unmask Archives - The Automatic Earth

Germany was well aware of it’s post WWII collapsing birth rate and the impact of this on economic growth as this shrinking population of young made it’s way into the Core. Consider Germany’s Core population peaked in 1995 and it’s domestic consumer base has been shrinking since, now down over 3.3 million potential consumers (about a 9% Core decline…remember a depression is a 10% decline in economic activity, which a 9% and growing decline in German consumers would have almost surely induced).

GERMANY

The chart below shows Germany’s Core population from 1950–>2040…but understand this is no guestimate through 2040. This is simply taking the existing 0-24yr/old population (plus anticipated immigration) and sliding them into the Core through 2040. Germany’s Core population is set to fall by over 30% or 10+ million by 2040 (far more than the 7 million Germans of all ages who died in WWII).

But Germany had a plan. With the advent of the EU and Euro just as Germany’s Core began shrinking, Germany was able to avoid the pitfalls of a shrinking domestic consumer base, circumvent the strong German currency, and effectively quadruple it’s effective export market across Europe. German exports, as a % of GDP, have essentially doubled since the advent of the Euro (22% in ’95 to almost 50% in ’16). The chart below highlights Germany’s shrinking Core vs. rising GDP (primarily via exports) since 1995.

[..] the German motivation for the EU and Euro are fairly plain as are the resultant economic transfusion from South to North. But for Germany to be a winner, there had to be a loser in this shrinking pie game. Hello PIGS (Portugal, Italy, Greece, Spain), you lost. As the old poker adage goes, when you don’t know who the sucker at the table is…it’s you. Particularly when you “win big” at first and it all seems so easy…but then it all turns.

PIGS

The chart below shows the PIGS Core population peaking about 15 years later than in Germany but likewise clearly rolling over. By 2040, the PIGS Core population will be back at it’s 1960 levels…down from the 2010 peak by 17 million or about a 30% decline.

But if we look at the PIGS combined GDP and Core population…we see a very different picture than in Germany. The chart below shows the PIGS GDP turned down ahead of the Core population peak. The rise in GDP in these nations was a credit bubble premised on cheap EU wide interest rates more appropriate for Germany. Exports as a % of GDP (which were higher than Germany’s in ’95) have risen less than half of Germany’s increase (rising as a % primarily due to declining PIGS GDP). Low German wage increases and high quality German goods helped displace PIGS domestic manufacturing base.

The logical consequence of the article above. Economic warfare. Tsipras complains about the Troika “moving the goalposts”, but that’s exactly the game, Alexis.

• Greece Wants Eurozone Summit If Deal On Bailout Doesn’t Happen Soon (AP)

Top Greek and European officials indicated Wednesday that it’s possible to reach a breakthrough in the country’s difficult bailout talks over the next two days. Greece’s prime minister said that if a deal on paying Athens the next bailout installment fails to materialize, the eurozone should hold a special summit. Alexis Tsipras said negotiators are “just a breath away” from an agreement at Friday’s scheduled meeting in Malta of the so-called eurogroup, the gather of finance ministers from countries that use the euro. But Tsipras blamed unnamed negotiators among Greece’s European creditors and the IMF for “moving the goalposts” each time Greece was getting close to meeting approval conditions for the bailout. “We are not playing games here … that must stop,” he said, after talks in Athens with EU Council President Donald Tusk.

Greece has to agree on budget measures to get access to its loans. But the talks have dragged on for months, freezing the latest loan payout and hurting chances of a Greek economic recovery after years of recession and turmoil. Without the bailout payment, Greece would struggle to make a debt payment in July, raising anew the prospect of default. Tsipras’ left-led government is pushing for a comprehensive deal that would cover more than just spending cuts and harsh reforms by Greece, but also alleviate the country’s debt burden and ease its access later this year to international bond markets. “If the eurogroup is not in a position to (reach an agreement) on Friday, I have asked President Tusk to convene a eurozone summit to achieve an immediate agreement,” Tsipras said. “I don’t think that will be needed, because there will be a result on Friday, but these delays cannot continue.”

Is it just me, or do we see similar surveys once a week these days? How can anyone maintain that the US economy is doing fine?

• Half Of American Working Families Are Living Paycheck To Paycheck (MW)

More than seven years after the Great Recession officially ended, there is yet more depressing research that at least half of Americans are vulnerable to financial disaster. Some 50% of people is woefully unprepared for a financial emergency, new research finds. Nearly 1 in 5 (19%) Americans have nothing set aside to cover an unexpected emergency, while nearly 1 in 3 (31%) Americans don’t have at least $500 set aside to cover an unexpected emergency expense, according to a survey released Tuesday by HomeServe USA, a home repair service. A separate survey released Monday by insurance company MetLife found that 49% of employees are “concerned, anxious or fearful about their current financial well-being.”

One explanation: Americans are crippled under the same amount of debt as they had during the recession. The New York Federal Reserve on Monday predicted that total household debt will reach its previous peak of $12.68 trillion in 2017. The last time it reached that level was in the third quarter of 2008, during the depths of the Great Recession. Indeed, it’s already close: Total household debt in the fourth quarter of 2016 was $12.58 trillion. Fewer borrowers have housing-related debt in 2017 and, instead, have taken on auto and student loans.

One illness can push people to the brink of financial ruin. Wanda Battle, a registered nurse for four decades, was recently hit with a $100,000 medical bill. She has visited her local emergency room on more than one occasion due to severe migraines and mini-strokes. Battle, who is based near Nashville, Tenn., managed to reduce her latest hospital bill to $32,000 based on her relatively low income, but still faces $650 monthly payments for a previous $22,000 medical bill. “There were times I couldn’t work,” she told MarketWatch. “I have not held a job that is continuous.”

Glass Steagall. Interesting.

• Trump Top Economic Adviser Cohn Backs Split Of Lending, Investment Banks (BBG)

In a private meeting with lawmakers, White House economic adviser Gary Cohn said he supports a policy that could radically reshape Wall Street’s biggest firms by separating their consumer-lending businesses from their investment banks, said people with direct knowledge of the matter. Cohn, the ex-Goldman Sachs executive who is now advising President Donald Trump, said he generally favors banking going back to how it was when firms like Goldman focused on trading and underwriting securities, and companies such as Citigroup primarily issued loans, according to the people, who heard his comments. The remarks surprised some senators and congressional aides who attended the Wednesday meeting, as they didn’t expect a former top Wall Street executive to speak favorably of proposals that would force banks to dramatically rethink how they do business.

Yet Cohn’s comments echo what Trump and Republican lawmakers have previously said about wanting to bring back the Glass-Steagall Act, the Depression-era law that kept bricks-and-mortar lending separate from investment banking for more than six decades. In the years after the law’s 1999 repeal, banks such as Citigroup, Bank of America and JPMorgan Chase gobbled up rivals and pushed into all sorts of new businesses, becoming one-stop-shopping financial behemoths. Many banking executives believed that the inclusion of former finance executives like Cohn in Trump’s White House would temper major changes such as a Glass-Steagall return. But his Wednesday remarks suggest he could be a wildcard should Congress get serious about reinstating the law. White House officials haven’t said what an updated version of Glass-Steagall might look like.

They actually wrote a manual.

• IMF Explains How To Subvert Resistance Against Elimination Of Cash (Häring)

The IMF has published a Working Paper on “de-cashing”. It gives advice to governments who want to abolish cash against the will of their citizenry. Move slowly, start with harmless seeming measures, is part of that advice. In “The Macroeconomics of De-Cashing”, IMF-Analyst Alexei Kireyev recommends in his conclusions:

“Although some countries most likely will de-cash in a few years, going completely cashless should be phased in steps. The de-cashing process could build on the initial and largely uncontested steps, such as the phasing out of large denomination bills, the placement of ceilings on cash transactions, and the reporting of cash moves across the borders. Further steps could include creating economic incentives to reduce the use of cash in transactions, simplifying the opening and use of transferrable deposits, and further computerizing the financial system. The private sector led de-cashing seems preferable to the public sector led decashing. The former seems almost entirely benign (e.g., more use of mobile phones to pay for coffee), but still needs policy adaptation.

The latter seems more questionable, and people may have valid objections to it. De-cashing of either kind leaves both individuals and states more vulnerable to disruptions, ranging from power outages to hacks to cyberwarfare. In any case, the tempting attempts to impose de-cashing by a decree should be avoided, given the popular personal attachment to cash. A targeted outreach program is needed to alleviate suspicions related to de-cashing; in particular, that by de-cashing the authorities are trying to control all aspects of peoples’ lives, including their use of money, or push personal savings into banks. The de-cashing process would acquire more traction if it were based on individual consumer choice and cost-benefits considerations.”

Note, that the author is not talking about unreasonable objections and imagined disadvantages: He does count it among the advantages of de-cashing in the very next paragraph that personal savings are pushed into banks and he also does count total control of all aspects of financial life under the pros, as in the last sentence of the last quote below.

“As de-cashing gives incentives to economies’ agents to convert their currency in bank deposits, the deposit base of the banking system will increase, which can help reduce the lending rates and expand credit.”

And finally the advice to do it together:

“Coordinated efforts on de-cashing could help enhance its positive effects and reduce potential costs. At least at the level of major countries and their currencies, the authorities could coordinate their de-cashing efforts. Such coordinated efforts are, in particular, important in the decisions to phase out large denomination bills for all major currencies, to use ceilings and other restrictions on cash transactions, and to introduce the reporting requirements for cash transactions or their taxation. For currency areas, a single decashing policy would be clearly preferable to a national one. Finally, consensus between the public and the private sector and outreach on the advantages and modalities of gradual decashing should be viewed as key preconditions for its success.”

They’re all over the place.

• Precursors to the ’08 Crisis are Repeating Now (Nomi Prins)

The biggest banks are still as dangerous as they were before the last crisis, even as they push for less regulation. The big six banks U.S. banks are JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley. Despite their belly-aching about heinous Dodd-Frank Act regulations cramping their betting style, they have all done damn good recently. Since Trump was elected and started talking about deregulation, the big six bank stock values have collectively skyrocketed 33.5% (as of March 10th). Bank of America tops that rise with an eye-popping increase of 48.8% in three months. Goldman Sachs and Morgan Stanley shares shot up 36.6%. Of course, most stocks have been moving up since the election. But keep in mind that the S&P 500 rose just 10.9% during that same period.

Beyond a few extra capital requirements (mostly in the form of a set of rules called Basel III coming from Europe), the need to establish a “living will” in case of another financial emergency, and some limitations on risky trading, not much has changed for these banks. Since the 2008 financial crisis, the big six banks’ total assets have increased by 21%. The big four by 25%. Yet, of the total Global Derivatives Notional amount of $544 trillion, the big six U.S. banks carry $168 trillion of it. Comparing that figure to their total assets, we get a leverage amount of 24 times. To put that in perspective, that’s only slightly less than the leverage their derivatives positions before the 2008 crisis. The biggest banks are still the ones most at risk, and most threatening to anyone with money in the stock market. Cracks have started popping up that make it clear to us that the next financial crisis is just around the corner.

[..] The Fed’s data shows bank lending to businesses has been strong, perhaps too strong. That’s why it’s just now starting to trail off. We’ve had an epic credit expansionary cycle on the back of cheap, central bank fabricated money and ultra-loose monetary policy — what I call “artisanal” money. But defaults and distressed credit activity is rising. Last year, corporates posted their fifth-highest yearly default volume. According to Forbes, “62 companies defaulted on $59.3 billion in debt — 57% higher than the $37.7 billion of defaults in 2015.” That’s an ominous trajectory.

Bank of America just revealed that its 30-90 day consumer credit delinquencies are rising significantly again. So are delinquencies at Wells Fargo. The bank card default rate is at a 42 month high. U.S. subprime auto loan losses are at their highest level since the ’08 crisis. Banks that had been offering more commercial real estate loans now say they will tighten standards. Fears are rising that a greater%age will become delinquent just as they did in the lead up to the last financial crises. A downturn is inevitable. It’s a matter of when, not if.

Of course it shouldn’t.

• Former Fed Advisor Says Central Bank Shouldn’t Comment On Equities (CNBC)

Federal Reserve officials commented on the stock market in March, as minutes from the Federal Open Market Committee meeting revealed the central bank is working to reduce its $4.5 trillion in bonds on its balance sheet this year. Danielle DiMartino Booth, a former Dallas Fed advisor and president of Money Strong, said on CNBC’s Power Lunch on Monday, “It always makes me uncomfortable,” when the central bank comments on U.S. equities. In the summary of the March meeting, Fed members “commented that the recent increase in equity prices might in part reflect investors’ anticipation of a boost to earnings from a cut in corporate taxes or more expansionary fiscal policy, which might not materialize.

They also expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty attending the outlook for such policy initiatives.” “I don’t think it’s necessarily the purview of central bankers to comment on this,” DiMartino Booth said. She said the Fed’s comments on the market shows “they are also verbally concerned about financial instability,” and may consider it when the Fed makes fiscal policy decisions, in addition to labor and inflation mandates. David Nelson, chief strategist at Belpointe Asset Management, agreed, “I don’t think the Fed should be commenting on stock prices.”

“..getting from Point A ($4.5 trillion) to Point B ($2 trillion based on balance sheet contracting just over a tenth the size of the country’s GDP) will take at least five years.”

• Is the Fed’s Balance Sheet Headed for the Crapper? (DiMartino Booth)

The good news, for those fearing having to enter monetary rehab, is that it’s going to take a mighty long time to shrink the balance sheet. The fine folks over at Goldman Sachs figure that getting from Point A ($4.5 trillion) to Point B ($2 trillion based on balance sheet contracting just over a tenth the size of the country’s GDP) will take at least five years. (An aside for you insomniacs out there: Have a look back at Mind the Cap, penned back on December 16, 2015, released hours before the Fed hiked rates for the first time in order to raise the cap on the Reverse Repo Facility (RRP) to $2 trillion. (Mind The Cap via DiMartinobooth.com) Come what may, you can consider Goldman’s estimate of the terminal value of a $2 trillion balance sheet and the size of the RRP to be anything but coincidental.)

In any event, things change. As per Goldman, by 2022, “…changes in Fed leadership, regulation, Treasury issuance policy, or macroeconomic conditions could alter both the near-term path and the intended terminal size of the balance sheet.” Indeed. It is entertaining to watch market pundits shift in their skivvies trying to assure the masses that a shrinking balance sheet will be welcomed by risky assets. It was downright comical to read that the Fed’s strategically allowing only long-dated Treasuries to expire and not be replaced would prevent the yield curve from inverting, thus staving off recession. Pardon the interruption, but domestic non-financial sector debt stood at about 140% of GDP in 1980. Today, it’s crested 250% of GDP and keeps rising.

Interest rate sensitivity, especially in commercial real estate, household finance and junk bonds is particularly acute. Oh, and by the way, monetary policy is a global phenomenon. At last check, the European periphery and emerging market corporate bond market were not in the best position to weather a rising rate environment. The best performance, though, was delivered by Chair Janet Yellen herself. In the spirit of giving credit its due, Business Insider’s Pedro da Costa highlighted this delightful nugget from testimony Yellen presented to Congress in February: “Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting the financial markets and pushing the economy into recession.” Isn’t the rapidly flattening yield curve communicating that ‘removing accommodation’ today is one and the same with ‘pushing the economy into recession’?

Better do something, Justin. This is going to blow up in YOUR face.

• Toronto House Price Bubble Goes Nuts (WS)

Residential property sales in Greater Toronto soared 17.7% year-over-year to 12,077 homes, according to the Toronto Real Estate Board (TREB). New listings jumped 15.2% to 17,052. Prices for all types of homes, based on the MLS Home Price Index Composite “Benchmark,” soared 28.6%. The “average” selling price soared 33.2%! That average selling price of C$916,567 is up from C$688,011 a year ago. Over the past five years, it has doubled! The heavenly manna was spread across the spectrum. For condos, the average price in Greater Toronto soared 33.1% to C$518,879; for townhouses it soared 32.9% to C$705,078; for semi-detached houses, 34.4% to C$858,202; and for detached houses, 33.4% to C$1,214,422. Even the house price bubble in Beijing cannot compete with this sort of miracle; new house prices there increased only 22% year-over-year in February.

And Sydney’s fabulous house price bubble just flat out pales compared to the spectacle transpiring in Toronto, with prices up only 19% in March. Vancouver has its own housing bubble to deal with. But there, the government of British Columbia has tried to tamp down on wild speculation with various measures, including a transfer tax aimed squarely at foreign non-resident investors, with “mixed” success. Now the great fear in Toronto’s real estate circles is that the government of Ontario might impose similarly cruel and unusual punishment on the participants in this spectacle. Some measures are on the table, with folks wondering how to stop the bubble from inflating further and causing even greater harm to the real economy when it deflates, as all bubbles eventually do.

They’re reluctant. It seems they want to see how BC’s measures are washing out in Vancouver. The central government too is trying to fine-tune some macroprudential measures, but they’ve had absolutely no effect on Toronto’s housing bubble. And the Bank of Canada, which has been fretting about the housing bubble for a while – always couched in its very careful terms – refuses to raise rates. Everyone is talking. No one dares to do anything real about Toronto’s house price bubble. In Toronto, according the real estate folks, it’s all based on fundamentals. It’s based on supply and demand and very rational calculated thinking, and there is no bubble in sight, lenders are just fine, and if Canadians are locked out of the housing market, so be it, it’s just a shortage of housing, really.

We’re supposed to believe Australia never got the memo? Get real.

• Interest-Only Loans ‘To End In Tears’ (Aus.)

Former National Australia Bank boss Don Argus has added to warnings about the overreliance of interest-only loans, declaring it is going to “lead to tears” as interest rates eventually move higher. After a widely expected decision by the Reserve Bank to leave its official cash rate unchanged at a record low 1.5% at its monthly board meeting yesterday, Mr Argus declared that borrowers had “forgotten” the cyclical nature of interest rates. “You can only hope that some of these dizzy values that you see people paying for houses now, you hope that they stand up on any correction, any economic correction”, Mr Argus told The Australian. Backing a tightening of so-called macroprudential controls on home lending announced by the Australian Prudential Regulation Authority last week, Mr Argus, a former BHP Billiton chairman, said the capacity of borrowers to repay loans “was always a primary concern in housing loans of yesteryear”.

“If you progressed to just an interest-only environment, that’s only going to lead to tears.” However, in a speech given in Melbourne last night, RBA governor Philip Lowe took aim at banks and other lenders for making overly generous serviceability assessments. “Despite the focus on this area over recent times, too many loans are still made where the borrower has the skinniest of income buffers after interest payments”, Dr Lowe said. “In some cases, lenders are assuming that people can live more frugally than in practice they can, leaving little buffer if things go wrong. So APRA quite rightly has said lenders can expect a strong supervisory focus on loans with a very low net income surplus.” Dr Lowe also noted that the prevalence of interest-only lending was “unusual” globally.

“A reduced reliance on interest-only loans in Australia would be a positive development and would help improve our resilience. With interest rates so low, now is a good time for us to move in this direction,” he said. Almost 40% of residential mortgage lending in Australia is interest-only, where the borrower pays off the interest rather than the principal.

“It is about regime survival for a Chinese Communist Party that faces existential risk if they stumble.”

• China Is More Fragile than You Realize (DR)

China’s economy is not just about providing jobs, goods and services. It is about regime survival for a Chinese Communist Party that faces existential risk if they stumble. Given the systemic problems inherent in trying to run an economy in the absence of the accurate price signals only free markets provide (a problem for both Chinese socialism and the West’s corrupt crony markets), their challenges are worsening every day. Malinvestments the size of ghost cities are not lost on the world’s central bankers who fear a systemic collapse of China’s economy, nor on the brilliant investors who are betting on China’s collapse like they bet against the corrupt banking products in the U.S. housing bubble. Before the 2008 financial crisis, the Chinese debt-to-GDP ratio was 147%; now, it is at about 250%.

Quietly, the Chinese leadership has begun to lower growth expectations but even those numbers should be taken with skepticism. The methodology used to calculate their GDP figures is not publicly known but uses economic data that can be manipulated for sake of appearances. Declining growth impacts China’s financial market as well. Local banks are struggling with non-performing debt rapidly increasing. Non-bank financial institutions referred to as the “shadow banking system” are spreading, with little regulation or recognition of the risks. The government’s attempts to better regulate the system is stymied by local corruption where exaggerated assets and little documentation mask a wave of malinvestments. Like the appearance of no-doc “liar” loans in the U.S. in 2004-2006, the entire shadow banking system is signalling risk of systemic collapse.

Another source of malinvestment is the real estate market. Commercial real estate bubbles are breathtaking and residential real estate values have begun to fall. This seriously threatens social unrest as many Chinese families have put their life savings into real estate believing well intended but nonsensical government assurances of support to an ever increasing housing market. As is typical with most countries, the Chinese government tries to mask the ravages of inflation by adjusting their public measurement downwards. Doing so conceals the impact it has on households. But when values collapse wiping out the entire family savings for their old age, there will be a terrifying political backlash.

Yet another concern is that the 2008 Lehman bankruptcy marked a plateau in world trade. This has been particularly difficult for China as exports accounted for more than 40% of their GDP. With reduced global trade, China began to lose competitiveness in the market place. Inflation of the money supply in the Chinese economy required higher wages to offset rising prices. In turn, China tried to move into higher value exports by manufacturing more technologically advanced and complicated products. Unfortunately, in the transition, quality suffered and foreign markets began to look for alternatives to Chinese components.

Good to see I’m not the only one who questions the narrative (see Any of this Sound Familiar?).

• Syria Gas Attack: Assad’s Doing…Or False Flag? (Ron Paul)

Just days after the US Administration changed course on Syrian President Assad, saying he could stay, an alleged chemical weapon attack that killed dozens of civilians has been blamed on the Syrian government. Did Assad sign his own death warrant with such an attack…or does some other entity benefit?

“Sort of like in a divorce case where lawyers are hired, investigators are hired just to find out what the other person is doing from morning until night and then you try to piece it together later on.”

• Reports In Unmasking Controversy Were Detailed (Fox)

The intelligence reports at the center of the Susan Rice unmasking controversy were detailed, and almost resembled a private investigator’s file, according to a Republican congressman familiar with the documents. “This is information about their everyday lives,” Rep. Peter King of New York, a member of the House Intelligence committee said. “Sort of like in a divorce case where lawyers are hired, investigators are hired just to find out what the other person is doing from morning until night and then you try to piece it together later on.” On the House Intelligence Committee, only the Republican chairman, Devin Nunes of California, and the ranking Democrat Adam Schiff, also of California, have personally reviewed the intelligence reports. Some members were given broad outlines.

Nunes has consistently stated that the files caused him deep concern because the unmasking went beyond the former national security adviser Mike Flynn, and the information was not related to Moscow. Schiff said in a statement, “I cannot comment on the content of these materials or any other classified documents, and nothing should be inferred from the fact that I am treating classified materials the way they should be treated – by refusing to comment on them. Only the Administration has the power to declassify the information and make it available to the public.” Former National Security Adviser Rice is under scrutiny after allegations she sought to unmask the identities of Trump associates caught up in surveillance – such as phone calls between foreign intelligence targets. Rice denies ever having sought such information for political purposes and has defended her requests as routine.

[..] During his March 20 testimony before the House Intelligence Committee, NSA director Admiral Mike Rogers said only 20 individuals within the agency are authorized to approve those requests. “They receive specific training, there are specific controls put in place in terms of our ability to disseminate information out of the databases associated with U.S. persons,” Rogers said at the time. What it appears to suggest is that the NSA itself agreed that the instances in which Rice requested unmasking warranted that action. FBI Director James Comey was less direct. “I don’t know for sure. As I sit here, surely more, given the nature of the FBI’s work,” he testified.

What’s a 100 million more or less?

• We Are Heading For The Warmest Climate In Half A Billion Years (Conv.)

Carbon dioxide concentrations are heading towards values not seen in the past 200m years. The sun has also been gradually getting stronger over time. Put together, these facts mean the climate may be heading towards warmth not seen in the past half a billion years. A lot has happened on Earth since 500,000,000 BC – continents, oceans and mountain ranges have come and gone, and complex life has evolved and moved from the oceans onto the land and into the air. Most of these changes occur on very long timescales of millions of years or more. However, over the past 150 years global temperatures have increased by about 1ºC, ice caps and glaciers have retreated, polar sea-ice has melted, and sea levels have risen.Some will point out that Earth’s climate has undergone similar changes before. So what’s the big deal?

Scientists can seek to understand past climates by looking at the evidence locked away in rocks, sediments and fossils. What this tells us is that yes, the climate has changed in the past, but the current speed of change is highly unusual. For instance, carbon dioxide hasn’t been added to the atmosphere as rapidly as today for at least the past 66m years. In terms of geological time, 1ºC of global warming isn’t particularly unusual. For much of its history the planet was significantly warmer than today, and in fact more often than not Earth was in what is termed a “greenhouse” climate state. During the last greenhouse state 50m years ago, global average temperatures were 10-15ºC warmer than today, the polar regions were ice-free, palm trees grew on the coast of Antarctica, and alligators and turtles wallowed in swamp-forests in what is now the frozen Canadian Arctic.

Debt Rattle April 5 2017

Apr 052017

April 5, 2017 Posted by Raúl Ilargi Meijer at 8:43 am Finance Tagged with: bubble, Comex, debt, Fed, junk, leak, Russiagate, shadow, Susan RIce, unmask, zombie 1 Response »

DPC Times Square seen from Broadway 1908

• JPMorgan CEO Jamie Dimon Warns ‘Something Is Wrong’ With the US (BBG)

• US Housing Boom Is Anything But as Ownership Loses Appeal (A. Gary Shilling)

• Young Americans Are Killing Marriage (BBG)

• The Comex Is The World’s Most Corrupted Market (IRD)

• The Real Russiagate (Paul Craig Roberts – Michael Hudson)

• Fed Leak Probe Dooms Lacker But Leaves Key Question: Who Leaked? (BBG)

• I Tried To Ask Yellen About The Fed Leak (Da Costa)

• Australia’s Household Debt Crisis Is Worse Than Ever (Abc.au)

• Australian Economy At Risk As Debt Bomb Grows (Aus.)

• Chinese Brokers Are Muscling in on Asia’s Junk Bond Underwriters

• Zombie Nation: In Japan, Zero Public Companies Went Bust in 2016 (BBG)

• The World’s Best Economist (PCR)

• New Zealand Post To Deliver KFC (AFP)

Actually, a lot is wrong. Including Dimon talking his book and people thinking he’s doing something else, like trying to help anyone other than himself.

• JPMorgan CEO Jamie Dimon Warns ‘Something Is Wrong’ With the US (BBG)

JPMorgan CEO Jamie Dimon has two big pronouncements as the Trump administration starts reshaping the government: “The United States of America is truly an exceptional country,” and “it is clear that something is wrong.” Dimon, leader of world’s most valuable bank and a counselor to the new president, used his 45-page annual letter to shareholders on Tuesday to list ways America is stronger than ever – before jumping into a much longer list of self-inflicted problems that he said was “upsetting” to write. Here’s the start: Since the turn of the century, the U.S. has dumped trillions of dollars into wars, piled huge debt onto students, forced legions of foreigners to leave after getting advanced degrees, driven millions of Americans out of the workplace with felonies for sometimes minor offenses and hobbled the housing market with hastily crafted layers of rules.

Dimon, who sits on Donald Trump’s business forum aimed at boosting job growth, is renowned for his optimism and has been voicing support this year for parts of the president’s business agenda. In February, Dimon predicted the U.S. would have a bright economic future if the new administration carries out plans to overhaul taxes, rein in rules and boost infrastructure investment. In an interview last month, he credited Trump with boosting consumer and business confidence in growth, and reawakening “animal spirits.” But on Tuesday, reasons for concern kept coming. Labor market participation is low, Dimon wrote. Inner-city schools are failing poor kids. High schools and vocational schools aren’t providing skills to get decent jobs. Infrastructure planning and spending is so anemic that the U.S. hasn’t built a major airport in more than 20 years.

Corporate taxes are so onerous it’s driving capital and brains overseas. Regulation is excessive. “It is understandable why so many are angry at the leaders of America’s institutions, including businesses, schools and governments,” Dimon, 61, summarized. “This can understandably lead to disenchantment with trade, globalization and even our free enterprise system, which for so many people seems not to have worked.”

I like Shilling. But this reeks of nonsense. It’s not about appeal, it’s about getting poorer.

• US Housing Boom Is Anything But as Ownership Loses Appeal (A. Gary Shilling)

By many measures, the U.S. housing market seems in very good shape. The National Association of Realtors in Washington said last week that contracts to buy existing homes jumped 5.5% in February, the biggest increase since July 2010. Fannie Mae’s National Housing Survey showed that Americans expect home prices to rise a robust 3.2% over the next year as its sentiment index reached a record high. So, are boom times ahead for housing? Not quite. To understand why, it helps to revisit recent history. The housing bubble of the early 2000s was driven by subprime mortgages and other loose-lending practices. The subsequent collapse left many potential new homeowners with inadequate credit scores, not enough money for a down payment and insufficient job security to buy a house.

They also saw, for the first time since the 1930s, that not only house prices fall nationwide, but nosedive by a third. Homeownership plunged and those who did form households moved into rental apartments instead of single-family houses. That drove rental vacancy rates down and starts of multi-family housing – about two-thirds of which are rentals – up to 396,000 units, more than the earlier norm of 300,000 starts at annual rates. But single-family housing starts – even with the rebound to an 872,000 annual rate from the bottom of about 400,000 – are still far below the pre-housing bubble average of more than 1 million. Despite the recovery in house prices, rents have risen at a much faster pace. As a share of median income, rents have jumped while mortgage costs have fallen. The latest data from the National Association of Realtors show its Housing Affordability Index was up 52% in the fourth quarter of 2016 from the early 2007 low.

Yesterday we saw IMF head Lagarde saying the loss of productivity can be solved with education. But the younger have had a boatload more education than their parents.

• Young Americans Are Killing Marriage (BBG)

There’s no shortage of theories as to how and why today’s young people differ from their parents. As marketing consultants never cease to point out, baby boomers and millennials appear to have starkly different attitudes about pretty much everything, from money and sports to breakfast and lunch. New research tries to ground those observations in solid data. The National Center for Family and Marriage Research at Bowling Green State University set out to compare 25- to 34-year-olds in 1980—baby boomers—with the same age group today. Researcher Lydia Anderson compared U.S. Census data from 1980 with the most recent American Community Survey data in 2015. The results reveal some stark differences in how young Americans are living today, compared with three or four decades ago.

In 1980, two-thirds of 25- to 34-year-olds were already married. One in eight had already been married and divorced. In 2015, just two in five millennials were married, and only 7% had been divorced. Baby boomers’ eagerness to get married meant they were far more likely than today’s young people to live on their own. Anderson looked at the share of each generation living independently, either as heads of their own household or in married couples. The chance that Americans in their late twenties and early thirties live with parents or grandparents has more than doubled. In 1980, just 9% of 25- to 34-year-olds were doing so. In 2015, 22% lived with parents or grandparents. Millennials are also less likely than boomers to be living with kids—and to be homeowners.

It’s easy to look at these figures and say millennials are lagging behind their boomer parents. However, even as young Americans delay marriage, kids, and homeownership, they’re ahead of their parents by one measure: education.

Dazzling. “Historically, when the amount of paper exceeds the amount of underlying commodity that is available for delivery by more than 20-30%, the CFTC intervenes by investigating the possibility of market manipulation. But never with gold and silver.”

• The Comex Is The World’s Most Corrupted Market (IRD)

If you were to poll the public about comparing the investment returns between gold, silver and stocks during the first quarter of 2017, it’s highly probable that the majority of the populace would respond that the S&P 500 outperformed the precious metals. That’s a result of the mainstream media’s unwillingness to report on the precious metals market other than to disparage it as an investment. In reality, among silver, gold, the Nasdaq 100 and the S&P 500, the S&P 500 had the lowest ROR in Q1. Silver led the pack at 14%, followed by tech-heavy Nasdaq 100 at 11.1%, gold at 8.6% and the S&P 500 at 4.8%. Put that in your pipe and smoke it, Cramer. Imagine the performance gold and silver would have turned in if the Comex was prevented from creating paper gold and silver in amounts that exceeded the quantity of gold and silver sitting in the Comex vaults.

As an example, as of Friday the Comex is reporting 949k ozs of gold in the registered accounts of the Comex vaults and 9 million ozs of total gold. Yet, the open interest in paper gold contracts as of Friday totaled 41.7 million ozs. This is 44x more paper gold than the amount of physical that has been designated – “registered” – as available for delivery. It’s 4.6x more than the total amount of gold sitting on Comex vaults. With silver the situation is even more extreme. The Comex is reporting 29.5 million ozs of silver as registered and 190.2 million total ozs. Yet, the open interest in paper silver is a staggering 1.08 billion ozs. 1.08 billion ozs of silver is more silver than the world mines in a year. The paper silver open interest is 5x greater than the total amount of silver held in Comex vaults; it’s an astonishing 37x more than the amount of silver that is available to be delivered.

This degree of imbalance between the open interest in CME futures contracts in relation to the amount of the underlying physical commodity represented by those contracts never occurs in any other CME commodity – ever. Historically, when the amount of paper exceeds the amount of underlying commodity that is available for delivery by more than 20-30%, the CFTC intervenes by investigating the possibility of market manipulation. But never with gold and silver. The Comex is perhaps the most corrupted securities market in history. It is emblematic of the fraud and corruption that has engulfed the entire U.S. financial and political system. The U.S. Government has now issued $20 trillion in Treasury debt for which it has no intention of every redeeming. It’s issued over $100 trillion in unfunded liabilities (entitlements, pensions, etc) for which default is not a matter of “if” but of “when.”

“..We are now in a position to see the real story behind “Russiagate.” It’s not about Russia, except incidentally…”

• The Real Russiagate (Paul Craig Roberts – Michael Hudson)

Wall Street Journal editorialist Kimberley A. Strassel poses the real question: Why hasn’t the Trump administration had the Secret Service arrest Comey, Brennan, Schiff, the DNC and Hillary for trying to overthrow the President of the United States? “Mr. Nunes has said he has seen proof that the Obama White House surveilled the incoming administration—on subjects that had nothing to do with Russia—and that it further unmasked (identified by name) transition officials. This goes far beyond a mere scandal. It’s a potential crime.” What we are watching is turning out to be traces of a plot against a government elected by the American people. Attempts by House national security committee Chairman Devin Nunes have been countered with demands by his potential victims to recuse himself so as to stop his exposé of how “Team Obama was spying broadly on the incoming administration.”

[..] We are now in a position to see the real story behind “Russiagate.” It’s not about Russia, except incidentally. The Obama regime abused the government’s surveillance powers and spied on Donald Trump and other Republicans in order to build a dossier for the DNC to leak to the press in an attempt to slander or compromise Trump and throw the election to Hillary. They’ve been caught, but we can now see that they took steps to protect themselves against this. They prepared a cover story. They pretend they were not spying on Trump, but on Russians – which only by fortuitous happenchance turned up incriminating smoke against Trump. This cover story was buttressed by the fake news story prepared by former MI6 freelancer Christopher Steele.

As Whitney reports, Steele “was hired as an opposition researcher last June to dig up derogatory information on Donald Trump.” Unvetted and unverified information paid for by so-called informants “somehow” found its way into U.S. intelligence agency reports. These reports were then leaked to Democrat-friendly media. This is where the crime lies. Obama regime and DNC were using these agencies for domestic political use, KGB style. The Obama/Clinton cover story is now falling to pieces. That explains the desperation in the attack by Adam Schiff, the ranking Democrat on the House Intelligence Committee, on Committee Chairman Devin Nunes to stop the exposure. Russiagate is not a Trump/Putin collusion but a domestic spy job carried out by Democrats. Law requires Trump to arrest those responsible and to put them on trial for treason and conspiracy to overthrow the government of the United States.

They end the investigation without answering the question that started it?!

• Fed Leak Probe Dooms Lacker But Leaves Key Question: Who Leaked? (BBG)

The Federal Reserve’s inspector general says it will be ending its investigation into the 2012 release of confidential information. Even after the scandal cut short the career of one top Fed official, the answer to the most important question remains a mystery. Who did the initial leaking? Richmond Fed President Jeffrey Lacker resigned abruptly Tuesday as he announced his role in the unauthorized disclosure of information to Medley Global Advisors about policy options that the central bank was considering in 2012. His explanation suggested he was confirming facts the Medley analyst already knew. It was a sudden career stop for a Fed president who was frequently in opposition to the Fed board consensus on interest-rate policy, and the news will likely revive questions in Congress about the value of the central bank’s discretion and transparency.

“The story is not over today,” said Andrew Levin, a professor at Dartmouth College who was previously a special adviser at the Fed board and helped then-Vice Chair Janet Yellen develop the Fed’s policy on external communication. “There are a number of distinct details that suggest that Lacker wasn’t the main source of information.” Aaron Klein, a fellow at the Brookings Institution and the former chief economist on the Senate Banking Committee, said the Lacker statement “is not a full and complete accounting of what happened.” “The Fed, internally and its inspector general, would be wise to fully explore every aspect of what happened here because today’s actions and statements by Lacker raise more questions than they answer,” he said.

[..] Lacker’s carefully worded statement, distributed by his attorney, said he “crossed the line to confirming information that should have remained confidential.” The investigation into Lacker has concluded and no charges will be brought against him, the attorney said. He also said the Medley analyst “introduced into the conversation an important non-public detail” about one of the policy options under consideration. Lacker says he didn’t decline to comment “and the interview continued.” His statement doesn’t suggest that he tipped the Medley analyst initially. Indeed, the Fed board’s own investigation said “a few Federal Reserve personnel” had contact with the Medley analyst.

Lacker the only leaker? Doesn’t quite look that way.

• I Tried To Ask Yellen About The Fed Leak (Da Costa)

I once asked Janet Yellen a rather straightforward question that would echo for much longer than I expected. It was March 2015, and the Federal Reserve was under pressure from Congress to reveal details about an internal investigation into how key details of its interest rate policy deliberations had made their way into a report by a private sector firm. I was a reporter at the Wall Street Journal, and I asked the following at a press conference:

Let’s make something clear: Like any journalist, I love a good leak. But this was not your typical leak of important information to a journalist who then reported it to the public. This was the sharing of private, market-sensitive details with a private party – Medley Global Advisors – which then shared that information with its clients. The leak, it should be noted, happened all the way back in 2012 but it was still being discussed in 2015 because – despite the Fed’s internal investigation – nobody seemed to have gotten to the bottom of what had happened. And back in 2012, any read on what the Federal Reserve might do to suppress interest rates as the US economy continued to crawl out of the Great Recession, could lead to huge profits for the traders who bet on such things. These days, traders are thinking about the next rate hike.

Back then, interest rates were already at zero and the real insight gleaned from Medley’s report was how aggressively the Fed would work to keep them there by using its balance sheet. My question to Yellen had to do with basic public trust in the Fed. Why should the American people believe the central bank is working in its best interests if policymakers chat privately with movers and shakers on Wall Street? This was an alarming trend I had been reporting on since 2010, when I co-authored a report for Reuters entitled “Cozying up to big investors at Club Fed.” In it, my colleagues and I detailed other instances of market-moving information inappropriately being shared with investors, a trend we first observed when Fed officials speaking to bankers and hedge fund managers at conferences would suddenly go silent when a reporter walked by.

After the Yellen press conference, I took two weeks of paid leave for the birth of my daughter. When I returned, my editor at the paper told me I would no longer be attending Fed press conferences. No reason was given, and I left the job a few months later. Market bloggers speculated the Fed had “banned” me from the press conference. I have no reason to think that was the case because the central bank let me back in as soon as I changed news organizations. Fast-forward to April 4, 2017: Richmond Fed President Jeffrey Lacker resigns abruptly after admitting he was a source of the leak. As soon as I saw the news, the whole press conference incident flashed before my eyes. But Lacker’s admission that the Medley leak originated with him doesn’t entirely settle the matter. We know Yellen also met with Medley herself. Why? What did she say to them? Former Fed economist and Treasury official Seth Carpenter was also under scrutiny on the issue. What were the results of the Fed’s own investigation? And of Congress’?

Meanwhile in the gutter….

• Australia’s Household Debt Crisis Is Worse Than Ever (Abc.au)

Mr Russell told me there had been a big increase in debt-distressed Australians calling the [National Debt] helpline in recent months unable to pay their utilities bills. Naturally, he explained, rent and mortgage repayments take priority over the utilities bills because, in the order of survival priorities, you first need a roof over your head. Generally speaking, though, the National Debt helpline told me the rising cost of living is becoming crippling. Utilities bills, mortgage repayments and credit card debt, are all contributing to household financial stress. Last year over 150,000 calls were made to the National Debt Helpline. This year, monthly call volumes for the helpline are already 20% higher, compared to 2016. Based on current call volumes, the NDH predicts that there will be over 182,000 calls this year.

Martin North is the principal of financial research firm Digital Finance Analytics. He crunched the numbers and calculated that, in March, of the 3.1 million mortgaged households, around 22% were in “mild mortgage stress”. That’s up 1.5% on February, and is directly related to the even the smallest of interest rate increases by some of the big four banks. That means those households are managing to make their mortgage repayments, but only by cutting back on other expenditure, or putting more on credit cards, and generally hunkering down. Then there are those Australians under extreme levels of financial stress. Data from Digital Finance Analytics show 1% of households are in severe stress. That means they’re behind with their repayments, and are trying to dig their way out by refinancing, selling their property, or seeking help from services like the National Debt Helpline.

Ha ha: “Our banks are resilient and they are soundly capitalised,” he said.”

• Australian Economy At Risk As Debt Bomb Grows (Aus.)

The rampant debt-fuelled surge in the Sydney and Melbourne property markets will threaten the health of the national economy if it continues, Reserve Bank governor Philip Lowe has warned. However, Treasurer Scott Morrison has talked down drastic action on house prices after a “strong intervention” from Dr Lowe. The RBA is worried that housing debts are rising more than twice as fast as household incomes and that banks are lending to people who cannot afford to repay their debts. The concern has been that the longer the recent trends continued, the greater the risk to the future health of the Australian economy, Dr Lowe told a business dinner in Melbourne last night. “Stretched balance sheets make for more volatility when things turn down.” “For many people, the high debt levels and low wage growth are a sobering combination.”

The chairman of the government’s Financial System Inquiry, former Future Fund chairman David Murray, yesterday sounded a further alarm on the housing boom, saying a crisis on the scale of the 1890s great property collapse could not be ruled out. “What people should do is look at the 1890s, which was caused by a housing land boom,” he told The Australian. “To say it won’t happen and simply ignore it is wrong.” Half of the nation’s banks closed their doors following the 1890s crash. “Many people say a crisis has a low probability of occurrence, but the problem with that view is that whatever the probability, the severity can be very high if it occurs”, Mr Murray, who is also a former Commonwealth Bank chief executive, said. “It shouldn t be allowed to grow & it’s too big a risk to take.”

[..] House prices in Australia’s capital cities have risen 12.9% compared with this time last year, with a surge of 18.9% in Sydney and 15.9% in Melbourne, according to data released on Monday by property analytics firm CoreLogic. [..] Dr Lowe dismissed fears that the banks would be undermined by a housing downturn, saying the Council of Financial Regulators did not believe the boom was a threat to financial stability. “Our banks are resilient and they are soundly capitalised,” he said.

In China, the shadow banks are taking over…

• Chinese Brokers Are Muscling in on Asia’s Junk Bond Underwriters

China’s brokerages are out-muscling global investment banks to win more underwriting business in Asia’s junk bond market amid record offerings, as they increasingly help borrowers from the nation raise foreign currency debt. Haitong Securities topped the league table for high-yield notes denominated in dollars, euro and yen from companies in Asia excluding Japan in the first quarter, according to data compiled by Bloomberg. China Merchants Securities moved up four places to fifth. While HSBC rose three places to second, Standard Chartered and UBS slid to eighth and 11th from first and second in the first quarter of 2016. Junk bonds offer more lucrative fees than high-grade bonds, giving an extra boost to financial institutions that can expand in the business.

As Chinese firms have flocked to the offshore high-yield market, mainland banks and brokerage firms have grabbed market share away from international peers. Issuance of junk notes in dollars, euro and yen from Asia excluding Japan swelled to a record $14.6 billion in the first quarter, with nearly 70% from Chinese companies. “It’s increasingly competitive and Chinese banks are effectively buying market share with their balance sheet,” said Veronique Lafon-Vinais at the Hong Kong University of Science and Technology. Alexi Chan, global co-head of debt capital markets at HSBC, said that the significant rise in Asia high-yield bond sales reflected the “constructive market sentiment” and “positive outlook for China’s economy.”

… and in Japan, the zombies take over.

• Zombie Nation: In Japan, Zero Public Companies Went Bust in 2016 (BBG)

Corporate Japan achieved a rare feat in the fiscal year that ended last week. Not one of its almost 4,000 publicly-traded firms filed for bankruptcy protection. Yet that’s no reason to celebrate, according to analysts who see Japan’s easy credit conditions standing in the way of a much-needed, corporate restructuring to flush out failing companies and make room for new businesses. “It’s totally unhealthy,” says Martin Schulz, an economist at Fujitsu Research Institute in Tokyo. “Japan’s business cycle isn’t working. When no old companies go out of business, no new ones can come in because there isn’t room. The old companies will always compete on price, simply because they can.”

The last time not a single Japanese corporate titan went belly up was a four-year stretch 26 years ago, according to a report published this week by research firm Teikoku Databank. Back then, though, an overheated Japanese economy averaged 5.5% growth per year and then hit a wall when stock and real estate asset bubbles burst. This time, ultra-low interest rates and government loan guarantees left over from the global financial crisis are keeping companies afloat. Prime Minister Shinzo Abe touts fewer business failures as an economic success, but critics say too-easy credit is keeping “zombie” firms alive, worsening labor shortages, and excess competition is putting downward pressure on prices.

The Austrian economist Joseph Schumpeter in 1942 coined the term “creative destruction” to describe the messy way that capitalism reinvents itself. Japan may be stuck in a rut because it refuses to take the economic pain needed for a revival. Yet it’s hardly the only country keeping companies on life support. A January study by the OECD blamed zombies – defined as firms with persistent difficulties paying interest on debt – for slowing productivity, and thus causing sluggish growth, in the developed world. In South Korea, where the shipping industry has been hit by slumping global trade, state-run banks last month agreed to lend Daewoo Shipbuilding $2.6 billion and swap debt for equity to prevent a default. It was the second time in less than two years that the troubled shipbuilder was bailed out.

In China, roughly 10% of the country’s publicly-traded companies are “among the walking dead,” being kept alive by continuous support from government and banks, according to research by He Fan, an economist at Beijing’s Renmin University. Banks keep lending, often because they don’t want to own up to their bad debts. Meanwhile, the government fears the unemployment that would result if so many troubled firms were left to wither away.

“..the owners of property along the subway line experience a rise in property values. They owe their increased wealth and their increased incomes from the rental values of their properties to the expenditure of taxpayer dollars. If these gains were taxed away, the subway line could have been financed without taxpayers’ money.”

• The World’s Best Economist (PCR)

If you want to learn real economics instead of neoliberal junk economics, read Michael Hudson’s books. What you will learn is that neoliberal economics is an apology for the rentier class and the large banks that have succeeded in financializing the economy, shifting consumer spending power from the purchase of goods and services that drive the real economy to the payment of interest and fees to banks. His latest book is J is for Junk Economics. It is written in the form of a dictionary, but the definitions give you the precise meaning of economic terms, the history of economic concepts, and describe the transformation of economics from classical economics, where the emphasis was on taxing incomes that are not the product of the production of goods and services, to neoliberal economics, which rests on the taxation of labor and production.

This is an important difference that is not easy to understand. Classical economists defined “unearned income” as “economic rent.” This is not the rent that you pay for your apartment. Economic rent is an income stream that has no counterpart in cost incurred by the receipient of the income stream. For example, when a public authority, say the city of Alexandria, Virginia, decides to connect Alexandria with Washington, D.C., and with itself, with a subway paid for with public money, the owners of property along the subway line experience a rise in property values. They owe their increased wealth and their increased incomes from the rental values of their properties to the expenditure of taxpayer dollars. If these gains were taxed away, the subway line could have been financed without taxpayers’ money.

It is these gains in value produced by the subway, or by a taxpayer-financed road across property, or by having beachfront property instead of property off the beach, or by having property on the sunny side of the street in a business area that are “economic rents.” Monopoly profits due to a unique positioning are also economic rents. Hudson adds to these rents the interest that governments pay to bondholders when governments can avoid the issuance of bonds by printing money instead of bonds. When governments allow private banks to create the money with which to purchase the government’s bonds, the governments create liabilities for taxpayers than are easily avoidable if, instead, government created the money themselves to finance their projects. The buildup of public debt is entirely unnecessary.

No less money is created by the banks that buy government bonds than would be created if the government printed money instead of bonds. The inability of neoliberal economics to differentiate income streams that are economic rents with no cost of production from produced output makes the National Income and Product Accounts, the main source of data on economic activity in the US, extremely misleading. The economy can be said to be growing because public debt-financed investment projects raise the rents along subway lines. “Free market” economists today are different from the classical free market economists. Classical economists, such as Adam Smith, understood a free market to be one in which taxation freed the economy from untaxed economic rents. In neoliberal economics, Hudson explains, “free market” means freedom for rent extraction free of government taxation and regulation. This is a huge difference.

I got nothing. We’re doomed.

• New Zealand Post To Deliver KFC (AFP)

New Zealand Post has announced its couriers will home-deliver KFC fast food, in a trial that could provide a recipe for success as letter volumes continue to dwindle. Under a pilot scheme that started this week in the North Island town of Tauranga, KFC customers can order online and have their food delivered by NZ Post drivers. KFC operator Restaurant Brands NZ said that while it knew how to produce food, it had no experience in logistics, making the postal service a natural fit. “NZ Post has an extensive delivery distribution network around New Zealand, and KFC is available in most towns nationwide,” chief executive Ian Letele said.

“With the support of NZ Post, we hope to service the home delivery needs of many more KFC customers throughout New Zealand.” New Zealand Post has struggled in the digital age as email and texts have replaced traditional “snail mail”. The state-owned service slashed 2,000 jobs, or 20% of its workforce in 2013, and two years later moved to three-day-a-week deliveries, down from six. It said in its last financial statement that the fall in letter deliveries meant it was losing up to NZ$30 million ($21 million) a year in revenue. However, it said parcel volumes were up due to rising online orders and NZ Post was concentrating on capturing more e-commerce business.