May 062018
 
 May 6, 2018  Posted by at 9:46 am Finance Tagged with: , , , , , , , , , , ,  


Paul Klee In the Houses of Saint Germain 1932

 

The Rising Dollar Will Trigger Next “Systemic Banking Crisis” – Napier (ZH)
Warren Buffett Compares Bitcoin To ‘Rat Poison Squared’ (Ind.)
UK Rates Will Stay Low For A Very Long Time (G.)
Trump White House Accuses China Of ‘Orwellian Nonsense’ (G.)
US Prosecutors Allege Ex-CEO of VW Knew All About Diesel Cheating (BBC)
US Freezes Funding For Syria’s “White Helmets” (CBS)
The U.S Government Can Still Confiscate Gold (GT)
Shock Figures From Top Thinktank Reveal Extent Of NHS Crisis (G.)
Earthquakes, Lava Fissures Could Last For Months On Hawaii (R.)
CO2 Levels In Earth’s Atmosphere ‘Highest In 800,000 Years’ (Ind.)
Facing Extinction, The North Atlantic Right Whale Cannot Adapt. Can We? (G.)

 

 

Emerging markets are already hurting. Watch Turkey.

The Rising Dollar Will Trigger Next “Systemic Banking Crisis” – Napier (ZH)

Fresh off his successful call earlier this year that the US dollar would strengthen in the coming months, macroeconomic strategist and market historian Russell Napier joined MacroVoices host Erik Townsend to discuss why he favors deflation and why he has such a bullish view on the US dollar. Echoing David Tepper’s concerns that the equity highs for the year might already be in, and that a 10-year yield above 3.25% could lead to market chaos, Napier said he sees interest rates rising sharply in the coming months as the dollar strengthens – a phenomenon that will push the US back into deflation.

Napier’s thesis relies on one simple fact: With the Fed and foreign buyers pulling back, who will step into the breach and buy Treasurys? The answer is – unfortunately for anybody who borrows in dollars – nobody. In fact, the Fed is expected to allow $228 billion in Treasury debt to roll off its balance sheet this year. This “net sell” will inevitably lead to higher interest rates in the US, as well as a stronger dollar. And once the 10-year yield reaches the 4% area, signs of stress that could be a lead up to a global “credit crisis” could start to appear.

“We know what the Federal Reserve plans to sell this calendar year, $228 billion. We know what the rise in global foreign reserves is, and about 64% of that will flow into the United States’ assets. Slightly less of that will flow into Treasuries. $228 billion, at the current rate at which foreign reserves are accumulating, we are not going to see foreign central bankers offsetting the sales from the Fed. So that’s a net sell. We don’t know what that net sale will be, but it’s a net sale from central bankers at a time when the Congressional Budget Office forecasts a roughly $1 trillion fiscal deficit. This is the first time in my investment career that savers will have to fund the whole lot. And it’s perfectly normal that real rates of interest have to go higher to attract those savings.

$1 trillion is still a large amount of money. It can come from anywhere in the world. It can come from outside the United States. It can come from inside the United States. But it’s a liquidation of other assets or a rise in the savings rate, which is necessary to fund this. Either of these things is positive for the dollar.”

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“It essentially will not deliver anything other than supposed scarcity..”

Warren Buffett Compares Bitcoin To ‘Rat Poison Squared’ (Ind.)

Mega-investor Warren Buffett still is not buying into the crypto-currency craze, likening Bitcoin to “rat poison squared”. “Cryptocurrencies will come to a bad ending”, Mr Buffett told shareholders at a retreat in Omaha, Nebraska, according to the Associated Press, adding that crypto currencies have no intrinsic value. “It essentially will not deliver anything other than supposed scarcity”, added Mr Buffett, who has earned the nickname the “Oracle of Omaha” for his prescient investment decisions. The Berkshire Hathaway CEO maintained his sceptical stance even as the alternate currency’s soaring value set off a scramble last year.

In an interview with CNBC last year, he said his company did not own any cryptocurrency and was avoiding taking a position in them. “What’s going on definitely will come to a bad ending,” Mr Buffett said at the time. Other prominent economists and investors have echoed those warnings, cautioning that the frenzied speculation around crypto-currencies had the makings of a bubble. Turning to politics, Mr Buffett downplayed the risks of a trade war breaking out as a result of Donald Trump imposing tariffs on steel and aluminum, which sparked Chinese retaliation. He said it was unlikely that the two countries would “dig themselves into” a “real trade war”, suggesting the broad appeal of trade would prevent conflict.

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If the Fed raises rates, can BoE remain behind?

UK Rates Will Stay Low For A Very Long Time (G.)

Bank of England governor Mark Carney has already faced accusations of behaving like the Grand old Duke of York and he will probably do so again should Britain’s central bank opt to keep interest rates on hold. Since he joined the Bank in 2013, he has marched borrowers and savers up the hill with heavy hints about the imminent prospect of a rate rise, only to march them back down again. Last November’s restoration of 2016’s emergency rate cut hardly qualified as a major move, whatever the Bank said about its significance. Until an interview with the BBC during the IMF spring meetings a fortnight ago, it seemed to be a racing cert that the Bank was finally ready to begin the long journey back to 3% and push the base rate from 0.5% to 0.75%.

The markets were guided to expect action at a meeting of the monetary policy committee on Thursday. And it wasn’t just Carney dropping hints. Almost every member of the committee who had previously blocked a rise had gone on the record arguing that the time for a rate increase was near at hand. Speeches by external member Jan Vlieghe constituted the most startling intervention. During 2016 and much of 2017, the former hedge fund economist turned interest-rate setter was one of the most vociferous opponents of a rise. His former brethren in the Square Mile considered him an arch dove who might never vote to increase rates, such was his downbeat view of the economy’s growth potential.

Yet, towards the end of last year, he was one of the most optimistic proponents of the economy’s resilience and the likelihood of a rate rise. Just as before, a moment of central bank exuberance looks like becoming a non-event – which is strange given Vlieghe’s reasoning for backing an increase last year. Then, he said that ultra-low unemployment, steady growth and the probable end to a long period of declining real wages was enough to justify tighter monetary policy.

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Ha!

Trump White House Accuses China Of ‘Orwellian Nonsense’ (G.)

The White House on Saturday condemned Chinese efforts to control how US airlines refer to Taiwan, Hong Kong and Macao as “Orwellian nonsense”. The harshly worded statement came as a high-level trade delegation led by the Treasury secretary Steven Mnuchin returned from negotiations in China. The carriers were told to remove references on their websites or in other material that suggests Taiwan, Hong Kong and Macau are part of countries independent from China, US and airline officials said. Taiwan is China’s most sensitive territorial issue. Beijing considers the self-ruled, democratic island a wayward province. Hong Kong and Macau are former European colonies that are now part of China but run largely autonomously.

A spokesman for Airlines for America, a trade group representing United Airlines, American Airlines and other major carriers, said the group was “continuing to work with US government officials as we determine next steps”. In January, Delta Air Lines, following a demand from China over listing Taiwan and Tibet as countries on its website, apologized for making “an inadvertent error with no business or political intention” and said it had taken steps to resolve the issue. Also in January, China suspended Marriott International’s Chinese website for a week, punishing the world’s biggest hotel chain for listing Tibet, Taiwan, Hong Kong and Macau as separate countries in a customer questionnaire.

On Saturday, White House press secretary Sarah Sanders said in a statement that Donald Trump “ran against political correctness in the United States” and as president would “stand up for Americans resisting efforts by the Chinese Communist Party to impose Chinese political correctness on American companies and citizens”.

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What will Germany do?

US Prosecutors Allege Ex-CEO of VW Knew All About Diesel Cheating (BBC)

It was an “appalling” fraud that went to the very top of the company. That is the striking allegation made by US prosecutors looking into the emissions-cheating scandal at the Volkswagen Group. The indictment unsealed on Thursday claims that former CEO Martin Winterkorn was not only fully briefed about what his engineers were up to, he also authorised a continuing cover-up. These allegations have yet to be tested in a court of law. But if true, they paint a picture of extraordinary executive wrongdoing at one of the titans of German industry. Dr Winterkorn himself is unlikely ever to face trial in the US. But he remains under investigation in Germany on suspicion of deceiving investors.

The Volkswagen scandal erupted in September 2015, when the company admitted that nearly 600,000 cars sold in the US were fitted with “defeat devices” designed to circumvent emissions tests. Shortly afterwards the then head of its US operations, Michael Horn, told a congressional committee that the deception was the work of “a couple of software engineers”. We know that was far from the truth. Volkswagen has already admitted as much in an agreed “statement of facts” published last year as part of a settlement with the US Department of Justice. That document set out how Volkswagen engineers struggled to make a diesel engine which would both perform well and be capable of meeting stringent US emissions standards.

It explained how instead they designed a system to switch on emissions controls when the cars were being tested, and turn them off during normal driving. It also described how managers repeatedly sanctioned the use of this system despite objections from some employees, and encouraged engineers to hide what they were up to. The indictment against Dr Winterkorn goes considerably further – suggesting that the CEO himself was made well aware of what the engineers were doing and authorised a continued cover-up. It claims that in early 2014, engineers heard about a study commissioned by the International Council on Clean Transport, which showed that VW diesels were producing far higher emissions on the road than in official lab tests.

It says that senior managers were informed, and warned that the study might result in VW’s deception being uncovered. A memorandum was written for Dr Winterkorn explaining that the company would be unable to explain the test results to the authorities.

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No, CBS, you can’t sing the praises of these people without looking behind them.

US Freezes Funding For Syria’s “White Helmets” (CBS)

Less than two months ago the State Department hosted members of the White Helmets at Foggy Bottom. At the time, the humanitarian group was showered with praise for saving lives in Syria. “Our meetings in March were very positive. There were even remarks from senior officials about long-term commitments even into 2020. There were no suggestions whatsoever about stopping support,” Raed Saleh, the group’s leader, told CBS News. Now they are not getting any U.S funding as the State Department says the support is “under active review.” The U.S had accounted for about a third of the group’s overall funding. “This is a very worrisome development,” said an official from the White Helmets. “Ultimately, this will negatively impact the humanitarian workers ability to save lives.”

The White Helmets, formally known as the Syrian Civil Defense, are a group of 3,000 volunteer rescuers that have saved thousands of lives since the Syrian civil war began in 2011. A makeshift 911, they have run into the collapsing buildings to pull children, men and women out of danger’s way. They say they have saved more than 70,000 lives. Having not received U.S. funding in recent weeks, White Helmets are questioning what this means for the future. They have received no formal declaration from the U.S. government that the monetary assistance has come to a full halt, but the group’s people on the ground in Syria report that their funds have been cut off.

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“..gold is actually what kept the Federal Reserve solvent in 2008.”

The U.S Government Can Still Confiscate Gold (GT)

By the 1930s, the US government was facing its most severe financial crisis, and it needed gold (something of value), to stimulate the economy that was running on the fumes of fiat currency. So, it took people’s gold. It was as simple as that. Non-compliance was threatened with severe punishment. We may be facing another financial crisis, and it might be best to avoid the role of fugitive “gold hoarder.” At this point, it doesn’t make sense for the government to confiscate private gold, as a cashless society will indirectly control peoples finances. Why would the government seize gold? In 1933, under the 1913 Federal Reserve Act, the dollar had to be backed by 40 percent gold.

This would give the Federal Reserve room to print new money when needed. What’s a government to do when it needs to print money, but doesn’t have the gold reserves needed to back it up? It passes an Executive Order making gold ownership illegal but buys up the illegal gold itself. That’s what Roosevelt did. When the government continued to print more money, it declared ownership of silver illegal a year later. Soon after the government confiscated all gold, the price rose by 40 percent. As if by magic, the US government had a lot more funds than it had before. What happens is that the government buys your gold with cash, then devalues the cash and raises the value of the gold. It wins, you lose.

While the government attributes artificial value to money, it can do and does the same to the value of gold. The government currently holds 261 million ounces of gold in reserve at marked on its book at $42.22 per ounce. That’s a total value of $11 billion. Or is it? The fair market value of gold today is around $1,300 per ounce. As Jim Rickards pointed out in the New Case For Gold, gold is actually what kept the Federal Reserve solvent in 2008.

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Third world.

Shock Figures From Top Thinktank Reveal Extent Of NHS Crisis (G.)

The NHS has among the lowest per capita numbers of doctors, nurses and hospital beds in the western world, a new study of international health spending has revealed. The stark findings come from a new King’s Fund analysis of health data from 21 countries, collected by the Organisation for Economic Cooperation and Development. They reveal that only Poland has fewer doctors and nurses than the UK, while only Canada, Denmark and Sweden have fewer hospital beds, and that Britain also falls short when it comes to scanners. “If the 21 countries were a football league then the UK would be in the relegation zone in terms of the resources we put into our healthcare system, as measured by staff, equipment and beds in which to care for patients,” said Siva Anandaciva, the King’s Fund’s chief analyst.

“If you look across all these indicators – beds, staffing, scanners – the UK is consistently below the average in the resources we give the NHS relative to countries such as France and Germany. Overall, the NHS does not have the level of resources it needs to do the job we all expect it to do, given our ageing and growing population, and the OECD data confirms that,” he added. The report concludes that, given the dramatic differences between Britain and other countries: “A general picture emerges that suggests the NHS is under-resourced.”

The thinktank’s research found that the UK has the third-lowest number of doctors among the 21 nations, with just 2.8 per 1,000 people, barely half the number in Austria, which has 5.1 doctors per 1,000 of population. Similarly, the UK has the sixth-smallest number of nurses for its population: just 7.9 per 1,000 people – way behind Switzerland, which has the most: 18 nurses, more than twice as many. With hospital beds, the UK has just 2.6 for every 1,000 people, just over a third of the number in Germany, which has the most – 8.1 beds – and which places the UK 18th overall out of the 21 countries which the OECD gathered figures for. The number of hospital beds in England has halved over the last 30 years and now stands at about 100,000 ..

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How wrong can this go?

Earthquakes, Lava Fissures Could Last For Months On Hawaii (R.)

More homes on Hawaii’s Big Island were destroyed on Saturday as eruptions linked to the Kilauea volcano increased, spewing lava into residential areas and forcing nearly 2,000 people to evacuate, officials said. Scientists forecast more eruptions and more earthquakes, perhaps for months to come, after the southeast corner of the island was rocked by a 6.9 tremor on Friday, the strongest on the island since 1975. The U.S. Geological Survey (USGS) said on Saturday that several new lava fissures had opened in the Leilani Estates subdivision of Puna District, about a dozen miles (19 km) from the volcano. Not all the fissures were still active, it added.

The Hawaiian Volcano Observatory said at midday local time on Saturday that “eruptive activity is increasing and is expected to continue.” Janet Babb, a spokeswoman for the observatory, said by telephone that the eruptions could carry on “for weeks or months.” Babb said the activity since Thursday is beginning to show similarities to another event in the area in 1955 that lasted for 88 days, when far fewer people lived near the volcano.

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Rebalancing carbon: there’s too much inside the planet.

CO2 Levels In Earth’s Atmosphere ‘Highest In 800,000 Years’ (Ind.)

The concentration of carbon dioxide in the atmosphere has reached its highest level in at least 800,000 years, according to scientists. In April, CO2 concentration in the atmosphere exceeded an average of 410 parts per million (ppm) across the entire month, according to readings from the Mauna Loa Observatory in Hawaii. This is the first time in the history of the observatory’s readings that a monthly average has exceeded that level. The Scripps Institution of Oceanography said that before the Industrial Revolution, carbon dioxide levels did not exceed 300ppm in the last 800,000 years.

The Keeling Curve, which plots the concentration of carbon dioxide in the atmosphere, shows a steady rise in CO2 levels in the atmosphere for decades. Scientists have warned levels of carbon dioxide are crossing a threshold which could lead to global warming beyond the “safe” level identified by the international community, fuelling a rise in sea levels. The latest reading shows a 30 per cent increase in carbon dioxide concentration in the global atmosphere since recording began in 1958. The first measurement was recorded as 315ppm. Carbon dioxide concentration exceeded 400ppm for the first time in 2013. Prior to 1800, atmospheric CO2 averaged about 280ppm, which demonstrates the effect of manmade emissions since the industrial revolution.

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“By 1935, with as few as 60 breeding individuals left, the situation was so dire that the right whale became the first cetacean to be protected by law.”

Facing Extinction, The North Atlantic Right Whale Cannot Adapt. Can We? (G.)

As if to confound everyone, this past week Dr Charles “Stormy” Mayo and his team from the Provincetown Center for Coastal Studies reported seeing up to 150 right whales in Cape Cod Bay. Dr Mayo – who has been studying these animals for 40 years and has a scientist’s aversion to exaggeration – is stunned. “It is amazing for such a rare and utterly odd creature,” he tells me. All the more amazing since he knows this great gathering could be a final flourish. By 2040, the North Atlantic right whale may be gone. He hesitates, then uses the e-word: extinction. How can such a huge mammal simply disappear within reach of the richest and most powerful nation on earth?

Shifting food sources – due to climate change – are leading whales to areas where maritime industries are unused to them. In the past 12 months, 18 rights have died after ship strikes or entanglement in fishing gear. With as few as 430 animals left, 100 of them breeding females in a reduced gene pool, the species is unsustainable. The right whale may be the strangest beast in the ocean. Vast and rotund, its gigantic mouth is fringed with two-metre strips of baleen, once “harvested” by humans to furnish Venetian blinds and corset stays but used by the whale to strain its diet of rice-sized zooplankton from the sea.

These bizarre animals are not easily known or imagined. They live far longer than us – like its Arctic cousin, the bowhead, the right whale may reach 200, perhaps more. Individuals could be older than constitutional America. They exist beyond us in time, dimension and experience. If we lose the right whale, we lose part of our planet’s biological history. [..] By 1935, with as few as 60 breeding individuals left, the situation was so dire that the right whale became the first cetacean to be protected by law. But by the start of this century, the numbers seemed to recover. Shipping lanes were shifted and fishing industries took on board the whale’s protected status. It even got its own air exclusion zone. “Like a Hollywood star,” as John Waters quipped to me.


Eubalaena glacialis with calf

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Mar 302018
 
 March 30, 2018  Posted by at 9:46 am Finance Tagged with: , , , , , , , , , , ,  


James McNeill Whistler Nocturne in Blue and Silver, The Lagoon, Venice 1880

 

The Donald’s Blind Squirrel Nails An Acorn (David Stockman)
Russia To Expel 150 Diplomats And Close US Consulate In St Petersburg (Ind.)
Yulia Skripal No Longer In Critical Condition (G.)
UK Household Spending Hit Six-Year Low In 2017 Amid Brexit Inflation (PA)
Bitcoin Drops Below $7,000, Down 50% in 2018 (BBG)
Tesla Recalls 123,000 Early Model S Cars (BBG)
Volkswagen Stores 300,000 Diesels Across US (R.)
Trump Says US Withdrawing From Syria ‘Very Soon’ (AFP)
Sessions Rejects Calls for Second Special Counsel, Appoints Investigator (BBG)

 

 

“Amazon is a monstrous predator enabled by the state..” Are we seeing the Big Tech Backlash of 2018?

The Donald’s Blind Squirrel Nails An Acorn (David Stockman)

It is said that even a blind squirrel occasionally finds an acorn, and so it goes with the Donald. Banging on his Twitter keyboard in the morning darkness, he drilled Jeff Bezos a new one – or at least that’s what most people would call having their net worth lightened by about $2 billion: “I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!” You can’t get more accurate than that. Amazon is a monstrous predator enabled by the state, but Amazon’s outrageous postal subsidy – a $1.46 gift card from the USPS stabled on each box – isn’t the half of it.

The real crime here is that Amazon has been exempted from making a profit, and the culprit is the Federal Reserve’s malignant regime of Bubble Finance. The latter has destroyed financial discipline entirely and turned the stock market into the greatest den of speculation in human history. That’s why Bezos can kill established businesses with impunity. The casino allows him to run a pernicious business model based on “price to destroy”, rather than price for profit and a return on capital. Needless to say, under a regime of sound money and honest capital markets Amazon would be a far more benign economic creature. That’s because no real investors would value AMZN’s money-loosing e-Commerce business at $540 billion – nor even a small fraction of that after 25-years of profitless growth.

[..] At the end of the mini-correction in February 2016 Amazon’s market cap was $230 billion, but just 25 months later it was worth $775 billion at its March 12 peak. That staggering $545 billion gain in market cap had absolutely nothing to do with financial performance, of course. Operating free cash flow was a meager $6.4 billion during 2017 and had been $6.6 billion two years earlier. That is to say, AMZN was valued at a frisky 35X free cash flow in early 2016 and a completely insane 121X a few weeks ago. The fact that Bezos’ net worth exploded by $100 billion during that same 25 month interval perhaps explains why even the Donald found his acorn.

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By all means, let’s stop talking.

Russia To Expel 150 Diplomats And Close US Consulate In St Petersburg (Ind.)

Russia has said it will expel around 150 diplomats and close the US consulate in St Petersburg in retaliation to the coordinated international response over the poisoning of a former Russian spy in Britain. More than two dozen countries, including the US and many EU nations – as well as Nato – have ordered more than 150 Russian diplomats out this week in a show of solidarity with Britain over the poisoning of Sergei Skripal and his daughter Yulia in Salisbury earlier this month. The UK has accused Russia of responsibility for the attack, during which it claims the Skripals were exposed to a class of nerve agent called novichok. Russia has denied being involved and its foreign minister Sergei Lavrov made clear that all expulsions will be responded to in kind.

Mr Lavrov said that US Ambassador Jon Huntsman was summoned to the Foreign Ministry where he was given notice that Russia is replicating the US decision to order 60 Russian diplomats out. Mr Lavrov added that Moscow will also retaliate to the decision by Washington to shut the Russian consulate in Seattle by closing the US consulate in St Petersburg. The tit-for-tat expulsions come as no surprise. But the shuttering of the American consulate in Russia’s second city is an escalation. The Seattle consulate is Russia’s smallest diplomatic outpost in the US. Fifty-eight of the US officials are based in Moscow, with another two general consulate officials in the eastern city of Yekateringburg. They have been declared persona non grata and have been told to leave Russia by 5 April.

The US Consulate in St Petersburg has two days to suspend operations, according to Russian media. During the briefing Mr Lavrov accused Britain of “forcing everyone to follow an anti-Russian course” and that they were “making mockery of international law”. Russia has called for a meeting with the executive council of the Organisation for the Prohibition of Chemical Weapons (OPCW) to ask questions to “establish the truth”, he said. “The measures would be reciprocal … They include expulsion of the equivalent number of diplomats and they include our decision to withdraw our agreement to allow the United States’ general consulate to operate in St Petersburg,” Mr Lavrov said.

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How does one recover from being infected with one of the most lethal nerve agents ever?

The photo, dated 3 days after the ‘attack’, shows a policeman standing by the front door to the Skripal home, the very door through which father and daughter were allegedly poisoned. He wears no protection.

Yulia Skripal No Longer In Critical Condition (G.)

The condition of Yulia Skripal, who was poisoned with a nerve agent in Salisbury along with her father, is improving rapidly, doctors have said. Salisbury NHS foundation trust said on Thursday the 33-year-old was no longer in a critical condition, describing her medical state as stable. Christine Blanshard, the medical director for Salisbury district hospital, said: “I’m pleased to be able to report an improvement in the condition of Yulia Skripal. She has responded well to treatment but continues to receive expert clinical care 24 hours a day. “I want to take this opportunity to once again thank the staff of Salisbury district hospital for delivering such high-quality care to these patients over the last few weeks. I am very proud both of our frontline staff and all those who support them.”

Her father’s condition was described by the hospital as still critical but stable. Sergei Skripal, 66, a former Russian double agent, is believed to have been the main target of the attack. The update came as Russia said it was taking tit-for-tat measures against all the nations that have expelled Russian diplomats over attack. In a separate development, Scotland Yard said police had placed a cordon around a children’s play area near Sergei Skripal’s home as a precautionary measure. “Officers investigating the attempted murders of Sergei Skripal and his daughter Yulia Skripal are continuing to focus their enquiries around the Skripals’ home address,” a police statement revealed.

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Both spending and saving are hit.

UK Household Spending Hit Six-Year Low In 2017 Amid Brexit Inflation (PA)

Household spending slowed to its lowest annual growth for six years in 2017 amid Brexit-fuelled inflation, with borrowing surging and family savings slumping to a record low. Figures from the Office for National Statistics (ONS) confirmed economic growth slowed to 0.4% in the final three months of last year, down from 0.5% in the third quarter as weaker household spending took its toll. The ONS revised upgrowth for the year as a whole to 1.8% from the previous estimate of 1.7%, but this was still the lowest since 2012. It leaves the UK with the lowest growth among the G7 economies at the end of 2017 as it enters the final year of its membership of the European Union.

The quarterly national accounts data showed Britons turned to debt to support spending in the face of last year’s surging inflation, which outstripped paltry wage growth. The proportion of total income saved by households dropped to 4.9% in 2017, its lowest level since records began in 1963, the ONS said. Overall household spending fell last year to 1.7%, which was the lowest annual growth since 2011, according to the ONS. But there was some cheer in Thursday’s latest official data dump as figures revealed the UK’s current account deficit with the rest of the world narrowed to £82.9bn or 4.1% of GDP in 2017 – the smallest gap since 2011. This came as a growing world economy boosted the earnings on foreign investments.

In the fourth quarter, the current account deficit shrank by more than expected to £18.4bn, or 3.6% of GDP, down from £19.2bn in the previous three months. Net trade – exports less imports – made its largest contribution to full-year growth since 2011, the ONS reported.

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Shaky?!

Bitcoin Drops Below $7,000, Down 50% in 2018 (BBG)

Bitcoin’s miserable quarter isn’t over yet. The world’s biggest cryptocurrency by market value dropped below the $7,000 mark Friday morning in Asia, the first time it’s breached that level since early February, according to data compiled by Bloomberg. It fell as low as $6,912 before rebounding, trading at $7,094 as of 7:50 a.m in Hong Kong. The moves took the token’s losses in 2018 to a whopping 50%, and other digital assets, including rivals Ripple and Litecoin, slumped more. In addition, regulatory pressure is mounting in the cryptocurrency space, while major social media platforms are distancing themselves from the industry. Reddit, a community hub popular in the crypto community, no longer accepts payments made in Bitcoin, while Twitter confirmed Monday that it’s banning advertisements for initial coin offerings, joining Facebook and Google.

Looming over the market are sales of Bitcoin held by the trustee of Mt Gox, the now-defunct Japanese exchange. The trustee sold about $400 million in Bitcoin and Bitcoin Cash in the last few months to reimburse the exchange’s creditors, according to his recent report. The trustee had said that he will sell more of the cryptocurrency he holds. As of early March, he was sitting on more than $1 billion. “Bitcoin is under selling pressure again and chances of its recovery are looking slim,” Naeem Aslam at TF Global Markets said in a note. It has “slid significantly, since the tech giants’ ban on ICOs,” he noted. The slump this year is its biggest quarterly decline since 2011. Keep in mind that Bitcoin rallied 1,400% last year.

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“Classic two hours after the close before a three-day weekend news release. Unbelievable (almost)!”

Tesla Recalls 123,000 Early Model S Cars (BBG)

Tesla is recalling all Model S cars built before April 2016 to retrofit a power-steering component as the company caps its worst one-month performance in the stock market since December 2010. The issue, which the carmaker said has not led to any accidents or injuries, impacts only the flagship Model S sedan, not the Model X sport utility vehicle or more affordable Model 3. The recall affects roughly 123,000 vehicles globally. The carmaker said it’s performing the voluntary recall after observing “excessive corrosion in the power steering bolts, though only in very cold climates, particularly those that frequently use calcium or magnesium road salts,” according to an email sent to impacted customers Thursday.

“Nonetheless, Tesla plans to replace all early Model S power steering bolts in all climates worldwide to account for the possibility that the vehicle may later be used in a highly corrosive environment,” the electric-car maker said in the customer email. Tesla has been routed this month as analysts and investors have questioned the company’s ability to mass-manufacture its new Model 3 sedan. Bottlenecks at Tesla’s battery factory and assembly plant have undermined that effort, limiting the return on that investment and arousing concern that the company may need to raise more cash. Moody’s Investors Service also downgraded Tesla’s credit rating further into junk on Tuesday.

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Maybe they can figure something out with Musk?

Volkswagen Stores 300,000 Diesels Across US (R.)

Volkswagen has taken parking lots to a whole new level in the US – and will not be emptying them soon. Volkswagen AG has paid more than $7.4bn to buy back about 350,000 US diesel vehicles, a recent court filing shows. The German automaker has been storing hundreds of thousands of vehicles around the US for months. Volkswagen has 37 secure storage facilities around the US housing nearly 300,000 vehicles, the filing from the program’s independent administrator said. The lots include a shuttered suburban Detroit football stadium, a former Minnesota paper mill and a desert site near Victorville, California.

VW spokeswoman Jeannine Ginivan said in a statement the storage facility in Victorville, California, is one of many “to ensure the responsible storage of vehicles that are bought back” under the terms of the Volkswagen diesel settlements. “These vehicles are being stored on an interim basis and routinely maintained in a manner to ensure their long-term operability and quality, so that they may be returned to commerce or exported once US regulators approve appropriate emissions modifications,” she said. In total VW has agreed to spend more than $25bn in the US for claims from owners, environmental regulators, states and dealers and offered to buy back about 500,000 polluting vehicles.

The buybacks will continue through the end of 2019. The court filing said through 31 December Volkswagen bought back 335,000 diesel vehicles, resold 13,000 and destroyed about 28,000. As of the end of last year VW was storing 294,000 vehicles around the country. VW must buy back or fix 85% of the vehicles involved by June 2019 or face higher payments for emissions.

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A populist address? What does that mean?

Trump Says US Withdrawing From Syria ‘Very Soon’ (AFP)

US President Donald Trump insisted Thursday that US forces would pull out of Syria “very soon” and lamented what he said was Washington’s waste of $7 trillion in Middle East wars. In a populist address to industrial workers in Ohio, Trump said US forces were close to securing all of the territory that the Islamic State jihadist group once claimed. “We’ll be coming out of Syria, like, very soon. Let the other people take care of it now,” he promised, to applause. Trump did not say who the others were who might take care of Syria, but Russia and Iran have sizable forces in the country to support President Bashar al-Assad’s regime. “Very soon – very soon we’re coming out. We’re going to have 100% of the caliphate, as they call it – sometimes referred to as ‘land’ – taking it all back quickly, quickly,” he said.

“But we’re going to be coming out of there real soon. Going to get back to our country, where we belong, where we want to be.” State Department spokeswoman Heather Nauert was later asked at a briefing if she was aware of any decision for the US to pull out of Syria. She responded, “I am not, no. No.” The United States has more than 2,000 military personnel in eastern Syria, working with local militia groups to defeat the Islamic State group while trying to keep out of Syria’s broader civil war. Trump’s eagerness to quit the conflict flies in the face of a new US Syria strategy announced in January by then secretary of state Rex Tillerson – who has since been sacked. Tillerson argued that US forces must remain engaged in Syria to prevent IS and Al-Qaeda from returning and to deny Iran a chance “to further strengthen its position in Syria.”

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This is not over.

Sessions Rejects Calls for Second Special Counsel, Appoints Investigator (BBG)

Attorney General Jeff Sessions rejected calls from Republican lawmakers for a second special counsel to look into potential misconduct by the Justice Department and the FBI in past investigations of Hillary Clinton, saying that the issues were already under scrutiny. In a letter to three Republican committee chairmen, Sessions disclosed Thursday that he has assigned John Huber, a U.S. attorney based in Utah, to conduct an internal probe into complaints of FBI bias and wrongdoing. “I am confident that Mr. Huber’s review will include a full, complete and objective evaluation of these matters in a manner that is consistent with the law and facts,” Sessions wrote to Senate Judiciary Chairman Chuck Grassley, House Judiciary Chairman Bob Goodlatte, and House Oversight Chairman Trey Gowdy.

Sessions said he would consider the recommendations Huber might make, including “whether any matters merit the appointment of a special counsel” later. Huber has been the U.S. attorney in Utah since June 2015 and was twice confirmed unanimously by the Senate. He served for almost two years as an appointee of Democratic President Barack Obama, and was appointed by Sessions to continue his work in March 2017.| Gowdy and Goodlatte, in a joint statement released Thursday night, said that “while we continue to believe the appointment of a second special counsel is necessary, this is a step in the right direction.”

[..] Sessions reminded the chairmen in his letter that the department’s inspector general also is looking into some of the same matters. The attorney general’s letter came a day after that internal watchdog, Michael Horowitz, confirmed that he’s now examining the FBI’s actions early in its investigation into Russian campaign interference, including how it obtained a warrant to monitor Carter Page, a foreign policy adviser to the Trump campaign.

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Mar 212018
 
 March 21, 2018  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , , , ,  


Dirk de Herder Amstel Bridge, Amsterdam1946

 

Sign of Pending Recession? Total American Net Worth Ratio At New High (CNBC)
EU To Unveil Digital Tax Targeting Facebook, Google (AFP)
UK Tells Facebook’s Auditors Visiting Cambridge Analytica To Stand Down (CNBC)
Whatsapp Co-Founder Who Made Billions From Facebook Now Says To Delete It (MW)
The NSA Worked To “Track Down” Bitcoin Users – Snowden Documents (IC)
Bitcoin Bust Is Like Nasdaq Crash, But Faster (BBG)
German Prosecutors Launch New Enquiry Into VW Over Market Manipulation (R.)
Capitalism And The Veil Of Ignorance (Claire Connelly)
Libya: The True Face Of ‘Humanitarian Intervention’ (RT)
France’s Bird Population Collapses As Pesticides Kill Off Insects (AFP)

 

 

Net worth my ass.

Sign of Pending Recession? Total American Net Worth Ratio At New High (CNBC)

Nine years into the second-longest bull market run in history, the level of total net worth compared with income has reached a record, according to Joe LaVorgna, chief economist for the Americas at Natixis, citing Federal Reserve data. Since the Great Recession ended in June 2009, the disparity between net worth and income has soared, attributable in large part to the growth in financial assets, which have increased by $33.9 trillion, compared with $10.4 trillion in nonfinancial assets. Essentially, that means that American wallets have grown fatter from the accumulation of financial assets like stocks and mutual fund holdings than they have from gains in their homes and other physical assets like autos.

In all, total net worth of $98.75 trillion is now 6.79 times the $14.55 trillion in disposable income for households as of the fourth quarter, according to Fed financial accounts figures. That’s up from 6.71 times in the third quarter. The previous tops came in the first quarter of 2006, with 6.51, and the first quarter of 2000, at 6.12. Those two levels cast ominous signals over the U.S. economy. “A recession started four quarters from the peak of the former and eight quarters from the zenith in the latter,” LaVorgna said Tuesday in a note to clients. As a practical matter, the level should serve as a yellow flag for Fed officials, who are on a course of hiking rates gradually but steadily.

[..] The Fed is an important part of the equation in that it helped boost financial assets through historically low interest rates and an aggressive policy of monthly bond buying called quantitative easing. This is the first meeting for new Chairman Jerome Powell, who must navigate the Fed through rate increases aimed at controlling but not stopping growth. After years of mostly steady gains since the bull market run began in 2009, volatility has crept in 2018 and raised the specter that forward gains will be tougher to achieve. “Powell needs to be mindful of the current backdrop and not signal aggressive rate hikes to come,” LaVorgna said. “Otherwise, stock prices and the economy are in trouble.”

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Brussels and Facebook: they’re going to come for part of the loot of selling your data.

EU To Unveil Digital Tax Targeting Facebook, Google (AFP)

The EU will unveil proposals for a digital tax on US tech giants on Wednesday, bringing yet more turmoil to Facebook after revelations over misused data of 50 million users shocked the world. The special tax is the latest measure by the 28-nation European Union to rein in Silicon Valley giants and could further embitter the bad-tempered trade row pitting the EU against US President Donald Trump. EU Economics Affairs Commissioner Pierre Moscovici will present proposals aimed at recovering billions of euros from mainly US multinationals that shift earnings around Europe to pay lower tax rates.

The transatlantic blow has been championed by French President Emmanuel Macron and will be discussed over dinner at an EU leaders summit on Thursday. “This will be given top priority as tax file. There is a lot of political momentum on this issue,” an EU official said ahead of the announcement. The unprecedented tech tax follows major anti-trust decisions by the EU that have cost Apple and Google billions and also caught out Amazon. The commission’s tax, expected to be about 3% of sales, would affect revenue from digital advertising, paid subscriptions and the selling of personal data.

The EU tax plan will target mainly US companies with worldwide annual turnover above 750 million euros ($924 million), such as Facebook, Google, Twitter, Airbnb and Uber. Spared are smaller European start-ups that struggle to compete with them. Companies like Netflix, which depend on subscriptions, will also avoid the chop. Brussels is seeking to choke tax-avoidance strategies used by the tech giants that, although legal, deprive EU governments of billions of euros in revenue.

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Got to admit, hard to say who I’d trust least with this, Facebook or the UK deep state.

UK Tells Facebook’s Auditors Visiting Cambridge Analytica To Stand Down (CNBC)

The U.K.’s data protection watchdog ordered Facebook’s auditors to back down from a probe into a political analytics company accused of wrongly harvesting the data of millions of its users. The tech giant was planning to investigate Cambridge Analytica’s servers and systems, but the Information Commissioner’s Office told Facebook on Monday that it should withdraw from the research firm’s London premises. The ICO said it would seek to gain its own warrant to access the company’s computers and servers.

Facebook had said Monday that it was pursuing a forensic audit of Cambridge Analytica and had hired digital forensics firm Stroz Friedberg to determine whether the data analytics company still possessed Facebook user data. But in an updated statement later that day, Facebook said: “Independent forensic auditors from Stroz Friedberg were on site at Cambridge Analytica’s London office this evening. At the request of the U.K. Information Commissioner’s Office, which has announced it is pursuing a warrant to conduct its own on-site investigation, the Stroz Friedberg auditors stood down.”

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Sold his shares first?!

Whatsapp Co-Founder Who Made Billions From Facebook Now Says To Delete It (MW)

WhatsApp co-founder Brian Acton left Facebook last year. Now he’s saying others should do the same. In a tweet Tuesday, Action said: “It is time. #deletefacebook,” referencing the online movement that is gaining steam in the wake of revelations that the personal data of 50 million Facebook users was used without their permission by political data company Cambridge Analytica during the 2016 presidential campaign. He did not immediately expand on his comment. While his Facebook profile was still active for hours after his tweet, it appeared deactivated later Tuesday night.

Acton and fellow co-founder Jan Koum sold the messaging service WhatsApp to Facebook in 2014 for $22 billion. Acton received about $3 billion in the deal, and has a net worth of about $5.5 billion, according to Forbes. After staying on for three years, Acton quit Facebook in September, and is now a major backer of rival messaging service Signal, which boasts encryption to make its messages resistent to government surveillance. In February, he joined the newly launched nonprofit Signal Foundation as executive chairman, and invested $50 million into the app.

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Now connect this to the Facebook stories.

The NSA Worked To “Track Down” Bitcoin Users – Snowden Documents (IC)

Classified documents provided by whistleblower Edward Snowden show that the National Security Agency indeed worked urgently to target bitcoin users around the world — and wielded at least one mysterious source of information to “help track down senders and receivers of Bitcoins,” according to a top-secret passage in an internal NSA report dating to March 2013. The data source appears to have leveraged the NSA’s ability to harvest and analyze raw, global internet traffic while also exploiting an unnamed software program that purported to offer anonymity to users, according to other documents. Although the agency was interested in surveilling some competing cryptocurrencies, “Bitcoin is #1 priority,” a March 15, 2013 internal NSA report stated.

The documents indicate that “tracking down” bitcoin users went well beyond closely examining bitcoin’s public transaction ledger, known as the Blockchain, where users are typically referred to through anonymous identifiers; the tracking may also have involved gathering intimate details of these users’ computers. The NSA collected some bitcoin users’ password information, internet activity, and a type of unique device identification number known as a MAC address, a March 29, 2013 NSA memo suggested. In the same document, analysts also discussed tracking internet users’ internet addresses, network ports, and timestamps to identify “BITCOIN Targets.”

The agency appears to have wanted even more data: The March 29 memo raised the question of whether the data source validated its users, and suggested that the agency retained bitcoin information in a file named “Provider user full.csv.” It also suggested powerful search capabilities against bitcoin targets, hinting that the NSA may have been using its XKeyScore searching system, where the bitcoin information and wide range of other NSA data was cataloged, to enhance its information on bitcoin users. An NSA reference document indicated that the data source provided “user data such as billing information and Internet Protocol addresses.” With this sort of information in hand, putting a name to a given bitcoin user would be easy.

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One took 519 days, the other 35 days. That’s an actual compariosn?

Bitcoin Bust Is Like Nasdaq Crash, But Faster (BBG)

Bitcoin has long been compared to the dot-com bubble. Morgan Stanley says its recent moves are similar to the tech boom and bust, but on steroids. Bitcoin’s recent moves almost mirror that of the Nasdaq Composite Index in the lead-up to and aftermath of 2000, but at 15 times the speed, Morgan Stanley said. The Nasdaq climbed 278% in 519 days in the rally leading up to its high in March 2000, while Bitcoin soared 248% in 35 days in the last leg of the rally to its $19,511 high in December, according to the report. There have been three waves of weakness since Bitcoin peaked in December, with prices falling between 45% and 50% each time, before rebounding.

The Nasdaq’s bear market from 2000 had five price declines, averaging a similar 44%. The bear market also looks similar on the way up. There have been two Bitcoin bear market rallies of 43% on average, while the Nasdaq bear market rallies averaged 40%. Bear markets are nothing new for the first decentralized digital currency. Since the coin’s creation in 2009 there have been four bear markets with price declines ranging from 28% to 92%. From the December peak to the most recent low on February, Bitcoin’s price fell by 70%, “nothing out of the ordinary,” Morgan Stanley said.

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C’mon, close them down already. This movie’s getting boring.

German Prosecutors Launch New Enquiry Into VW Over Market Manipulation (R.)

German prosecutors said on Tuesday they had searched Volkswagen’s headquarters as part of a new investigation into whether the carmaker had overstated the fuel efficiency of more vehicles than previously disclosed. The news is the latest setback in the German company’s efforts to move on from a 2015 scandal in which it admitted to cheating U.S. emissions tests on diesel engines. Prosecutors from the city of Braunschweig searched 13 offices at Volkswagen’s (VW) headquarters in nearby Wolfsburg at the start of March, seizing documents and computer files that will now be reviewed, a spokesman for the prosecutor’s office said, confirming a report by German magazine WirtschaftsWoche.

They were checking a statement issued by VW on Dec. 9, 2015—about three months after its “dieselgate” scandal broke in the United States—over suspicions its contents were incorrect In that statement, VW said its own investigations found it had understated fuel consumption, and hence carbon dioxide (CO2) emissions, on no more than 36,000 vehicles. That was much lower than its preliminary estimate of around 800,000 diesel and gasoline vehicles produced five weeks earlier, which caused VW to warn it could face a 2 billion euro ($2.5 billion) hit to profits from the disclosure. VW also said in its December 2015 statement that it had found no evidence of unlawful alterations to CO2 emissions data.

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We might as well keep thinking as long as we still can.

Capitalism And The Veil Of Ignorance (Claire Connelly)

So our taxes don’t pay for spending, so what? So the government can’t run out of money. Big deal. Does that change anything? ‘We can’t afford it’ has been the proverbial comforter of opponents of the welfare state harking back to the Clinton / Blair days. Perhaps even earlier. And while it might make you feel good to believe that, it is simply untrue. This argument has been used as an emotional crutch for people who don’t want to admit that they’re comfortable with homelessness and unemployment if it keeps export prices low. Or the currency competitive. Or their bottom line stable. Ultimately, this comes down to what government is for, and what role markets should play in our lives. People are divided on this. And that is ok. Civil disagreements are a hallmark of a civilised society.

Economies and markets are complex beasts, that perform differently in different environments, under different conditions. Arguably across the duration of time, a range of potential solutions could apply at any given scenario. And the best solution is to pick and choose from a range of different economic schools of thought, and use them in combination. Unfortunately, across the world, the economists and historians that are seeking to gain greater clarity of how to do just that, by understanding the true function of economies and markets are being pushed out of universities and barred from institutions and organisations that would allow their research to come to fruition. This is not a mark of a civilised society, but corporate fascism that is actively suppressing research that threatens the dominance of late-stage capitalism.

If you feel comfortable convincing yourself that unemployment and homelessness is acceptable, if you think the fact that wages have not only stagnated but are in many countries actually going backwards somehow doesn’t affect you, that what most people earn in a lifetime will be insufficient to cover a modestly comfortable retirement should not concern you, that addressing any one of these things would be a detriment not only to your bottom line but to the economy itself, if you can justify that position without relying on arguments over deficits and balanced budgets, well, more power to you, I guess. But we should be honest about our disagreements. And our opinions should be informed by an as accurate understanding of how wealth is created as possible.

For many people, whether or not government can afford to address unemployment and social spending isn’t the issue, the question is whether it should. The argument over budgets, debt ceilings and deficits have been used as a national pacifier that would have us believe that the health of the economy and our ability to earn a living relies on a degree of human suffering. We have been convinced that the balancing of federal budgets somehow relates to our ability to put food on the table, when in fact the opposite is true. These lies have made us paranoid and competitive, where the well-being of everyone else is a direct threat to our own. It’s a pretty genius strategy, really.

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On the 15th anniversary of the invasion of Iraq.

“Libya had the highest GDP per capita and life expectancy on the continent. Less people lived below the poverty line than in the Netherlands.”

Libya: The True Face Of ‘Humanitarian Intervention’ (RT)

Seven years ago today, NATO began its “humanitarian bombing” of Libya. While “humanitarian bombing” is an oxymoron, many believe that a country is not truly advancing human rights if it’s not bombing another back to the Stone Age. As an initial matter, it must be said that while the UN had authorized a NATO fly-zone over Libya to protect civilians – all civilians, by the way – there was never authorization for the full-scale invasion which was carried out and which quickly became aimed at regime change. Therefore, the NATO operation which actually took place was illegal.

[..] the intervention was spearheaded by Hillary Clinton, Samantha Power and Susan Rice – three self-described warriors for human and women’s rights. Instead, they became three ushers of the Apocalypse. In addition, Italy and France, which also helped lead the charge for invasion, had their own reasons for intervening in Libya. For his part, French President Nicolas Sarkozy appeared to be singularly focused on killing Libyan leader Muammar Gaddafi, who allegedly gave him €50 million for his presidential campaign – a claim which was just coming to light and to which Gaddafi was the chief witness.

[..] Gaddafi had taken Libya from being the least prosperous country in Africa to the being the most prosperous by the time of the NATO operation. Thus, as one commentator explains, before the intervention, “Libya had the highest GDP per capita and life expectancy on the continent. Less people lived below the poverty line than in the Netherlands.” Moreover, one of the main reasons, we were told, that NATO needed to intervene in 2011 was to save Benghazi from imminent harm from the government forces of Gaddafi.

However, Hillary Clinton’s own internal emails show that her team recognized that any humanitarian problems confronting Benghazi had passed by the time of the NATO bombing. For example, Clinton’s assistant, Huma Abedin, in an email dated February 21, 2011 – that is, just a mere four days after the initial anti-government protests broke out in Libya – explains that the Gaddafi forces no longer controlled Benghazi and that the mood in the city was indeed “celebratory” by that time. Then, on March 2, just over two weeks before the bombing began, Harriet Spanos of USAID sent an email describing “[s]ecurity reports” which “confirm that Benghazi has been calm over the past couple of days.”

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Rhinos, insects, birds. You are next.

Bird populations in France have fallen by 33% in just 15 years.

France’s Bird Population Collapses As Pesticides Kill Off Insects (AFP)

Bird populations across the French countryside have fallen by a third over the last decade and a half, researchers have said. Dozens of species have seen their numbers decline, in some cases by two-thirds, the scientists said in a pair of studies – one national in scope and the other covering a large agricultural region in central France. “The situation is catastrophic,” said Benoit Fontaine, a conservation biologist at France’s National Museum of Natural History and co-author of one of the studies. “Our countryside is in the process of becoming a veritable desert,” he said in a communique released by the National Centre for Scientific Research (CNRS), which also contributed to the findings.

The common white throat, the ortolan bunting, the Eurasian skylark and other once-ubiquitous species have all fallen off by at least a third, according a detailed, annual census initiated at the start of the century. A migratory song bird, the meadow pipit, has declined by nearly 70%. The museum described the pace and extent of the wipe-out as “a level approaching an ecological catastrophe”. The primary culprit, researchers speculate, is the intensive use of pesticides on vast tracts of monoculture crops, especially wheat and corn. The problem is not that birds are being poisoned, but that the insects on which they depend for food have disappeared.

“There are hardly any insects left, that’s the number one problem,” said Vincent Bretagnolle, a CNRS ecologist at the Centre for Biological Studies in Chize. Recent research, he noted, has uncovered similar trends across Europe, estimating that flying insects have declined by 80%, and bird populations has dropped by more than 400m in 30 years. Despite a government plan to cut pesticide use in half by 2020, sales in France have climbed steadily, reaching more than 75,000 tonnes of active ingredient in 2014, according to EU figures. “What is really alarming, is that all the birds in an agricultural setting are declining at the same speed, even ’generalist’ birds,” which also thrive in other settings such as wooded areas, said Bretagnolle.

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Feb 012018
 
 February 1, 2018  Posted by at 11:03 am Finance Tagged with: , , , , , , , , , ,  


Frederic Edwin Church The Parthenon 1871

 

FBI Opposes Memo Release Due To “Inaccurate Information” (ZH)
Alan Greenspan Sees Bubbles in Stocks and Bonds (BBG)
Janet Yellen’s Fed Era Ends With Unanimous Vote of No Rate Hike (BBG)
Two Out Of Three UK Pension Schemes Are In The Red (Yahoo)
Secret Price Fixing Among German Carmakers (Spiegel)
Germany Reaches Limit of Support for Macron’s Europe Plans (BBG)
Hungary Rejects Macron’s ‘Arrogance’ as EU Reform-Fight Looms (BBG)
More Than One Million Greeks Trapped In Tax Payment Scheme Nightmare (K.)
Planting Wildflowers Across Farm Fields Could Cut Pesticide Spraying (G.)
Earth’s Magnetic Field Is Shifting, Poles May Flip (ZH)
‘Super Blue Blood Moon’ Rises Over The Acropolis (K.)
Latest Rhino Poaching Figures Show A Decade Of Bloodshed (Ind.)

 

 

Bad theater. But not releasing the memo is no longer an option.

FBI Opposes Memo Release Due To “Inaccurate Information” (ZH)

Update 1240ET: In what CNN described as a “rate public warning,” the FBI released a statement Wednesday saying it has “grave concerns” over the accuracy of the House Intel Committee’s memo describing purportedly egregious FISA abuses. “With regard to the House Intelligence Committee’s memorandum, the FBI was provided a limited opportunity to review this memo the day before the committee voted to release it. As expressed during our initial review, we have grave concerns about material omissions of fact that fundamentally impact the memo’s accuracy,” the FBI said in a statement.
* * *
Update 1130ET: Bloomberg reports that FBI Director Christopher Wray told the White House he opposes release of a classified Republican memo alleging bias at the FBI and Justice Department because it contains inaccurate information and paints a false narrative, according to a person familiar with the matter. Of course, given the allegedly terrible picture the memo paints of The FBI, it is perhaps not entirely surprising that Wary would oppose its release, however, if this sourced reporting proves correct, it plays very badly for Republicans as it would seem to confirm Rep. Schiff’s accusations.
* * *
As we detailed earlier, just before President Trump headed to the Capitol for last night’s “State of the Union”, the Washington Post reported that top Justice Department officials made a last-ditch plea on Monday to White House Chief of Staff John Kelly about the dangers of publicly releasing the memo. Shortly before the House Intelligence Committee voted to make the document public, Deputy Attorney General Rod J. Rosenstein warned Kelly that the four-page memo prepared by House Republicans could jeopardize classified information and implored the president to reconsider his support for making it public. But those pleas from Rosenstein – who isn’t exactly the West Wing’s favorite lawman, and whose name apparently appears in the memo – have apparently fallen on deaf ears.

Last night, President Trump promised a lawmaker that the memo would “100%” be released now that the House Intel Committee has voted to approve its release. And during a Fox News Radio interview with Brian Kilmeade, Chief of Staff John Kelly added that the memo would be publicly released “pretty quick.” “I’ll let all the experts decide that when it’s released. This president wants everything out so the American people can make up their own minds,” he said.

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He should know, he created them both.

Alan Greenspan Sees Bubbles in Stocks and Bonds (BBG)

The man who made the term “irrational exuberance” famous says investors are at it again. “There are two bubbles: We have a stock market bubble, and we have a bond market bubble,” Alan Greenspan, 91, said Wednesday on Bloomberg Television with Tom Keene and Scarlet Fu. Greenspan, who led the Federal Reserve from 1987 until 2006, memorably used the phrase to describe asset values during the 1990’s dot-com bubble. Greenspan’s comments come as stock indexes remain near record highs, despite selling off in recent days, and as the yields on government notes and bonds hover not far from historic lows. Interest rates are expected to move up in coming years as the Fed continues with a campaign to gradually tighten monetary policy.

“At the end of the day, the bond market bubble will eventually be the critical issue, but for the short term it’s not too bad,” Greenspan said. “But we’re working, obviously, toward a major increase in long-term interest rates, and that has a very important impact, as you know, on the whole structure of the economy.” The Fed on Wednesday opted to leave rates unchanged and markets are pricing in an increase at the central bank’s March meeting. Greenspan sounded an alarm on forecasts that the U.S. government deficit will continue to climb as a share of GDP. He said he was “surprised” that President Donald Trump didn’t specify how he would fund new government initiatives in Tuesday’s State of the Union speech. The president last month signed into law about $1.5 trillion in tax cuts that critics say will further balloon the budget gap.

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The nonsense is deafening. Great solid economy, but no rate hikes.

Janet Yellen’s Fed Era Ends With Unanimous Vote of No Rate Hike (BBG)

Federal Reserve officials, meeting for the last time under Chair Janet Yellen, left borrowing costs unchanged while adding emphasis to their plan for more hikes, setting the stage for an increase in March under her successor Jerome Powell. “The committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate,” the policy-setting Federal Open Market Committee said in a statement Wednesday in Washington, adding the word “further” twice to previous language. The changes to the statement, collectively acknowledging stronger growth and more confidence that inflation will rise to their 2% target, may spur speculation that the Fed will pick up the pace of interest-rate increases.

Officials also said inflation “is expected to move up this year and to stabilize” around the goal, in phrasing that marked an upgrade from their statement in December. At the same time, the Fed repeated language saying that “near-term risks to the economic outlook appear roughly balanced.” “It opens the door to four hikes for them, but I don’t think they have walked through it,” said Michael Gapen at Barclays in New York. “It closes the door to two hikes.” Fed officials penciled in three rate moves this year in quarterly forecasts they updated last month, according to their median projection.

With her term ending later this week after President Donald Trump chose to replace her, Yellen is handing the reins to Powell, who has backed her gradual approach and is widely expected to raise interest rates at the FOMC’s next meeting for the sixth time since late 2015. Fed officials are hoping to keep a tight labor market from overheating without raising borrowing costs so fast that it would stifle the economy. “Gains in employment, household spending and business fixed investment have been solid, and the unemployment rate has stayed low,” the Fed said, removing previous references to disruptions from hurricanes. “Market-based measures of inflation compensation have increased in recent months but remain low.”

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People won’t understand their pensions are Ponzis until there are no payments.

Two Out Of Three UK Pension Schemes Are In The Red (Yahoo)

Two out of three pension funds are in the red – to the tune of a combined £210 billion, it has been revealed. Some 3,710 schemes are in deficit according to the Pension Protection Fund watchdog, putting a serious question mark over the retirement plans of millions of workers. The PFF has been called into action on two high profile occasions of late – working with Toys R Us to secure a near £10m injection into its ailing fund to protect the company’s short-term future and also sorting through the debris of the Carillion collapse. The giant contractor folded earlier this month with debts of above £1.3bn, including an estimated £800m hole in its pension fund. The PFF monitors the health of 5,588 pension pots, with some of the biggest names on the FTSE 100 running schemes with major shortfalls.

The biggest include £9.1billion at BT, as well as deficits of £6.9billion at Royal Dutch Shell, £6.7billion at BP and £6.6billion at both Tesco and BAE Systems. Sir Steve Webb, a former pensions minister under the recent coalition government, said Carillion would not be the last big company to fold leaving its pension scheme in jeopardy. “The question isn’t if there will be another Carillion – it’s when,” said Webb, who is now director of policy at pensions group Royal London. “With two-thirds of schemes in deficit it is inevitable there will be more insolvencies and more schemes ending up in the PPF.”

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They had more than 60 active working groups.. And thought it’d remain secret? Anyone going to jail?

Secret Price Fixing Among German Carmakers (Spiegel)

The Federal Cartel Office suspects that major carmakers and a few of their suppliers have been fixing prices for years, and possibly even decades. It’s not the prices at which the companies sell their cars or car parts that is at issue, but rather a significant component of the prices they pay for steel. “The aim of the suspected collusion,” the court ruling that granted the search warrants read, was to “unify the purchasing price for steel in the automobile industry and, by doing so, create a commonality of costs.” The Federal Cartel Office believes that the alleged collusion existed back in the 1990s and that “it existed again from March 2007 until February 2013.” Investigators have also found indications there may have been collusion in 2016.

Collusion of that nature is the antithesis of competition. It means that VW, Daimler and BMW were no longer competing to buy steel cheaper than their rivals and passing their savings down to customers – as is normally the case in a functioning market economy. And steel is one of the most important supplies purchased by carmakers. The nationwide searches didn’t remain secret, with the media quickly reporting on them. But until now, the background and details of the raids have remained largely unknown, the case having been overshadowed by a European Commission investigation into another case that also involves the automobile industry – a case that DER SPIEGEL exposed last summer.

That case was triggered when Daimler and Volkswagen essentially admitted wrongdoing, and since then the Brussels authority has been looking into suspicions that the companies engaged in collusion for several years with BMW, Porsche and Audi, in the form of more than 60 working groups covering areas such as technological development, suppliers and how to deal with environmental protection authorities. The companies had created working groups for almost every part of a vehicle. They existed for “gasoline engines,” “diesel engines,” “car body,” “chassis,” “total vehicle” and many more areas. With five brands involved – Daimler, BMW, Audi, Porsche and VW – the groups were referred to internally as “groups of five.” All together, they met more than 1,000 times in past years.

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Say no more: “Desired ambiguities..”

Germany Reaches Limit of Support for Macron’s Europe Plans (BBG)

French President Emmanuel Macron will be disappointed if he expects Germany’s next government to drum up more goodwill for his European reform plans in this week’s talks, according to four people familiar with the current coalition negotiations. Angela Merkel’s Christian Democratic Union-led bloc and its prospective Social Democratic Party partner are not planning any fundamental changes to their proposals on Europe’s future as set out in a preliminary agreement reached Jan. 12, according to the people, who represent all three parties involved in the talks. All asked not to be named as the negotiations are private and ongoing. Representatives of Merkel’s CDU, its Christian Social Union sister party and Martin Schulz’s Social Democrats met in the Chancellery in Berlin on Wednesday to discuss Europe policy.

While Schulz hailed the outcome as a “fresh start” for Europe, details were in short supply. The negotiators didn’t go much beyond those measures already agreed, one of the people attending the meeting said. These include higher German contributions to the EU budget; expanding the European Stability Fund (ESM) into a European Monetary Fund; and a European framework for minimum wages. The SPD proposed giving the EU its own means to raise revenue, whether by taxes or tolls, prompting Merkel’s bloc to warn against a debate over tax increases. On a visit to Macron in Paris on Jan. 19, Merkel said the coalition’s common Europe plans contained “desired ambiguities,” since any attempt to agree on the final details now would reduce the room to negotiate.

In reality, her CDU/CSU and the SPD, as the Social Democrats are known in German, have different interpretations of the proposals, and these divergent positions are likely to bubble up in the coming months in the debate over euro-area reform.

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Hungary won’t be easy to strong-arm. But Brussels will try. The only people who want more Europe are politicians.

Hungary Rejects Macron’s ‘Arrogance’ as EU Reform-Fight Looms (BBG)

French President Emmanuel Macron’s plan to bring to heel renegade European Union nations as part of a drive to reform the bloc smacks of arrogance and will fail, a senior Hungarian ruling party official said. Unanimity is required both to change the EU constitution and approve a multi-year, post-2020 EU budget. That means proposed sanctions on countries like Hungary and Poland for alleged rule-of-law violations won’t gain traction, according to Gergely Gulyas, parliamentary leader of Hungarian Prime Minister Viktor Orban’s Fidesz party. Governments are drawing battle lines as the EU mulls plans to re-invent itself, with some members saying the euro crisis, Brexit, the biggest refugee influx since World War II and ex-communist members ditching the bloc’s liberal values have necessitated a revamp.

Macron has presented the most ambitious proposals, with a plan to deepen integration in everything from defense to the economy. He has also called for sanctions against member states seen as backsliding on democracy. “If we’re going to play the game that western European countries want to launch rule-of-law procedures against eastern European countries because of differences over values, then that’s not going to work,” said Gulyas, 36. “That would destroy the Union.” Hungary received 3.6 billion euros ($4.5 billion) in net EU funding in 2016. That made it the fourth-biggest beneficiary in the 28-member bloc after Poland, Romania and Greece and underscores the risk to its economy if Macron can make good on his pledge. Gulyas dismissed proposals aimed at punishing Hungary and Poland, arguing that France has for years failed to meet EU spending limits yet has escaped penalties for fiscal offenders.

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Under an alleged left-wing government.

More Than One Million Greeks Trapped In Tax Payment Scheme Nightmare (K.)

More than 1 million Greeks are now trapped in programs to pay off their tax and social security dues in installments, a situation likely to continue for years to come. On Wednesday the Finance Ministry announced taxpayers can apply for a 12- or 24-installment payment scheme, which under certain circumstances can include non-expired dues, on the website of the Independent Authority for Public Revenue. Citizens are resorting to various payment programs offered by the ministries of Finance and Labor because they would otherwise be unable to meet their obligations. In many cases taxpayers are forced to pay additional installments in order not to default on their plans.

The million-plus taxpayers and businesses that are trapped in the various schemes they have entered to pay off the tax authorities and the social security funds have no other choice but to keep paying, otherwise they will have their assets confiscated. The payment schemes are the outcome of the growth in taxation and of social security contributions in recent years. Worse, as of this year, if anyone delays the payment of an installment by more than 24 hours, the debt will be classified as overdue and the process of the monitoring mechanism will be triggered for the state to safeguard its interests. Particularly in the case of the 100-payment program for dues to the tax authorities, missing a deadline means the entire amount due is classified as expired and becomes immediately payable along with fines and penalties.

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You mean, monoculture is not the greatest thing ever?!

Planting Wildflowers Across Farm Fields To Cut Pesticide Spraying (G.)

Long strips of bright wildflowers are being planted through crop fields to boost the natural predators of pests and potentially cut pesticide spraying. The strips were planted on 15 large arable farms in central and eastern England last autumn and will be monitored for five years, as part of a trial run by the Centre for Ecology and Hydrology (CEH). Concern over the environmental damage caused by pesticides has grown rapidly in recent years. Using wildflower margins to support insects including hoverflies, parasitic wasps and ground beetles has been shown to slash pest numbers in crops and even increase yields. But until now wildflower strips were only planted around fields, meaning the natural predators are unable to reach the centre of large crop fields.

“If you imagine the size of a [ground beetle], it’s a bloody long walk to the middle of a field,” said Prof Richard Pywell, at CEH. GPS-guided harvesters can now precisely reap crops, meaning strips of wildflowers planted through crop fields can be avoided and left as refuges all year round. Pywell’s initial tests show that planting strips 100m apart means the predators are able to attack aphids and other pests throughout the field. The flowers planted include oxeye daisy, red clover, common knapweed and wild carrot. In the new field trials, the strips are six metres wide and take up just 2% of the total field area. They will be monitored through a full rotation cycle from winter wheat to oil seed rape to spring barley.

“It’s a real acid test – we scientists are having to come up with real practical solutions,” said Pywell, who led a landmark study published in 2017 showing that neonicotinoids insecticides damage bee populations, not just individual insects. In the new trials, the researchers will be looking out for any sign that drawing the wild insects into the centre of fields, and therefore closer to where pesticides are sprayed, does more harm than good.

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Old threat. But a real one.

Earth’s Magnetic Field Is Shifting, Poles May Flip (ZH)

[..] scientists from the University of Colorado in Boulder are sounding the alarm that the Earth’s magnetic poles are showing signs of reversing. Although the pole reversal, in and of itself, isn’t unprecedented, the solar winds that would take out the power grid and make parts of the globe uninhabitable could cause widespread disasters. The Earth has a fierce molten core that generates a magnetic field capable of defending our planet against devastating solar winds. This magnetic field is vital to life on Earth and has weakened by 15 percent over the last 200 years. This protective field acts as a shield against harmful solar radiation and extends thousands of miles into space and its magnetism affects everything from global communication to power grids.

Historically, Earth’s North and South magnetic poles have flipped every 200,000 or 300,000 years. However, the last flip was about 780,000 years ago, meaning our planet is well overdue. The latest satellite data, from the European Space Agency’s Swarm trio which monitors the Earth’s magnetic field, suggest a pole flip may be imminent. The satellites allow researchers to study changes building at the Earth’s core, where the magnetic field is generated. Their observations suggest molten iron and nickel are draining the energy out of the Earth’s core near where the magnetic field is generated. While scientists aren’t sure why exactly this happens, they describe it as a “restless activity” that suggests the magnetic field is preparing to flip.

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A lot more timeless than most other pics of this.

‘Super Blue Blood Moon’ Rises Over The Acropolis (K.)

A ‘super blue blood moon’ rises behind the 2,500-year-old Parthenon temple on the Acropolis hill in Athens on Wednesday evening, when thousands of city residents took to the streets and balconies to witness the rare spectacle. People in many parts of the world caught a glimpse of the moon as a giant reddish globe thanks to a rare lunar phenomenon that combines a total eclipse with a blue moon and super moon. The spectacle – the first in 152 years – has been coined a ‘super blue blood moon’ by NASA. [Petros Giannakouris/AP]

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Just refuse to do any trade with any country that imports the horns. For starters.

Latest Rhino Poaching Figures Show A Decade Of Bloodshed (Ind.)

Dr Ian Player, the veteran South African game ranger and doyen of global rhino conservation, would be turning in his grave today were he to discover that another 1,000 rhinos had been slaughtered in the last calendar year. The African-wildlife warrior died just over three years ago aged 87, at a point when poaching had just exploded to record levels in South Africa – with nearly three rhinos gunned down daily. Annual government statistics announced last week complete the picture of 7,130 rhino carcasses piled up in South Africa over the last decade. Shortly before his death, I visited Player at his home in the KwaZulu-Natal Midlands to ask him about his thoughts on the poaching crisis and the future of one of the “big five” (lion, leopard, rhinoceros, elephant and Cape buffalo) species he devoted most of his life to protecting.

Frail and dispirited, he had reached a point in life where he should have been taking things easy, after more than six decades of service to nature conservation. Instead, his cellphone rang incessantly as colleagues from all corners of the country reported the discovery of yet another rhino butchered for its horns. Having worked so hard to save rhinos from extinction once before, there was no way Player could hang up his conservation boots amidst this new crisis. He also told me about a dream that haunted him. “My dream was about a young white rhino which came to lie down next to me and then gently placed its head on my shoulder. That does not need too much interpretation – the rhinos still need our help more than ever before,” he explained.

Player first came across a rhino in Imfolozi Game Reserve in the early 1950s when he joined the Natal Parks Board as a learner game ranger. A disciple of Carl Jung and Sir Laurens van der Post, Player went on to spearhead a global operation to safeguard the world’s second-largest land animal from extinction. Less than a decade ago, poaching deaths were limited to roughly 20 rhinos per year in South Africa, the country that provides sanctuary to 93% of Africa’s white rhinos and nearly 40% of the continent’s black rhinos. In 2007, only 13 rhinos were poached in South Africa. But in 2008 that tally rose steeply to 80 deaths; to 333 in 2010 and then to a record level of 1,205 during 2014. Last year the death toll topped the 1,000 mark for the fifth year in a row.

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Jan 292018
 
 January 29, 2018  Posted by at 11:10 am Finance Tagged with: , , , , , , , , , , ,  


Fratelli Alinari Delphi c1920

 

German Carmakers Take Another Hit With Diesel Testing on Monkeys, Humans (BBG)
The Risks Facing Global Stocks As Money Printing Comes To An End (BI)
Fire Sale By The Treasury Could Send Shock Waves Through Bond Market (CNBC)
The Donald’s Davos Delusions (David Stockman)
ECB’s Knot Says QE Must End ‘As Soon As Possible’ (BBG)
The ECB And The Euro Are The Only Glue Holding Parts Of Europe Together (CNBC)
Trump Administration Ponders Nationalizing 5G Mobile Network (CNBC)
Facebook Makes Privacy Push Ahead Of Strict EU Law (R.)
Hundreds Of Thousands Living In Squalid Rented Homes In England (G.)
UK Brexit Bill ‘Constitutionally Unacceptable’ – House of Lords (Ind.)
Australia Unveils Plan To Become One Of World’s Top 10 Arms Exporters (G.)
Greek Debt Relief Will Depend On Continued Reforms – Regling (K.)

 

 

They get together to set up a testing group, but carefully far enough removed from their structures to deny any responsibility. “We paid millions into it, but we have no idea what they do”. And they will escape any real punishment. TBTF. Testing carcinogenics on people. In the past 10 years.

German Carmakers Take Another Hit With Diesel Testing on Monkeys, Humans (BBG)

The reputation of Germany’s auto industry took a fresh hit from revelations it sponsored tests that exposed humans as well as monkeys to diesel exhaust fumes, which can cause respiratory illness and cancer. The study, supported by a little-known group founded by Volkswagen, Daimler and BMW in 2007, had 25 people breathe in diesel exhaust at a clinic used by the University of Aachen, Stuttgarter Zeitung reported Monday. The story, citing annual reports from the European Research Group on Environment and Health in the Transport Sector, or EUGT, which closed last year, followed a New York Times report earlier that the organization also conducted tests using monkeys. Germany’s auto industry, which is still reeling from Volkswagen’s diesel-cheating scandal where the company rigged emissions tests, distanced itself from the organization.

“We are appalled by the extent of the studies and their implementation,” Daimler said Monday in an emailed statement, adding it didn’t have any influence over the study and promised an investigation. “We condemn the experiments in the strongest terms.” The revelations are another bombshell undermining diesel’s image. The technology remains a key profit driver for German automakers, even as demand gradually slips in Europe, the main market for the diesel models. The reports also weaken the carmakers’ position in its efforts to counter criticism of the technology as cities mull bans and German politicians weigh more stringent upgrades to lower pollution levels. In an additional twist, the VW Beetle model used in the test with animals was among the vehicles rigged to cheat on emissions tests, the New York Times reported. Volkswagen apologized for the misconduct and lack of judgment of some individuals, calling the trials a mistake. VW on Monday again distanced itself from the activities of the group.

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That rumbling roar in the distance.

The Risks Facing Global Stocks As Money Printing Comes To An End (BI)

“Correlation does not imply causation” is a vital principle of statistics and numerical models which reminds us that just because two things correlate doesn’t mean one causes the other. For many investors, they’ll be hoping that the correlation shown in the chart below is not a sign for things to come for stock market returns. Because if this correlation holds, things could be about to get nasty. The chart, from Citi, shows the rolling annual change in central bank asset purchases overlaid against annual returns for the MSCI World Stock Market Index since the depths of the global financial crisis back in early 2009. Clearly, as asset purchase levels have changed, so too has the performance of global stocks, tending to rise when asset purchases increase and fall when asset purchases decline.

Until recently that is. As shown in the red circle on the chart, despite a recent deceleration in central bank purchases, stock market returns have actually increased recently, bucking the trend seen over much of the past nine years. “In a world where the global CB taper is well underway — and in any case largely announced — stocks are seemingly starting to decouple from the bearish implication of [the chart],” says Citi. “As we had hoped, in a strong cyclical backdrop, with earnings coming in strong, markets can focus on underlying fundamentals rather than the reduction in central bank accommodation.” Central bank asset purchases set to slow sharply over the next year, as seen in the dotted black line in the chart. If the relationship between asset purchases and stock market returns were to snap back into place, it suggests that stocks could fall by close to 50% over the next year or so. 50%!

To be clear, Citi isn’t saying that’s going to happen, but it is a reminder that we’re entering uncharted territory for financial markets. Ultra-easy monetary policy settings are slowly being reversed, and no one is really certain as to how it will all play out. Adding to the intrigue, it’s clear from this other chart from Citi that while stocks recently disconnected from central bank asset purchases, corporate credit markets have not, with spread compression in investment grade debt starting to reverse in line with lower asset purchases.

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Bond yields are already soaring. Does the Fed have any control left, or is this it?

Fire Sale By The Treasury Could Send Shock Waves Through Bond Market (CNBC)

Wells Fargo’s head of interest rate strategy is detecting a major trouble spot in the bond market. Michael Schumacher’s chief concern right now: Who’s going to buy all those extra Treasury notes? “They [people] are worried about Treasury issuance going up, up, up. You could see an increase in 2018 of 50% — maybe more versus last year. That’s got a lot of people very concerned, myself included,” he said recently on CNBC’s “Futures Now.” He anticipates the Treasury Department will likely announce within days a “pretty significant change” in the way it issues bonds. It comes just as the Fed is shrinking its balance sheet. With less demand coming from the Fed, a fire sale of sorts would increase supply and emerge as the major catalyst causing yields to jump.

“You could see a pretty significant sell-off not just in the 10-year, which people focus on quite a bit, but also on 30-year bonds. We’re very concerned about that,” Schumacher said. “Being the bond nerd that I am, I’d say the market wants to climb a wall of worry like it does in stocks.” Right now, 10-year Treasury yields are bouncing around 2.6% — up nearly 40 basis points during the past six months. Schumacher’s year-end forecast on the note is 2.95%. But he believes it’s not unreasonable to expect rates to push 3.25%. “Something around that level probably does get people pretty worked up. And, it’s such a contrast versus last year when bonds did very, very little,” he said. Yields for 30-year Treasurys, essentially flat for the past six months, appear to be waking up. They’re up about 17 basis points this year.

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Too much swamp to be drained.

The Donald’s Davos Delusions (David Stockman)

[..] above all else, the Donald has whiffed entirely on what is really killing the American economy. That is, the nation’s out-of-control central bank. Via its massive falsification of financial asset prices, the Fed has turned Wall Street into a gambling casino, the corporate C-suites into financial engineering joints and Washington into a profligate den of debt addicts. Likewise, its idiotic pursuit of more inflation (2%) through 100 straight months of ZIRP (or near zero interest rates) has savaged retirees and savers, enriched gamblers and leverage artists, eroded the purchasing power of stagnant worker paychecks and unleashed virulent speculation and malinvestment throughout the warp and woof of the financial system.

Of course, we did not really expect the Donald to take on the money printers – notwithstanding his campaign rhetoric about “one big, fat, ugly bubble”. After all, Trump has always claimed to be a “low interest man” and he did spend 40 years getting the worst financial education possible. To wit, he rode the Fed’s easy money fueled real estate bubble to a multi-billion net worth, or so he claims, and pronounced himself a business genius – mostly by virtue of piling cheap debt upon his properties and reaping the windfall gains. Stated differently, the Donald came to office wholly unacquainted with any notion of sound money and free market financial discipline. And now he has spent a year proving he is completely clueless as to why Flyover America has been shafted economically.

Rather than the top-to-bottom housecleaning that the Eccles Building desperately needed, Trump actually appointed a pedigreed Keynesian crony capitalist Washington lifer, Jerome Powell, to chair the Fed. Then and there, and whether he understood it or not (he didn’t), the Donald surrendered to the permanent rulers of the Imperial City. That’s because at the end of the day, it was the Fed’s serial financial bubbles and massive monetization of the public debt that has enabled Washington’s imperial hegemony abroad, welfare state largesse at home and the egregious inflation of financial asset prices for the rich and the bicoastal elites coupled to them.

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Knot is from Holland, an export-dependent country that suffers from a strong euro.

ECB’s Knot Says QE Must End ‘As Soon As Possible’ (BBG)

The European Central Bank has to end its quantitative easing as soon as possible, according to ECB Governing Council member Klaas Knot, who said there’s not a single reason anymore to continue with the program. “The program has done what could realistically be expected of it,” Knot, who also heads the Dutch Central Bank, said in an interview on the television talk show Buitenhof on Sunday. The ECB is inching closer to unwinding unprecedented stimulus. At their December meeting, officials held out the prospect of a change in policy language early in the year, and some governors have since expressed their favor for taking a first step in March. While President Mario Draghi said Thursday that confidence in a sustained pickup in inflation has increased, patience and persistence are still warranted as progress so far remains muted.

“The program is fixed until September,” Knot said, with Draghi’s reasoning being that the central bank doesn’t have to commit yet to what will happen after that month. “We don’t have to communicate yet that it will be over after September, but I think that’s where we’re headed.” He said there is enough proof to make that clear. [..] Knot said the lack of commitment to any communication by the ECB as to what might happen to the QE program beyond September could have a dampening affect on the euro. A 6% surge in the euro since mid-December is threatening to become a thorn in the economy’s side if it curbs exports and damps prices.

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And that’s definitely not enough.

The ECB And The Euro Are The Only Glue Holding Parts Of Europe Together (CNBC)

Many German political observers estimate that, under the best circumstances, their country is unlikely to have a new three-party coalition government before Easter — April 1. They realize that this might be an optimistic forecast given the fundamental differences separating those who want a status quo stability (two right-wing parties) and a radical change of “governing culture” (the left-wing Social Democratic Party of Germany). Expectations are so dire, and so low, that the unfolding political events in Germany could mean the end of stability in the entire EU. In spite of that, the euro was soaring last Thursday to $1.2537 during the press conference at the European Central Bank. That was the highest reading since the middle of December 2014. And that had little to do with the talking down of the dollar by a U.S. delegation having fun in the Alps.

As of last Friday, the euro was up 16% against the dollar and 5.4% in trade-weighted terms since the Trump administration came to power a year ago. That puzzling paradox of a strong currency in a politically disintegrating economic system owes mainly to the euro area’s improving cyclical growth dynamics, engineered by a supportive monetary policy, and to trading bets ignoring the convulsions of the European project. The project in question has been a difficult work-in-progress for the past 59 years, as the relentless French-German rivalry failed to define mutually acceptable terms for a fairy tale called the European economic and political union. The euro is a result of such a political struggle between the two nations: Fearful of an overwhelming power of a reunited Germany, France insisted on a monetary union to dilute the influence of its erstwhile arch-enemy across the Rhine.

Reluctantly, Germany accepted to part with the Deutsche mark while imposing a legal and institutional infrastructure that would make the euro a clone of it. And to make sure that happened, Germany dictated the rules for the ECB — a supra-national institution and the world’s only genuinely independent monetary authority. Born out of fear of German domination, the euro is, arguably, the only major achievement of a project that was supposed to make another French-German war an impossibility. Still, a war by other means did happen, and France, Italy, Spain, Portugal, Ireland and Greece – 54% of the euro area GDP – have only the ECB to thank for rescuing them from an assault of disastrous German-imposed austerity policies.

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When will we talk about making Facebook a public utility?

Trump Administration Ponders Nationalizing 5G Mobile Network (CNBC)

National security officials in the Trump administration are looking at options where the U.S. government could take over a part of the country’s mobile network as a way of guarding against China, news outlet Axios reported. Axios, citing sensitive documents it obtained, said there are two options up for consideration: First, the U.S. government could pay for and build a single, super-fast mobile network and could then rent access to national carriers. The move, according to Axios, could see an unprecedented nationalization of infrastructure that has historically been privately-owned. But, the news outlet reported, a source familiar with the matter said a newer version of the document is neutral about whether the government should build and own such a network.

The alternative, according to Axios, is that wireless providers in the U.S. build their own 5G networks that would compete with one another — an option the document said could be costly and more time-consuming, but would be less commercially disruptive to the industry. The reason for even considering nationalization of part of the system is that China “has achieved a dominant position in the manufacture and operation of network infrastructure” and it’s “the dominant malicious actor in the Information Domain,” the document said, according to Axios. Reuters reported that a senior administration official on Sunday said that the government wants to build a secure 5G network and it’ll have to work with the industry to figure out the best way to do it. “We want to build a network so the Chinese can’t listen to your calls,” the official told Reuters.

“We have to have a secure network that doesn’t allow bad actors to get in. We also have to ensure the Chinese don’t take over the market and put every non-5G network out of business.” The matter was being debated at a lower level, the official said to Reuters, adding that it would take between six to eight months before it reaches President Donald Trump for consideration. The fifth generation (hence the 5G name) of mobile networks aims to provide faster data speeds and more bandwidth to carry ever-growing levels of web traffic. Late last year, the first specification for 5G was completed, which was considered a huge step toward commercializing the technology. Market watchers have predicted the technology will have more than one billion users by 2023, with more than half based in China. U.S. carriers are already working on deploying 5G networks.

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Facebook gets nervous.

Facebook Makes Privacy Push Ahead Of Strict EU Law (R.)

Facebook said on Monday it was publishing its privacy principles for the first time and rolling out educational videos to help users control who has access to their information, as it prepares for the start of a tough new EU data protection law. The videos will show users how to manage the data that Facebook uses to show them ads, how to delete old posts, and what happens to the data when they delete their account, Erin Egan, chief privacy officer at Facebook, said in a blog post. Facebook, which has more than 2 billion users worldwide, said it had never before published the principles, which are its rules on how the company handles users’ information.

Monday’s announcements are a sign of its efforts to get ready before the European Union’s General Data Protection Regulation (GDPR) enters into force on May 25, marking the biggest overhaul of personal data privacy rules since the birth of the internet. Under GDPR, companies will be required to report data breaches within 72 hours, as well as to allow customers to export their data and delete it. Facebook’s privacy principles, which are separate from the user terms and conditions that are agreed when someone opens an account, range from giving users control of their privacy, to building privacy features into Facebook products from the outset, to users owning the information they share. “We recognize that people use Facebook to connect, but not everyone wants to share everything with everyone – including with us. It’s important that you have choices when it comes to how your data is used,” Egan wrote.

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No-one can be surprised by this anymore: “..Rats, mouldy walls, exposed electrical wiring, leaking roofs and broken locks ..” and “..holes in external walls, insect-infested beds, water pouring through ceilings and mould-covered kitchens ..”

Hundreds Of Thousands Living In Squalid Rented Homes In England (G.)

Rented housing so squalid it is likely to leave tenants requiring medical attention is being endured by hundreds of thousands of young adults in England, an analysis of government figures has revealed. Rats, mouldy walls, exposed electrical wiring, leaking roofs and broken locks are among problems blighting an estimated 338,000 homes rented by people under 35 that have been deemed so hazardous they are likely to cause harm. It is likely to mean that over half a million people are starting their adult lives in such conditions, amid a worsening housing shortage and rising rents, which are up 15% across the UK in the last seven years. Visits by the Guardian to properties where tenants are paying private landlords up to £1,100 a month have revealed holes in external walls, insect-infested beds, water pouring through ceilings and mould-covered kitchens.

A 30-year-old mother near Bristol said her home is so damp that her child’s cot rotted. A 34-year-old woman in Luton told of living with no heating and infestations of rats and cockroaches, while a 24-year-old mother from Kent said she lived in a damp flat with no heating and defective wiring for a year before it was condemned. “Young adults have very little option but to rent from a private landlord, so we should at least expect a decent home in return for what we pay,” said Dan Wilson Craw, director of the Generation Rent campaign group. “Relying on cash-strapped councils to enforce our rights means that too many of us are stuck with unsafe housing.” The extent of the impact on young people emerged as a cross-party bid to give tenants new powers to hit back against rogue landlords gathers strength.

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And the House of Commons passed the bill without noticing?!

UK Brexit Bill ‘Constitutionally Unacceptable’ – House of Lords (Ind.)

An influential group of peers have warned Theresa May’s flagship Brexit legislation is “constitutionally unacceptable” and will need to be substantially rewritten. The stark warning comes as peers in the upper chamber gear up to begin the lengthy process of debating the legislation – passed with a seal of approval from the Commons earlier this month. The EU (Withdrawal) Bill seeks to transpose all existing EU law onto the UK statue book in time for Britain formally leaving the bloc in March 2019. More than 180 members are already lined up to speak during the two-day debate accompanying the legislation’s second reading this Tuesday and Wednesday, and there are likely to be impassioned interventions from both prominent Leave and Remain voices.

But peers on the Lords Constitution Committee warn in a report to be released on Monday that, while the legislation is necessary to ensure legal continuity after Brexit, it has “fundamental flaws” in its current state. The committee claims that at present the bill risks “undermining the legal certainty it seeks to provide” and gives “overly broad” powers to government ministers. Baroness Taylor of Bolton, who chairs the committee, said: “We acknowledge the scale, challenge and unprecedented nature of the task of converting existing EU law into UK law, but as it stands this bill is constitutionally unacceptable. “In our two previous reports we highlighted the issues this raised and we are disappointed that the Government has not acted on a number of our recommendations.

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Words fail.

Australia Unveils Plan To Become One Of World’s Top 10 Arms Exporters (G.)

Australia is set to become one of the world’s largest arms exporters under a controversial Turnbull government plan. The prime minister, Malcolm Turnbull, has unveiled a new “defence export strategy” setting out the policy and strategy to make Australia one of the world’s top 10 weapons exporters within the next decade. Hailing it a job-creating plan for local manufacturers, the Coalition says Australia only sells about $1.5bn to $2.5bn in “defence exports” a year and it wants the value of those exports to increase significantly. It has identified a number of “priority markets”: the Middle East, the Indo-Pacific region, Europe, the United States, the United Kingdom, Canada and New Zealand. It will set up a new Defence Export Office to work hand in hand with Austrade and the Centre for Defence Industry Capability to coordinate the commonwealth’s whole-of-government export efforts and provide a focal point for more arms exports.

A $3.8bn Defence Export Facility, to be administered by the Export Finance and Insurance Corporation, will provide the finance local companies need to help them sell their defence equipment overseas. A new Australian Defence Export Advocate position, set up to support the Australian Defence Export Office, will provide industry with the constant high-level advocacy needed to promote Australian-made weapons overseas. “It is an ambitious, positive plan to boost Australian industry, increase investment, and create more jobs for Australian businesses,” Turnbull said. “A strong, exporting defence industry in Australia will provide greater certainty of investment, support high-end manufacturing jobs and support the capability of the Australian defence force.”

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Them’s fighting words. Greece needs debt relief no matter what. Blackmailing the country with it is amoral.

Greek Debt Relief Will Depend On Continued Reforms – Regling (K.)

If Greece wants to see its debt burden lightened further it must ensure that it enacts agreed-to reforms and be prepared for the supervision of its foreign creditors to continue, European Stability Mechanism (ESM) Managing Director Klaus Regling told Sunday’s Kathimerini in an interview in which he also stressed that markets would like to see the IMF join the country’s third bailout. “If Greece wants additional debt relief, which means for creditor countries to grant something extra, there is the legitimate question that creditor countries would want to make sure that agreed policies are implemented and that there is no backtracking, on promises in relation to the primary surplus for instance, on future tax policies and on privatizations, or on the reduction of non-performing loans,” Regling said.

He added that there would be no additional conditions for further debt relief but that reforms must be fully implemented, noting that greater “ownership” of the bailout program will help achieve this. “Ownership has improved,” he said, adding however that, “sometimes there are still signals that it’s not fully there the way we would like. For example, on privatizations there are different voices.” As for continued foreign supervision of Greece after its scheduled exit from the third bailout in August, Regling said this was “normal,” noting that there is “post-program surveillance” in other countries that borrowed from the ESM. He added that “markets are always happy if a country is under the surveillance of its creditors.”

As for the potential participation of the IMF in Greece’s third bailout, Regling said it was “one of the elements that could play a positive role to further strengthen the good impression that the markets have.” He added, however, that the markets will also “look for statements by the Greek government that show there is real ownership of the program.”

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Sep 302017
 
 September 30, 2017  Posted by at 8:45 am Finance Tagged with: , , , , , , , ,  


Vincent van Gogh Boulevard de Clichy, Paris 1887

 

Trump’s 1,500-word Airball (Stockman)
Puerto Rico Supply Failure Stops Food, Water Reaching Desperate Residents (G.)
Abenomics: Bat-Shit-Crazy (Muir)
Congress Can Give Every American A Pony (Kelton)
Homeowners Face Double Whammy Of Interest Rates And Slumped Market (Ind.)
ECB Wants to Weed Out Smaller Banks to Cut Competition (DQ)
VW’s Dieselgate Bill Hits $30 Billion After Another Charge (R.)
Could Ryanair’s ‘Pilotgate’ Spell The End Of Cheap Flights? (Ind.)
Citizens United No More (Jim Kunstler)
The Slimy Business of Russia-gate (Robert Parry)
Catalan Government Says Millions Will Turn Out For Referendum (G.)
Aid Programs Are Designed To Keep Countries In Poverty (Ren.)

 

 

The White House should consult with Stockman. He’s been there. This is going nowhere good. “..after nine months of work these geniuses have come up with $6 trillion of easy to propose tax rate cuts and virtually no plan whatsoever to pay for them..”

Trump’s 1,500-word Airball (Stockman)

The Donald’s strong point isn’t his grasp of policy detail. The nine page bare-bones outline released yesterday is nothing more than an aspirational air ball that lacks virtually every policy detail needed to assess its impact and to price out its cost. It promises to shrink the code to three rates (12%, 25%, 35%), for example. But it doesn’t say boo about where the brackets begin and end compared to current law. Needless to say, a taxpayer with $50,000 of taxable income who is on the 15% marginal bracket today might wish to know whether he is in the new 12% or the new 25% bracket proposed by the White House. After all, it could change his tax bill by several thousand dollars. Similarly, to help pay for upwards of $6 trillion of tax cuts over the next decade, it proposes to eliminate “most” itemized deductions. These “payfors” would in theory increase revenues by about $3 trillion.

Then again, the plan explicitly excludes the two biggest deductions – the charitable deduction and mortgage deduction – which together account for $1.3 trillion of that total. And it doesn’t name a single item among the hundreds of deductions that account for another $1 trillion of current law revenue loss. They’re just mystery meat to be stealthily extracted during committee meetings after Congressman have run the gauntlet of lobbyists prowling the halls outside. Stated differently, after nine months of work these geniuses have come up with $6 trillion of easy to propose tax rate cuts and virtually no plan whatsoever to pay for them. In fact, this latest nine pages of puffery contains just 1,500 words – including obligatory quotes from the Donald and page titles. I hate to get picky, but the Donald’s team has been on the job for 250 days now. And all they came up with amounts to just three words each per day in office.

Read more …

Blaming Puerto Rico on Trump as well is cheap and easy. The Jones Act must go, but Congress has left it intact. So have successive presidents.

Puerto Rico Supply Failure Stops Food, Water Reaching Desperate Residents (G.)

Nine days after Hurricane Maria struck Puerto Rico, thousands of containers of food, water and medicine are stuck in ports and warehouses on the island, as logistical problems continue to stop desperately needed supplies from reaching millions of Americans. In many parts of the US territory, food, medicine and drinking water are scarce, and amid a growing humanitarian crisis, local researchers have suggested the death toll could be much higher than the 16 deaths reported so far. On Thursday, the White House temporarily waived the Jones Act – the 1920 legislation which had prevented foreign ships from delivering supplies from US ports to Puerto Rico. But the breakdown of the island’s supply chain has left many concerned that the move will not be enough to get goods to the people who need them most.

Yennifer Álvarez, a spokesperson for Puerto Rico’s governor, said about 9,500 shipping containers filled with cargo were at the port of San Juan on Thursday morning as the government struggled to find truckers who could deliver supplies across the island. The delivery issue is aggravated by an intense shortage of gasoline. About half of Puerto Rico’s 1,100 gas stations are out of action; at those that are open, people have been queuing for up to nine hours to buy fuel for vehicles or the generators which have become essential since the island is still without electricity. Rafael Álvarez, vice-president of Méndez & Co, a food distribution company based in San Juan, said he was worried that if fuel was not efficiently distributed soon, people might get desperate. “I really hope things are worse today than they are going to be tomorrow,” he said.

“People are getting very anxious with the heat and the lack of easily accessible drinkable water.” Because of Puerto Rico’s crippling economic crisis, few people had the money to afford more than a week’s worth of emergency supplies, said Alvarez. But if fuel was readily available, Alvarez said, goods could be efficiently delivered around the island and generators would reliably function, resolving many of the territory’s most pressing concerns. Alvarez’s warehouse is at 100% capacity with shelf-stable products including cereals, granola bars and pasta sauce. Yet although the goods are ready to move to local grocery stores, only around 25% of his normal distribution fleet is available, because of the shortage of fuel or damage inflicted by the storm. And few stores are open because they need diesel to power their generators.

“The food industry is really intact except for diesel fuel,” Alvarez said. “We need diesel fuel to operate.” Federal and state officials have said there is enough diesel on the island, but it too has been difficult to distribute. “You know, the gas and fuel issue is not a matter of how much do we have – it’s a matter of how we can distribute it,” Puerto Rico’s governor, Ricardo Rosselló, told NPR.

Read more …

“And just like that, Abeconomics was born. Since then the Bank of Japan balance sheet has swelled from 30% of GDP to 95%!”

Abenomics: Bat-Shit-Crazy (Muir)

Between 1999 and 2012, the Bank of Japan increased their balance sheet threefold, raising it from 10% of GDP to 30%. Many a pundit screamed about Japan’s irresponsible monetary policy, but then the 2008 Great Financial Crisis hit, and suddenly the BoJ’s policies didn’t seem that extreme. The Fed embarked on a massive quantitative easing program, followed by most of the rest of the developed world. Next thing you knew, the Bank of Japan’s bloated balance sheet seemed like just one of many. Post GFC, the rate at which these other Central Banks were expanding their balance sheet put extreme stress on the Japanese economy as the BoJ’s relatively tame quantitative easing policy was overwhelmed by the rest of the world. Global deflation was exported to Japan. And just when things couldn’t get worse, Japan was hit by the tsunami/nuclear disaster.

Paradoxically, this caused a spike in the USDJPY rate down to 75, with the Yen hitting an all-time high value against the US dollar. This proved the final straw for the Japanese people, and Prime Minister Abe was elected on a platform of breaking the back of deflation through innovative extreme policies. And just like that, Abeconomics was born. Since then the Bank of Japan balance sheet has swelled from 30% of GDP to 95%! It’s too easy to take this for granted. The blue tickets just seem to keep coming, and coming, and coming. Pretty soon, it all seems so normal. But it isn’t. Not even close. This is bat-shit-crazy monetary expansion. Forget about arguing whether it is appropriate or needed. It doesn’t matter. The markets don’t give a hoot about your opinion. Nor does the BoJ. Heck, they barely even care what Yellen or Trump thinks.

They are going to do what they think best for their people, and that means inflating the shit out of their currency. What I find amazing is how complacent the markets have become about all of this. Sure when Abeconomics first came to pass there were tons of worrisome hedge fund presentations about the inevitability of disaster. But since then Kyle Bass and all the other Japan skeptics have moved on to China, or to the most recent hedge-fund-herding-theme-of-the-day. Yet at one point a few years back a reporter asked Kyle if he could put on one trade for the next decade and couldn’t touch it, what would it be? Bass answered gold denominated in Yen. I have this sneaking suspicion our favourite Texas hedge fund manager’s call was way more prescient than even he imagines (I just hope Kyle hasn’t taken it all off to bet on the China collapse.)

Read more …

At the very least the topic warrants a serious discussion. Just saying Stephanie’s crazy is not that.

Congress Can Give Every American A Pony (Kelton)

In her new book, Hillary Clinton mocks Sen. Bernie Sanders’ populist agenda. BERNIE: I think America should get a pony. HILLARY: How will you pay for the pony? You might find Clinton’s question intuitively reasonable. If you promise to fight for big things, then you should draw a detailed road map to the treasure chest that will fund them all. After all, the money has to come from somewhere. But what if I told you that your intuition was all wrong? What if it turned out that the government really could give everyone a pony — and a chicken and car? That is, so long as we could breed enough ponies and chickens and manufacture enough cars. The cars and the food have to come from somewhere; the money is conjured out of thin air, more or less.

When Clinton asks where the money will come from, she’s ordering the government’s fiscal operations like so:
1. Government collects money from us in the form of taxes (T)
2. Government figures out how much it wants to spend and then borrows any additional money it needs (B)
3. Government spends the money it has collected (S)

Since none of us learned any differently, most of us accept the idea that taxes and borrowing precede spending – TABS. And because the government has to “find the money” before it can spend in this sequence, everyone wants to know who’s picking up the tab. There’s just one catch. The big secret in Washington is that the federal government abandoned TABS back when it dropped the gold standard. Here’s how things really work:
1. Congress approves the spending and the money gets spent (S)
2. Government collects some of that money in the form of taxes (T)
3. If 1 > 2, Treasury allows the difference to be swapped for government bonds (B)

In other words, the government spends money and then collects some money back as people pay their taxes and buy bonds. Spending precedes taxing and borrowing – STAB. It takes votes and vocal interest groups, not tax revenue, to start the ball rolling. If you need proof that STAB is the law of the land, look no further than the Senate’s recent $700-billion defense authorization. Without raising a dime from the rest of us, the Senate quietly approved an $80-billion annual increase, or more than enough money to make 4-year public colleges and universities tuition-free. And just where did the government get the money to do that? It authorized it into existence.

Read more …

The future inside all housing bubbles. And there are more of those than anyone acknowledges.

Homeowners Face Double Whammy Of Interest Rates And Slumped Market (Ind.)

Homeowners are facing a twin blow of increased mortgage payments and a slowing housing market, with London prices falling for the first time in eight years. Across the UK the average price of a home increased at its slowest slowest pace in more than four years in September, Nationwide said on Friday. The news came shortly after Bank of England governor Mark Carney gave his clearest signal yet that the central bank’s Monetary Policy Committee would raise its benchmark interest rate from 0.25%. “What we have said, that if the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates would increase somewhat,” he told BBC Radio 4’s Today Programme, on Friday. A rate hike would mean more expensive home loans for homeowners who have grown used to ultra-low interest rates.

The MPC meets on 2 November to make its decision and a rate rise would be the first in more than a decade. Any increase is expected to be small but would place additional strain on households already stretched amid higher inflation and weak wage growth. A 0.25% rise would mean a person with a £200,000 mortgage on the average UK variable rate of 4.6% would pay an extra £28.72 per month. An increase of 1% would add an extra £117.10 to payments, though this scenario is not expected to become a reality in the short term. Higher payments could prove painful for homeowners, especially as the housing market begins to stutter. London house prices fell 0.6% in the year to September, Nationwide said – the first annual drop since the aftermath of the financial crisis in 2009. It was the first time since 2005 that London was the worst performing region in the country.

Read more …

Centralization is dead.

ECB Wants to Weed Out Smaller Banks to Cut Competition (DQ)

The biggest financial problem in Europe these days is that it is “over-banked,” according to Daniele Nouy, Chair of the ECB’s Supervisory Board, and thus in charge of the Single Supervisory Mechanism, which regulates the largest 130 European banks. In a speech bizarrely titled “Too Much of a Good Thing: The Need for Consolidation in the European Banking Sector,” Nouy blamed fierce competition for squeezing profits for many of Europe’s banks while steadfastly ignoring the much larger role in the profit squeeze played by the ECB’s negative-interest-rate policy. ECB President Mario Draghi agrees. The profits of the largest 10 European banks rose by only 5% in the first half of 2017, compared to 19% for the US banks, which benefited from higher interest rates, stronger capital markets, better capitalization, and larger market shares, according to a new report by Ernst and Young.

In its latest annual health check of European banks, Bain Capital found that 31 institutions, or 28% of the 111 financial institutions they assessed, are in the “high-risk” quadrant. Location seemed to be a far more important factor than size. Banks in Italy, Greece, Portugal and Spain have become “a breed apart in continued distress,” the report said, adding: “Every single bank that has failed in the past decade and for which there are financial statements available…fell into this quadrant before their demise.” Scandinavian, Belgian, and Dutch banks figured prominently among the 38% of the banks that attained the strongest position, outperforming on virtually all financial indicators. By contrast, many German and UK banks fell into the second category, that of “weaker business model.” In fact, virtually all the large German names fit into this category as their profitability and efficiency languish at levels comparable with their Greek counterparts.

They include Deutsche Bank, which in the midst of its third revamp in so many years, just reported its worst revenues in three and a half years. Deutsche Bank is far from alone. The dismal reality is that nine long years after the global financial crisis began, many systemic European banks pose as big a risk to the financial system, if not bigger, as they did back then. The only major difference is that now they’re hooked on Draghi’s myriad monetary welfare schemes (LTRO, TLTRO I and II…), which have managed to keep them afloat even as the ECB’s monetary policy puts a massive squeeze on their lending margins by driving interest rates to unfathomably low levels. But rather than raising interest rates — a scary thought given how major Eurozone economies like Italy and Spain have come to depend on QE to keep servicing their public debt — the ECB plans to reduce competition in the banking sector by weeding out smaller banks.

It’s a process that is already well under way, as Nouy explained in her speech: “Since 2008, the number of banks in the euro area has declined by about 20%, to around 5,000. And the number of bank employees has fallen by about 300,000, to 1.9 million. Total assets of the euro area banking sector peaked in 2012 at about 340% of GDP. Since then, they have fallen back to about 280% of GDP.” But this is not about shrinking the size of the banking sector; it’s about shrinking the number of players within it and in the process creating trans-European banking giants. To achieve that goal, all Europe needs are “brave banks” that are willing to conquer new territory: “Cross-border mergers would do more than just help the banking sector to shrink. They would also deepen integration. And this would take us closer to our goal of a truly European banking sector.”

Read more …

Time for Merkel to stop cozying up to carmakers.

VW’s Dieselgate Bill Hits $30 Billion After Another Charge (R.)

Volkswagenis taking another $3 billion charge to fix diesel engines in the United States, lifting the total bill for its emissions test cheating scandal to around $30 billion. Shares in the German carmaker fell as much as 3% on Friday, as traders and analysts expressed dismay the company was still booking charges two years after the scandal broke. “This is yet another unexpected and unwelcome announcement from VW, not only from an earnings and cash flow perspective but also with respect to the credibility of management,” said Evercore ISI analyst Arndt Ellinghorst. Europe’s biggest automaker admitted in September 2015 it had used illegal software to cheat U.S. diesel emissions tests, sparking the biggest business crisis in its 80 year history. Before Friday, it had set aside 22.6 billion euros ($26.7 billion) to cover costs such as fines and vehicle refits.

On Friday, it said hardware fixes were proving tougher than expected, as it booked an additional 2.5 billion euro provision. “We have to do more with the hardware,” a VW spokesman said, adding U.S. customers were having to wait longer for their cars to be repaired. The news relates to the program to buy back or fix up to 475,000 2 liter diesel cars. In Europe, where only a software update is required for the 8.5 million affected cars, besides a minor component integration for about 3 million of those, fixes are running smoothly, the spokesman added. The additional provision will be reflected in third-quarter results due on Oct. 27, VW said. Ellinghorst, who has an “outperform” rating on VW shares, expects the company to report third-quarter group earnings before tax and interest of €4.04 billion. “You have to ask if this is a bottomless pit,” said one Frankfurt-based trader of the U.S. charges.

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Something needs to stop it.

Could Ryanair’s ‘Pilotgate’ Spell The End Of Cheap Flights? (Ind.)

Ryanair has apologised to 800,000 passengers for cancelling their flights because of a pilot shortage, and then misleading them about their rights. But an obligation to meet travellers’ out-of-pocket expenses has raised fears that airlines’ costs – and fares – could soar because of demands for recompense. Airlines who cancel flights appear to have an open-ended liability for out-of-pocket expenses, which could include anything from tickets for an FC Barcelona Champions’ League football match to lost wages. The payments are additional to EU requirements to cover hotel rooms and meals connected with flight disruption. Costs could feed through to more expensive tickets – which, with supply reduced because of mass cancellations by Ryanair, are already rising.

[..] The Civil Aviation Authority (CAA) had demanded a statement from Ryanair explaining its obligations under European passengers’ rights rules. The airline complied shortly before the 5pm deadline. The statement explains in unprecedented detail the options open to passengers whose flights are cancelled: a Ryanair flight, if one is available on the same route on the same or next day; a Ryanair flight from a nearby airport; a flight on one of Ryanair’s seven “disruption partner airlines”, including easyJet, Jet2, Aer Lingus and Norwegian; or “comparable alternative transport” by air, rail or road. Europe’s biggest budget airline also promises to “reimburse any reasonable out-of-pocket expenses incurred by customers as a result of these flight cancellations”.

Passengers who have already accepted a refund or alternative Ryanair flight are able to reconsider, while those who have booked on a rival airline can claim the difference in fare paid. The improved offer to passengers could double Ryanair’s previous estimate of €50m in extra costs because of the debacle. This represents less than 5% of its expected full-year profit. But the obligation to refund “any reasonable out-of-pocket expenses” could add significantly more. “This could open the floodgates to claims,” said one senior aviation executive.

[..] The move came two weeks after Ryanair began to cancel hundreds of flights at very short notice, having “messed up” rostering of pilots. It initially cancelled a tranche of 2,100 departures until the end of October, saying that its winter programme would be unaffected. But on 27 September Ryanair said it would ground 25 of its jets this winter – representing one-16th of its fleet – and cut 18,000 flights from the schedules. By giving more than two weeks’ notice of cancellations, the airline avoided the obligation to pay cash compensation. Affected passengers were emailed with two options: a refund, or re-booking on a different Ryanair flight. The option to fly on a rival airline at Ryanair’s expense was not mentioned – an omission that infuriated the CAA’s chief executive, Andrew Haines.

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“..Okefenokee Swamp of identity politics and Russia paranoia..”

Citizens United No More (Jim Kunstler)

I have an idea for the political party out of power, the Democrats, sunk in its special Okefenokee Swamp of identity politics and Russia paranoia: make an effort to legislate the Citizens United calamity out of existence. Who knows, a handful of Republicans may be shamed into going along with it. [..] corporations have not always been what they are deemed to be today. They evolved with the increasingly complex activities of industrial economies. Along the way — in Great Britain first, actually — they were deemed to exist as the equivalent of legal persons, to establish that the liabilities of the company were separate and distinct from those of its owners. In the USA, forming a corporation usually required an act of legislation until the late 19th century.

After that, they merely had to register with the states. Then congress had to sort out the additional problems of giant “trusts” and holding companies (hence, anti-trust laws, now generally ignored). In short, the definition of what a corporation is and what it has a right to do is in a pretty constant state of change as economies evolve. [..] This homework assignment should be given to the Democratic members of congress, since they are otherwise preoccupied only with hunting for Russian gremlins and discovering new sexual abnormalities to protect and defend.

The crux of the argument is that corporations cannot be said to be entirely and altogether the equivalent of persons for all legal purposes. In law, corporations have duties, obligations, and responsibilities to their shareholders first, and only after that to the public interest or the common good, and only then by pretty strict legal prescription. It may be assumed that the interests of corporations and their shareholders are in opposition to, and in conflict with, the public interest. And insofar as elections are fundamentally matters of the public interest, corporations must be prohibited from efforts to influence the outcome of elections.

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“.. we are now in a phase of Russia-gate in which NGO “scholars” produce deeply biased reports and their nonsense is treated as front-page news..”

The Slimy Business of Russia-gate (Robert Parry)

The “Field of Dreams” slogan for America’s NGOs should be: “If you pay for it, we will come.” And right now, tens of millions of dollars are flowing to non-governmental organizations if they will buttress the thesis of Russian “meddling” in the U.S. democratic process no matter how sloppy the “research” or how absurd the “findings.” And, if you think the pillars of the U.S. mainstream media – The Washington Post, The New York Times, CNN and others – will apply some quality controls, you haven’t been paying attention for the past year or so. The MSM is just as unethical as the NGOs are. So, we are now in a phase of Russia-gate in which NGO “scholars” produce deeply biased reports and their nonsense is treated as front-page news and items for serious discussion across the MSM.

Yet, there’s even an implicit confession about how pathetic some of this “scholarship” is in the hazy phrasing that gets applied to the “findings,” although the weasel words will slip past most unsuspecting Americans and will be dropped for more definitive language when the narrative is summarized in the next day’s newspaper or in a cable-news “crawl.” For example, a Times front-page story on Thursday reported that “a network of Twitter accounts suspected of links to Russia seized on both sides of the [NFL players kneeling during the National Anthem] issue with hashtags, such as #boycottnfl, #standforouranthem and #takeaknee.” The story, which fits neatly into the current U.S. propaganda meme that the Russian government somehow is undermining American democracy by stirring up dissent inside the U.S., quickly spread to other news outlets and became the latest “proof” of a Russian “war” against America.

However, before we empty the nuclear silos and exterminate life on the planet, we might take a second to look at the Times phrasing: “a network of Twitter accounts suspected of links to Russia.” The vague wording doesn’t even say the Russian government was involved but rather presents an unsupported claim that some Twitter accounts are “suspected” of being part of some “network” and that this “network” may have some ill-defined connection – or “links” – to “Russia,” a country of 144 million people. It’s like the old game of “six degrees of separation” from Kevin Bacon. Yes, perhaps we are all “linked” to Kevin Bacon somehow but that doesn’t prove that we know Kevin Bacon or are part of a Kevin Bacon “network” that is executing a grand conspiracy to sow discontent by taking opposite sides of issues and then tweeting.

Read more …

What will Barcelona look like on Monday morning?

Catalan Government Says Millions Will Turn Out For Referendum (G.)

The Catalan government has laid out its plans for the referendum on independence from Spain, claiming that more than 7,200 people will staff 2,315 polling stations across the region to stage a vote that has triggered the country’s worst territorial crisis since its return to democracy four decades ago. On Friday afternoon, the pro-independence regional government unveiled plastic ballot boxes and predicted that 60% of Catalonia’s 5.3 million eligible voters would head to the polls on Sunday in defiance of the Spanish government, the police and the courts. “Catalans will be able to vote,” said the region’s vice-president, Oriol Junqueras. “Even if someone attacks a polling station, Catalans will still be able to vote.” Junqueras gave no further details but called on people to behave responsibly and to ignore the “provocations of those who want to stop the vote”.

His words were echoed by the Catalan president, Carles Puigdemont, who told Reuters: “I don’t believe there will be anyone who will use violence or who will want to provoke violence that will tarnish the irreproachable image of the Catalan independence movement as pacifist.” On Friday afternoon, a large convoy of tractors driven by Catalan farmers and flying independence flags rolled into Barcelona to show support for the vote and to protest against moves to halt it. Both the Spanish government and the country’s constitutional court have declared the vote illegal. Over the past 10 days, the authorities have stepped up their efforts to stop the referendum, arresting 14 senior Catalan government officials, shutting down referendum websites, and seizing millions of ballot papers. Spain’s interior ministry has deployed thousands of extra police officers to the region and the infrastructure ministry announced on Friday that the airspace over Barcelona would be closed to helicopters and light aircraft until Monday.

Read more …

Nothing new.

Aid Programs Are Designed To Keep Countries In Poverty (Ren.)

The income gap between rich countries and poor countries is not diminishing. It has been increasing dramatically, and not only during colonialism. Since the 1960s, the income gap between north and south has tripled. “There’s something fundamentally wrong and it won’t be changed with a bit of aid here in there,” Hickel says. “We need to fundamentally restructure the global economy and make it fair.” Hickel’s central thesis is that there is nothing natural about poverty. His book examines structurally determined behaviour, designed in fact, to deliver the poverty outcomes we witness around the world. “One of the dominant understandings out there that I seek to question in the book is the idea that rich countries are giving aid to poor countries in any meaningful quantity,” he says.

“In fact there is a lot of aid given – it’s about $130 billion per year transferred from rich countries to poor countries. That’s an enormous amount of money.” Some of the money comes in the form of charity. A lot of it in the form of loans, with debt strings – and conditions – attached. “A lot of the aid that’s given comes with conditions attached that the recipients of the aid have to implement certain economic policies, or have to votes with the donor country in UN agreements and so on,” says Hickel. “There’s no free lunch.” “But even if we assume that there was a free lunch, that $130 billion dollars are really being transferred for free from rich countries the poor countries, even that is misleading because in fact vastly more than that amount flows in the opposite direction – from poor countries to rich countries – for all sorts of reasons.

“The biggest one is probably illicit financial flows, most of which are in the form of tax evasion by major multinational companies operating in the global south, headquartered often in rich countries that are effectively stealing wealth, their profits from global south countries and stashing them away in tax havens because of rules written by the WTO that make this practice possible.” The World Trade Organisation basically governs the rules of global trade, for the most part, centrally. It is a very anti-democratic institution, where the vast majority of bargaining power has long been in the hands of a handful of countries which get to determine rules that end up serving their interests. “That’s one of the reasons that we see these financial flows in such magnitude,” says Hickel.

“These financial flows outstrip the aid budget by a factor of 10. So for every dollar of aid that poor countries receive, they lose 10 dollars to multinational tax havens. Another one is debt service. Poor countries pay $200 billion per year in debt service to banks in rich countries. “And that’s just the interest payments on debts, many of which have been paid-off already many times over, some of which are accumulated by legitimate dictators. That’s a direct cash transfusion from from poor to rich. That outstrips the aid budget by a factor or two.”

Read more …

Aug 052017
 
 August 5, 2017  Posted by at 8:54 am Finance Tagged with: , , , , , , ,  


Pablo Picasso Absinthe Drinker 1901

 

The Body Language of Power (Handelsblatt)
Let This Be Your Final Warning On US Stocks’ Overvaluation (MW)
Beneath The Glow Of Stock-Market Records Lurk Darkly Bearish Trends (MW)
Albert Edwards: Central Banks To Blame For Impending Disaster (CW)
Paul Singer Rages Against Everything From Passive Investing To Safe Spaces (ZH)
The Amazon Effect: Part Time Jobs Soar By 393K, Full Time Jobs Slide (ZH)
Where The Jobs Were: Waiters And Bartenders Topped The List (ZH)
Volkswagen Executive Pleads Guilty In US Emissions Cheating Scandal (R.)
Krauthammer Warns Impeachment Would Be “A Catastrophic Mistake” (ZH)
Russiatosis (Jim Kunstler)
Greece Erasing Asylum Backlog (K.)
Italy Seizes Refugee Rescue Ship (Ind.)

 

 

Germans making fun of Trump and lauding Merkel. What else can they do? She’s as strong as ever. That’s why I added a second picture at the bottom. But someone should write “The Dark Side of Merkel”.

The Body Language of Power (Handelsblatt)

Much about her unique style of power was already evident at the very moment she was closing in on the office of chancellor. It occurred on German television shortly after eight in the evening of September 18, 2005. Germans had just voted, and the polls showed Ms. Merkel’s center-right bloc falling far short of expectations with a tiny lead at 35 percent. The Social Democrats led by the incumbent chancellor Gerhard Schröder were in effect tied at 34 percent. As is customary in Germany, all the parties’ leaders gathered with two journalists to take stock on air. Ms. Merkel, with much larger hair than today, was the only woman among seven men. In the German parliamentary system, various coalition options were still open for either Mr. Schröder or Ms. Merkel to control a majority of the Bundestag. So Mr. Schröder, whom the German press called an “alpha animal”, decided to create facts on the ground.

He burst out with a forceful verbal barrage, insinuating that the moderators were biased, asserting that he was the real winner and disparaging Ms. Merkel. Constantly interrupting all his interlocutors as though in some dominance ritual, he blurted out, “Do you seriously think that my party will take up an offer of coalition talks from Ms. Merkel in this situation, in which she says she wants to be chancellor?” The other men in the round were not his primary targets, but they spent the following 40 minutes sparring with him. Ms. Merkel’s reaction was more interesting. Whenever the camera strayed from the dueling silverbacks and zoomed in on her, she had a neutral expression, or a look of mild puzzlement, but never one of anger or annoyance. Her hands mostly stayed folded on the table in front of her. She hardly spoke at all. In effect, she responded to Mr. Schröder by not reacting.

In the following hours and days, Mr. Schröder’s political career collapsed, as all of Germany wondered what demon had got into him. In at least one interview, he later had to deny that he was drunk during the debate. Meanwhile, Ms. Merkel quietly began coalition negotiations that led her to be sworn in as chancellor two months later, with the Social Democrats as her junior partners. Something had revealed itself that day on television between Mr. Schröder and Ms. Merkel. “When he entered the room, she had lost the election. When he left, she had won the chancellor’s office,” recalls Wolfgang Nowak, a former adviser to Mr. Schröder, who nowadays also has the ear of Ms. Merkel. “Nobody is like her,” says Gregor Gysi, who was opposition leader in parliament for much of Ms. Merkel’s current term. Mr. Gysi is widely considered the wittiest speaker in German politics, and his job in the Bundestag was to needle and provoke the chancellor. But all of his attacks fell flat. Merkel never took his baits; he never got a rise out of her.

Mr. Gysi, now retired, does not contest the point. Ms. Merkel, he says, reminds him of his experience in the 1970s, when he was a lawyer in the East German dictatorship. During interrogations he could always crack the men, he says, but against a certain kind of woman he had “no chance”, provided they did not make the mistake of trying to be like men. Hillary Clinton made that mistake, Mr. Gysi says. She blew a presidential election in America against a man who is almost comical in his pseudo-virility. By contrast, Mr. Gysi says, “Merkel’s secret is that she has found a method against the men, but the men have found no method against her.” “Merkel gets stronger by letting the men be men,” Mr. Nowak agrees. Many of these encounters resemble that televised encounter with Mr Schröder. “She let him do all his wrestling poses,” recalls Mr. Nowak. And in the end the macho always throws himself on the mat, with her left standing.


The flipside. Pic posted on Twitter with caption: “Don’t play with superglue”

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“People on Wall Street always tell you “this time is different,” but it never has been yet.”

Let This Be Your Final Warning On US Stocks’ Overvaluation (MW)

The Shiller PE [..] compares stocks against the average earnings of the past 10 years, rather than just one year, as Wall Street likes to do. The argument is that longer-term measures smooth out the distortions of booms and busts. Shiller has tracked his data back to 1881. The stock market’s average reading has been about 16 over that time. But that’s masked a wide range, from the single digits all the way up to 45 in early 2000. Critics sometimes like to argue that the reading of late has been distorted because it includes the abysmal corporate earnings during the 2008-2009 crash. So I decided to exclude those, and just compare stock prices to the average of the past five years, rather than 10, to see how that affected the measure. And, yes, it does. But it only cuts the reading from 31 to 25.5.

For reference, it’s only reached a level of about 25 on five previous occasions: 1901, 1928-9, 1966, 1996-2002 and 2003-2007. Each one ended with a crash. People on Wall Street always tell you “this time is different,” but it never has been yet. The “new era” of the 1920s, the “Nifty Fifty” stocks of the 1970s, the “new economy” of the 1990s. Investors in those eras have been told to ignore the lessons of the past and look only to the bright and unprecedented future. Each time they’ve lost their shirts. Other metrics with long-term records are also flashing yellow or red. Those include the so-called Tobin’s q, which compares stock valuations to how much it would cost to rebuild all those companies from scratch; and the Warren Buffett indicator, which compares the value of the stock market to the size of the national economy. (Buffett himself has somewhat backed away from that measure recently.)

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“As the indexes continue to produce a series of higher highs, subsurface conditions are painting an entirely different picture..”

Beneath The Glow Of Stock-Market Records Lurk Darkly Bearish Trends (MW)

Major U.S. stock-market indexes are trading near record levels, but does that statistic simply mask an ominous picture that’s being painted behind the scenes? Market breadth, a measure of how many stocks are rising versus the number that are dropping, has turned “exceedingly negative,” according to Brad Lamensdorf, a portfolio manager at Ranger Alternative Management. Lamensdorf writes the Lamensdorf Market Timing Report newsletter and runs the AdvisorShares Ranger Equity Bear, an exchange-traded fund that “shorts” stocks, or bets that they will fall. “As the indexes continue to produce a series of higher highs, subsurface conditions are painting an entirely different picture,” Lamensdorf wrote in the latest edition of the newsletter. He noted that the year-to-date advance in equities — the S&P 500 is up 10.6% in 2017 — has been driven by outsize gains in some of the market’s biggest names.

Most notably, the so-called FAANG stocks, which refers to a quintet of technology and internet names, have by themselves contributed more than 28% of the benchmark index’s gain. Separately, megacap names like Boeing and Johnson & Johnson have also outperformed the broader market. “The good performance of these large companies is masking the fact that many stocks, including REITs and those in the retail sector, have already entered bear-market territory,” Lamensdorf wrote, referring to real estate investment trusts. According to an analysis of FactSet data, 79 components of the S&P 500 are trading at least 20% below their 52-week high; a bear market is typically defined as a 20% drop from a peak. However, more than half the components are in what could be deemed bull market territory — at least 20% above their 52-week low.

Lamensdorf also cited a measure that compares market volume on advancing days to volume on days when the major indexes decline. This is a volatile metric, one that has both spikes and pronounced dips. However, since mid-2016, the spikes have topped out at progressively smaller highs. “This situation has occurred while the indexes have simultaneously hit higher highs; a classic negative divergence illustrating that large institutional sponsorship has not been following the indexes,” he wrote.

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Wait. Wasn’t that my line?

Albert Edwards: Central Banks To Blame For Impending Disaster (CW)

Notoriously bearish strategist Albert Edwards believes the UK is sitting on a ‘massive credit bubble that is primed to burst’ as another recession looms. The Société Générale global strategist said the recent sharp decline in household saving ratios (SR) in the UK and the US was last seen in 2007 just before the global financial crisis. This week, the US saw a substantial downward revision to its SR, with 1.5% lopped off the estimates taking the ratio to 3.8%, a level which Edwards claimed was last seen prior to the recession. In the UK, household SR slumped in the first quarter of this year to 1.9%, which he said was ‘shockingly low’. He said: ‘I’m genuinely getting tired of bashing the major central banks, but every day more evidence mounts that almost exactly the same debt excesses that caused the global financial crisis in 2008 are present today.

‘The UK Bank of England and US Federal Reserve deserve particular vilification for failing to remove the monetary punchbowl quickly enough just like the 2003-2007 period, allowing grotesque debt excesses to build.’ Edwards previously said he believed the US corporate sector ‘borrowing binge’ will take ‘centre stage in the next credit crisis’, but now thinks the household sector will play a bigger part thanks to the latest SR data. Blaming the Fed, he said: ‘QE has not only inflated corporate debt to grotesque levels, but finally the US SR has responded to the surge in household paper wealth that QE has produced. ‘Typically the SR always declines with rising wealth. Why do you need to bother saving if interest rates are close to zero and house and stock prices are rising?’

Edwards also believes the Bank of England (BoE) should have normalised rates ‘long ago’ and thinks it is ‘100%’ the BoE’s ‘own responsibility’ if credit growth spirals out of control. Comparing the UK to SR data from other European countries, Edwards said huge swings in the SR, representing credit booms and busts, are most apparent in the UK – ‘especially relative to the stability of somewhere like France.’ He added: ‘But the recent decline in the UK SR is almost without historical precedent. It is a credit disaster waiting to happen.’

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“..most fiscal and monetary policymakers’ knowlege of the world is somewhere between “close to nothing” and “way less than zero..”

Paul Singer Rages Against Everything From Passive Investing To Safe Spaces (ZH)

On Central Bankers: The combination of central banker-applied brute force (buying everything in sight) and deity-like central banker pronouncements has dampened market volatility and frisky free-lancing, but at the same time it has encouraged risk taking (in market positioning, not it business formation). We have thought, and still think, that confidence in central banks and policymakers has been unjustified and thus could erode or collapse at any time. Since the major financial institutions which comprise the financial system are still way overleveraged and opaque (in fact with record amounts of debt and derivatives at present), such a break in confidence could happen abruptly and without warning. Investors should come to grips, intellectually and viscerally, with the likelihood that most fiscal and monetary policymakers’ knowlege of the world is somewhere between “close to nothing” and “way less than zero,” and that their pronouncements and policies usually range from “silly but harmless” to “dumb and dangerous.

On whether labor markets are tight: Short answer: no. Programs which foster long-term dependency are not creating social justice; rather, they are creating demeaned citizens and preventing people from experiencing the dignity and contribution to society of work. Given record stock prices and low unemployment rates, the slow rate of increases in wages is “surprising.” But it clearly demonstrates that there is something wrong with the existing prosperity-delivering mechanism. In this regard, America is catching up (but not in a good way) with Europe, which long has lived with much higher rates of unemployment and long-term dependency.

On Chinese Debt: In response to the world economic slowdown after the GFC, China undertook a large debt-fueled stimulus. In 2008, it had a non-financial sector debt-to-GDP ratio of 141% or $6.6 trillion; by 2016 that number was 257% or $27.5 trillion. Combined with wild real estate booms and overbuilding, plus an unhealthy dose of corruption and severe neglect in “rule of law” infrastructure, a serious economic dislocation (or crash) is the obvious (but not necessarily correct) expectation based on the numbers, the leverage, the interconnectivity and the likely quality of debt. A Chinese financial market collapse would likely push the global economy into a deep recession.

Whether they will succeed or fail is completely unknown as this letter is written. A reasonable conclusion about China is that it is foolish to ignore the signs of developing storm but also ill-advised to put a “clock” on it or deem it to be inevitable. Our instinct is that close to perfection will be required to avoid a very painful sequence of events in the global financial system and hence the world economy.

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Still haven’t got a serious way to measure job quality. A job is a job is a job is nonsense.

The Amazon Effect: Part Time Jobs Soar By 393K, Full Time Jobs Slide (ZH)

On the surface the July jobs report was solid, with 209K jobs added, more than the expected, as the recent auto sector slowdown appears to skip the labor market (for now), with Trump quick to take credit for the report. However, digging through the numbers reveals some troubling features: while the Household survey reported that an impressive 345K jobs were added, more than 50% higher than the Establishment survey, the bulk of these jobs was part-time. According to the BLS, in July 393,000 part time jobs were added, offset by a drop of 54,000 full-time workers.

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Most jobs now go to people with high school or less.

Where The Jobs Were: Waiters And Bartenders Topped The List (ZH)

We already showed that contrary to the strong headline payrolls print, the sole source of job gains in July was part-time jobs, which rose by 393K in the month, the biggest monthly increase since September 2016, as full-time jobs sunk by 54K. Which is why it should not surprise that of the 209K jobs added according to the Establishment survey, the sector that added the most jobs was the “food services and drinking places”, i.e. “waiters and barenders” category, which added 53,000 jobs, the highest monthly increase since March 2014. There have now been 89 consecutive months without a decline for waiter and bartender jobs, the strongest sector for US employment. Needless to say, these jobs fall within leisure and hospitality, that sector pays the worst wages, an average of $13.35 an hour, and $331.08 a week.

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Will the others pick a plea deal as well now?

Volkswagen Executive Pleads Guilty In US Emissions Cheating Scandal (R.)

Volkswagen executive Oliver Schmidt pleaded guilty on Friday in U.S. District Court in Detroit in connection with a massive diesel emissions scandal that has cost the German automaker as much as $25 billion. Under a plea agreement, Schmidt faces up to seven years in prison and a fine of between $40,000 and $400,000 after admitting to conspiring to mislead U.S regulators and violating clean air laws. Schmidt will be sentenced on Dec. 6. In March, Volkswagen pleaded guilty to three felony counts under a plea agreement to resolve U.S. charges it installed secret software in vehicles to evade emissions tests. U.S. prosecutors have charged eight current and former Volkswagen executives.

Earlier this year, Schmidt was charged with 11 felony counts and federal prosecutors said he could have faced a maximum of up to 169 years in prison. As part of his guilty plea, prosecutors agreed to drop most of the counts and Schmidt has consented to be deported at the end of his prison sentence. After being informed of the existence of the emissions software in the summer of 2015, according to the agreement, Schmidt conspired with other executives to avoid disclosing “intentional cheating” by the automaker in a bid to seek regulatory approval for its model 2016 VW 2 liter diesel vehicles. During the period in question, Schmidt was working at the companys Wolfsburg, Germany, headquarters as one of three subordinates to the head of engine development. He was arrested when he traveled to the United States in early January.

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“..if you think a man is unfit, you vote against him. But you don’t remove him from office..”

Krauthammer Warns Impeachment Would Be “A Catastrophic Mistake” (ZH)

“I think [impeaching Trump] would be a catastrophic mistake,” warned outspoken conservative, and Fox News contributor, Charles Krauthammer, noting that there’s no evidence Trump has committed any crime. As The Hill reports, Krauthammer stressed that he doesn’t defend Trump, but only thinks that impeachment is a mistake. “Again, I think he’s unfit,” Krauthammer said, “but that’s not the grounds for removal.” “I don’t think he’s very well fit for the presidency. But fitness is not a reason for impeachment and removal.” Crucially, Krauthammer notes, as demonstrated by last night’s rally in West Virginia… Trump’s base is still firmly behind him and worries “I think we’re really headed into very choppy and dangerous constitutional waters” “Here’s a guy whose numbers are down in the 30s,” Krauthammer said on Fox News’s “Tucker Carlson Tonight.”

“He’s got this grand jury, reports of a grand jury being convened, he’s got the walls kind of closing in on him in Washington. And here he’s going out into the country and saying ‘These are my people. These are real people. Forget about the numbers. Forget about the chatter in Washington. Forget about the stories about Russia – which he spent a lot of time on – but I represent a huge constituency of tremendous support and enthusiasm.’” Townhall notes that Krauthammer then stressed the importance of our democratic process. “Again, I think he’s unfit but that’s not the grounds for removal,” Krauthammer said. What it means is, if you think a man is unfit, you vote against him. But you don’t remove him from office and that’s where I’m afraid we are headed given the forces that are surrounding the president. I just hope that cooler heads prevail. There will be another election – there always are – people can make their choices.”

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“All of this psychotic political behavior screams for the rise of a new party, or more than one new party..”

Russiatosis (Jim Kunstler)

So what exactly was Mr. Trump thinking when he signed the “deeply flawed” (his words) Russian Sanctions bill coughed up like a hairball by congress? It’s a ridiculous piece of legislation from any angle. It limits the president’s own established prerogatives for negotiating with foreign nations (probably unconstitutionally), and will only provoke economic warfare (at least) against the US that can easily lead to shattering global trade relations entirely. Some observers say he had to sign it because the vote for it in congress was so overwhelming (419 to 3) that they would only override a Trump veto. But the veto would have had, at least, symbolic value in the Jacksonian spirit that Trump pretended to want to emulate at the outset of his term. Perhaps he sees the Deep State endgame and is tired of resisting.

On the home front, Russia paranoia is at the center of Robert Mueller’s intensifying probe of Trump and his political associates as he calls a federal grand jury to hear testimony — which implies that he some lined up. This opens up all kinds of opportunities for prosecutorial mischief, for instance going after every business transaction Trump made as a private citizen before he ran for president, and coercing Trump intimates into immunization deals in exchange for testimony, real or cooked-up, to enable the establishment’s ultimate goal of shoving Trump out. The “Russian meddling in our election” story hasn’t produced any credible evidence after a full year — and speaking to foreign diplomats is not a crime — but the Russian meddling juggernaut rolls on perfectly well, and might accomplish its ends, without it.

Just repeating “Russian meddling” five thousand times on CNN has surely induced many poorly-informed citizens to believe that Russia changed the numbers in American voting machines though, in fact, voting machines are not connected to the Internet. All of this psychotic political behavior screams for the rise of a new party, or more than one new party, composed of men and women who have not lost their minds. I’m sure they’re out there. Plenty of traces on the Internet attest to the existence of a higher and better political consciousness in this country. It just hasn’t found a way to congeal. Yet.

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It’s still a godalmighty mess. And we can thank Merkel for that, too.

Greece Erasing Asylum Backlog (K.)

Greece has taken a significant step toward restoring the credibility of its asylum system as – according to the latest data from sources within the Migration Policy Ministry – authorities have processed 97.5 percent of a backlog of about 84,000 claims submitted under the old procedure in place before 2011. Progress has been achieved mostly thanks to an amendment to Law 4375/2016. Adopted in the wake of an EU-Turkey deal aimed at stemming the flow of migrants into Europe, the law introduced a series of changes to the institutional framework. Now applicants for international protection who lodged a claim more than five years ago, have a pending appeal and possess a valid asylum seeker’s permit are granted a residence permit on humanitarian grounds. The measure affects about 800 cases.

“It’s a fair decision as these people have lived in the country for many years with no final decision on their cases without it being their fault. They have become integrated and grown ties with Greece and the people. Some may have even made a family here,” Maria Stavropoulou, head of the Greek Asylum service, told Kathimerini. “It would be harsh and unfair to demand after all those years that these people return to their country of origin,” she said. With the same amendment that was voted in Parliament early last week, individuals with pending appeals under the old system who have not appeared before the Greek authorities to renew their asylum-seeker permit for a minimum of eight months are considered to have implicitly withdrawn their applications – and their claims are thereby discontinued.

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Another case of non-existent collusion, played out in the media for political reasons.

Italy Seizes Refugee Rescue Ship (Ind.)

Italian authorities have seized a refugee rescue ship operated by a German charity over allegations volunteers had contact with Libyan smugglers. Prosecutors in Trapani said an investigation started in October had uncovered evidence suggesting that the Iuventa was used “to aid and abet illegal immigration”. The vessel, operated by Jugend Rettet, was seized on the island of Lampedusa on Wednesday after it was ordered to take rescued migrants to shore there and its crew have been interviewed by police. Ambrogio Cartosio, a public prosecutor from Trapani, said there was evidence some members had contact with smugglers during one incident in September and two others in June. “There were contacts, meetings, understandings,” between the group’s boat and the smugglers, he said.

The prosecutor alleged that migrants were “handed over” to the Iuventa by smugglers rather than being “rescued”, and later transferred to other ships to be taken ashore in Italy. “The evidence is serious,” Mr Cartosio said. “We have evidence of encounters between traffickers, who escorted illegal immigrants to the Iuventa, and members of the boat’s crew.” But the prosecutor stressed that there was no evidence of Jugend Rettet receiving any money from Libyan traffickers and no indication of a wider conspiracy between the two groups – a favourite theory of the European far-right. “My personal conviction was that the motive is humanitarian, exclusively humanitarian,” Mr Cartosio said. “It would be fantasy to say there was a coordinated plan between the NGOs and the Libyan traffickers.”

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Jan 092017
 
 January 9, 2017  Posted by at 10:34 am Finance Tagged with: , , , , , , , , , ,  


AFP Photo/Johannes EISELE Giant Trump Chicken

Locating Fascism on the Home Map (Ford)
‘The Bull Market Is In Its Final Inning’ (CNBC)
Chinese Warns Trump: End One China Policy And China Will Take Revenge (R.)
It’s Gonna Be Huge: China Factory Hatches Giant Trump Chickens (AFP)
How Meaningful Will China “Opening Up” Markets To Foreigners Be? (BBG)
China Tightens Rules After Anti-Corruption Staff Caught Up In Graft (R.)
China’s Pyrrhic Growth Victory Spurs 2017 Shift To Contain Risks (BBG)
The Rise, Fall and Comeback Of China’s Economy Over The Last 800 Years (BI)
Australia Predicts Dramatic Fall In Iron Ore Prices (BBC)
FBI Arrests Volkswagen Exec on Conspiracy Charges in Emissions Scandal (NYT)
UK Motorists Launch Class-Action Suit Against VW (G.)
Le Pen: I’ll Come To Brussels And Dismantle France’s Relationship With EU (EUK)
Beppe Grillo Calls For Five Star Movement Vote On Quitting Farage Bloc (G.)
New Cold Snap, Heavy Snowfall Causes Problems Across Greece (Kath.)

 

 

Hear hear!

Locating Fascism on the Home Map (Ford)

In decadence and decline, the U,S. has produced two strong strains of fascism that now vie for supremacy. The First Black President, now outgoing, represents the “cosmopolitan, global obsessed” variety of fascist. Donald Trump hails from an older fascist strain, “crude and petty, too ugly for global prime time.” At this stage in history, the two corporate parties seem incapable of producing anything other than fascists of one kind or the other.

Barack Obama was a savior – of a drowning ruling class. Under his administration, Wall Street rose from near-death to new heights of speculative frenzy, awash in capital brutally extracted from the vanishing assets and past and future earnings of the vast majority of the population, or gifted in the form of trillions in free money at corporate-only Federal Reserve windows. The Big Casino, reduced to a rubble of its own contradictions in 2008, ushered in the New Year just shy of the once-fantastical 20,000 mark. Analysts credited Donald Trump’s victory for the bankers’ bacchanal, but it was Obama who made the party possible by overseeing the restructuring of the U.S. economy to accommodate and encourage the hyper-consolidation of capital – another way to describe the deliberate deepening of economic (and political) inequality. Having accomplished the mission assigned him by Wall Street in return for record-breaking contributions to his first campaign, Obama is said to be angling for a hot-money squat in Silicon Valley, the super-rich sector that was most supportive of his presidency.

Meanwhile, Hillary Clinton is melting quicker than the Wicked Witch of the West, principally due to the failure of traditionally Democratic working (and out of work) people of all races to turn out on November 8 – a perfectly understandable response to a party and a system that offers them absolutely nothing but grief, in ever quickening increments. The merciless downsizing of the American worker is a central element of Obama’s legacy. Real wages had been frozen or declining for decades. However, economic restructuring in the Age of Obama demanded that millions of workers be crushed all the way through the floor to a lower level of hell: temporary, contract, not-really-a-job, part-time “gig” employment. If the 1930s squatter shanty-towns called “Hoovervilles” were testaments to President Herbert Hoover’s economic policies, then the maddeningly precarious, no guaranteed hours, no benefits, zero job security, fraction of a shift, arbitrarily scheduled employment of today should be called ObamaJobs. A new study by economists at Princeton and Harvard universities shows that an astounding 94% of the 10 million jobs created during the First Black President’s two terms in office were ObamaJobs.

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“Risk has been priced out of the market..”

‘The Bull Market Is In Its Final Inning’ (CNBC)

As investors await the Dow Jones 20,000 with baited breath, one widely followed chart watcher believes the current market rally is actually on its last legs. On Friday, blue chip shares in the Dow Industrial Average flirted with the psychologically charged 20,000 level, which have largely been driven higher by anticipation over President-elect Donald Trump’s business-friendly policies. Yet a few observers think the party is nearly over, and the punch bowl is about to run dry. “Risk has been priced out of the market,” said Sven Henrick of NorthmanTrader.com on CNBC’s “Futures Now.” Henrich, who is known online as the Northman Trader, said that despite the abundance of optimism on the part of investors, technical indicators could be pointing to some near-term pain.

According to the Northman’s chartwork, every time the S&P 500 Index has hit new highs, it eventually retreats back towards its 25-day moving average line, which would translate to a 4% pullback from current levels. The S&P 500 has rallied 6% since the election, and hit an intraday record high on Friday. “I would expect that at some point there would be a buying opportunity for people who may want to invest in this market,” said Henrich. “But if this line breaks, we may see significantly more downside that we’ve seen in previous corrections as well.” What’s more, Henrich also believes that the S&P 500 has continued to trade in a “bearish wedge pattern” that began just after the end of the last recession.

The wedge pattern Henrich speaks of consists of two trend lines: One that runs along the S&P’s highs and a second that runs along its lows, that look to meet sometime in 2017. It is at that point that Henrich believes the rally will have run its course, and a downside will soon follow. On a fundamental basis, the Northman Trader is troubled by “record debt levels” that the global governments have incurred. “In 2016, the U.S. government ran a deficit of over $600 billion,” explained Henrich.” “If we now add tax cuts and stimulus spending, you’re either going to have to cut a significant amount of programs somewhere, or you’re going to end up with an even larger deficit.”

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For domestic use only?

Chinese Warns Trump: End One China Policy And China Will Take Revenge (R.)

State-run Chinese tabloid Global Times warned U.S. President-elect Donald Trump that China would “take revenge” if he reneged on the one-China policy, only hours after Taiwan’s president made a controversial stopover in Houston. Taiwanese President Tsai Ing-wen met senior U.S. Republican lawmakers during her stopover in Houston on Sunday en route to Central America, where she will visit Honduras, Nicaragua, Guatemala and El Salvador. Beijing had asked Washington not to allow Tsai to enter the United States and that she not have any formal government meetings under the one China policy. A photograph tweeted by Texas Governor Greg Abbott shows him meeting Tsai, with a small table between them adorned with the U.S., Texas and Taiwanese flags. Tsai also met Texas Senator Ted Cruz.

“Sticking to (the one China) principle is not a capricious request by China upon U.S. presidents, but an obligation of U.S. presidents to maintain China-U.S. relations and respect the existing order of the Asia-Pacific,” said the Global Times editorial on Sunday. The influential tabloid is published by the ruling Communist Party’s official People’s Daily. Trump triggered protests from Beijing last month by accepting a congratulatory telephone call from Tsai and questioning Washington’s commitment to China’s position that Taiwan is part of one China. “If Trump reneges on the one-China policy after taking office, the Chinese people will demand the government to take revenge. There is no room for bargaining,” said the Global Times.

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“..mimic his signature hand gestures with their tiny wings.”

It’s Gonna Be Huge: China Factory Hatches Giant Trump Chickens (AFP)

A Chinese factory is hatching giant inflatable chickens resembling Donald Trump to usher in the Year of the Rooster. The five-metre (16-foot) fowls sport the distinctive golden mane of the US president-elect and mimic his signature hand gestures with their tiny wings. Cartoon figures of animals from the Chinese zodiac are ubiquitous around Chinese New Year at the end of this month. The balloon factory is selling its presidential birds for as much as 14,400 yuan ($2,080) on Chinese shopping site Taobao for a 10-metre version.


A golden mane and tiny wings that mimic his hand gestures – the resemblence of inflatable chickens produced for the Chinese New Year to US President-elect is unmistakable (AFP Photo/Johannes EISELE)

“I saw his image on the news and he has a lot of personality, and since Year of the Rooster is coming up I mixed these two elements together to make a Chinese chicken,” factory owner Wei Qing told AFP. “It is so funny, so we designed it and tried to sell it and it turned out to be popular.” The cartoon balloon appeared to be based on a sculpture designed by US artist Casey Latiolais, which was unveiled at a shopping mall last month in Taiyuan, capital of the northern province of Shanxi. Wei said he was not aware that the American designer had created the original, but added that “there are some differences in the facial expression. And that one is glass. Ours is inflatable.”

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“If we do get any reforms this year, they are going to be Potemkin reforms. The veneer will look like they are moving to a market economy, and the reality will be anything but.”

How Meaningful Will China “Opening Up” Markets To Foreigners Be? (BBG)

China’s recent policy of opening its markets to foreigners is expected to continue this year, but there are questions about how meaningful the change will be amid a clampdown on money leaving the country. While China loosened restrictions on its interbank bond market and relaxed rules for offshore investors trading stocks, it also saw $762 billion head overseas in the first 11 months of last year, according to Bloomberg Intelligence estimates, as investors sought safety in foreign assets. That helped push the yuan down 6.5% against the dollar in 2016, the most since 1994. Seeking to stem the flow, mainland authorities tightened rules that contributed to MSCI Inc. refusing to add Chinese-listed shares to its global indexes.

China’s regulators have indicated that this year foreigners might be allowed to access commodity futures and bond derivatives, while MSCI will again consider adding mainland stocks. But concerns remain about how open China’s markets will be, especially on the issue of taking assets out of the country. The contrast highlights the tension authorities face between inviting more investment while keeping control of the financial sector. “I’d describe China’s strategy as a pipeline strategy. Essentially what they do is to create various pipelines of inflows and outflows,” said John Greenwood, London-based chief economist at Invesco Asset Management. “The problem is the flows are always in the opposite direction of what they want.”

Among last year’s steps, Beijing lifted almost all quotas on China’s interbank bond market and scrapped some constraints under the Qualified Foreign Institutional Investor program, which governs how offshore funds invest in mainland markets. The Shenzhen-Hong Kong stock exchange link, the second between the mainland and the former British colony, opened in December. Expectations then rose as an official with the People’s Bank of China said the central bank is committed to further opening the interbank market, including giving foreign investors access to foreign-exchange and interest-rate derivatives to hedge risks, and expanding trading hours. Even as China opens up to incoming funds, it has been clamping down on outflows.

Officials have banned the use of friends’ currency quotas, made it more difficult to buy insurance policies in Hong Kong and prepared restrictions on overseas acquisitions by Chinese companies. Grants of new quotas for domestic fund managers to invest overseas were frozen, according to data compiled by Bloomberg. The tightening of outflow rules makes it hard for some to say that the country is fully embracing financial reform. “We have already seen in China’s case, markets only work when they go up. You are not allowed to go down,” said Michael Every at Rabobank in Hong Kong. “If we do get any reforms this year, they are going to be Potemkin reforms. The veneer will look like they are moving to a market economy, and the reality will be anything but.”

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“500,000-plus corruption investigators..” Who are corrupt.

China Tightens Rules After Anti-Corruption Staff Caught Up In Graft (R.)

China’s top anti-corruption watchdog has tightened supervision of its 500,000-plus corruption investigators, after some of its own staff were caught in graft probes. The Central Commission for Discipline Inspection (CCDI) said in a statement on its website late on Sunday that a new regulation would be applied to procedures such as evidence collection and case reviews, without providing further details. “Trust cannot replace supervision,” the CCDI said in the statement, released after it held an annual 3-day meeting. “We must make sure the power granted by the (Communist) Party and the people is not abused,” it said.

State newspaper the China Daily, which did not indicate its sources, said the new regulation would set clear standards on how to handle corruption tips, how to handle ill-gotten assets, and would encourage audio and video recordings to be made throughout interrogations. More than 7,900 disciplinary officials have been punished for wrongdoing since 2012, the newspaper said, citing CCDI figures. Of those, 17 were CCDI staffers who were put under investigation for graft, it said. On Friday, state news agency Xinhua quoted Chinese President Xi Jinping as saying that the battle against corruption “must go deeper”, and called for the Communist Party to be governed “systematically, creatively and efficiently”.

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Stuck.

China’s Pyrrhic Growth Victory Spurs 2017 Shift To Contain Risks (BBG)

As China’s top leaders tallied the cost of another year of debt-fueled growth at a December meeting, the imperative for stability as a leadership reshuffle loomed later this year prompted an unexpected conclusion. The price was too high, the leaders agreed, according to a person familiar with the situation. The buildup of debt used to fuel smokestack industries from steel to cement had helped win the short-term battle for growth, but the triumph itself undermined the foundations of long-term expansion, the leaders decided, according to the person, who asked not to be named because the meeting was private. What followed was an order to central and local government officials that if they are forced to choose this year, stability must be the priority while everything else, including the growth target and economic reform, is secondary, said another four people familiar with the situation.

Other concerns aired at the meeting that contributed to the policy shift were the short-term risk of a confrontation with the U.S. under President-elect Donald Trump over trade or Taiwan, and longer-term challenges including how to spur the innovation needed to prevent economic stagnation as well as cleaning up toxic air that enrages and poisons citizens, said the person. Left unsaid was that economic growth underpins the legitimacy of Communist Party rule. “China’s reaching the point where it has to pick its poison and giving up a half%age point of growth would be far less politically damaging than instability in the bond or currency markets,” said David Loevinger, a former China specialist at the U.S. Treasury and now an analyst at fund manager TCW in Los Angeles. “Looking past the Party Congress later in the year, President Xi Jinping may realize that unlike his predecessor, Hu Jintao, he can’t kick the can to his successor, even more so if he plans on extending his term” beyond 2022.

At the December meeting, officials expressed alarm over the nation’s rapid accumulation of total debt, with some present noting that other nations have experienced crises after allowing debt to climb to about 300% of gross domestic product, the person said. China’s credit boom may have pushed overall debt at the end of 2016 to 265% of GDP. Also aired at the meeting was the risk that China falls into the so-called Thucydides trap, a theory attributed to the eponymous Greek philosopher that says a rising power will clash with an established force. So menacing is the array of economic and political challenges confronting the nation that some leaders at the meeting said there’s no prospect for yuan appreciation against the dollar until at least 2020, said the person. “Tapping the brakes may help avoid the economy skidding off the road,” said Frederic Neumann at HSBC in Hong Kong.

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Interesting point of view.

The Rise, Fall and Comeback Of China’s Economy Over The Last 800 Years (BI)

China’s economy led its European counterpart by leaps and bounds at the start of the Renaissance. China was so far ahead, in fact, that economic historian Eric L. Jones once argued that the Chinese empire “came within a hair’s breadth of industrializing in the fourteenth century.” At the start of the 15th century, China already had the compass, movable type print, and excellent naval capacity. In fact, Chinese Admiral Zheng He commanded expeditions to Southeast Asia, South Asia, Western Asia, and East Africa from about 1405-1433 – about a century before the Portuguese reached India. He also had ships several times the length of Christopher Columbus’ Santa Maria, the largest of Columbus’ three ships that crossed the Atlantic.

Still, it’s hard to understand the magnitude of the shift China’s economic fortunes have seen just with historical anecdotes. And so, in a recent note to clients, Macquarie Research’s Viktor Shvets included two fascinating charts showing the changes China saw over the last 800 years, which we included below. The first chart shows the estimated percent share of a given country’s economy as a part of the overall world economy. In the 15th and 16th centuries, China was about 25-30% of the global economy, but come 1950-1970, after the destruction of World War II and under the rule of Mao Zedong, it was under 5%. Today, its economy is about 17% of the global economy – roughly the same as the US.

The second chart compares GDP per capita in China, Japan, and the US to the British GDP per capita measured in 1990 US dollars. In this case, the British GDP per capita in each year is 100, so if a number from China, Japan, or the US is above 100, then its GDP per capita is greater than in Britain, and if the number falls below 100, per capita output is lower than that in Britain. As Shvets writes, on a per capita basis, China was the wealthiest part of the world in the 1200-1300s — aside from Italy. Even as late as the 1600s it was roughly on par with the Brits. However, after that, the GDP per capita relative to Britain declines all the way up to the 1970s, when it was below 10% of the British standard of living. Around 1990, it starts to pick up again, but it has yet to recover to levels seen in 1200-1600.

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And what does this say about China?

Australia Predicts Dramatic Fall In Iron Ore Prices (BBC)

Shares in Australian mining companies have fallen after the government forecasted a dramatic decline in iron ore prices. The government forecast an iron ore price of $46.70 a tonne by 2018, almost half the current level of $80. The current price is supported by resurgent demand from China. But the Department of Industry, Innovation and Science said that demand was unlikely to continue over the coming years. The department also lowered its forecast for iron ore exports by 2% to 832.2 million tonnes for the fiscal year 2016-17. Australia is the world’s biggest supplier of iron ore and shares in the country’s main mining companies fell after the report was released. Hardest hit was Fortescue Metals which fell more than 3% in early trade, while commodity giants BHP Billiton and Rio Tinto also saw their shares prices drop. In its forecast early last year, the department had predicted an iron ore price of $44.10 per tonne, but an increase in Chinese demand spurred the price to above $80.

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This guy’s been lying outright to US authorities.

FBI Arrests Volkswagen Exec on Conspiracy Charges in Emissions Scandal (NYT)

The Federal Bureau of Investigation has arrested a Volkswagen executive who faces charges of conspiracy to defraud the United States, two people with knowledge of the arrest said on Sunday, marking an escalation of the criminal investigation into the automaker’s diesel emissions cheating scandal. Oliver Schmidt, who led Volkswagen’s regulatory compliance office in the United States from 2014 to March 2015, was arrested on Saturday by investigators in Florida and is expected to be arraigned on Monday in Detroit, said the two people, a law enforcement official and someone familiar with the case. [..] In a statement, Jeannine Ginivan, a spokeswoman for Volkswagen, said that the automaker “continues to cooperate with the Department of Justice” but that “it would not be appropriate to comment on any ongoing investigations or to discuss personnel matters.”

Lawsuits filed against Volkswagen by the New York and Massachusetts state attorneys general accused Mr. Schmidt of playing an important role in Volkswagen’s efforts to conceal its emissions cheating from United States regulators. Starting in late 2014, Mr. Schmidt and other Volkswagen officials repeatedly cited false technical explanations for the high emissions levels from Volkswagen vehicles, the state attorneys general said. In 2015, Mr. Schmidt acknowledged the existence of a so-called defeat device that allowed Volkswagen cars to cheat emissions tests. Volkswagen eventually said that it had fitted 11 million diesel cars worldwide with illegal software that made the vehicles capable of defeating pollution tests. [..] James Liang, a former Volkswagen engineer who worked for the company in California, pleaded guilty in September to charges that included conspiracy to defraud the federal government and violating the Clean Air Act. But Mr. Schmidt’s arrest brings the investigation into the executive ranks.

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Settling the UK alone could cost VW £3.6 billion.

UK Motorists Launch Class-Action Suit Against VW (G.)

Thousands of British motorists have launched a lawsuit against Volkswagen over the “dieselgate” emissions scandal, in a claim that could end up costing the carmaker billions of pounds. The group of 10,000 VW owners has filed a class action lawsuit against the German car firm, seeking £30m, or £3,000 each. If VW ends up having to pay the amount to each one of the 1.2 million people in the UK who own affected cars, including its Skoda, Audi and Seat marques, it would cost the company around £3.6bn.The German firm has yet to reach a settlement with British and European owners affected by the scandal, in which the company admitted using “defeat devices” to cheat emissions tests, making its cars appears greener than they were.

It has not compensated British owners despite reaching a £15bn settlement with 500,000 US drivers, offering instead to fix affected vehicles. The class action suit, which is being led by law firm Harcus Sinclair, is expected to claim that drivers should be compensated because they paid extra for what they thought were clean diesel cars. In fact, the claimants will allege, the cars emitted far higher levels of NOx – a mixture of pollutants nitrogen oxide and nitrogen dioxide – than stated. Damon Parker, head of litigation at Harcus Sinclair, told the Daily Mail that claimants were “angry and believe that VW might get away with it”. “They feel that they have been left with no choice but to take legal action,” Parker said. “We have paved the way for consumers who trusted but were let down by VW, Audi, Seat and Skoda to seek redress through our courts.

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My guess is pollsters and media will get this as wrong as they got Brexit and Trump.

Le Pen: I’ll Come To Brussels And Dismantle France’s Relationship With EU (EUK)

Marine Le Pen announced her first foreign visit would be to Brussels to dismantle France’s relationship with the EU if elected president later this year. The National Front leader has been a long-time critic of the EU and has promised to push back the sprawling European superstate and take back sovereignty to France. The 48-year-old said: “I would go to Brussels to immediately launch negotiations allowing me to give back to the French people their sovereignty.” The right-wing leader attacked the faltering euro currency as one of the root problems of the EU and described her main economic proposals as “economic patriotism, intelligent protectionism and a return to monetary independence”. She added: “The euro is a major obstacle to the development of our economy.”

Le Pen mooted that she was in favour of maintaining a form of common currency mechanism between France and the EU to help prevent sharp currency fluctuations. Recent opinion polls predicted that Le Pen would finish second in April’s first round of voting – putting her through to the next round in a run-off against Les Repubicain’s François Fillon. If pollsters are correct, France would be guaranteed a right-wing leader after five years of left-wing leadership from Francois Hollande.

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Farage got his price, Grillo still has nothing. Weird to ally himself with Verhofstadt, but it’s how Brussels is set up: you either force yourself into some group or you don’t count.

Beppe Grillo Calls For Five Star Movement Vote On Quitting Farage Bloc (G.)

The founder of Italy’s populist Five Star Movement (M5S) has asked members to vote on splitting from a Eurosceptic bloc of MEPs co-chaired by Nigel Farage. Beppe Grillo, a comedian turned politician, said in a post on his blog that since Farage had led Ukip to Britain voting to leave the EU, the two parties no longer shared common goals and he recommended leaving the Europe of Freedom and Direct Democracy (EFDD). “Recent events in Europe, such as Brexit, have led us to reconsider the nature of the EFDD group,” Grillo wrote. “With the extraordinary success of the leave campaign, Ukip achieved its political objective: to leave the EU. “Let’s discuss the concrete facts: Farage has already abandoned the leadership of his party and British MEPs will leave the European parliament in the next legislature. Until then, our British colleagues will be focused on developing the choices that will determine the UK’s political future.”

Grillo and Farage forged an alliance over lunch in Brussels after 2014’s European elections, in which Ukip took the largest share of the vote in Britain and M5S came second in Italy after winning 17 seats. Both said at the time that the group was aimed at “restoring freedom and national democracy”, with Farage adding: “Expect us to fight the good fight to take back control of our countries’ destinies.” In a move that would see his party mesh with European liberals, Grillo has called an online referendum, scheduled for Sunday and Monday, on breaking away and instead forming a new group with the Alliance of Liberals and Democrats for Europe (ALDE), led by the former Belgian prime minister, Guy Verhofstadt, who is also the EU’s chief Brexit negotiator. Grillo has long called for a referendum on Italy’s membership of the euro currency, but not on Italy leaving the EU.

With ALDE’s 68 MEPs, the alliance could become the “third political force in the European parliament”, Grillo wrote, while pointing to the fact that his party had only voted alongside Ukip about 20% of the time within the past few years. He said the two shared values linked to “direct democracy, transparency, freedom and honesty”. “With our vote we can make a difference and influence the result of many important decisions to counter the European establishment,” Grillo added. Farage said in a statement: “In political terms it would be completely illogical for Five Star to join the most Euro fanatic group in the European parliament. The ALDE group doesn’t support referenda or the basic principle of direct democracy. ALDE are also the loudest voice for a EU army. I suspect if Five Star joins ALDE it’s support will not last long.” A Ukip spokesman said: “Both Ukip and Five Star are free to choose to stay or quit a political relationship. While it’s interesting that some Five Star MEPs adamantly wish to stay in the EFDD group, as adults we wish them all the best whatever they do.”

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The scandal spreads and deepens. Tens of millions have been handed to NGOs to prepare for winter, and they simply haven’t done it. While those of us that could make it happen don’t have the money. People have to die first?

New Cold Snap, Heavy Snowfall Causes Problems Across Greece (Kath.)

A new cold snap brought snowfall to many parts of the country, leaving the Sporades islands of Alonissos and Skopelos without a ferry connection to the mainland and the Aegean islands of Lesvos and Chios struggling to care for hundreds of migrants amid freezing temperatures. Schools remained closed in many parts of the country due to heavy snowfall, including in the northern suburbs of Athens. According to meteorologists, the bad weather is set to continue through Wednesday. From Monday evening, the cold snap is forecast to spread to eastern Macedonia, Thrace, Halkidiki, the northern Aegean, the Sporades and across Crete. Storms are also likely at sea.


Moria camp, Lesbos, Jan 7

Temperatures are set to drop to -16 degrees Celsius in western Macedonia. The icy conditions left many households in the Thessaloniki region without water as pipes froze or broke. Most schools in the region were to remain closed on Monday due to heavy snowfall and low temperatures. The cold snap has made road travel risky in many parts of the country with motorists advised to fit their cars with anti-skid chains in northern areas.


Moria camp, Lesbos, Jan 7

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Sep 192016
 
 September 19, 2016  Posted by at 9:23 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 19 2016


Jack Delano Chicago & North Western Railroad locomotive shops 1942

BIS Flashes Red Alert For a Banking Crisis in China (AEP)
BIS Warning Indicator for China Banking Stress Climbs to Record (BBG)
China Relies on Housing Bubble to Keep GDP Numbers Elevated (CNBC)
Chinese Yuan Borrowing Rate Hits Second Highest Level On Record (R.)
Oil Investors Flee as OPEC Freeze Hopes Face Supply Reality (BBG)
The Death Of The Bakken Field Has Begun (SRSrocco)
Canada To Impose Nationwide Carbon Price (R.)
1000s of VW Lawsuits To Be Filed By The End Of Monday, All in Print (BBG)
Many Car Brands Emit More Pollution Than Volkswagen (G.)
The Ongoing Collapse of Economics (Caswell)
WaPo 1st Paper to Call for Prosecution of its Own Source -After Pulitzer- (GG)
‘People’s Candidate’ Le Pen Vows To Free France From EU Yoke (AFP)
Merkel Suffers Drubbing In Berlin Vote Due To Migrant Angst (R.)
Why Won’t The World Tackle The Refugee Crisis? (Observer)

 

 

“..China’s “credit to GDP gap” has reached 30.1, the highest to date and in a different league altogether from any other major country tracked by the institution”

BIS Flashes Red Alert For a Banking Crisis in China (AEP)

China has failed to curb excesses in its credit system and faces mounting risks of a full-blown banking crisis, according to early warning indicators released by the world’s top financial watchdog. A key gauge of credit vulnerability is now three times over the danger threshold and has continued to deteriorate, despite pledges by Chinese premier Li Keqiang to wean the economy off debt-driven growth before it is too late. The Bank for International Settlements warned in its quarterly report that China’s “credit to GDP gap” has reached 30.1, the highest to date and in a different league altogether from any other major country tracked by the institution. It is also significantly higher than the scores in East Asia’s speculative boom on 1997 or in the US subprime bubble before the Lehman crisis.

Studies of earlier banking crises around the world over the last sixty years suggest that any score above ten requires careful monitoring. The credit to GDP gap measures deviations from normal patterns within any one country and therefore strips out cultural differences. It is based on work the US economist Hyman Minsky and has proved to be the best single gauge of banking risk, although the final denouement can often take longer than assumed. Indicators for what would happen to debt service costs if interest rates rose 250 basis points are also well over the safety line. China’s total credit reached 255pc of GDP at the end of last year, a jump of 107 percentage points over eight years. This is an extremely high level for a developing economy and is still rising fast.

Outstanding loans have reached $28 trillion, as much as the commercial banking systems of the US and Japan combined. The scale is enough to threaten a worldwide shock if China ever loses control. Corporate debt alone has reached 171pc of GDP, and it is this that is keeping global regulators awake at night. The BIS said there are ample reasons to worry about the health of world’s financial system. Zero interest rates and bond purchases by central banks have left markets acutely sensitive to the slightest shift in monetary policy, or even a hint of a shift. “There has been a distinctly mixed feel to the recent rally – more stick than carrot, more push than pull,” said Claudio Borio, the BIS’s chief economist. “This explains the nagging question of whether market prices fully reflect the risks ahead.”

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really? “..the state’s control of the financial system and limited levels of overseas debt may mitigate against the risk of a banking crisis.”

BIS Warning Indicator for China Banking Stress Climbs to Record (BBG)

A warning indicator for banking stress rose to a record in China in the first quarter, underscoring risks to the nation and the world from a rapid build-up of Chinese corporate debt. China’s credit-to-GDP “gap” stood at 30.1%, the highest for the nation in data stretching back to 1995, according to the Basel-based Bank for International Settlements. Readings above 10% signal elevated risks of banking strains, according to the BIS, which released the latest data on Sunday. The gap is the difference between the credit-to-GDP ratio and its long-term trend. A blow-out in the number can signal that credit growth is excessive and a financial bust may be looming. Some analysts argue that China will need to recapitalise its banks in coming years because of bad loans that may be higher than the official numbers.

At the same time, the state’s control of the financial system and limited levels of overseas debt may mitigate against the risk of a banking crisis. In a financial stability report published in June, China’s central bank said lenders would be able to maintain relatively high capital levels even if hit by severe shocks. While the BIS says that credit-to-GDP gaps exceeded 10% in the three years preceding the majority of financial crises, China has remained above that threshold for most of the period since mid-2009, with no crisis so far. In the first quarter, China’s gap exceeded the levels of 41 other nations and the euro area. In the U.S., readings exceeded 10% in the lead up to the global financial crisis.

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“.. the importance of the property sector to China’s overall economic health, posed a challenge. It contributes up to one-third of GDP..”

China Relies on Housing Bubble to Keep GDP Numbers Elevated (CNBC)

Policymakers in China were facing the dilemma of driving growth while preventing the property market from overheating, an economist said Monday as prices in the world’s second largest economy jumped in August. Average new home prices in China’s 70 major cities rose 9.2% in August from a year earlier, accelerating from a 7.9% increase in July, an official survey from the National Bureau of Statistics showed Monday. Home prices rose 1.5% from July. But according to Donna Kwok, senior China economist at UBS, the importance of the property sector to China’s overall economic health, posed a challenge. It contributes up to one-third of GDP as its effects filter through to related businesses such as heavy industries and raw materials.

“On the one hand, they need to temper the signs of froth that we are seeing in the higher-tier cities. On the other hand, they are still having to rely on the (market’s) contribution to headline GDP growth that property investment as the whole—which is still reliant on the lower-tier city recovery—generates…so that 6.5 to 7% annual growth target is still met for this year,” Kwok told CNBC’s “Street Signs.” The data showed prices in the first-tier cities of Shanghai and Beijing prices rose 31.2% and 23.5%, respectively. Home prices in the second tier cities of Xiamen and Hefei saw the larges price gains, rising 43.8 percent and 40.3 percent respectively, from a year ago.

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Liquidity.

Chinese Yuan Borrowing Rate Hits Second Highest Level On Record (R.)

Hong Kong’s overnight yuan borrowing rate was fixed at the highest level in eight months on Monday after the long holiday weekend. China’s financial markets were closed from Thursday for the Mid-Autumn Festival, and Hong Kong’s markets were shut on Friday. The CNH Hong Kong Interbank Offered Rate benchmark (CNH Hibor), set by the city’s Treasury Markets Association (TMA), was fixed at 23.683% for overnight contracts, the highest level since Jan. 12. Traders said the elevated offshore yuan borrowing rates in the past week were due to tight liquidity in the market and rumors that China took action to raise the cost of shorting its currency.

“Normal lenders of the yuan, like Chinese banks, have refrained from injecting liquidity into the market recently due to speculation that the yuan will depreciate toward certain levels like 6.68, 6.7 per dollar,” said a trader in a local bank in Hong Kong. “(The yuan’s) inclusion into the SDR basket nears, so the central bank would like to maintain the offshore yuan near the stronger side,” said the trader, adding that seasonal reasons including national holidays and caution near the quarter-end also drains yuan liquidity from the market. The U.S. dollar traded near a two-week high against a basket of major currencies on Monday after U.S. consumer prices rose more than expected in August, bolstering expectations the Federal Reserve will raise interest rates this year.

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Really, it’s about demand.

Oil Investors Flee as OPEC Freeze Hopes Face Supply Reality (BBG)

Oil speculators headed for the sidelines as OPEC members prepare to discuss freezing output in the face of signs the supply glut will linger. Money managers cut wagers on both falling and rising crude prices before talks between OPEC and other producers later this month. The meeting comes after the International Energy Agency said that the global oversupply will last longer than previously thought as demand growth slows and output proves resilient. “It’s a cliff trade right here,” said John Kilduff, partner at Again Capita, a New York hedge fund focused on energy. “There’s more uncertainty than usual in the market because of the upcoming meeting. People are waiting for the outcome and a number think this is a good time to stand on the sidelines.”

OPEC plans to hold an informal meeting with competitor Russia in Algiers Sept. 27, fanning speculation the producers may agree on an output cap to shore up prices. Oil climbed 7.5% in August after OPEC announced talks in the Algerian capital. [..] World oil stockpiles will continue to accumulate into late 2017, a fourth consecutive year of oversupply, according to the IEA. Just last month, the agency predicted the market would start returning to equilibrium this year. OPEC production rose last month as Middle East producers opened the taps, the IEA said. Saudi Arabia, Kuwait and the UAE pumped at or near record levels and Iraq pushed output higher, according to the agency. “OPEC is out of bullets,” said Stephen Schork, president of the Schork Group. “Even if they agree on a production freeze it will be at such a high level that it will be meaningless.”

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“..the energy companies producing shale oil in the Bakken are in the hole for $32 billion. ”

The Death Of The Bakken Field Has Begun (SRSrocco)

The Death of the Great Bakken Oil Field has begun and very few Americans understand the significance. Just a few years ago, the U.S. Energy Industry and Mainstream media were gloating that the United States was on its way to “Energy Independence.” Unfortunately for most Americans, they believed the hype and are now back to driving BIG SUV’s and trucks that get lousy fuel mileage. And why not? Americans now think the price of gasoline will continue to decline because the U.S. oil industry is able to produce its “supposed” massive shale oil reserves for a fraction of the cost, due to the new wonders of technological improvement. [..] they have no clue that the Great Bakken Oil Field is now down a stunning 25% from its peak just a little more than a year and half ago:

Some folks believe the reason for the decline in oil production at the Bakken was due to low oil prices. While this was part of the reason, the Bakken was going to peak and decline in 2016-2017 regardless of the price. This was forecasted by peak oil analyst Jean Laherrere. [..] I took Jean Laherrere’s chart and placed it next to the current actual Bakken oil field production:

As we can see in the chart above, the rise and fall of Bakken oil production is very close to what Jean Laherrere forecasted several years ago (shown by the red arrow). According to Laherrere’s chart, the Bakken will be producing a lot less oil by 2020 and very little by 2025. This would also be true for the Eagle Ford Field in Texas. According to the most recent EIA Drilling Productivity Report [8], the Eagle Ford Shale Oil Field in Texas will be producing an estimated 1,026,000 barrels of oil per day in September, down from a peak of 1,708,000 barrels per day in May 2015. Thus, Eagle Ford oil production is slated to be down a stunning 40% since its peak last year.

Do you folks see the writing on the wall here? The Bakken down 25% and the Eagle Ford down 40%. These are not subtle declines. This is much quicker than the U.S. Oil Industry or the Mainstream Media realize. And… it’s much worse than that. The U.S. Oil Industry Hasn’t Made a RED CENT Producing Shale. Rune Likvern of Fractional Flow has done a wonderful job providing data on the Bakken Shale Oil Field. Here is his excellent chart showing the cumulative FREE CASH FLOW from producing oil in the Bakken: [..] the BLACK BARS are estimates of the monthly Free Cash flow from producing oil in the Bakken since 2009, while the RED AREA is the cumulative negative free cash flow. [..] Furthermore, the red area shows that the approximate negative free cash flow (deducting CAPEX- capital expenditures) is $32 billion. So, with all the effort and high oil prices from 2011-2014 (first half of 2014), the energy companies producing shale oil in the Bakken are in the hole for $32 billion. Well done…. hat’s off to the new wonderful fracking technology.

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Lofty.

Canada To Impose Nationwide Carbon Price (R.)

Canada will impose a carbon price on provinces that do not adequately regulate emissions by themselves, Environment Minister Catherine McKenna said on Sunday without giving details on how the Liberal government will do so. Speaking on the CTV broadcaster’s “Question Period,” a national politics talk show, McKenna said the new emissions regime will be in place sometime in October, before a federal-provincial meeting on the matter. She only said the government will have a “backstop” for provinces that do not comply, but did not address questions on penalties for defiance. Canada’s 10 provinces, which enjoy significant jurisdiction over the environment, have been wary of Ottawa’s intentions and have said they should be allowed to cut carbon emissions their own way.

Prime Minister Justin Trudeau persuaded the provinces in March to accept a compromise deal that acknowledged the concept of putting a price on carbon emissions, but agreed the specific details, which would take into account provinces’ individual circumstances, could be worked out later. Canada’s four largest provinces, British Columbia, Alberta, Ontario and Quebec, currently have either a tax on carbon or a cap-and-trade emissions-limiting system. But Brad Wall, the right-leaning premier of the western energy-producing province of Saskatchewan, has long been resistant to federal emissions-limiting plans. McKenna said provinces such as Saskatchewan can design a system in which emissions revenues go back to companies through tax cuts, which would dampen the impact of the extra cost brought by the carbon price.

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“Lower Saxony, home state to Volkswagen doesn’t offer electronic filing for civil litigation.”

1000s of VW Lawsuits To Be Filed By The End Of Monday, All in Print (BBG)

There was one thing Andreas Tilp and Klaus Nieding needed most for taking a wave of Volkswagen investor cases to court: a pickup truck. Nieding had a load of 5,000 suits sent Friday from his office in Frankfurt to Braunschweig, about 350 kilometers (218 miles) away. Tilp’s 1,000 or so complaints will arrive in a transport vehicle Monday, traveling more than 500 kilometers from his office in the southern German city of Kirchentellinsfurt. There was no other way to do it: Lower Saxony, home state to Volkswagen doesn’t offer electronic filing for civil litigation. The court in Braunschweig, the legal district that includes VW’s Wolfsburg headquarters, is expecting thousands of cases by the end of the day.

Investors are lining up to sue in Germany, where VW shares lost more than a third of their value in the first two trading days after the Sept. 18 disclosure of the emissions scandal by U.S. regulators. Monday is the first business day after the anniversary of the scandal and investors fear they have to sue within a year of the company’s admission that it had equipped about 11 million diesel vehicles with software to cheat pollution tests. The lawsuits disclosed so far are seeking 10.7 billion euros ($11.9 billion). The Braunschweig court has said it will release the total number this week. Volkswagen has consistently argued that it has followed all capital-markets rules and properly disclosed emissions issues in a timely fashion.

The super-sized filing is yet another example of the sheer scale of the scandal that’s haunted VW for a year. It forced the German carmaker into the biggest recall in its history to fix the cars or get them off the road entirely, the fines already levied are among the steepest against any manufacturer, and the carmaker has built up massive provisions to absorb the hit.

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What are the odds VW sponsored the report?

Many Car Brands Emit More Pollution Than Volkswagen (G.)

A year on from the “Dieselgate” scandal that engulfed Volkswagen, damning new research reveals that all major diesel car brands, including Fiat, Vauxhall and Suzuki, are selling models that emit far higher levels of pollution than the shamed German carmaker. The car industry has faced fierce scrutiny since the US government ordered Volkswagen to recall almost 500,000 cars in 2015 after discovering it had installed illegal software on its diesel vehicles to cheat emissions tests. But a new in-depth study by campaign group Transport & Environment (T&E) found not one brand complies with the latest “Euro 6” air pollution limits when driven on the road and that Volkswagen is far from being the worst offender.

“We’ve had this focus on Volkswagen as a ‘dirty carmaker’ but when you look at the emissions of other manufacturers you find there are no really clean carmakers,” says Greg Archer, clean vehicles director at T&E. “Volkswagen is not the carmaker producing the diesel cars with highest nitrogen oxides emissions and the failure to investigate other companies brings disgrace on the European regulatory system.” T&E analysed emissions test data from around 230 diesel car models to rank the worst performing car brands based on their emissions in real-world driving conditions. Fiat and Suzuki (which use Fiat engines) top the list with their newest diesels, designed to meet Euro 6 requirements, spewing out 15 times the NOx limit; while Renault-Nissan vehicle emissions were judged to be more than 14 times higher. General Motors’ brands Opel-Vauxhall also fared badly with emissions found to be 10 times higher than permitted levels.

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Exposed. But too late.

The Ongoing Collapse of Economics (Caswell)

If we accept the rapidly growing body of evidence and authority suggesting that many of the core concepts of conventional macroeconomics are bollox, and that economists don’t really know what they’re doing, then the important question becomes ‘What next?’ As conventional macroeconomic theory crumbles in the face of facts, what will replace it? One of the primary contenders is Modern Monetary Theory, which focuses on money itself (something which, believe it or not, conventional macroeconomic theory doesn’t do). Another possibility is that macroeconomics will learn from complexity and systems theory, and that its models (and, hopefully, their predictive ability) will become more like those used in meteorology and climate science.

Anti-economist Steve Keen is working in this direction, influenced by the Financial Instability Hypothesis (FIH) of Hyman Minsky, whatever that is. But wherever macroeconomics is going, it’s clear that the old order is collapsing. The theoretical orthodoxy that has guided the highest level of economic management for many decades is crumbling. Either economics is an objective science or it’s not. And if economics is not an objective science, then we quickly need an economics that is. Countless livelihoods and lives will be deeply affected by the revolution we are witnessing in theoretical macroeconomics. It may be dry, it may be boring, it may be theoretical, and it may seem incomprehensible. But it’s hard to think of any discussion that’s more important.

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Not looking good.

WaPo 1st Paper to Call for Prosecution of its Own Source -After Pulitzer- (GG)

Three of the four media outlets which received and published large numbers of secret NSA documents provided by Edward Snowden – The Guardian, The New York Times and The Intercept – have called for the U.S. Government to allow the NSA whistleblower to return to the U.S. with no charges. That’s the normal course for a newspaper, which owes its sources duties of protection, and which – by virtue of accepting the source’s materials and then publishing them – implicitly declares the source’s information to be in the public interest. But not The Washington Post.

In the face of a growing ACLU-and-Amnesty-led campaign to secure a pardon for Snowden, timed to this weekend’s release of the Oliver Stone biopic “Snowden,” the Post Editorial Page not only argued today in opposition to a pardon, but explicitly demanded that Snowden – their paper’s own source – stand trial on espionage charges or, as a “second-best solution,” “accept [] a measure of criminal responsibility for his excesses and the U.S. government offers a measure of leniency.” In doing so, The Washington Post has achieved an ignominious feat in U.S. media history: the first-ever paper to explicitly editorialize for the criminal prosecution of its own paper’s source – one on whose back the paper won and eagerly accepted a Pulitzer Prize for Public Service. But even more staggering than this act of journalistic treachery against their paper’s own source are the claims made to justify it.

The Post Editors concede that one – and only one – of the programs which Snowden enabled to be revealed was justifiably exposed – namely, the domestic metadata program, because it “was a stretch, if not an outright violation, of federal surveillance law, and posed risks to privacy.” Regarding the “corrective legislation” that followed its exposure, the Post acknowledges: “we owe these necessary reforms to Mr. Snowden.” But that metadata program wasn’t revealed by the Post, but rather by the Guardian.

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Soon one of many.

‘People’s Candidate’ Le Pen Vows To Free France From EU Yoke (AFP)

French far-right National Front leader Marine Le Pen on Sunday vowed to give her country back control over its laws, currency and borders if elected president next year on an anti-EU, anti-immigration platform. Addressing around 3,000 party faithful in the town of Frejus on the Cote d’Azur, Le Pen aimed to set the tone for her campaign, declaring in her speech: “The time of the nation state has come again.” The FN leader, who has pledged to hold a referendum on France’s future in the EU if elected and bring back the French franc, said she was closely watching developments in Britain since it voted to leave the bloc. “We too are keen on winning back our freedom…. We want a free France that is the master of its own laws and currency and the guardian of its borders.”

Polls consistently show Le Pen among the top two candidates in the two-stage presidential elections to take place in April and May. But while the polls show her easily winning a place in the run-off they also show the French rallying around her as-yet-unknown conservative opponent in order to block her victory in the final duel. In Frejus, Le Pen sought to sanitise her image, continuing a process of “de-demonisation” that has paid off handsomely at the ballot box since she took over the FN leadership from her ex-paratrooper father Jean-Marie Le Pen in 2011. “I am the candidate of the people and I want to talk to you about France, because that is what unites us,” the 48-year-old politician said in a speech that avoided any reference to the FN which is seen as more taboo than its leader.

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What would happen if she decides not to run next year?

Merkel Suffers Drubbing In Berlin Vote Due To Migrant Angst (R.)

Chancellor Angela Merkel’s conservatives suffered their second electoral blow in two weeks on Sunday, with support for her Christian Democrats (CDU) plunging to a post-reunification low in a Berlin state vote due to unease with her migrant policy. The anti-immigrant Alternative for Germany (AfD) polled 11.5%, gaining from a popular backlash over Merkel’s decision a year ago to keep borders open for refugees, an exit poll by public broadcaster ARD showed. The result means the AfD will enter a 10th state assembly, out of 16 in total.

Merkel’s CDU polled 18%, down from 23.3% at the last election in 2011, with the centre-left Social Democrats (SPD) remaining the largest party on 23%. The SPD may now ditch the CDU from their coalition in the German capital. The blow to the CDU came two weeks after they suffered heavy losses in the eastern state of Mecklenburg-Vorpommern. The setbacks have raised questions about whether Merkel will stand for a fourth term next year, but her party has few good alternatives so she still looks like the most likely candidate.

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Perhaps there’s a contradiction hiding in realizing that globalization is moving in reverse, but still expecting global responses to crises.

Why Won’t The World Tackle The Refugee Crisis? (Observer)

It is now the greatest movement of the uprooted that the world has ever known. Some 65 million people have been displaced from their homes, 21.3 million of them refugees for whom flight is virtually compulsory – involuntary victims of politics, war or natural catastrophe. With just less than 1% of the world’s population homeless and seeking a better, safer life, a global crisis is under way, exacerbated by a lack of political cooperation – and several states, including the United Kingdom, are flouting international agreements designed to deal with the crisis. This week’s two major summits in New York, called by the United Nations general assembly and by President Barack Obama, are coming under intense criticism before the first world leaders have even taken their seats.

Amnesty, Human Rights Watch and refugee charities are among those accusing both summits of being “toothless” and saying that the declaration expected to be ratified by the UN on Monday imposes no obligations on the 193 general assembly nations to resettle refugees. The Obama-led summit, meanwhile, which follows on Tuesday, is designed to extract pledges of funding which critics say too often fail to materialise. Steve Symonds, refugee programme director at Amnesty, said: “Funding is great and very much needed, but it’s not going to tackle the central point of some sharing of responsibility. The scale of imbalance there is growing, and growing with disastrous consequences.”

He said nations were sabotaging agreements through self-interest. “It’s very, very difficult to feel any optimism about this summit or what it will do for people looking for a safe place for them and their families right at this moment, nor tackle the awful actions of countries who are now thinking, ‘If other countries won’t help take responsibility, then why should we?’ and are now driving back desperate people. “Compelling refugees to go back to countries where there is conflict and instability doesn’t help this awful merry-go-round going on and on.”

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Sep 172016
 
 September 17, 2016  Posted by at 9:01 am Finance Tagged with: , , , , , , , , , ,  


DPC Near Lewiston, Minnesota – The Pulpit. 1899

The Beginning of the End of the World (Umair Haque)
US Household Net Worth Hits Record $89 Trillion, But There’s A Catch (ZH)
China’s Holdings of US Treasuries Fall to Lowest Since 2013 (BBG)
Trump’s Economic Plan: Some Decent Ideas, Lots Of Really Bad Fiscal Math (DS)
US Is Investigating Bosch in Widening VW Diesel-Cheat Scandal (BBG)
Why the Fed Destroyed the Market Economy (Gordon)
IMF’s Lagarde: Big Salary, Big Ideas (TO Sun)
House Intelligence Committee’s Terrible, Horrible, Very Bad Snowden Report (TCF)
Western Media Credibility In Free Fall Collapse (Paul Craig Roberts)
The Intellectual Yet Idiot (Taleb)
The Existential Madness of Putin-Bashing (Robert Parry)
Russia Says US Refuses To Share Syria Truce Deal With UN Council (R.)

 

 

Nice attempt by Haque, but no, some kind of ‘leadership’ would not solve our problems.

The Beginning of the End of the World (Umair Haque)

The beginning of the end of the world means that yesterday’s model of prosperity – let’s call it capitalist liberal democracy – has reached its limits. It is like an aging machine that shudders and backfires more violently and regularly, because it is broken. And yet, we are unsure, as a world, where to go next.

Let’s take it in four levels. At the macro level, liberal capitalism’s a set of agreements and institutions. These agreements are being torn up, rejected, abandoned. Witness Brexit. The world is left in a state of void, just as the UK is now. Let me try to translate that: there is not a single leader in the world today who appears to have a vision for a stagnant global economy. The kind of great and radical vision that Keynes, Marshall, JFK had. Maybe we don’t agree with the vision – but what is important is that are visions to discuss, debate, inspire, cohere, lead. That level of vision is missing when it is most badly needed. Without such a vision, what happens?

A void of vision, leadership, direction to fix any of the existential threats of inequality, fragility, insecurity, at the global level inevitably means social discontent, decay, decline. Why be a part of societies and unions that step on your future? The beginning of the end of the world at the social level means: entire societies are beginning to fracture. As they fracture, so there is a return to tribalism, dynasty, feudal and authoritarian ways of ordering society. You don’t have to look much further than the US election to see it. In the void of democracy, feudalism is the darkness, and fascism is midnight. What happens when societies begin to splinter and fracture, regress and decline?

At the institutional level, the level of corporations and organisations, the end of the world means that there is now an even more severe power imbalance. Institutions hold far more power than relatively powerless, ossified, fractured states. And they exercise it. They set the terms and define the rules of trade, freedom, work, reward. What does that mean for people? At the personal level, the end of the world is already here. This is the first generation in modern history that’s going to suffer worse living standards than their parents. The question is: how much worse? Very badly worse. With stagnant incomes, no savings, this generation will never retire, vacation, advance, enjoy, or own. Their relationships, health, and productivity will suffer as a result. The quality of their lives is going to be long, bleak, and pointless. Worked to the grave to make a dwindling number of dynasties wealthy, largely by serving them hand and foot, not really enhancing human life.

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Tyler presents inequality as the catch, but the -admittedly related- asset bubble is a much bigger one.

US Household Net Worth Hits Record $89 Trillion, But There’s A Catch (ZH)

As part of its quarterly Flow of Funds update, earlier today the Fed released snapshot of the US “household” sector as of June 30. What it revealed is that with $103.8 trillion in assets and a modest $14.7 trillion in liabilities, the net worth of the average US household rose to a new all time high of $89.1 trillion, up $1.1 trillion as a result of an estimated $474 billion increase in real estate values, and mostly $750 billion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds. Household borrowing rose at a 4.4% annual rate, with total household liabilities grew growing by $200 billion from $14.5 trillion to $14.7 trillion, the bulk of which was $9.6 trillion in home mortgages. The breakdown of the total household balance sheet as of Q2 is shown below.

And while it would be great news if wealth across America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans. As a reminder, from the CBO’s latest Trends in Family Wealth analysis, here is a breakdown of the above chart by wealth group, which sadly shows how the “average” American wealth is anything but. While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits.

Here is how the CBO recently explained the wealth is distributed: In 2013, families in the top 10% of the wealth distribution held 76% of all family wealth, families in the 51st to the 90th %iles held 23%, and those in the bottom half of the distribution held 1%. Average wealth was about $4 million for families in the top 10% of the wealth distribution, $316,000 for families in the 51st to 90th%iles, and $36,000 for families in the 26th to 50th %iles. On average, families at or below the 25th %ile were $13,000 in debt.

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Maybe Draghi and Kuroda can buy them all.

China’s Holdings of US Treasuries Fall to Lowest Since 2013 (BBG)

China’s holdings of U.S. Treasuries fell in July to the lowest level in more than three years, as the world’s second-largest economy pares its foreign-exchange reserves to support the yuan. The biggest foreign holder of U.S. government debt had $1.22 trillion in bonds, notes and bills in July, down $22 billion from the prior month, in the biggest drop since 2013, according to U.S. Treasury Department data released Friday in Washington and previous figures compiled by Bloomberg. The portfolio of Japan, the largest holder after China, rose $6.9 billion to $1.15 trillion. Saudi Arabia’s holdings of Treasuries declined for a sixth straight month, to $96.5 billion.

The figures compare with official Chinese data showing that the nation’s foreign-exchange reserves were little changed in July at $3.2 trillion, though they’re down from a peak of close to $4 trillion in 2014. The reserves dropped $16 billion in August to the lowest level since 2011. The report, which also contains data on international capital flows, showed net foreign buying of long-term securities totaling $103.9 billion in July. It showed a total cross-border inflow, including short-term securities such as Treasury bills and stock swaps, of $140.6 billion. Net foreign selling of U.S. Treasuries was $13.1 billion in July, while foreigners scooped up a net $26.1 billion in equities, $20.7 billion of corporate debt and $38.9 billion in agency debt, according to the report.

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Stockman knows what he’s talking about on this issue, far more than most. Not perfect, but useful.

Trump’s Economic Plan: Some Decent Ideas, Lots Of Really Bad Fiscal Math (DS)

[..] the Reagan White House—me included – fell for the theory of “dynamic scoring” and that the big cuts in the income tax rates would partially pay for themselves via revenue “flowback”. Back in those days the latter was expressed in an economic forecast known as Rosy Scenario, which assumed that in response to the supply side tax cuts, the US economy would get up on its hind legs and leap forward at a real GDP growth rate of more than 4% per year, and as far as the eye could see. What happened instead, of course, is that the US economy plunged into the drink of the deep 1982 recession and the Federal deficit soared to 5% of GDP—a truly shocking outcome back in those innocent days when the old-time fiscal religion still had roots inside the beltway.

And it would have also caused enormous economic havoc had not the Gipper’s advisors—me included—talked him to signing three tax bills over 1982-1984 that recaptured roughly 40% of the revenue loss from his cherished tax cuts. Even then, the public debt grew by 250% during Reagan’s eight years – or by more than under any peacetime President in American history. Yet even to this day the GOP politicians and their economic advisers profess a case of heavy duty amnesia about what happened, claiming that real GDP grew by upwards of 4.5% and that these results were proof positive that “dynamic scoring” of tax cuts is valid.

Worse still, they appear to have convinced Donald Trump of this same fallacious revisionist history because it was embedded at the core of the Thursday speech’s fiscal math. To wit, Trump claimed that $2.6 trillion or 60% of the revenue loss from his $4.4 trillion tax cut would be recouped by, yes, 4% economic growth as far as the eye can see.

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As Merkel pushes back.

US Is Investigating Bosch in Widening VW Diesel-Cheat Scandal (BBG)

U.S. prosecutors are investigating whether Germany’s Robert Bosch, which provided software to Volkswagen, conspired with the automaker to engineer diesel cars that would cheat U.S. emissions testing, according to two people familiar with the matter. Among the questions the Justice Department is asking in the criminal probe, one of them said, is whether automakers in addition to VW used Bosch software to skirt environmental standards. Bosch, which is also under U.S. civil probe and German inquiry, is cooperating in investigations and can’t comment on them, said spokesman Rene Ziegler.

The line of inquiry broadens what is already the costliest scandal in U.S. automaking history. VW faces an industry-record $16.5 billion, and counting, in criminal and civil litigation fines after admitting last year that its diesel cars were outfitted with a “defeat device” that lowered emissions to legal levels only when it detected the vehicle was being tested. More than a half dozen big manufacturers sell diesel-powered vehicles in the U.S. The people familiar with the matter declined to say whether specific makers are under scrutiny. A second supplier may also be part of the widening probe: When prosecutors in Detroit outlined their case last week against a VW engineer who pleaded guilty to conspiracy in the matter, they said he had help from a Berlin-based company that is 50% owned by Volkswagen, described as “Company A” in a court filing. That company, according to a another person familiar with the matter, is IAV, which supplies VW and other automakers.

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“..the data told them to…”

Why the Fed Destroyed the Market Economy (Gordon)

Kashkari’s a man with crazy eyes. But he’s also a man with even crazier ideas. After stating that politics is not part of presidential election year Fed policy, Kashkari explained how Fed policy is set. “We look at the data,” he said. In hindsight, this clarification was more revealing than the initial denial. Clearly, Kashkari’s never thought about what exactly it is he’s looking at when looking at the data. If he had, he’d likely conclude that the approach of using data to identify apparent aggregate demand insufficiencies and perceived supply gluts is crazy. Unemployment. GDP. Price inflation. These data points are all fabricated and fudged to the government number crunchers’ liking. What’s more, for each headline number there are a list of footnotes and qualifiers. Hedonic price adjustments. Price deflators. Seasonal adjustments. Discouraged worker disappearances. These subjective adjustments greatly affect the results.

Yet what’s even crazier is that Kashkari believes that by finagling around with the price of money the Fed can improve the outputs of their bogus data. According to central planners, better data – i.e. higher GDP, greater consumer demand, 2% inflation – means a better economy. But after 100-years of mismanagement, the last eight being in the radically extreme, the Fed has scored a big fat rotten tomato. The data still stinks – GDP’s still anemic. But the downside of their actions is downright putrid. Policy makers have pushed public and private debt well past their serviceable limits. They’ve debased the dollar to less than 5% of its former value and propagated bubbles and busts in real estate, stock markets, emerging markets, mining, oil and gas, and just about every other market there is. Aside from enriching private bankers, we now know the answer to why the Fed destroyed the market economy. According to Kashkari, the data told them to.

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“..a former French finance minister who has more than a passing knowledge of the debt crisis in the country formerly known as Greece..”

IMF’s Lagarde: Big Salary, Big Ideas (TO Sun)

You probably didn’t get invited to the International Forum of the Americas conference held in Toronto this week. Neither did I. Just as well. From $700 for a “regular” one-day pass to $3,500 for an “executive club” three-day pass, the croissants and coffee must have been vastly superior to the fare at Tim Hortons. We both missed the opportunity to hear Christine Lagarde, the managing director of the IMF, pontificate on the rise of protectionist political rhetoric in the developed world. Lagarde drew criticism for praising Prime Minister Justin Trudeau’s fiscal plan from my friends Tony Clement, who’s in the running for the leadership of the federal Conservatives and Lisa Raitt, who hasn’t yet said whether she will run. Lagarde commented that she hoped Trudeau’s fiscal approach of spend now, pay later would go viral.

It’s an interesting take on how to build a strong, national economy, particularly from a former French finance minister who has more than a passing knowledge of the debt crisis in the country formerly known as Greece. The IMF has been intricately involved in the economic and political meltdown of Greece and, early in her tenure as managing director, Lagarde raised hackles by agreeing Greeks had “had a nice time” but it was now “payback time”. It’s hard to square the gap between praising Trudeau for “stimulus” spending and borrowing, while criticizing Greeks for not paying their way.

[..] I found Lagarde’s comments on the protectionist political wave sweeping over much of the developed world more interesting, and unintentionally, insightful. I had the pleasure of hearing her speak at a forum in New York. She is intelligent, informed and opinionated, all things I like. She’s also an elite, globe-traveling bureaucrat with a $500,000 tax-free salary and an expense account commensurate with a lifestyle unrecognizable to average folk. From her lofty, enlightened position Lagarde offered that blue-collar workers in developed countries should be offered educational opportunities. Apparently that will help them adjust to factory closings.

The author was a cabinet minister in the Conservative government of Ontario premier Mike Harris from 1995 to 2002.

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Barton Gellman takes down an idiot report.

House Intelligence Committee’s Terrible, Horrible, Very Bad Snowden Report (TCF)

Since I’m on record claiming the report is dishonest, let’s skip straight to the fourth section. That’s the one that describes Snowden as “a serial exaggerator and fabricator,” with “a pattern of intentional lying.” Here is the evidence adduced for that finding, in its entirety.

“He claimed to have left Army basic training because of broken legs when in fact he washed out because of shin splints.” This is verifiably false for anyone who, as the committee asserts it did, performs a “close review of Snowden’s official employment records.” Snowden’s Army paperwork, some of which I have examined, says he met the demanding standards of an 18X Special Forces recruit and mustered into the Army on June 3, 2004. The diagnosis that led to his discharge, on crutches, was bilateral tibial stress fractures.

“He claimed to have obtained a high school degree equivalent when in fact he never did.” I do not know how the committee could get this one wrong in good faith. According to the official Maryland State Department of Education test report, which I have reviewed, Snowden sat for the high school equivalency test on May 4, 2004. He needed a score of 2250 to pass. He scored 3550. His Diploma No. 269403 was dated June 2, 2004, the same month he would have graduated had he returned to Arundel High School after losing his sophomore year to mononucleosis. In the interim, he took courses at Anne Arundel Community College.

“He claimed to have worked for the CIA as a ‘senior advisor,’ which was a gross exaggeration of his entry-level duties as a computer technician.” Judge for yourself. Here are the three main roles Snowden played at the Central Intelligence Agency (CIA). (1) His entry level position, as a contractor, was system administrator (one among several) of the agency’s Washington metropolitan area network. (2) After that he was selected for and spent six months in training as a telecommunications information security officer, responsible for all classified technology in U.S. embassies overseas. The CIA deployed him to Geneva under diplomatic cover, complete with an alias identity and a badge describing him as a State Department attache. (3) In his third CIA job, the title on his Dell business card was “solutions consultant / cyber referent” for the intelligence community writ large—the company’s principal point of contact for cyber contracts and proposals. In that role, Snowden met regularly with the chiefs and deputy chiefs of the CIA’s technical branches to talk through their cutting edge computer needs.

“He also doctored his performance evaluations…” Truly deceptive, this. I will tell the story in my book. Suffice to say that Snowden discovered and reported a security hole in the CIA’s human resources intranet page. With his supervisor’s permission, he made a benign demonstration of how a hostile actor could take control. He did not change the content of his performance evaluation. He changed the way it displayed on screen.

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But they control.

Western Media Credibility In Free Fall Collapse (Paul Craig Roberts)

The latest from the Gallup Poll is that only 32% of Amerians trust the print and TV media to tell the truth. Republicans, 18 to 49 year old Americans, and independents trust the media even less, with trust rates of 14%, 26%, and 30%. The only group that can produce a majority that still trusts the media are Democrats with a 51% trust rate in print and TV reporting. The next highest trust rate is Americans over 50 years of age with a trust rate of 38%. The conclusion is that old people who are Democrats are the only remaining group that barely trusts the media. This mistaken trust is due to their enculturation. For older Democrats belief in government takes the place of Republican belief in evangelical Christianity.

Older Democrats are firm believers that it was government under the leadership of President Franklin D. Roosevelt that saved America from the Great Depression. As the print and TV media in the 21st century are firmly aligned with the government, the trust in government spills over into trust of the media that is serving the government. As the generation of Democrats enculturated with this mythology die off, Democratic trust rates will plummet toward Republican levels. It is not difficult to see why trust in the media has collapsed. The corrupt Clinton regime, which we might be on the verge of repeating, allowed a somewhat diverse and independent media to be 90% acquired by six mega-corporations. The result was the disappearance of independence in reporting and opinion.

The constraints that corporate ownership and drive for profits put on journalistic freedom and resources reduced reporting to regurgitations of government and corporate press releases, always the cheapest and uncontroversial way to report. With journalistic families driven out of journalism by estate taxes, the few remaining newspapers become acquisitions like a trophy wife or a collector Ferrari. Jeff Bezos, CEO and founder of amazon.com, handed over $250 million in cash for the Washington Post. Jeff might be a whiz in e-commerce, but when it comes to journalism he could just as well be named Jeff Bozo.

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Taleb’s been tweeting on this for a long time. Wonder if he’s read Ivan Illich’s work on institutionalism.

The Intellectual Yet Idiot (Taleb)

The Intellectual Yet Idiot is a production of modernity hence has been accelerating since the mid twentieth century, to reach its local supremum today, along with the broad category of people without skin-in-the-game who have been invading many walks of life. Why? Simply, in most countries, the government’s role is between five and ten times what it was a century ago (expressed in%age of GDP). The IYI seems ubiquitous in our lives but is still a small minority and is rarely seen outside specialized outlets, think tanks, the media, and universities – most people have proper jobs and there are not many openings for the IYI. Beware the semi-erudite who thinks he is an erudite. He fails to naturally detect sophistry.

The IYI pathologizes others for doing things he doesn’t understand without ever realizing it is his understanding that may be limited. He thinks people should act according to their best interests and he knows their interests, particularly if they are “red necks” or English non-crisp-vowel class who voted for Brexit. When Plebeians do something that makes sense to them, but not to him, the IYI uses the term “uneducated”. What we generally call participation in the political process, he calls by two distinct designations: “democracy” when it fits the IYI, and “populism” when the plebeians dare voting in a way that contradicts his preferences. While rich people believe in one tax dollar one vote, more humanistic ones in one man one vote, Monsanto in one lobbyist one vote, the IYI believes in one Ivy League degree one-vote, with some equivalence for foreign elite schools, and PhDs as these are needed in the club.

More socially, the IYI subscribes to The New Yorker. He never curses on twitter. He speaks of “equality of races” and “economic equality” but never went out drinking with a minority cab driver. Those in the U.K. have been taken for a ride by Tony Blair. The modern IYI has attended more than one TEDx talks in person or watched more than two TED talks on Youtube. Not only will he vote for Hillary Monsanto-Malmaison because she seems electable and some other such circular reasoning, but holds that anyone who doesn’t do so is mentally ill. The IYI has a copy of the first hardback edition of The Black Swan on his shelves, but mistakes absence of evidence for evidence of absence. He believes that GMOs are “science”, that the “technology” is not different from conventional breeding as a result of his readiness to confuse science with scientism.

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Everyone should read this. And then realize that Russia in not a threat to us.

The Existential Madness of Putin-Bashing (Robert Parry)

the United States dispatched financial “experts” – many from Harvard Business School – who arrived in Moscow with neoliberal plans for “shock therapy” to “privatize” Russia’s resources, which turned a handful of corrupt insiders into powerful billionaires, known as “oligarchs,” and the “Harvard Boys” into well-rewarded consultants. But the result for the average Russian was horrific as the population experienced a drop in life expectancy unprecedented in a country not at war. While a Russian could expect to live to be almost 70 in the mid-1980s, that expectation had dropped to less than 65 by the mid-1990s.

The “Harvard Boys” were living the high-life with beautiful women, caviar and champagne in the lavish enclaves of Moscow – as Yeltsin drank himself into stupors – but there were reports of starvation in villages in the Russian heartland and organized crime murdered people on the street with near impunity. Meanwhile, Presidents Bill Clinton and George W. Bush cast aside any restraint regarding Russia’s national pride and historic fears by expanding NATO across Eastern Europe, including the incorporation of former Soviet republics. In the 1990s, the “triumphalist” neocons formulated a doctrine for permanent U.S. global dominance with their thinking reaching its most belligerent form during George W. Bush’s presidency, which asserted the virtually unlimited right for the United States to intervene militarily anywhere in the world regardless of international law and treaties.

Without recognizing the desperation and despair of the Russian people during the Yeltsin era – and the soaring American arrogance in the 1990s – it is hard to comprehend the political rise and enduring popularity of Vladimir Putin, who became president after Yeltsin abruptly resigned on New Year’s Eve 1999. (In declining health, Yeltsin died on April 23, 2007). Putin, a former KGB officer with a strong devotion to his native land, began to put Russia’s house back in order. Though he collaborated with some oligarchs, he reined in others by putting them in jail for corruption or forcing them into exile.

Putin cracked down on crime and terrorism, often employing harsh means to restore order, including smashing Islamist rebels seeking to take Chechnya out of the Russian Federation. Gradually, Russia regained its economic footing and the condition of the average Russian improved. By 2012, Russian life expectancy had rebounded to more than 70 years. Putin also won praise from many Russians for reestablishing the country’s national pride and reasserting its position on the world stage.

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Why?

Russia Says US Refuses To Share Syria Truce Deal With UN Council (R.)

Russia said on Friday that a U.N. Security Council endorsement of a Syria ceasefire deal between Moscow and Washington appeared unlikely because the United States does not want to share the documents detailing the agreement with the 15-member body. Russian U.N. Ambassador Vitaly Churkin and U.S. Ambassador Samantha Power had been due to brief the council behind closed-doors on Friday but that was canceled at the last minute. “The main problem … which in my mind makes it impossible to produce any resolution, is that they are refusing to give those documents to members of the Security Council or even to read those documents to the members of the Security Council,” Churkin told reporters.

“We believe that we cannot ask them (council members) to support documents which they haven’t seen,” said Churkin, suggesting there was lack of unity in U.S. President Barack Obama’s administration toward the agreement. The U.S. mission to the United Nations said it could not agree with Russia on a way to brief the council that would “not compromise the operational security of the arrangement.” [..] Churkin said Russia has given two drafts of a possible Security Council resolution to the United States. He said on Thursday that Moscow hoped a resolution could be adopted next week during the annual U.N. gathering of world leaders. “They, in their typical way, came up with a completely different thing, which is trying to interpret and reinterpret the agreement,” Churkin said, referring to U.S. officials.

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