted that it can make the payment, but bosses at rival companies warned that the industry was under unsustainable pressure. In the home care sector, where specialists look after the elderly in their own properties, the United Kingdom Homecare Association cautioned that leading providers could pull out of 55,125 care hours and 33 contracts because of the shortfall between the cost of care and the amount local authorities were paying for the service. Wollaston, a former GP, said she supported the new national living wage and moves to pay transport costs to carers, but added that the government had to recognise that both measures would increase the costs of care.

“There has been a longstanding gap in funding for social care and this will become much more severe if there is not adequate recognition of the rising costs the sector will face as a result of the living wage. Otherwise, we will see more care providers pulling out of the sector,” she said. Many problems result from the fact that local authorities, which have suffered funding cuts of more than 40% since 2010, cannot offer enough to make contracts attractive or, in many cases, viable. Many providers are turning to the private market as an alternative, where they can. Martin Green, the head of Care England, said the crisis would lead to more people ending up in hospitals and Patel, whose company runs 250 care homes, said he had given research to the government that showed that half of care homes could disappear.

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So who’s going to pay, now and in 5 years, 10 years?

Crisis In UK Care Homes Set To ‘Dwarf The Steel Industry’s Problems’ (Observer)

The ghost of Southern Cross hangs over Britain’s care home industry. Four years ago the country’s largest care home group collapsed, sparking months of uncertainty and worry for its 31,000 residents and their families, until Southern Cross’s rivals stepped forward to agree rescue deals for its 750 homes. Now, however, the industry could be rewarded by facing an even bigger crisis. While it was a set of circumstances unique to Southern Cross that laid it low in 2011 – particularly high rents for its properties and the costs of a debt mountain left by its private equity owners – today care homes across the country are feeling the squeeze. Four Seasons, which has more than 22,000 beds spread among 470 homes nationwide, is at forefront of the new crisis.

The company is owned by private equity group Terra Firma, the organisation led by financier Guy Hands that has, at various times, controlled companies as diverse as Méridien hotels, Odeon cinemas and record label EMI. It is losing millions of pound a year and struggling under £500m of debt. Four Seasons needs to make a £26m interest payment in December to satisfy creditors who could put it into administration. Terra Firma insists it will be able to make the payment, but the private equity group, trade unions, and local authorities all agree this is only the start of the problems for the care home industry. Justin Bowden, national officer at the GMB union, which represents thousands of care home employees, said: “You are looking potentially at several Southern Crosses in the next 12 months if something drastic is not done.”

Martin Green, chief executive of Care England, the body that represents independent care providers, warned that the crisis in the sector would dwarf the problems in the steel industry. “We are looking at Redcar happening twice a month if care homes go down,” he said. “These people can only be looked after in care homes and hospitals. If Jeremy Hunt thinks he has a problem with bed blocking now, it is nothing on what it is going to be like if these care homes start to close. Hospitals won’t be able to do elective care because they will be full of old people.” The problems for care homes are rooted in the gap between the costs of care and the amounts local authorities are paying for residents. There are staggering variations in fees across the country, ranging from £350 a week to as high as £750, according to consumer watchdog Which?

The Local Government Association itself estimates that there will be a £2.9bn annual funding gap in social care by the end of the decade. This gap will widen with the introduction of the national living wage next April, which will add another £1bn to the costs of care homes between now and 2020.

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“China is confronting a massive debt problem, the scale of which the world has never seen.”

China Bad Loans Estimated At 20% Or Higher vs Official 1.5% (Bloomberg)

Corporate investigator Violet Ho never put a lot of faith in the bad loan numbers reported by China’s banks. Crisscrossing provinces from Shandong to Xinjiang, she’s seen too much — from the shell game of moving assets between affiliated companies to disguise the true state of their finances to cover-ups by bankers loath to admit that loans they made won’t be recovered. “If I have one piece of advice for people worrying about the financial status of Chinese companies, it’s this: it’s right to be worried,” said Ho, senior managing director in Hong Kong for Kroll Inc., a U.S. risk consultancy. “Often a credit report for a Chinese company is not worth the paper it’s written on.”

As China’s banking industry persists with publishing delinquent-debt numbers that few have faith in – a survey in 2014 indicated that even lenders didn’t believe them – some financial analysts, too, have turned detectives to try to work out what the real numbers may be. The amount of bad debt piling up in China is at the center of a debate about whether the country will continue as a locomotive of global growth or sink into decades of stagnation like Japan after its credit bubble burst. Bank of China Ltd. reported on Thursday its biggest quarterly bad-loan provisions since going public in 2006. While the analysts interviewed for this story differ in their approaches to calculating likely levels of soured credit, their conclusion is the same: The official 1.5% bad-loan estimate is way too low.

Charlene Chu, who made her name at Fitch Ratings making bearish assessments of the risks from China’s credit explosion since 2008, is among those crunching the numbers. While corporate investigator Ho relies on her observations from hitting the road, Chu and her colleagues at Autonomous Research in Hong Kong take a top-down approach. They estimate how much money is being wasted after the nation began getting smaller and smaller economic returns on its credit from 2008. Their assessment is informed by data from economies such as Japan that have gone though similar debt explosions. While traditional bank loans are not Chu’s prime focus – she looks at the wider picture, including shadow banking – she says her work suggests that nonperforming loans may be at 20% to 21%, or even higher.

The Bank for International Settlements cautioned in September that China’s credit to gross domestic product ratio indicates an increasing risk of a banking crisis in coming years. “A financial crisis is by no means preordained, but if losses don’t manifest in financial sector losses, they will do so via slowing growth and deflation, as they did in Japan,” said Chu. “China is confronting a massive debt problem, the scale of which the world has never seen.”

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But there’s still plenty voices willing to paint rosy picstures.

China’s Official Factory Gauge Signals Contraction Continues (Bloomberg)

China’s first key indicator this quarter, an official factory gauge, missed analysts’ estimates, signaling that the manufacturing sector has yet to bottom out as global demand falters and deflationary pressures deepen. The official purchasing managers index was unchanged at 49.8 in October, the National Bureau of Statistics said Sunday, compared with the median estimate of 50 in a Bloomberg survey. It was the third straight reading below 50, the line between expansion and contraction. The official non-manufacturing PMI, a barometer of services and construction, fell to 53.1 from 53.4 in September, the weakest since December 2008. “The manufacturing sector is still contracting, though stabilizing,” and the report indicates economic momentum remains sluggish, said Liu Ligang at Australia & New Zealand Banking Group.

“We still believe the Chinese economy will experience modest rebound supported by faster infrastructure investment in November and December.” The newest data highlight the challenges confronting China’s old growth drivers. The nation’s leaders have reiterated priorities of both reforming the economy and maintaining medium- to high-speed growth in the next five years, according to a communique released by Xinhua News Agency on Thursday. The readings suggest continued monetary easing by the central bank hasn’t yet boosted smaller businesses as much as their larger, state-owned counterparts, which are able to borrow at reduced rates. “Big companies are stabilizing, while smaller ones continue to perform below the contraction-expansion line,” Zhao Qinghe, a senior statistician at NBS, wrote in a statement interpreting the data on Sunday.

“The percentage of small companies facing a financial strain is considerably higher than that of bigger companies.” The unchanged manufacturing PMI suggests “managed stabilization” as policy makers strive to balance growth, reform, and market stability, according to Zhou Hao at Commerzbank in Singapore. The manufacturing sector stabilized “somewhat” due to monetary policy easing, Zhou said, while slowing power generation, steel production and housing sales are “suggesting that the overall economy is still under downward pressure.” The employment gauges of both manufacturing and non-manufacturing sectors remained mired in contraction zone, Sunday’s report showed. China’s survey-based unemployment rate picked up slightly to around 5.2% in September, while a ratio of job supply and demand rose in the third quarter.

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Stop confusing inflation with rising prices, and things get a lot clearer.

‘Lipstick’-ing The GDP Pig Amid An Epochal Global Deflationary Swoon (Stockman)

The talking heads were busy yesterday morning powdering the GDP pig. By averaging up the “disappointing” 1.5% gain for Q3 with the previous quarter they were able to pronounce that the economy is moving forward at an “encouraging” 2% clip. And once we get through this quarter’s big negative inventory adjustment, they insisted, we will be off to the ‘escape velocity’ races. Again. No we won’t! The global economy is in an epochal deflationary swoon and the US economy has already hit stall speed. It is only a matter of months before this long-in-the-tooth 75-month old business expansion will rollover into outright liquidation of excess inventories and hoarded labor. That is otherwise known as a recession.

Its arrival will be a thundering repudiation of the lunatic monetary policies of the last seven years; and it will send into panicked shock all those buy-the-dip speculators and robo-traders who still presume the central bank is omnipotent. So forget all the averaging and seasonally maladjusted noise in yesterday’s report and peak inside at the warning signs. To begin, the year/year gain of just 2.0% was the weakest result since the first quarter of 2014. And that’s only if you believe that inflation during the last 12 months was just 0.9%, as per the GDP deflator used by the Commerce Department statistical mills. Needless to say, there are about 90 million households in America below the top 20%, which more or less live paycheck to paycheck, that would argue quite vehemently that their cost of living including medical care, housing, education, groceries, utilities and much else – has gone up a lot more than 0.9%.

So put a reasonable “deflator” on the reported “real” GDP number, and you are getting pretty close to stall speed – even before you look inside at the internals. Indeed, even before you get to the components of the “deflated” GDP figure, you need to examine an even more important number contained in yesterday’s report that was not mentioned by a single talking head. To wit, the year/year gain in nominal GDP was only 2.9%, and it represented a continuing deceleration from 3.7% in the year ending in Q2 2015 and 3.9% in the years ending in Q1 2015 and Q4 2014, respectively. In short, the US economy is sitting there with $59 trillion of credit market debt outstanding, but owing to the tides of worldwide deflation now washing up on these shores, nominal GDP growth is sinking toward the flat line.

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QE accelerates deflation.

Fed Admits: ‘Something’s Going On Here That We Maybe Don’t Understand’ (ZH)

In a somewhat shocking admission of its own un-omnipotence, or perhaps more of a C.Y.A. moment for the inevitable mean-reversion to reality, Reuters reports that San Francisco Fed President John Williams said Friday that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand. With Japan having been there for decades, and the rest of the developed world there for 6 years… Suddenly, just weeks away from what The Fed would like the market to believe is the first rate hike in almost a decade, Williams decides now it is the time to admit the central planners might be missing a factor (and carefully demands better fiscal policy)… (as Reuters reports)

“I see this as more of a warning, a red flag that there’s something going on here that isn’t in the models, that we maybe don’t understand as well as we think, and we should dig down deep deeper and try to figure this out better,” said San Francisco Federal Reserve President John Williams on Friday pointing out that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand.

Williams, who is a voting member of the Fed’s policy-setting panel through the end of the year, has said the central bank should begin to raise interest rates soon but thereafter go at a gradual pace; ironically adding that the low neutral interest rate had “pretty significant” implications for monetary policy, and put more focus on fiscal policy as a response.

“If we could come up with better fiscal policy, find a way to have the economy grow faster or have a stronger natural rate of interest, then that takes the pressure off of us to try to come up with other ways to do it, like through a large balance sheet or having a higher inflation target,” Williams said. “It also means we don’t have to turn to quantitative easing and other policies as much.”

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As long as the investors are not the big banks?!

Fed Looks At Way To Shift Big-Bank Losses To Investors (AP)

In their latest bid to reduce the chances of future taxpayer bailouts, federal regulators are proposing that the eight biggest U.S. banks build new cushions against losses that would shift the burden to investors. The Federal Reserve’s proposal put forward Friday means the mega-banks would have to bulk up their capacity to absorb financial shocks by issuing equity or long-term debt equal to prescribed portions of total bank assets. The idea is that the cost of a huge bank’s failure would fall on investors in the bank’s equity or debt, not on taxpayers. The Fed governors led by Chair Janet Yellen voted 5-0 at a public meeting to propose the so-called “loss-absorbing capacity” requirements for the banks, which include JPMorgan Chase, Citigroup and Bank of America.

The eight banks would have to issue a total of about $120 billion in new long-term debt to meet the requirements of the proposal, the Fed staff estimates. If formally adopted, most of the requirements wouldn’t take effect until 2019, and the remainder not until 2022. The new cushions would come atop rules adopted by the Fed in July for the eight banks to shore up their financial bases with about $200 billion in additional capital — over and above capital requirements for the industry. And they would be in addition to 2014 rules directing all large U.S. banks to keep enough high-quality assets on hand to survive during a severe downturn. Combined with the regulators’ previous actions, the new proposal “would substantially reduce the risk to taxpayers and the threat to financial stability stemming from the failure of these (banks),” Yellen said at the start of the meeting.

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Problem is: Australia would need to address its own role.

Australia Should ‘Tell The Story Of The Pacific To The World’ (Guardian)

Australia should “tell the story of the Pacific to the world” when global leaders sit down to climate change talks in Paris at the end of this month, Labor has said. The impact of climate change on the nations of the Pacific is a focus for both the government and opposition ahead of COP21, where governments of more than 190 nations will gather to discuss a possible new global climate accord. The opposition leader, Bill Shorten, accompanied by foreign affairs spokeswoman Tanya Plibersek and immigration spokesman Richard Marles, will visit Papua New Guinea, the Marshall Islands, and Kiribati over four days this week, while the government’s minister for international development and the Pacific, Steve Ciobo, will travel to New Caledonia, Fiji and Niue. The Labor leaders said climate change was an existential threat to some countries in the region.

“The dangerous consequences of climate change is no more evident than in the Pacific region. Pacific leaders have consistently identified climate change as the greatest threat to their livelihoods, food production, housing, security and wellbeing. “This is a serious problem that demands serious attention.” Marles, the former parliamentary secretary for Pacific island affairs, told Guardian Australia that it was important for Australia to have strong and constructive relations with its Pacific neighbours. He praised Pacific leaders, in particular Kiribati’s president, Anote Tong, for highlighting the issues being faced by Pacific nations on the international stage. “It is crucial that, in the lead-up to Paris, the world understands the problems being faced by the Pacific. And it’s important that Australia plays a role in telling that story of the Pacific to the world.”

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