Sep 042017
 
 September 4, 2017  Posted by at 3:34 pm Finance Tagged with: , , , , , , , , ,  2 Responses »
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Detail of a fresco from the House of the Tragic Poet, Pompeii, 2nd century BC

 

About a month ago, I finished reading former Greek finance minister Yanis Varoufakis’ book “Adults in the Room”, subtitled “My Battle With Europe’s Deep Establishment”, and published by The Bodley Head. I started writing about it right away, but noticed I was writing more about my personal ideas and experiences related to Greece than about the book. So I let it rest a bit.

I read the book in, of all places, Athens, sitting outside various old-style cafés. That got me a lot of reactions from Greeks seeing the cover of the book, most of them negative, somewhat to my surprise. Many Greeks apparently do not like Varoufakis. Of course I asked all the time why that is. “He’s arrogant” was/is a frequent one.

That’s not very helpful, I find, since first of all, it’s a purely subjective judgment, and second, I’m convinced their views come to a large extent from Greek media coverage, not only during Yanis’ term as finance minister from January to July 2015, but also in the years leading up to it. And Greek media are all controlled by ‘oligarchs’ et al, who certainly do not like either Yanis or the Syriza party he represented as minister.

The irony is that Varoufakis received more -individual- votes in the January 2015 election that brought Syriza to power than any other party member. And in the July 5 referendum 61.3% of Greeks voted against -yet- another bailout, very much in line with what Varoufakis had proposed. So there was a time when he was popular.

One guy said: ”he should be in jail”. When I asked why, the response was something like “they should all be in jail”, meaning politicians. Which is a bit curious, because whatever Varoufakis may be, a politician he is not. And the Greeks know that. They are very disappointed, and often depressed, by what has happened to them, of course they are. But why they would think Yanis is responsible for that is much less clear. Other then: “they’re all responsible”.

The best line in my opinion came from someone who said he thought Varoufakis was wrong for getting involved with Greek politics in the first place, a pit -as is the EU- replete with slithering venomous snakes. That I understand. That he should never have become minister since it could only have ended badly because of the corruption and backstabbing at all levels. I’m guessing Yanis himself has thought that too at times.

But at the same time, I remain convinced, as I’m sure he does, that he genuinely did it to help his people -who were already in terrible shape in late 2014 when he decided to run, and are much worse off now. And that’s not all. He would never have done it if he hadn’t had a plan to make things better. He did. If anything, that’s the key to his story.

And if his one-time friend, PM Tsipras, had not been paralyzed with fear at the last moment, that plan might well have worked. Yanis is an economist, and a game theorist at that. And though he has always insisted game theory was not the basis of what he did as minister, and rightly so because it’s not a game, there’s one aspect of what happened that comes straight from that field.

That is, before he agreed to run for finance minister, as he writes in the book, he tells Tsipras and his closest Syriza confidants that because Greece is very weak vs the Troika, they are not in any position to bluff. Meaning, if they are going to follow ‘the plan’, they must follow it to the end, in other words, they must be willing to walk away from the Troika, from the EU.

Not because they want to, but because the rules of the game demand it. When you’re weak, you cannot afford to blink. Yanis based his plan on letting the other side blink first, as he felt they would have to if only Greece did not. That’s what the whole thing was based on. And then, after -or rather, even before- winning the NO referendum, Tsipras blinked.

And yes, you can blame Varoufakis for that: for not making sure that would not happen. For putting trust where none was warranted. But the alternative would have been to stay in Texas and see his country perish. He was asked to join, he had a plan he believed in, what was he supposed to do?

 

“[The book] reads like a train”, says a Dutch review of Adults in the Room. And it does. Yanis proves a talented writer in the ‘genre’, which is not his by trade -so to speak-, of a day-to-day description of a series of events, conversations, confrontations with Greek, European and global political elites -with the occasional economist thrown in here and there-. The fact that he recorded many of the conversations on his iPhone, and undoubtedly made notes of many things as they happened, makes it a very compelling read. It’s obvious he’s not making it up, that he wrote down what actually happened -much of it word for word-. Seen through his eyes, of course.

As much as it reads like a train though, it also reads like a trainwreck. The portraits Yanis paints of many of the individuals he encounters, as well as of the institutions they represent, are often as painful as they are damning. Still, that is not what he sets out to do, as many of those who find their names in the book will undoubtedly claim. They are simply the portraits that emerge as events unfold.

In the world of power politics, this should not be a great surprise. But the picture of the dynamics that ‘control’ the European Union and it representatives, as well as the Troika institutions, the IMF, ECB, Eurogroup and European Commission, becomes, as we read along, more and more that of one familiar to us through the Godfather and the Sopranos. For many of the ‘players’ that appear on the scene, a comparison to ‘made men’ in the mafia is hard to avoid. Only, without a proper code of honor. A conversation Yanis describes in the introduction of the book makes this ‘analogy’ even more striking. He’s talking to Larry Summers, former US Treasury Secretary, who talks about insiders and outsiders.

“I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People – powerful people – listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.”

That’s obvious stuff. Except that this quote is from another book, US Senator Elizabeth Warren’s “A Fighting Chance”, and it’s almost verbatim the same as the one in Yanis’ book. It’s just politics. In the same way that Vito Corleone says: “it’s not personal, Sonny, it’s strictly business”. And Larry Summers is a consiglieri who spreads the gospel. Like it was once spread to him.

How do you become an insider, a made man? By committing to ‘the cause’, the family, through performing acts, initiation rituals. In the mob, that act is mostly murder, in the EU it’s something else, like obliterating the Greek economy. Or, in the case of European Council president Donald Tusk or First Vice-President of the European Commission Frans Timmermans, incessantly badmouthing Vladimir Putin. That gets you in. We know this because neither Tusk nor Timmermans had any other outstanding achievements to their names before they landed their top jobs.

So that gets you in. But into what, exactly? That’s a very opaque issue, and Varoufakis’ book doesn’t shine much light on it. Which is not a criticism, that’s not what he set out to do. Still, when he writes that in many occasions, as he tries to talk to for instance the assembled Eurogroup (all EU finance ministers plus -often- ECB head Mario Draghi and IMF head Christine Lagarde) about actual policies and plans, he “might as well have been singing the Swedish national anthem”, the opaqueness is the only thing that does ‘shine’.

A question that occurred to me, repeatedly, was how many of the people he tries to discuss issues with, actually understand what he’s talking about. For instance, once you delve into the specifics of debt swaps, what the benefits of one sort of bond are over others, you need a specific kind of knowledge, something an experienced investment banker or economist would have.

Schäuble’s a lawyer. Dijsselbloem’s an ‘agricultural economist’, whatever that may be. If you want to prevent any discussion on issues, what better than to put people in place who are -by education, by intelligence- simply not able to discuss them?

 

Not even Yanis, in my view, condemns Merkel and Schäuble and Dijsselbloem and a whole host of other characters in Brussels, Athens and beyond, strongly enough. Because the mob truly resides in Brussels -and Athens is truly corrupt. And Berlin. No matter how many times you may hear, or say, that something is simply politics, or it’s simply business, and nothing personal, it is very much personal and we should never accept it as normal human behavior.

That is the most damning issue Varoufakis brings up, but he doesn’t do that strong enough. When he seals a deal with China’s ambassador to Greece for Beijing to invest in Greece’s ports and railways, Angela Merkel calls the Chinese to tell them to back off; Germany’s not done with Greece yet. When current French President Emmanuel Macron, who was Economy Minister in 2015, sought to help Greece, Merkel called then-President Hollande to order him to get Macron ‘off the case’.

The European Union is undemocratic in myriad ways. What Varoufakis lays bare in his book, and then fails to utterly condemn, is that it is also undemocratic in the ‘ultimate’ way. That is, no country has anything to say except Germany. The EU’s largest member country decides everything. Not that Berlin sweats the small stuff, mind you, others are allowed to keep the illusion of democracy alive there.

But as soon as big decisions are made, finance, defense, there is one voice only that counts. That is the final nail in Europe’s coffin, even if it remains hidden very well. But spell that out loud and clear to the French people, or the Italians, that they have nothing at all to say about their own country and their own laws anymore, that the Germans decide FOR them, and what do you think they will say?

The very concept of a sovereign country, and the Union officially has 27 of them left, has turned into a joke inside the EU. Plus, Merkel and Macron and Brussels are calling for more Europe. Go to a supreme court in any EU country and tell them their own governments have lost all power over money and economics, and what do you think their constitutions will say? Care to define sovereignty?

So tell people that. Tell them that in reality Angela Merkel is their ‘leader’, not the people they have voted for. Ironically and unfortunately, the right wing regimes in eastern Europe may prove to be the ones who point this out first. Which is in line with how Brexit came about, and Trump, but in the end what all this really exposes is that we are all lied to three ways to Sunday, every day of the week.

Perhaps just as ironically, Varoufakis now leads a movement, named DiEM 25, that seeks to democratize the EU. I wish him all the good and then some with that, but I don’t see it. Because you would have to ‘overthrow’ Germany’s dictatorship of Europe, and get Germany to agree to being voluntarily ‘overthrown’. Why would Berlin ever agree to that? That’s even less likely than them agreeing to Varoufakis’ ideas about saving the Greek economy.

I’ve said it many times before, Europe’s nations can work together in many different ways, and the EU is just one of them, and it’s a very bad option. But reforming the EU from within does not look to me to be the way to go. It’s like reforming the US Republican or Democratic parties: they’re rotten to the core; why not start something new that doesn’t come with the whole deep-state-style burden?

 

You will hear and see a lot about how Yanis is naive and/or didn’t know what he was doing and proposing. But the only way in which he may have been naive is that he believed common sense would ultimately rule Europe. He might still have been right, if Tsipras et al had not choked. Which he told them repeatedly before he became Finance Minister would be fatal for Greece. He was right on that too, but he’ll find no pleasure in it.

His fault is that he didn’t – and doesn’t- want to ‘play the game’. That game is the only one in town, and it consists of keeping the established order in charge of everything, and of enhancing that power. It’s about politics, not economics. Or rather, the prevalent economic models suit the power elite just fine, so much so that their very faults help them stay in power, and nobody wants better models.

For trying to swim against that stream, you can blame Yanis, but that is the world turned upside down. Because if you look just a little bit closer, you can see that the present model is not only riddled with nonsensical assumptions, it is, because it is, destroying formerly sovereign nations.

For trying to prevent his country, Greece, from becoming the first nation in the formerly rich world to fall prey to that new-fangled colonialist model, Varoufakis deserves praise, not scorn. Do remember that when you see yet another ‘serious’ reviewer ridicule him for being naive. As in: who’s naive, you or Yanis? Is one naive for not kneeling before dictatorship disguised as democracy?

 

One last issue. It is often mentioned that the reason Brussels acts the way it does towards Greece is to scare off other EU members from ‘trying the same’, i.e. go against the rules set by the EU -which we, thanks to Yanis, know means Germany, and Germany only. But I don’t think that is true. It’s not about going against the EU; it’s doing anything. whatever it is, that would endanger the banks.

What the -scandalous- treatment of EU member and sovereign country Greece reveals is that it’s in the end not even Angela Merkel who calls the shots, but the main German, French, Dutch banks. Why the British would want to remain members of that kind of cabal will never cease to amaze me, but why their banks would does not in the least.

But yeah, so, the banks. That’s where it all started. Europe’s main banks lent Greek banks and corporations, all as corrupt as can be, money ‘up the wazoo’. When that could not be paid back this debt was not restructured, as it would be in any normal bankruptcy case, it was transferred first to the EU and then directly to Greek pensioners and other citizens. That is why Greece is in such a deplorable state.

The banks who made the loans were made whole, through a trick that hadn’t been tried before -and may not have been 100% legal but who cares about law in the EU?- and the entire mess was unloaded upon Greek society. Which is now in an even much bigger mess, with no end in sight, than when Varoufakis became finance minister. He knew that was coming and tried to prevent it.

What Merkel et al have done is to make sure that this ‘salvation’ of Deutsche Bank, Crédit Agricole et al will not be in peril. That’s more important to the system than Portugal or Italy questioning the powers of Berlin or Brussels. It’s not about scaring off other countries, it’s about safe-guarding the banks. It’s not about economics, it’s about raw political power.

In the next economic downfall, watch that dynamic. I’ve often said that the general principle of globalization/centralization, of which the EU is a good example, cannot stand in times of negative growth, because people won’t accept decisions about their lives being taken by far-away ‘leaders’ unless they think they can profit from it.

Wait till the realization dawns that Europe, like the rest of the world, only looks sort of okay because debt levels are rising everywhere. Mario Draghi still buys tens of billions of euros in ‘paper assets’ every month. That’s the European economy, that’s all that keeps it looking good, that’s the pig and that’s the lipstick, right there.

But forst and foremost, read the book. Yanis Varoufakis: “Adults in the Room”, subtitled “My Battle With Europe’s Deep Establishment”, published by The Bodley Head. If you’re at all interested in Greece, politics, economics, Michael Corleone, the EU, the IMF and/or the Sopranos. It reads like a train.

And it tells you a lot about how the world does (not) work. From the inside, and you don’t get to have a lot of views from the inside. “Adults in the Room” is a rare chance. The ruling powers will keep trying to discredit Yanis, but the more they do, the more you should be alerted.

 

 

Jul 252017
 
 July 25, 2017  Posted by at 8:34 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle July 25 2017
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Vincent van Gogh Sunflowers 1887

 

The Next Financial Crisis Is Parked Out Front (G.)
Bank of England Warns of ‘Spiral Of Complacency’ on Household Debt (G.)
How Big Of A Deleveraging Are We Talking About? (Roberts)
IMF: US Looks Weaker, Rest Of The World Picks Up Economic Slack (CNBC)
Bloated London Property Prices Fuel Exodus (G.)
The Foreclosure ‘Pig’ Moves Through The Housing-Crisis ‘Python’ (MW)
Australian Housing Market At Risk Of Crash – UBS Research (CNBC)
It’s Time To Rethink Monetary Policy (Rochon)
Scandals Threaten Japanese Prime Minister Shinzo Abe’s Grip On Power (G.)
Brussels To Act ‘Within Days’ If US Sanctions Hurt EU Trade With Russia (RT)
EU Divided On How To Answer New US Sanctions Against Russia (R.)
US ‘May Send Arms’ To Ukraine, Says New Envoy (BBC)
Tsipras and Varoufakis Go Public With Spat (K.)
Alexis Tsipras’s Mixed Messages Over Appointing Me As Finance Minister (YV)
Greece Plans Return To Bond Market As Athens Sees End To Austerity (G.)
Greek Spending Cuts Prettify Budget Data (K.)

 

 

Can’t let a headline like that go to waste. More on the topic in the 2nd article.

The Next Financial Crisis Is Parked Out Front (G.)

Good morning – Warren Murray here with your Tuesday briefing. Britain’s rising level of personal debt has prompted a warning from the Bank of England about dire consequences for lenders and the economy. There are “classic signs” that the risks involved in car finance, credit cards and personal loans are being underestimated as financial institutions make hay while the sun shines, says Alex Brazier, the Bank’s director for financial stability. The economy defied expectations when it grew strongly in the six months after the EU referendum. But that was partly fuelled by consumers racking up their credit cards and loans, as lenders offered easier terms and longer interest-free deals. Much higher levels of borrowing compared with income are now being allowed, at a time when household incomes have only marginally risen.

As the anniversary of the global financial meltdown approaches, Brazier has suggested current low rates of default on personal credit may have again caused banks to become blinkered to the potential for disaster. Back in 2007, “banks – and their regulators – were blind to the basic fact that more debt meant greater risk of loss”. “Lenders have not entered, but they may be dicing with, the spiral of complacency. The spiral continues, and borrowers rack up more and more debt. “[In 2007] complacency gave way to crisis. Companies and households were unable to refinance their debts. The result was economic disaster.”

Read more …

The BoE creates huge bubbles, and afterwards starts warning about them. Typical central bank behavior.

Bank of England Warns of ‘Spiral Of Complacency’ on Household Debt (G.)

The Bank of England has told banks, credit card companies and car loan providers that they risk fresh action against reckless lending as it warned of a looming “spiral of complacency” about mounting consumer debt. In its toughest warning yet about the possibility of a rerun of the financial crisis that devastated the economy 10 years ago, Threadneedle Street admitted it was alarmed about the increase in the amount of money being borrowed on easy terms over the past year. “Household debt – like most things that are good in moderation – can be dangerous in excess”, Alex Brazier, the Bank director for financial stability, said in a speech in Liverpool. “Dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy.”

Brazier’s said there were “classic signs” of lenders thinking the risks were lower following a prolonged period of good economic performance and low losses on loans. The first signs of the Bank’s anxiety about consumer debt came from its governor, Mark Carney, a month ago, but Brazier’s comments marked a ratcheting up of Threadneedle Street’s rhetoric. “Lenders have been the lucky beneficiaries of the benign way the economy has evolved. In expanding the supply of credit, they may be placing undue weight on the recent performance of credit cards and loans in benign conditions,” Brazier said. The willingness of consumers to take on more debt to fund their spending helped the economy grow strongly in the six months after the EU referendum, a period when the Bank expected growth to fall sharply.

Over the past year, Brazier said, household incomes had grown by just 1.5% but outstanding car loans, credit card balances and personal loans had risen by 10%. He added that terms and conditions on credit cards and personal loans had become easier. The average advertised length of 0% credit card balance transfers had doubled to close to 30 months, while advertised interest rates on £10,000 personal loans had fallen from 8% to around 3.8%, even though official interest rates had barely changed.

Read more …

More great work by Lance. if these graphs and numbers don’t scare you, look again.

How Big Of A Deleveraging Are We Talking About? (Roberts)

Debt, if used for productive investments, can be a solution to stimulating economic growth in the short-term. However, in the U.S., debt has been squandered on increases in social welfare programs and debt service which has an effective negative return on investment. Therefore, the larger the balance of debt becomes, the more economically destructive it is by diverting an ever growing amount of dollars away from productive investments to service payments. The relevance of debt growth versus economic growth is all too evident as shown below. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the growth in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare.

It now requires nearly $3.00 of debt to create $1 of economic growth.

In fact, the economic deficit has never been greater. For the 30-year period from 1952 to 1982, the economic surplus fostered a rising economic growth rate which averaged roughly 8% during that period. Today, with the economy growing at an average rate of just 2%, the economic deficit has never been greater.

But again, it isn’t just Federal debt that is the problem. It is all debt. As discussed last week, when it comes to households, which are responsible for roughly 2/3rds of economic growth through personal consumption expenditures, debt was used to sustain a standard of living well beyond what income and wage growth could support. This worked out as long as the ability to leverage indebtedness was an option. The problem is that eventually, the debt reaches a level where the level of debt service erodes the ability to consume at levels great enough to foster stronger economic growth. In reality, the economic growth of the U.S. has been declining rapidly over the past 35 years supported only by a massive push into deficit spending by households.

[..]The massive indulgence in debt, or a “credit induced boom”, has now begun to reach its inevitable conclusion. The debt driven expansion, which leads to artificially stimulated borrowing, seeks out diminishing investment opportunities. Ultimately these diminished investment opportunities lead to widespread malinvestments. Not surprisingly, we clearly saw it play out in “real-time” in 2005-2007 in everything from sub-prime mortgages to derivative instruments. Today, we see it again in mortgages, subprime auto loans, student loan debt and debt driven stock buybacks and acquisitions.

When credit creation can no longer be sustained the markets will begin to “clear” the excesses. It is only then, and must be allowed to happen, can resources be reallocated back towards more efficient uses. This is why all the efforts of Keynesian policies to stimulate growth in the economy have ultimately failed. Those fiscal and monetary policies, from TARP and QE to tax cuts, only delay the clearing process. Ultimately, that delay only potentially worsens the inevitable clearing process. That clearing process is going to be very substantial. With the economy currently requiring roughly $3 of debt to create $1 of real, inflation-adjusted, economic growth, a reversion to a structurally manageable level of debt would involve a nearly $35 Trillion reduction of total credit market debt from current levels.

Read more …

Difference: BOJ and ECB still buy trilions in ‘assets’.

IMF: US Looks Weaker, Rest Of The World Picks Up Economic Slack (CNBC)

Despite cutting the economic growth outlook for the U.S. and U.K., the IMF kept its global growth forecast unchanged on expectations the euro zone and Japanese growth would accelerate. In the July update of its World Economic Outlook, the IMF forecast global economic growth of 3.5% for 2017 and 3.6% for 2018, unchanged from its April outlook. That was despite earlier cutting its U.S. growth projection to 2.1% from 2.3% for 2017 and to 2.1% from 2.5% for 2018, citing both weak growth in the first quarter of this year as well as the assumption that fiscal policy will be less expansionary than previously expected. A weaker-than-expected first quarter also spurred the IMF to cut its forecast for U.K. growth for this year to 1.7% from 2.0%, while leaving its 2018 forecast at 1.5%.

But slowdowns in the U.S. and U.K. were expected to be offset by increased forecasts for many euro area countries, including Germany, France, Italy and Spain, where first quarter growth largely beat expectations, the IMF said. “This, together with positive growth revisions for the last quarter of 2016 and high-frequency indicators for the second quarter of 2017, indicate stronger momentum in domestic demand than previously anticipated,” the IMF said in its release. It raised its euro-area growth forecast for 2017 to 1.9% from 1.7%. For 2018, it increased its forecast to 1.7% from 1.6%.

Read more …

The Guardian has the guts to claim that people don’t move out because they don’t have the money to stay, but because they want to get on the f*cking property ladder.

Bloated London Property Prices Fuel Exodus (G.)

In the Kent seaside town of Whitstable, long-term residents call them DFLs – people who have moved “down from London”, sometimes for the lifestyle but more often for cheaper housing. The number of people fleeing the capital to live elsewhere has hit a five-year high. In the year to June 2016, net outward migration from London reached 93,300 people – more than 80% higher than five years earlier, according to analysis of official statistics. A common theme among the leavers’ destinations is significantly cheaper housing, according to the estate agent Savills, which analysed figures from the Office for National Statistics and the Land Registry. Cambridge, Canterbury, Dartford and Bristol are reportedly among the most popular escape routes for people who have grown tired of London and its swollen property prices.

The most likely destination for people aged over 25 moving from Islington is St Albans in Hertfordshire, where the average home is £173,000 cheaper. People moving from Ealing to Slough – the most popular move from the west London borough – stand to save on average £241,000. Among all homeowners leaving London, the average house price was £580,000 while the average in the areas they moved to was £333,000. The exodus is not just of homeowners, but of renters too. Rents in London have soared by a third in the last decade, compared to 18% in the south-west, 13% in the West Midlands and 11% in the north-west of England.

The only age group that has a positive net migration figure in the capital is those in their twenties, the research found. Everyone else, from teens to pensioners, is tending to get out. Since 2009, the trend has been steadily increasing among people in their thirties with 15,000 more people in that age bracket leaving every year than at the end of the last decade – a 27% rise. The phenomenon is being driven by a widespread desire to “trade up the housing ladder”, something that is all too often impossible in London according to Lucian Cook, Savill’s head of residential research. “Five years ago people would have been reluctant [to move out] because the economy wasn’t as strong and some owners didn’t want to miss out on house price growth [in London],” he said.

Read more …

Pretending it’s the last of the pig. We’ll see about that.

The Foreclosure ‘Pig’ Moves Through The Housing-Crisis ‘Python’ (MW)

As the effects of the housing crisis further recede, markers of distress are declining, with one notable exception: Among the batches of severely delinquent mortgages bought by institutional investors, foreclosures are on the rise. The trend is a reminder of the reasons many community advocates resisted allowing institutional investors to buy delinquent mortgages in government auctions that began in 2010. Wall Street, those advocates said, shouldn’t be rewarded for its role in creating the housing crisis with the chance to buy for pennies on the dollar the very assets whose values it dented. The government auctions promised a risk-sharing solution that would benefit nearly everyone: Homeowners whose mortgages had been bought dirt-cheap could get loan modifications, investors would get profitable assets, and communities would see tax revenues restored and neighborhoods revitalized.

But that win-win-win scenario may bring little relief to the most distressed among those troubled assets. A new Attom Data analysis for MarketWatch shows increasing foreclosures in the mortgages auctioned by the government. A subsidiary of private-equity firm Lone Star Investments, for example, has foreclosed on nearly 2,000 homeowners this year, through early July, and has increased foreclosures every year since 2013. And a Goldman Sachs subsidiary called MTGLQ, which has more than doubled foreclosures each year from 2014 to 2016, may do the same again this year, based on early 2017 data. Those figures stand in stark contrast to the housing market overall, where foreclosures fell 22% in the second quarter, touching an 11-year low of just over 220,000.

The institutional-investor foreclosure figures are a small fraction of the total, noted Daren Blomquist, Attom’s senior vice president of communications. And they don’t surprise investors who intentionally snatch up the most distressed mortgages available because their elevated risk promises higher yield. Attom Data does show an uptick in foreclosures by other lenders, though not all participated in the government auctions. But they’re a reminder that a decade after the housing downturn began, the pockets of foreclosures that still pop up represent the worst of the worst, prompting even those questioning the program to agree that some foreclosures were inevitable, no matter who owned the mortgages. Analysts call the current crop of foreclosures “the last of the pig moving through the python.”

Read more …

All bubble countries now face the issue. There’s no way out. So they’ll deny their bubble for a while longer.

Australian Housing Market At Risk Of Crash – UBS Research (CNBC)

The Australian housing market has peaked and could crash if the country’s central bank raises rates by too much or too quickly according to researchers at the Swiss bank, UBS. Property in Australia has boomed and the most recent government data marked growth in residential property prices at 10.2% year on year for the 2017 March quarter. In a note Monday, UBS Economist George Tharenou said any rash interest rate action from the Reserve Bank of Australia (RBA) could trigger a crash. “We still see rates on hold in the coming year, amid macroprudential tightening on credit growth and interest only loans. “Hence we still see a correction, but not a collapse, but if the RBA hikes too early or too much (as flagged by its hawkish minutes), it risks triggering a crash,” Tharenou warned.

Housing starts fell 19% in the first quarter of the year and May’s mortgage approvals also slid 20%. After a multi-year boom, the cost of an average home in the country now sits at 669,700 Australian dollars ($532,000) but Tharenou said price growth is certain to slow. “Despite weaker activity, house prices just keep booming with still strong growth of 10% y/y in June. However, this is unsustainably 4-5 times faster than income. “Looking ahead, we still see price growth slowing to 7% y/y in 2017 and 0-3% in 2018, amid record supply & poor affordability,” the economist added.

Read more …

Raising rates into a gigantesque bubble. No problem.

It’s Time To Rethink Monetary Policy (Rochon)

July 12 marks the date the Bank of Canada ignored common sense and increased its rate for the first time in seven years. Economists are largely divided on whether this was a good move, but in my opinion this was an ill-informed decision, largely based on the usually strong first quarter data, which may prove unsustainable in the longer term. In turn, it raises important questions about the conduct of monetary policy and the need to rethink the role and purpose of central bank policy. For the record, I don’t think there is much to fear from a single increase to 0.75% from 0.50, though it will have an immediate impact on mortgage rates — some Canadians will pay more for their homes. However, it is the prospect of what that move represents that sends chills down this economist’s spine.

As we know all too well, central banks never raise rates once or twice, but usually do so several times. Indeed, the consensus among economists is that there will be at least two more raises before the end of 2018, bringing the bank rate to 1.25%. This is still low by historical standards, but the raises begin to add up. I expect many more rate hikes through 2019 and 2020. You see, the Bank of Canada believes the so-called natural rate is 3%, which means we could possibly see nine more interest rate increases. Imagine the damage that will do. Yet, according to their own model, this rate is the “neutral” or “natural” rate and should have no far reaching impact. Try telling that to Canadians who have consumer debt and a mortgage. Clearly, there is nothing “neutral” about these rate increases. This alone is a reason to rethink monetary policy.

Second, the Bank of Canada targets inflation, and has been officially since 1991, a fact it reminds us of all the time. All other objectives, including economic growth and unemployment, or even household debt and income inequality, are far behind the principal objective of trying to keep the inflation rate on target. There is much to say about this, including whether interest rates and monetary policy in general are the best tool to deliver on the inflation crusade. Even if we accept this, inflation is currently at a near two-decade low. In other words, where’s the inflation beef? Inflation does not represent a current threat, and there are no inflationary pressures in the economy, which raises the question: Why raise rates?

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With Abenomics dead, so is Abe.

Scandals Threaten Japanese Prime Minister Shinzo Abe’s Grip On Power (G.)

Shinzo Abe is fighting for his future as Japan’s prime minister as scandals drag his government’s popularity close to what political observers describe as “death zone” levels. Apart from clouding Abe’s hopes of winning another term as leader of the Liberal Democratic Party (LDP) when a vote is held next year, the polling slump also undermines his long-running push to revise Japan’s war-renouncing constitution. Abe, who returned to the prime ministership four and a half years ago, was long seen as a steady hand whose position appeared unassailable – so much so that the LDP changed its rules to allow Abe the freedom to seek a third consecutive three-year term at the helm of the party. “He is no longer invincible and the reason why he is no longer invincible is he served his personal friends not the party,” said Michael Thomas Cucek, an adjunct professor at Temple University Japan.

Abe’s standing has been damaged by allegations of favours for two school operators who have links to him. The first scandal centred on a cut-price land deal between the finance ministry and a nationalist school group known as Moritomo Gakuen. The second related to the approval of a veterinary department of a private university headed by his friend, Kotaro Kake. Abe has repeatedly denied personal involvement, but polls showed voters doubted his explanations, especially after leaked education ministry documents mentioned the involvement of “a top-level official of the prime minister’s office” in the vet school story. Abe attempted to show humility in a parliamentary hearing this week by acknowledging it was “natural for the public to sceptically view the issue” because it involved his friend. “I lacked the perspective,” he said. Experts doubt that Abe’s contrition, combined with a planned cabinet reshuffle next week, will do much to reverse his sagging fortunes.

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The limits of the anti-Russia craze.

Brussels To Act ‘Within Days’ If US Sanctions Hurt EU Trade With Russia (RT)

The EU should act “within days” if new sanctions the US plans to impose on Russia prove to be damaging to Europe’s trade ties with Moscow, an internal memo seen by the media says. Retaliatory measures may include limiting US jurisdiction over EU companies. An internal memo seen by the Financial Times and Politico has emerged amid mounting opposition to a US bill seeking to hit Russia with a new round of sanctions. The bill, if signed into law, will also give US lawmakers the power to veto any attempt by the president to lift the sanctions. The document reportedly said European Commission chief Jean-Claude Juncker was particularly concerned the sanctions would neglect the interests of European companies. Juncker said Brussels “should stand ready to act within days” if sanctions on Russia are “adopted without EU concerns being taken into account,” according to the FT.

The EU memo also warns that “the measures could impact a potentially large number of European companies doing legitimate business under EU measures with Russian entities in the railways, financial, shipping or mining sectors, among others.” Restrictions against Russia come as part of the Countering Iran’s Destabilizing Activities Act, targeting not only Tehran, but also North Korea. Initially passed by the Senate last month, the measures seek to impose new economic measures on major sectors of the Russian economy. The draft legislation would also introduce individual sanctions for investing in Gazprom’s Nord Stream 2 gas pipeline project, outlining steps to hamper construction of the pipeline and imposing sanctions on European companies which contribute to the project.

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So EU vs US, and EU vs EU. The problem seems to be that US companies could profit from the sanctions, as European ones suffer.

EU Divided On How To Answer New US Sanctions Against Russia (R.)

European Commission preparations to retaliate against proposed new U.S. sanctions on Russia that could affect European firms are likely to face resistance within a bloc divided on how to deal with Moscow, diplomats, officials and experts say. A bill agreed by U.S. Senate and House leaders foresees fines for companies aiding Russia to build energy export pipelines. EU firms involved in Nord Stream 2, a 9.5 billion euro ($11.1 billion) project to carry Russian gas across the Baltic, are likely to be affected. Both the European Union and the United States imposed broad economic sanctions on Russia’s financial, defense and energy sectors in response to Moscow’s annexation of Crimea from Ukraine in 2014 and its direct support for separatists in eastern Ukraine. But northern EU states in particular have sought to shield the supplies of Russian gas that they rely on.

Markus Beyrer, director of the EU’s main business lobby, Business Europe, urged Washington to “avoid unilateral actions that would mainly hit the EU, its citizens and its companies”. The Commission, the EU executive, will discuss next steps on Wednesday, a day after the U.S. House of Representatives votes on the legislation, knowing that the U.S. move threatens to reopen divisions over the bloc’s own Russia sanctions. Among the European companies involved in Nord Stream 2 are German oil and gas group Wintershall, German energy trading firm Uniper, Anglo-Dutch Royal Dutch Shell, Austria’s OMV and France’s Engie. The Commission could demand a formal U.S. promise to exclude EU energy companies; use EU laws to block U.S. measures against European entities; or impose outright bans on doing business with certain U.S. companies, an EU official said.

But if no such promise is offered, punitive sanctions such as limiting the access of U.S. companies to EU banks require unanimity from the 28 EU member states. Ex-Soviet states such as Poland and the Baltic states are unlikely to vote for retaliation to protect a project they have resisted because it would increase EU dependence on Russian gas. An EU official said most member states saw Nord Stream 2 as “contrary or at least not fully in line with European objectives” of reducing reliance on Russian energy. Britain, one of the United States’ closest allies, is also wary of challenging the U.S. Congress as it prepares to leave the EU and seeks a trade deal with Washington. In fact, the EU’s chief executive, Jean-Claude Juncker, has few tools that do not require unanimous support from the bloc’s 28 governments.

The Commission could act alone to file a complaint at the World Trade Organisation. But imposing punitive tariffs on U.S. goods would require detailed proof to be gathered that European companies were being unfairly disadvantaged — a process that would take many months. Diplomatic protests such as cutting EU official visits to Washington are unlikely to have much effect, since requests by EU commissioners for meetings with members of Trump’s administration have gone unanswered, EU aides say.

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Let’s hope they don’t try.

US ‘May Send Arms’ To Ukraine, Says New Envoy (BBC)

The new US special representative for Ukraine says Washington is actively reviewing whether to send weapons to help those fighting against Russian-backed rebels. Kurt Volker told the BBC that arming Ukrainian government forces could change Moscow’s approach. He said he did not think the move would be provocative. Last week, the US State Department urged both sides to observe the fragile ceasefire in eastern Ukraine. “Defensive weapons, ones that would allow Ukraine to defend itself, and to take out tanks for example, would actually to help” to stop Russia threatening Ukraine, Mr Volker said in a BBC interview.

“I’m not again predicting where we go on this, that’s a matter for further discussion and decision, but I think that argument that it would be provocative to Russia or emboldening of Ukraine is just getting it backwards,” he added. He said success in establishing peace in eastern Ukraine would require what he called a new strategic dialogue with Russia.

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Undoubtedly not the last we hear of this.

Tsipras and Varoufakis Go Public With Spat (K.)

The coalition on Monday rejected calls for an investigation to be launched into the first months of the government’s time in power, as a dispute between Prime Minister Alexis Tsipras and ex-finance minister Yannis Varoufakis over that period in 2015 became public. “The evaluation of this period has to be conducted with political criteria, not myth-making or gossip,” said government spokesman Dimitris Tzanakopoulos, who accused Varoufakis of trying to advertise his recent book via the “systemic media” he once attacked. Tzanakopoulos’s comments came after Tsipras gave an interview to The Guardian in which he admitted making “big mistakes” in the past and suggested that Varoufakis’s plan for a parallel payment system could not be considered seriously.

“Yanis is trying to write history in a different way,” said Tsipras. “When we got to the point of reading what he presented as his plan B it was so vague, it wasn’t worth the trouble of even talking about. It was simply weak and ineffective.” The former minister immediately responded to the premier’s comments by claiming they displayed a “deep incoherence,” as Varoufakis claims that he had made Tsipras aware of the plan before he came to office yet the SYRIZA leader still chose to appoint him to the cabinet. “Either I was the right choice to spearhead the ‘collision’ with the troika of Greece’s lenders because my plans were convincing, or my plans were not convincing and, thus, I was the wrong choice as his first finance minister,” he wrote in a letter to The Guardian.

New Democracy called for judicial and parliamentary investigations into the claims made by Varoufakis, as well as by former energy minister Panayiotis Lafazanis. The latter claimed in a radio interview on Saturday that he had secured an advance payment from Russia for a gas pipeline to be used to held fund Greece if it left the euro. “Varoufakis and Lafazanis described with clarity the SYRIZA leadership’s plans to take Greece out of the eurozone,” said the conservatives in a statement. “If these plans were seen through to the end, the country would have found itself in a dramatic situation like Venezuela, with unforeseeable social consequences.”

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Makes sense.

Alexis Tsipras’s Mixed Messages Over Appointing Me As Finance Minister (YV)

[..] the Greek prime minister, Alexis Tsipras, having admitted to “big mistakes”, was asked if appointing me as his first finance minister was one of them. According to the interviewer, Mr Tsipras said “Varoufakis … was the right choice for an initial strategy of ‘collision politics’, but he dismisses the plan he presented had Greece been forced to make the dramatic move to a new currency as ‘so vague, it wasn’t worth talking about’”. Given that I presented my plans to Mr Tsipras for deterring the troika’s aggression and responding to a potential impasse (and any move by the troika to evict Greece from the eurozone) before we won the election of January 2015, and I was chosen by him as finance minister (one presumes) on the basis of their merit, his answer reflects a deep incoherence.

Either I was the right choice to spearhead the “collision” with the troika of Greece’s lenders because my plans were convincing, or my plans were not convincing and, thus, I was the wrong choice as his first finance minister. Arguing, as Mr Tsipras does, that I was both the right choice for the initial confrontation and that my plan B was so vague it wasn’t worth the trouble of even talking about is disingenuous, albeit insightful, for it reveals the impossibility of maintaining a radical critique of his predecessors while adopting the Tina (There Is No Alternative) doctrine.

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A brand new line of lipstick for farm animals.

Greece Plans Return To Bond Market As Athens Sees End To Austerity (G.)

Athens has outlined plans to return to the financial markets for the first time since 2014, with a plan to sell new five-year bonds to investors. Existing Greek five-year bonds were trading at 3.6% on Monday morning compared with 63% at the height of the Greek financial crisis in 2012 when the finance ministry was unable to pay public sector wages and there were riots in the streets. Following the announcement that Athens would be returning to the market, the yield fell to 3.4%. The Greek finance ministry has set a goal of a 4.2% interest rate on the new bond. But banking sources believe that level will be hard to achieve and say an interest rate of between 4.3% to 4.5% is much more likely. Government sources say valuation will take place on Tuesday 25 July.

The market test is crucial to Greece for not only judging sentiment of the market, from which it has been essentially exiled since the start of its economic crisis, but also for weaning itself off borrowed bailout funds. Speaking after the bond issue was announced, the EU’s economy commissioner, Pierre Moscovici, described the public spending cuts imposed on Greece since it almost went bust as “too tough” but “necessary”, adding there was now “light at the end of austerity”. Reuters reported that Greece had employed six banks – BNP Paribas, Bank of America Merrill Lynch, Citigroup, Deutsche Bank, Goldman Sachs and HSBC – to act as joint lead managers for a five-year euro bond “subject to market conditions”. Greek ministers will provide more details on Monday afternoon about how much it hopes to borrow, and on what terms.

If the issue is successful, it could help Greece, which is still coping with a debt to GDP ratio of 180%, to exit its long cycle of austerity and rescue packages. Late on Friday, S&P upgraded its outlook on Greek government debt from stable to “positive”, thanks partly to renewed hopes that the country’s creditors could finally grant it debt relief.

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And here’s how it’s done.

Greek Spending Cuts Prettify Budget Data (K.)

Delays in the funding of hospitals, social spending cuts and low expenditure on the Public Investments Program served to prettify the picture of the state budget over the first half of the year, producing a primary surplus of 1.93 billion euros, Finance Ministry figures showed on Monday. At the same time budget revenues posted a marginal increase over the target the ministry had set for the January-June period. However, the big challenge for the government starts at the end of this month with the payment of the first tranche of income tax by taxpayers, followed later on by the Single Property Tax (ENFIA) and road tax at the end of the year.

In total the state will have to collect 33 billion euros by the end of the year, which is considerably higher than in the second half of 2016. According to the H1 budget data, the primary surplus amounted to 1.936 billion euros, against a primary surplus of 1.632 billion in the same period last year, and a target for 431 million for the year to end-June. Expenditure missed its target by 1.15 billion euros, amounting to 22.86 billion in the first half. Compared to last year it was down 757 million euros. Hospital funding missed its target by 265 million.

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Jul 132017
 
 July 13, 2017  Posted by at 8:56 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Vincent van Gogh Vineyards with a View of Auvers 1890

 

‘Investors Underestimate How Low The Bar Is For The Fed’ (CNBC)
Unwinding QE will be “More Disruptive than People Think” (WS)
I Wouldn’t Rule Out Another Financial Crisis – IMF’s Lagarde (CNBC)
The US Stock Market Is 66% Higher Than It Should Be (Kee jr)
Valuation Measures & Forward Returns (Lance Roberts)
Nonprime Mortgages Prove Leery Investors Are Finally Hungry Again (CNBC)
VISA takes its War on Cash to US Retailers (WS)
Greece To Exit EU’s Excessive Deficit Procedure (K.)
Brain Drain Gathers Pace as One in Three Greeks Looks for a Job Abroad
Germany Profits From Greek Debt Crisis (HB)
Defiant Varoufakis Ready to Face ‘Even Martial Court’ Over Plan B (GR)

 

 

What Yellen says is not so interesting. What lies beyond those carefully crafted speeches is.

BTW, no Trump today, but maybe we can start a separate gossip page.

“The Fed says it’s going to hike again this year, markets says 50-50. The Fed says three, four times next year, the market says it’s not going to happen at all..”

‘Investors Underestimate How Low The Bar Is For The Fed’ (CNBC)

Patrick Armstrong, the CIO at Plurimi Investment Managers, believes that very high valuations, an expected tightening in monetary policy and too much optimism over tax cuts and new fiscal spending should leave investors cautious on the United States. “Valuation doesn’t matter in the short term but at current CAPE (cyclically adjusted price to earnings, which gives a more clear indication of a stock price in comparison to average earnings over the last 10 years) of 29 times, U.S. equities have historically delivered negative real returns over periods of two to five years,” he said in an investment outlook published earlier this month. The U.S. Federal Reserve has begun normalizing its policy in the wake of improved economic growth and low unemployment levels.

According to Armstrong, the easy monetary policy of the past had boosted equities but this might change with the Fed’s plans to hike rates and reduce its balance sheet. “I think there was a clear warning in the last (meeting) minutes talking about risk premium, price earnings and investors haven’t acknowledged it, but when the Fed starts worrying about equity markets, as an equity investor they’ve given you that warning,” he told CNBC on Tuesday. The third reason to be “short” – where a trader takes a bet that prices will fall – on U.S. equities is the government’s plans on fiscal policy. President Donald Trump promised tax cuts and big infrastructure spending, which made U.S. equities rally since he took office last November. However, such policies are yet to reach the consultation stage and doubts have emerged over the president’s ability to deliver.

[..] Speaking to CNBC Tuesday, Armstrong suggested that investors aren’t listening to the U.S. Federal Reserve. “What investors are completely underestimating is how low the bar is for the United States Federal Reserve. They have told us what they intend to do, the markets don’t believe any of it,” Armstrong said. “The Fed says it’s going to hike again this year, markets says 50-50. The Fed says three, four times next year, the market says it’s not going to happen at all,” he added.

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Central banks are trying to get out before the blast. But in doing so they bring it forward. Were given far too much power.

Unwinding QE will be “More Disruptive than People Think” (WS)

“We’ve never had QE like this before, and we’ve never had unwinding like this before,” said JPMorgan CEO Jamie Dimon at the Europlace finance conference in Paris. “Obviously that should say something to you about the risk that might mean, because we’ve never lived with it before.” He was referring to the Fed’s plan to unwind QE, shedding Treasury securities and mortgage-backed securities on its balance sheet. The Fed will likely announce the kick-off this year, possibly at its September meeting. According to its plan, there will be a phase-in period. It will unload $10 billion the first month and raise that to $50 billion over the next 12 months. Then it will continue at that pace to achieve its “balance sheet normalization.” Just like the Fed “created” this money during QE to buy these assets, it will “destroy” this money at a rate of $50 billion a month, or $600 billion a year.

It’s the reverse of QE, with reverse effects. Other central banks are in a similar boat. The Fed, the Bank of Japan, and the ECB together have loaded up their balance sheets with $14 trillion in assets. Unwinding this is going to have some impact – likely reversing some of the asset price inflation in stocks, bonds, real estate, and other markets that these gigantic bouts of asset buying have caused. The Bank of Japan has been quietly tapering its asset purchases for a while to where it buys only enough to keep the 10-year yield barely above zero. And the ECB has tapered its monthly purchases by €20 billion earlier this year and is preparing the markets for more tapering. Once central banks stop buying assets, the phase starts when central banks try to unload some of those assets. The Fed is at the threshold of this phase.

Dimon was less concerned about the Fed’s rate hikes. People are too focused on rate hikes, he said, according to a Bloomberg recording of the conference. If the economy is strong, economic growth itself overcomes the issues posed by higher rates, he said. The economy has been through rate hikes many times before. They’re a known quantity. But “when selling securities in the market place starts,” that’s when it gets serious. “When that happens of size or substance, it could be a little more disruptive than people think,” he said. Whatever it will do, no one knows what it will do – because “it never happened before.”

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Don’t woryy, they serve the same lords.

I Wouldn’t Rule Out Another Financial Crisis – IMF’s Lagarde (CNBC)

The IMF’s Managing Director, Christine Lagarde, has said that she would not rule out another financial crisis in her lifetime, indicating that comments made recently by Federal Reserve Chair Janet Yellen may have been premature. “There may, one day, be another crisis,” Lagarde told CNBC Tuesday on the sidelines of a joint conference with the IMF and the Croatian National Bank in Dubrovnik. Lagarde’s comments responded to a statement made by Yellen a fortnight earlier in which she said she does not expect to see another financial crisis in her lifetime. “I plan on having a long life and I hope she (Yellen) does, too, so I wouldn’t absolutely bet on that because there are cycles that we have seen over the past decade and I wouldn’t exclude that,” Lagarde said.

She, however, noted the unpredictability of financial crises and said that finance ministers and policymakers should act with caution to prepare for such eventualities. “Where it will come from, what form it takes, how international and broad-based it will be is to be seen, and typically the crisis never comes from where we expect it,” she added. “Our duty, and certainly the message that we give to the finance ministers, to the policymakers, is ‘be prepared’. Make sure that your financial sector is under good supervision, that it’s well regulated, that the institutions are rock-solid, and anticipate at home with enough buffers so that you can resist the potential crisis.”

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And we will see undershoot on the way down. The Fed killing off price discovery will be a scourge on society.

The US Stock Market Is 66% Higher Than It Should Be (Kee jr)

I have, in previous articles here on MarketWatch, pointed out the fundamental risks in the U.S. stock market. I have identified the liquidity risks created by the ECB and the Federal Reserve in the tightening of monetary policy, in the reduction of the Fed’s balance sheet, and the likelihood that these risks will prick the asset bubble that the market is in today. Most people I speak and email with agree. The risks are high, as the price-to-earnings multiple of the S&P 500 (about 25, depending on the indicator) is far greater than its historical norm (14.5). The truth, however, is that no one knows for sure. But, still, people are apathetic. In fact, my experience over the past 20 years and through each of the past two major asset bubbles (the internet bubble in 2000 and the credit crisis in 2008-2009), is that the unanimous identification of an asset bubble did not take place until after the asset bubble had burst.

By that time, all of the major indices — the Dow Jones Industrial Average S&P 500, Nasdaq 100 and Russell 2000 — had already fallen. The result largely handcuffed investors to investments that were severely underwater. As luck would have it, though, after the credit crisis, the Fed’s policy-making body printed $2 trillion and, with that money, bought assets to prop up the economy and save investors from destruction. Largely, this perceived savior is probably why investors are so lethargic when it comes to the asset bubble that we are probably in right now. This bubble even seems to include real estate and bonds in addition to stocks, and it has been driven by fabricated central bank liquidity.

Admittedly, I cannot be sure what will happen. I do not know if this bubble will burst, and I do not know if central banks will come running to the rescue again, as they did after the credit crisis. Unfortunately, I do know a great deal of people who believe that the central banks of the world will simply print more money if the going gets tough again, but that is a seriously risky bet. With major indices coming off all-time highs and technical trading patterns (dojis) surfacing in long-term chart patterns last week, potential reversal signals are coming on a technical basis. As much as it is appealing to opt for relaxation and vacationing during the summer months, some time must be spent evaluating the conditions the market is facing right now.

In previous articles, I have offered alternatives to the traditional buy-and-hold methodology, and I think everyone should consider heading that way because strategies like “lock and walk” can work no matter what happens. The risks in the market today are extremely high for buy-and-hold investors because the liquidity picture is changing for the worse, and that is fundamental in nature. But longer-term technical observations point toward serious risks as well. My longer-term macroeconomic analysis, The Investment Rate, is offering warnings that this market is 66% higher than it should be. Given the changes in liquidity and technical observations happening now, those risk warnings should be heard with an acute ear.

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A whole bunch of Lance graphs again. Hard to choose. But pretty as the graphs are, they do not paint a pretty picture. They say BUBBLE.

Valuation Measures & Forward Returns (Lance Roberts)

[..] if the market can reverse the current course of weakness and rally above recent highs, it will confirm the bull market is alive and well, and we will continue to look for a push to our next target of 2500. With portfolios currently fully allocated, we are simply monitoring risk and looking for opportunities to invest “new capital” into markets with a measured risk/reward ratio. However, this is a very short-term outlook which is why “price is the only thing that matters.” “Price measures the current “psychology” of the “herd” and is the clearest representation of the behavioral dynamics of the living organism we call “the market.” But in the long-term, fundamentals are the only thing that matters. I have shown you the following chart many times before. Which is simply a comparison of 20-year forward total real returns from every previous P/E ratio.

I know, I know. “P/E’s don’t matter anymore because of Central Bank interventions, accounting gimmicks, share buybacks, etc.” Okay, let’s play. In the following series of charts, I am using forward 10-year returns just for consistency as some of the data sets utilized don’t yet have enough history to show 20-years of forward returns. The purpose here is simple. Based on a variety of measures, is the valuation/return ratio still valid, OR, is this time really different? Let’s see. Tobin’s Q-ratio measures the market value of a company’s assets divided by its replacement costs. The higher the ratio, the higher the cost resulting in lower returns going forward. Just as a comparison, I have added Shiller’s CAPE-10. Not surprisingly the two measures not only have an extremely high correlation, but the return outcome remains the same.

One of the arguments has been that higher valuations are okay because interest rates are so low. Okay, let’s take the smoothed P/E ratio (CAPE-10 above) and compare it to the 10-year average of interest rates going back to 1900. The analysis that low rates justify higher valuations clearly does not withstand the test of history.

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Substitute nonprime for subprime and you open a whole new can of suckers again. “No, these are fine and upstanding citizens. They just don’t have access to normal bank loans.” Gee, why is that?

Nonprime Mortgages Prove Leery Investors Are Finally Hungry Again (CNBC)

The appetite for riskier mortgages is rising, and a small cadre of investment firms is ready to feed it. Angel Oak Capital Advisors just announced its second rated securitization of nonprime residential mortgages this year, a deal worth just more than $210 million and its largest ever. Its first deal was slightly less, but demand from borrowers and investors alike is growing, and the securitizations are growing with it. Angel Oak is one of very few firms offering these private-label mortgage-backed securities — the ones that were so very popular during the last housing boom and which were later blamed for the financial crisis. Today’s nonprime loans, however, are nothing like the ones of the past. The government cracked down on faulty loan products, those with low teaser rates, negative amortization and no documentation.

Still, for the past decade investors wouldn’t touch anything that wasn’t government-backed. Only now are they seeing value and dipping their toes in again. The number of nonprime mortgage-backed securities “skyrocketed” in the second quarter of this year, according to Inside Mortgage Finance — a total of $1.08 billion of MBS backed by nonprime home loans. That was the strongest quarter for the sector since the financial crisis. It is still, however, nothing compared with the volume that caused the housing crash. “At one point during the housing boom, we had a third of all mortgage originations that were nonprime [subprime or Alt-A, the latter having low or no documentation]. We’re not going to be even 5% of the market if we have a record year this year. It still has a long, long way to go,” said Guy Cecala, CEO of Inside Mortgage Finance.

That is because while investors are hungry for yield, they are still very skeptical. The ratings agencies are as well. That makes it difficult for companies like Angel Oak, and its competitors — Lone Star and Deephaven Mortgage — to issue large quantities of nonprime MBS. Nonprime securitizations today are far less risky, consisting of loans that were underwritten far more stringently. Angel Oaks’ securitization does consist of both fixed- and floating-rate loans. “In addition to borrowers that had prior credit events, our loans are also for borrowers who are self-employed,” said Lauren Hedvat, capital markets director at Angel Oak. “They are of high credit quality, but they are not able to access mortgage products by the more traditional bank routes.”

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Start paying cash everywhere.

VISA takes its War on Cash to US Retailers (WS)

“We’re focused on putting cash out of business,” Visa’s new CEO Al Kelly said on June 22 at Visa Investor Day. Pushing consumers into digital and electronic payments is the company’s “number-one growth lever.” Visa has been dogged by the stubborn survival of cash and checks, despite widespread government and corporate efforts to kill them off. Globally, check and cash transactions totaled $17 trillion in 2016, Visa President Ryan McInerney said. Confusingly, that’s up 2% from a year earlier. So today, Visa rolled out a new initiative on its war on cash. It’s designed “for small business restaurants, cafés, or food truck owners,” and the like. In this trial, it will award up to $10,000 each to 50 eligible businesses (online businesses are excluded) when they commit to refusing cash payments.

Going “100% cashless,” as Visa calls it, means that consumers can only pay with debit or credit cards or with their smartphones. That’ll be the day. You go to your favorite taco truck, and when it comes time to pay, you pull out a wad of legal tender, only to be treated to an embarrassed nod toward a sign that says, “No Cash.” I’d walk. But Visa hopes that other folks will pull out their Visa-branded card or a smartphone with a payment app that uses the Visa system. This would help Visa extract its fees from the transaction. “We have an incredible opportunity to educate merchants and consumers alike on the effectiveness of going cashless,” Jack Forestell, Visa’s head of global merchant solutions, said in the press release, which touted a “study” that Visa recently “conducted” that “found that if businesses in 100 cities transitioned from cash to digital, their cities stand to experience net benefits of $312 billion per year.”

However dubious these “net benefits” may be, one thing is not dubious: Visa gets a cut from every transaction made via Visa-branded cards or digital payment systems that use Visa. The merchant pays the cut and then tries to pass it on to customers via higher prices. The total card fees normally range between 1% and 3%. Among the entities that get to divvy this moolah up are the bank that issued the visa card and the credit card network – such as Visa, MasterCard, and the like. Visa gets just a small piece of the pie, but if it is on every transaction, it adds up. And payments by cash and check seriously get in the way of a lot of money. In 2016, Visa extracted $15 billion from processing transactions globally without even carrying any credit risk (the banks have to deal with that).

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Purely symbolic. Everyone loves to present a meme of recovery, but it’s not there. Ironically, the move from deficit to -forced- surplus guarantees it. Greece should run a deficit now to boost its economy.

Greece To Exit EU’s Excessive Deficit Procedure (K.)

After eight years, Greece emerged on Wednesday from the European Commission’s process for countries with excessive deficit. The Commission proposed Greece’s exit from the process as its general government debt has dropped below the threshold of 3% of GDP. This is a largely symbolic move, but it does have some significance given that the government is planning to return to the bond markets for the first time since 2014. Economic Affairs Commissioner Pierre Moscovici gave a wink to the markets on Wednesday, saying that the disbursement of the tranche of 7.7 billion euros on Monday and the decision on the deficit is “good news that the markets ought to read,” even though he explained that what the investors do is not up to him.

Commission Vice President Valdis Dombrovskis called on Greece to capitalize on its achievements and continue to strengthen confidence in its economy, which is crucial as the country prepares its return to the credit markets. The Commission’s proposal for Greece’s emergence from the deficit procedure has to be ratified by the EU’s finance ministers, but has little practical use. Ultimately, Greece’s fiscal targets are dictated by the bailout agreement and not by the rules that apply to other eurozone members. As one European official told Kathimerini, “nothing changes essentially, the fiscal targets Greece must hit remain high and [yesterday’s] decision is only of a symbolic dimension.”

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Greece can only get worse, for many years into the future.

Brain Drain Gathers Pace as One in Three Greeks Looks for a Job Abroad

A new study highlights the problem in the Greek labor market as more than 30% of Greek unemployed say that they are actively seeking a job abroad. According to the annual survey by the firm Adecco titled “Employability in Greece,” the brain drain phenomenon has been increasing over the last three years. In 2015 only about 11% of unemployed respondents said that they were actively looking for a job abroad. This figure increased to 28% in 2016 and reached 33% this year. The responses show that the unemployed have different reasons to seek work abroad. Whereas in 2005, the main reason was the prospect of a better wage, in 2016 and 2017 the main reason given were better career opportunities.

The study conducted for the third year running, in collaboration with polling company LMG, was based on a sample of 903 people from the age of 18 to 67. According to other findings, 37% of respondents say that they have been out of the labor market for at least 12 months. Despite the slight improvement in official unemployment rates, the Adecco survey finds that there is an increasing number of people who state that they have been at least once without a job – 58% this year compared to 54% in 2016. According to the data, more than 1 out of 4 (28%) are out of the labor market, a higher rate compared with the previous two years.

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Money that could have helped Greece escape the claws of Schäuble et al. The pattern is not coincidental.

Germany Profits From Greek Debt Crisis (HB)

The German government has long been accused by critics of profiting from Greece’s debt crisis. Now there are some new numbers to back it up: Loans and bonds purchased in support of Greece over nearly a decade have resulted in profits of €1.34 billion for Germany’s finance ministry, which confirmed the number in response to a parliamentary query from the Green Party, according to a report by German daily Süddeutsche Zeitung. The profits come from a range of programs, running into the hundreds of billions, that Germany and other euro-zone countries have backed to keep Greece’s government and economy afloat since its massive debt crisis emerged in 2009. It includes, for example, a €393-million profit generated from a 2010 loan by the development bank KfW, which is owned by the German government.

The report also shows that Germany’s central bank, the Bundesbank, has received profits from the Securities Market Program (SMP), a now-defunct government bond-buying plan initiated by the ECB and run from 2010 to 2012. The ECB collected more than €1.1 billion in 2016 in interest payments on the nearly €20 billion-worth of Greek bonds it bought through the SMP, according to the report. This year, the figure will be €901 million, which will again be redistributed to the euro zone’s 19 member states. Since 2015, Germany has collected a total of €952 million in SMP profits. The new revelations drew strong criticism from the Greens Party, in opposition. “The profits from collecting interest must be paid out to Greece. [Finance Minister] Wolfgang Schäuble cannot use the Greek profits to clean up Germany’s federal budget,” Manuel Sarrazin, EU expert for the Green Party in the parliament, told the Süddeutsche newspaper.

Mr. Schäuble, a member of Chancellor Angela Merkel’s conservative Christian Democrats, has been cannily keeping Germany’s federal budget balanced over the past four years, taking on no new debt. Berlin’s surplus amounted to €6.2 billion in 2016 alone. Critics complain that Greece’s crisis has helped it achieve that goal. “It might be legal for Germany to profit from the crisis in Greece, but from a moral and solidarity perspective, it is not right,” Sven-Christian Kindler, budget policy spokesperson for the Green Party, also told the paper. Mr. Schäuble has said he is open to reducing Greece’s interest burden but has resisted calls to end them completely. His finance ministry has argued that, with inflation, deferring interest payments would eventually end up costing Greece’s creditors.

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There are many parties not too keen on such an investigation, and Varoufakis is not one of them.

Defiant Varoufakis Ready to Face ‘Even Martial Court’ Over Plan B (GR)

Undeterred over the controversy surrounding the new disclosures over the system of a parallel currency that was apparently considered by the government of Alexis Tsipras in 2015, Yanis Varoufakis said that he is ready to face any court to respond to the charges. Speaking in a radio show, Varoufakis, the finance minister at the time and the instigator of the parallel payments system or Plan B, said that Tsipras had a copy of the proposals from as early as 2012 when he was still in opposition. “I have handed the plan to Tsipras in 2012,” so it could become the government’s plan B if negotiations with Greece’s creditors collapsed.

Mr. Varoufakis said he was willing to accept any kind of judicial investigation into Plan B and his role in drafting it. “Let’s have a special court of inquiry, or even a martial court, or any other court, so all the facts can be revealed,” he said responding to calls from the opposition for a judicial inquiry. He also attacked the SYRIZA-led government for refusing to proceed with an investigation. The Varoufakis Plan B for the Greek economy in the event that the country clashed with creditors and went bankrupt was to partially pay civil servants with coupons. Parts of the plan were revealed last week by his financial advisor Glenn Kim.

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 May 13, 2017  Posted by at 8:47 am Finance Tagged with: , , , , , , , , ,  1 Response »
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Fred Stein Subway Steps New York 1943

 

Hackers Hit Dozens of Countries Exploiting Stolen NSA Tool (NYT)
UK Health Service, Targeted in Cyberattack, Ignored Warnings for Months (NYT)
Hurricane Bearing Down on the Casino (Stockman)
$500 Trillion in Derivatives “Remain an Important Asset Class” – NY Fed (WS)
The Great Misconception of a Return to “Normal” (Econimica)
US Nears $100 Billion Arms Deal For Saudi Arabia (R.)
Wells Fargo Bogus Accounts Balloon To 3.5 Million (R.)
EU To Decide Future Of Uber, Airbnb In Europe (NE)
A Populist Storm Stirs in Italy (WSJ)
Macron To Visit Germany To Seek Support For A Beefed Up Eurozone (G.)
Blood Sports (Jim Kunstler)
Greece and the Bond Market. Friends Reunited? (BBG)
China’s Xi Offers Indebted Greece Strong Support (R.)
Varoufakis Accuses Tsipras, Tsakalotos Of Giving In To Creditors (K.)
IMF, Eurozone Say Need More Time To Reach Greek Debt Relief Deal (R.)

 

 

Edward Snowden @Snowden: “In light of today’s attack, Congress needs to be asking @NSAgov if it knows of any other vulnerabilities in software used in our hospitals.”

Hackers Hit Dozens of Countries Exploiting Stolen NSA Tool (NYT)

Hackers exploiting malicious software stolen from the National Security Agency executed damaging cyberattacks on Friday that hit dozens of countries worldwide, forcing Britain’s public health system to send patients away, freezing computers at Russia’s Interior Ministry and wreaking havoc on tens of thousands of computers elsewhere. The attacks amounted to an audacious global blackmail attempt spread by the internet and underscored the vulnerabilities of the digital age. Transmitted via email, the malicious software locked British hospitals out of their computer systems and demanded ransom before users could be let back in – with a threat that data would be destroyed if the demands were not met.

By late Friday the attacks had spread to more than 74 countries, according to security firms tracking the spread. Kaspersky Lab, a Russian cybersecurity firm, said Russia was the worst-hit, followed by Ukraine, India and Taiwan. Reports of attacks also came from Latin America and Africa.[..] The hackers’ weapon of choice on Friday was Wanna Decryptor, a new variant of the WannaCry ransomware, which encrypts victims’ data, locks them out of their systems and demands ransoms. Researchers said the impact and speed of Friday’s attacks had not been seen in nearly a decade, when the Conficker computer worm infected millions of government, business and personal computers in more than 190 countries, threatening to overpower the computer networks that controlled health care, air traffic and banking systems over the course of several weeks.

One reason the ransomware on Friday was able to spread so quickly was that the stolen N.S.A. hacking tool, known as “Eternal Blue,” affected a vulnerability in Microsoft Windows servers. Hours after the Shadow Brokers released the tool last month, Microsoft assured users that it had already included a patch for the underlying vulnerability in a software update in March. But Microsoft, which regularly credits researchers who discover holes in its products, curiously would not say who had tipped the company off to the issue. Many suspected that the United States government itself had told Microsoft, after the N.S.A. realized that its hacking method exploiting the vulnerability had been stolen.

Privacy activists said if that were the case, the government would be to blame for the fact that so many companies were left vulnerable to Friday’s attacks. It takes time for companies to roll out systemwide patches, and by notifying Microsoft of the hole only after the N.S.A.’s hacking tool was stolen, activists say the government would have left many hospitals, businesses and governments susceptible. “It would be deeply troubling if the N.S.A. knew about this vulnerability but failed to disclose it to Microsoft until after it was stolen,” Patrick Toomey, a lawyer at the American Civil Liberties Union, said on Friday. “These attacks underscore the fact that vulnerabilities will be exploited not just by our security agencies, but by hackers and criminals around the world.”

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Don’t just blame the hospitals. Blame the government that squeezes them so dry they have to choose patients over computers.

UK Health Service, Targeted in Cyberattack, Ignored Warnings for Months (NYT)

Britain’s National Health Service ignored numerous warnings over the last year that many of its computer systems were outdated and unprotected from the type of devastating cyberattack it suffered on Friday. The attack caused some hospitals to stop accepting patients, doctor’s offices to shut down, emergency rooms to divert patients, and critical operations to be canceled as a decentralized system struggled to cope. At some hospitals, nurses could not even print out name tags for newborn babies. At the Royal London Hospital, in east London, George Popescu, a 23-year-old hotel cook, showed up with a forehead injury. “My head is pounding and they say they can’t see me,” he said. “They said their computers weren’t working. You don’t expect this in a big city like London.”

In a statement on Friday, the N.H.S. said its inquiry into the attack was in its early phases but that “at this stage we do not have any evidence that patient data has been accessed.” Many of the N.H.S. computers still run Windows XP, an out-of-date software that no longer gets security updates from its maker, Microsoft. A government contract with Microsoft to update the software for the N.H.S. expired two years ago. Microsoft discontinued the security updates for Windows XP in 2014. It made a patch, or fix, available in newer versions of Windows for the flaws that were exploited in Friday’s cyberattacks. But the health service does not seem to have installed either the newer version of Windows or the patch.

“Historically, we’ve known that N.H.S. uses computers running old versions of Windows that Microsoft itself no longer supports and says is a security risk,” said Graham Cluley, a cybersecurity expert in Oxford, England. “And even on the newest computers, they would have needed to apply the patch released in March. Clearly that did not happen, or the malware wouldn’t have spread this fast.” Just this month, a parliamentary research briefing noted that cyberattacks were viewed as one of the top threats facing Britain. The push to make medical records systems more interconnected might also make the system more vulnerable to attack. Britain plans to digitize all patient records by 2020.

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The anti-Trump battle will be fought with financial weapons. And the Donald is walking into that trap.

Hurricane Bearing Down on the Casino (Stockman)

Yesterday I said the Donald was absolutely right in canning the insufferable James Comey, but that he has also has stepped on a terminal political land-mine. And he did. That’s because the entire Russian meddling and collusion narrative is a ridiculous, evidence-free attempt to re-litigate the last election. And now that the powers that be have all the justification they need. And what is already an irrational witch-hunt will be quickly turned into a scorched-earth assault on a sitting president. I have no idea how this will play out, but as a youthful witness to history back in 1973-1974 I observed Tricky Dick’s demise in daily slow motion. But the most memorable part of the saga was how incredibly invincible Nixon seemed in early 1973. Nixon started his second term, in fact, with a massive electoral landslide, strong public opinion polls and a completely functioning government and cabinet.

Even more importantly, he was still basking in the afterglow of his smashing 1972 foreign policy successes in negotiating detente and the anti-ballistic missile (ABM) treaty with Brezhnev and then the historic opening to China on his Beijing trip. So I’ll take the unders from anyone who gives the Donald even the 19 months that Nixon survived. After all, Trump lost the popular vote, is loathed by official Washington, barely has a functioning cabinet and is a whirling dervish of disorder, indiscipline and unpredictability. To be sure, the terms of the Donald’s eventual exit from the Imperial City will ultimately by finalized by the 46th President in waiting, Mike Pence. But I’m pretty sure of one thing: Between now and then, there is not a snow ball’s chance in the hot place that Donald’s severance package will include the ballyhooed Trump Tax Cut and Fiscal Stimulus.

Markets slipped today because of carnage in the retail sector (which I’ve been warning readers about). But these fantasies are apparently still “priced-in” to a market that has now become just plain stupid. What is surely coming down the pike after the Comey firing, however, is just the opposite. That is, Washington will soon become a three-ring circus of investigations of Russia-gate and the “hidden” reasons for Trump’s action. The Imperial City will get embroiled in bitter partisan warfare and the splintering of the GOP between its populist and establishment wings. In that context, what passes for “governance” will be reduced to a moveable Fiscal Bloodbath that cycles between debt ceiling showdowns and short-term continuing resolution extensions.

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The swamp that can’t be drained without causing explosions.

$500 Trillion in Derivatives “Remain an Important Asset Class” – NY Fed (WS)

Economists at the New York Fed included this gem in their report on a two-day conference on “Derivatives and Regulatory Changes” since the Financial Crisis: “Though the notional amount [of derivatives] outstanding has declined in recent years, at more than $500 trillion outstanding, OTC derivatives remain an important asset class.” An important asset class. A hilarious understatement. Let’s see… the “notional amount” of $500 trillion is 25 times the GDP of the US and about 7 times global GDP. Derivatives are not just an “important asset class,” like bonds; they’re the largest “financial weapons of mass destruction,” as Warren Buffett called them in 2003.

Derivatives are used for hedging economic risks. And they’re used as “speculative directional exposures” – very risky one-sided bets. It’s all tied together in an immense and opaque market interwoven with the banks. The New York Fed: The 2007-09 financial crisis highlighted weaknesses in the over-the-counter (OTC) derivatives markets and the increased risk of contagion due to the interconnectedness of market participants in these markets. This chart from the New York Fed shows how derivatives ballooned 150% – or by $360 trillion – in less than four years before the Financial Crisis. They ticked down during the Financial Crisis, then rose again during the Fed’s QE to peak at $700 trillion. After the end of QE, they declined, but recently ticked up again to $500 trillion. I added in red the Warren Buffett moment:

The vast majority of the derivatives are interest rate and credit contracts (dark blue). Banks specialize in that. For example, according to the OCC’s Q4 2016 Report on Derivatives, JPMorgan Chase holds $47.5 trillion of derivatives at notional value and Citibank $43.9 trillion. The top 25 US banks hold $164.7 trillion, or 8.5 times US GDP. So even a minor squiggle could trigger some serious heartburn.

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Try use “normal” and “derivatives” in one sentence and put on a straight face.

The Great Misconception of a Return to “Normal” (Econimica)

Since 2009, there has been ongoing discussion of the size & composition of major central bank balance sheets (I’m focusing on the Federal Reserve Bank, European Central Bank, and the Bank of Japan) but little discussion of why these institutions felt (and continue to feel) compelled to “buy” assets. The chart below highlights the ongoing collective explosion of these bank “assets” since 2009 after a previous period of relative stability. These institutions clearly have the capability and willingness to digitally conjure “money” from nothing and have felt compelled to remove over $10 trillion worth of assets from the markets since 2009. This swap of illiquid assets for liquid cash had (and continues to have) the effect of squeezing the prices of the remaining assets higher (more money chasing fewer assets=price appreciation).

A prime example of that squeeze, the US stock market total valuation (represented by the Wilshire 5000, below) is $10 trillion higher than the “bubble” peak of 2008…and $11 trillion higher than the 2001 “bubble” peak. Likewise, US federal debt since 2008 has increased by…you guessed it, $10 trillion. The narrative seems to be that 2009 was a one off event and that the central banks role was and still is to “stabilize” the situation until things “normalize”. But right there…that idea that 2009 was a “one-off” or “abnormal” couldn’t be more wrong. So what is “normal” growth, at least from a consumption standpoint? Normal is never the same twice…it is ever changing and must be constantly rediscovered.

To determine “normal” growth in consumption, all we need do is figure the change in the quantity of consumers (annual population growth) and the quality of those consumers (their earnings, savings, and utilization of credit). The chart below details the ever changing “normal” that is the annual change in the under 65yr/old global population broken down by wealthy consuming nations (blue line) and the rest of the (generally poor) world (red line). The natural rate of growth in consumption has been declining ever since 1988 (persistently less growth in the population on a year over year basis)…but central banks and central governments have substituted interest rate cuts and un-repayable debt to maintain an unnaturally high consumption growth rate.

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If we don’t put a stop to this, we have no chance. This is where it all begins and ends.

US Nears $100 Billion Arms Deal For Saudi Arabia (R.)

The United States is close to completing a series of arms deals for Saudi Arabia totaling more than $100 billion, a senior White House official said on Friday, a week ahead of President Donald Trump’s planned visit to Riyadh. The official, who spoke to Reuters on condition of anonymity, said the arms package could end up surpassing more than $300 billion over a decade to help Saudi Arabia boost its defensive capabilities while still maintaining U.S. ally Israel’s qualitative military edge over its neighbors. “We are in the final stages of a series of deals,” the official said. The package is being developed to coincide with Trump’s visit to Saudi Arabia. Trump leaves for the kingdom on May 19, the first stop on his maiden international trip.

Reuters reported last week that Washington was pushing through contracts for tens of billions of dollars in arms sales to Saudi Arabia, some new, others already in the pipeline, ahead of Trump’s visit. The United States has been the main supplier for most Saudi military needs, from F-15 fighter jets to command and control systems worth tens of billions of dollars in recent years. Trump has vowed to stimulate the U.S. economy by boosting manufacturing jobs. The package includes American arms and maintenance, ships, air missile defense and maritime security, the official said. “We’ll see a very substantial commitment … In many ways it is intended to build capabilities for the threats they face.” The official added: “It’s good for the American economy but it will also be good in terms of building a capability that is appropriate for the challenges of the region. Israel would still maintain an edge.”

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How many executives in jail, you said?

Wells Fargo Bogus Accounts Balloon To 3.5 Million (R.)

Wells Fargo may have opened as many as 3.5 million unauthorized customer accounts, far more than previously estimated, according to lawyers seeking approval of a $142 million settlement over the practice. The new estimate was provided in a filing late Thursday night in the federal court in San Francisco, and is 1.4 million accounts higher than previously reported by federal regulators, in what became a national scandal. Keller Rohrback, a law firm for the plaintiff customers, said the higher estimate reflects “public information, negotiations, and confirmatory discovery.” The Seattle-based firm also said the number “may well be over-inclusive, but provides a reasonable basis on which to estimate a maximum recovery.”

Wells Fargo spokesman Ancel Martinez in an email said the new estimate was “based on a hypothetical scenario” and unverified, and did not reflect “actual unauthorized accounts.” Nonetheless, it could complicate Wells Fargo’s ability to win approval for the settlement, which has drawn opposition from some customers and lawyers who consider it too small. “This adds more credence to the fact there is not enough information to assess whether the settlement is fair and adequate,” Lewis Garrison, a partner at Heninger Garrison Davis in Birmingham, Alabama who represents some objecting customers, said in an interview. U.S. District Judge Vince Chhabria in San Francisco is scheduled to consider preliminary approval at a May 18 hearing. The accounts scandal mushroomed after Wells Fargo agreed last September to pay $185 million in penalties to settle charges by authorities including the U.S. Consumer Financial Protection Bureau.

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They better be thorough, or individual countries must each formulate their own responses.

EU To Decide Future Of Uber, Airbnb In Europe (NE)

An opinion issued by the European Court of Justice on May 11 could prevent people from using or working for services such as Uber and Airbnb. The opinion from the Advocate General of the European Court of Justice follows a case that has been brought by Spanish taxi drivers against the ride sharing service Uber. It found that Uber should be regulated like a transportation company, not as an “information society service”. If the opinion is upheld, these services could be required to apply for specific licences or be restricted in number as is the case with taxis in various European cities in an attempt to keep prices artificially high.

The court is slated to deliver a final ruling on whether Uber should be classified as a transport company or as a passive internet intermediary, in the coming months. Usually, the judges follow the opinion of the Advocate General. It remains to be seen whether the case will impact other so-called sharing economy services as Airbnb. Speaking after the opinion was issued, Dan Dalton, European Conservatives and Reformists (ECR) spokesman on the EU internal market said: “The opinion given today has huge implications for innovative, consumer driven digital services all across Europe… It is right that there are safeguards for consumers, but applying analogue era regulation to the digital world only strangles innovation and entrenches privileged monopolies.”

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Beppe always had one goal first: get rid of corruption. The WSJ can talk all it wants about M5S teething problems, but there are bigger issues here.

A Populist Storm Stirs in Italy (WSJ)

Europe’s establishment breathed a sigh of relief after the pro-European Union centrist Emmanuel Macron was elected French president this week. But another populist storm is brewing in Italy, where the euroskeptic 5 Star Movement has remained strong. Fueled by discontent with slow growth, high unemployment and disillusionment with mainstream politicians, 5-Star has won local elections in Rome, Turin and elsewhere, partly on the strength of its leaders’ call for a referendum on Italy’s use of the European single currency. Pollsters say about 30% of Italian voters support the movement founded by comedian Beppe Grillo, a level of popularity that has stood firm despite a series of high-profile stumbles, especially by its mayor in Rome.

The self-described association of free citizens has replaced the center-left Democratic Party at the top of most polls ahead of national elections to be held by May 2018. Now, the group that has flouted the rules of the game for establishment parties in Italy is experiencing growing pains as it prepares for the possibility of taking power. The prospect of Mr. Grillo and his supporters winning and forming a government has made investors nervous and pushed up yields on Italian bonds in recent months. On Friday, the spread between Italian and German 10-year sovereign bond yields was 1.85 percentage points, nearly five times the corresponding spread between French and German bonds.

Mr. Grillo and 5 Star waged a successful campaign to block constitutional changes sought by former Democratic Italian Prime Minister Matteo Renzi, effectively forcing him from office in December. Since then, a caretaker government has run Italy. The movement has vowed to institute tougher anticorruption laws and deliver a minimum guaranteed income for all working-age and retired Italians if it emerges from upcoming elections as head of a minority government or in a governing coalition with other euroskeptic parties.

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There is no support for a beefed up EU or eurozone. Besides, Macron will be fighting the unions over the summer.

Macron To Visit Germany To Seek Support For A Beefed Up Eurozone (G.)

Emmanuel Macron will take power as French president on Sunday and immediately face the twin challenges of European Union reform and loosening strict labour laws in France. After walking up the red carpet to the Élysée Palace on Sunday morning, being briefed on the nuclear deterrent by the outgoing Socialist leader François Hollande, and making his first speech, Macron will on Monday fly to Berlin to meet the German chancellor, Angela Merkel. It is traditional for French leaders to make Berlin their first European trip. The pro-European centrist Macron wants to boost the French-German motor at the heart of Europe and press for closer cooperation, including creating a parliament and budget for the eurozone. Merkel welcomed Macron’s decisive election victory over the far-right Marine Le Pen, saying he carried “the hopes of millions of French people and also many in Germany and across Europe”.

But if Macron is to push for eurozone reform, he must also prove to Berlin and other European allies that he can deliver the changes he has promised on France’s sluggish economy and deficit problem. The German finance minister, Wolfgang Schäuble, in an interview with the weekly Spiegel, kept up his country’s pressure on France to reduce its budget deficit to the EU ceiling of 3%. “France can make it,” he said. Macron, 39, France’s youngest elected leader, vowed during his campaign that he would immediately loosen France’s rigid labour regulations, giving businesses more power over setting working hours and deciding working conditions. He said that if needed, he would push through these changes by decree soon after taking office. Trade unions and leftwing demonstrators are warning of street protests if changes are not handled carefully.

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Jim waxes nostalgic on Nixon.

Blood Sports (Jim Kunstler)

I remember that sweaty August day that he threw in the towel. (I was a young newspaper reporter when newspapers still mattered.) It was pretty much a national orgasm. “NIXON RESIGNS!” the headlines screamed. A moment later he was on the gangway into the helicopter for the last time. Enter, stage right, the genial Gerald Ford…. Forgive me for getting caught up in the very nostalgia I castigate. And now here we are in the mere early months of Trumptopia about to hit the replay button on a televised inquisition. In my humble opinion, Donald Trump is a far more troubling personality than Tricky Dick ever was, infantile, narcissistic, at times verging on psychotic, but the RussiaGate story looks pretty flimsy. At this point, after about ten months of NSA-FBI investigation, nothing conclusive has turned up about Trump’s people “colluding” with Russia to gain unfair advantage in the election against You-Know-Who.

Former NSA chief James Clapper has publicly stated twice in no uncertain terms that there’s no evidence to support the allegations (so far). And there remains the specter of the actual content of the “collusion” — conveniently ignored by the so-called “Resistance” and its water-carriers at The New York Times — the hacked emails that evince all kinds of actual misbehavior by Secretary of State HRC and the DNC. The General Mike Flynn episode seems especially squishy, since it is the routine duty of incoming foreign affairs officials to check in with the ambassador corps in Washington. Why do you think nations send ambassadors to other countries? The upshot of all this will be a political circus for the rest of the year and the abandonment of any real business in government, at a moment in history when some very weighty black swans circle above the clouds waiting to crash land. Enjoy the histrionics if you dare, and pay no attention to collapsing economy as it all plays out.

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Draghi need to buy Greek bonds, and bring down those rates.

Greece and the Bond Market. Friends Reunited? (BBG)

Greece is considering tapping the capital markets for the first time in three years. Let’s hope its second attempt to regain market access goes more smoothly for investors than its first. A bond sale in July or September is being considered – if a deal on debt relief is reached, and the ECB adds Greek debt to the shopping list of securities it can buy through its quantitative easing program, according to the Wall Street Journal. The news comes as the U.S. presses European officials to ease Greece’s debt burden at informal talks during the Group of Seven gathering currently taking place in Italy.Investors can be forgiven if they feel a sense of déjà vu.In April 2014, Greece sold €3 billion of 4.75% bonds repayable in 2019 in its first issue for almost four years.

The country had sought to raise €2.5 billion; orders from more than 550 investors, though, exceeded €20 billion, and, five months later, the bond was increased by a further €1 billion. The then PM Antonis Samaras called the sale “one more decisive step toward exiting the crisis.”Except … it turned out Greece was about to get worse, not better. The day after the sale, the price of the bonds slipped by a bit more than half a point. By the end of the year, they’d lost almost 20% of their value. And by the middle of 2015, they slumped to as low as 40% of face value as the government was forced to introduce capital controls in an effort to stanch the flood of money leaving the country’s banking system. The bond price recovered as the Greek government dropped its defiance against the terms demanded by its lenders, implemented pension and labor market reforms and accelerated the sale of government assets.

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Does Brussels really want China to buy up Greece?

China’s Xi Offers Indebted Greece Strong Support (R.)

Chinese President Xi Jinping offered the prime minister of deeply indebted Greece strong support on Saturday, saying the two countries should expand cooperation in infrastructure, energy and telecommunications. Xi told Prime Minister Alexis Tsipras that Greece was an important part in China’s new Silk Road strategy. “At present, China and Greece’s traditional friendship and cooperation continues to glow with new dynamism,” China’s Foreign Ministry cited Xi as saying. Cooperation in infrastructure, energy and telecommunications should be “deep and solid”, Xi added, without giving details. Tsipras is in Beijing to attend a summit to promote Xi’s vision of expanding links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment called the Belt and Road initiative.

Greek infrastructure development group Copelouzos has signed a deal with China’s Shenhua Group to cooperate in green energy projects and the upgrade of power plants in Greece and other countries, the Greek company said on Friday. The deal will involve total investment of €3 billion, Copelouzos said in a statement, without providing further details. China has been investing heavily in Greece in recent years. Its biggest shipping company, COSCO Shipping, bought a majority stake in Piraeus Port Authority last year under a plan to turn Greece into a transhipment hub for rapidly growing trade between Asia and Eastern Europe. Xi said China and Greece should focus their efforts on turning the Piraeus port into an important international transhipment hub and key part of the new Silk Road, the Chinese ministry said.

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Yanis says Greece’s future is Kosovo, Steve Keen said Somalia. They’re both right.

Varoufakis Accuses Tsipras, Tsakalotos Of Giving In To Creditors (K.)

In an interview Friday on Skai TV, former finance minister Yanis Varoufakis hit out at his erstwhile government colleagues, accusing both his successor Euclid Tsakalotos and Prime Minister Alexis Tsipras of giving in to the country’s international creditors. “There is no new agreement, just a new surrender,” he said of the latest deal with Greece’s lenders. “The first memorandum burned Papandreou, the second Samaras, the third Tsipras. The fourth will require a new prime minister,” he said. As for Greece’s prospects, his prediction was bleak. “We will become Kosovo, a protectorate run by an employee of the European Union.”

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Never seen a more broken record.

IMF, Eurozone Say Need More Time To Reach Greek Debt Relief Deal (R.)

The IMF and eurozone government lenders need more time to reach an agreement on debt relief for Greece because the eurozone is still not sufficiently clear in its intentions, IMF chief Christine Lagarde said on Friday. Top eurozone officials and Lagarde met on Friday morning to discuss debt relief for Athens which eurozone finance ministers, or the Eurogroup, promised in May 2016, but under strict conditions. “We will carry on working on this debt relief package. There is not enough clarity yet. Our European partners need to be more specific in terms of debt relief, which is an imperative,” Lagarde told reporters in the city of Bari in Italy. German Finance Ministers Wolfgang Schaeuble, also at the meeting of the G7 advanced economies in Bari, asked if he would be prepared to ease the conditions for debt relief, said: “We are prepared to stick to what we have agreed in May 2016. That is the basis on which we are working … I am still in favor of getting a solution, at least a political solution, in the Eurogroup on the 22nd of May.”

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Apr 292017
 
 April 29, 2017  Posted by at 10:03 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Pablo Picasso Self portrait 1972

 

US Q1 Growth Weakest In Three Years As Consumer Spending Falters (R.)
Don’t Show President Trump This Chart (ZH)
Just Five Companies Account For 28% Of The S&P’s 2017 Returns (ZH)
Germany Knew Austerity Would Destroy Greece, Says Varoufakis (Tel.)
EU Deletes UK from Official Map – Two Years Before Brexit (BT)
These Americans Will Never Get Social Security Benefits (MW)
Julian Assange Speaks Out: The War On The Truth (Ron Paul)
US Spy Agency Abandons Controversial Surveillance Technique (R.)
Russian Economy Has Grown Immune to Western Sanctions – UN (Sp.)
California Enacts $52 Billion Fuel Tax Hike For Road, Bridge Repairs (R.)
Melenchon Attacks Macron as Le Pen Fights to Win His Supporters (BBG)
US Troops Deploy Along Syria-Turkish Border (AP)
Tensions Escalate Between Kurdish Forces, Turkish Troops in North Syria (ARA)
‘Europe’s Dirty Secret’: Officials On Chios Scramble To Cope With Rising Tensions (G.)

 

 

Consumption growth lowest since 2009.

US Q1 Growth Weakest In Three Years As Consumer Spending Falters (R.)

The U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending almost stalled, but a surge in business investment and wage growth suggested activity would regain momentum as the year progresses. The soft patch at the start of the year is bad news for the Trump administration’s ambitions to significantly boost growth. “It marks a rough start to the administration’s high hopes of achieving 3% or better growth; this is not the kind of news it was looking for to cap its first 100 days in office,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. GDP increased at a 0.7% annual rate also as the government further cut defense spending and businesses spent less on inventories, the Commerce Department said on Friday in its advance estimate.

That was the weakest performance since the first quarter of 2014. The pedestrian first-quarter growth pace is, however, not a true picture of the economy’s health. Wage growth in the first quarter was the fastest in 10 years as the labor market nears full employment and business investment on equipment was the strongest since the third quarter of 2015. Also underscoring the economy’s underlying strength, consumer and business confidence are near multi-year highs. First-quarter GDP tends to underperform because of difficulties with the calculation of data that the government has acknowledged and is working to rectify.

[..] Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked to a 0.3% rate, the slowest pace since the fourth quarter of 2009. That followed the fourth quarter’s robust 3.5% growth rate. A mild winter undercut demand for heating and utilities production. Higher inflation, with the personal consumption expenditures price index averaging 2.4% – the highest since the second quarter of 2011 – was also a drag.

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Anti-Trump rally?!

Don’t Show President Trump This Chart (ZH)

It's been (almost) 100 days and stocks are higher, hype is at its peak, hope remains higher-ish… there's just one problem, real economic data is collapsing…

 

As today's Q1 GDP proved, relying on 'hope' and 'soft' data to lift a 'real' economy is simply a false narrative…

 

How will that translate into Making America Great Again?

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Bubble. But their power is real. And scary.

Just Five Companies Account For 28% Of The S&P’s 2017 Returns (ZH)

On the last day of the busiest earnings week in a decade, here is a striking statistic from Goldman Sachs, showing just how dominant a handful of large cap companies have become in terms of both overall profitability and market impact: “Year to date the top 10 contributors have combined to account for 37% of the S&P 500 index return (more than double their market cap representation of 17%). The concentration among the top five is even greater, with those firms – AAPL, FB, AMZN, GOOGL, and MSFT – accounting for 28% of the return and 12% of market cap.” Some further perspective, courtesy of the WSJ, which notes that the combined market capitalization of AMZN, MSFT, INTC and GOOG makes up about 8% of the Index’s total.

Throwing in Apple and Facebook puts about 13% of the S&P 500’s combined market cap into the hands of just six companies. This wasn’t always the case. “Ten years ago, Apple, Amazon, Google, Microsoft and Intel made up just 5% of the S&P 500’s market cap, while Facebook was four years away from becoming a public company. The newfound prominence of big tech companies now can be chalked up to a few factors. One is that most big tech companies are profit machines—unlike many of their smaller peers that are still losing money. Alphabet, Microsoft, Intel and Amazon reported a combined $16.8 billion in operating income for the March quarter on Thursday. That is about 7% of the total projected for the S&P 500. ”

“Amazon looks like an outlier with a rather thin operating margin of 2.8% for the quarter, but even that is a notable gain from its average of just 1.5% over the last five years. But the other, even bigger factor is that demand for technology products and services keeps increasing, even as some market segments like PCs have declined. That has allowed several big tech companies to pivot into new segments with the help of strong cash flows generated by their original businesses. Amazon, Microsoft and Google have built large cloud services used by businesses shifting from more traditional computing setups.”

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New book, series in the Telegraph.

Germany Knew Austerity Would Destroy Greece, Says Varoufakis (Tel.)

Greece was forced to sign up to crippling austerity policies even though the German finance minister privately admitted he would not have endorsed the deal. The extraordinary admission by Wolfgang Schauble was made to Yanis Varoufakis, the former Greek finance minister, whose new memoir is serialised in The Telegraph all this weekend. In a frank private exchange, Mr Varoufakis asked Mr Schauble if he personally would sign up to the EU-ordered austerity plan which saw billions cut from Greek budgets and many Greeks lose their jobs. “As a patriot, no. It’s bad for your people,” the German minister replied. The Germans are also accused in the book of blocking a Chinese rescue deal for Greece and of repeatedly going back on promises and pledges made by other senior European figures as the EU battled to hold the eurozone together.

In a 500-page insider’s account of nearly six months of encounters with the leading political figures of Europe, Mr Varoufakis exposes the lengths to which Germany will go to maintain the EU and single currency. The minister secretly recorded many of his conversations with senior global figures and today exposes the gulf between private conversations and public pronouncements. In an interview today, Mr ≠Varoufakis says his experience contains dark warnings for Britain’s coming Brexit negotiations with a German-dominated EU. Angela Merkel warned this week that Britain should have no illusions about the coming talks and the EU yesterday put the ( issue of Irish reunification on the Brexit negotiating table. He warns that Theresa May must prepare an alternative deal as the EU will use dubious negotiating tactics to block reasonable discussion and potential solutions.

My advice to Theresa May is to avoid negotiation at all costs. If she doesn’t do that she will fall into the trap of [Greek prime minister] Alexis Tsipras, and it will end in capitulation, he told The Daily Telegraph. The parallel with Brexit is the tactic of stalling negotiations. They will get you on the sequencing. First there is the price of divorce to sort out before they will talk about free trade in the future, he added. In his book, Mr Varoufakis recounts how Germany used its political and financial muscle to impose austerity on Greece, despite widespread acknowledgement in other EU capitals that the policy was self-defeating and unsustainable. He reveals private encounters -many recorded secretly- with leading figures including Barack Obama, George Osborne and ( Emmanuel Macron, who polls say is almost certain to become the next president of France. In one conversation at the White House Mr Obama readily agrees that ‘austerity sucks’ but can do nothing to deflect the German agenda.

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Almost funny.

EU Deletes UK from Official Map – Two Years Before Brexit (BT)

This could be the first official map produced by the European Union to exclude the UK. But it is also an inaccurate one: the UK is still a member state of the EU. Brexit means Brexit: on 29 March, British Prime Minister Theresa May officially notified EU Council President Donald Tusk of Britain’s intention to leave the European Union. But Britain hasn’t left yet. By invoking Article 50 of the Treaty of Lisbon, May triggered a process that gives both sides two years to reach an agreement. Meaning that Britain is scheduled to leave the EU on 29 March 2019. Until that time, the United Kingdom remains a full member of the European Union.

It is no secret that hardline brexiteers would rather leave today than tomorrow, and ‘crash out’ of the EU, even if that means falling back on the most rudimentary of agreements for trade and cooperation with ‘EU27’ – shorthand for the EU minus the UK. Now it seems that sentiment is reciprocated in the highest circles of the EU bureaucracy in Brussels. The map shows the unemployment rates of the member states – and the stark differences for those rates between member states in the north and south of the Union. But the eye is immediately drawn to the land mass of the United Kingdom: coloured not in the blues or oranges that indicate unemployment rates in the EU, but the grey of the non-member states that dot the map.

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Giving the news to you bite size.

These Americans Will Never Get Social Security Benefits (MW)

Today’s young people fear that they will never see Social Security benefits. The reality is, 3% of elderly Americans already don’t. The three main groups of people who never receive Social Security benefits include infrequent workers (44.3%) who do not have sufficient earnings to qualify for the benefits, immigrants who arrived in the US at 50 or older (37.3%) and therefore haven’t worked long enough to qualify for the benefits, and non-covered workers (11.4%), such as state and local government employees. A little less than 7% of “never beneficiaries” were individuals who were expected to get Social Security benefits, but died before receiving them, according to a 2015 Social Security Administration report.

What’s worse, most Americans may not realize how much they will – or will not – receive in Social Security benefits, said Bill Meyer, chief executive of Social Security Solutions, a software provider that strategizes how to claim Social Security. Social Security benefits are based on earnings history from the past 35 years – “The onus is on the individual retiree that the Social Security Administration has the right information,” Meyer said. Social Security benefits are hotly contested, specifically how — or even whether — those benefits will be distributed in the future. Young Americans say they’re not confident they’ll ever collect Social Security benefits (81% of millennials didn’t think so, at least, according to a recent Investopedia survey) but current near retirees may also be at risk.

In December, the House Ways and Means Social Security Subcommittee introduced a bill that would “save” Social Security by cutting benefits for above-average earners, eliminating the cost-of-living adjustment for individuals who make more than $85,000 (and $170,000 for couples), and increasing the full retirement age to 69 from 66.

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Vault7 the largest ever publication?

Julian Assange Speaks Out: The War On The Truth (Ron Paul)

Wikileaks Founder and Editor-in-Chief Julian Assange joins the Liberty Report to discuss the latest push by the Trump Administration to bring charges against him and his organization for publishing US Government documents. How will they get around the First Amendment and the Espionage Act? The US government and the mainstream media – some of which gladly publish Wikileaks documents – are pushing to demonize Assange in the court of public opinion.

Tyler Durden: Having blasted the Trump administration for their hyprocritical flip-flop from “loving WikiLeaks” to “arrest Assange,” Ron Paul made his feelings very clear on what this signals: “If we allow this president to declare war on those who tell the truth, we have only ourselves to blame.” Today he sits down with WikiLeaks founder Julian Assange for a live interview…

“The CIA has been deeply humiliated as a result of our ongoing publications so this is a preemptive move by the CIA to try and discredit our publications and create a new category for Wikileaks and other national security reporters to strip them of First Amendment protections,” Assange said in a preview clip from the interview below…:

 

Full interview below… 

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US intelligence has gone bonkers, and it may well be too late to rein it in.

US Spy Agency Abandons Controversial Surveillance Technique (R.)

The U.S. National Security Agency said on Friday it had stopped a form of surveillance that allowed it to collect without a warrant the digital communications of Americans who mentioned a foreign intelligence target in their messages, marking an unexpected triumph for privacy advocates long critical of the practice. The decision to stop the once-secret activity, which involved messages sent to or received from people believed to be living overseas, came despite the insistence of U.S. officials in recent years that it was both lawful and vital to national security. The halt is among the most substantial changes to U.S. surveillance policy in years and comes as digital privacy remains a contentious issue across the globe following the 2013 disclosures of broad NSA spying activity by former intelligence contractor Edward Snowden.

“NSA will no longer collect certain internet communications that merely mention a foreign intelligence target,” the agency said in a statement. “Instead, NSA will limit such collection to internet communications that are sent directly to or from a foreign target.” NSA also said it would delete the “vast majority” of internet data collected under the surveillance program “to further protect the privacy of U.S. person communications.” The decision is an effort to remedy privacy compliance issues raised in 2011 by the Foreign Intelligence Surveillance Court, a secret tribunal that rules on the legality of intelligence operations. [..] The NSA is not permitted to conduct surveillance within the United States. The so-called “about” collection went after messages that mentioned a surveillance target, even if the message was neither to nor from that person. That type of collection sometimes resulted in surveillance of emails, texts and other communications that were wholly domestic.

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Unintended consequences.

Russian Economy Has Grown Immune to Western Sanctions – UN (Sp.)

Maintaining the sanctions imposed by Western states will not negatively affect Russia’s economy, which has adapted to these restrictive measures, UN Special Rapporteur on the negative impact of the unilateral coercive measures Idriss Jazairy said Thursday. Jazairy stressed that the economy is adaptive to sanctions and the policies of its main trade partners, and thus the introduction of sanctions mostly harms the effectiveness of international trade, but not the country itself for which the sanctions were aimed against. Jazairy expressed his view on the anti-Russian sanctions during a meeting with the Russian upper house Council of the Federation Committee on Constitutional Legislation and State-Building chairman Andrei Klishas in Moscow.

Since 2014, relations between Russia and the European Union and the United States, deteriorated amid the crisis in Ukraine. Brussels, Washington and their allies introduced several rounds of sanctions against Russia on the pretext of its alleged involvement in the Ukrainian conflict, which Moscow has repeatedly denied. In response to the restrictive measures, Russia has imposed a food embargo on some products originating in countries that have targeted it with sanctions. On April 18, the IMF said in its World Economic Outlook report that Russian economic growth is expected to pick up in 2017 – 2018 and will reach 1.4% for both years.

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There are too many cars. That’s the only real problem. But no-one dares touch it.

California Enacts $52 Billion Fuel Tax Hike For Road, Bridge Repairs (R.)

California Governor Jerry Brown signed into law on Friday a bill to raise gasoline taxes and other transportation-related fees for the first time in decades in an ambitious $52 billion plan to repair the state’s long-neglected roads and bridges. The measure, increasing excise taxes on gasoline by 12 cents per gallon, from the current rate of $0.28 a gallon, and on diesel fuel by 20 cents per gallon over the next 10 years, goes into effect in November. It cleared the state legislature three weeks ago, on the strength of a two-thirds super-majority the Democrats wield in both houses that allows them to pass new taxes with little or no Republican support. Republicans condemned the increases, saying the state’s transportation taxes and fees are already among the highest in the nation. They call the newly enacted measure the largest gasoline tax in California’s history.

The average motorist in California, a state renowned for its car culture, will see transportation costs rise by about $10 a month under the measure, according to Brown, a Democrat who has governed largely as a fiscal moderate. He has refused to back any transportation overall plans that involved borrowing money. Supporters say the measure is needed to address a mounting backlog of crumbling infrastructure projects, including more than 500 bridges statewide requiring major repair, most of them considered structurally deficient. The fuel tax increases, together with higher vehicle licensing fees and a new $100 annual fee on owners of electric-only vehicles, would raise $5.2 billion a year, all earmarked for road, highway and bridge repairs and anti-congestion projects.

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Too many people are too sure Le Pen has no chance.

Melenchon Attacks Macron as Le Pen Fights to Win His Supporters (BBG)

The left-wing populist Jean-Luc Melenchon, who was eliminated from France’s presidential election this week, declined to endorse centrist front-runner Emmanuel Macron as he looked to keep hold of his 7.1 million voters ahead of a parliamentary ballot in June. Melenchon, who came fourth in Sunday’s first-round vote, said he won’t vote for the anti-euro nationalist Marine Le Pen in the runoff on the May 7 in a 32-minute video posted on his official YouTube channel late Friday. But he also aimed criticism at the centrist Macron who has won endorsements from most of his mainstream rivals, as well as German Chancellor Angela Merkel. “We can’t really call this a choice,” Melenchon said. “The nature of the two candidates makes it impossible to come out of this with stability.”

“One because he’s the extreme of finance, the other because she’s the extreme right,” he added, saying his party, France Unbowed, will reach the second round in 450 of the 577 constituencies up for grabs in the lower chamber of parliament in June and Macron sees him as a “threat.” Politicians and observers across the European Union have been transfixed by the French election with Le Pen promising to pull out of the euro and erect barriers to trade with the rest of the bloc while Macron has vowed to revive the Franco-German partnership to begin a new era of continental cooperation. Le Pen is fighting to win over Melenchon’s supporters as she seeks to close a gap of some 20 %age points on her rival.

Despite the personal antipathy between Melenchon and Le Pen, their protectionist, anti-European platforms had lots in common. In a speech in Arras on Wednesday, Macron praised Melenchon’s “panache” and the wave of support he created in the campaign. Le Pen said on France 2 television on Monday that they had “very similar” economic ideas and her team acclaimed his “noble” act to hold back an endorsement. Surveys show that Melenchon voters are increasingly likely to abstain rather than back Macron on May 7. An OpinionWay polled Friday showed that 45% of Melenchon supporters plan to abstain in the second round, up from 23% at the start of the week. Macron’s support among that group fell to 40% from 55%, while Le Pen’s dropped to 15% from 22%.

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Looks like a positive development.

US Troops Deploy Along Syria-Turkish Border (AP)

US armoured vehicles are deploying in areas in northern Syria along the tense border with Turkey, a few days after a Turkish airstrike that killed 20 US-backed Kurdish fighters, a Syrian war monitor and Kurdish activists said Friday. Footage posted by Syrian activists online showed a convoy of US armoured vehicles driving on a rural road in the village of Darbasiyah, a few hundred meters from the Turkish border. Clashes in the area were reported between Turkish and Kurdish forces Wednesday a day after the Turkish airstrike which also destroyed a Kurdish command headquarters. The Turkish airstrikes, which also wounded 18 members of the US-backed People’s Protection Units, or YPG, in Syria were criticized by both the US and Russia.

The YPG is a close US ally in the fight against Daesh, also known as ISIS and ISIL, but is seen by Ankara as a terrorist group because of its ties to Turkey’s Kurdish rebels. Further clashes between Turkish and Kurdish forces in Syria could potentially undermine the US-led war on Daesh. A senior Kurdish official, Ilham Ahmad told AP that American forces began carrying out patrols along the border Thursday along with reconnaissance flights in the area. She said the deployment was in principle temporary, but may become more permanent. A Kurdish activist in the area, Mustafa Bali, said the deployment began Friday afternoon and is ongoing. He said deployment stretches from the Iraqi border to areas past Darbasiyah in the largely Kurdish part of eastern Syria.

“The US role has now become more like a buffer force between us and the Turks on all front lines,” he said. He said US forces will also deploy as a separation force in areas where the Turkish-backed Syrian fighting forces and the Kurdish forces meet. It is a message of reassurance for the Kurds and almost a “warning message” to the Turks, he said. Navy Capt. Jeff Davis, a Pentagon spokesman, did not dispute that U.S. troops are operating with elements of the Syrian Democratic Forces (SDF) along the Turkish border, but he would not get into specifics. The SDF is a Kurdish-dominated alliance fighting Daesh that includes Arab fighters. “We have U.S. forces that are there throughout the entirety of northern Syria that operate with our Syrian Democratic Force partners,” Davis said. “The border is among the areas where they operate.”

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Here’s why there are US tropps in the region.

Tensions Escalate Between Kurdish Forces, Turkish Troops in North Syria (ARA)

Clashes continued for the third consecutive day between Kurdish fighters of the People’s Protection Units (YPG) and Turkey’s military in several areas in northern Syria, military sources reported on Friday. The Turkish Army bombed several villages in the Kurdish Afrin district, including Panerak, Shankila, Midan Akbas and Rajo. “The Turkish artillery bombarded YPG security checkpoints and residential buildings in Afrin countryside, killing and wounding dozens, most of them civilians,” a spokesperson for the YPG told ARA News. The bombardment led to clashes between the Kurdish units and Turkish military forces in the sub-districts of Rajo and Shiya. “Our units responded to the Turkish offensive by hitting the positions of the Turkish troops near Susk hill in Afrin. At least three military vehicles were destroyed by YPG fire,” the Kurdish official said.

The YPG also released a video showing the destruction of a Turkish base in northwestern Aleppo. “At least 17 Turkish soldiers were killed and three others were wounded under heavy bombardment by the YPG,” a member of the YPG media office in Afrin told ARA News. The source added that the clashes between the YPG and Turkey’s military are still ongoing in the Shiya and Rajo sub-districts. Clashes broke out on Wednesday between the Syrian Kurdish forces and Turkish troops after the latter targeted the Kurdish town of Derbassiye in Syria’s northeastern Hasakah province with heavy artillery, shutting down the road between Derbassiye and Serikaniye. This coincided with similar clashes between the YPG and Turkish troops in Afrin. This comes after the Turkish jets killed over 25 Kurdish fighters in Iraq and Syria on Tuesday.

The US-led coalition expressed concerns over the Turkish attacks against the Kurdish fighters who are in war with ISIS in northern Syria. “We call on all forces to remain focused on the fight to defeat ISIS, which is the greatest threat to regional and worldwide peace, security,” said Air Force Col John L. Dorrian, Spokesman for the US-led coalition against ISIS. “Turkish strikes were conducted without proper coordination with the Coalition or the Government of Iraq,” he said. “Our partner forces have been killed by Turkey strike, they have made many sacrifices to defeat ISIS,” the American Colonel said. “We are troubled by Turkey airstrikes on SDF and Kurdish forces,” he added.

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This will not go quiet for much longer.

‘Europe’s Dirty Secret’: Officials On Chios Scramble To Cope With Rising Tensions (G.)

On a clear day the channel dividing Chios from the Turkish coast does not look like a channel at all. The nooks and crevices of Turkey’s western shores, its wind turbines and summer homes could, to the naked eye, be a promontory of the Greek island itself. For the men, women and children who almost daily make the crossing in dinghies and other smuggler craft, it is a God-given proximity, the gateway to Europe that continues to lure. Samuel Aneke crossed the sea almost a year ago on 1 June. Like those before him, and doubtless those who will follow, he saw the five-mile stretch as the last hurdle to freedom. “You could say geography brought me here,” said the Nigerian, a broad smile momentarily dousing his otherwise dour demeanour. “But it was not supposed to keep me prisoner.”

Refugee flows via Greece were meant to stop when the EU and Turkey announced what was seen as a pioneering agreement to stem the influx in March 2016. In Chios, like other Aegean isles, residents initially welcomed the accord. It was short-lived. The influx – one that saw more than 850,000 refugees arrive into the country in 2015 – was soon replaced by a steady flow, with asylum seekers arriving in groups that were sometimes small, sometimes large, but always propelled by the same ambition: to reach Europe by way of its southern shores. On Chios, more than 825 asylum seekers, the vast majority Syrians, arrived from Turkey in March. This month almost 600 have come. With at least 3,000, according to authorities, housed in two overcrowded camps – one makeshift, the other a razor-wire topped detention centre in a former factory known as Vial – it is anger that hangs in the air.

Greece’s Aegean isles have become de facto detention facilities – a dumpling ground for nearly 14,000 stranded souls, unable to move until permits are processed and fearful of what lies ahead. “Anything could happen because everything is hanging by a thread,” says Makis Mylonas, a policy adviser at the town hall. “Chios, Samos, Lesvos, Kos, Leros were sacrificed in the name of Europe’s fixation to keep immigrants out,” he claims, listing the isles that continue to bear the brunt of the flows.

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

 

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

 

 

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

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

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

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

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

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Orwell meets Samuel Beckett.

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

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

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

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

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

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

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

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

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Looming, right?

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

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

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

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

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

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Long and deep from Nafeez.

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

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

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

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

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

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

Banking, Credit & Norway (Steve Keen)

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

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But illogical demans are all there is.

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

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

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

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One minute of devastating numbers.

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

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

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Well, they won’t stop.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Feb 112017
 
 February 11, 2017  Posted by at 4:28 pm Finance Tagged with: , , , , , , , , ,  Comments Off on Outrageous Malevolence
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Henri Cartier Bresson Salamanca 1963

 

Earlier this week I was talking in Athens to a guy from Holland, who incidentally with a group of friends runs a great project on Lesbos taking care of some 1000 refugees in one of the camps there. But that’s another topic for another day. I was wondering in our conversation how it is possible that, as we both painfully acknowledged, people in Holland and Germany don’t know what has really happened in the Greek debt crisis. Or, rather, don’t know how it started.

That certainly is a big ugly stain on their media. And it threatens to lead to things even uglier than what we’ve seen so far. People there in Northern Europe really think the Greeks are taking them for a ride, that the hard-working and saving Dutch and Germans pay through the teeth for Greek extravaganza. It’s all one big lie, but one that suits the local politicians just fine.

By accident(?!), I saw two different references to what really happened, both yesterday in the UK press. So let’s reiterate this one more time, and hope that perhaps this time someone in Berlin or Amsterdam picks it up and does something with it. There must be a few actual journalists left?! Or just ‘ordinary’ people curious enough, and with some intact active neurons, to go check if their politicians are not perhaps lying to them as much as their peers are all over the planet.

What I’m talking about in this instance is the first Greek bailout in 2010. While there are still discussions about the question whether the Greek deficit was artificially inflated by the country’s own statisticians, in order to force the bailout down the throats of the then government led by George Papandreou, there are far fewer doubts that the EU set up Greece for a major league fall just because it could, and because Dutch, French, German politicians could use that fall for their own benefit.

The reason to do all this would have been -should we say ostensibly or allegedly?-, to get Greece in a situation where the Germans and the French could abuse the emergency they themselves thus created, to transfer the Greece-related bad debts of their banks to the EU public at large, and subsequently to the Greek public, instead of forcing the banks to write these debts down. That is still the core of the Greek problem to this day. It’s also the core problem with the IMF’s involvement: the fund’s statutes prescribe it should have insisted on writedowns long ago, from the very first moment it got involved.

The bailout, as Yanis Varoufakis repeats below, was not -and never- meant to help Greece. Instead, it was meant to do the exact opposite, to enable Europe’s richer countries -and their banks- to escape the only just punishment for reckless lending practices, by unloading their debt onto the Greek people.

Varoufakis Accuses Creditors Of Going After Greece’s ‘Little People’

Former Greek finance minister Yanis Varoufakis [..] said that the country has been put on a fiscal path which makes everyday life “unsustainable” in Greece. “The German finance minister agrees that no Greek government, however reformist it might be, can sustain the current debt obligations of Greece,” he said. Earlier in the day, Wolfgang Schäuble told German broadcaster ARD that Greece must reform or quit the euro. “A country in desperate need of reform has been made unreformable by unsustainable macroeconomic policies,” Mr Varoufakis said.

He said that “instead of attacking the worst cases of corruption, for six years now the creditors have been after the little people, the small pharmacists, the very poor pensioners instead of going for the oligarchies”. Greece in 2010 was given a huge loan that Mr Varoufakis said was not designed to save the bankrupt country but to “cynically transfer huge banking losses from the books of the Franco German banks onto the shoulders of the weakest taxpayers in Europe”.

The Financial Times, in a rare moment of lucidity, and with an unintentionally hilarious headline, puts its fingers on that same issue, as well as a few additional sore spots, and with admirable vengeance and clarity:

Conflict Over Athens’ Surplus Needles The IMF

This week the enduring problem of Greece took a new and disturbing turn. It was revealed that the executive board of the IMF is split on the question of what fiscal surplus Greece should be required to hit — which in itself will affect whether it needs official debt relief to reach sustainable growth.

[..] the fact that the fund admitted a division between its member countries is significant. European nations are over-represented on the board relative to their size in the global economy. Wielding that power to dissuade the fund from demanding debt relief from eurozone governments is a clear conflict of interest and poses a threat to the fund’s credibility and independence.

[..] The fund, which over the years has come to take a more realistic view of Greece’s debt sustainability, has dug its heels in and said it will not continue to participate without further reductions in the burden. This leaves eurozone countries, particularly Germany, in a quandary. Berlin insists it will not continue with the rescue without the involvement of the IMF but it fiercely opposes the debt writedown that the fund is demanding.

The point at issue is the fiscal surplus Greece is required to hit. The IMF says that reaching and maintaining a primary surplus of 1.5% of gross domestic product is sufficient; the eurozone wants an improbable 3.5%. [..] The European directors on the board, who want the IMF to agree to the higher fiscal surplus number, are undoubtedly conflicted by having an eye on the effect on their own governments having to write down debt.

Forthcoming elections in the eurozone, including Germany and France, mean that the political as well as economic cost of being seen to give in to Greece is considerable.

Greece’s own government has also been shaken by the conflict, and through its intransigence, the eurozone may force yet another change of administration, with the Syriza government being replaced by the centre-right opposition. At the margin, that may result in Greece being offered a slightly better deal than under the current administration. But short-term political manoeuvring is a terrible way to try to set Greece on a path to long-term debt sustainability and economic stability.

Right from the beginning of the Greek crisis in 2010, the political need to shield first their banks and investors, and then their taxpayers, has warped the response of eurozone governments. They have consistently signed up to hugely over-optimistic growth and surplus targets rather than accepting the need for more external finance and, if required, debt writedowns.

The rest of the IMF’s membership should be prepared to overrule the recalcitrant Europeans. The complaints of a self-interested cabal cannot be allowed to get in the way of Greece’s best interests. Eurozone governments have behaved poorly on this issue. They deserve to be defeated.

First of all, to put Greece and ‘sustainable growth’ together in one sentence is as preposterous as it is to do the same with Greece and ‘surplus’. But more importantly, the FT is right in just about every word here. Europe de facto decides what the IMF does. So despite all the recent conflicts between the Troika members (though they reportedly just announced they agreed on what to dictate to Greece over the weekend), it’s really all EU (i.e. Germany, France) all the time. Greece never stood a chance, and neither did justice.

The point about upcoming elections in Holland, France and Germany gets more important by the day. Since former EU parliament chief Martin Schulz left that post to head the ‘socialist’ SPD in Germany’s elections, he’s seen his poll numbers soar so much that Merkel and Schaeuble are getting seriously nervous about their chances of re-election. Like in all countries these days, certainly also in Europe, their knee-jerk reaction is to pull further to the right. Which is the opposite of setting the record straight with regards to.

As for Dijsselbloem, Schaeuble’s counterpart as finance minister for Holland, his Labor Party (PVDA) -yes, that twit claims to be a leftie- is down so much in the polls that you have to wonder where he gets the guts -let alone the authority- to even open his mouth. PVDA has 38 seats in the Dutch parliament right now and are predicted to lose 27 of them and have just 11 left after the March 15 vote, taking them from 2nd largest party to 7th largest. And out of power.

And he still heads the eurogroup, including in the negotiations with Greece and the IMF?! It’s a strange world. Dijsselbloem proudly proclaimed this week that without the IMF being involved in the next bailout, Holland wouldn’t ‘give’ Greece another penny anymore. Think Dijsselbloem and Schaeuble don’t know what happened in 2010? Of course they do. They know better than anyone.

It’s simply better for their careers -or so they think- to further impoverish the entire Greek nation and the poorest of its citizens than it is to come clean, to tell their people the whole story has been based on dirty tricks from the start. And since their media refuse to tell the truth, too, the story will last until at least after their respective elections. Thing is, Dijsselbloem will be out of a political job by March 16, so what’s he doing, setting himself up for a juicy job at one of the banks whose debts were transferred to Greek pensioners in 2010? No conscience?

 

Perhaps Greece’s best hope is, of all people, Donald Trump. Yeah, a long shot if ever you saw one. But Trump can overrule the IMF board simply because the US is the biggest party involved in the fund. He can tell that divided board to get its act together and stop harassing a valuable NATO member. At least he has the business sense to understand that a country with 23% unemployment -and that’s just the official number- and 50-60% youth unemployment cannot recover no matter what happens, and that sustainable growth, any kind of growth, is an impossibility once you take people’s spending power away.

Meanwhile, elite and incumbent Europe seems to think that publicly agitating against Trump is the way to go (they may come to regret that stance, and a stance it all it is). Trump’s apparent choice for EU ambassador, economist Ted Malloch, was accused by European Parliament hotshots Weber and Verhofstadt -in a letter, no less- of “outrageous malevolence” towards “the values that define this European Union”, for saying the Union needs ‘a little taming’. For some reason, they don’t seem to like that kind of thing. “Outrageous malevolence”, we’re talking Nobel literature material here.

Malloch also said EU president Juncker was a “very adequate mayor, I think, of some city in Luxembourg.” And that he “should go back and do that again.” And Malloch said on Greek TV this week that Greece should have left the eurozone four years ago. “Why is Greece again on the brink? It seems like a deja vu. Will it ever end? I think this time I would have to say that the odds are higher that Greece itself will break out of the euro.”

Why would he say that? How about because of the numbers in this by now infamous graph, straight out of the IMF itself, which shows EU countries have conspired to plunge one of their fellow “Union” member states into a situation far worse than the US was in during the Great Depression? Would that do it?

 

 

And we haven’t even touched on the role that Goldman Sachs plays in the entire kerfuffle, with its fake loans and derivatives, yet another sordid tale in this Cruella De Vil web of power plays spun by incompetent petty men. And Americans think they got it bad… Guess that Goldman role makes it less likely for Trump to interfere in Greece’s favor. Which would seem a bad idea, for everyone involved, not least of all because of rising tensions with Turkey over islands and islets and rocks (I kid you not) in the Aegean Sea.

It would be much better and safer for Trump, and for all of Europe, to make sure Greece is a strong nation, not a depressed and demoralized penal colony for homeless and refugees. That is asking for even more trouble. But nary a soul seems to be tuned in to that, it’s all narrow windows, short term concerns and upcoming elections. No vision.

Or perhaps Merkel will do something unexpected. Word has it that Greek finance minister Tsakalotos is meeting with Angela this weekend, a move that would seem to bypass Schaeuble, who once again said yesterday that Greece can only get a debt writedown if it leaves the eurozone. And that’s something Merkel is not exactly keen on. If only because it means unpredictability, volatility, not a great thing if your popularity as leader is already on shaky ground.

But to summarize, the Greek people didn’t do this. Of course plenty of Greek citizens borrowed more money than they should have in the first decade of the millenium, stories about credit cards in people’s mailboxes with a ‘free’ €5000 credit on them are well known in Athens. But they were by no means the ones who profited most. And the country has a long history of corruption and tax evasion. Which is what the French and German banks ‘cleverly’ played into as their politicians acted like they had no idea. Still, none of that comes even close to a reason or an excuse for completely eviscerating a fellow member of both the EU and NATO.

And it makes little sense. Do these people really want to risk peace in the eastern Mediterranean, or inside Greece itself (which will inevitably explode if this continues), just in order to keep Commerzbank or BNP Paribas out of the trouble they rightfully deserve to be in?

No, it’s not Tim Malloch’s ‘statements that reveal’ “outrageous malevolence” towards “the values that define this European Union”. It’s the actions of the European Union itself that do.

Feb 052017
 
 February 5, 2017  Posted by at 8:59 pm Finance Tagged with: , , , , , , , , ,  3 Responses »
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Hugo Simberg The Wounded Angel 1903

 

US Appeals Court Denies Request To Restore Trump’s Immigration Ban (R.)
DHS Suspends Actions On Travel Ban; ‘Standard Policy’ Now In Effect (R.)
Trump Tells O’Reilly He ‘Respects’ Putin in Super Bowl Interview (Fox)
As Trump Weighs Thaw With Putin, EU Set to Renew Its Blacklist (BBG)
Goldman Throws Cold Water On Trump Agenda (CNBC)
Economists Say Action On Carbon Is Vital, Or Say Nothing At All (Age)
Japan – It’s Finally Happening (Muir)
Le Pen Kicks Off Campaign With Promise Of French ‘Freedom’ (R.)
Theresa May Abandons ‘Home Owning Democracy’ of Thatcher and Tories (G.)
Attention Trade Warriors: Germany’s Surplus is on the Wane (BBG)
Dennis Kucinich Rages Against The Military-Industrial-Complex (FB)
NATO, Not Russia, Has Deployed Tanks To Poland & Baltic States – Galloway (RT)
Varoufakis Calls on PM Tspiras to Ditch Bailout Restructuring (GR)
Varoufakis Urges Tsipras To Ditch Negotiations, Adopt “Parallel System” (KTG)
UK: Refugees Heading To Europe To Be Sent To Asia And Latin America (Ind.)

 

 

It was always going to the Supreme Court. More interesting right now is how strongly this is dividing the White House team. Kelly refused to enact some of Bannon’s demands. Tillerson and Mattis are not sitting comfortable either. And the legal team has gained in standing, a lot. Trump cannot afford too many of these snags, even if they love the attention and controversy coming from it. All in all, a good thing that the legal system gets tested, never a thing to fall asleep on.

US Appeals Court Denies Request To Restore Trump’s Immigration Ban (R.)

A U.S. appeal court late on Saturday denied an emergency appeal from the U.S. Department of Justice to restore an immigration order from President Donald Trump barring citizens from seven mainly Muslim countries and temporarily banning refugees. “Appellants’ request for an immediate administrative stay pending full consideration of the emergency motion for a stay pending appeal is denied,” the ruling by the U.S. Court of Appeals for the Ninth Circuit said. It said a reply from the Department in support of the emergency appeal was due on Monday. The Department filed the appeal a day after a federal judge in Seattle ordered Trump’s travel ban to be lifted. The president’s Jan. 27 order had barred admission of citizens from the seven nations for 90 days.

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Law.

DHS Suspends Actions On Travel Ban; ‘Standard Policy’ Now In Effect (R.)

A Seattle federal judge on Friday put a nationwide block on U.S. President Donald Trump’s week-old executive order that had temporarily barred refugees and nationals from seven countries from entering the United States. The judge’s temporary restraining order represents a major setback for Trump’s action, though the White House said late Friday that it believed the ban to be “lawful and appropriate” and that the U.S. Department of Justice would file an emergency appeal. As a result of the ruling, the Department of Homeland Security suspended its enforcement of the ban, announcing on Saturday that “standard policy and procedures” were now in effect. “In accordance with the judge’s ruling, DHS has suspended any and all actions implementing the affected sections of the Executive Order entitled, “Protecting the Nation from Foreign Terrorist Entry into the United States,” DHS said in a statement.

“DHS personnel will resume inspection of travelers in accordance with standard policy and procedure,” it stated, adding that the Justice Department would file an emergency stay to “defend the president’s executive order, which is lawful and appropriate.” The move came on the heels of the State Department announcing it was reversing the revocation of visas that left countless travelers stranded at airports last weekend. The move all but ensures a protracted public and legal battle over one of Trump’s most controversial policies, barely two weeks after he was inaugurated. Early Saturday morning, Trump criticised the ruling as “ridiculous” and warned of big trouble if a country could not control its borders.

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Quite right. Putin bashing is a losing strategy.

Trump Tells O’Reilly He ‘Respects’ Putin in Super Bowl Interview (Fox)

On Sunday, Bill O’Reilly will hold a special Super Bowl pre-game interview with President Trump at 4 p.m. ET on your local FOX broadcast station. In a special preview, Trump revealed his plans for dealing with Russian President Vladimir Putin. O’Reilly asked Trump whether he “respects” the former KGB agent: “I do respect him, but I respect a lot of people,” Trump said, “That doesn’t mean I’m going to get along with him.” Trump said he would appreciate any assistance from Russia in the fight against ISIS terrorists, adding that he would rather get along with the former Cold War-era foe than otherwise. “But, [Putin] is a killer,” O’Reilly said. “There are a lot of killers,” Trump responded, “We’ve got a lot of killers. What do you think? Our country’s so innocent?”

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For the EU, like NATO, Putin bashing is the only thing left that provides a reason to be. That’s just dangerous.

As Trump Weighs Thaw With Putin, EU Set to Renew Its Blacklist (BBG)

The European Union plans to renew asset freezes and travel bans against key allies of Russian President Vladimir Putin who are accused of destabilizing Ukraine, at a time when Donald Trump is weighing warmer ties with Moscow. Four EU officials said member governments intend by mid-March to prolong the sanctions for another six months on more than 100 Ukrainians and Russians. Among them: Arkady Rotenberg, co-owner of SMP Bank and InvestCapitalBank, and Yury Kovalchuk, the biggest shareholder in Bank Rossiya, the Brussels-based officials said. The officials spoke on condition of anonymity because the deliberations are confidential. Trump, who had a phone call with Putin on Jan. 28, has left open the possibility of easing the U.S.’s sanctions against Russia.

Former President Barack Obama drew up the American penalties in coordination with the 28-nation EU after Putin annexed the Ukrainian region of Crimea in 2014 and lent support to separatist rebels. “The Europeans are waiting to see what hand grenade Trump throws into the Russia-Ukraine pond,” Michael Emerson, a foreign-policy expert at the CEPS think tank in Brussels, said by phone. With the asset freezes and travel bans due to expire on March 15, “European politicians and diplomats will be cautious and stick to the status quo,” he said. The planned renewal of the blacklist highlights the EU’s political commitment to a policy that Angela Merkel and Francois Hollande guided in step with Obama. The European sanctions against Russia resemble the U.S. penalties and include a separate set of curbs – prolonged for another six months just before Trump took office on Jan. 20 – on Russia’s financial, energy and defense industries.

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Volatility.

Goldman Throws Cold Water On Trump Agenda (CNBC)

The policy halo effect that provided ballast to the stock market and fueled investor optimism is already being dimmed by political realities, according to Goldman Sachs, which may have negative implications for economic growth. In a note to clients on Friday, the investment bank noted President Donald Trump’s agenda was already running into bipartisan political resistance, with doubts growing about potential tax reform and a repeal of the Affordable Care Act, among other marquee Trump administration initiatives. Just two weeks into his tenure, “risks are less positively tilted than they appeared shortly after the election ,” Goldman wrote. Growing resistance to Trump’s executive orders on immigration and financial reform has galvanized opposition while dividing members of the president’s own Republican Party.

It has also curbed the enthusiasm of investors, who sent stocks on a roller-coaster ride this week as they struggled to reconcile the new restrictions on immigration with Trump’s professed pro-business bent. “While bipartisan cooperation looked possible on some issues following the election, the political environment appears to be as polarized as ever, suggesting that issues that require bipartisan support may be difficult to address,” the bank added. The balance of risks “are less positively tilted than they appeared shortly after the election,” Goldman said, which may blunt the force of future growth. Amid reports that top GOP members are reportedly becoming nervous about the impact of a full-fleged repeal of health care, that political pushback “does not bode well for reaching a quick agreement on tax reform or infrastructure funding, and reinforces our view that a fiscal boost, if it happens, is mostly a 2018 story.”

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Steve on Twitter: “Coulnd’t resist it: sanctimonious carbon price pap, & belief market can solve an ecological problem just baug me. So my satirical gene fired.”

Economists Say Action On Carbon Is Vital, Or Say Nothing At All (Age)

There is no consensus. Economists either believe it is vital that Australia becomes a low-carbon intensity economy, or that the issue is so unimportant – or perhaps that it is so politically divisive – that they choose not to volunteer an opinion. Asked about the importance of reducing the country’s carbon footprint and how best to do it, more than half of 27 economists from industry, consultancy, academia and finance questioned for the annual BusinessDay Scope survey agreed it was a must. Another 10 left the question blank. Whether this indicates a lack of interest or the contentious nature of climate change policy is unclear. But none of those who did answer made the case that cleaning up the economy did not matter. They overwhelmingly said action should be swift and include a market-based carbon pricing scheme.

[..] Steve Keen, of London’s Kingston University, made what – we think – was a similar point about the importance of climate action, albeit less conventionally. “Nah mate! Wassa matta, dontcha own a pair of budgie smugglers?” he wrote. “It’s all a conspiracy by Marxists anyway to undermine the Ostralyan way of life – you know, burning stuff and damn well enjoying it rather than whingeing. “A bit a coal never hurt anyone, matter of fact it tastes even better than a raw onion!”

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“I am shorting JGBs with both fists.”

Japan – It’s Finally Happening (Muir)

I still shake my head at the stupidity. One of the most overindebted countries in the history of modern finance trading with a 0% thirty year bond. Professor Malkiel – stick that in your pipe and smoke it. But into that panic a crazy thing happened. Worried its bonds would trade at negative yields and pressure the financial system, the Bank of Japan pegged its 10 year yield at 0%. In doing so, the Bank of Japan moved from a set rate of balance sheet expansion to one that varies based on whether that peg is either too high, or too low. If the equilibrium level of 10 year rates was in fact below 0%, the Bank of Japan would be forced to sell bonds to keep rates stuck at 0%. If there was demand for credit and 10 year rates moved higher, then the BoJ would be forced to buy bonds to keep them from declining.

The BoJ program was a little more nuanced, and there were some caveats, but at its heart, the BoJ was giving up control of its balance sheet so it could peg a specific part of the yield curve. Of course Central Banks do this all the time. The difference is they usually operate at the front part of the curve, and when there is too much demand or supply, they change the rate. When the Bank of Japan took this unprecedented step, I walked away from my short JGB position. I figured there were better fixed income markets to short. Yet I highlighted that by pegging the 10 year rate, the Bank of Japan had not eliminated volatility, but merely postponed it. Eventually the Bank of Japan’s massive balance sheet expansion would kick in. At that point, inflation would pick up, credit would be demanded and the Bank of Japan would be forced to defend the 0% peg.

Yet this defending would be expansionary as they would be forced to buy bonds and expand the amount of base money, which if not offset with a decline in the velocity of money, would create more inflation, etc… All of this would be occurring with an already highly supercharged Japanese Central Bank balance sheet. I have been sitting and waiting for this expansionary feedback loop to kickstart. Until recently, the Bank of Japan had not been forced to buy any bonds to keep the rate pegged at 0%. When 10 year rates drifted far enough above 0%, the Bank of Japan made a bid to buy an unlimited number of bonds at a level below the market, which scared the market back to the pegged level. But this week the market decided to test the BoJ’s resolve.

The JGB 10 Year bond spiked through the previous high yield on news the Bank of Japan would not be expanding their balance sheet quite as aggressively as expected in their regular QE program. As yields popped through the previous 0.10% yield ceiling, the Bank of Japan came charging into the market. The BoJ bid 3-4 basis points through the market with unlimited size to push yields back down to the 0.10% level. What does this mean? The market is finally saying the demand for credit is enough to force the Bank of Japan to buy bonds to keep rates down. And that was the signal I was waiting for. I am shorting JGBs with both fists. It probably won’t happen tomorrow, nor the next day. Heck it probably won’t even happen next month, but we have reached the point where I need to be short JGBs.

The pressure will continue to build and when it finally bursts, the torrent will be overwhelming and quick. Although many traders think they will be able to climb on board, it will most likely be extremely difficult – like jumping on a raft bouncing down a raging river, it always seems way easier than it is. I hate German bunds, but I now have a fixed income instrument I hate even more. I expect bund yields to double or even triple in the coming quarters, but JGBs will eventually trade significantly though bunds. It would be just like the Market Gods to finally usher in the JGBs collapse once all the hedge fund guys had given up on it…

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Count her out at your own peril.

Le Pen Kicks Off Campaign With Promise Of French ‘Freedom’ (R.)

French far-right leader Marine Le Pen kicked off her presidential campaign on Saturday with a promise to shield voters from globalization and make their country “free”, hoping to profit from political turmoil to score a Donald Trump-style upset. Opinion polls see the 48-year old daughter of National Front (FN) founder Jean-Marie Le Pen topping the first round on April 23 but then losing the May 7 run-off to a mainstream candidate. But in the most unpredictable election race France has known in decades, the FN hopes the scandal hitting conservative candidate Francois Fillon and the rise of populism across the West will help convince voters to back Le Pen. “We were told Donald Trump would never win in the United States against the media, against the establishment, but he won… We were told Marine Le Pen would not win the presidential election, but on May 7 she will win!” Jean-Lin Lacapelle, a top FN official, told several hundred party officials and members.

In 144 “commitments” published at the start of a two-day rally in Lyon, Le Pen proposes leaving the euro zone, holding a referendum on EU membership, slapping taxes on imports and on the job contracts of foreigners, lowering the retirement age and increasing several welfare benefits while lowering income tax. The manifesto also foresees reserving certain rights now available to all residents, including free education, to French citizens only, hiring 15,000 police, curbing migration and leaving NATO’s integrated command. “The aim of this program is first of all to give France its freedom back and give the people a voice,” Le Pen said in the introduction to the manifesto.

[..] “This presidential election puts two opposite proposals,” Le Pen said in her manifesto. “The ‘globalist’ choice backed by all my opponents … and the ‘patriotic’ choice which I personify.” If elected, Le Pen says she would immediately seek an overhaul of the European Union that would reduce it to a very loose cooperative of nations with no single currency and no border-free area. If, as is likely, France’s EU partners refuse to agree to this, she would call a referendum to leave the bloc.

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Horse barn.

Theresa May Abandons ‘Home Owning Democracy’ of Thatcher and Tories (G.)

A major shift in Tory housing policy in favour of people who rent will be announced by ministers this week as Theresa May’s government admits that home ownership is now out of reach for millions of families. In a departure from her predecessor David Cameron, who focused on advancing Margaret Thatcher’s ambition for a “home-owning democracy”, a white paper will aim to deliver more affordable and secure rental deals, and threaten tougher action against rogue landlords, for the millions of families unable to buy because of sky-high property prices. Ministers will say they want to change planning and other rules to ensure developers provide a proportion of new homes for “affordable rent” instead of just insisting that they provide a quota of “affordable homes for sale”.

They will also announce incentives to encourage landlords to offer “family-friendly” guaranteed three-year tenancies, new action to ban unscrupulous landlords who offer sub-standard properties, and a further consultation on banning many of the fees that are charged by letting agents. A senior Whitehall source said: “We want to help renters get more choice, a better deal and more secure tenancies.” They added that the government did not want to scare people off from renting out homes, but offer incentives to encourage best practice and isolate the worst landlords. By emphasising the rights of renters, as well as trying to boost house building, the white paper will mark a turning point for a party that since the 1980s, and the first council house sales, has promoted home ownership as a badge of success, while neglecting the interests of renters.

The Tory manifesto for the 2015 general election spelt out plans for 200,000 new “starter homes” that could be bought by first-time buyers at 20% discounts, but said little about promoting the interests and improving the lot of so-called “generation rent”. Cameron also pushed the idea of getting people on the housing ladder through shared ownership schemes, an idea that is no longer such a priority. The white paper will be seen as part of May’s deliberate break with Cameron, and her drive to create a country “that works for everyone, not just the privileged few”.

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Makes no difference anymore to Greece and Italy.

Attention Trade Warriors: Germany’s Surplus is on the Wane (BBG)

The Trump administration appears intent on escalating the long-standing U.S. practice of attacking Germany’s current-account surplus. Good news for those on the receiving end: It has probably peaked. As officials like National Trade Council director Peter Navarro rail against the trade imbalance that dominates the balance of payments between the two countries, pensioners, home-buyers and immigrants are quietly working to bring that $297 billion current-account surplus down. According to research by Deutsche Bank, demographics and a housing boom are two factors that will drive the current account balance – the difference between what a country earns from abroad and what it spends – to its lowest level in seven years by 2020.

That may offer little consolation to the German delegation when it hosts a Group of 20 meeting of finance ministers in March, as they’ll likely face intensified criticism for allowing such an imbalance to continue. Germany has long faced flak, both within the euro area and outside it, for failing to encourage greater domestic spending and imports to balance out its external excess. Still, while the weaker euro will continue to make German exports attractive in the U.S. – think expensive sedans, high-tech machinery – there are countervailing factors at play on the other side of the equation. “In the medium term we expect the demographic development and the solid domestic economy, driven by a sustained positive development on the property market, to push the surplus down to 7 percent of GDP,” Deutsche Bank economist Heiko Peters said by phone.

A rising share of pensioners in the German population, who normally have less money to save than people in jobs, will crimp household savings rates, while an increasing number of immigrants such as refugees will contribute to boosting German imports, Peters wrote in a study first published last year. And with housing valuations outpacing income and rent growth since 2009, home owners feel richer, save less toward retirement and borrow against their property. That leads to rising imports of building materials to fuel the property boom and increased demand for foreign consumer goods on the back of the wealth effect. 7% of GDP is still a mighty big number for an economy as large as Germany’s. “That’s still a relatively high level until 2020,” Peters says. “But an even greater demographic effect is then expected for 2020-2025, and the surplus should then decline clearly further.”

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Another ‘curious’ WaPo feat.

Dennis Kucinich Rages Against The Military-Industrial-Complex (FB)

I have dedicated my life to peace. As a member of Congress I led efforts to avert conflict and end wars in countries such as Afghanistan, Iraq, Lebanon, Libya, Syria and Iran. And yet those of us who work for peace are put under false scrutiny to protect Washington’s war machine. Those who undermine our national security by promoting military attacks and destroying other nations are held up as national leaders to admire. Recently Rep. Tulsi Gabbard and I took a Congressional Ethics-approved fact finding trip to Lebanon and Syria, where we visited Aleppo and refugee camps, and met with religious leaders, governmental leaders and people from all sides of the conflict, including political opposition to the Syrian government.

Since that time we have been under constant attack on false grounds. The media and the war establishment are desperate to keep hold of their false narrative for world-wide war, interventionism and regime change, which is a profitable business for Washington insiders and which impoverishes our own country. Today, Rep. Gabbard came under attack yet again by the Washington Post’s Josh Rogin who has been on a tear trying to ruin the reputations of the people and the organization who sponsored our humanitarian, fact-finding mission of peace to the Middle East. Rogin just claimed in a tweet that as community organization I have been associated with for twenty years does not exist. The organization is in my neighborhood. Here’s photos I took yesterday of AACCESS-Ohio’s marquee.

It clearly exists, despite the base, condescending assertions of Mr. Rogin. Enough of this dangerous pettiness. Let’s dig in to what is really going on, inside Syria, in the State Department, the CIA and the Pentagon. In the words of President Eisenhower, let’s beware (and scrutinize) the military-industrial-complex. It is time to be vigilant for our democracy.


These leaders of the Christian faith in Aleppo begged for the US to stop funding terrorists in #Syria. They expressed that before international interventions (covert and overt) Syrians lived in peace without concern as to whether they were Christian, Muslim or Jew.

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Line of the day: “Why are we spending £160bn on renewing Trident when we now know its missiles are more likely to hit Australia if they were aimed at Russia?..”

NATO, Not Russia, Has Deployed Tanks To Poland & Baltic States – Galloway (RT)

British Defense Secretary speech on “Russian threat” is a desperate attempt to “save jobs and budgets” for the Cold War crowd, which is worried the new US leader will not consider Russia an enemy, broadcaster and former British MP George Galloway told RT. Addressing a group of university students, the UK’s defense secretary Michael Fallon warned of a resurgent Russia and said that it is becoming aggressive. RT: What did you make of Michael Fallon’s speech? George Galloway: Well, Michael Fallon puts the ‘squeak’ in the word ‘pipsqueak.’ He is of course the defense minister of a small and semi-detached European power with not much military prowess and which wants to feel big about itself.

And these people, and he’s not alone – the military industrial complex in the United States is up to the same game – they are desperately thrashing around to save their jobs, to save their budgets, to save their roles as muscle-men in the world. And Fallon got used to, as did other European powers, going around the world, threatening people with America’s army. Now America’s army is not quite so reliable, because America has a President who might not want to use the army in the way that these people want him to, at least one hopes not. And so they desperately seek to continually exacerbate the existing tensions with Russia to defend their own relevance. The people are asking, “What’s NATO for?”

The people are asking, “Why are we spending £160bn on renewing Trident when we now know its missiles are more likely to hit Australia if they were aimed at Russia? And in any case Russia has thousands of nuclear weapons, and we only a handful.” So it’s all pretty pitiful, actually. Right down to the audience of university students, hoping that none of them would challenge him. I’d like him to debate these matters with me, he knows me well, he comes from the same town in Scotland as me. I’d really love to get my metaphorical hands on him to have some of these matters out. The truth is that the European Union is having to come to terms with the fact that the US now has a President that doesn’t want war with Russia and they – who have built their entire 50-60 years of history on the possibility of war with Russia – are all at sea, except we don’t have that many battleships left either.

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Greece turning into an impoverished prison camp is a feature not a bug.

Varoufakis Calls on PM Tspiras to Ditch Bailout Restructuring (GR)

Yanis Varoufakis wrote in an op-ed in Efimerida ton Syntakton on Saturday. The former finance minister called on Prime Minister Alexis Tspiras to adopt a plan originally proposed by Varoufakis while he was still in office. The plan would unilaterally restructure the loans the ECB holds. In addition according to BitCoin Magazine and reiterated in the former FM’s op-ed a payment system that could operate in euros but which could be changed into drachmas “overnight” if necessary would be implemented along with a parallel payment system. “This two-pronged preparation is the only way to prevent another excruciating retreat by the prime minister in the short-term and [German Finance Minister Wolfgang] Schaeuble’s plan in the long-term,” Varoufakis wrote. Varoufakis has been a vocal protester to Greek bailout plans and restructuring as it stands now, hence his resignation. He firmly believes that the current plan could lead to Greece leaving the Eurozone of their own accord.

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More on that. “In reality there was never a basis for hope that the toxic 3rd bailout would be gradually rationalized, in terms that the European Commission would support Athens so that the austerity and anti-social IMF measures would relax..”

Varoufakis Urges Tsipras To Ditch Negotiations, Adopt “Parallel System” (KTG)

Former finance minister Yanis Varoufakis strikes back and urges Prime Minister Alexis Tsipras to turn his back on Greece’s lenders, adopt a parallel payment system and to unilaterally restructure the loans held by the ECB. In an op-ed in Efimerida ton Syntakton, Varoufakis, Varoufakis calls on Tispras to prepare for rupture with creditors in order to avoid rupture. “This two-pronged preparation is the only way to prevent another excruciating retreat by the prime minister in the short term and [German Finance Minister Wolfgang] Schaeuble’s plan in the long term,” Varoufakis wrote. In his article, Varoufakis suggested that Schaeuble’s strategy is to lead Greeks to the point of exhaustion so they ask to leave the euro themselves.

Noting that the “parallel payment system was already designed in 2014”, Varoufakis stresses that Tsipras had “two delusions” that led the government to the current impasse: A) that on the night of the referendum, the dilemma was between Schaeuble’s Grexit Plan and the 3rd bailout, and B) that the obedience to the 3rd bailout could be politically manageable through a parallel, society-friendly program. Both of these “working assumptions” were based only on autosuggestion, the ex finance minister stresses adding that he tried to explained this to the Prime Minister on the night of the referendum

“In reality there was never a basis for hope that the toxic 3rd bailout would be gradually rationalized, in terms that the European Commission would support Athens so that the austerity and anti-social IMF measures would relax, the IMF would force Berlin to accept debt restructuring and lower primary surpluses, the ECB would include Greece in the bond purchase program (QE),” Varoufakis wrote. He accused leading European negotiators of lying. “That Moscovici [EU Monetary Affairs Commissioner], Coerer [ECB] and Sapen [French finance minister] might have given such promises was not an excuse. Since May 2015 we were fully aware that these gentlemen know how to lie and fail to deliver on their promises when they do not lie.”

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Completely devoid of any comprehension or compassion. Moral Bankruptcy. Throw money at it, that should work… And then keep bombing, British involvement in that makes a lot of profit.

UK: Refugees Heading To Europe To Be Sent To Asia And Latin America (Ind.)

Refugees heading to Europe will be urged to settle in Asia and Latin America instead, under a new £30m British aid package. Theresa May announced the scheme at an EU summit in Malta, arguing it showed the Government is “stepping up its support for the most vulnerable refugees”. The package will see Britain provide lifesaving supplies for people facing freezing conditions across Eastern Europe and Greece, including warm clothing, shelter and medical care. However, it will also pay for better infrastructure in far-flung countries willing to take refugees who had hoped to settle in Europe. The move builds on an existing scheme run by The UN Refugee Agency (UNHCR), but it is the first time Britain’s aid budget has been used to bolster it. It risks adding to criticism that the Prime Minister is unwilling for the UK to accept a reasonable share of the refugees and migrants fleeing Syria and other war zones.

Only a few thousand Syrian refugees have been resettled in Britain – and the Government has refused to take part in an EU-wide programme to co-ordinate the continent’s response to the crisis. Government sources stressed that people would only be diverted to countries in Asia and Latin America if they were willing to be resettled there. The Department for International Development is expected to release a list of interested countries later. In Malta the Prime Minister insisted the focus of the £30m programme was “helping migrants return home rather than risk their lives continuing perilous journeys to Europe”. It would provide assistance to refugees and migrants across Greece, the Balkans, Libya, Egypt, Tunisia, Morocco, Algeria and Sudan. Priti Patel, the International Development Secretary, said: “Conflict, drought and political upheaval have fuelled protracted crises and driven mass migration. We cannot ignore these challenges.

The package will be delivered by UNHCR, the International Organisation for Migration (IOM) and NGO collective Start Network. Its aim is to:

* provide 22,400 life-saving relief items including tents, blankets, winter clothes such as hats and gloves and hygiene kits including mother and baby products

* help more than 60,000 people with emergency medical care, legal support and frontline workers to identify those at risk of violence and trafficking

* allow up to 22,000 people to reunite with family members they have become separated from

* help countries in Asia and Latin America that “might be able to resettle refugees put the infrastructure and systems in place to do so”

* provide more than 1,500 refugees in Egypt, including those fleeing Syria and other conflicts, with urgent health assistance and educational grants for students to go back to school

* provide a migrant centre in Sudan to enable “voluntary returns home when safe”, replicating a successful scheme in Niger.

Read more …

Oct 152016
 
 October 15, 2016  Posted by at 10:18 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle October 15 2016
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Harris&Ewing Motorcycle postman, Washington, DC 1912

US Deficit Up for First Time Since 2009 on Spending Surge (BBG)
Why the Economy Doesn’t Roar Anymore (WSJ)
Jim Rogers: Sterling Is In Serious Decline, Could Go Below Dollar (Ind.)
What The United States Needs (Varoufakis)
German Government Has Ruled Out Taking Stake in Deutsche Bank (WSJ)
Varoufakis, Others Deny Hollande’s Russian Drachma-Printing Claim (Kath.)
A Child Born Today Comes Into the World With More Debt Than You (BBG)
The Press Buries Hillary Clinton’s Sins (WSJ)
Donald Trump Uncensored: This Is America’s “Moment Of Reckoning” (ZH)
The Fury and Failure of Donald Trump (Matt Taibbi)
Hypernormalisation: Adam Curtis’ Path From Syria To Trump, Via Jane Fonda (G.)
Greece, The Hot Corner (Stavridis)

 

 

You don’t say!: “The slowdown in tax collections suggests some cooling in labor market activity..”

US Deficit Up for First Time Since 2009 on Spending Surge (BBG)

The U.S. budget deficit as a share of the economy widened for the first time in seven years, marking a turning point in the nation’s fiscal outlook as an aging population boosts government spending and debt. Spending exceeded revenue by $587.4 billion in the 12 months to Sept. 30, compared with a $439.1 billion deficit in fiscal 2015, the Treasury Department said in a report released Friday. That was in line with a Congressional Budget Office estimate on Oct. 7 for a shortfall of $588 billion. As a share of gross domestic product, the shortfall rose to 3.2% from 2.5% a year earlier, the first such increase since 2009, government figures show. “The slowdown in tax collections suggests some cooling in labor market activity,” said Gennadiy Goldberg at TD Securities in New York. He sees the higher budget deficits implying more borrowing needs by Treasury.

Read more …

Accepting that today’s reality is normal, and boom times are not, is at least a first step.

Why the Economy Doesn’t Roar Anymore (WSJ)

The U.S. presidential candidates have made the usual pile of promises, none more predictable than their pledge to make the U.S. economy grow faster. With the economy struggling to expand at 2% a year, they would have us believe that 3%, 4% or even 5% growth is within reach. But of all the promises uttered by Donald Trump and Hillary Clinton over the course of this disheartening campaign, none will be tougher to keep. Whoever sits in the Oval Office next year will swiftly find that faster productivity growth—the key to faster economic growth—isn’t something a president can decree. It might be wiser to accept the truth: The U.S. economy isn’t behaving badly. It is just being ordinary. Historically, boom times are the exception, not the norm.

[..] It is tempting to think that we know how to do better, that there is some secret sauce that governments can ladle out to make economies grow faster than the norm. But despite glib talk about “pro-growth” economic policies, productivity growth is something over which governments have very little control. Rapid productivity growth has occurred in countries with low tax rates but also in nations where tax rates were sky-high. Slashing government regulations has unleashed productivity growth at some times and places but undermined it at others. The claim that freer markets and smaller governments are always better for productivity than a larger, more powerful state is not one that can be verified by the data.

Here is the lesson: What some economists now call “secular stagnation” might better be termed “ordinary performance.” Most of the time, in most economies, incomes increase slowly, and living standards rise bit by bit. The extraordinary experience of the Golden Age left us with the unfortunate legacy of unrealistic expectations about our governments’ ability to deliver jobs, pay raises and steady growth. Ever since the Golden Age vanished amid the gasoline lines of 1973, political leaders in every wealthy country have insisted that the right policies will bring back those heady days. Voters who have been trained to expect that their leaders can deliver something more than ordinary are likely to find reality disappointing.

Read more …

Q: “How low could it get?”
A: “If I told you Mark, you’d hang up”.

Jim Rogers: Sterling Is In Serious Decline, Could Go Below Dollar (Ind.)

International investor Jim Rogers has warned that the value of the pound could go under one dollar within three to four years if Scotland was to leave the UK. His comments came on the day that Nicola Sturgeon said declaring independence could help Scotland escape the uncertainty triggered by UK’s vote to leave the EU. Rogers, who co-founded the Quantum Fund with George Soros, said the UK is facing serious problems. Speaking to the BBC, Rogers said: “If Scotland leaves they are going to take their oil with them and the pound could go down a great deal. It would certainly go down under one US dollar.”

“You’ve got a lot of debt, you’ve got a serious balance of trade problem which shows no signs of being corrected. I don’t see anything to make sterling go up.“ Rogers warned that the City of London is now going to be under serious pressure as Europe is hoping to attract as much business leaving London as possible. His warning came as the pound fell below $1.22 against the dollar in early trading on Friday, pushed down by comments from the President of the European Council Donald Tusk and the French finance minister Michel Sapin. Sterling was still below the $1.22 mark at market closing time.

Read more …

Not bad as an analysis in itself, but the conclusion that America needs “progressive internationalism” is a goal-seeked illusion, and useless. As is wishing for “massive private sector growth”.

What The United States Needs (Varoufakis)

When the world faced Armageddon in the 1940s, in the form of Hitler’s atom bomb program, Washington responded with the Manhattan Project. In effect, they gathered the best scientists, gave them as much money as they needed in fully-appointed facilities, and said to them: “You have two years to deliver the bomb.” Today, we face similar threats to the planet: climate change, rising seas, water shortages, etc. Our cities are less sustainable than ever. Commuters waste more and more of their lives in stationary cars. America needs a new Manhattan Project, one located on hundreds of campuses around the United States, that helps put to work the idle trillions of dollars, our scientists, and the next generation of youngsters (who must be educated with government subsidies to end the student debt scandal).

The joint effort would produce technologies that could lead to a cost-effective green transition. Who will pay for it? Just as the government-funded Internet spurred massive private sector growth – and taxes – so would the technologies that could spring out of a new Manhattan Project. But first the initial investment must come from government. To do this, the United States needs to collect more taxes. It is scandalous, for instance, that the IRS does not exercise its right to tax the earnings of corporations like Apple, Google and Gilead for intellectual property rights developed on American soil, letting them park billions upon billions of dollars in tax havens, including Ireland.

Overall, US federal taxes must rise from the present ultra-low 17% of GDP to at least 25%, with all of the increase coming from the top 1%. This is what logic and justice demands. What stops America from doing this service to itself? It is the 30-year-old bipartisan class war waged against America’s working class and shrinking middle class. Republicans automatically gravitated to tax cuts for the rich. Democrats served Wall Street and exhausted their talents at finding ways to curtail welfare. Both burdened the young with unbearable student debt. The US has reached a point where sensible policies, that the nation needs, are off the table.

Read more …

What’s German for bail-in?

German Government Has Ruled Out Taking Stake in Deutsche Bank (WSJ)

Aides to Angela Merkel have told lawmakers the state wouldn’t take a stake in Deutsche Bank if it were to issue new stock to shore up its thin capital cushion, one person who attended the briefing said. The fact that Berlin appears to have ruled out any aid for the embattled lender as both unnecessary and politically unfeasible could put Deutsche Bank under renewed pressure as it works to stabilize its share price and stay out of the news while negotiating an acceptable settlement in a U.S. misconduct investigation. In a closed-door briefing with a small group of lawmakers last week, Chancellery aides and senior Finance Ministry officials said it was “inconceivable for the state to take a stake in Deutsche Bank,” said one person.

“We have a different bank resolution system than in 2009 and this must apply to us in Germany too,” the government officials said according to this person. This referred to recent legal changes that now force European governments to bail-in creditors—and in some cases depositors—before they shore up a struggling bank with taxpayer money. Deutsche Bank is currently negotiating with the U.S. Justice Department to bring down a settlement in several investigations over the mis-selling of mortgage-backed securities. Last month, The Wall Street Journal reported that U.S. authorities had floated a $14 billion amount as an opening bid, sparking a rout in the bank’s share price. The bank has said it would not pay anywhere near this amount, which would wipe out nearly all of its existing capital.

It is still unclear whether Deutsche Bank will need to increase capital and, if it does, whether it would need the government to pitch in. But the fact that Ms. Merkel’s government has ruled out any aid for the bank will come as a negative surprise to investors, given widespread expectations in the market that the state would offer some form of last-resort assistance given the scale of Deutsche Bank and the shock its failure could inflict on Europe’s financial system.

Read more …

That Greece would have made some official request, that they would have asked Putin himself, and that he would have called up Hollande to tell him that, it’s all not very credible.

Varoufakis, Others Deny Hollande’s Russian Drachma-Printing Claim (Kath.)

Former finance minister Yanis Varoufakis on Friday hastened to dismiss claims made by French President Francois Hollande in a new book that Russian President Vladimir Putin had told him he had been approached by Greek officials a day after a referendum on the country’s third bailout agreement on July 5, 2015, and asked whether Athens could print drachmas in Russia. “I can confirm that during my tenure at the Finance Ministry there were no thoughts of printing a new currency, let alone overtures to third parties at home or abroad,” Varoufakis said in a statement on Friday. Parliament Speaker Nikos Voutsis also denied the existence of such a plan on Friday, dismissing the discussion as being irrelevant, while Alternate Defense Minister Dimitris Vitsas brushed off the claims as “nonsense.”

Speaking on Skai TV on the same day, however, ruling SYRIZA MP Sakis Papadopoulos admitted that the leftist-led government had discussed a possible Greek exit from the eurozone in the days building up to the referendum and just after it. “This information did not come out of the blue,” he said. In “A President Shouldn’t Say That,” based on a series of interviews with Hollande by two journalists from daily Le Monde, the French president is quoted as saying he received a call from Putin, who allegedly told him that “Greece asked us to print drachmas in Russia because they no longer have a printing machine to do so.”

Read more …

How about forgiving each new born the $66,000 (s)he owes, as a first step toward debt restructuring?!

A Child Born Today Comes Into the World With More Debt Than You (BBG)

Each newborn’s share of the national debt today is more than double what it was in the 1990s. In the past 35 years, the national debt on a per capita basis has increased with each U.S. president. Under President Bill Clinton, the debt grew at the slowest pace — with a net increase of 1.4% over his two terms. After reducing the slope of public debt in his first term, he shrunk it in his second. Under current law, U.S. inflation-adjusted debt per person is expected to reach the $66,000 milestone by April 2026, based on Bloomberg calculations of Congressional Budget Office and Census Bureau data. So what would the debt path look like under either a Hillary Clinton or Donald Trump presidency? It would be pretty bleak in either case, according to a report released by the Committee for a Responsible Federal Budget.

And while the committee is non-partisan, they do have a policy bent on fixing the national debt and improving the way the budget is developed. The committee projects debt held by the public to grow by $9 trillion over the next decade under current law. Economic proposals put forth by both presidential candidates would add to the national debt, and Trump’s would add even more than Clinton’s. The report estimates that Clinton’s policies would increase the national debt by $200 billion over the next decade, while Trump’s proposals would add $5.3 trillion.

Read more …

Again, the WSJ diverging from the rest of the mainstream press. “.. the “vast majority” of [FBI] career agents and prosecutors working the case “felt she should be prosecuted” and that giving her a pass was “a top-down decision.”

The Press Buries Hillary Clinton’s Sins (WSJ)

If average voters turned on the TV for five minutes this week, chances are they know that Donald Trump made lewd remarks a decade ago and now stands accused of groping women. But even if average voters had the TV on 24/7, they still probably haven’t heard the news about Hillary Clinton: That the nation now has proof of pretty much everything she has been accused of. It comes from hacked emails dumped by WikiLeaks, documents released under the Freedom of Information Act, and accounts from FBI insiders. The media has almost uniformly ignored the flurry of bombshells, preferring to devote its front pages to the Trump story. So let’s review what amounts to a devastating case against a Clinton presidency.

Start with a June 2015 email to Clinton staffers from Erika Rottenberg, the former general counsel of LinkedIn. Ms. Rottenberg wrote that none of the attorneys in her circle of friends “can understand how it was viewed as ok/secure/appropriate to use a private server for secure documents AND why further Hillary took it upon herself to review them and delete documents.” She added: “It smacks of acting above the law and it smacks of the type of thing I’ve either gotten discovery sanctions for, fired people for, etc.” A few months later, in a September 2015 email, a Clinton confidante fretted that Mrs. Clinton was too bullheaded to acknowledge she’d done wrong. “Everyone wants her to apologize,” wrote Neera Tanden, president of the liberal Center for American Progress.

“And she should. Apologies are like her Achilles’ heel.” Clinton staffers debated how to evade a congressional subpoena of Mrs. Clinton’s emails—three weeks before a technician deleted them. The campaign later employed a focus group to see if it could fool Americans into thinking the email scandal was part of the Benghazi investigation (they are separate) and lay it all off as a Republican plot. A senior FBI official involved with the Clinton investigation told Fox News this week that the “vast majority” of career agents and prosecutors working the case “felt she should be prosecuted” and that giving her a pass was “a top-down decision.”

[..] Voters might not know any of this, because while both presidential candidates have plenty to answer for, the press has focused solely on taking out Mr. Trump. And the press is doing a diligent job of it.

Read more …

Not a bad analysis. At all.

Donald Trump Uncensored: This Is America’s “Moment Of Reckoning” (ZH)

Sometimes, you just have to listen…

“There is nothing that the political establishment wil not do; no lie they will not tell, to hold their prestige and power at your expense… and that’s what’s been happening. The Wasshington establishment – and the financial and media corporations that fund it – exists for one thing only… to protect and enrich itself.”

“For those who control the levers of power in Washington and for the global special interests – they partner with these people that don’t have your good in mind – our campaign represents a true existential threat… like they haven’t seen before. This is not simply another four-year election; this is a crossroads in the history of our civilization that will determine whether or not we, the people, reclaim control over our government.”

Turn off MSNBC, CNBC, CNN, and NBC and listen – away from the spectacle – to some uncomfortable deep state realities…

Read more …

It’s more the failure of the Republican party than of Trump, if you read Matt well.

The Fury and Failure of Donald Trump (Matt Taibbi)

Trump’s early rampage through the Republican field made literary sense. It was classic farce. He was the lewd, unwelcome guest who horrified priggish, decent society, a theme that has mesmerized audiences for centuries, from Vanity Fair to The Government Inspector to (closer to home) Fear and Loathing in Las Vegas. When you let a hands-y, drunken slob loose at an aristocrats’ ball, the satirical power of the story comes from the aristocrats deserving what comes next. And nothing has ever deserved a comeuppance quite like the American presidential electoral process, which had become as exclusive and cut off from the people as a tsarist shooting party The first symptom of a degraded aristocracy is a lack of capable candidates for the throne.

After years of indulgence, ruling families become frail, inbred and isolated, with no one but mystics, impotents and children to put forward as kings. Think of Nikolai Romanov reading fortunes as his troops starved at the front. Weak princes lead to popular uprisings. Which brings us to this year’s Republican field. There wasn’t one capable or inspiring person in the infamous “Clown Car” lineup. All 16 of the non-Trump entrants were dunces, religious zealots, wimps or tyrants, all equally out of touch with voters. Scott Walker was a lipless sadist who in centuries past would have worn a leather jerkin and thrown dogs off the castle walls for recreation. Marco Rubio was the young rake with debts. Jeb Bush was the last offering in a fast-diminishing hereditary line. Ted Cruz was the Zodiac Killer. And so on.

The party spent 50 years preaching rich people bromides like “trickle-down economics” and “picking yourself up by your bootstraps” as solutions to the growing alienation and financial privation of the ordinary voter. In place of jobs, exported overseas by the millions by their financial backers, Republicans glibly offered the flag, Jesus and Willie Horton. In recent years it all went stale. They started to run out of lines to sell the public. Things got so desperate that during the Tea Party phase, some GOP candidates began dabbling in the truth. They told voters that all Washington politicians, including their own leaders, had abandoned them and become whores for special interests. It was a slapstick routine: Throw us bums out!

[..] How Giuliani isn’t Trump’s running mate, no one will ever understand. Theirs is the most passionate television love story since Beavis and Butthead. Every time Trump says something nuts, Giuliani either co-signs it or outdoes him. They will probably spend the years after the election doing prostate-medicine commercials together.

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Adam Curtis has no peers. Available from Sunday at BBCiPlayer (only in Britain?!) Great video excerpt on -some of- Trump’s Atlantic City losses.

Hypernormalisation: Adam Curtis’ Path From Syria To Trump, Via Jane Fonda (G.)

I struggle to think a more perfect union of medium and message than HyperNormalisation, Adam Curtis’s new film for the BBC iPlayer. Though he’s spent the best part of four decades making television, Curtis’s signature blend of hypnotic archive footage, authoritative voiceover and a seemingly inexhaustible appetite for bizarre historical tangents is better suited to the web, a place just as resistant to the narrative handholding of broadcast TV as he is. Safe in the knowledge that his audience now has the ability to pause and rewind at will, Curtis crafts a mammoth labyrinth of political storytelling in the film, his follow-up to last year’s “war on terror” epic Bitter Lake.

Launching on Sunday, his 165-minute opus makes a feature of its sheer unwieldiness, as Curtis veers from social history to conspiracy theory via the odd rambling bar-room anecdote, like a man who’s two-dozen browser tabs into a major Wikipedia binge. He argues that an army of technocrats, complacent radicals and Faustian internet entrepreneurs have conspired to create an unreal world; one whose familiar and often comforting details blind us to its total inauthenticity. Not wishing to undersell the concept, Curtis begins the film with a shot of a torch shining limply into a thicket, so that viewers find themselves literally unable to see the wood for the trees.

From there, HyperNormalisation tracks a course to the present day, allowing Curtis to weigh in on Trump, Putin and Syria. But those expecting a snappy crash course in our chaotic world (“You won’t believe how this veteran BBC film-maker explains the Islamic State! What happens at 156:34 will shock you!”) clearly aren’t familiar with his methods. The film may address some of today’s most critical global issues, but it also allocates space to Jane Fonda, the fall of the Soviet Union and a supercut of pre-9/11 disaster movies. And unlike Curtis’s earlier work for TV, HyperNormalisation refuses to drop the kind of storytelling breadcrumbs that might anchor a viewer in its overarching narrative.

Read more …

Not bad from US general with Greek roots. Who’s also a typical 13 in a dozen Putin basher, unfortunately.

Greece, The Hot Corner (Stavridis)

First and foremost, Greece – perhaps more than any other country – represents the confluence of values in the trans-Atlantic community. These values are fundamental to our societies and cultures: democracy, liberty, freedom of speech, freedom of religion, freedom of education and assembly. They came to us from ancient Greece, passed through the Age of Enlightenment in Western Europe, and washed up on our shores as the principles of the American Revolution. To walk away from a nation that represents the core of those values would be an abiding mistake.

Second, geography continues to matter, and Greece’s position – on the figurative hot corner of Europe – means that without stability there, there will be an open gateway for migrant and refugee populations fleeing the violence in the Levant, the larger Arab world, and northern Africa. As a geographic location, Greece offers the best bases in the NATO Alliance from which to operate in the trouble spots of the Middle East and the Mediterranean. Our military-to-military relations with Greece are exceptionally good and provide us true strategic advantage both unilaterally for the USA and via the NATO Alliance.

A third crucial element that argues for supporting Greece is the excellence and professionalism of the Greek military. It is a relatively large and very technologically advanced force, with fine capabilities at sea, in the air, and via its land army. Greek soldiers, sailors, and airmen have participated in every NATO operation over the past decade: Afghanistan, the Balkans, Libya, and piracy, to name a few. Ensuring Greece’s economic viability will ensure those troops and capabilities are available for future operations as well.

Fourth, Greece has a unique and positive position in the Balkans and elsewhere via its influence in the Orthodox world. Greeks are well established regionally, and have useful connections in most of the Balkan countries (despite some disputes, including, for example over the name of Macedonia). The Greeks also have a relatively good set of relationships with fellow orthodox nation Russia, and are leaders in the broader global Orthodox community, providing a bridge to a variety of nations and communities around the world.

Read more …

Aug 192016
 
 August 19, 2016  Posted by at 2:25 pm Finance Tagged with: , , , , , , , , ,  9 Responses »
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Opening of Golden Gate Bridge May 27 1937

This is an absolute must see, and a joy to watch. Longtime friend of the Automatic Earth Steve Keen was on BBC’s Hardtalk over the weekend. I already really liked the 2.30min clip the BBC released earlier this week. Now Steve himself has posted the entire interview, while the BBC only has an audio podcast (for anyone outside the UK).

You can see that Steve came prepared for some ‘hard’ questioning, and the format fits him very well. Kudo’s! Also, kudo’s to the BBC for having him on, perhaps alternative views on economics have become more palatable in Britain post-Brexit? Interviewer Stephen Sackur sound quite typical of what I see in British media almost 2 months after Brexit: fear and uncertainty and the overall notion that leaving the EU is a very bad thing. Time to move on, perhaps?

I’m not sure Steve would join me in professing the term Beautiful Brexit, but our views on the EU are remarkably alike: it’s a dangerous club (and it will end up imploding no matter what). And that is in turn remarkable unlike the view of our friend Yanis Varoufakis, who is seeking to reform the union.

I went to see Yanis’ presentation of his DiEM25 initiative on the island of Aegina, off Athens, last week, and I found far too much idealism there. There were DiEM25 members from France, Italy and Spain, and they all seemed to agree on one thing: “we need” a pan-European organization -of sorts-. But do we? And why? In my view, they ignore those questions far too easily.

Moreover, even if we choose that path, why the EU? For me, as I said to the people I was with last week, reforming the EU is like reforming the mafia: you don’t want to go there, you want to dissolve it and shut it down. What the EU is today is the result of 60+ years of building an anti-democratic structure that involves and feeds tens of thousands of people, and you’re not going to break that down in any kind of short term.

Though it’s politically ‘not done’, I do think Boris Johnson was on to something when he said during the Brexit campaign: “Napoleon, Hitler, various people tried this out, and it ends tragically. The EU is an attempt to do this by different methods [..] But fundamentally, what is lacking is the eternal problem, which is that there is no underlying loyalty to the idea of Europe. There is no single authority that anybody respects or understands. That is causing this massive democratic void.”

When he said it in May, it was used as campaign fodder by the Remain side, though ironically they never mentioned Napoleon, only Hitler. “How dare you make that comparison!” But Johnson could have mentioned Charlemagne or Charles V, or Julius Ceasar just as well. They all tried to unify Europe, and all with pretty bloody results.

And just like all the idealism I see today in DiEM25, there were plenty idealists at the foundation of the EU, too. But again it’s going awfully wrong. Diversity is what makes Europe beautiful, and trying to rule over it from a centralized place threatens that diversity. European nations have a zillion ways to work together, but a central government and a central bank, plus a one-currency system, that is not going to work.

Still, before I get people proclaiming for instance that Steve Keen is a fan of Boris Johnson, which I’m sure he’s not and neither am I, we’re both fans of Yanis Varoufakis, just not on this issue, but before I make people make that link, I’ll shut up and hand you over to Steve.

But not before reiterating once more that in my view none of this EU talk really matters, because centralization can exist only in times of -economic- growth (or dictatorship), and we’re smack in the middle of a non-growth era kept hidden from us by a veil of gigantesque debt issuance. The future is going to be localization, protectionism, name it what you want; feel free to call it common sense. It will happen regardless of what you call it.