Aug 052018
 
 August 5, 2018  Posted by at 8:57 am Finance Tagged with: , , , , , , , , , , ,  


Claude Monet Hollowed Cliff near Étretat 1883

 

The Real Threat To The Fed’s Independence Is Wall Street, Not Trump (WM)
The Trillion-Dollar Question: Can The Tech Giants Keep Growing? (G.)
Light It Up (Kunstler)
IMF Option Looms Larger For Turkey Amid Row With US (AL M.)
Beware the Slippery Slope of Facebook Censorship (Matt Taibbi)
Why Theresa May Must Stop The Brexit Clock (O.)
UK Trade Minister Fox Says EU Is Pushing Britain To No-Deal Brexit (R.)
Separating Children From Their Parents Puts UK Government To Shame, Too (O.)
Britain’s Economics Students Are Dangerously Poorly Educated (G.)
How Reality Is Being Redefined (Slog)
Greece’s Unemployment Highest in Developed World (GR)
Greece: An Economy That Has Shrunk So Much It Looks War-Torn (WaPo)

 

 

But we’ve given them all the power…

The Real Threat To The Fed’s Independence Is Wall Street, Not Trump (WM)

[..] the real threat to the Fed’s independence isn’t coming from Trump—it’s coming from Wall Street. The Fed’s structural flaws have led to regulatory capture, which compromises its ability to set monetary and regulatory policy in a manner that isn’t tilted to favor those at the very top of the economic ladder. Trump may have broken a norm by commenting on monetary policy, but the Fed’s status quo is unaccountable, opaque decision-making shaped by deep conflicts of interest with the very financial institutions the Fed is ostensibly supposed to supervise. Consider, for instance, the abrupt resignation in March of David Cote from the New York Fed’s board of directors—a move that came as a shock to many Fed watchers.

Cote was one of just a couple people responsible for choosing the next president of the New York Fed, the most powerful economic policymaking position in the country that Trump doesn’t control. Yet before the search for New York Fed President Bill Dudley’s successor had formally concluded, Cote left the board to pursue “new business opportunities that could affect his eligibility to serve”—later revealed to be helping Goldman Sachs undertake an ambitious corporate acquisition strategy. The New York Fed claims that Cote and his fellow board members had already decided on former San Francisco Fed President John Williams to succeed Dudley by the time that Cote announced his resignation, but that means that Cote was simultaneously negotiating a new gig at Goldman Sachs while selecting one of Goldman’s top regulators.

The entire ordeal served as an unsettling reminder of the cozy relationship between the Federal Reserve and the biggest behemoth on Wall Street. Prior to being selected as New York Fed president in 2009, Dudley was Goldman Sachs’s chief economist. In 2008, Goldman Sachs Director Stephen Friedman chaired the New York Fed’s board of the directors at the same moment that it was reviewing Goldman’s application to become a bank holding company. In 2014, leaked tapes exposed New York Fed regulators pressuring one of their examiners to back off of a finding that would have imperiled Goldman Sachs’s ability to engage in a deal with Banco Santander. And in 2015, the Fed chose three consecutive men with strong ties to Goldman Sachs to be new Federal Reserve Bank presidents.

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Only if we let them.

The Trillion-Dollar Question: Can The Tech Giants Keep Growing? (G.)

It has been a tumultuous couple of weeks for America’s high-flying technology stocks, even by their own unique standards. Their shares have been soaring since the start of the year, despite being buffeted by trade war fears as President Trump talked of limiting Chinese investments in the US and restricting American technology imports to China. But now there are signs that cracks may be starting to appear in some of the biggest firms in the sector. Facebook suffered the biggest ever one-day drop in a company’s market value – losing more than £90bn – after its growth slowed in the wake of the Cambridge Analytica scandal. Twitter lost 20%, or $5bn, as it reported a surprise fall in active monthly users, while streaming service Netflix missed its targets for subscriber numbers.

On the other hand, electric car specialist Tesla managed to head in the right direction despite making a $717m second-quarter loss, as its controversial chief executive, Elon Musk, regained investor confidence after apologising for previous outbursts. That was in marked contrast to a conference call for the company’s previous set of figures, when he accused a Wall Street analyst of “boring bonehead questions” and ignored queries from investors. But the pick of the bunch remains Apple, which beat Amazon and Google to reach the landmark $1 trillion valuation on Thursday.

Despite the recent rollercoaster ride, the five key tech stocks, known as the “Faangs” – Facebook, Amazon, Apple, Netflix, and Alphabet-owned Google – have reached breathtaking heights. The total value of the five companies amounts to a staggering 19% of total US GDP. But their surge in value has prompted fears of a re-run of the dotcom boom of the late 1990s, when technology businesses dominated the stock market before coming crashing to earth. Russ Mould at investment group AJ Bell says: “That [19%] compares to the 15.5% of US GDP reached by the five biggest companies by value at the US stock market’s peak in the fourth quarter of 1999, just before the technology, media and telecoms bubble burst and that particular mania came to grief.”

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“That’s my theory about what Russia is up to. If you have a better one, let’s hear it?”

Light It Up (Kunstler)

The Guardians of the Galaxy at National Public Radio were beside themselves Wednesday night reporting that “the lights are blinking red for a 2018 election attack by Russia.” Well, isn’t that an interesting set-up? In effect, NPR is preparing its listeners in advance to reject and dispute the coming midterm election if they’re not happy with the results. Thus continues America’s institutional self-sabotage, with the help of a news media that’s become the errand boy of the Deep State.

What do I mean by the Deep State? The vested permanent bureaucracy of Washington DC, and especially its vastly overgrown and redundant “Intel Community,” which has achieved critical mass to take on a life of its own within the larger government, makes up its own rules of conduct, not necessarily within the rule of law, and devotes too much of its budget and influence defending its own prerogatives rather than the interests of the nation.

Personally, I doubt that President Putin of Russia is dumb enough to allow, let alone direct, his intel services to lift a finger “meddling” in the coming US midterm election, with this American intel behemoth vacuuming every digital electron on earth into the NSA’s bottomless maw of intercepted secrets. Mr. Putin must have also observed by now that the US Intel Community is capable of generating mass public hallucinations, to the beat of war-drums, and determined not to give it anything to work with. That’s my theory about what Russia is up to. If you have a better one, let’s hear it?

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Turkey double-crossed the US in a prisoner swap deal. Bad idea of course. Erdogan wants Gulen, but this is not the way.

IMF Option Looms Larger For Turkey Amid Row With US (AL M.)

While the climate of uncertainty is discouraging investments, inflation is eroding real incomes and curbing domestic consumption. As a result, the shrinking demand is bearing on economic growth, which has relied largely on the domestic market. The Turkish economy, which grew 7.4% in 2017, is expected to slow in the third quarter before beginning to contract.

The growing uncertainties are discouraging also the inflow of hot money from abroad, which Turkey desperately needs. Moreover, existing foreign investors have been fleeing the Turkish stock market, albeit slowly — a trend that contributes to sustaining the high prices of foreign exchange, especially the dollar. Accordingly, Turkey’s risk premium — reflected in credit default swaps (CDS) — is on the rise. Turkey’s CDS, which had stood at 166 basis points Feb. 1 and 199 basis points May 1, hit a record high of 334 basis points on the evening of Aug. 1 — up from 321 points in the morning. The increasing risk premium means that Turkey will now face higher interest rates when it tries to borrow from foreign creditors.

The country’s external financing needs for the next 12 months amount to $230 billion, including $180 billion to roll over external debts and $50 billion to cover its gaping current account deficit. Hence, the question of how the required funds will be secured and at what cost is crucial. The tensions with Washington came amid this already serious crunch, exacerbating the woes of Erdogan’s regime. The row over Brunson had flared last week, as both President Donald Trump and Vice President Mike Pence threatened sanctions unless Ankara took “immediate action” to release the pastor, who is being held on what Washington sees as bogus charges of espionage and collaboration with terrorist groups.

The warnings had an immediate economic effect, pushing up Turkey’s risk premium, as pundits sought to predict the scope of the upcoming sanctions. Some suggested that Washington’s hardening stance would bear on the flow of foreign capital to Turkey and the support it might seek from the IMF, while others saw trouble looming over Halkbank, the Turkish public lender embroiled in a scheme to evade US sanctions against Iran. Ultimately, Washington announced sanctions on Interior Minister Suleyman Soylu and Justice Minister Abdulhamit Gul under the 2016 Magnitsky Act, which targets individuals and entities involved in human rights abuses. According to Bloomberg, this “could be just the start of what would look like a US assault on Turkey’s vulnerable economy,” including a potentially hefty fine on Halkbank.

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There’s Mark Warner again, the guy who with Comey screwed up the Assange deal with the DOJ.

Beware the Slippery Slope of Facebook Censorship (Matt Taibbi)

You may have seen a story this week detailing how Facebook shut down a series of accounts. As noted by Politico, Facebook claimed these accounts “sought to inflame social and political tensions in the United States, and said their activity was similar — and in some cases connected — to that of Russian accounts during the 2016 election.” Similar? What does “similar” mean? The death-pit for civil liberties is usually found in a combination of fringe/unpopular people or ideas and a national security emergency. This is where we are with this unsettling new confab of Facebook, Congress and the Trump administration.

Read this jarring quote from Sen. Mark Warner (D-VA) about the shutting down of the “inauthentic” accounts: “Today’s disclosure is further evidence that the Kremlin continues to exploit platforms like Facebook to sow division and spread disinformation… I also expect Facebook, along with other platform companies, will continue to identify Russian troll activity and to work with Congress…” This was in a story in which Facebook stated that it did not know the source of all the pages. They might be Russian, or they might just be Warner’s idea of “sowing division.” Are we comfortable with that range of possibilities?

[..] Facebook was “helped” in its efforts to wipe out these dangerous memes by the Atlantic Council, on whose board you’ll find confidence-inspiring names like Henry Kissinger, former CIA chief Michael Hayden, former acting CIA head Michael Morell and former Bush-era Homeland Security chief Michael Chertoff. (The latter is the guy who used to bring you the insane color-coded terror threat level system.) These people now have their hands on what is essentially a direct lever over nationwide news distribution. It’s hard to understate the potential mischief that lurks behind this union of Internet platforms and would-be government censors. As noted in Rolling Stone earlier this year, 70 percent of Americans get their news from just two sources, Facebook and Google. As that number rises, the power of just a few people to decide what information does and does not reach the public will amplify significantly.

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Makes sense. But too much of the whole thing doesn’t.

Why Theresa May Must Stop The Brexit Clock (O.)

May’s cabinet colleagues, fanning out across the continent like Patton’s Third Army to advance her Chequers compromise, do not appear to have fared any better. Especially embarrassing are the efforts of Jeremy Hunt, the new foreign secretary. He gravely warned puzzled Europeans last week that Britain was heading for “no-deal by accident” by pushing itself off a cliff. The UK would not “blink first”, he added. Perhaps Hunt thinks he is Clint Eastwood. It matters not. On Brexit, this government has its eyes tight shut. It is blind to the consequences – and the waiting chasm. Blinking does not come into it. What part of the EU’s unchanging position on the principles governing Britain’s future relationship with Europe does May’s government not understand?

For two years or more, Barnier, the chief negotiator, firmly backed by 27 governments, has been telling London there can be no compromise and no fudge that weakens the integrity of the single market, pan-European customs and legal regulations and Europe’s borders. Yet May’s Chequers plan, seeking exceptional (and unworkable) arrangements, blithely ignores all that. In case the European public did not appreciate what was at stake, or was taken in by chauvinistic Tory claims of EU vindictiveness and dogmatism, Barnier published an op-ed in 20 European newspapers last week. Amid Brexit’s baffling complexities, his concision and clarity were refreshing. He explained the EU’s justified fears about the impact of Brexit on Europe and why it cannot reasonably be expected to bow to May’s demands for special treatment:

“The UK knows well the benefits of the single market. It has contributed to shaping our rules over the last 45 years. And yet some UK proposals would undermine our single market, which is one of the EU’s biggest achievements. The UK wants to keep free movement of goods between us, but not of people and services. And it proposes to apply EU customs rules without being part of the EU’s legal order. The UK wants to take back sovereignty and control of its own laws, which we respect, but it cannot ask the EU to lose control of its borders and laws,” Barnier wrote.

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Oh, yeah, they’re going to blame it on the EU.

UK Trade Minister Fox Says EU Is Pushing Britain To No-Deal Brexit (R.)

British trade minister Liam Fox said “intransigence” from the European Union was pushing Britain toward a no-deal Brexit, in an interview published on Saturday by the Sunday Times. With less than eight months until Britain quits the EU, the government has yet to agree a divorce deal with Brussels and has stepped up planning for the possibility of leaving the bloc without any formal agreement. Fox, a prominent Brexit supporter in Prime Minister Theresa May’s cabinet, put the odds of Britain leaving the European Union without agreeing a deal over their future relationship at 60-40. “I think the intransigence of the commission is pushing us toward no deal,” Fox told the Sunday Times after a trade mission in Japan.

“We have set out the basis in which a deal can happen but if the EU decides that the theological obsession of the unelected is to take priority over the economic wellbeing of the people of Europe then it’s a bureaucrats’ Brexit — not a people’s Brexit — (and) then there is only going to be one outcome.” It was up to the EU whether it wanted to put “ideological purity” ahead of the real economy, Fox said. If Britain fails to agree the terms of its divorce with the EU and leaves without even a transition agreement to smooth its exit, it would revert to trading under World Trade Organization rules in March 2019.

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All sociopaths do it. They are defined by their lack of empathy.

Separating Children From Their Parents Puts UK Government To Shame, Too (O.)

Donald Trump’s policy of forcibly separating immigrant parents and children at the US border has been greeted with shock and abhorrence. Around the world, people have listened to audio of young children sobbing for their parents while federal agents crack jokes and heard the stories of children locked up in cages in the richest country in the world. Even the prime minister broke with her usual timidity about Trump’s transgressions to call his family separation policy “deeply disturbing”. What hypocrisy. Less noticed – although no less inhumane – is the British government’s policy of separating parents from their young children as part of immigration detention, all conducted on Theresa May’s watch, first as home secretary, then as prime minister.

Charities such as Bail for Immigration Detainees (BID) have for years been raising the cases of children, many of whom are British citizens, taken into care because their parents have been detained, or even deported, without them. In recent months, a long list of cruelties meted out in the name of the government’s “hostile environment” policy has come to the public’s attention: people who’ve lived in Britain legally for decades, paying their taxes, suddenly denied life-saving NHS care; young people who’ve grown up in Britain facing many thousands of pounds in fees and a multi-year slog to get permanent residency; children raised in care facing the risk of deportation as an adult to a country they don’t know. Any sense of basic justice or human compassion seems to have eluded the Home Office.

But separating tiny children from their parents is cruelty of a whole different order. Today, we report on the case of Kishi, a young mother who dropped her two-year-old off at nursery in order to attend an appointment at an immigration reporting centre. There, she was restrained by immigration security officials and taken to an immigration removals centre. No arrangements were made for her toddler, who was put into emergency foster care when no one came to pick her up, and Kishi was not told where her daughter was for two days. It was another month before she saw her. Kishi and her child are not alone. BID says more than 300 children were removed from their parents in the last 12 months, an increase of 16% on the previous year. Many of those will have been taken into care as a result. The Home Office does not keep records on this; perhaps because it contravenes its own guidance, which says children must not be separated from their parents for immigration purposes if it means they will be taken into care.

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Sometimes I think in Britain it’s not only the economists.

Britain’s Economics Students Are Dangerously Poorly Educated (G.)

This month, the pressure group Rethinking Economics said Britain’s universities were failing to equip economics students with the skills that businesses and the government say they need. Following extensive interviews with employers, including organisations such as the Bank of England, it found that universities were producing “a cohort of economic practitioners who struggle to provide innovative ideas to overcome economic challenges or use economic tools on real-world problems”. Moreover, the group said, “when political decisions are backed by economics reasoning, as they so often are, economists are unable to communicate ideas to the public, resulting in a large democratic deficit.”

You could easily level that criticism at the economists forecasting the impact of AI. What are people supposed to think when those who study the field come up with such wildly varying predictions? More importantly, what will politicians think they should do? Nothing, probably, given the confusion. The Rethinking group is concerned that university departments only train, rather than educate, huge numbers of graduates for econometrics jobs across the banking, insurance and consulting sectors. In our increasingly student-led system, these young people don’t want to mess around with history or modules on inequality. They are on a mission to make money for themselves in the private sector.

If they were diverted into discussions of economic history, they might find out we are about to repeat the mistakes of the past and trigger another financial crisis. Even more inhibiting, their course might show that higher inequality dampens workers’ incentives to increase productivity, and might prompt them to ask why young economists in the City are paid colossal amounts of money to analyse bond yields or forecast oil prices. Pay them less, share the money around, and productivity might improve. Failing that, let a robot do their job.

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John put something like dictatorship in the title. Bit much.

How Reality Is Being Redefined (Slog)

The last burgeoning growth sector on the Planet is the pursuit of redefinition. The idea is first to confuse, then create a climate of acceptance, and finally do away with every form of liberty that stands in the way of power. Both Capital and Labour are actively following the same road. It will be the end of the road for citizen freedom unless they’re both stopped. John Williams at Shadowstats.com reckons that the real unemployment rate in the US is 21.4%. Unimpressed by the US State’s insane assumption that all those no longer able to claim unemployment welfare “have found a job”, Mr Williams provides further fuel for my longstanding thesis that no real recovery can occur – if more and more mass-market consumers work fewer and fewer hours for less and less money or have no job at all – because their personal disposable income is disappearing out of sight. The term ‘in employment’ has been redefined.

When he arrived at the UK Treasury as Chancellor, George Osborne immediately gave notice that he’d be switching from the higher RPI measure of inflation (then at 5.2%) to the lower CPI at 4.5%. That doesn’t sound like much, but one has to remember two things: first, that is a 14% difference in levels that makes inflation look much lower; and second, over time the different impression given is huge: from 1996 to 2011, under the RPI system prices rose 53.6%….but using the CPI method, it only came to 35.6%. Significantly, the CPI system excludes financial services costs and government charges to the consumer. Just fancy that. So the term ‘inflation’ has been redefined.

Within two years of taking office, the Conservative-led coalition’s leader David Cameron started claiming that “the Government’s long-term economic plan is working to create more jobs”. Government Party Political Broadcasts showed the statistics, and yes, it certainly looked that way. But “a job” to most people over the last half century meant 38-40 hours a week with a month’s notice. When analysed, these new jobs were averaging 20 hours a week, often at unsocial hours and frequently on no contracts at all. They typically demand, for example, that the “employee” be ready to come into the workplace without notice. When using the weasel term ‘job’, Cameron was comparing meat and two veg with bread and dripping. So the term ‘job’ has been redefined.

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One thing: people earning a low income ‘rate’ is much higher than 10.6%, and up by much more than 2% in 10 years. Lost in translation?

Greece’s Unemployment Highest in Developed World (GR)

Greece tops all countries in the developed world in unemployment according to the Organization for Economic Cooperation and Development’s (OECD) Employment Outlook 2018. Greece has suffered a dramatic spike in unemployment, with the 2017 total climbing to 21.7% of the working population, more than double the 2006 figure.

Large increases in unemployment and an underutilized workforce were accompanied by falling output, very high debt, a serious GDP deficit and deflation, the report says. Along with its impact on employment levels, the financial crisis caused a reduction in wage growth in a lot of countries, leading to a drop in living standards for many.

The proportion of working-age people earning the “low-income” rate jumped to 10.6%, up from 9.56% a decade earlier. Although Korea, Mexico, and Chile have seen a decrease in the number of low-income households, most of the countries hit hardest by the euro crisis, such as Greece, Italy, Spain and Slovenia, have suffered a 2% rise.

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Thank you Brussels and Berlin.

Greece: An Economy That Has Shrunk So Much It Looks War-Torn (WaPo)

The point is that this kind of economic collapse is usually the symptom of a broader state collapse. Which is why it almost never happens in rich countries. That’s clear enough if you look at the late Angus Maddison’s historical GDP per capita numbers. Going back to 1900, there have been only three general times when European economies have shrunk over a 10-year period as much as Greece’s has since 2008: after World War I, after World War II and after the fall of communism. Most of the exceptions to this involve other wars – in particular, the Balkan wars of the 1910s, the Spanish Civil War, the Greek Civil War and the Yugoslav wars of the 1990s — but there is one that largely took place during peacetime. That was Weimar Germany’s hyperinflation.

It’s worth pointing out what isn’t here: the Great Depression. That wasn’t quite as bad in Europe as it was in the United States — at its nadir in 1933, the U.S. 10-year decline was actually comparable to Greece’s today — partly due to the fact that most European countries were quicker to leave the gold standard when things did start to get more dire. That allowed them to inject enough monetary stimulus into their economies to jump-start almost immediate recoveries. The problem, of course, is that it’s a lot harder for Greece to do the equivalent of that right now. The gold standard and the euro are similar in that they are both fixed-exchange rate systems that can get countries into trouble if they are hit by a big enough shock that their economy “needs” a cheaper currency than it has under the system.

But they’re different in that it’s a lot simpler to say your currency won’t be worth as much gold as it used to than to replace all of your currency with a new one. So instead of stimulus, Greece has gotten austerity — and a lot of it. Under the terms of its just-about-to-be-completed bailout agreement, Greece is actually supposed to keep running primary budget surpluses of at least 2.2 percent of GDP until 2060. That’s right: four more decades of austerity. It’s no wonder, then, that Greece’s economy might not get back to where it was in 2008 until 2030. This is what Europe calls a success: an economy that has shrunk so much it looks war-torn.

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Jun 022018
 


Edward S. Curtis Crow Scout in Winter 1908

 

The US Economy Suddenly Looks Like It’s Unstoppable (CNBC)
Record 95.9 Million Americans Are No Longer In The Labor Force (ZH)
The Pause That Refreshes (Roberts)
EU Joins Global Battle Against Trump Tariff Onslaught (AFP)
Eurozone Not Facing New Debt Crisis – Juncker (R.)
Three Critical Lessons From Europe’s Recent Mini-Meltdown (Black)
EU Lawmakers From Italy’s Coalition Parties Seek Funds To Quit Euro (R.)
Canada Auditor General To Public Service: Stop Ignoring My Reports (CBC)
Greece’s Busiest Port Reveals the Perils of Privatization (Nation)
EU Scraps Plans To Tackle Antibiotics Abuse (G.)

 

 

And I have a bridge in Brooklyn.

The US Economy Suddenly Looks Like It’s Unstoppable (CNBC)

In the face of persistent fears that the world could be facing a trade war and a synchronized slowdown, the U.S. economy enters June with a good deal of momentum. Friday’s data provided convincing evidence that domestic growth remains intact even if other developed economies are slowing. A better-than-expected nonfarm payrolls report coupled with a convincing uptick in manufacturing and construction activity showed that the second half approaches with a tail wind blowing. “The fundamentals all look very solid right now,” said Gus Faucher, chief economist at PNC. “You’ve got job growth and wage gains that are supporting consumer spending, and tax cuts as well. There’s a little bit of a drag from higher energy prices, but the positives far outweigh that. Business incentives are in good shape.”

The day started off with the payrolls report showing a gain of 223,000 in May, well above market expectations of 188,000, and the unemployment rate hitting an 18-year low of 3.8%. Then, the ISM manufacturing index registered a 58.7 reading — representing the%age of businesses that report expanding conditions — that also topped Wall Street estimates. Finally, the construction spending report showed a monthly gain of 1.8%, a full point higher than expectations. Put together, the data helped fuel expectations that first-quarter growth of 2.2% will be the low-water point of 2018. “May’s rebound in jobs together with yesterday’s report of solid income growth and the rise in consumer confidence points to the economy functioning very well,” the National Retail Federation’s chief economist, Jack Kleinhenz, said in a statement.

“Solid fundamentals in the job market are encouraging for retail spending, as employment gains generate additional income for consumers and consequently increase spending.” The most recent slate of widely followed barometers could see economists ratchet up growth expectations. Already, the Atlanta Fed’s GDPNow tracker sees the second quarter rising by 4.8%. While the measure also was strongly optimistic on the first quarter as well, at one point estimating 5.4% growth, other gauges are positive as well. CNBC’s Rapid Update, for instance, puts the April-to-June period at 3.6%.

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The unemployment rate is meaningless. Is that why it keeps being reported?

Record 95.9 Million Americans Are No Longer In The Labor Force (ZH)

In what was otherwise a solid jobs report – one which Donald Trump may or may not have leaked in advance – in which the establishment survey reported that a higher than expected 223K jobs were added at a time when numbers below 200K are expected for an economy that is allegedly without slack, the biggest surprise was not in the Establishment survey, but the household, where the unemployment rate tumbled once more, sliding to a new 18 year low of 3.8%, even as the participation rate declined once again, as a result of a stagnant labor force, which was virtually unchanged (161.527MM in April to 161.539MM in May, even as the total civilian non-inst population rose by 182K to 257.454LMM).

What was perhaps more interesting, however, is that for all the talk that the slack in the labor force is set to decline, precisely the opposite is taking place, because in May, the number of people not in the labor force increased by another 170K, rising to 95.915 million, a new all time high. Adding to this the 6.1 million currently unemployed Americans, there are 102 million Americans who are either unemployed or out of the labor force (and it is also worth noting that of those employed 26.9 million are part-time workers). In other words, contrary to prevailing economist groupthink, there is a lot of slack in the economy, and if as the latest Beige Book revealed, employers are now hiring drug addicts and felons to make up for the shortage of qualified candidates, a long time will pass before wages see significant gains.

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Deutsche is dangerous.

The Pause That Refreshes (Roberts)

As long as interest rates remain low and negative in some cases, debt can continue to be accumulated even with weaker rates of economic growth. More importantly, as long as rates remain low, the banking system can continue to play the “hide-the-debt game” through derivatives, swaps and a variety of other means. But rates are rising, and sharply, on the shorter-end of the curve. Historically, sharply rising rates have been a catalyst for a debt related crisis. As long as everything remains within the expected ranges, the complicated “math” behind trillions of dollars worth of financial instruments function properly. It is when those boundaries are broken that things “go wrong” and quickly so.

People have forgotten that in 2008 a major U.S. financial firm crashed as its derivative based exposure “blew up.” No, I am not talking about Lehman Brothers, the poster-child of the financial crisis, I am talking about Bear Stearns. In just 365-days, Bear Stearns stock went from $159 to $2, with about half of the loss occurring within a few weeks. Bear Stearns was the warning shot for the financial markets in early 2008 that no one heeded. Within a couple of months, the markets dismissed Bear Stearns as a “non-event” and rallied to a higher level than prior to the event, and almost back to highs for the year. Remember, there was “nothing to worry about” at the time, even though the Fed was increasing interest rates, as the “Goldilocks economy” could handle tighter monetary policy.

Sure, housing had been slowing down, mortgage delinquencies were rising, along with credit card defaults, but there wasn’t much concern. Today, we are seeing similar signs.Interest rates are rising, along with delinquencies, defaults, and a slowing housing market. But no one is concerned as the “Goldilocks economy” can clearly offset these mild risks. And no one is paying attention to, what I believe to be, one of the biggest risks to the global financial markets – Deutsche Bank.

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Globalization in reverse.

EU Joins Global Battle Against Trump Tariff Onslaught (AFP)

The EU on Friday launched its first counteroffensive against Washington’s punishing steel and aluminum tariffs while the US began meetings in Canada with outraged finance ministers from its top trading partners. Meanwhile in Washington, US President Donald Trump floated the possibility of scrapping the 24-year-old North American Free Trade Agreement in favor of separate bilateral deals with Canada and Mexico. And in another leg of Trump’s multi-front trade offensive, Commerce Secretary Wilbur Ross arrived in Beijing to continue fraught talks with Chinese officials. Trump has vowed to press ahead with tariffs on as much as $50 billion in imports from China.

Brussels and Ottawa on Friday filed legal challenges at the World Trade Organization against Washington’s decision. The EU, Canada and Mexico also threatened stiff retaliatory tariffs as they pushed back against Trump’s moves. Canadian Prime Minister Justin Trudeau said Friday he was dumbfounded by Washington’s national security basis for the tariffs, given that US and Canadian troops had fought together in World War II, Afghanistan and elsewhere. “This is insulting to them,” he told NBC News. British Prime Minister Theresa May said she was “deeply disappointed” and reiterated a call for Britain and the EU to be “permanently exempted” from the “unjustified” metals tariffs.

At the Group of Seven ministerial meeting in Canada, US Treasury Secretary Steven Mnuchin faced stern reactions from his counterparts, who accused Trump of jeopardizing the world economy with steps that would prove job killers for all concerned. “The French, British and Germans held firm,” French Finance Minister Bruno Le Maire told reporters. “Everyone expressed their complete incomprehension of the American decisions and everyone said it was up to the Americans to take the next step since they were the ones who imposed the tariffs.”

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This is like the owner of a sports team publicly declaring the coach has their full support. Bad sign.

Eurozone Not Facing New Debt Crisis – Juncker (R.)

There is no threat of a new sovereign debt crisis in the euro zone despite an anti-establishment coalition government taking power in Italy, European Commission President Jean-Claude Juncker said in remarks published on Saturday. Asked by the RND network of German newspapers if the single currency bloc faced a new crisis, Juncker said: “No. The reactions of the financial markets are irrational. People should not draw political conclusions from every fluctuation in the stock market. Investors have been wrong on so many occasions before.” A governing coalition comprising two parties hostile to the euro was installed in Italy on Friday, calming markets spooked by the possibility of a new election that might have become a referendum on quitting the single currency. “I am certain the Italians have a keen sense of what is good for their country,” Juncker said. “They will sort it out.”

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It will just take one little spark.

Three Critical Lessons From Europe’s Recent Mini-Meltdown (Black)

1) On the day that the finance minster was rejected, financial markets worldwide tanked. Italy’s stock market plunged 5%, which is considered a major drop. But curiously, the stock market in the US fell as well, with the Dow Jones Industrial Average shedding 400 points. Even markets in China and Japan had significant drops as a result of the Italy turmoil. Now, it’s easy to see why Italy’s markets fell. And even the rest of Europe. But the entire world? Granted, a lot of people made a really big deal out of this event, concluding that it signals the end of the euro.. or Europe itself… or some other such drama. Sure, maybe. But it’s almost impossible to foretell a trend as significant as ‘the end of the euro’ based on a single event.

At face value, the rejection of a cabinet minister in Italy should have almost -zero- relevance on economies as large and diversified as the US, China, and Japan. To me, this is another sign that we’re near the peak of the bubble… and possibly already past it. Markets are so stretched, and investors are on such pins and needles, that even a minor, insignificant event induces panic. And it makes me wonder: if financial markets are so tightly wound that something so irrelevant can cause such an enormous impact, how big will the plunge be when something serious happens?

2) It wasn’t just stocks either. Bond markets were also keenly impacted. Bear in mind that stocks are volatile by nature; prices move much more wildly than other asset classes. But bonds, on the other hand, are supposed to be safe, stable, boring assets. Especially government bonds in highly developed nations. In Italy the carnage was obviously the worst. Investors dumped the 2-year Italian government bond, and yields (which move opposite to prices) surged from 0.9% to 2.4% in a matter of hours. Simply put, that’s not supposed to happen. And it hadn’t happened in at least three decades. Again, though, even in the United States, yields on the US 10-year note dropped 16 basis points overnight, from 2.93% to 2.77% (which means US bond prices increased).

That’s considered MAJOR volatility for US government bonds. To put it in context, the only day over the past few YEARS that saw 10-year yields move more than that was the day after Donald Trump won the US Presidential Election in 2016. So it was a pretty big deal. Again, this leads me to wonder: if safe, stable assets like government bonds can react so violently from such an insignificant event, how volatile will riskier assets be when there’s an actual crisis? Just imagine what’s going to happen to all the garbage assets out there (like unprofitable, heavily indebted businesses) when a real downturn kicks in.

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No, they supported setting up a fund for countries in trouble.

EU Lawmakers From Italy’s Coalition Parties Seek Funds To Quit Euro (R.)

European Union lawmakers from the two parties forming Italy’s new government coalition backed this week a rejected proposal to set up EU funds to help countries quit the euro, a sign of the Italian leadership’s ambivalent position on the common currency. Their vote came as the anti-establishment 5-Star Movement and far-right League were finalising a deal to form an executive in Rome, under pledges that leaving the euro was not in their government programme. The government was sworn in on Friday. An earlier attempt to form a government foundered after the parties proposed as economy minister an economist who had devised a plan for Italy’s departure from the euro zone, prompting his rejection by the head of state.

Despite the declared intentions to stay in the euro, all six EU lawmakers from the League and all but one of the 14 5-Star Members of the European Parliament voted on Wednesday for a document that called for the establishment of programmes of financial support “for member states that plan to negotiate their exit from the euro.” The document voted on by their EU lawmakers called for compensation for “the social and economic damages caused by the euro zone membership.” The document was an amendment to a European Parliament resolution on the EU budget for the 2021-2027 period. The proposal, advanced by three leftist MEPs, was backed by 90 lawmakers but was rejected by a majority of the 750 MEPs.

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Sure this is very recognizable across the globe.

Canada Auditor General To Public Service: Stop Ignoring My Reports (CBC)

Canada’s auditor general says he’s getting tired of filing annual reports recommending reforms to the way the government does business — only to see those recommendations disappear down the memory hole afterward. Michael Ferguson released his spring audits on Tuesday. They included scathing criticisms of the government’s performance on the Phoenix pay system, Indigenous services and military justice. Many of these problems have been highlighted in Ferguson’s reports in the past. And that, he told CBC News, is the problem. “We always get the department agreeing to our recommendation but then somehow we come back five years later, 10 years later and we find the same problems,” he told host Chris Hall on CBC Radio’s The House on Wednesday.

“It almost is like the departments are trying to make our recommendations and our reports go away by saying they agree with our recommendations.” His work has made one thing clear, he said: the federal government has a culture problem that makes meaningful change difficult. “They need to do things to make the results better.” Part of the problem stems from political pressure on the public service, said Ferguson. Politicians tend to think from election to election, he said, which can undermine public servants’ efforts to bring in a longer-term plan. “It seems like the political side of things ends up having more weight in the conversation.” In Parliament, he said — and particularly with respect to Indigenous Services — progress tends to be measured on the basis of how much money the government spends on a particular policy file, and not on measurable outcomes.

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“.. it is clear there were strong interests to see Greece’s public wealth turned over into other peoples’ hands..”

Greece’s Busiest Port Reveals the Perils of Privatization (Nation)

In 2015, as a condition of the $100 billion European Union bailout that followed the 2008 financial crisis, the Greek government agreed to privatize a number of state-held assets including the Piraeus Port Authority, which manages the port’s container and passenger terminals. The Greek state sold a majority stake for $330 million to COSCO. For the Chinese company, the purchase had a clear financial logic. About 80 percent of China’s imports and exports to and from Europe are transported by sea, and by avoiding the need to sail to busy Northern European ports like Rotterdam or Hamburg, COSCO could offload containers in Piraeus, reducing the time it takes cargo to get to Europe by nearly a week. Plus, by owning the port authority, COSCO could help determine how much its own ships would have to pay itself in port fees.

As part of the deal, COSCO pledged to participate in financing $410 million worth of investment in the port, including a repair of port equipment and the dredging of Piraeus’s central port. Supporters of privatization argue these improvements signal a coming maritime renaissance at Piraeus—already the busiest port in the eastern Mediterranean. Nektarios Demenopolous, the deputy manager for investor relations at Piraeus Port Authority, told me, “There are 300 million euros [$350 million] of investment to come in the next five years, followed by another 50 million. Privatization has made the port much more dynamic and will reboot activities at the port like ship repair that have been in recession. It will be remembered as a success story.”

But a “success story” for whom? The dockworkers of Piraeus say they and their families have seen little of the alleged gains brought by COSCO. As Piraeus Port Authority boasts of widening profit margins and increasing maritime traffic, wages for dockworkers haven’t budged since they were slashed from 1500 euros ($1,750) per month to 600 euros after the financial crisis. Beyond that, COSCO now hires few dockworkers as full-time employees, and tends to enlist unskilled laborers for complex container unloading. COSCO also primarily remunerates people on an ad hoc basis as subcontractors, leaving dockworkers and their families entirely dependent on the ebb and flow of traffic into Piraeus. It also means their traditional retirement benefits have disappeared.

The long list of Greek public assets in the privatization pipeline includes Athens International Airport, the oil refiner Hellenic Petroleum, and the electric-grid operator. To date, some roughly $5 billion in Greek state assets, including the Port of Piraeus and Greece’s regional airport network, have been sold, and it is expected that the Greek government will sell nearly $55 billion worth of state assets within the next decade. There is no conclusive evidence that privatized state assets are more efficiently managed than their state-owned predecessors, but privatization is undoubtedly an effective means for a cash-strapped government to raise funds when its creditors are getting impatient. “Piraeus was always a profitable port. However, it is clear there were strong interests to see Greece’s public wealth turned over into other peoples’ hands,” said Giorgos Gogos, head of the Piraeus dockworkers’ union.

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How corrupt is Juncker?

EU Scraps Plans To Tackle Antibiotics Abuse (G.)

The EU has scrapped plans for a clampdown on pharmaceutical pollution that contributes to the spread of deadly superbugs. Plans to monitor farm and pharmaceutical companies, to add environmental standards to EU medical product rules and to oblige environmental risk assessments for drugs used by humans have all been discarded, leaked documents seen by the Guardian reveal. An estimated 700,000 people die every year from antimicrobial resistance, partly due to drug-resistant bacteria created by the overuse, misuse and dumping of antibiotics. The UK’s chief medical officer, Dame Sally Davies, has warned that failing to act could lead to a post-antibiotic apocalypse, spelling “the end of modern medicine” as routine infections defy effective treatment.

Some studies predict that antimicrobial resistance could cost $100tn (£75tn) between now and 2050, with the annual death toll reaching 10 million over that period. An EU strategy for pharmaceuticals in the environment was supposed to propose ways to avert the threat, but leaked material shows that a raft of ideas contained in an early draft have since been diluted or deleted. Proposals that have fallen by the wayside include an EU push to have environmental criteria for antibiotic use included in international agreements as “good manufacturing practice requirements”. This would have allowed EU inspectors to visit factories in Asia or Africa, sanctioning them were evidence of pharmaceutical pollution found.

[..] The pharmaceutical industry spent nearly €40m on lobbying EU institutions in 2015, according to voluntary declarations, and enjoys infamously easy access to officials. Public records show that the European Federation of Pharmaceutical Industries and Associations had more than 50 meetings with the Juncker commission in its first four and a half months of office. In the same period, GlaxoSmithKline had 15 meetings with the commission, Novartis had eight engagements, Sanofi and Johnson & Johnson had six sessions apiece, while Pfizer and Eli Lilly both met with EU officials five times each.

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May 232018
 


Brassaï Couple on a bench, Paris 1932

 

The End Is Nigh For The Biggest Tech Bubble Ever (CNBC)
ECB’s Negative Interest Rate Policy The Funniest Monetary Joke Ever (WS)
The Italian Crisis Is Far From Over (ZH)
Turkish Lira Hits Record Low, Down 20% Against Dollar This Year (R.)
American Women’s $1 Trillion Burden (MW)
22% Of Americans Can’t Pay Bills; 41% Have Less Than $400 In Cash (ZH)
French Unemployment Rises To 9.2% In First Quarter (MW)
EU Rejects May’s Plan For Northern Ireland Border (Ind.)
Nationwide’s UK Mortgage Lending Slumps By A Third (G.)
House Votes To Ease Bank Rules And Send Bill To Trump’s Desk (CNBC)
How Russia and China Gained a Strategic Advantage in Hypersonic Technology
Former Trump Adviser Makes Claim About A Second Informant (DC)
Illegal Online Sales Of Endangered Wildlife Rife In Europe (G.)
Landmark Lawsuit Claims Monsanto Hid Roundup Cancer Danger For Decades (G.)

 

 

Unicorns as defined by venture capitalist Aileen Lee back in 2013: Privately-held startups valued at $1 billion or more.

The End Is Nigh For The Biggest Tech Bubble Ever (CNBC)

In case you missed it, the peak in the tech unicorn bubble already has been reached. And it’s going to be all downhill from here. Massive losses are coming in venture capital-funded start-ups that are, in some cases, as much as 50% overvalued. The age of the unicorn likely peaked a few years ago. In 2014 there were 42 new unicorns in the United States; in 2015 there were 43. The unicorn market hasn’t reached that number again. In 2017, 33 new U.S. companies achieved unicorn status from a total of 53 globally. This year there have been 11 new unicorns, according to PitchBook data as of May 15, but these numbers tend to move around, and I believe the 279 unicorns recorded globally in late February by TechCrunch was the peak, where the start-up bubble was stretched to its limit.

A recent study by the National Bureau of Economic Research concludes that, on average, unicorns are roughly 50% overvalued. The research, conducted by Will Gornall at the University of British Columbia and Ilya Strebulaev of Stanford, examined 135 unicorns. Of those 135, the researchers estimate that nearly half, or 65, should be more fairly valued at less than $1 billion. In 1999 the average life of a tech company before it went public was four years. Today it is 11 years. The new dynamic is the increased amount of private capital available to unicorns. Investors new to the VC game, including hedge funds and mutual funds, came in when the Jobs Act started to get rid of investor protections in 2012, because there were fewer IPOs occurring.

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The US Treasury two-year yield is 2.57% over 10 times higher than the Italian. Go Draghi!

ECB’s Negative Interest Rate Policy The Funniest Monetary Joke Ever (WS)

The distortions in the European bond markets are actually quite hilarious, when you think about them, and it’s hard to keep a straight face. “Italian assets were pummeled again on mounting concern over the populist coalition’s fiscal plans, with the moves rippling across European debt markets,” Bloomberg wrote this morning, also trying hard to keep a straight face. As Italian bonds took a hit, “bond yields climbed to the highest levels in almost three years, while the premium to cover a default in the nation’s debt was the stiffest since October,” it said. “Investors fret the anti-establishment parties’ proposal to issue short-term credit notes – so-called ‘mini-BOTs’ – will lead to increased borrowing in what is already one of Europe’s most indebted economies.”

This comes on top of a proposal by the new coalition last week that the ECB should forgive and forget €250 billion in Italian bonds that it had foolishly bought. The proposals by a government for a debt write-off, and the issuance of short-term credit notes as a sort of alternate currency are hallmarks of a looming default and should cause Italian yields to spike into the stratosphere, or at least into the double digits. And so Italian government bonds fell, and the yield spiked today, adding to the prior four days of spiking. But wait…Five trading days ago, the Italian two-year yield was still negative -0.12%. In other words, investors were still paying the Italian government – whose new players are contemplating a form of default – for the privilege of lending it money.

And now, the two-year yield has spiked to a positive but still minuscule 0.247% at the moment. By comparison, the US Treasury two-year yield is 2.57% over 10 times higher! [..] This is an over-indebted government that doesn’t control its own currency and cannot print itself out of trouble and whose new leadership – made up of the coalition of the Five Star Movement on the left and the League on the right – is proposing a haircut for its creditors to make the debt burden easier, and is also proposing the issuance of an alternate currency to give it more money to spend, even as it also promises to crank up government deficit spending and cut taxes too.

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“As parallel currencies and debt-cancellation become serious discussion points for an Italian government, so European break-up risk is resurging.”

The Italian Crisis Is Far From Over (ZH)

The Italian crisis is far from over and the concept of their ‘mini-BoT’ parallel currency is throwing up some very red flags about the future of the European Union… You just have to know where to look. As Bloomberg’s Tasos Vossos notes, a gauge of euro re-denomination risk (based on the so-called ‘ISDA Basis’ in Italy’s credit default swaps) blew out. What’s more, redenomination risks are spreading as the measure widened in Portugal, Spain, and in France to a lesser extent, according to CMAN data. As parallel currencies and debt-cancellation become serious discussion points for an Italian government, so European break-up risk is resurging.

Simply put, the higher this chart goes, the lower the market ‘values’ an Italian Euro relative to say a German Euro… and thus it is measuring the risk that the European Union – so long defended by Draghi et al. as indestructible – will break up. As Marcello Minenna, head of Quantitative Analysis and Financial Innovation at Consob – the Italian securities regulator, previously noted, “markets do not lie… Italy must avoid remaining with short end of the stick. I wonder if our leadership will rise to the challenge.”

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Erdogan wants lower rates, but if this goes on, he’ll end up with the opposite.

Turkish Lira Hits Record Low, Down 20% Against Dollar This Year (R.)

The Turkish lira weakened sharply against the dollar on Wednesday, bringing its losses to some 20% this year, as investors pushed it to fresh record lows on growing concern about President Tayyip Erdogan’s influence on monetary policy. At 0724 GMT, the lira stood at 4.7642 against the U.S. currency, paring its losses after touching an all-time low of 4.8450 in Asian trade overnight. It has lost as much as 21% of its value since the start of the year. The lira also fell sharply against the Japanese yen, amid talk of Japanese retail investors selling the lira as stop-loss levels were hit.

“The lira fall is now on the agenda of world markets and some are saying there is an increased risk of contagion in other emerging markets from the Turkey risk,” said GCM Securities analyst Enver Erkan. “The necessity of the Turkish central bank taking a significant step is increasing,” he said. A self-described “enemy of interest rates”, Erdogan wants borrowing costs lowered to spur credit growth and construction and said last week he would seek greater control over monetary policy after elections set for June 24.

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Almost twice as much as men. And then they get paid less at the jobs they find.

American Women’s $1 Trillion Burden (MW)

Student debt is on its way to becoming a universally American problem, but there’s more evidence to indicate that it’s a particularly acute challenge for women. The gap between the amount of debt shouldered by male and female graduates has nearly doubled in the past four years, according to a report released Monday by the American Association for University Women. On average, female bachelor’s degree recipients graduated with $2,700 more in debt in 2016 than their male counterparts. That’s up from about a $1,400 gap in 2012. If trends continue on their current trajectory, Kevin Miller, a senior researcher at AAUW and the author of the report, estimates that the outstanding student debt held by women alone could reach $1 trillion over the next year.

If the ratio of debt owed by women versus men stays the same, then men hold about $550 billion at that time. “We’ll be keeping a watch on it,” he said. The data adds to the growing body of evidence — much of which has been published by AAUW — that student debt is a women’s issue. Although they make up just 56% of American college students, women hold nearly two-thirds of America’s outstanding student debt, or about $890 billion, and take longer to pay it off. There are a variety of reasons why this is the case, according to Miller.

For one, women typically have to rely more on loans to finance college because they earn less from their work before they enter college (if they have a job before they start) and while they’re in school. And once women graduate college, the gender pay gap continues to play a role. Women working full-time with college degrees earn 26% less than their male colleagues, according to AAUW, delaying their efforts to repay their loans.

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Small part of a large survey.

22% Of Americans Can’t Pay Bills; 41% Have Less Than $400 In Cash (ZH)

Almost nine years into an economic recovery, 41% of adults in 2017 are unable to afford an unexpected $400 expense without borrowing money or selling something, down from 44% last year. When faced with a hypothetical expense of only $400, 59% of adults in 2017 say they could easily cover it, using entirely cash, savings, or a credit card paid off at the next statement (referred to, altogether, as “cash or its equivalent”). Even without an unexpected expense, the report reveals, 22% of adults expected to forgo payment on some of their bills in the month of the survey. “One-third of those who are not able to pay all their bills say that their rent, mortgage, or utility bills will be left at least partially unpaid.” Altogether, one-third of adults are either unable to pay their bills or are one modest financial setback away from financial hardship, slightly less than in 2016 (35%).

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Protests against Macron are becoming massive.

French Unemployment Rises To 9.2% In First Quarter (MW)

French unemployment rose in the first quarter of the year, the latest indication that the surging eurozone recovery of 2017 is losing momentum in 2018. The unemployment rate in France–the eurozone’s second-largest economy–rose to 9.2% in the first quarter from 9% at the end of 2017, national statistics agency Insee said Wednesday. The deterioration in French unemployment comes as economic growth slowed abruptly in the first quarter of the year after a sharp acceleration at the end of 2017.

The soft economic data and lower business confidence are adding to uncertainty over whether the eurozone is on the cusp of a broad slowdown or just catching its breath before resuming stronger growth. The French government has said unemployment remains in a downward trend despite fluctuations from one quarter to another. In the first quarter of 2017, unemployment stood at 9.6%. France’s statistics agency said Wednesday that increases in unemployment were particularly strong at the start of 2018 and youth unemployment remained above 20%. Long-term unemployment was unchanged in the first quarter from the end of 2017.

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Everybody knew this would happen. But May has nothing else.

EU Rejects May’s Plan For Northern Ireland Border (Ind.)

Brussels has rejected Theresa May’s new customs proposal less than 24 hours after the prime minister set it out in a bid to placate Brexiteers in her cabinet. European Commission officials told The Independent Ms May’s plan would be unacceptable and would go back on previous commitments made by British negotiators. A day earlier the prime minister had said the “backstop” plan to avoid a hard border in Northern Ireland – which keeps Britain in alignment with the single market and customs union if no other agreement is reached – would be time limited. The move was an attempt to assuage Brexiteers such as Boris Johnson, who fear that it would become a backdoor way to keep Britain tied indefinitely to the EU through the customs union and single market.

The controversial fallback arrangements look increasingly likely to come into play, with no other plan for the Northern Ireland border in sight and Ms May’s cabinet deadlocked on what Britain’s future customs relationship with the EU should be. European Commission officials close to the talks told The Independent that British negotiators had already made written commitments for the backstop to apply “unless and until” another solution was found in Northern Ireland, and that there was no way it could be time limited. Facing a backlash over the plan from her pro-Brexit ministers, the prime minister sought to calm their fears, telling reporters on Monday: “If it is necessary, it will be in a very limited set of circumstances for a limited time.”

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They blame it on competition.

Nationwide’s UK Mortgage Lending Slumps By A Third (G.)

Nationwide has reported declining profits for the second year in a row, as net mortgage lending slumped by a third amid intense competition. The UK’s largest building society reported a 7.3% drop in statutory profits to £977m for the year to 4 April, down from £1.05bn the previous year. Profits include the £116m cost of buying back debt. Net mortgage lending fell from £8.8bn to £5.8bn, and Nationwide’s share of the market nearly halved, from 25.4% to 13.0%. Even so, it said it remained the UK’s second-biggest mortgage lender, behind Halifax. The Swindon-based mutual blamed fierce competition that forced it to lower mortgage rates, hurting profit margins, and said there was no sign of a let-up.

Mark Rennison, the Nationwide chief financial officer, said: “Our view is price competition will continue, which is good news for customers.” Nationwide has been hit by the end of the Bank of England’s term funding scheme, which was launched after the Brexit vote to provide cheap finance to enable banks to lend at lower interest rates. Rennison said competition had increased because the big five banks had returned to the market after ringfencing their high street banking operations from the riskier parts of their businesses.

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Two words: Glass-Steagall.

House Votes To Ease Bank Rules And Send Bill To Trump’s Desk (CNBC)

The House voted Tuesday to pass the biggest rollback of financial regulations since the global financial crisis. The margin was 258-159, with 33 Democrats supporting the legislation. The bill will now go to President Donald Trump’s desk. He is expected to sign it into law. The Senate already passed the legislation with bipartisan support. The bill makes good on Republican promises to cut red tape they say hurts businesses, but does not go nearly as far as some GOP lawmakers had hoped. It also appeases some Democrats who argue financial rules passed following the financial meltdown unnecessarily hamstrung small and mid-sized lenders.

The measure eases restrictions on all but the largest banks. It raises the threshold to $250 billion from $50 billion under which banks are deemed too important to the financial system to fail. Those institutions also would not have to undergo stress tests or submit so-called living wills, both safety valves designed to plan for financial disaster. It eases mortgage loan data reporting requirements for the overwhelming majority of banks. It would add some safeguards for student loan borrowers and also require credit reporting companies to provide free credit monitoring services.

Republicans have argued the post-crisis regulations held down lending and economic growth. On Tuesday ahead of the vote, House Speaker Paul Ryan promoted the bill as a boon for community banks — though it boosts medium-sized and regional institutions, as well. “This is a bill for the small banks that are the financial anchors of our communities. … It addresses some of Dodd Frank’s biggest burdens to ease the regulatory costs on these small banks — costs which are ultimately transferred on to consumers,” the Wisconsin Republican said.

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It makes wars useless.

How Russia and China Gained a Strategic Advantage in Hypersonic Technology

The development of hypersonic weapons has been part of the military doctrine that China and Russia have been developing for quite some time, driven by various motivations. For one thing, it is a means of achieving strategic parity with the United States without having to match Washington’s unparallelled spending power. The amount of military hardware possessed by the United States cannot be matched by any other armed force, an obvious result of decades of military expenditure estimated to be in the range of five to 15 times that of its nearest competitors. For these reasons, the US Navy is able to deploy ten carrier groups, hundreds of aircraft, and engage in thousands of weapon-development programs.

Over a number of decades, the US war machine has seen its direct adversaries literally vanish, firstly following the Second World War, and then following the collapse of the Soviet Union. This led in the 1990s to shift in focus from one opposing peer competitors to one dealing with smaller and less sophisticated opponents (Yugoslavia, Syria, Iraq, Afghanistan, international terrorism). Accordingly, less funds were devoted to research in cutting-edge technology for new weapons systems in light of these changed circumstances. This strategic decision obliged the US military-industrial complex to slow down advanced research and to concentrate more on large-scale sales of new versions of aircraft, tanks, submarines and ships.

With exorbitant costs and projects lasting up to two decades, this led to systems that were already outdated by the time they rolled off the production lines. All these problems had little visibility until 2014, when the concept of great-power competition returned with a vengeance, and with it the need for the US to compare its level of firepower with that of its peer competitors. Forced by circumstances to pursue a different path, China and Russia begun a rationalization of their armed forces from the end of the 1990s, focusing on those areas that would best allow them the ability to defend against the United States’ overwhelming military power.

[..] After sealing the skies and achieving a robust nuclear-strategic parity with the United States, Moscow and Beijing begun to focus their attention on the US anti-ballistic-missile (ABM) systems placed along their borders, which also consist of the AEGIS system operated by US naval ships. As Putin warned, this posed an existential threat that compromised Russia and China’s second-strike capability in response to any American nuclear first strike, thereby disrupting the strategic balance inherent in the doctrine of mutually assured destruction (MAD).

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This story will be getting bigger fast.

Former Trump Adviser Makes Claim About A Second Informant (DC)

Former Trump campaign adviser Michael Caputo had much to tell on Monday night when he claimed on Fox News he was approached by a second government informant during his stint on President Donald Trump’s team. “Let me tell you something that I know for a fact,” Caputo said on “The Ingraham Angle” with host Laura Ingraham. “This informant, this person [who] they tried to plant into the campaign … he’s not the only person who came at the campaign. And the FBI is not the only Obama agency who came at the campaign.” “I know because they came at me. And I’m looking for clearance from my attorney to reveal this to the public. This is just the beginning.”

Stefan Halper, a Cambridge professor, has been identified as one FBI informant who approached campaign advisers Carter Page, George Papadopoulos and Sam Clovis. Halper, a veteran of three Republican administrations, approached Page in July 2016 and maintained a relationship through September 2017. Halper approached Papadopoulos on Sept. 2, 2016, with an offer to fly him to London and pay $3,000 for a policy paper on energy issues. Papadopoulos accepted the offer and met Halper several times in London. Halper asked Papadopoulos whether he knew about Russian hacks of Democrats’ emails.

Caputo did not say why he believes he was contacted by a second government informant; he declined to offer additional details, saying he needed clearance from his attorney. He did say the encounter occurred prior to Halper’s outreach to Page. “When we finally find out the truth about this, Director Clapper and the rest of them will be wearing some orange suits,” Caputo said on, referring to former Director of National Intelligence James Clapper.

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The horror. The horror.

Illegal Online Sales Of Endangered Wildlife Rife In Europe (G.)

The online sale of endangered and threatened wildlife is rife across Europe, a new investigation has revealed, ranging from live cheetahs, orangutans and bears to ivory, polar bear skins and many live reptiles and birds. Researchers from the International Fund for Animal Welfare (Ifaw) spent six weeks tracking adverts on 100 online marketplaces in four countries, the UK, Germany, France and Russia. They found more than 5,000 adverts offering to sell almost 12,000 items, worth $4m (£3m) in total. All the specimens were species in which trade is restricted or banned by the global Convention on the International Trade in Endangered Species.

Wildlife groups have worked with online marketplaces including eBay, Gumtree and Preloved to cut the trade and the results of the survey are an improvement compared to a previous Ifaw report in 2014. In March, 21 technology giants including Google, eBay, Etsy, Facebook and Instagram became part of the Global Coalition to End Wildlife Trafficking Online, and committed to bring the online illegal trade in threatened species down by 80% by 2020. “It is great to see we are making really significant inroads into disrupting and dismantling the trade,” said Tania McCrea-Steele at Ifaw. “But the scale of the trade is still enormous.”

Almost 20% of the adverts were for ivory and while the number had dropped significantly in the UK and France, a surge was seen in Germany, where traders developed new code words to mask their sales. “It is a war of attrition and we can never let our guard down,” said McCrea-Steele. The UK is implementing a stricter ban on ivory sales and the EU is under pressure from African nations to follow suit.

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Internal Monsanto communications indicate they knew all along.

Landmark Lawsuit Claims Monsanto Hid Roundup Cancer Danger For Decades (G.)

At the age of 46, DeWayne Johnson is not ready to die. But with cancer spread through most of his body, doctors say he probably has just months to live. Now Johnson, a husband and father of three in California, hopes to survive long enough to make Monsanto take the blame for his fate. On 18 June, Johnson will become the first person to take the globa; seed and chemical company to trial on allegations that it has spent decades hiding the cancer-causing dangers of its popular Roundup herbicide products – and his case has just received a major boost.

Last week Judge Curtis Karnow issued an order clearing the way for jurors to consider not just scientific evidence related to what caused Johnson’s cancer, but allegations that Monsanto suppressed evidence of the risks of its weed killing products. Karnow ruled that the trial will proceed and a jury would be allowed to consider possible punitive damages. “The internal correspondence noted by Johnson could support a jury finding that Monsanto has long been aware of the risk that its glyphosate-based herbicides are carcinogenic … but has continuously sought to influence the scientific literature to prevent its internal concerns from reaching the public sphere and to bolster its defenses in products liability actions,” Karnow wrote.

“Thus there are triable issues of material fact.” Johnson’s case, filed in San Francisco county superior court in California, is at the forefront of a legal fight against Monsanto. Some 4,000 plaintiffs have sued Monsanto alleging exposure to Roundup caused them, or their loved ones, to develop non-Hodgkin lymphoma (NHL). Another case is scheduled for trial in October, in Monsanto’s home town of St Louis, Missouri.

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May 162018
 


Alfred Wertheimer Elvis 1956

 

What If Wall Street Is Waiting For The Wrong Disaster? (BI)
US Mortgage Rates Surge To Highest Level In 7 Years (CNBC)
Economic Numbers Are Less Than Meet the Eye (Rickards)
Argentina Went From Selling 100-Year Bonds To An IMF Rescue In 9 Months (Q.)
Turkey’s Economy Enters A ‘Slow Burning Crisis’ (CNBC)
Investors In Turkey Stunned By Erdogan’s Fight With Markets (R.)
Ecuador Spent Millions On Spy Operation For Julian Assange (G.)
New York City Poised To Join Airbnb Crackdown (Pol.)
US State Lawsuits Against Purdue Pharma Over Opioid Epidemic Mount (R.)
Debt Relief Woes Threaten Greece’s Bailout Exit (K.)
Greece Changes Asylum Rules To Fight Camp Overcrowding (AP)
UK Government Wants To Put A Price On Nature – But That Will Destroy It (G.)
Chimpanzees Have Much Cleaner Beds Than Humans Do (Ind.)

 

 

Deflation.

What If Wall Street Is Waiting For The Wrong Disaster? (BI)

What if the entire world of money is preparing for the wrong disaster — which would be a disaster in and of itself? Since the financial crisis, Wall Street, central-bank heads, economists, and policymakers have been waiting for the return of inflation. At the beginning of this year, they thought they had found it. It came, so they thought, in the form of a weak dollar, wage growth, economic stability in China, and steadily rising interest rates. So here in the US, the Fed started talking about the importance of preparing to fight runaway inflation. In fact, it’s obsessed with the idea. According to Deutsche Bank analyst Torsten Slok, the Fed is talking more about inflation now (in its minutes and in its reports) than it did in 2006 when the economy was actually overheating, right before the crash.

This, even though personal-consumption expenditures haven’t grown by the Federal Reserve’s 2% target since the financial crisis. There’s a lot of noise, from data revisions and Trump tweets, trade-war threats and hopes of growth from tax policy, a wobbling stock market, and rising interest rates. But when it comes down to it, the things that everyone is saying will be sources of inflation may not be sources at all. Meanwhile, the weak dollar, wage growth, and a stable China elixir that got markets high in January have since faded. That should be a warning. If we play our cards wrong and pay attention to all the wrong signs, we may still be in a world tilting dangerously closer to our old enemy, deflation.

[..] As Slok said, aging can’t fully explain why wage growth has been suppressed, but he has other ideas too. “One important reason why the expansion since 2009 has been so weak is that wealth gains have been unevenly distributed (see chart below). A decline in the homeownership rate and the number of households holding stocks has dampened consumer spending growth for the bottom 90% of households,” he wrote in a note to clients back in March.

The deflationary impacts of economic inequality and an aging population are not going away with the flick of a wrist or the push of a button. They are long-term challenges that require imaginative, difficult policy solutions. It’s hard to see that coming from the Trump administration or an increasingly polarized, uncooperative world. So we need to ask ourselves: Are we waiting for the wrong disaster?

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That’s the end?!

US Mortgage Rates Surge To Highest Level In 7 Years (CNBC)

A sharp sell-off in the bond market is sending mortgage rates to the highest level in seven years. The average contract rate on the 30-year fixed will likely end the day as high as 4.875% for the highest creditworthy borrowers and 5% for the average borrower, according to Mortgage News Daily. Mortgage rates, which loosely follow the yield on the 10-year Treasury, started the year right around 4% but began rising almost immediately. They then leveled off in March and early April, only to begin rising yet again. Tuesday’s move follows positive economic data in retail sales, suggesting that newly imposed tariffs would not hit sales as hard as expected.

Rates have been widely expected to rise, as the Federal Reserve increases its lending rate and pulls back its investments in mortgage-backed bonds. But mortgage rates have reacted only in fits and starts. “The bottom line is that the writing on the wall has been telling rates to go higher since at least last September,” said Matthew Graham, chief operating officer of Mortgage News Daily. “Rates keep looking back to see if the writing has changed, and although there have been opportunities for hope (trade wars, stock selling-sprees, spotty data at times), it hasn’t. Today is just the latest reiteration of that writing.”

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10% unemployment.

Economic Numbers Are Less Than Meet the Eye (Rickards)

Let’s start with the employment report. The U.S. Department of Labor, Bureau of Labor Statistics report dated May 4, 2018, showed the official U.S. unemployment rate for April 2018 at 3.9%, with a separate unemployment rate for adult men of 4.1% and adult women of 3.7%. The 3.9% unemployment rate is based on a total workforce of 160 million people, of whom 153 million are employed and 6.3 million are unemployed. The 3.9% figure is the lowest unemployment rate since 2001, and before that, the early 1970s. The average rate of unemployment in the U.S. from 1948 to 2018 is 5.78%. By these superficial measures, unemployment is indeed low and the economy is arguably at full employment.

Still, these statistics don’t tell the whole story. Of the 153 million with jobs, 5 million are working part time involuntarily; they would prefer full-time jobs but can’t find them or have had their hours cut by current employers. Another 1.4 million workers wanted jobs and had searched for a job in the prior year but are not included in the labor force because they had not searched in the prior four weeks. If their numbers were counted as unemployed, the unemployment rate would be 5%. Yet the real unemployment rate is far worse than that. The unemployment rate is calculated using a narrow definition of the workforce. But there are millions of able-bodied men and women between the ages of 25–54 capable of work who are not included in the workforce.

These are not retirees or teenagers but adults in their prime working years. They are, in effect, “missing workers.” The number of these missing workers not included in the official unemployment rolls is measured by the Labor Force Participation Rate, LFPR. The LFPR measures the total number of workers divided by the total number of potential workers regardless of whether those potential workers are seeking work or not. The LFPR plunged from 67.3% in January 2000 to 62.8% in April 2018, a drop of 4.4percentage points. If those potential workers reflected in the difference between the 2018 and 2000 LFPRs were added back to the unemployment calculation, the unemployment rate would be close to 10%.

[..] Another serious problem is illustrated in Chart 1 below. This shows the U.S. budget deficit as apercentage of GDP (the white line measured on the right scale) compared with the official unemployment rate (the blue line measured on the left scale). From the late 1980s through 2009, these two time series exhibited a fairly strong correlation. As unemployment went up, the deficit went up also because of increased costs for food stamps, unemployment benefits, stimulus spending and other so-called “automatic stabilizers” designed to bring the economy out of recession. That makes sense. But as the chart reveals, the correlation has broken down since 2009 and the two time series are diverging rapidly. Unemployment is going down, but budget deficits are still going up.

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Too late to get a new government?

Argentina Went From Selling 100-Year Bonds To An IMF Rescue In 9 Months (Q.)

In financial markets, memories can be short. Last year, Argentina sold 100-year bonds, joining a select club of countries with the confidence to borrow for such an extended period. Yes, the same Argentina that has defaulted on its debt eight times in the past 200 years, including the largest sovereign default in history in 2001. Not long before investors decided it was a good idea to lend to the South American nation for 100 years, it was largely shut out of international capital markets. In June 2017, Argentina sold $2.75 billion of US dollar-denominated 100-year bonds at an effective yield of 8%. The history of defaults seemed to be forgotten—nearly $10 billion in bids were placed for the bonds.

The sale came at a time when investors were hungry for high-yielding debt, but it also showed confidence in president Mauricio Macri and his program of pro-market reforms. Less than a year later, Macri has asked the IMF for a $30 billion loan to help it combat a currency crisis and limit further damage to the Argentinian economy from a dangerous outbreak of market turmoil. What went wrong?

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Not sure it’ll be all that slow. Turekey has borrowed in dollars up the wazoo.

Turkey’s Economy Enters A ‘Slow Burning Crisis’ (CNBC)

Turkey’s economy is overheating and if the government doesn’t act then the country is in trouble, according to several analysts. “The government has no intention of tackling imbalances or overheating,” Marcus Chevenix, global political research analyst at TS Lombard, said in a research note this week. “It is this unwillingness to act that leads us to believe that we can now say that Turkey is entering a slow burning crisis.” The Turkish lira is at a record low against the dollar, and is ranked among the worst-performing currencies this year. After comments this week by Turkish President Recep Erdogan promising to lower interest rates after the country’s June election, the currency tanked to its lowest point yet against the greenback, hitting 4.4527 on Tuesday mid-afternoon.

The dollar has appreciated by around 18% against the lira so far this year. The reason? Erdogan has been sitting on interest rates, opting for a monetary policy that prioritizes growth over controlling its double-digit inflation. Turkey’s growth rate reached an impressive 7.4% for 2017 and leads the G-20, but at the expense of inflation, which has shot up to 10.9%. Market sentiment has driven much of the lira’s sell-off, as investors worry about government intervention in monetary policy and central bank independence. Investors have been hoping for a rate rise by the bank, but that now appears unlikely.

Erdogan plays an unusually heavy-handed role in deciding his country’s monetary policy, and many observers say he keeps the Central Bank of the Republic of Turkey’s (TCMB) hands tied. The bank finally raised its rates for the first time in several sessions in late April, moving its late liquidity window rate (which it uses to set policy) up by 75 basis points to 13.5%. The lira temporarily jumped on the news. But Erdogan aims to bring the rate back down, saying it must be done to ease pressure on Turkish households and drive the growth needed to create jobs for Turkey’s youth. “I’m seriously concerned about the Turkish lira,” Piotr Matys at Rabobank told CNBC via email. “Is Turkey the domino the market expects to fall next? It’s got all those problems — high current account deficit, government borrowing in other currencies.”

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He went to the City for this?!

Investors In Turkey Stunned By Erdogan’s Fight With Markets (R.)

“Shock and disbelief” – that’s how global money managers reacted to an attempt by Turkish President Tayyip Erdogan to re-assure foreign investors about his economic management as the lira went into tailspin. Fund managers who met Erdogan and his delegation in London on Monday, part of a three-day visit to Britain, were baffled about how he plans to tame rising inflation and a currency in freefall – while simultaneously seeking lower interest rates. Some said that while Erdogan has crushed his domestic enemies, he would find taking on international financial markets with policies that defy economic orthodoxy much tougher.

A resurgent dollar, rising oil prices and a jump in borrowing costs have caused havoc across emerging markets in recent weeks. However, Turkey has been among the worst affected due to its a gaping current account deficit and growing puzzlement over who exactly holds the reins of monetary policy. Erdogan’s comments that he planned to take greater control of the economy after snap presidential and parliamentary elections next month deepened investors’ worries about the central bank’s ability to fight inflation, helping to send the lira to a record low on Tuesday.

Rampant inflation dogged Turkey for decades before 2000 and has been back in double digits since the start of 2017. But Erdogan has styled himself as an enemy of high interest rates, defying orthodox monetary policy that prescribes tighter credit to keep a lid on prices. Speaking on condition of anonymity due to the political sensitivity of the meetings, investors told Reuters they were flabbergasted by his stance and willingness to go into battle with world markets at such a fragile time.

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A suggestive and tendentious piece by the Guardian, which seems to prepare us for a justification of Ecuador throwing Julian out. Other articles in today’s paper have titles like “How Julian Assange became an unwelcome guest in Ecuador’s embassy” and “Why does Ecuador want Assange out of its London embassy?”

Ecuador Spent Millions On Spy Operation For Julian Assange (G.)

Ecuador bankrolled a multimillion-dollar spy operation to protect and support Julian Assange in its central London embassy, employing an international security company and undercover agents to monitor his visitors, embassy staff and even the British police, according to documents seen by the Guardian. Over more than five years, Ecuador put at least $5m (£3.7m) into a secret intelligence budget that protected the WikiLeaks founder while he had visits from Nigel Farage, members of European nationalist groups and individuals linked to the Kremlin. Other guests included hackers, activists, lawyers and journalists.

[..] Documents show the intelligence programme, called “Operation Guest”, which later became known as “Operation Hotel” – coupled with parallel covert actions – ran up an average cost of at least $66,000 a month for security, intelligence gathering and counter-intelligence to “protect” one of the world’s most high-profile fugitives. An investigation by the Guardian and Focus Ecuador reveals the operation had the approval of the then Ecuadorian president, Rafael Correa, and the then foreign minister, Ricardo Patiño, according to sources. [..] Worried that British authorities could use force to enter the embassy and seize Assange, Ecuadorian officials came up with plans to help him escape.

They included smuggling Assange out in a diplomatic vehicle or appointing him as Ecuador’s United Nations representative so he could have diplomatic immunity in order to attend UN meetings, according to documents seen by the Guardian dated August 2012. In addition to giving Assange asylum, Correa’s government was apparently prepared to spend money on improving his image. A lawyer was asked to devise a “media strategy” to mark the “second anniversary of his diplomatic asylum”, in a leaked 2014 email exchange seen by the Guardian.

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Force them to open the books.

New York City Poised To Join Airbnb Crackdown (Pol.)

New York’s City Council is plotting a crackdown on Airbnb, the largest home-sharing platform in the world, as the hotel industry and its unionized workers push lawmakers in some of the nation’s biggest cities to blunt the $30 billion company’s growth. New York City’s push resembles a legislative effort underway in Los Angeles, and comes months after San Francisco passed a measure mandating that hosts of short-term rental platforms register their homes with the city, leading to a decline in listings. The coastal cities are among Airbnb’s largest markets in the United States.

The Council is crafting a bill that would require online home-sharing companies to provide the Mayor’s Office of Special Enforcement with the addresses of their listings — a potential blow to Airbnb if its users are revealed to be turning rent-regulated apartments into business enterprises in a city starved for more housing. The move is coming two years after New York’s state Legislature first took aim at Airbnb with a bill that banned the advertising of illegal short-term rentals — but ultimately did little to hurt the company. The New York push comes amid a well-funded advertising and lobbying campaign by the hotel industry, which has run ads supporting a recent report from City Comptroller Scott Stringer that was critical of Airbnb, and is accusing the company of reducing the amount of affordable housing in cities.

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What’s taking so long?

US State Lawsuits Against Purdue Pharma Over Opioid Epidemic Mount (R.)

Litigation against OxyContin maker Purdue Pharma is intensifying as six more U.S. states on Tuesday announced lawsuits, accusing the company of fueling a national opioid epidemic by deceptively marketing its prescription painkillers to generate billions of dollars in sales. U.S. state attorneys general of Nevada, Texas, Florida, North Carolina, North Dakota and Tennessee also said Purdue Pharma violated state consumer protection laws by falsely denying or downplaying the addiction risk while overstating the benefits of opioids. “It’s time the defendants pay for the pain and the destruction they’ve caused,” Florida State Attorney General Pam Bondi told a press conference.

Florida also sued drugmakers Endo Pharmaceuticals, Allergan, units of Johnson & Johnson and Teva Pharmaceutical Industries, and Mallinckrodt, as well as drug distributors AmerisourceBergen, Cardinal Health and McKesson. [..] Lawsuits have already been filed by 16 other U.S. states and Puerto Rico against Purdue. The privately-held company in February said it stopped promoting opioids to physicians after widespread criticism of the ways drugmakers market highly addictive painkillers. Bondi said state attorneys general from New York, California and Massachusetts were preparing similar lawsuits.

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And on and on and on…

Debt Relief Woes Threaten Greece’s Bailout Exit (K.)

The tug of war between the IMF and Berlin over the Greek debt issue is threatening Greece’s successful bailout program exit in August. Germany insists on granting Greece gradual debt relief under the condition that it will be approved every year by the Bundestag. For its part, the IMF disagrees with Berlin’s insistence on reviewing the measures every year and is threatening to leave the Greek program. If the IMF were to leave the program because it thinks that debt relief measures are inadequate to secure the sustainability of Greece’s debt, the country’s access to international market funding will be cast in doubt. This means that, inevitably, the government will have to resort to precautionary credit to shield itself from complications.

The chasm between Berlin and the IMF was clear during Monday’s session of the so-called Washington Group – representatives of Greece’s creditors as well as the governments of Germany, France, Spain and Italy, the biggest eurozone economies. Poul Thomsen, the head of the IMF’s European Department, who attended Monday’s meeting, countered that Berlin’s conditions were not acceptable. Thomsen said Tuesday that the Fund wants to activate the program for Greece but warned that time is running out and asked for final decisions on the matter by the next Eurogroup on May 24.

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Speed up deportations and appeals, restrict freedom of movement. Lovely

Greece Changes Asylum Rules To Fight Camp Overcrowding (AP)

Greece’s parliament approved legislation Tuesday that is designed to speed up the asylum process for migrants, ease the overcrowding at Greek island refugee camps and to deport more people back to Turkey. Under the new law, staff will be added at the office that handles asylum requests, the appeals process for rejected applications will be shortened and travel restrictions can be imposed on asylum-seekers who are moved from the Greek islands to the mainland. Currently, restrictions on asylum-seekers are mostly limited to five islands near the coast of Turkey, where strained refugee camps are trying to cope with up to three times more residents than planned.

More than 16,000 people are stuck there. A group of 13 Greek human rights organizations, however, has accused the government of ignoring refugee rights. The number of newly arriving migrants and refugees has risen sharply this year at the islands and Greece’s land border with Turkey, prompting the change in policy. Police cleared out two abandoned factory buildings used by migrants in the city of Patras in western Greece early Tuesday. More than 600 people will be moved from there to refugee camps on the mainland, police said.

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Have we lost the ability to frame everything in anything else than monetary terms?

UK Government Wants To Put A Price On Nature – But That Will Destroy It (G.)

Never mind that the new environmental watchdog will have no teeth. Never mind that the government plans to remove protection from local wildlife sites. Never mind that its 25-year environment plan is all talk and no action. We don’t need rules any more. We have a pouch of magic powder we can sprinkle on any problem to make it disappear. This powder is the monetary valuation of the natural world. Through the market, we can avoid conflict and hard choices, laws and policies, by replacing political decisions with economic calculations. Almost all official documents on environmental issues are now peppered with references to “natural capital” and to the Natural Capital Committee, the Laputian body the government has created to price the living world and develop a set of “national natural capital accounts”.

The government admits that “at present we cannot robustly value everything we wish to in economic terms; wildlife being a particular challenge”. Hopefully, such gaps can soon be filled, so we’ll know exactly how much a primrose is worth. The government argues that without a price, the living world is accorded no value, so irrational decisions are made. By costing nature, you ensure that it commands the investment and protection that other forms of capital attract. This thinking is based on a series of extraordinary misconceptions. Even the name reveals a confusion: natural capital is a contradiction in terms. Capital is properly understood as the human-made segment of wealth that is deployed in production to create further financial returns.

Concepts such as natural capital, human capital or social capital can be used as metaphors or analogies, though even these are misleading. But the 25-year plan defines natural capital as “the air, water, soil and ecosystems that support all forms of life”. In other words, nature is capital. In reality, natural wealth and human-made capital are neither comparable nor interchangeable. If the soil is washed off the land, we cannot grow crops on a bed of derivatives. A similar fallacy applies to price. Unless something is redeemable for money, a pound or dollar sign placed in front of it is senseless: price represents an expectation of payment, in accordance with market rates. In pricing a river, a landscape or an ecosystem, either you are lining it up for sale, in which case the exercise is sinister, or you are not, in which case it is meaningless.

Still more deluded is the expectation that we can defend the living world through the mindset that’s destroying it. The notions that nature exists to serve us; that its value consists of the instrumental benefits we can extract; that this value can be measured in cash terms; and that what can’t be measured does not matter, have proved lethal to the rest of life on Earth. The way we name things and think about them – in other words the mental frames we use – helps determine the way we treat them.

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Make a fresh bed every day.

Chimpanzees Have Much Cleaner Beds Than Humans Do (Ind.)

Chimpanzees have much cleaner beds – with fewer bodily bacteria – than humans do, scientists have found. A study comparing swabs taken from chimp nests with those from human beds found that people’s sheets and mattresses harboured far more bacteria from their bodies than the animals’ beds did from theirs. The researchers say their findings suggest that our attempts to create clean environments for ourselves may actually make our surroundings “less ideal”. More than a third – 35 per cent – of the bacteria in human beds comes from our own saliva, skin and faecal particles. By contrast, chimps – humans’ closest evolutionary relatives – appear to sleep with few such bacteria.

“We found almost none of those microbes in the chimpanzee nests, which was a little surprising,” said Megan Thoemmes, lead author of the paper. The researchers collected samples from 41 chimpanzee beds – or nests – in Tanzania and tested them for microbial biodiversity. At 15 primates’ nests, researchers also used vacuums to find out whether there were arthropods, such as insects, spiders, mites and ticks. “We also expected to see a significant number of arthropod parasites, but we didn’t,” said Ms Thoemmes. In addition, the team were shocked to find very few fleas, lice and bed bugs – ectoparasites – in the chimp nests.

“There were only four ectoparasites found, across all the nests we looked at. And that’s four individual specimens, not four different species,” said Ms Thoemmes, a PhD student at North Carolina State University. She believes chimps’ beds are cleaner because they make them freshly in treetops each day.

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May 052018
 


Edgar Degas Landscape with Path Leading to a Copse of Trees 1890-92

 

40% Unemployment Ain’t Awesome (Stockman)
The Next Recession Is Closer Than You Think (Cook)
US Lays Down A List Of Trade Demands To China (CNBC)
Theresa May Under Pressure To Ditch New Immigration Clampdown (Ind.)
150,000 UK ‘Mortgage Prisoners’ Need Help To Escape Expensive Deals (Ind.)
Argentina Hikes Interest Rates To 40% Amid Inflation Crisis (Ind.)
Judge In Manafort Case Rebukes Mueller For Exceeding Authority (G.)
The Horsefly Cometh (Jim Kunstler)
Chemical Weapons Watchdog Backtracks On ‘100g Of Novichok’ Claim (Ind. )
Greek Unpaid Taxes Build Up Again As Taxpayers Are Unable To Pay (K.)
Monsanto Appeals To India Supreme Court Over GMO Cotton Patents (R.)
Congo To Drill For Oil In Parks Home To Endangered Mountain Gorilla (Ind.)

 

 

“..at some point it gets pretty hard to hide 16.6 million missing workers..”

40% Unemployment Ain’t Awesome (Stockman)

[..] the Awesome Economy narrative gets more threadbare by the month. As Jeff Snider astutely observed in his commentary on today’s report—at some point it gets pretty hard to hide 16.6 million missing workers. What he means is that if the labor force participation rate had not plunged from more than 67.0% to the 62.8% level reported again for April, there would be 16.6 million more persons employed in the US economy today at the ostensible 3.9% unemployment rate.

“Here in the United States, the Bureau of Labor Statistics (BLS) sends us another farce. These payroll Friday’s were always a little overwrought, but in the past four years they have become ridiculous spectacles. It’s not the fault of the BLS (apart from questions about their estimates for 2014), mainly it is the same issue as in Japan. What should be obvious is misinterpreted sometimes intentionally. According to the latest figures, the unemployment rate in the US is now down to 3.9%. The reason it crossed the 4% line in April was perfect. Not in the manner of what a 3.9% unemployment should indicate, rather it was all the wrong things that expose the unemployment rate for what it is – meaningless. The primary reason for its drop was another monthly subtraction from the labor force. Down for a second month in a row, in April by 236k, the HH Survey managed to increase by all of 3k. The result: a perfectly representative decline to 3.9%.”

The Keynesian gummers reject Snider’s point entirely, of course, on the vague theory that retirements and the aging demographics of the US explain away much of the change in the participation rate. As a matter of fact, they don’t. And, besides, the whole BLS employment/unemployment reporting framework and model is essentially a pile of garbage that might have been relevant during the days of your grandfather’s economy, if even then. That is, it is built on the flawed notion that labor inputs can be accurately measured by a unit called a “job” and that an economic trend in motion tends to stay in motion.

To the contrary, in today’s world labor is procured by the hour and by the gig—meaning that the “job” units counted in both the establishment and household surveys are a case of apples, oranges and cumquats. The household survey, for example, would count as equally “employed” a person holding: • a 10-hour per week gig with no benefits; • a worker holding three part-time jobs adding to less than 36 hours per week with some benefits; and • a 50-hour per week manufacturing job (with overtime) providing a cadillac style benefit package.

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How about Kondratieff?

The Next Recession Is Closer Than You Think (Cook)

Business cycles run for periods of years, not days, weeks, or months. So business cycle analysis is different from the common definition of market-timing because it is concerned with a much longer time horizon. It is difficult for anyone other than politicians to deny the existence of a business cycle, which includes both an expansion and a recession phase because they are a fact of economic life. A recent Goldman Sachs research piece not only acknowledges the existence of cycles but divides them into four phases and produces recommended asset allocations for each phase, as shown below.

Goldman’s investment recommendation for 2018 is based on the belief that 2018 lies within Phase 3, in which the economy is operating above capacity and growing. More broadly, Goldman’s chart and table show that identifying the Phases is a crucial determinant of investment success. For example, if 2018 truly lies within Phase 4, cash and bonds would outperform commodities and equities. \The Fed appears to agree with Goldman’s analysis of Phase 3, based on its simultaneous campaigns to lift the Fed Funds rate and to reduce the size of its bond holdings that were acquired during its QE experiment. In another admission that business cycles exist, Bank of America/Merrill Lynch (BAML) produces a monthly Fund Manager Survey, in which it asks the largest institutional investment managers a simple question; where are we in the business cycle?

[..] The BAML survey extends further back than 2008, so we can get a better idea of investors’ beliefs leading to the recession of 2008-09, as shown below. During these years, investors were given two other choices to describe the economy; early-cycle or recession. A majority of investors believed the economy was late-cycle beginning in 2005, with a peak in that belief occurring in late 2007 (thin black line), which coincided with a continuous decline in the percentage believing the economy was mid-cycle. During the period 2005-2007, almost no investors believed that the economy was in either in its early-cycle or recession.

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China is negotiating.

US Lays Down A List Of Trade Demands To China (CNBC)

The U.S. stands ready to impose further trade tariffs on Chinese products if Beijing walks away from agreed-upon commitments, according to a reporter at the Wall Street Journal. Trade representatives from the U.S. and China entered a second day of trade discussions on Friday, as the world’s two largest economies sought to find a way to stave off global concerns of a full-blown trade war. The discussions, led by Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, are expected to cover a wide range of U.S. complaints about alleged unfair trade practices in Beijing. A major breakthrough deal to fundamentally change China’s economic stance was widely viewed as highly unlikely.

In a tweet posted Friday, Lingling Wei, a China economics correspondent at the Wall Street Journal, said the U.S asked China to reduce its trade surplus by at least $200 billion by year-end 2020, citing a document issued to the Chinese before the talks. President Donald Trump has often called on China to reduce its bilateral trade deficit by $100 billion a year. The U.S. trade envoy also wanted China not to target U.S. farmers and agricultural products and sought assurances from the Asian giant that it would not retaliate over restrictions on investments from Beijing, Wei said.

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The entire British press seems set on ignoring Labour’s win. Which, true enough, isn’t big enough.

Theresa May Under Pressure To Ditch New Immigration Clampdown (Ind.)

Theresa May is under mounting pressure to ditch a fresh immigration clampdown dubbed “the next Windrush”, ahead of a crucial Commons vote next week. Thirty-four organisations have joined forces to urge the prime minister not to repeat the blunders that sparked the scandal by preventing other immigrants from proving their right to be in the UK. Under planned new data laws, people will be denied access to the personal information the government holds about them if releasing it would “undermine immigration control”. Leading lawyers have warned that withholding potentially vital proof would lead to people being wrongly deported, detained or denied health treatment – in a mirror image of the treatment of the Windrush generation.

On Wednesday, Labour and the Liberal Democrats will join forces to try to throw out the exemption, arguing it is the “first test” of Ms May’s promise to learn the lessons of the Windrush debacle. Now, the joint letter – seen by The Independent – brings together human rights campaigners, trade unions, migrant support groups and law firms to warn it will “foster fear within minority communities”. Unless halted, the plan will make it “near-impossible” to prevent the “disposing of information that could help people prove their right to reside in the UK – as it did with the Windrush landing cards”, they say. People would also avoid using essential public services “for fear that their medical or school records will be secretly passed to the Home Office”.

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The lenders don’t own the loans anymore, they’ve been packaged and sold.

150,000 UK ‘Mortgage Prisoners’ Need Help To Escape Expensive Deals (Ind.)

Tens of thousands of people are “mortgage prisoners”, trapped on expensive deals and not allowed to switch, the financial regulator has said. The Financial Conduct Authority urged for more innovation to help around 150,000 people who signed up for deals before interest rates plummeted after the financial crisis. They have since been switched to more expensive “reversion rates” once their previous deal expired and are unable to switch because they do not meet stricter affordability rules which have been brought in. Christopher Woolard, director of strategy and competition at the FCA, said: “For many, the market is working well, with high levels of consumer engagement. “However, we believe that things could work better with more innovative tools to help consumers.

“There are also a number of long-standing borrowers that have kept up-to-date with their mortgage repayments but are unable to get a new mortgage deal; we want to explore ways that we, and the industry, can help them.” The FCA said it will consider seeking an industry-wide agreement to approve applications from those who are affected and are up-to-date with payments. However, this will only help 30,000 people who are with authorised mortgage lenders. The remaining 120,000 are with firms who are not authorised to lend, often because the lender has sold on a batch of mortgages. These firms are outside the FCA’s remit, which is set by parliament, meaning new legislation would be required to enable the regulator take action.

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“..large twin budget and current account deficits, a heavy dollar debt burden, entrenched high inflation and an overvalued currency..”

Argentina Hikes Interest Rates To 40% Amid Inflation Crisis (Ind.)

Argentina has jacked up its interest rates to 40 per cent in a drastic attempt to keep a lid on domestic inflation and stabilise its currency. The Latin American country’s central bank announced the hike on Friday, the third in seven days, saying it would keep using the tools at its disposal to get inflation back down to it 15 per cent target. Inflation in the country is currently running at 25.4 per cent, despite the investor-friendly economic reforms of President Mauricio Macri. Argentina is one of several emerging market economies that have suffered from currency pressure in recent weeks as the US dollar has strengthened and foreign capital has been withdrawn.

“Investors are moving out of [emerging markets], frontier [economies], and other risky assets and so countries like Argentina remain at heightened risk,” said Win Thin of Brown Brothers Harriman. The value of the Argentinian peso has declined from 18.6 against the greenback in January to 23 this week. President Macri succeeded the Peronist Cristina Fernandez de Kirchner in 2015 and has been seeking to reverse her policies of protectionism and high government spending. “This crisis looks set to continue unless the government steps in to reassure investors that it will take more aggressive steps to fix Argentina’s economic vulnerabilities,” said Edward Glossop of Capital Economics.

“Risks to the peso have been brewing for a while – large twin budget and current account deficits, a heavy dollar debt burden, entrenched high inflation and an overvalued currency. The real surprise is how quickly and suddenly things seem to be escalating.”

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“It’s unlikely you’re going to persuade me the special prosecutor has power to do anything he or she wants. ..”

Judge In Manafort Case Rebukes Mueller For Exceeding Authority (G.)

A federal judge has rebuked the special counsel investigating alleged collusion between Trump aides and Russia, for overstepping his bounds in a criminal case against the president’s former campaign manager. Robert Mueller last year brought tax and bank fraud charges against Paul Manafort, the first indictment in the Russia investigation. Manafort maintains his innocence. On Friday TS Ellis, a judge in the eastern district of Virginia, suggested that Mueller’s real motivation for pursuing Manafort was to compel him to “sing” against Trump. “You don’t really care about Mr Manafort’s bank fraud,” the judge, reportedly losing his temper, challenged lawyers from the office of special counsel.

“You really care about getting information Mr Manafort can give you that would reflect on Mr Trump and lead to his prosecution or impeachment.” The comments, at a tense court hearing in Alexandria, were a boost for Manafort’s lawyers who contend that the charges against him are outside Mueller’s mandate to investigate Russian interference in the 2016 election. Ellis added: “I don’t see what relationship this indictment has with anything the special counsel is authorised to investigate. “We don’t want anyone in this country with unfettered power. It’s unlikely you’re going to persuade me the special prosecutor has power to do anything he or she wants. The American people feel pretty strongly that no one has unfettered power.”

[..] Ellis withheld ruling on dismissal of the indictment. He asked the special counsel’s office to share privately with him a copy of deputy attorney general Rod Rosentein’s August 2017 memo elaborating on the scope of Mueller’s Russia investigation. The current version has been heavily redacted, he said. Leaving the White House on his way to Texas on Friday, Trump claimed he would welcome an interview with Mueller. “So I would love to speak,” he told reporters. “I would love to go. Nothing I want to do more, because we did nothing wrong. We ran a great campaign. We won easily.” But he added: “I have to find that we’re going to be treated fairly, because everybody sees it now, and it is a pure witch-hunt. Right now, it’s a pure witch-hunt.”

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The FBI is far from squeaky clean.

The Horsefly Cometh (Jim Kunstler)

You can see where this Mueller thing is going: to the moment when the Golden Golem of Greatness finally swats down the political horsefly that has orbited his glittering brainpan for a whole year, and says, “There! It’s done.”

It suggests that Civil War Two will end up looking a whole lot more like the French Revolution than Civil War One. The latter unfurled as a solemn tragedy; the former as a Coen Brothers style opéra bouffe bloodbath. Having executed the presidential swat to said orbiting horsefly, Trump will try to turn his attention to the affairs of the nation, only to find that it is insolvent and teetering on the most destructive workout of bad debt the world has ever seen. And then his enemies will really go to work. In the process, they’ll probably wreck the institutional infrastructure needed to run a republic in constitutional democracy mode.

They got a good start in politicizing the upper ranks of the FBI, a fatal miscalculation based on the certainty of a Hillary win, which would have enabled the various schemers in the J. Edgar Hoover building to just fade back into the procedural woodwork of the agency and get on with life. Instead, their shenanigans were exposed and so far one key player, Deputy Director Andrew McCabe, was hung out to dry by a committee of his fellow agency execs for lying about his official conduct. Long about now, you kind of wonder: is that where it ends for him? Seems like everybody else (and his uncle) is getting indicted for lying to the FBI. How about Mr. McCabe, since that is exactly why his colleagues at the FBI fired him?

Perhaps further resolution of this murky situation awaits Inspector General Michael Horowitz’s forthcoming report, which the media seems to have forgotten about lately. An awful lot of the mischief at the FBI and its parent agency, the Department of Justice, is already on the public record, for instance the conflicting statements of Andrew McCabe and his former boss James Comey concerning who illegally leaked what to the press. On the face of it, it looks pretty bad when at least one of these Big Fish at the top of a supposedly incorruptible agency is lying. There are at least a dozen other Big Fish in there who still have some serious ‘splainin’ to do, and why not in the grand jury setting?

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There goes the OPCWs credibility.

Chemical Weapons Watchdog Backtracks On ‘100g Of Novichok’ Claim (Ind. )

The international chemical weapons watchdog has backtracked on a suggestion that as much as 100 grams of nerve agent may have been used in the poisoning of former Russian spy Sergei Skripal and his daughter Yulia. Ahmet Uzumcu, director general of the Organisation for the Prohibition of Chemical Weapons (OPCW), had said the relatively large quantities of novichok used suggested it had been created as a weapon rather than for research purposes. But a new OPCW statement said the organisation was not able to “estimate or determine the amount of the nerve agent that was used” in the incident. Mr Uzumcu had said samples collected suggested the nerve agent used to poison the Skripals was of “high purity”.

He said: “For research activities or protection you would need, for instance, five to 10 grams or so, but even in Salisbury it looks like they may have used more than that. “Without knowing the exact quantity, I am told it may be 50, 100 grams or so, which goes beyond research activities for protection. “It’s not affected by weather conditions. That explains, actually, that they were able to identify it after a considerable time lapse.” It came as Czech President Milos Zeman said his country had produced small quantities of novichok. Britain has argued the use of Novichok – which was developed by the former Soviet Union in the 1980s – meant there was no “plausible alternative” explanation other than the Russian state was behind the attack.

However Mr Zeman’s comments were seized on by President Vladimir Putin’s spokesman Dmitry Peskov, who said they were a “clear illustration of the groundless stance the British authorities have taken”.

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And they want you to believe the economy is growing.

Greek Unpaid Taxes Build Up Again As Taxpayers Are Unable To Pay (K.)

Concerns are growing in the Finance Ministry as expired debts to the tax authorities grew at an unexpectedly high rate in March – a month with no major obligations. Unpaid taxes came to 776 million euros in March, taking total new arrears to the state in the first quarter of the year to 3.55 billion euros. According to figures released on Friday by the tax administration, the sum of old and new debts to the state amounted to 101.6 billion euros at end-March. Out of the 3.55 billion created in Q1, 3.3 billion euros was in the form of unpaid taxes. Ministry officials argue that the increase in tax debts is due to the fact that many taxpayers missed the deadlines for them to pay installments as part of debt settlement programs concerning the revelation of previously undeclared incomes.

Other reasons cited are that taxpayers have failed to pay fines, as well as many individuals and enterprises having exhausted all means for paying taxes. If this situation continues in the following months, the hole in budget revenues will grow considerably, given that the submission process for income tax statements has just begun and the first tranche is payable by end-July. The state’s response to this phenomenon is confiscations, which in March alone numbered 21,275. This takes the sum of taxpayers who have suffered confiscations to 1,109,971, while the total number of Greeks owing to the state has risen to 3,907,847.

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“..agricultural products, including seeds, cannot be patented in India..”

Monsanto Appeals To India Supreme Court Over GMO Cotton Patents (R.)

Monsanto has appealed to the Supreme Court against a ruling by the Delhi High Court which decreed last month that the world’s biggest seed maker cannot claim patents on its genetically modified or GM cotton seeds, a company spokesman said on Friday. The Delhi High Court on April concurred with Indian seed company Nuziveedu Seeds Ltd (NSL), which argued that the Patent Act does not allow Monsanto any patent cover for its genetically modified cotton seeds. Monsanto has appealed to the Supreme Court, said a Monsanto India spokesman. “In the Supreme Court, we’ll maintain our stand that agricultural products, including seeds, cannot be patented in India,” said Narne Murali Krishna, a company secretary for NSL.

“The judgement of the Delhi High Court has already vindicated our stand.” New Delhi approved Monsanto’s GM cotton seed trait, the only lab-altered crop allowed in India, in 2003 and an upgraded variety in 2006, helping transform the country into the world’s top producer and second-largest exporter of the fibre. Monsanto’s GM cotton seed technology went on to dominate 90 percent of India’s cotton acreage. But for the past few years Monsanto has been at loggerheads with NSL, drawing in the Indian and US governments, Reuters revealed last year.

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Gorilla’s, bonobos, dwarf chimpanzees, Congo peacocks and forest elephants…

Congo To Drill For Oil In Parks Home To Endangered Mountain Gorilla (Ind.)

The Democratic Republic of Congo is planning to reclassify two protected national parks to allow oil exploration. Documents seen by The Independent show the government wants to redraw the boundaries of the Salonga and Virunga national parks, which are home to critically endangered species such as mountain gorillas, to remove protected status from certain areas. Both parks are UNESCO World Heritage sites, a status which in theory should protect them from oil exploration and other extractive activities. In a letter, Congo’s oil minister Aime Ngoi Muken invited the environment minister and the minister for scientific research to a special commission meeting to discuss the plans on 27 April.

Minutes and notes of the meeting give more details about the areas in which the Congolese government wants to allow exploration. In another series of letters seen by NGO Global Witness, Congo’s oil minister Ngoi Muken argued for the need to open up the protected sites for oil exploration and set out the legal procedures to do so. Global Witness said the plans would be a violation of the UNESCO World Heritage Convention to which the Democratic Republic of Congo is a signatory. The Virunga park is one of the most biologically diverse areas on the planet and is home to about a quarter of the world’s remaining mountain gorillas. According to UNESCO, the Salonga park is Africa’s largest tropical rainforest, home to many endangered species such as bonobos, dwarf chimpanzees, Congo peacocks and forest elephants.

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Jun 122016
 
 June 12, 2016  Posted by at 10:21 am Finance Tagged with: , , , , , ,  


Jack Delano Worker inspecting locomotive, Proviso Yard 1942

European Central Bank Preparing for Brexit (IS)
We’re Rich! We’re Rich! Are Inflated Asset Prices Like Real Wealth? (SA)
The Pension Bubble: How The Defaults Will Occur (PD)
Bulging Pension Funds Lure US Asset Managers to Australia (WSJ)
‘Condition Red Alert’ – Albert Edwards (BI)
ECB Corporate Bond-Buying Program Makes Up Almost 1 In 5 Trades (CNBC)
Real Unemployment Rate More Than Double The Official Number: CLSA (ZH)
Where Do Matters Stand? (Paul Craig Roberts)

“..Brexit might potentially be a worse hit to mainland Europe than to the UK itself..”

European Central Bank Preparing for Brexit (IS)

The European Central Bank said they are gearing up for the UK leaving the EU by activating swap lines to financial institutions should the Brexit trigger capital outflows in the short-term. Meanwhile, major European Banks are already facing declines in stock valuation, with dynamics in yield curves suggesting the market is weighing a greater possibility of the ‘Out’ vote in the UK. As volatility increases ahead of the June 23 referendum, additional euro-denominated liquidity might come in handy for the European banking system, particularly so given that the ultra-accommodative monetary conditions are failing to boost either growth or inflation in the near-to-mid-term.

The ECB announced they are ready to pour extra euro liquidity to financial institutions through the existing mechanisms of swap lines should the UK decide to leave the EU. In such a scenario, additional euros would help calm the markets and boost the already-battered banking sector capitalization, staving off the risks of massive financial turmoil amidst the uncertainty of the potential effects of Britain’s separation from the bloc. “Life won’t change much after the referendum — these agreements and contracts will still be in force,” Ilmars Rimsevics of the ECB Governing Council, and also the head of Latvia’s central bank said. “If they’ll be needed and there is some sort of shock, then of course these lines will work.”

Meanwhile, the European banks are tumbling and crumbling, as the prospect of Brexit becomes increasingly likely. During the past two weeks, the European financial institutions suffered the worst blow to their capitalization in two years, hinting at possible massive capital outflows in case of Brexit. Deutsche Bank dropped to its record lowest, according to European stock market data. Considering these developments, Brexit might potentially be a worse hit to mainland Europe than to the UK itself. Either way, the upside of this is that the overheated European stock markets would cool to be more in line with the sluggish overall growth in the region.

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“..the U.S. economy is by far the best it has ever been and total household wealth is clearly vastly superior to prior periods.”

We’re Rich! We’re Rich! Are Inflated Asset Prices Like Real Wealth? (SA)

The Federal Reserve recently released the latest “Financial Accounts of the United States” and I am pleased to inform readers that the U.S. economy is by far the best it has ever been and total household wealth is clearly vastly superior to prior periods. In a nutshell, we’ve done it. We beat back the last recession and generated enormous amounts of new wealth by having asset prices for existing wealth move higher. Who says you need growth in GDP or that real wealth has to be measured in having the goods and services that improve human lives? The financial accounts clearly show that the total household wealth in the United States has grown dramatically and vastly outpaced inflation so long as inflation is measured in other terms.

[..] Say you live in a city where the hospital has only one ambulance. If you have a heart attack, you may be out of luck. If the hospital can acquire a second ambulance, the community has gained a form of real wealth. That ambulance can provide a service that can save lives. In such a situation, you might feel that your odds of surviving a heart attack had improved. On the other hand, if the price of ambulances doubled it would do nothing to improve your odds of surviving. Unfortunately, either of these situations would double asset value recorded for ambulances. Since inflation rates are low over the last several years there is a general theory that the impact of inflation is not material to these measurements.

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Slowly?!

The Pension Bubble: How The Defaults Will Occur (PD)

Experts worry about stock, bond and real estate market excesses. But a bubble is forming that dwarfs them all: in pension plans. Millions of Americans and Canadians who are counting on pension benefits to fund their retirements risk being severely disappointed. The hard money community has, of course, been aware of this for some time. However in recent years, even the elites have been taking notice. One such group, the International Forum of the Americas, will be holding its fourth annual pension conference in Montreal next Monday. There politicians, financiers and monetary policy officials will discuss the declining rates of return in public and private sector pension plans. The picture they will paint is increasingly grim.

Pension funds, which have been issuing over-optimistic revenue forecasts for years, aren’t going to earn nearly enough money to pay the benefits recipients expect. Much of this relates to secular stagnation in the economy. Bonds, which form a major part of most plans’ holdings, earn next to nothing in interest. Stocks, which are trading at record levels, despite falling corporate earnings, look to have more downside risk than upside potential. Worse, if bond returns average 2%, balanced portfolios projecting 7% to 8% annual returns, have to earn 12% to 14% on equities investments to make up the difference. That’s unlikely to happen. At least private sector plans have some money in them – public sector plans are in even in worse shape. Governments have almost nothing put aside to fund future retirees – and they don’t even fully list their debts.

That process of “cooking the books” ramped up in a major way during Bill Clinton’s administration, whom Hillary Clinton, the current Democratic Presidential nominee, has promised to “put in charge of the economy.” The upshot is that most Americans and Canadians have no clue how far in debt their countries are. Researchers such as Laurence Kotlikoff , a professor at Boston University and a write-in candidate for President in 2016, suggest that unfunded pension and other liabilities run into the tens of trillions of dollars in the United States. The Fraser Institute has shown that Canada isn’t much better.

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Hedge funds will help pension funds default.

Bulging Pension Funds Lure US Asset Managers to Australia (WSJ)

U.S. asset managers are going for the hard sell in Australia in a bid to woo some of the world’s most cashed-up pension funds as clients. The push is being led by hedge funds and other firms offering so-called alternative investments in anything from almond plantations to oil futures. Several large U.S. asset managers recently opened offices in Sydney. Others have forged alliances with local fund managers and some already-established players are adding more sales staff.

Los Angeles-based Oaktree Capital Management, which invests in commercial mortgages and debt of financially troubled companies, opened a local branch here in March. U.S. giant TIAA Global Asset Management, which for years has been buying up Australian farmland, timber plantations and shopping malls, last year cemented its presence with a Sydney office. A major draw for foreign managers is the country’s two trillion Australian dollars (about US$1.5 trillion) in retirement savings, one of the largest and fastest-growing pools of pension money in the world. “Everyone wants to get their hands on that pie,” said Jesse Huang at Boston-based quantitative hedge fund PanAgora Asset Management. “People think there’s a lot of money to be made in Australia.”

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“It is not a pleasant place. It is cold, dark, and damp..”

‘Condition Red Alert’ – Albert Edwards (BI)

“The key to the Ice Age thesis is to sound CONDITION RED ALERT as each recession approaches, because the equity outcome then always proves much worse than anyone expects due to the additional phase of secular de-rating..” In the aftermath of the latest, weaker than expected, nonfarm payroll data, economists are certainly more worried. The excellent folks at Advisor Perspectives highlight the Fedis Labour Market Conditions Index as suggesting a recession is imminent (the cumulative peak is an average of 9 months ahead of the start of recession and we are now four months beyond a peak. For investors who think copper still has some predictive power, its recent move is disturbing.

This, of course, is just another recession in Edwards’ Ice Age thesis, which posits that during long-term equity downturns, it takes at least four recessions to work through. So far, according to Edwards, we have only had two since the top of the bubble in 2000, so we still have a way to go until the pain is over. “The secular bear market only ends when cyclically adjusted valuation measures reach rock bottom (such as the Shiller PE on the bottom line),” said Edwards. “Each successive recession (red part of real S&P top line) sees huge downturns, usually to new lower lows of both prices and valuations. That is why we reiterated our view early this year that in the coming recession the S&P will bottom at 550, a 75% decline from current levels.”

Edwards maintains that he is bearish for a reason, despite it being a difficult spot. “We remain at the bearish extreme of the market,” he wrote. “It is not a pleasant place. It is cold, dark, and damp. People either don’it speak to you or send you abusive emails. Members of your own family pretend not to know you. Actually, I made that last bit up.”

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They’re shooting for more.

ECB Corporate Bond-Buying Program Makes Up Almost 1 In 5 Trades (CNBC)

Nearly 19% of all corporate bond activity in the past two days is down to the European Central Bank’s corporate bond-buying program, according to insights from market data provider Trax. The ECB formally kicked off its corporate bond buying program on June 8th, a move heralded by President Mario Draghi in March. As part of its plan, the ECB will buy euro-denominated investment grade bonds issued by companies in the euro area. Data from Trax released Friday showed that in the whole of 2015, corporate bond buying accounted for 12% of all corporate bond activity processed by Trax. This number went up to 14% in just the first half of 2016, the firm reported. The company processes approximately 65% of all fixed income transactions in Europe through its post-trade services.

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What everyone knows.

Real Unemployment Rate More Than Double The Official Number: CLSA (ZH)

While everyone loves to focus on the headline unemployment rate as a reason to say the economy is doing well, especially those at the Fed trying to justify hiking rates into a recession, or those in the current administration trying to establish a legacy of being a market whisperer, the facts get in the way of that narrative. We continuously remind those who are interested in the truth that the number of Americans who are no longer in the labor force has hit an all time high of 94.7 million. If one were to factor in the low labor force participation rate, the actual unemployment rate would be significantly higher than the 4.7% headline.

According to CLSA economists, who have updated an analysis we first did in the summer of 2010, if the participation rate stayed at the levels before the financial crisis, the unemployment rate would be 9.6%, more than double what it is today.

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“..the West is incapable of producing leadership capable of preserving life on earth.”

Where Do Matters Stand? (Paul Craig Roberts)

On the eve of World War II the United States was still mired in the Great Depression and found itself facing war on two fronts with Japan and Germany. However bleak the outlook, it was nothing compared to the outlook today. Has anyone in Washington, the presstitute Western media, the EU, or NATO ever considered the consequences of constant military and propaganda provocations against Russia? Is there anyone in any responsible position anywhere in the Western world who has enough sense to ask: “What if the Russians believe us? What if we convince Russia that we are going to attack her?” The same can be asked about China.

The recklessness of the White House Fool and the media whores has gone far beyond mere danger. What do the Russians think when they see that the Democratic Party intends to elect Hillary Clinton president of the US? Hillary is a person so crazed that she declared the president of Russia to be “the new Hitler” and organized through her underling, neocon monster Victoria Nuland, the overthrow of the democratically elected government of Ukraine. Nuland installed Washington’s puppet government in a former Russian province that until about 20 years ago was part of Russia for centuries. I would bet that this tells even the naive pro-western part of the Russian government and population that the United States intends war with Russia.

[..] The Russians know that the propaganda about “Russian aggression” is a lie. What is the purpose of the lie other than to prepare the Western peoples for war with Russia? There is no other explanation. Even morons such as Obama, Merkel, Hollande, and Cameron should be capable of understanding that it is extremely dangerous to convince a major military power that you are going to attack. To simultaneously also convince China doubles the danger. Clearly, the West is incapable of producing leadership capable of preserving life on earth.

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Jun 062016
 
 June 6, 2016  Posted by at 8:38 am Finance Tagged with: , , , , , , , , ,  

Goldman Finds That China’s Debt Is Far Greater Than Anyone Thought (ZH)
World’s Most Battered Market Is the Worst Place to Find Bargains (BBG)
China’s Hidden Unemployment Rate (BBG)
China’s Factory to the World Is in a Race to Survive (BBG)
BOJ Board Member Warns Of “2003 Shock” Historic Bond Market Collapse (ZH)
As Iran’s Oil Exports Surge, International Tankers Help Ship Its Fuel (R.)
Saudi Arabia Races Through Financial Toolkit to Raise Funds (BBG)
If Wind/Solar Is So Cheap, Why Require Government Subsidy? (SL)
Pound Tumbles, Volatility Jumps After Polls Show Brexit Momentum (BBG)
Constitutional Crisis: Pro-Remain MPs Consider Pre-Empting Brexit Vote (BBC)
Brexit May Seem Like The West’s Biggest Problem. But Look At The US Economy (G.)
‘Brexit Voters Succumbing To Impulse Irritation And Anger’ (AEP)
Erdogan: Childless Women Deficient, Incomplete: Have At Least 3 (AFP)
Turkey Shelves Refugee ‘Readmission’ Deal With EU (DS)

Well, I’ve pointed a zillion times to the size and power of China’s shadow banks. And here you go…

Goldman Finds That China’s Debt Is Far Greater Than Anyone Thought (ZH)

In an analysis conducted by Goldman’s MK Tang, the strategist notes that a frequent inquiry from investors in recent months is how much credit has actually been extended to Chinese households and corporates. He explains that this arises from debates about the accuracy of the commonly used credit data (i.e., total social financing (TSF)) in light of an apparent rise in financial institutions’ (FI) shadow lending activity (as well as due to the ongoing municipal bond swap program). Tang adds that while it is clear that banks’ investment assets and claims on other FIs have surged, it is unclear how much of that reflects opaque loans, and also how much such loans and off-balance sheet credit are not included in TSF. By the very nature of shadow lending, it is almost impossible to reach a conclusion on these issues based on FIs’ asset information.

Goldman circumvents these data complications by instead focusing on the “money” concept, a mirror image to credit on FIs’ funding side. The idea is that money is created largely only when credit is extended—hence an effective gauge of “money” can give a good sense of the size of credit. We construct our own money flow measure, specifically following and quantifying the money flow from households/corporates. Goldman finds something stunning: true credit creation in China was vastly greater than even the comprehensive Total Social Financing series. To wit: “a substantial amount of money was created last year, evidencing a very large supply of credit, to the tune of RMB 25tn (36% of 2015 GDP). This is about RMB 6tn (or 9pp of GDP) higher than implied by TSF data (even after adjusting for municipal bond swaps). Divergence from TSF has been particularly notable since Q2 last year after a major dovish shift in policy stance.”

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China stocks are already down 40% in 12 months, but look down below.

World’s Most Battered Market Is the Worst Place to Find Bargains (BBG)

It’s going to take more than the world’s deepest stock-market selloff to turn China into a destination for international bargain hunters. Even after a 40% tumble in the Shanghai Composite Index over the past 12 months, valuations for China’s domestic A shares are three times as expensive as every other major market worldwide. The median price-to-earnings ratio on the nation’s exchanges is 59, higher than that of U.S. technology shares at the height of the dot-com boom in 2000. One year after China’s equity bubble peaked, valuations have yet to fall back to earth as government intervention keeps stock prices elevated at a time of shrinking corporate profits.

For money managers at Silvercrest Asset Management and Blackfriars Asset Management who predicted last year’s selloff, China’s weak economic growth and fragile investor sentiment mean it’s too early to jump back into the $6 trillion market. “We do not own any A shares,” said Tony Hann, the London-based head of equities at Blackfriars, which oversees about $270 million. The firm’s Oriental Focus Fund has outperformed 83% of peers this year. “The bull case seems to be that I can buy at this P/E because someone else will buy it from me at a higher P/E. The biggest risk is that investor psychology on the mainland changes.”

There’s plenty for investors to be worried about. After expanding at the weakest pace since 1990 last year, China’s economy shows few signs of recovery. Earnings at Shanghai Composite companies have declined by 13% since last June, while corporate defaults are spreading and the yuan is trading near a five-year low.

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Debt is hidden, losses are hidden, unemployment is hidden.

China’s Hidden Unemployment Rate (BBG)

China’s authorities may face a bigger worry than slowing economic growth. The jobless rate may be three times the official estimate, according to a new report by Fathom Consulting, whose China’s Underemployment Indicator has tripled to 12.9% since 2012 even while the official jobless rate has hovered near 4% for five years. The weakening labor market may explain China’s decision to uncork the credit spigots and revive old growth drivers in an effort to stabilize the world’s no. 2 economy. Leaders have stressed that keeping employment stable is a top priority. Fathom’s data shows that while mass layoffs haven’t materialized, the number of people not working at full capacity or hours has increased. “The degree of slack has surged in recent years,” analysts at the London-based firm wrote.

“China has a substantial hidden unemployment problem, in our view, and that explains why the authorities have come under so much pressure to re-start the old growth engines.” Leaders of the world’s most populous nation have promised to slash excess capacity in coal mines and steel mills while at the same time ensuring that the economy grows by at least 6.5% this year. Across the nation, state-backed ‘zombie’ factories are being kept alive by local governments to keep a lid on any social unrest. To keep the plants ticking over, employees in some cases have been asked to work half the time for half the pay. The official registered unemployment gauge is notorious for not changing during economic cycles. It’s compiled from the number of people who register at local governments for unemployment benefits, which excludes most of the nation’s more than 270 million migrant workers.

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China as a robotics guinea pig. What could go wrong?

China’s Factory to the World Is in a Race to Survive (BBG)

China’s shift to consumption and services lies at the heart of Xi’s quest for new growth drivers to escape the middle-income trap, when productivity and profit margins fail to keep up with wage growth. That’s spurred provincial leaders to encourage cities to attract new businesses and upgrade factories, headlined by the aphorisms that China’s administrators are fond of. “Empty the cages to welcome better birds,” demanded former Guangdong Communist Party Chief Wang Yang, meaning let the old industries leave and replace them with new, higher-value ones.

“Replace humans with robots,” added his successor, Hu Chunhua, 53, one of the youngest members of the Politburo, in a 950 billion yuan ($144 billion) plan to upgrade 2,000 companies in three years, the official Guangzhou Daily reported in March 2015, adding that the move is not expected to cause heavy layoffs. Dongguan replaced 43,684 workers with robots in 2015, cutting costs at those factories by nearly 10%, according to the local government. Lu Miao, a vice general manager of Lyric Robot in Guangdong’s Huizhou city, said the government pays as much as 50,000 yuan to Lyric’s customers for each robot they use to replace workers. “The government at all levels in Guangdong has been encouraging companies to replace human workers as rapidly as possible,” said Lu. “I can see our business increasing more than 50% this year.”

The ultimate result is so-called “dark factories” that don’t need lighting because only robots work on the production line. TCL has such a plant making LCD displays, Li said in an interview at the company’s headquarters in Huizhou, about an hour’s drive from Dongguan. “For society at large, some workers will be laid off,” said Huizhou Mayor Mai Jiaomeng. “But it’s good for companies to improve their competitiveness.” Local officials say the layoffs are under control, but are reluctant to provide details on how many plants have shut or moved away. A municipal report from Shenzhen in January said that the city has “washed out” or “transformed” more than 17,000 low-end factories over the past five years.

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Looks inevitable, just a question of where on the globe it will begin.

BOJ Board Member Warns Of “2003 Shock” Historic Bond Market Collapse (ZH)

In a somewhat shocking break from the age-old tradition of lying and obfuscation, Bank of Japan policy board member Takehiro Sato raised significant concerns about global financial stability in a speech last week. In addition to raising concerns about Japanese economic fragility, Sato warned that due to the impact of negative interest rates, he “detected a vulnerability similar to that seen before the so-called VaR (Value at Risk) shock in 2003.”

Financial institutions are facing the risk of a negative spread for marginal assets due to the extreme flattening of the yield curve and the drop in the yield on government bonds in short- to long-term zones into negative territory. When there is a negative spread, shrinking the balance sheet, rather than expanding it, would be a reasonable business decision. In the future, this may prompt an increasing number of financial institutions to take such actions as restraining loans to borrowers with potentially high credit costs and raising interest rates on loans to firms with poor access to finance.

…a weakening of the financial intermediary functioning could affect the financial system’s resilience against shocks in times of stress. In addition, an excessive drop in bond yields in the super-long-term zone could also make the financial system vulnerable by increasing the risk of a buildup of financial imbalances in the system.

There is also the risk that financial institutions that have problems in terms of profitability or fiscal soundness will make loans and investment without adequate risk valuation. From financial institutions’ recent move to purchase super-long-term bonds in pursuit of tiny positive yield, I detect a vulnerability similar to that seen before the so-called VaR (Value at Risk) shock in 2003.

Simply put, as Bloomberg notes, Sato is concerned the government bond market is heading for an historic collapse after 10-year yields plunged below zero, forcing banks to pile into super-long-term bonds in pursuit of tiny positive yields. This is creating huge concentrated positions with increasing duration risk (as we detailed previously), causing a vulnerability “similar to that seen before the so-called VaR (Value at Risk) shock in 2003,” when an initial jump in yields triggered a spectacular sell-off by breaching banks’ models for estimating potential losses.

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Reuniting OPEC.

As Iran’s Oil Exports Surge, International Tankers Help Ship Its Fuel (R.)

More than 25 European and Asian-owned supertankers are shipping Iranian oil, data seen by Reuters shows, allowing Tehran to ramp up exports much faster than analysts had expected following the lifting of sanctions in January. Iran was struggling as recently as April to find partners to ship its oil, but after an agreement on a temporary insurance fix more than a third of Iran’s crude shipments are now being handled by foreign vessels. “Charterers are buying cargo from Iran and the rest of the world is OK with that,” said Odysseus Valatsas, chartering manager at Dynacom Tankers Management. Greek owner Dynacom has fixed three of its supertankers to carry Iranian crude.

Some international shipowners remain reluctant to handle Iranian oil, however, due mainly to some U.S. restrictions on Tehran that remain and prohibit any trade in dollars or the involvement of U.S. firms, including banks and reinsurers. Iran is seeking to make up for lost trade following the lifting of sanctions imposed in 2011 and 2012 over its nuclear program. Port loading data seen by Reuters, as well as live shipping data, shows at least 26 foreign tankers with capacity to carry more than 25 million barrels of light and heavy crude oil, as well as fuel oil, have either loaded crude or fuel oil in the last two weeks or are about load at Iran’s Kharg Island and Bandar Mahshahr terminals.

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One more major price drop and we have panic.

Saudi Arabia Races Through Financial Toolkit to Raise Funds (BBG)

Saudi Arabia’s plans to bolster its finances are taking on a new sense of urgency as lower oil prices put the economy under more strain than at any other time in the past decade. In recent weeks, the kingdom raised a $10 billion loan, clamped down on currency speculators and informed banks of plans to raise as much as $15 billion in its first international bond sale, people with knowledge of the matter said. It’s also said to be contemplating IOUs to pay contractor bills and hired HSBC Holdings Plc banker Fahad Al Saif to set up a new debt office. The speed of the measures underscores Deputy Crown Prince Mohammed bin Salman’s urgency to shore up the country’s finances as an era of oil-fueled abundance falters.

Though currency reserves remain strong – among the world’s largest – net foreign assets are at a four-year low after declining for 15 months in a row and the kingdom may post a budget deficit of about 13.5% of economic output this year. “The pace of the decline in Saudi Arabia’s foreign assets is faster than in previous oil downturns and the period over which they’ve been falling is longer,” Raza Agha, VTB Capital’s chief economist for the Middle East and Africa, said by e-mail. “This generates a real sense of urgency to get the ball rolling in raising external funding.”

Five years ago, oil surged to more than $100 a barrel, adding billions of dollars to the country’s reserves. The windfall allowed the kingdom to slash its debt and post an average budget surplus of 8.2% between 2000 and 2012, according to International Monetary Fund data. Now, with crude having tumbled about 50%, the country is moving to sell assets and find other ways to raise funds.

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Just a cute graph.

If Wind/Solar Is So Cheap, Why Require Government Subsidy? (SL)

I don’t have an inherent dislike of solar and wind energy, but I am suspicious of the way they are being pushed. Here’s an example: Renewable energy advocates such as Tony Seba are talking about how solar and battery technology will enable exponential uptake in renewable technology, and that people won’t want to invest in a thermal power plant anymore. But on the other hand: Renewable advocates want government legislation to support their chosen renewable energy targets. e.g. “50% renewable energy would put Australia in line with leading nations” at the Conversation. Or another example might be where energy companies are talking about how the government has to ‘support the transition’ in this AFR article: AGL says government must support power industry exit from coal.

But wait a minute, if wind and solar are truly so amazing and so cheap – why does the government need to get involved? Why wouldn’t these renewable energy companies and advocates find a way to profitably do it and not make any fuss about wanting governmental regulation/subsidies? Borrowing from Mark Perry’s excellent Venn diagram idea over at AEI Carpe Diem blog: (Could it be that renewable advocates are using the government to push renewable energy cost and risk onto taxpayers?)

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17 days still to go. Brace for increased madness. it’s going to be so much fun.

Pound Tumbles, Volatility Jumps After Polls Show Brexit Momentum (BBG)

The pound slumped to a three-week low after polls showed more Britons favor exiting the European Union, reviving concern a June 23 referendum will throw global markets into turmoil and undermine confidence in the 28-nation trading bloc. Sterling weakened against all 10 developed-market peers after two surveys showed more voters were willing to vote to leave the EU than those wishing to stay. A gauge of the currency’s expected swings against the dollar during the next month surged to a seven-year high. The Bank of England has said uncertainty surrounding the referendum vote is damping U.K. growth, while global institutions including the IMF and OECD are warning of dire fallout if Britain votes to quit the EU.

Federal Reserve Bank of Chicago President Charles Evans said the referendum is undermining confidence in the outlook at a time when the international economy is already losing momentum. “A ‘Leave’ vote would expose a host of uncertainties,” said Sue Trinh at Royal Bank of Canada in Hong Kong. “It would be more negative for the euro and the EU since the issue will drag on for other members.” A YouGov poll for television network ITV found 45% would choose ‘Leave,’ compared with 41% picking ‘Remain.’ A separate survey by global market research company TNS showed 43% for ‘Leave’ and 41% for ‘Remain.’

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Well, that seems modeled after the EU’s attitude towards democracy alright. They fit right in.

Constitutional Crisis: Pro-Remain MPs Consider Pre-Empting Brexit Vote (BBC)

Pro-Remain MPs are considering using their Commons majority to keep Britain inside the EU single market if there is a vote for Brexit, the BBC has learned. The MPs fear a post-Brexit government might negotiate a limited free trade deal with the EU, which they say would damage the UK’s economy. There is a pro-Remain majority in the House of Commons of 454 MPs to 147. A Vote Leave campaign spokesman said MPs will not be able to “defy the will of the electorate” on key issues. The single market guarantees the free movement of goods, people, services and capital. The BBC has learned pro-Remain MPs would use their voting power in the House of Commons to protect what they see as the economic benefits of a single market, which gives the UK access to 500 million consumers.

Staying inside the single market would mean Britain would have to keep its borders open to EU workers and continue paying into EU coffers. Ministers have told the BBC they expect pro-EU MPs to conduct what one called a “reverse Maastricht” process – a reference to the long parliamentary campaign fought by Tory eurosceptic MPs in the 1990s against legislation deepening EU integration. Like then as now, the Conservative government has a small working majority of just 17. They say it would be legitimate for MPs to push for the UK to stay in the single market because the Leave campaign has refused to spell out what trading relationship it wants the UK to have with the EU in the future. As such, a post-Brexit government could not claim it had a popular mandate for a particular model.

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Equal partners.

Brexit May Seem Like The West’s Biggest Problem. But Look At The US Economy (G.)

Britain is trapped in its own little Brexit bubble. For the next two and a half weeks, the country will be obsessed with the result of the referendum on 23 June. Nothing that is going on in the rest of the world will get much of a look-in. But beyond these shores, things are happening. The authorities in China are desperately trying to shore up growth. Eurozone finance ministers have all but guaranteed that, sooner or later, the Greek crisis will flare up again. Most pressingly, the US economy looks to be heading for serious trouble. Make no mistake, the jobs report issued in Washington on Friday was a shocker. Wall Street had been expecting the non-farm payroll – the benchmark for the strength of the US labour market – to increase by 164,000. The actual figure was 38,000, the smallest monthly increase since September 2010.

True, the total was slightly distorted because 35,000 striking workers at Verizon were counted as jobless because they were not being paid. But that still would have meant an NFP increase of just 73,000. The weak jobs report comes at a particularly sensitive time because America’s central bank, the Federal Reserve, has been softening the markets up for an increase in interest rates, either this month or next. Any such move is now out of the question. US borrowing costs will not be going up again until the autumn at the earliest. This is all rather chastening for the Fed. When it raised interest rates in December for the first time since the Great Recession, the central bank signalled that there would be four more increases during the course of 2016.

Financial markets subsequently went into freefall during the early weeks of the year, forcing the Fed into a crash rethink. In March, it indicated that the number of 2016 rate increases had been halved from four to two – but the guidance was promptly ignored by traders, who based their decisions on the assumption that there would be no further tightening of policy by the Fed until 2017. With its reputation at stake, the Fed has gone out of its way since March to convince the markets that it was serious about two rate rises in 2016. Really, really it was. Janet Yellen, the Fed’s chair, told Wall Street that it might be “confused” about the way the central bank was going about its business.

Yet if anyone is confused it is Yellen, not the markets, which have rightly calculated that the Fed is all talk and should be judged by what it does and not by what it says. Here’s the position. The US economy grew at an annualised rate of 0.8% in the first quarter of 2016, which was not just weaker than the UK but substantially worse than the eurozone. Friday’s May payrolls were not a one-off, since the totals for March and April were revised downwards by a combined 59,000.

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Not quite sure what Ambrose intends here, but yeah, Britons’ dislike of Cameron, Major and any and all EU mouthpieces may well decide the issue.

‘Brexit Voters Succumbing To Impulse Irritation And Anger’ (AEP)

British voters are succumbing to impulsive gut feelings and irrational reflexes in the Brexit campaign with little regard for the enormous consequences down the road, the world’s most influential psychologist has warned. Daniel Kahneman, the Israeli Nobel laureate and father of behavioural economics, said the referendum debate is being driven by a destructive psychological process, one that could lead to a grave misjudgment and a downward spiral for British society. “The major impression one gets observing the debate is that the reasons for exit are clearly emotional,” he said. “The arguments look odd: they look short-term and based on irritation and anger. These seem to be powerful enough that they may lead to Brexit,” he said, speaking to The Telegraph at the Amundi world investment forum in Paris.

The counter-critique is that the Remain campaign is equally degrading the debate, playing on visceral reactions and ephemeral issues of the day. In a sense the two sides are egging each other on. That is the sociological fascination of it. Professor Kahneman, who survived the Nazi occupation of France as a Jewish child in the Second World War, said the risk is that the British people will be swept along by emotion and lash out later at scapegoats if EU withdrawal proves to be a disastrous strategic error. “They won’t regret it because regret is rare. They’ll find a way to explain what happened and blame somebody. That is the general pattern when things go wrong and people are afraid,” he said. The refusal to face up to the implications of what is really at stake in the referendum comes as no surprise to a man imbued with deep sense of anthropological pessimism.

His life’s work is anchored in studies showing that people are irrational. They are prone to cognitive biases and “systematic errors in thinking”, made worse by chronic over-confidence in their own judgment – and the less intelligent they are, the more militantly certain they tend to be. People do not always act in their own economic self-interest. Nor do they strive to maximize “utility’ and minimize risk, contrary to the assumptions of efficient market theory and the core premises of the economics profession. “People are myopic. Our brain circuits respond to immediate consequences,” he said.

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Added for entertainment value. BTW, what century is this?

Erdogan: Childless Women Deficient, Incomplete: Have At Least 3 (AFP)

President Recep Tayyip Erdogan on Sunday urged Turkish women to have at least three children, saying a woman’s life was “incomplete” if she failed to have offspring. Erdogan’s comments were the latest in a series of controversial remarks aimed at encouraging women to help boost Turkey’s population, which had already risen exponentially in the last years. The president emphasised he was a strong supporter of women having careers but emphasised that this should not be an “obstacle” to having children. “Rejecting motherhood means giving up on humanity,” Erdogan said in a speech marking the opening of the new building of Turkey’s Women’s and Democracy Association (KADEM). “I would recommend having at least three children,” added the president.

“The fact that a woman is attatched to her professional life should not prevent her from being a mother,” he added, saying that Turkey had taken “important steps” to support working mothers. Erdogan had on Monday said that family planning and contraception were not for Muslim families, prompting fury among women’s activists. In his speech Sunday he went on to add: “A woman who says ‘because I am working I will not be a mother’ is actually denying her feminity.” “A women who rejects motherhood, who refrains from being around the house, however successful her working life is, is deficient, is incomplete,” he added.

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And there we go.

Turkey Shelves Refugee ‘Readmission’ Deal With EU (DS)

The agreement between Turkey and the EU that will facilitate visa liberalization for Turkish nationals and allow readmission of Syrian refugees who enter Europe illegally is practically shelved due to ongoing disagreements, according to sources from the Foreign Ministry. The Turkey-EU agreement that will pave the way for visa liberalization was initially signed on Dec. 16, 2013 and was later included in the comprehensive refugee deal by both parties. Although Brussels says the deal will succeed, it also requires Turkey to meet the EU’s 72 benchmarks, which include narrowing its counterterrorism laws.

Turkey’s Aksam daily reported over the weekend that a senior official from the Foreign Ministry said Turkey has used its administrative measures correctly to temporarily suspend the Readmission Agreement, which will return undocumented, illegal refugees who enter Europe via Turkey in exchange for registered migrants. Sources from the Foreign Ministry who spoke to Daily Sabah yesterday said: “In order for the Readmission Agreement to be successfully fulfilled, a Cabinet decision approving the bill published in the Official Gazette must be announced.” Such an approval is not expected anytime soon. Although the European Commission had announced early last week that the Readmission Agreement would come into full force as of June 1, Ankara asserted that “the EU has failed to fulfill its duties resulting from the agreement,” stressing that it suspended the Readmission Agreement as part of administrative measures.

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Jun 042016
 
 June 4, 2016  Posted by at 11:29 am Finance Tagged with: , , , , , , , ,  


Walker Evans Street Scene, Vicksburg, Mississippi 1936

The Funniest BLS Jobs Report Ever (Quinn)
US Payrolls Huge Miss: Worst Since September 2010 (ZH)
This Financial Bubble Is 8 Times Bigger Than The 2008 Subprime Crisis (SM)
Lew Says China’s Overcapacity Skewing Markets (BBG)
UBS Tells Clients To Stick With Cash-Bleeding Hedge Funds (BBG)
Schroedinger’s Assets (Coppola)
Homes Should Be Lived In, Not Traded (G.)
EC Wants “Immunity” For EU Technocrats At Greek Privatization Fund (KTG)
Greek Banks Mulling Special NPL Vehicles (Kath.)
A Russian Warning (Dmitry Orlov et al)
20,000 Migrants Wait For Boats To Take Them To UK (DM)
At Least 117 Bodies Of Migrants Found After Boat Capsized Off Libya (AP)
Hundreds Rescued, At Least 9 Die In Shipwreck Off Crete (Kath.)

Is the narrative falling apart?

The Funniest BLS Jobs Report Ever (Quinn)

Only a captured government drone could put out a report showing only 38,000 new jobs created, with the working age population rising by 205,000, and have the balls to report the unemployment rate plunged from 5.0% to 4.7%, the lowest since August 2007. If you ever needed proof these worthless bureaucrats are nothing more than propaganda peddlers for the establishment, this report is it. The two previous months were revised significantly downward in the fine print of the press release. It is absolutely mind boggling that these government pond scum hacks can get away with reporting that 484,000 people who WERE unemployed last month are no longer unemployed this month.

Life is so fucking good in this country, they all just decided to kick back and leave the labor force. Maybe they all won the Powerball lottery. How many people do you know who can afford to just leave the workforce and live off their vast savings? In addition, 180,000 more Americans left the workforce, bringing the total to a record 94.7 million Americans not in the labor force. The corporate MSM will roll out the usual “experts” to blather about the retirement of Baby Boomers as the false narrative to deflect blame from Obama and his minions. The absolute absurdity of the data heaped upon the ignorant masses is clearly evident in the data over the last three months.

Here is government idiocracy at its finest:
• Number of working age Americans added since March – 406,000
• Number of employed Americans since March – NEGATIVE 290,000
• Number of Americans who have supposedly voluntarily left the workforce – 1,226,000
• Unemployment rate – FELL from 5.0% to 4.7%

Talk about perpetrating the BIG LIE. Goebbels and Bernays are smiling up from the fires of hell as their acolytes of propaganda have kicked it into hyper-drive. We only need the other 7.4 million “officially” unemployed Americans to leave the work force and we’ll have 0% unemployment. At the current pace we should be there by election time. I wonder if Cramer, Liesman, or any of the other CNBC mouthpieces for the establishment will point out that not one single full-time job has been added in 2016. There were 6,000 less full-time jobs in May than in January, while there are 572,000 more low paying, no benefits, part-time Obama service jobs. Sounds like a recovery to me.

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“..a massive surge in people not in the labor force..” We’re approaching negative employment.

US Payrolls Huge Miss: Worst Since September 2010 (ZH)

If anyone was “worried” about the Verizon strike taking away 35,000 jobs from the pro forma whisper number of 200,000 with consensus expecting 160,000 jobs, or worried about a rate hike by the Fed any time soon, you can sweep all worries away: moments ago the BLS reported that in May a paltry 38,000 jobs were added, a plunge from last month’s downward revised 123K (was 160K). The number was the lowest since September 2010! The household survey was just as bad, with only 26,000 jobs added in May, bringing the total to 151,030K. This happened as the number of unemployed tumbled from 7,920K to 7,436K driven by a massive surge in people not in the labor force which soared to a record 94,7 million, a monthly increase of over 600,000 workers.

As expected Verizon subtracted 35,000 workers however this was more than offset by a 36,000 drop in goods producing workers. Worse, there was no offsetting increase in temp workers (something we caution recently), and no growth in trade and transportation services. What is striking is that while the deteriorationg in mining employment continued (-10,000), and since reaching a peak in September 2014, mining has lost 207,000 jobs, for the first time the BLS acknowledged that the tech bubble has also burst, reporting that employment in information declined by 34,000 in May. The change in total nonfarm payroll employment for March was revised from +208,000 to +186,000, and the change for April was revised from +160,000 to +123,000.

With these revisions, employment gains in March and April combined were 59,000 less than previously reported. Over the past 3 months, job gains have averaged 116,000 per month. There is no way to spin this number as anything but atrocious.

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And growing..

This Financial Bubble Is 8 Times Bigger Than The 2008 Subprime Crisis (SM)

On July 1, 2005, the Chairman of then President George W. Bush’s Council of Economic Advisors told a reporter from CNBC that “We’ve never had a decline in house prices on a nationwide basis. So, what I think is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” His name was Ben Bernanke. And within a year he would become Chairman of the Federal Reserve. Of course, we now know that he was dead wrong. The housing market crashed and dragged the US economy with it. And Bernanke spent his entire tenure as Fed chairman dealing with the consequences. One of the chief culprits of this debacle was the collapse of the sub-prime bubble.

Banks had spent years making sweetheart home loans to just about anyone who wanted to borrow, including high risk ‘sub-prime’ borrowers who were often insolvent and had little prospect of honoring the terms of the loan. When the bubble got into full swing, lending practices were so out of control that banks routinely offered no-money-down mortgages to subprime borrowers. The deals got even sweeter, with banks making 102% and even 105% loans. In other words, they would loan the entire purchase price of a home plus closing costs, and then kick in a little bit extra for the borrower to put in his/her pocket. So basically these subprime home buyers were getting paid to borrow money.

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They know this already, Jack.

Lew Says China’s Overcapacity Skewing Markets (BBG)

The U.S. will push China to reduce excess capacity in its economy at upcoming talks in Beijing, with Treasury Secretary Jacob J. Lew calling it an “area of central concern” Friday in Seoul. The issue bears watching when “excess capacity is distorting markets and important global commodities,” Lew said in remarks to reporters ahead of the U.S.-China Strategic and Economic Dialogue, scheduled for June 6-7 in Beijing. China Vice Premier Wang Yang, State Councilor Yang Jiechi and U.S. Secretary of State John Kerry will attend the meeting along with Lew. A senior Treasury official told reporters China has made a commitment to take serious action to reduce excess capacity in areas like steel and aluminum.

It’s a tough transition, especially as millions of workers would have to find new jobs. However, if the actions aren’t taken, excess capacity will continue to erode China’s economic growth prospects, said the official, who asked not to be identified. Chinese authorities are cutting excess capacity in industries including coal and steel while striving to keep growth above their 6.5% minimum target for this year. The economy has endured four years of factory-gate deflation, though forecasters expect that to turn around. Producer prices will improve in each of the next four quarters and turn positive in 2018, according to economists surveyed by Bloomberg in April.

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At what fee for UBS?

UBS Tells Clients To Stick With Cash-Bleeding Hedge Funds (BBG)

UBS is advising its wealthiest clients to stick with hedge funds even after the $2.9 trillion industry had its worst start to a year since 2008. While the days of “double-digit and triple-digit returns” for hedge funds are over, they still generate enough to satisfy yield-hungry clients who face negative interest rates, said Mark Haefele, global CIO of UBS Wealth Management. “Their performance in the first half hasn’t been impressive but they provide diversification,” he said in an interview with Bloomberg. “They still provide a better risk-reward or different risk-reward than other parts like sovereign bonds.”

UBS in April boosted its recommended allocation to hedge funds to 20% from 18%, saying the strategy will provide stability from volatile markets. The move comes as a net $15 billion was pulled from the global hedge-fund industry in the the first quarter and as some of world’s largest institutions including MetLife said they will scale back their holdings. Hedge funds may lose about a quarter of their assets in the next year as performance slumps Blackstone’s billionaire president, Tony James, predicted last week. The HFRI Fund Weighted Composite Index declined 0.6% in the first quarter, its worst start to a year since 2008.

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The number of non-dead assets is much higher than we let on.

Schroedinger’s Assets (Coppola)

In a new paper, Michael Woodford has reimagined the famous “Schroedinger’s Cat” thought experiment. I suspect this is unintentional. But that’s what happens when, in an understandable quest for simplicity, you create binary decisions in a complex probability-based structure. Schroedinger imagined a cat locked in a box in which there is a phial of poison. The probability of the cat being dead when the box is opened is less than 100% (since some cats are tough). So if p is the probability of the cat being dead, 1-p is the probability of it being alive. The problem is that until the box is opened, we do not know if the cat is alive or dead. In Schroedinger’s universe of probabilities, the cat is both “alive” and “dead” until the box is opened, when one of the possible outcomes is crystallised. Now for “cat”, read assets. In Woodford’s model, when there is no crisis, the probability of asset collapse is zero. But if there is a crisis, the probability of an asset collapse is greater than zero but less than 100%:

“The sequence of events, and the set of alternative states that may be reached, within each period is indicated in Figure 1. In subperiod 1, a financial market is open in which bankers issue short-term safe liabilities and acquire risky durables, and households decide on the cash balances to hold for use by the shopper. In subperiod 2, information is revealed about the possibility that the durable goods purchased by the banks will prove to be valueless. With probability p, the no crisis state is reached, in which it is known with certainty that the no collapse in the value of the assets will occur, but with probability 1-p, a crisis state is reached, in which it is understood to be possible (though not yet certain) that the assets will prove to be worthless. Finally, in subperiod 3, the value of the risky durables is learned.”

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Close to my heart, but very incomplete in its argumentation.

Homes Should Be Lived In, Not Traded (G.)

The problem is twofold: the move to viewing houses as assets, a predictable investment that lets you turn a profit and offers more return on the pound than a pension, means there’s an incentive for wealthy buyers to invest in bricks and mortar without bothering with tenants. But also, as long as our economy gets sucked into a south-east vortex, more people will head to the capital for work, as the rest of the country struggles. George Osborne’s northern powerhouse claims to address this imbalance, twinned with the excruciatingly named “Midlands engine”. But with the announcement that 250 jobs in the very department responsible for rolling out the northern powerhouse are moving from Sheffield to London, that commitment looks as weak as the efforts to give it a catchy moniker.

As long as jobs fail to materialise in post-industrial towns, empty terraces will multiply. Conservative politicians have long opined that people seeking work should “get on their bike”, without stopping to observe that many do: hence the brain drain from the north and Wales, and the exponential demand for housing in the south-east England. Houses should be lived in, most people would agree: so the government’s move to criminalise squatting is key to understanding the problem of empty houses. Contrary to scare stories, people don’t pop out for a pint of milk and find that squatters have moved in to their home. Squatters often took up residence in vacant buildings, and used the houses for their intended purpose: living in.

Prosecuting squatters reasserts people’s right to treat homes as assets, not shelter. When it comes to empty houses, it’s the inequality stupid. The inequality that means some can buy multiple houses, while others cannot rent one. That sees London swallowing up wealth, jobs and land value hikes, while parts of the country grow desolate. There shouldn’t be empty homes while some people sleep on the streets, but the fact that so many lie empty should worry us: many houses aren’t homes, they’re investment vehicles, and long term, they scupper all our chances of financial and social security.

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Selling off a country in peace.

EC Wants “Immunity” For EU Technocrats At Greek Privatization Fund (KTG)

The European Commission directly intervened in the work of the Greek Justice and demanded that EU technocrats working at the Greek Privatization Fund enjoy “immunity.” The EC intervenes two days after corruption prosecutors in Athens raised charges against 3 Greeks and 3 EU-nationals of the HRADF for selling public assets thus causing losses of several millions of euro to the state. On Friday, EC spokesman Margaritis Schinas told reporters in Brussels that EU experts working in Greece under the Greek program, should enjoy some kind of ‘guarantee’. “For us, satisfactory operating margins should be guaranteed for all European experts assisting Greece to improve its economy and find its way back to growth,” Schinas said.

At the same time, he stressed that “there is full respect to judicial procedures” currently under way against 6 members of the old Privatization Fund.but the invervention was clear. Schinas did not elaborate on the Eurogroup request referring to immunity for EU technocrats who will work for the new Greek Privatization Fund. The EC intervention came right after the corruption prosecutors raised charges against 6 members of the TAIPED for the sale of 28 public assets. Three of those members are Greeks, the other three from Italy, Spain and Slovakia appointed by the Eurogroup. The six have been investigated for the period 2013-2014 and have been called to testify before corruption investigator Costas Sargiotis.

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Yeah, let’s create some more creativity.

Greek Banks Mulling Special NPL Vehicles (Kath.)

Greece’s core banks are considering the creation of special purpose companies which will receive large portfolios of nonperforming loans and then be sold so that they stop burdening the lenders’ financial figures, as NPLs now exceed €100 billion in total. The ECB is asking bank managers to proceed with tackling this huge matter at a speedier pace and to make brave decisions for the drastic slashing of bad loans from their finances. In this context, one of the plans being examined concerns the special vehicles to be created with NPL portfolios and sold off not to third parties but to the existing stakeholders of the banks.

This creation of what would resemble a “bad bank” for each lender would serve to immediately lighten the credit sector’s financial reports, while the transfer of those vehicles to the existing stakeholders could offer them future benefits from the active management of those bad loans. Nowadays the biggest obstacle to the sale of NPLs to third parties is the great distance between buyers and sellers. The buyers of bad loans want to acquire such portfolios at exceptionally low prices, due to the country risk, the devaluation of assets owing to the protracted recession in Greece, the inefficient legal system etc. On the other hand, the sellers – i.e. the banks – are refusing to sell at such low prices as they appear certain that among the current NPL stock that reaches up to 55 percent of all loans there is a huge volume of debts that could revert to normality with the right management.

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They are not kidding.

A Russian Warning (Dmitry Orlov et al)

We, the undersigned, are Russians living and working in the USA. We have been watching with increasing anxiety as the current US and NATO policies have set us on an extremely dangerous collision course with the Russian Federation, as well as with China. Many respected, patriotic Americans, such as Paul Craig Roberts, Stephen Cohen, Philip Giraldi, Ray McGovern and many others have been issuing warnings of a looming a Third World War. But their voices have been all but lost among the din of a mass media that is full of deceptive and inaccurate stories that characterize the Russian economy as being in shambles and the Russian military as weak—all based on no evidence. But we—knowing both Russian history and the current state of Russian society and the Russian military, cannot swallow these lies. We now feel that it is our duty, as Russians living in the US, to warn the American people that they are being lied to, and to tell them the truth.

And the truth is simply this: If there is going to be a war with Russia, then the United States will most certainly be destroyed, and most of us will end up dead. Let us take a step back and put what is happening in a historical context. Russia has suffered a great deal at the hands of foreign invaders, losing 22 million people in World War II. Most of the dead were civilians, because the country was invaded, and the Russians have vowed to never let such a disaster happen again. Each time Russia had been invaded, she emerged victorious. In 1812 Nepoleon invaded Russia; in 1814 Russian cavalry rode into Paris. On June 22, 1941, Hitler’s Luftwaffe bombed Kiev; On May 8, 1945, Soviet troops rolled into Berlin.

But times have changed since then. If Hitler were to attack Russia today, he would be dead 20 to 30 minutes later, his bunker reduced to glowing rubble by a strike from a Kalibr supersonic cruise missile launched from a small Russian navy ship somewhere in the Baltic Sea. The operational abilities of the new Russian military have been most persuasively demonstrated during the recent action against ISIS, Al Nusra and other foreign-funded terrorist groups operating in Syria. A long time ago Russia had to respond to provocations by fighting land battles on her own territory, then launching a counter-invasion; but this is no longer necessary. Russia’s new weapons make retaliation instant, undetectable, unstoppable and perfectly lethal.

Read more …

Be afraid! There’s only 60 million of you!

20,000 Migrants Wait For Boats To Take Them To UK (DM)

A file lying in the drawer of the manager’s office at a small French seaside hotel provides intriguing clues about the gangsters who smuggle migrants across the Channel to Britain. It contains the passport details of four shadowy men who booked in for a night to pull off an audacious crime by trafficking 30 Pakistanis and Albanians by sea into the UK. Gangs of people smugglers now operate along all 450 miles of the north French coast — from Calais on the Belgian border to Cherbourg and beyond — as 20,000 migrants wait to get to England for a new life. During the past week they have used small fishing vessels, private yachts and speedboats to slip migrants onto England’s South Coast beaches under cover of darkness.

Early last Sunday, 18 migrants were rescued in Dymchurch, a coastal village in Kent, after their rubber dinghy began to sink offshore. The same morning, eight migrants were rescued by a lifeboat in Portsmouth harbour as they floated adrift in a fishing boat. The determination of migrants and the greed of traffickers has not been diminished by the French government’s demolition in March of the ‘Jungle’ migrant camp in Calais, an unhygienic shanty town of 4,000. The migrants simply moved on — initially 30 or so miles away to Dunkirk, where thousands live in a camp near the port, paying traffickers to cross the Channel, and then spreading further along the coast.

Read more …

How many boats and bodies sink that we never hear about?

At Least 117 Bodies Of Migrants Found After Boat Capsized Off Libya (AP)

More than 110 bodies were found along a Libyan beach after a smuggling boat of mostly African migrants sank, while a separate search-and-rescue operation across the Mediterranean saved 340 people Friday and recovered nine bodies. The developments were the latest deadly disasters for refugees and migrants seeking a better life in Europe, and they followed the drownings of more than 1,000 people since May 25 while attempting the long and perilous journey from North Africa to southern Europe. As traffickers take advantage of improving weather, officials say it is impossible to know how many unseaworthy boats are being launched — and how many never reach their destination. Naval operations in the southern Mediterranean, co-ordinated by Italy, have been stretched just responding to the disasters they do hear about.

At least 117 bodies — 75 women, six children and 36 men — washed up on a beach or were pulled from the water near the western Libyan city of Zwara Thursday and Friday, Mohammed al-Mosrati, a spokesman for Libya’s Red Crescent, told The Associated Press. All but a few were from African countries. The death toll was expected to rise. The children were aged between 7 and 10, said Bahaa al-Kwash, a top media official in the Red Crescent. “It is very painful, and the numbers are very high,” he said, adding that the dead were not wearing life jackets — something the organization had noticed about bodies recovered in recent weeks. “This is a cross-border network of smugglers and traffickers, and there is a need for an international effort to combat this phenomenon,” he said.

Read more …

Crete is a somewhat novel destination.

Hundreds Rescued, At Least 9 Die In Shipwreck Off Crete (Kath.)

Hundreds of migrants were rescued on Friday after a smuggling boat sank in international waters south of Crete, while the Hellenic Coast Guard recovered the bodies of at least nine drowned migrants. The 25-meter vessel capsized in the early hours of Friday morning under circumstances that remained unclear, leaving hundreds of migrants in the sea, some 70 nautical miles south of Crete. According to the International Organization for Migration, around 700 migrants had been aboard the vessel. Five ships – cargo and commercial vessels – had been near the scene and offered assistance, rescuing scores of migrants. The Hellenic Coast Guard sent two vessels while the navy dispatched two Super Puma helicopters to scour the area.

By late Friday, 340 migrants had been rescued and the bodies of nine migrants pulled out of the sea by rescue workers. Another vessel capsized off the coast of Libya on Friday, leading to a larger death toll, with more than 100 bodies found in the sea. Meanwhile authorities on the islands of the eastern Aegean expressed concern as tensions are rising at detention centers and frequently escalating into brawls. The influx of migrants to the islands, which had all but stopped in recent weeks, following a deal between the European Union and Ankara to return migrants to Turkey, appears to have picked up again, unnerving authorities. A group of 120 migrants arrived on Chios Friday and another 25 on Lesvos.

Read more …

Mar 122015
 
 March 12, 2015  Posted by at 9:21 am Finance Tagged with: , , , , , , , , ,  


NPC Kidwell’s Market on Pennsylvania Avenue, Washington DC 1920

I think I’ll just give you a slew of quotes, and then you can figure out if you can figure out why I chose to call this the Yellen Massacre. Which consists, by the way, of two separate but linked parts, not quite the Siamese twin perhaps, but close. What links them is the upcoming Fed decision to raise interest rates, and the timing of the announcement of that decision. It will blow up both bond markets and a large swath of emerging markets. People keep saying ‘the Fed won’t do it’, or ask ‘why would they do it’, but arguably they’re already quite late. It must be half a year ago now that I wrote it would hike rates, and also told you why: Wall Street banks. First, here’s a fine little ditty published at Econmatters:

Six Days Until Bond Market Crash Begins

Early on Thursday morning, realizing this was going to be a robust selloff in equities, the ‘smart money’, i.e., the big banks, investments banks, hedge funds and the like, ran to the old staple of buying bonds hand over fist with little regard for the yield they are getting paid for stepping in front of the freight train of rate rises coming down the tracks.

Just six days away from the most important FOMC meeting in the last seven years, and another 300k employment report in the rear view mirror, this looks like an excellent place to hide for nervous investors who have far more money than they have grains of common sense. Newsflash for these investors, yes markets are over-valued, and you need to get out of Apple, and about 100 other high flying overpriced momentum stocks, but you can`t hide out in bonds this time.

That party is over, and next Wednesday`s FOMC meeting is going to make this point abundantly clear. There is no place to hide except cash. You should have thought about that before you gorged yourself on ZIRP to the point where you have pushed stocks and bonds to unsupportable price levels, and you keep begging for the Fed to stall just another six months, so you can continue to buy more stocks and bonds.

Well you have done an excellent job hoodwinking the Fed to wait until June, you should thank your lucky stars you have done such a good job manipulating the Federal Reserve; but just like the boy crying wolf, this strategy loses its effectiveness over time. Throwing another temper tantrum right before another important FOMC meeting hoping that Janet Yellen will be alarmed by these Pre-FOMC Selloffs to put off another six months the inevitable rate hike, this blackmail strategy has run its course.

The Fed is forced to finally start the Rate Hiking Cycle after 7 plus years of Recession era Fed policies by an overheating labor market. You knew this day was going to come, but most of you are still in denial. What the heck were you buying 10-year bonds with a 1.6% yield five months before a rate hike?? You only have yourself to blame for the 65 basis point backup in yields on that disaster of an “Investment”.

But really what were you thinking here?? That is the problem when the Fed has incentivized such poor investment decisions and poor allocation of capital to useful, growth oriented projects over the past 7 plus years of ZIRP that these ‘investors’ don`t think at all, they have become behaviorally trained ZIRP Crack Addicts!

They can cry over the strong dollar, have a couple of 300 point Dow Selloffs, scare monger over Europe or Emerging Market currencies, but the fact is that the due date has come on your stupidity. You bought all this crap, and now you have to sell it! Well too freaking bad, boo hoo, you shouldn’t have bought so many worthless stocks and bonds at unsustainable levels in the first place. [..]

The positioning for this inevitability is as poor as I have seen in any market. The carnage in the bond market is just going to be gruesome, the denial is so strong, the lack of historical perspective of what normal bond yields look like, and what a normalized economy represents where savers actually get paid to save money in a CD or checking account. The fact that the Fed has so de-sensitized investors to what a normalized rate economy and healthy functioning financial system looks like is probably one of the biggest drawbacks of ZIRP Methodology.

The Federal Reserve, and now the European Union have set the stage for the biggest collapse in bond markets that will make the sub-prime financial crisis look like a cakewalk.

One may question whether 6 days is carved in stone; maybe THE announcement will come the next meeting, not this one. But does it really matter? Yellen has created a narrative about the US economy, especially the (un)employment rate. About which yet another narrative has been created by the BLS, which refuses to count many millions of Americans as unemployed, for various reasons. And that leads to the article’s claim of ‘an overheating labor market’. The only way the US jobs market is overheating is that it seems to have created a huge oversupply of underpaid waiters, greeters and burger flippers.

But the narrative is now firmly in place, so Yellen and her stooges can claim they have no choice but to hike. Not just once, but three times this year, suggests Ambrose Evans-Pritchard in the following very bleak read and weep portrait of the world today. In which he also describes how all of this plays out in sync with the soaring dollar, which will have devastating consequences around the world, starting in the poorer parts of the world (what else is new?).

Global Finance Faces $9 Trillion Stress Test As Dollar Soars

The report – “Global dollar credit: links to US monetary policy and leverage” – was first published by the Bank for International Settlements in January, but its biting relevance is growing by the day. It shows how the Fed’s zero rates and quantitative easing flooded the emerging world with dollar liquidity in the boom years, overwhelming all defences.[..]

Foreigners have borrowed $9 trillion in US currency outside American jurisdiction, and therefore without the protection of a lender-of-last-resort able to issue unlimited dollars in extremis. This is up from $2 trillion in 2000. The emerging market share – mostly Asian – has doubled to $4.5 trillion since the Lehman crisis, including camouflaged lending through banks registered in London, Zurich or the Cayman Islands. The result is that the world credit system is acutely sensitive to any shift by the Fed. “Changes in the short-term policy rate are promptly reflected in the cost of $5 trillion in US dollar bank loans,” said the BIS.

Markets are already pricing in such a change. The Fed’s so-called “dot plot” – the gauge of future thinking by Fed members – hints at three rate rises this year, kicking off in June. The BIS paper’s ominous implications are already visible as the dollar rises at a parabolic rate, smashing the Brazilian real, the Turkish lira, the South African rand and the Malaysian Ringitt, and driving the euro to a 12-year low of $1.06.

The dollar index (DXY) has soared 24pc since July, and 40pc since mid-2011. This is a bigger and steeper rise than the dollar rally in the mid-1990s – also caused by a US recovery at a time of European weakness, and by Fed tightening – which set off the East Asian crisis and Russia’s default in 1998. Emerging market governments learned the bitter lesson of that shock. They no longer borrow in dollars. Companies have more than made up for them.

“The world is on a dollar standard, not a euro or a yen standard, and that is why it matters so much what the Fed does,” said Stephen Jen, a former IMF official now at SLJ Macro Partners. He says the latest spasms of stress in emerging markets are more serious than the “taper tantrum” in May 2013, when the Fed first talked of phasing out quantitative easing. “Capital flows into these countries have continued to accelerate over recent quarters. This is mostly fickle money. The result is that there is now even more dry wood in the pile to serve as fuel,” he said. Mr Jen said Asian and Latin American companies are frantically trying to hedge their dollar debts on the derivatives markets, which drives the dollar even higher and feeds a vicious circle. “This is how avalanches start,” he said.

Companies are hanging on by their fingertips across the world. Brazilian airline Gol was sitting pretty four years ago when the real was the strongest currency in the world. Three quarters of its debt is in dollars. This has now turned into a ghastly currency mismatch as the real goes into free-fall, losing half its value. Interest payments on Gol’s debts have doubled, relative to its income stream in Brazil. The loans must be repaid or rolled over in a far less benign world, if possible at all.

You would not think it possible that an Asian sovereign wealth fund could run into trouble too, but Malaysia’s 1MDM state fund came close to default earlier this year after borrowing too heavily to buy energy projects and speculate on land. Its bonds are currently trading at junk level. It became a piggy bank for the political elites and now faces a corruption probe, a recurring pattern in the BRICS and mini-BRICS as the liquidity tide recedes and exposes the underlying rot.

BIS data show that the dollar debts of Chinese companies have jumped fivefold to $1.1 trillion since 2008, and are almost certainly higher if disguised sources are included. Among the flow is a $900bn “carry trade” – mostly through Hong Kong – that amounts to a huge collective bet on a falling dollar. Woe betide them if China starts to drive down the yuan to keep growth alive.

Manoj Pradhan, from Morgan Stanley, said emerging markets were able to weather the dollar spike in 2014 because the world’s deflation scare was still holding down the cost of global funding. These costs are now rising. Even Singapore’s three-month Sibor used for benchmark lending is ratcheting up fast. The added twist is that central banks in the developing world have stopped buying foreign bonds, after boosting their reserves from $1 trillion to $11 trillion since 2000.

The Institute of International Finance (IIF) calculates that the oil slump has slashed petrodollar flows by $375bn a year. Crude exporters will switch from being net buyers of $123bn of foreign bonds and assets in 2013, to net sellers of $90bn this year. Russia sold $13bn in February alone. China has also changed sides, becoming a seller late last year as capital flight quickened. Liquidation of reserves automatically entails monetary tightening within these countries, unless offsetting action is taken. China still has the latitude to do this. Russia is not so lucky, and nor is Brazil. If they cut rates, they risk a further currency slide.

In short, Janet Yellen will go down into history as the person responsible for what may be the biggest economic crash ever, or at least delivering the final punch of the way into it, a crash that will make the rich banks even much richer. And there is not one iota of coincidence in there. Yellen works for those banks. The Fed only ever held investors’ hands because that worked out well for Wall Street. And now that’s over. Y’all are on the same side of the same trade, and there’s no profit for Wall Street that way.

Nov 252014
 
 November 25, 2014  Posted by at 9:49 pm Finance Tagged with: , , , , , , , ,  


John Vachon Rain. Pittsburgh, Pennsylvania Jun 1941

US Q3 GDP was revised up by the BEA to 3.89%, but that’s no longer what financial markets react to. They sit and wait for more QE somewhere on the planet to be doled out. Will Americans, if they see this at all, take those numbers, add them to the sweet drop in prices at the pump and spend what they save on more holiday purchases? I’m not saying I know, but I do see that US consumer confidence is down, as is global business confidence – the latter at a five year low.

The Case/Shiller index reports a “broad-based slowdown” for US home prices, and that in the rear view mirror that looks at Q3. So that’s not where those 3.89% came from, it wasn’t housing (wonder what it was). The Gallup Christmas survey lost 8% of exuberance in one month. What this adds up to is that Americans may not spend all of that saved gas money, and that means there’s a real danger of deflation coming to America too – as if Japanese and European attempts to export their own were not enough yet.

While the media continue to just about exclusively paint a picture of recovery and an improving economy, certainly in the US – Europe and Japan it’s harder to get away with that rosy image -, in ordinary people’s reality a completely different picture is being painted in sweat, blood, agony and despair. Whatever part of the recovery mirage may have a grain of reality in it, it is paid for by something being taken away from people leading real lives. US unemployment numbers are being massages three ways to Sunday, as is common knowledge, or should be; the amounts of working age people not working, and not being counted as unemployed either, is staggering.

But there’s a very large, and growing, number of people who do work, but find it impossible to sustain either themselves or their families on their wages. That’s how the recovery, fake as it even is, is paid for. And this will have grave consequences for many years, if not decades, to come.

If a government would come clean with its citizens, explain the overwhelming debt situation a nation is in, that everyone will have to do with less at least for a while, and then openly start restructuring the debts, those consequences would be much less damaging. But all governments choose to talk about only recovery and growth, and to let their people suffer the consequences of the policies enacted to achieve these goals, even if after 6-7 years of crisis and dozens of trillions in stimulus, we’re no closer to either. Quite the contrary. We’re not in ‘drive’, we’re stuck in ‘reverse’. We’re backing up. We’re moving backwards.

Lance Roberts at StreetTalkLive provides stats on how many Americans have been made dependent on some sort of handout:

The Dismal Economy: 148 Million Government Beneficiaries

.. the Federal Reserve has stopped their latest rounds of bond buying and are now starting to discuss the immediacy of increasing interest rates. This, of course, is based on the “hopes” that the economy has started to grow organically as headline unemployment rates have fallen to just 5.9%. If such activity were real then both inflation and wage pressures should be rising – they are not. According to the Congressional Budget Office study that was just released, approximately 60% of all U.S. households get more in transfer payments from the government than they pay in taxes.

Roughly 70% of all government spending now goes toward dependence-creating programs. From 2009 through 2013, the U.S. government spent an astounding 3.7 trillion dollars on welfare programs. In fact, today, the percentage of the U.S. population that gets money from the federal government grew by an astounding 62% between 1988 and 2011. Recent analysis of U.S. government numbers conducted by Terrence P. Jeffrey, shows that there are 86 million full-time private sector workers in the United States paying taxes to support the government, and nearly 148 million Americans that are receiving benefits from the government each month.

Yet Janet Yellen, and most other mainstream economists suggests that employment is booming in the U.S. Okay, if we assume that this is indeed the case then why, according to the Survey of Income and Program Participation conducted by the U.S. Census, are well over 100 million Americans are enrolled in at least one welfare program run by the federal government. Importantly, that figure does not even include Social Security or Medicare. (Here are the numbers for Social Security, Medicaid and Medicare: More than 64 million are receiving Social Security benefits, more than 54 million Americans are enrolled in Medicare and more than 70 million Americans are enrolled in Medicaid.) Furthermore, how do you explain the chart below? With roughly 45% of the working age population sitting outside the labor force, it should not be surprising that the ratio of social welfare as a percentage of real, inflation-adjusted, disposable personal income is at the highest level EVER on record.

Tyler Durden addresses deteriorating wages in America with a great metaphor:

The Mystery Of America’s “Schrodinger” Middle Class, Which Is Either Thriving Or About To Go Extinct

On one hand, the US middle class has rarely if ever had it worse. At least, if one actually dares to venture into this thing called the real world, and/or believes the NYT’s report: “Falling Wages at Factories Squeeze the Middle Class.” Some excerpts:

For nearly 20 years, Darrell Eberhardt worked in an Ohio factory putting together wheelchairs, earning $18.50 an hour, enough to gain a toehold in the middle class and feel respected at work. He is still working with his hands, assembling seats for Chevrolet Cruze cars at the Camaco auto parts factory in Lorain, Ohio, but now he makes $10.50 an hour and is barely hanging on. “I’d like to earn more,” said Mr. Eberhardt, who is 49 and went back to school a few years ago to earn an associate’s degree. “But the chances of finding something like I used to have are slim to none.” Even as the White House and leaders on Capitol Hill and in Fortune 500 boardrooms all agree that expanding the country’s manufacturing base is a key to prosperity, evidence is growing that the pay of many blue-collar jobs is shrinking to the point where they can no longer support a middle-class life.

In short: America’s manufacturing sector is being obliterated: “A new study by the National Employment Law Project, to be released on Friday, reveals that many factory jobs nowadays pay far less than what workers in almost identical positions earned in the past.

Perhaps even more significant, while the typical production job in the manufacturing sector paid more than the private sector average in the 1980s, 1990s and early 2000s, that relationship flipped in 2007, and line work in factories now pays less than the typical private sector job. That gap has been widening — in 2013, production jobs paid an average of $19.29 an hour, compared with $20.13 for all private sector positions. Pressured by temporary hiring practices and a sharp decrease in salaries in the auto parts sector, real wages for manufacturing workers fell by 4.4% from 2003 to 2013, NELP researchers found, nearly three times the decline for workers as a whole.

How is this possible: aren’t post-bankruptcy GM, and Ford, now widely touted as a symbol of the New Normal American manufacturing renaissance? Well yes. But there is a problem: recall what we wrote in December 2010: ‘Charting America’s Transformation To A Part-Time Worker Society:”

.. one of the most important reasons for lower pay is the increased use of temporary workers. Some manufacturers have turned to staffing agencies for hiring rather than employing workers directly on their own payroll. For the first half of 2014, these agencies supplied one out of seven workers employed by auto parts manufacturers. The increased use of these lower-paid workers, particularly on the assembly line, not only eats into the number of industry jobs available, but also has a ripple effect on full-time, regular workers. Even veteran full-time auto parts workers who have managed to work their way up the assembly-line chain of command have eked out only modest gains.

And that’s not some isolated incident, as the Guardian makes clear, it’s the same thing in Britain.:

Record Numbers Of UK Working Families In Poverty Due To Low-Paid Jobs

Insecure, low-paid jobs are leaving record numbers of working families in poverty, with two-thirds of people who found work in the past year taking jobs for less than the living wage, according to the latest annual report from the Joseph Rowntree Foundation. The research shows that over the last decade, increasing numbers of pensioners have become comfortable, but at the same time incomes among the worst-off have dropped almost 10% in real terms. Painting a picture of huge numbers trapped on low wages, the foundation said during the decade only a fifth of low-paid workers managed to move to better paid jobs. The living wage is calculated at £7.85 an hour nationally, or £9.15 in London – much higher than the legally enforceable £6.50 minimum wage.

As many people from working families are now in poverty as from workless ones, partly due to a vast increase in insecure work on zero-hours contracts, or in part-time or low-paid self-employment. Nearly 1.4 million people are on the controversial contracts that do not guarantee minimum hours, most of them in catering, accommodation, retail and administrative jobs. Meanwhile, the self-employed earn on average 13% less than they did five years ago, the foundation said. Average wages for men working full time have dropped from £13.90 to £12.90 an hour in real terms between 2008 and 2013 and for women from £10.80 to £10.30.

Poverty wages have been exacerbated by the number of people reliant on private rented accommodation and unable to get social housing, the report said. Evictions of tenants by private landlords outstrip mortgage repossessions and are the most common cause of homelessness. The report noted that price rises for food, energy and transport have far outstripped the accepted CPI inflation of 30% in the last decade. Julia Unwin, chief executive of the foundation, said the report showed a real change in UK society over a relatively short period of time. “We are concerned that the economic recovery we face will still have so many people living in poverty. It is a risk, waste and cost we cannot afford: we will never reach our full economic potential with so many people struggling to make ends meet.

And it’s even worse in Greece and Spain and Italy, all so northern Europe and the Brussels politicos can keep alive the idea that Germany and Holland are doing well, and overall growth is almost at hand. That southern Europe must suffer for that idea has been justified away for years now, and it’s not even an issue deemed worth discussing anymore.

And that attitude will blow up in their faces, it’s inevitable that it will. Very few people understand how dangerous the games are that our governments and central banks play. And when the effects do play out, they will be blamed on other causes. Debt and propaganda rule our world supreme.

Excellent writer and great friend Jim Kunstler shows how simple the entire facade is to fathom, and how the next step away from the mess we’re in is so painfully obvious: downscale.

Buy the All Time High

Wall Street is only one of several financial roach motels in what has become a giant slum of a global economy. Notional “money” scuttles in for safety and nourishment, but may never get out alive. Tom Friedman of The New York Times really put one over on the soft-headed American public when he declared in a string of books that the global economy was a permanent installation in the human condition. What we’re seeing “out there” these days is the basic operating system of that economy trying to shake itself to pieces. The reason it has to try so hard is that the various players in the global economy game have constructed an armature of falsehood to hold it in place — for instance the pipeline of central bank “liquidity” creation that pretends to be capital propping up markets.

It would be most accurate to call it fake wealth. It is not liquid at all but rather gaseous, and that is why it tends to blow “bubbles” in the places to which it flows. When the bubbles pop, the gas will tend to escape quickly and dramatically, and the ground will be littered with the pathetic broken balloons of so many hopes and dreams. All of this mighty, tragic effort to prop up a matrix of lies might have gone into a set of activities aimed at preserving the project of remaining civilized. But that would have required the dismantling of rackets such as agri-business, big-box commerce, the medical-hostage game, the Happy Motoring channel-stuffing scam, the suburban sprawl “industry,” and the higher ed loan swindle.

All of these evil systems have to go and must be replaced by more straightforward and honest endeavors aimed at growing food, doing trade, healing people, traveling, building places worth living in, and learning useful things.

All of those endeavors have to become smaller, less complex, more local, and reality-based rather than based, as now, on overgrown and sinister intermediaries creaming off layers of value, leaving nothing behind but a thin entropic gruel of waste. All of this inescapable reform is being held up by the intransigence of a banking system that can’t admit that it has entered the stage of criticality. It sustains itself on its sheer faith in perpetual levitation. It is reasonable to believe that upsetting that faith might lead to war.

But that’s not yet where we are, though Ferguson sure looks close to that war Jim talks about. Our leading classes will not let us downscale, no matter how much sense that makes for the ‘lower’ 95% of the population, because that would risk their leading positions. And so we’ll have to deal with a lot more misery before the whole edifice finally blows up, and we’ll end up with huge swaths of traumatized people. In a great article, Lynn Stuart Parramore describes how that works:

So Many People Are Badly Traumatized by Life in America: It’s Time We Admit It

Recently Don Hazen, the executive editor of AlterNet, asked me to think about trauma in the context of America’s political system. As I sifted through my thoughts on this topic, I began to sense an enormous weight in my body and a paralysis in my brain. What could I say? What could I possibly offer to my fellow citizens? Or to myself? After six years writing about the financial crisis and its gruesome aftermath, I feel weariness and fear. When I close my eyes, I see a great ogre with gold coins spilling from his pockets and pollution spewing from his maw lurching toward me with increasing speed. I don’t know how to stop him. Do you feel this way, too?

All along the watchtower, America’s alarms are sounding loudly. Voter turnout this last go-round was the worst in 72 years, as if we needed another sign that faith in democracy is waning. Is it really any wonder? When your choices range from the corrupt to the demented, how can you not feel that citizenship is a sham? Research by Martin Gilens and Benjamin I. Page clearly shows that our lawmakers create policy based on the desires of monied elites while “mass-based interest groups and average citizens have little or no independent influence.” Our voices are not heard.

When our government does pay attention to us, the focus seems to be more on intimidation and control than addressing our needs. We are surveilled through our phones and laptops. As the New York Times recently reported, a surge in undercover operations from a bewildering array of agencies has unleashed an army of unsupervised rogues poised to spy upon and victimize ordinary people rather than challenge the real predators who pillage at will. Aggressive and militarized police seem more likely to harm us than to protect us, even to mow us down if necessary.

Our policies amplify the harm. The mentally ill are locked away in solitary confinement, and even left there to die. Pregnant women in need of medical treatment are arrested and criminalized. Young people simply trying to get an education are crippled with debt. The elderly are left to wander the country in RVs in search of temporary jobs. If you’ve seen yourself as part of the middle class, you may have noticed cries of agony ripping through your ranks in ways that once seemed to belong to worlds far away.

[..] A 2012 study of hospital patients in Atlanta’s inner-city communities showed that rates of post-traumatic stress are now on par with those of veterans returning from war zones. At least 1 out of 3 surveyed said they had experienced stress responses like flashbacks, persistent fear, a sense of alienation, and aggressive behavior. All across the country, in Detroit, New Orleans, and in what historian Louis Ferleger describes as economic “dead zones” — places where people have simply given up and sunk into “involuntary idleness” — the pain is written on slumped bodies and faces that have become masks of despair. We are starting to break down.

When our alarm systems are set off too often, they start to malfunction, and we can end up in a state of hyper-vigilance, unable to properly assess the threats. It’s easy for the powerful to manipulate this tense condition and present an array of bogeymen to distract our attention, from immigrants to the unemployed, so that we focus our energy on the wrong enemy. Guns give a false sense of control, and hatred of those who do not look like us channels our impotent rage. Meanwhile, dietary supplements and prescription painkillers lure us into thinking that if we just find the right pill, we can shut off the sound of the sirens. Popular culture brings us movies with loud explosions that deafen us to what’s crashing all around us.

The 21st century, forged in the images of flames and bodies falling from the Twin Towers, has sputtered on with wars, financial ruin and crushing public policies that have left us ever more shaken, angry and afraid. At each crisis, people at the top have seized the opportunity to secure their positions and push the rest of us further down. They are not finished, not by a long shot.

Trauma is not just about experiencing wars and sexual violence, though there is plenty of that. Psychology researchers have discussed trauma as something intense that happens in your life that you can’t adequately respond to, and which causes you long-lasting negative effects. [..] trauma comes with a very high rate of interest. The children of traumatized people carry the legacy of pain forward in their brains and bodies, becoming more vulnerable to disease, mental breakdown, addiction, and violence. Psychiatrist Bessel van der Kolk, an expert on trauma, emphasizes that it’s not just personal.

Trauma occupies a space much bigger than our individual neurons: it’s political. If your parents lost their jobs, their home or their sense of security in the wake of the financial crisis, you will carry those wounds with you, even if conditions improve. Budget cuts to education and the social safety net produce trauma. Falling income produces trauma. Job insecurity produces trauma.

There’s much more at the link, and every word is worth reading. The mental consequences of the gutting of our societies by governments and the financial industry does not get nearly enough scrutiny. We act, or politicians and media do, as if millions of people losing their jobs, and over half of young people in certain nations never having had a chance of a job, is just a matter of numbers, of mere statistics.

And then all sorts of ‘experts’ claim it’s all just the price to pay for technological progress, that will make everything so much better for everyone some sunny day soon. But that sunny say will never come, the techno happy ideal version of the future has already died with the debt incurred to facilitate it. We need to take a step backwards, or we’ll continue to drive backwards. Or be driven, to be more precise, since we’ve handed over the steering wheel to people who have no intention of taking us where we want to, and should, go. They are only intent on taking us where they can squeeze us most.

Thing is, there’s precious little left to squeeze. And they know that much better than most of us do. That’s why it’s imperative that we should get rid of these clowns, or there’ll be a whole lot more trauma. We can organize our societies, and we can even organize ways to downscale them peacefully . But not with those at the helm who see us only as mere entities to draw blood from.

We need to be a whole lot more assertive about this; we shouldn’t want to be surrounded by traumatized friends and family members and neighbors There’s nothing good for us in that. It’ll be used against us in increased surveillance and clampdowns and all that comes with it.

We can have good jobs for everyone, all it takes is to have what we need, produced in our own communities and societies, instead of having it shipped over from China. It’s not rocket science. It’s just that there’s a certain segment in society, which unfortunately happens to be the most powerful one, that doesn’t want us to do that. They want more and bigger, not smaller and better.

Until we solve that issue, things will keep getting worse. And not just a little bit. We need to find leaders that actually represent us, our needs and desires and ideas, and we need to find ways to elect them. If we don’t, we face a very bleak future in which there won’t be much left for us to choose. Or enjoy. We live in a pivotal moment in time, but we don’t recognize it for what it is. We seem to think it’s all some minor hiccup. We are dead wrong.