May 032015
 


Harris&Ewing Hancock’s, the Old Curiosity Shop, 1234 Pennsylvania Avenue 1914

Gundlach’s Bet-Against-German-Debt Plan Has One Very Big Problem (Bloomberg)
Canada has the Most Overvalued Housing Market in the World (VC)
No New Bailout Needed If Greek Debt Restructured, Says Varoufakis (AFP)
Markets Waver As Greece Teeters On Edge Of Financial Tragedy (AFR)
Use Your Credit Card To Fight Tax Evasion, Greece Urges Visitors (Observer)
Greek Exit ‘Would Leave Western Alliance In Chaos’ (Telegraph)
Greece Braced For Weekend Of Unrest As Cash Crunch Nears (Telegraph)
German President Says Berlin Should Be Open To Greek War Reparations (Reuters)
What Does Putin Want? (Rostislav Ishchenko)
Insanity Grips The Western World (Paul Craig Roberts)
China Teaches Top Cadres Western Ideas Despite Backlash (AP)
Italy Rescues More Than 3,400 Europe-Bound Migrants At Sea (AFP)
Greece To Ask EU For Extra Funding For Migrant Influx (Kathimerini)
Many Displaced African Migrants Had No Plan to Land in Italy (NY Times)
Italian Army Growing Cannabis To Slash End User Prices (RT)
From Ukraine To Australia, Tributes Pour Out For Odessa Massacre Victims (RT)
Wildlife Decline To Lead To ‘Empty Landscape’ (BBC)

Europe’s bond markets are so distorted everything carries out-of-whack risks.

Gundlach’s Bet-Against-German-Debt Plan Has One Very Big Problem (Bloomberg)

So it turns out that Jeffrey Gundlach was really thinking out loud when he said he was looking to short negative-yielding German debt. Yes, it’s true he’d really like to. But, as he would subsequently acknowledge, it’s a very difficult trade to execute in today’s European markets. “The mechanics are challenging,” Gundlach wrote in an e-mail on April 29. Earlier this week, the chief executive officer of DoubleLine Capital said in an interview on Bloomberg TV that he’s thinking of amplifying a wager against 2-year German notes using leverage. “It seems to me there’s almost no way to lose,” he said in that interview. “I wonder why people don’t leverage up negative bonds.” There are legitimate reasons why everyone isn’t. For one, there appear to be no negative-yielding derivatives contracts tied to this debt.

And Europe closely regulates short-selling of government bonds. Then, even if you could do it, you may have to park cash at some point in European bank accounts, which make you pay to hold your money because the region’s deposit rates are negative. “You can actually lose money being short negative yielding debt,” said Ashish Shah at AllianceBernstein. “People charge you even more in the short term to hold cash.” Of course, this is an opportunity that seems too good to pass up, and traders are almost certainly trying to figure out the best way to make it happen.

The trade should be – again, in theory – very lucrative. While bonds are normally cushioned from losses due to their regular interest payments, it’s the opposite in this bizarro world of negative-yielding debt. Traders betting against bonds wouldn’t lose money if prices stayed about where they were, because there’s essentially no coupon payment. Yes, prices on this upside-down-inside-out debt could keep rising and yields could get even more negative, leading to some losses. But the chances of that happening appear to be getting smaller as economic data shows inflation and growth starting to pick up in the euro zone.

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Auckland wants that title.

Canada has the Most Overvalued Housing Market in the World (VC)

In every inflating bubble, there’s usually two camps. The first group points out various metrics suggesting something is inherently unsustainable, while the second reiterates that this time, it is different. After all, if everyone always agreed on these things, then no one would do the buying to perpetuate the bubble’s expansion. The Canadian housing bubble has been no exception to this, and the war of words is starting to heat up. On one side of the ring, we have The Economist, that came out last week saying Canada has the most overvalued housing market in the world. After crunching the data in housing markets in 26 nations, The Economist has determined that Canada’s property market is the most overvalued in terms of rent prices (+89%), and the third most overvalued in terms of incomes (+35%).

They have mentioned in the past that the market has looked bubbly for some time, but finally Canada is officially at the top of their list. Of course, The Economist is not the only fighter on this side of the ring. Just over a month ago, the IMF sounded a fresh alarm on Canada’s housing market by saying that household debt is well above that of other countries. Meanwhile, seven in ten mortgage lenders in Canada have expressed “concerns” that the real estate sector is in a bubble that could burst at any time. Deutsch Bank estimates the market is 67% overvalued and readily offers seven reasons why Canada is in trouble. Even hedge funds are starting to find ways to short the market in anticipation of an upcoming collapse. Canada’s housing situation could give rise to the world’s next Steve Eisman, Eugene Xu, or Greg Lippmann.

On the opposing side of the ring, who will contend that the Canadian housing market is just different this time? Hint: look to the banks and government. Stephen Harper, Canada’s Prime Minister, has tried to dispel fears. He recently told a business audience in New York that he didn’t anticipate any housing crisis in Canada. Just this week, the Bank of Canada also tried its best to deflate housing bubble fears. “We don’t believe we’re in a bubble,” says Stephen Poloz, the Bank’s Governor. “Our housing construction has stayed very much in line with our estimates of demographic demand.” Poloz suggested that housing costs do not necessarily have to contract to match the incomes of Canadians. Instead, he expects growth in the economy to raise wages and make housing more affordable.

Courtesy of: Visual Capitalist

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“..one thing to say we shouldn’t have joined the euro and it is another to say that we have to leave..”

No New Bailout Needed If Greek Debt Restructured, Says Varoufakis (AFP)

Greek Finance Minister Yanis Varoufakis insisted Saturday that Greece would not require a new bailout from its international creditors if they would simply restructure its debt. Athens last week resumed talks with its creditors in a bid to unblock €7.2 billion from its EU-IMF bailout before state coffers run dry. But analysts believe that even if it manages to secure the last tranche of aid, Athens may have to obtain a new rescue package to stay afloat. Varoufakis said however that Greece could do without a new bailout. “One of the conditions for this to happen though, is an important restructuring of the debt,” he told the Efimerida ton Sindakton daily in an interview published Saturday.

The radical-left SYRIZA government came into power in January on a campaign promise that it would seek to get part of its debt written off. However, its creditors have reiterated that that is impossible. Varoufakis, whose negotiating style has grated his EU counterparts, also took a swipe at the eurozone in the interview, warning that if it “doesn’t change it will die.” He added that “no country, not only Greece, should have joined such a shaky common monetary system.” Nevertheless, Varoufakis said it was “one thing to say we shouldn’t have joined the euro and it is another to say that we have to leave” because backtracking now would lead to “an unforeseen negative situation.” Asked about reported insults from fellow Eurogroup finance ministers during a tense meeting in Riga on April 24, Varoufakis was also dismissive.

Media reports said he had been branded a “gambler,” an “amateur” and an “adventurist” by his peers. “Those would have surely been heavy offenses if they had been expressed. But they were not,” said Varoufakis. Prime Minister Alexis Tsipras had reshuffled the team handling negotiations with its creditors after relations between Varoufakis and the EU hit a new low during a stormy Eurogroup meeting in Riga last week. Athens is struggling to pay salaries and pensions without the promised loans. Almost a billion euros in debt and interest is also due for repayment to the IMF by May 12. Unless an agreement is reached to unlock the remaining EU-IMF bailout money, the debt-ridden country faces default and a possible exit from the euro. Technical experts from the Eurogroup and the Greek delegation are due to be in contact all weekend, trying to resolve differences concerning sweeping reforms required by Brussels and the IMF to secure the package.

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Who cares if markets waver?

Markets Waver As Greece Teeters On Edge Of Financial Tragedy (AFR)

In an attempt to address its liquidity crunch, Athens has directed 1500 state entities – including local authorities, hospitals and universities – to hand over surplus cash reserves to the central bank. But some entities are resisting this directed, fearing that their funds may not be returned. Meanwhile, the lack of progress in negotiations with Greece’s creditors is unnerving Greece’s households and businesses, who withdrew a further €2 billion from the country’s banks in March, according to the Bank of Greece. This follows withdrawals of more than €7.5 billion in February, just under €13 billion in January, and around €4 billion last December. As a result, household and business deposits fell to €138.55 billion in March, their lowest level in 10 years. Even more worrying, early figures for April suggest that deposit outflows are again accelerating.

To compensate for their dwindling deposit base, Greek banks have stepped up their use of emergency funding provided by the country’s central bank. Last week the ECB, which now reviews the amount which Greek banks can borrow on a weekly basis, raised the ceiling on emergency liquidity assistance by a further €1.4 billion, bringing it to €76.9 billion. This emergency liquidity is playing a crucial role in keeping the country’s banking system afloat. But financial markets – along with top officials in Paris, Berlin and Brussels – are all to well aware that Athens is moving ever closer to a position where it is no longer able to pay its debts, and is forced to “default”, potentially triggering an uncontrollable bank run and a collapse of the Greek banking system.

At that point, either European politicians resolutely adopt special emergency measures to rescue the country, or the situation spirals out of control, leaving Greece with no option but to introduce capital controls and quit the euro zone. Although some European politicians are in favour of allowing Greece to default, Paris and Berlin are fearful that “Grexit” risks destabilising the euro zone and encouraging speculators to target vulnerable countries such as Italy, Portugal or Belgium. For his part, Tsipras is betting that worries about the potential disruption from a “Grexit” will eventually cause the Europeans to back away from their demands for further reforms. Still, it’s a dangerous strategy, because in Greece’s precarious position, a financial accident could occur at any time.

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The benefits of plastic.

Use Your Credit Card To Fight Tax Evasion, Greece Urges Visitors (Observer)

Greece’s tourism chief has appealed to the millions of Britons planning to visit the crisis-hit country this year to use credit cards as much as possible. The move comes as the government in Athens has signalled that it plans to raise VAT rates on some holiday islands. Andreas Andreadis made the plea to what are expected to be record numbers of holidaymakers, saying plastic could play a key role in hindering tax evasion, a perennial drain on the Greek economy. “What we are saying is that on cash transactions above a certain level please use your credit cards,” he told the Observer. “That way it forces services and shops to declare it on the cash register and issue receipts.”

Greece is bracing itself for around 25 million foreign arrivals – more than twice its population – with the vast majority heading for resorts where tax collection is notoriously lax. An estimated 2.4 million Britons will be among them. “In a country where the tax collection system is so inefficient, credit cards are the easiest way of clamping down on evasion,” said Andreadis, who heads the Confederation of Greek Tourism (Sete). “We calculate that around 40% of receipts are not issued in tourist areas to avoid VAT.” The confederation, which represents more than 50,000 enterprises in the sector, was pressing for consumers to be given incentives to use cards. Greece is in a race against the clock to clinch a cash-for-reform deal with international creditors to keep bankruptcy at bay.

Fraught negotiations with the EU and International Monetary Fund have brought the nation close to insolvency with Athens’ radical left Syriza government, voted in on a pledge to end austerity, struggling last week to pay pensions. With Greece shut out of international markets and unable to issue short-term debt, a desperate lack of liquidity has exacerbated the problem. Over the next 10 days, the country must pay two loan instalments to the IMF – including €780m on 12 May – or face the spectre of potentially devastating default. The appeal came days after prime minister Alexis Tsipras suggested credit card use being made mandatory for transactions of more than €70. In his first wide-ranging interview since assuming power in January, he said payment cards made eminently more sense than the proposal of Yanis Varoufakis, his finance minister, to use tourists as undercover tax agents.

“It’s simpler than that other idea involving people with [hidden] cameras, etc,” he told Star TV on Monday. Greece loses up to €20bn in tax evasion every year, according to finance ministry officials. The new government has made cracking down on it a top priority. Taxpayers owe in excess of €70bn to the state – nearly a quarter of its debt. Under pressure to provide reforms to unlock an intermediate €7.2bn in bailout funds held up since August, the government has also signalled it will increase VAT on popular Aegean islands. Isles such as Mykonos and Santorini would see a surcharge on hotel rooms, services and goods. The measure would bring in an estimated €350m. But it has been strongly opposed by the tourist industry, which provides one in five jobs and is by far Greece’s biggest foreign earner.

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“..there’s a whole range of political ramifications in terms of market expectations if the euro proves to be reversible. The natural question is: who will be next?”

Greek Exit ‘Would Leave Western Alliance In Chaos’ (Telegraph)

A Greek exit from the eurozone would throw the bloc into chaos and put the “whole cohesion of the western alliance in doubt”, a key figure in the country’s private sector debt restructuring has warned. While banks had reduced their exposure to Greece, which represents less than 2pc of eurozone GDP, investors are being too complacent about the implications of a Greek exit, which could have far-reaching political ramifications and amplify the polarisation between the eurozone’s core and periphery, Hung Tran, executive managing director of the Institute of International Finance (IIF), said. Mr Tran, who helped represent private sector bondholders during Greece’s debt haircut in 2012, said he remained optimistic that there was “room for compromise” and that Greece would reach a “last minute deal” to remain in the 19 nation bloc.

However, he stressed that if the country was forced out of the euro, the consequences would be complex and were “not fully understood”. “In the short term, it probably is the case that financial contagion in terms of spreading to borrowing costs of peripheral countries like Spain and Portugal would be more limited this time compared with 2010 or 2012,” he said. “However, there’s a whole range of political ramifications in terms of market expectations if the euro proves to be reversible. The natural question is: who will be next? “If Greece exiting the euro area severely strains its relationship with the EU and the West, questions will arise about the alignment of Greece in terms of foreign policy, security policy and so on, and the whole cohesion of the western alliance would be put in doubt.”

Mr Tran said the European Central Bank’s €60bn a month quantitative easing programme had helped to create a false sense of security by “overwhelming” any sense of potential spillover from the Greek crisis and pushing down borrowing costs across Europe. However, he said a Greek exit would only serve to amplify the polarisation that we have already seen in Europe. “There has been a sharp polarisation both on the right and left of the mainstream arguing that the current austerity driven approach of economic policy hasn’t worked … so the failure of reaching an agreement in Greece leading to a exit from the eurozone would make this debate and this polarisation sharper and more problematic.”

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Telegraph wishful thinking?

Greece Braced For Weekend Of Unrest As Cash Crunch Nears (Telegraph)

Greece was braced for the biggest weekend of civil unrest since its radical Left government assumed power, as tensions over the country’s future in the eurozone are set to reach breaking point in May. Athens was gripped by a throng of anti-austerity protests on Friday, to mark the Labour Day holiday across the continent. Several members of the ruling Syriza party, including embattled finance minister Yanis Varoufakis, took part in rallies, repeating they would not forsake their people and cower to the demands of creditors. In a veiled barb aimed at his paymasters, a defiant Prime Minister Alexis Tsipras tweeted: “We will prevail in our struggles to bolster and protect our rights, our democracy and our dignity”.

Labour market reforms have emerged as one of the main stumbling blocks in Greece’s three-month bail-out impasse, as European powers have pushed the Leftist regime to reverse its promises to raise the minimum wage. But Greece’s Labour minister Panos Skourletis said the policy would go ahead, calling it a “deep and immovable red line” for the government. In a taste of the domestic turmoil that could ensue should the state withold funds from its citizens, hundreds of pensioners in Athens were forced to queue outside banks on Thursday, as pensions payments were temporarily delayed. The government is scrambling to find the funds it needs to avoid defaulting on the IMF on May 6, when it is due to repay a €200m loan. Panic over the pensions payment “suggests that this comparably small IMF payment will be a headache to scrape together and underlines that Greece might well struggle to stay financially afloat much beyond May,” said Robert Kuenzel of Daiwa Capital Markets.

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What do you say to that, Schäuble?

German President Says Berlin Should Be Open To Greek War Reparations (Reuters)

German President Joachim Gauck expressed support on Friday for Athens’ demands for reparations for the Nazi occupation of Greece in World War Two, even though the government in Berlin has repeatedly rejected the claims. Gauck, who has little real power in Germany but a penchant for defying convention, said in an interview to be published in Saturday’s Sueddeutsche Zeitung newspaper that Germany should consider its historical responsibility to Greece. “We are not only people who are living in this day and age but we’re also the descendants of those who left behind a trail of destruction in Europe during World War Two – in Greece, among other places, where we shamefully knew little about it for so long,” Gauck said.

“It’s the right thing to do for a history-conscious country like ours to consider what possibilities there might be for reparations.” Greece’s demand for €278.7 billion in reparations for the brutal Nazi occupation have mostly fallen on deaf ears, but some legal experts say it may have a case. Many in Greece blame Germany, their biggest creditor, for the tough austerity measures and record unemployment that have followed from two international bailouts totaling €240 billion. Last month, economy minister and vice-chancellor Sigmar Gabriel called the demand “stupid”.

Gabriel said Greece wanted to squeeze some leeway out of its euro zone partners as they set conditions for further financial aid to help Greece avoid bankruptcy. “And this leeway has absolutely nothing to do with World War Two or reparation payments,” he said. German officials have previously argued that Germany has already honored its obligations, not least with a 115 million deutsche mark payment to Greece in 1960. Gauck, a former East German pastor, recently caused a stir by condemning the massacre of 1.5 million Armenians by Ottoman Turkish forces a century ago as “genocide”, a term that the Berlin government had long rejected. Turkey denies the charge.

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Good analysis of US-EU-Russia relations.

What Does Putin Want? (Rostislav Ishchenko)

To understand how, when and on what conditions military activity can end, we need to know what the politicians want and how they see the conditions of the postwar compromise. Then it will become clear why military action turned into a low-intensity civil war with occasional truces, not only in the Ukraine but also in Syria. Obviously, the views of Kiev politicians are of no interest to us because they don’t decide anything. The fact that outsiders govern the Ukraine is no longer concealed. It doesn’t matter whether the cabinet ministers are Estonian or Georgian; they are Americans just the same. It would also be a big mistake to take an interest in how the leaders of the Donetsk People’s Republic (DPR) and the Lugansk People’s Republic (LNR) see the future.

The republics exist only with Russian support, and as long as Russia supports them, Russia’s interests have to be protected, even from independent decisions and initiatives. There is too much at stake to allow [Alexander] Zakharchenko or [Igor] Plotnitzky, or anyone else for that matter, to make independent decisions. Nor are we interested in the European Union’s position. Much depended on the EU until the summer of last year, when the war could have been prevented or stopped at the outset. A tough, principled antiwar stance by the EU was needed. It could have blocked U.S. initiatives to start the war and would have turned the EU into a significant independent geopolitical player. The EU passed on that opportunity and instead behaved like a faithful vassal of the United States. As a result, Europe stands on the brink of frightful internal upheaval.

In the coming years, it has every chance of suffering the same fate as the Ukraine, only with a great roar, great bloodshed and less chance that in the near future things will settle down – in other words, that someone will show up and put things in order. In fact, today the EU can choose whether to remain a tool of the United States or to move closer to Russia. Depending on its choice, Europe can get off with a slight scare, such as a breakup of parts of its periphery and possible fragmentation of some countries, or it could collapse completely. Judging by the European elites’ reluctance to break openly with the United States, collapse is almost inevitable. What should interest us is the opinions of the two main players that determine the configuration of the geopolitical front and in fact are fighting for victory in the new generation of war – the network-centric Third World War. These players are the United States and Russia.

The U.S. position is clear and transparent. In the second half of the 1990s, Washington missed its only opportunity to reform the Cold War economy without any obstacles and thereby avoid the looming crisis in a system whose development is limited by the finite nature of planet Earth and its resources, including human ones, which conflicts with the need to endlessly print dollars. After that, the United States could prolong the death throes of the system only by plundering the rest of the world. At first, it went after Third World countries. Then it went for potential competitors. Then for allies and even close friends. Such plundering could continue only as long as the United States remained the world’s undisputed hegemon. Thus when Russia asserted its right to make independent political decisions – decisions of not global but regional import –, a clash with the United States became inevitable. This clash cannot end in a compromise peace.

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“Clearly, the European Parliament is a great danger to life on the planet.”

Insanity Grips The Western World (Paul Craig Roberts)

The White Media claims, and has claimed since February 2014, that there are Russian tanks and troops in Ukraine. Putin has pointed out that if this indeed was the case, Kiev and Western Ukraine would have fallen to the Russian invasion early last year. Kiev has been unable to defeat the small breakaway republics in eastern and southern Ukraine and would stand no chance against the Russian military. Recently a brave news organization made fun of the White Media’s claim that Russian tanks have been pouring into Ukraine for 14 months. The parody pictured Ukraine at a standstill. All traffic on all roads and residential streets is blocked by Russian tanks. All parking places, including sidewalks and people’s front and rear gardens have tanks piled upon tanks. The entire country is immobilized in gridlock.

Although a few have fun making fun of the gullible people who believe the White Media, the situation is nevertheless serious as it concerns life on planet Earth. There is little sign that Washington and its vassals care about life on Earth. Recently, the largest political group in the European Parliament–the European People’s Party–expressed a cavalier opinion about life on Earth. We know this, because, if we can trust Euractiv, an online EU news source, the majority EU party believes that declaring the EU’s readiness for nuclear war is one of the best steps to deter Russia from further aggression. The aggression to be stopped by Europe’s declaration of its readiness for armageddon is the alleged Russian invasion of Ukraine, and the “further aggression” is Putin’s alleged intention of reestablishing the Soviet Empire.

It must be disappointing to the Russian government to see that leaders of the European Union prefer to endorse nuclear war than to challenge Washington’s propaganda. When I read that the governing party in the European Parliament thought non-existent aggression had to be stopped by a declaration of readiness for nuclear war, I realized that money could buy any and every thing, even the life of the planet. The European People’s Party was speaking in behalf of Washington’s propaganda, not in behalf of Europe. Europe’s nuclear war with Russia would end instantly with the destruction of every European capital. The crazed vice-president of the European People’s Party, Jacek Saryusz-Wolski revealed who the real aggressor is when he declared: “Time of talk and persuasion with Russia is over. Now it’s time for a tough policy.” Clearly, the European Parliament is a great danger to life on the planet.

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Breeding Chinese Goldmanites.

China Teaches Top Cadres Western Ideas Despite Backlash (AP)

In the still, early hours, cadres make their way down tree-lined paths. They walk through a polished lobby, down dim hallways and settle themselves in rows in plain, wood-paneled classrooms. Here, they sit at the vanguard of the Communist Party of China. These rising Communist Party members from across the country have come to the China Executive Leadership Academy Pudong (CELAP) in Shanghai as part of the party’s decade-long effort to introduce its own elite to foreign ideas. Outside these walls, President Xi Jinping’s government is campaigning to scrub Western influence from classrooms, but here some 10,000 party loyalists each year hear from top Western scholars and executives about management techniques, media relations, urban development and innovation.

“It does no harm for top leaders to get to know different ideas in the world,” said Zhang Xuezhong, who was barred from teaching at East China University of Political Science and Law in 2013, after publishing an article critical of the government. “The Communist Party expects the people it rules to be ignorant, but they would not expect themselves to be like this.” As China seeks to play a more decisive role on the global stage, such exposure is becoming more important — at least for those at the forefront of transforming China’s economy and international role. For everyone else, education has become an ideological battleground, where destabilizing Western values must be vanquished lest they weaken the party’s grip on power.

“Young teachers and students are key targets of infiltration by enemy forces,” Education Minister Yuan Guiren wrote in a January essay. Around the same time, he told university officials to bar “teaching materials that disseminate Western values,” state-run news agency Xinhua reported. His remarks came shortly after Beijing issued new guidelines ordering universities to promote loyalty to the party, core socialist values, and the teachings of Xi himself. Meanwhile, Westerners continue to march through CELAP, bringing with them an uncontrollable parade of ideas. [..] “It’s a very unusual institution in China,” said Oxford University’s Nicholas Morris, who has taught at CELAP for a decade. “This institution’s job is to help Chinese leaders understand Western practice.”

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In one day. Where was Europe?

Italy Rescues More Than 3,400 Europe-Bound Migrants At Sea (AFP)

More than 3,400 migrants were rescued at sea Saturday, mainly off Libya, as Europe seeks ways to deal with the flood of people trying to reach its shores following a series of deadly shipwrecks. A total of 3,427 people were picked up during the operation coordinated by the Italian coast guard. While they said it was a “very busy day”, it was not a record for the coast guard, which coordinated the rescue of 3,791 migrants on April 12 and another 2,850 the following day. French patrol boat Commandant Birot, which was sent to boost EU patrols to deal with the influx of migrant boats in the Mediterranean, picked up 217 people off the coast of Libya.

The migrants – all men – had been on board three boats, the authorities said, adding that two suspected people smugglers were also caught and would be handed over to Italian police. In Italy, the coast guard announced late at night that 16 vessels had rescued a total of 3,427 people on Saturday alone in an operation coordinated from their headquarters in Rome.

In addition to the French patrol boat, the rescue operation mobilised four Italian coast guard ships, two Italian navy vessels, two cargo ships, two Italian customs ships and two tugs. Most notably, the navy said on Twitter that the frigate Bersagliere had rescued 778 migrants while the patrol boat Vega had picked up another 675. Some of the rescued migrants were expected to arrive overnight on the Italian island of Lampedusa, the closest to the African coast, while most of the others are expected to arrive in Sicily or southern Italy on Sunday night. According to the Italian coast guard, the French patrol vessel should land its migrants at a port in Calabria.

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Should have been taken care of a long time ago.

Greece To Ask EU For Extra Funding For Migrant Influx (Kathimerini)

Greece is to ask the European Union for €30 million of emergency funds to deal with the growing number of undocumented migrants arriving in the country, sources have told Kathimerini. The EU is already due to give Greece €470 million by 2020 for immigration-related matters, such as covering the cost of an asylum service and reception centers. However, this money covers existing operations and cannot be used to tackle problems caused by the spike in migrants reaching Greece over the last few months.

One of the things the government wants to use the emergency funds for is to hire a ferry to transport migrants from islands to reception centers or other facilities on the mainland. The coalition submitted an amendment to Parliament last week allowing authorities to bypass until the end of the year the tender process for immigration-related projects. The government says this will speed up the implementation of schemes aimed at helping migrants.

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Oooh, in-depth reporting from the NYT…

Many Displaced African Migrants Had No Plan to Land in Italy (NY Times)

By now, the unceasing tides of migrants arriving at the ports of Sicily fall into loose national categories. The Syrians usually arrive with money, bearing broken lives in canvas bags, and are able to slip out of Italy, bound for affluent northern Europe. The Eritreans may be far less wealthy but they too are well organized, with networks that move them north as well. Then there are men like Agyemin Boateng and Prince Adawiah, who were scooped out of the Mediterranean this month by an Italian rescue ship. Both are from Ghana, and neither has a plan for a new life in Europe — nor, they say, did either of them ever plan to come to Italy. They were working as laborers in Libya, until life there became untenable and returning to Ghana became unfeasible.

“There are guns and bombs,” said Mr. Adawiah, 25, who worked in Tripoli for nearly three years. “Every day, there is shooting. I’m afraid. That is why I traveled to Italy.” Europe’s migration crisis escalated sharply in April, with the coming of warmer weather to the Mediterranean. Many more smugglers’ boats took to the sea, and a record number of migrants died attempting the crossing — more than 1,700 people so far in 2015, by some estimates. Conflicts in Africa, the Middle East and Central Asia have shaped and reshaped Europe’s migrant flows in recent years, with none more transformative to the Mediterranean smuggling trade than the civil war in Syria. And the tumult in Libya is changing the migration equation once again.

Libyan lawlessness has allowed a haven for smugglers to operate along the country’s coastline, but it has also unmoored many African laborers who were working there as migrants. Many of these men now languish in Italian detention centers without contacts or plans for the future, and their growing numbers are frustrating some Italian mayors and other officials. “We don’t know anything,” said one migrant, Shamsudeen Sawud, 18, who arrived in Italy more than a week ago. “No one is telling us anything.”

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Yes, this is funny.

Italian Army Growing Cannabis To Slash End User Prices (RT)

Italy’s first medical marijuana crop – grown by the country’s military – is “coming along nicely,” according to officials at a government-funded greenhouse outside Florence. “The aim of the operation is to provide users with a product that is not always easily available on the market, at a more competitive price,” Colonel Antonio Medica, the director of the facility, told Italian daily Corriere della Sera. Medical marijuana has been legal in the country since 2013 as pain relief for conditions such as multiple sclerosis and cancer, and as treatment for others, such as glaucoma. However, as there have been no licensed producers, and the state would not pay for the treatment, those with prescriptions have had to purchase it abroad, from the Netherlands and Germany, at prices that reach up to €40 per gram.

This means many patients have simply been buying their drugs off the street, financing drug dealers, who do not pay taxes, and may be engaged in other illegal activities. By producing 100 kg of its own weed, the government hopes to undercut the street dealers. “We’re aiming to lower the price to under €15 euros ($17), maybe even around €5 euros per gram,’ said Medica, who noted that this would be similar to the black market price of the drug. The government chose a military lab, due to existing security and surveillance arrangements. While the innovations will help medicinal users, they are unlikely to undermine the illegal marijuana market in a country where one in five admitted to being smokers of the drug in a survey conducted in 2012.

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And not a word on an investigation.

From Ukraine To Australia, Tributes Pour Out For Odessa Massacre Victims (RT)

Thousands of people in Ukraine, Russia and around the world took to the streets to mark the first anniversary of the Odessa massacre. Last year, 48 activists were killed and over 200 injured as radicals set the local trade unions house on fire. The commemoration ceremonies for those who died in the fire on May 2, 2014 proceeded without serious incident in the Ukrainian port city of Odessa. A huge crowd, including the relatives of the victims, gathered in front of the Trade Unions building and released black balloons and doves in air. According to local media, the rally in Odessa was attended by around 5,000 people. The people held banners reading “fascism won’t pass” and “no to political repressions,” with some carrying photos of journalist Oles Buzina and politician Oleg Kalashnikov, who were assassinated in Kiev last month.

In the Ukrainian capital, Kiev, some 2,000 people marched to honor the victims of the tragedy in an action entitled ‘Kiev Remembers Odessa.’ The people were carrying photos of those who died in the fire, as well as pictures of Buzina and Kalashnikov. Several arrests were made during the demonstration, with the Kiev police saying that they “invited the men to a local police station”. They were later released. March to honor the victims of the Odessa massacre in Ukrainian capital Kiev on May 2, 2015.March to honor the victims of the Odessa massacre in Ukrainian capital Kiev on May 2, 2015. Earlier, reports emerged on social media that it was the organizers of the rally, who had been detained by the security officials. “The organizers of a peaceful rally have been arrested in Kiev! What for? Show me a single slogan, for which you can be arrested in a democratic ‘European’ country?” Yuri Kot, Ukrainian public figure and journalist, wrote on Facebook.

In Moscow, around 1,000 people gathered in front of the Ukrainian Embassy to Russia to commemorate the Odessa massacre victims. An outdoor photo exhibition, showcasing pictures of the burning Odessa Trade Union House, was organized together with the rally. “It was very hard to not to cry. I didn’t expect so many people to care and feel for the sorrow,” an eastern Ukrainian resident, who attended the event, told RIA-Novosti. At the end, the bell tolled 48 times to commemorate each victim of the last year’s tragedy. Remembrance events were also held in Australia, Poland, the Republic of Ireland, Switzerland, Morocco and other countries. In Italy, a monument to the Odessa tragedy was opened in the northern town of Ceriano Laghetto.

Ukraine authorities deployed over 3,000 law enforcers in Odessa ahead of the anniversary of mass killings on May 2. Odessa’s Kulikovo Field, the square where the bloodiest scenes in the last year’s confrontation unfolded, was cordoned off on Friday. People wishing to lay flowers in front of the Trade Unions building, where dozens of activists met their deaths, have had to pass through metal detectors. The streets are being patrolled by some 2,600 police officers, while 600 special service fighters are on alert, the Interior Ministry reported. Unarmed volunteer activists were also called to Odessa. “There cannot be too much police presence. It’s a demonstration of our presence and strength to those who want to shake the situation in Odessa. There will be a policeman in every square meter,” Ivan Katerhinchuk, the chief of Odessa region’s police force, told the media.

Earlier on Friday, police troops brought in from other regions and their local colleagues gathered in front of the building. CCTV footage showed dozens of trucks and patrol cars parked in rows and columns of security forces marching in the streets.

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“It’s no use having habitat if there’s nothing left to eat in it.”

Wildlife Decline May Lead To ‘Empty Landscape’ (BBC)

Populations of some of the world’s largest wild animals are dwindling, raising the threat of an “empty landscape”, say scientists. About 60% of giant herbivores – plant-eaters – including rhinos, elephants and gorillas, are at risk of extinction, according to research. Analysis of 74 herbivore species, published in Science Advances, blamed poaching and habitat loss. A previous study of large carnivores showed similar declines. Prof William Ripple, of Oregon State University, led the research looking at herbivores weighing over 100kg, from the reindeer up to the African elephant. “This is the first time anyone has analysed all of these species as a whole,” he said. “The process of declining animals is causing an empty landscape in the forest, savannah, grasslands and desert.”

Prof David Macdonald, of Oxford University’s Wildlife Conservation Research Unit, was among the team of 15 international scientists. “The big carnivores, like the charismatic big cats or wolves, face horrendous problems from direct persecution, over-hunting and habitat loss, but our new study adds another nail to their coffin – the empty larder,” he said. “It’s no use having habitat if there’s nothing left to eat in it.” According to the research, the decline is being driven by a number of factors including habitat loss, hunting for meat or body parts, and competition for food and resources with livestock. With rhinoceros horn worth more than gold, diamonds or cocaine on illegal markets, rhinos could be extinct in the wild within 20 years in Africa, said the researchers.

The consequences of large wild herbivore decline include: • Loss of habitat: for example, elephants maintain forest clearings by trampling vegetation. • Effects on the food chain: large predators such as lions, leopards, and hyena rely on large herbivores for food. • Seed dispersal: large herbivores eat seeds which are carried over long distances. • Impact on humans: an estimated one billion people rely on wild meat for subsistence while the loss of iconic herbivores will have a negative impact on tourism. The biggest losses are in South East Asia, India and Africa. Europe and North America have already lost most of their large herbivores in a previous wave of extinctions.

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Mar 122015
 


Harris&Ewing National Press Club Building newssstand, Washington DC 1940

Six Days Until Bond Market Crash Begins (EconMatters)
Global Finance Faces $9 Trillion Stress Test As Dollar Soars (AEP)
Euro Predicted To Fall To 85 Cents Against US Dollar (CNBC)
Asian Central Banks’ Dilemma: Balancing Debt and Growth (WSJ)
China Economic Data Weaker Than Expected, Fuels Policy Easing Bets (Reuters)
Greece Demands Nazi War Reparations And German Assets Seizures (Telegraph)
Athens Threatens To Seize German Assets Over WWII Reparations (Kathimerini)
Greek Alternative Reality Clashes With Eurozone Losing Patience (Bloomberg)
The ECB’s Noose Around Greece (Ellen Brown)
US Fed Slashes Payout Plans Of Large Wall Street Banks (Reuters)
Draghi: ECB Action Shields Eurozone States From Greek Contagion (Reuters)
How Big Oil Is Profiting From the Slump (Bloomberg)
Russia Gets Seat On SWIFT Board (RT)
Gas Terms For Kiev To Be Eased If It Pays East Ukraine Bills (RT)
Saudi King Salman: We’re Looking For More Oil (Reuters)
Suburb With 27% Jobless Shows Danger of Australian Recession (Bloomberg)
Chinese Tourists Are Headed Your Way With $264 Billion
The Year Humans Started to Ruin the World

What were you thinking?

Six Days Until Bond Market Crash Begins (EconMatters)

Early on Thursday morning, realizing this was going to be a robust selloff in equities, the ‘smart money’, i.e., the big banks, investments banks, hedge funds and the like, ran to the old staple of buying bonds hand over fist with little regard for the yield they are getting paid for stepping in front of the freight train of rate rises coming down the tracks. Just six days away from the most important FOMC meeting in the last seven years, and another 300k employment report in the rear view mirror, this looks like an excellent place to hide for nervous investors who have far more money than they have grains of common sense. Newsflash for these investors, yes markets are over-valued, and you need to get out of Apple, and about 100 other high flying overpriced momentum stocks, but you can`t hide out in bonds this time.

That party is over, and next Wednesday`s FOMC meeting is going to make this point abundantly clear. There is no place to hide except cash. You should have thought about that before you gorged yourself on ZIRP to the point where you have pushed stocks and bonds to unsupportable price levels, and you keep begging for the Fed to stall just another six months, so you can continue to buy more stocks and bonds. Well you have done an excellent job hoodwinking the Fed to wait until June, you should thank your lucky stars you have done such a good job manipulating the Federal Reserve; but just like the boy crying wolf, this strategy loses its effectiveness over time. Throwing another temper tantrum right before another important FOMC meeting hoping that Janet Yellen will be alarmed by these Pre-FOMC Selloffs to put off another six months the inevitable rate hike, this blackmail strategy has run its course.

The Fed is forced to finally start the Rate Hiking Cycle after 7 plus years of Recession era Fed policies by an overheating labor market. You knew this day was going to come, but most of you are still in denial. What the heck were you buying 10-year bonds with a 1.6% yield five months before a rate hike?? You only have yourself to blame for the 65 basis point backup in yields on that disaster of an “Investment”. But really what were you thinking here?? That is the problem when the Fed has incentivized such poor investment decisions and poor allocation of capital to useful, growth oriented projects over the past 7 plus years of ZIRP that these ‘investors’ don`t think at all, they have become behaviorally trained ZIRP Crack Addicts!

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“..the stuff of nightmares for those already caught on the wrong side of the biggest currency margin call in financial history..”

Global Finance Faces $9 Trillion Stress Test As Dollar Soars (AEP)

Sitting on the desks of central bank governors and regulators across the world is a scholarly report that spells out the vertiginous scale of global debt in US dollars, and gently hints at the horrors in store as the US Federal Reserve turns off the liquidity spigot. This dry paper is the talk of the hedge fund village in Mayfair, and the stuff of nightmares for those in Singapore or Hong Kong already caught on the wrong side of the biggest currency margin call in financial history. “Everybody is reading it,” said one ex-veteran from the New York Fed. The report – “Global dollar credit: links to US monetary policy and leverage” – was first published by the Bank for International Settlements in January, but its biting relevance is growing by the day. It shows how the Fed’s zero rates and quantitative easing flooded the emerging world with dollar liquidity in the boom years, overwhelming all defences.

This abundance enticed Asian and Latin American companies to borrow like never before in dollars – at real rates near 1pc – storing up a reckoning for the day when the US monetary cycle should turn, as it is now doing with a vengeance. Contrary to popular belief, the world is today more dollarized than ever before. Foreigners have borrowed $9 trillion in US currency outside American jurisdiction, and therefore without the protection of a lender-of-last-resort able to issue unlimited dollars in extremis. This is up from $2 trillion in 2000. The emerging market share – mostly Asian – has doubled to $4.5 trillion since the Lehman crisis, including camouflaged lending through banks registered in London, Zurich or the Cayman Islands. The result is that the world credit system is acutely sensitive to any shift by the Fed. “Changes in the short-term policy rate are promptly reflected in the cost of $5 trillion in US dollar bank loans,” said the BIS.

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“Europeans need to become a net creditor to the rest of the world. They need to buy a lot more foreign assets..”

Euro Predicted To Fall To 85 Cents Against US Dollar (CNBC)

As analysts were waiting to see how fast the euro reaches parity against the U.S. dollar, one foreign exchange pro told CNBC he saw the common currency dropping even further, with the dollar strengthening another 20%. George Saravelos, global co-head of FX research at Deutsche Bank, said the euro could fall to 85 U.S. cents against the greenback. “The current account surplus is actually helping the euro to weaken,” he said Wednesday in an interview with “Squawk on the Street.” “There’s just too many savings in Europe, too much cash. When that’s combined with what the ECB is doing, which is basically pushing extra liquidity in the system, charging for that liquidity, the only solution is for that capital to flow out of Europe.”

The euro traded around a 12-year low against the dollar on Wednesday and analysts were betting that party with the greenback would be reached soon. Wednesday morning the euro traded around $1.06. The move comes as the ECB began its quantitative easing program Monday in an effort to simulate the euro zone’s economy. “It’s a once-in-a-century event, really. We’ve never had a period where the Fed is about to hike rates over the next few months while at the same time the second-biggest economic bloc of the world is engaging in an unprecedented QE with negative rates,” Saravelos said. Right now there are more foreigners invested in Europe than there are Europeans abroad, he said. “That has to change. Europeans need to become a net creditor to the rest of the world. They need to buy a lot more foreign assets for that adjustment to be completed.”

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Korea just DID lower its rate. But…

Asian Central Banks’ Dilemma: Balancing Debt and Growth (WSJ)

While slowing growth has given central banks across Asia room to cut rates, some are doing so timidly, fearing an even greater buildup in debt. But there’s a growing sense that policy makers are going to have to take bolder action to boost demand in the face of fast-decelerating economies. The Bank of Thailand surprised with a quarter-percentage-point rate cut on Wednesday, and some observers think South Korea’s central bank could follow suit in its meeting on Thursday. “It is clear that Korea’s growth outlook has worsened,” said HSBC economist Ronald Man, who expects a quarter-percentage-point cut to 1.75%, in a note to clients. “The sooner the Bank of Korea lowers its policy rate, the sooner its benefits will transmit through the economy and support growth.”

There are reasons for caution. Both countries have high household debt levels, built up since the onset of the global financial crisis in 2007. As U.S. and European demand for Asia’s exports sagged, Asian governments came to rely more on credit to households and companies to fuel domestic demand. McKinsey, in a report last month, named Thailand and South Korea, along with Australia and Malaysia, as places where household debt levels may be unsustainable. South Korea’s household debt-to-income level stood at 144% at the end of the second quarter last year, the latest data available. That’s higher than the U.S. before its subprime crisis.

Policy makers in South Korea are faced with a problem. Exports of electronics, automobiles and machinery still haven’t picked up, and growth is unlikely to break much above 3% this year for the fourth year in a row. Household spending has remained moribund, in part due to stagnant wages. The high debt overhang also is making consumers cautious. The central bank cut rates twice last year to try to engender more local demand. The moves led to some increase in debt to purchase real estate, and house prices in Seoul, the capital, have begun to recover. But overall domestic spending has remained in the doldrums.

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QE would be suicidal for China. It already has a mountain of money

China Economic Data Weaker Than Expected, Fuels Policy Easing Bets (Reuters)

– Growth in China’s investment, retail sales and factory output all missed forecasts in January and February and fell to multi-year lows, leaving investors with little doubt that the economy is still losing steam and in need of further support measures. The figures came a day after data showed deflationary pressures intensified in the factory sector in February, reinforcing expectations of more interest rate cuts and other policy loosening to avert a sharper slowdown in the world’s second-largest economy. “Activity data surprised the market on the downside by a large margin, suggesting that China’s first quarter GDP growth could likely fall to below 7%,” ANZ economist Li-Gang Liu said in a research note.

“In our view, the extremely weak data at the beginning of the year suggest that China needs to engage in more aggressive policy easing, and we see that a reserve requirement ratio (RRR) cut will be imminent,” he said, adding that stimulus measures rolled out since last year seem to have had limited effect. Industrial output grew 6.8% in the first two months of the year compared with the same period a year ago, the National Bureau of Statistics said on Wednesday, the weakest expansion since the global financial crisis in late 2008. Analysts polled by Reuters had forecast a 7.8% rise, down slightly from December. Retail sales rose 10.7%, the lowest pace in a decade and missing expectations for a 11.7% rise.

Fixed-asset investment, a crucial driver of the Chinese economy, rose 13.9%, the weakest expansion since 2001 and compared with estimates for a 15% gain. “Fixed asset investment will likely face even more challenges,” economists at Credit Suisse said in a note this week, adding that crackdowns on corruption and shadow banking have heavily squeezed spending by local governments. “Local officials and executives at state owned enterprises are more worried about their jobs than investment … The central government is pushing out more investment projects, but with the aim of partially offsetting losses in local investment, rather than accelerating growth.”

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“The government will work in order to honour fully its obligations. But, at the same time, it will work so that all of the unfulfilled obligations to Greece and the Greek people are met..”

Greece Demands Nazi War Reparations And German Assets Seizures (Telegraph)

Greece’s prime minister has demanded Germany pay back more than €160bn in Second World War reparations as his country is squeezed by creditors to overhaul its economy in return for vital bail-out funds. In an emotive address to his parliament, Alexis Tsipras said his government had a “duty to history, to the people who fought and to the victims who gave their lives to defeat Nazism.” The Leftist government maintains it is owed more than €162bn – nearly half the value of its total public debt – for the destruction wrought during the Nazi occupation of Greece. “The government will work in order to honour fully its obligations. But, at the same time, it will work so that all of the unfulfilled obligations to Greece and the Greek people are met,” said Mr Tsipras on Tuesday at a parliamentary debate on the creation of a reparations committee.

Syriza’s leader added the atrocities of the Nazi occupation remained “fresh in the memory” of Greek people and “must be preserved in the younger generations.” Greece’s demand for reparations centres on a war loan of 476m Reichsmarks the Greek central bank was forced to make to the Nazis, as well as further compensation for the destruction and suffering caused by the occupation. The country’s justice minister went further, threatening the seizure of German assets in order to compensate the relatives of Nazi war crimes. Nikos Paraskevopoulos told Greek television he was willing to back a supreme court ruling which would lead to the foreclosure of German assets in Greece. Germany’s vice-chancellor dismissed the prospect of repayment last month. “The likelihood is zero,” said Sigmar Gabriel.

The Third Reich famously subdued Greek resistance in a matter of weeks in 1941, after the country had held out for months against Mussolini’s Italian army. The Nazi occupation that followed saw more than 40,000 civilians starved to death in Athens alone. Germany has claimed it has already covered its obligations in the post-war reparations it has since paid to Greece. The rhetoric comes as Athens prepares to open its books to its lenders in a bid to release €7.2bn in bail-out funds the country desperately needs to stay afloat. Inspection teams from the ECB, IMF and EC are due to cast their eyes over the country’s finances and begin technical work over the terms of the bail-out extension in the coming days. Athens is scrambling to pay €1.3bn in loans to the IMF before the end of the month.

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“You cannot pick and choose on ethical issues.”

Athens Threatens To Seize German Assets Over WWII Reparations (Kathimerini)

Justice Minister Nikos Paraskevopoulos has said he is ready to sign an older court ruling that will enable the foreclosure of German assets in Greece in order to compensate the relatives of victims of Nazi crimes during the Second World War. Greece’s Supreme Court ruled in favor of Distomo survivors in 2000, but the decision has not been enforced. Distomo, a small village in central Greece, lost 218 lives in a Nazi massacre in 1944. “The law states that in order to implement the ruling of the Supreme Court, the minister of justice has to order it. I believe this permission should be given and I’m ready to give it, notwithstanding any obstacles,” Paraskevopoulos told Antenna TV on Wednesday.

“There must probably be some negotiation with Germany,” said Paraskevopoulos, who first announced his intention Tuesday during a Parliament debate on the creation of a committee to seek war reparations, the repayment of a forced loan and the return of antiquities. During the same debate, Prime Minister Alexis Tsipras expressed his government’s firm intention to seek war reparations from Germany, noting that Athens would show sensitivity that it hoped to see reciprocated from Berlin. Tsipras told MPs that the matter of war reparations was “very technical and sensitive” but one he has a duty to pursue. He also seemed to indirectly connect the matter to talks between Greece and its international creditors on the country’s loan program.

“The Greek government will strive to honor its commitments to the full,” he said. “But it will also strive to ensure all unfulfilled obligations toward Greece and the Greek people are fulfilled,” he added. “You cannot pick and choose on ethical issues.” Tsipras noted that Germany got support “despite the crimes of the Third Reich” chiefly thanks to the London Debt Agreement of 1953. Since reunification, German governments have used “silence, legal tricks and delays” to avoid solving the problem, he said. “We are not giving morality lessons but we will not accept morality lessons either,” Tsipras said.

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“If it carries on like this, it’s a road to a car crash..”

Greek Alternative Reality Clashes With Eurozone Losing Patience (Bloomberg)

Ask Greek Finance Minister Yanis Varoufakis about his country’s predicament, and you’re likely to get a very different response from the one echoing around the euro region. The Athens University professor said on Monday he’s convinced the six-week-old government is doing what’s needed to secure more funding and avoid bankruptcy. His counterparts, during a euro-area finance ministers’ meeting, spoke of mixed messages, dawdling and a lack of detail over Greece’s deteriorating financial situation. Impressions aside, Greece is running out of time, money and friends. France’s Michel Sapin, whose government had made the most conciliatory noises toward Greek calls for less austerity, expressed frustration with Varoufakis. Spain’s finance minister, concerned about an anti-austerity insurrection at home, also hardened the rhetoric.

“The time comes when what’s needed is not declarations of intentions or slogans, but figures and verifiable data,” Sapin said in Brussels. Greece is seeking the disbursement of an aid payment totaling about 7 billion euros ($7.5 billion) amid speculation its coffers could be empty by the end of the month. With technicians representing the EC, ECB and IMF set to begin work Wednesday to assess the nation’s needs, officials around the euro zone have complained about the lack of progress. Much of the negotiations of the past few weeks have been a “complete waste of time,” according to Dutch Finance Minister Jeroen Dijsselbloem. “Not so much has happened,” in Greece since the euro area in February allowed the government’s loan agreement to be extended by four months,’’ he told reporters after the meeting. “So the question arises: how serious are they?”

For Varoufakis, 53, an economist whose expertise is game theory, all is working well and the government is on course to meet all its debt obligations. “I believe that we are doing our job properly,” Varoufakis said at the conclusion of Monday’s talks. “Our job is to start the process which is necessary for the European Central Bank to have confidence.” After promising the electorate it would break free from the conditions tied to the country’s bailout, the government committed to coming up with a package of economic reforms in exchange for the aid. It now has to give more details of how it will implement them. “If it carries on like this, it’s a road to a car crash,” Andrew Lynch at Schroder in London, told Bloomberg. “Both sides need to stop the posturing and get a deal done as quickly as possible because otherwise you just get to a stage where accidents can happen, and accidents at this stage could be very serious.”

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“The ECB bought public debt from private banks for a fortune, because the ECB could not buy public debt directly from the Greek state. The icing on this layer cake is that private banks had found the cash to buy Greece’s public debt exactly from…the ECB, profiting from ultra-friendly interest rates. This is outright theft. And it’s the thieves that have been setting the rules of the game all along.” “Goldman Sachs “helped” Greece get into the Eurozone through a highly questionable derivative scheme involving a currency swap that used artificially high exchange rates to conceal Greek debt. Goldman then turned around and hedged its bets by shorting Greek debt.

The ECB’s Noose Around Greece (Ellen Brown)

Remember when the infamous Goldman Sachs delivered a thinly-veiled threat to the Greek Parliament in December, warning them to elect a pro-austerity prime minister or risk having central bank liquidity cut off to their banks? It seems the ECB (headed by Mario Draghi, former managing director of Goldman Sachs) has now made good on the threat. The week after the leftwing Syriza candidate Alexis Tsipras was sworn in as prime minister, the ECB announced that it would no longer accept Greek government bonds and government-guaranteed debts as collateral for central bank loans to Greek banks. The banks were reduced to getting their central bank liquidity through “Emergency Liquidity Assistance” (ELA), which is at high interest rates and can also be terminated by the ECB at will.

In an interview reported in the German magazine Der Spiegel on March 6th, Alexis Tsipras said that the ECB was “holding a noose around Greece’s neck.” If the ECB continued its hardball tactics, he warned, “it will be back to the thriller we saw before February” (referring to the market turmoil accompanying negotiations before a four-month bailout extension was finally agreed to). The noose around Greece’s neck is this: the ECB will not accept Greek bonds as collateral for the central bank liquidity all banks need, until the new Syriza government accepts the very stringent austerity program imposed by the troika (the EU Commission, ECB and IMF). That means selling off public assets (including ports, airports, electric and petroleum companies), slashing salaries and pensions, drastically increasing taxes and dismantling social services, while creating special funds to save the banking system.

These are the mafia-like extortion tactics by which entire economies are yoked into paying off debts to foreign banks – debts that must be paid with the labor, assets and patrimony of people who had nothing to do with incurring them. Greece is not the first to feel the noose tightening on its neck. As The Economist notes, in 2013 the ECB announced that it would cut off Emergency Lending Assistance to Cypriot banks within days, unless the government agreed to its bailout terms. Similar threats were used to get agreement from the Irish government in 2010. Likewise, says The Economist, the “Greek banks’ growing dependence on ELA leaves the government at the ECB’s mercy as it tries to renegotiate the bailout.”[..]

The ECB bought public debt from private banks for a fortune, because the ECB could not buy public debt directly from the Greek state. The icing on this layer cake is that private banks had found the cash to buy Greece’s public debt exactly from…the ECB, profiting from ultra-friendly interest rates. This is outright theft. And it’s the thieves that have been setting the rules of the game all along. That brings us back to the role of Goldman Sachs (dubbed by Matt Taibbi the “Vampire Squid”), which “helped” Greece get into the Eurozone through a highly questionable derivative scheme involving a currency swap that used artificially high exchange rates to conceal Greek debt. Goldman then turned around and hedged its bets by shorting Greek debt.

Predictably, these derivative bets went very wrong for the less sophisticated of the two players. A €2.8 billion loan to Greece in 2001 became a €5.1 billion debt by 2005. Despite this debt burden, in 2006 Greece remained within the ECB’s 3% budget deficit guidelines. It got into serious trouble only after the 2008 banking crisis. In late 2009, Goldman joined in bearish bets on Greek debt launched by heavyweight hedge funds to put selling pressure on the euro, forcing Greece into the bailout and austerity measures that have since destroyed its economy.

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Somone’s blowing smoke, but who is it?

US Fed Slashes Payout Plans Of Large Wall Street Banks (Reuters)

– Four of the largest U.S. banks just scraped by in an annual Federal Reserve check-up on the industry’s health, underscoring their top regulator’s enduring doubts about Wall Street’s resilience more than six years after the crisis. Goldman Sachs, Morgan Stanley and JPMorgan, all with large and risky trading operations, lowered their ambitions for dividends and share buybacks, the Fed said on Wednesday, to keep them robust enough to withstand a hypothetical financial crisis. The revised plans allowed them to pass the Fed’s simulation of a severe recession. And Bank of America was told to get a better grip on its internal controls and its data models even as the Fed approved its payout plans after the so-called stress tests. “Bank of America exhibited deficiencies in its capital planning process…. in certain aspects of (its) loss and revenue modeling practices,” the Fed said.

The failure of four of the largest U.S. banks to win unconditional approval on their first attempt underscores the split between Wall Street banks and their regulators over whether the lenders have enough capital on their books to weather another crisis. Citigroup, whose Chief Executive Mike Corbat has staked his job on not failing the so-called stress tests again, will sigh a breath of relief as it passed, allowing it to raise its payouts after failing last year for the second time in three years. The Fed first started running its so-called stress tests in 2009, when many of the largest U.S. banks were struggling to repay taxpayer bailout funds they took after the collapse of Lehman Brothers a year earlier. Citi said it will raise its quarterly dividend to 5 cents a share from the penny a share payout it had to adopt during the financial crisis and that it had won approval to buy back $7.8 billion of stock over five quarters. Shares in Citi rose by as much as 3.2% after the bell.

The Fed rejected plans for the U.S. units of two European banks, Deutsche Bank and Santander, in line with earlier media reports. The objection came even though both banks satisfied the Fed’s minimum capital requirements, since there were “widespread and substantial weaknesses across their capital planning processes,” the Fed said. JPMorgan, Goldman Sachs and Morgan Stanley each had to adjust their capital plans to meet the Fed’s minimum capital requirements. “For those banks it’s going to be a continuing balancing act between how much leverage can you have to pass the stress tests and still maximize your profitability as a bank,” said David Little, the head of the enterprise Risk Solutions unit at Moody’s, referring to banks with large trading books operating on Wall Street.

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Mario’s on pills of some kind: “..a slowdown in growth had reversed and that the recovery should “broaden and hopefully strengthen.”

Draghi: ECB Action Shields Eurozone States From Greek Contagion (Reuters)

ECB buying of government and other debt may be shielding countries in the euro zone from any knock-on effect from events in Greece, ECB President Mario Draghi said on Wednesday. The ECB began a policy of printing money to buy sovereign bonds, or quantitative easing, on Monday with a view to supporting growth and lifting euro zone inflation from below zero up towards its target of just under 2%. “We also saw a further fall in the sovereign yields of Portugal and other formerly distressed countries in spite of the renewed Greek crisis,” Draghi told a conference in Frankfurt. “This suggests that the asset purchase program may be shielding euro area countries from contagion.”

Draghi spoke as Greece embarked on technical talks with its international creditors to agree reforms and unlock further funding amid growing frustration with Athens. The new left-wing Greek government, keen to show voters it is keeping a promise not to work with the detested “troika” of foreign lenders, has been trying to avoid having talks with inspectors from the three institutions in their own country. Earlier this week, ministers spent barely 30 minutes discussing Greece at their monthly meeting, an EU official said, stressing it was time for Athens to engage in serious, detailed discussions with experts from the institutions formerly known as the “troika”.

On the outlook for the euro zone economy, Draghi said a slowdown in growth had reversed and that the recovery should “broaden and hopefully strengthen.” Updated forecasts by ECB staff published last week showed the QE program would support growth in the 19-country euro zone and lift inflation from below zero up to 1.8% in 2017 – in line with the ECB’s goal. Draghi said these forecasts were conditional on the full implementation of all the ECB’s announced measures. The central bank plans to buy €60 billion a month of assets – mostly sovereign bonds – until at least September next year.

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Trading houses. Or is that casinos?

How Big Oil Is Profiting From the Slump (Bloomberg)

Europe’s largest oil companies are gaining support from an unlikely source as they confront the industry’s worst slump since the financial crisis: lower oil prices. Although better known for their oil fields, refineries, and petrol stations, BP, Shell and Total are also the world’s biggest oil traders, handling enough crude and refined products every day to meet the consumption of Japan, India, Germany, France, Italy, Spain and the Netherlands. The trio’s sway in commodities trading, largely unknown outside the industry, is set to pay off in 2015 as the bear market allows traders to generate higher returns by storing cheap oil today to sell at higher prices later and using lower prices to make more bets with the same capital.

“Volatility has increased dramatically over the last three or four months,” said Mike Conway, the head of Shell’s trading and supply business. “Parts of your business that are volatility driven are probably doing pretty well.” While companies are shy about revealing the financial results from their trading business, a look at the last major bear market provides clues to the opportunity they have today. In the first quarter of 2009, BP said it made $500 million above its normal level of profits from trading. That means that trading accounted for, at the very least, 20 percent of BP’s adjusted income that quarter of $2.38 billion.

From dealing floors that resemble the operations of Wall Street banks in cities including Geneva, London, Houston, Chicago and Singapore, oil trading could provide BP, Shell and Total with an edge over U.S. rivals Exxon Mobil and Chevron, which sell their own production, but largely eschew pure trading as a means of generating profits.

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How funny is that?

Russia Gets Seat On SWIFT Board (RT)

Increased banking traffic means Russia now has a seat on the board of the SWIFT global interbank communications system. The seat comes at a time of increased pressure for Russia to be removed from the organization because of sanctions. It is the first time Russia has had a seat on the 25-member board of directors of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) since it joined in 1989. Every three years the organization reconfigures the shares among the countries participating. Each country receives a number of shares in proportion to the traffic in the system. The reallocation has led to changes in the structure of the board.

“By the end of 2014 the SWIFT traffic growth in Russia allowed us to reach thirteenth place in the world, so Russia has increased its stake to a level that allows it to nominate a candidate to the Board of Directors”, the executive director of the Russian National SWIFT Association Roman Chernov told RBC. On this basis, Russia gained a seat as Hong Kong lost one, Belgium gained an additional seat giving it two and the Netherlands lost a seat giving it one, according to The Banker. “The threat of disconnection from SWIFT does not decrease after the appearance of the Russian representative on the board of directors, since the decision to disconnect from SWIFT is independent, but such a presence means that we can influence decisions made by SWIFT in terms of the introduction of the new standards, service improvements, and tariff systems”, Alma Obaeva, the Chairman of the non-commercial National Payments Council was cited as saying by RBC.

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Another major chuckle.

Gas Terms For Kiev To Be Eased If It Pays East Ukraine Bills (RT)

Russia could give Ukraine better terms provided Kiev pays for gas supplied to the Donbass region, said Russian Energy Minister Aleksandr Novak adding that this would open the possibility for new discounts. “We are supplying [East Ukraine – Ed.] under the [2009] contract. Gazprom doesn’t ship for free. Bills, invoices are being prepared,” Novak said Wednesday quoted by Reuters. He added that no clarification has been made over the further payments of gas supplies to Donbass. Ukraine’s Naftogaz owes Gazprom $2.4 billion for deliveries, including $200 million in penalties, according to the minister’s earlier estimates. The so-called ‘winter package’ terms for gas supply to Ukraine expires on March 31, along with a $100 discount per 1,000 cubic meters of gas and a suspension of a take-or-pay agreement that requires payment for gas no matter if Ukraine needs it by that date or not.

Novak said Russia is open to extend those concessions even without signing a new deal after the ‘winter package’ expires. “A discount is possible under the contract as well. No separate packages are needed if Ukraine and Russia reach an agreement. Take-or-pay [suspension – Ed.]… is also possible, it depends on the talks between the companies,” Novak said. If the gas price in the second quarter is $330 per 1,000 cubic meters or higher, the maximum discount for Kiev would be $100, he said. If the price is lower, the discount will be no greater than 30% of the cost. The price for the second quarter may be in the range of $350-360 without discounts, compared $329 in the current quarter.

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Thanks man, we really need it.

Saudi King Salman: We’re Looking For More Oil (Reuters)

Saudi Arabia’s King Salman said he would fight corruption, diversify the economy and confront anybody who challenged the stability of the world’s top oil exporter in his first big speech since taking power on Jan. 23. His speech, carried on state television, focused on the need to create private sector jobs for young Saudis, a main policy goal for many years as Riyadh strives to meet a looming demographic challenge while controlling public spending. Addressing the chaos threatening the kingdom from around the region, he said no one would be allowed to tamper with Saudi Arabia’s security or stability. He said Saudi foreign policy would be committed to the teachings of Islam and spoke of a move towards greater Arab and Islamic unity to face shared threats, as well as a continued focus on working with other countries against terrorism.

He also pledged to maintain the kingdom’s Sharia Islamic law, emphasising its central place in the kingdom, in a nod to the powerful clerical establishment that confers religious legitimacy on the unelected ruling dynasty. Salman also reassured Saudis about lower oil prices, noting the historically high revenues of recent years and saying the government would reduce the impact on development projects and continue to explore for oil and gas reserves. Addressing himself to young Saudis of both sexes, he said the state would do all it could to help develop their education, sending them to prestigious universities, to help them get jobs in either the public or private sector. King Salman added that he had directed the government to review its processes to help eradicate corruption, a source of dissatisfaction among many Saudis, alongside concerns about expensive housing and joblessness.

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More from the land of great recovery.

UK Ethnic Minority Youth See 50% Rise In Long-Term Unemployment (Guardian)

The number of young people from ethnic minority backgrounds who have been unemployed for more than a year has risen by almost 50% since the coalition came to power, according to figures released by the Labour party. There are now 41,000 16- to 24-year-olds from black, asian and minority ethnic [BAME] communities who are long-term unemployed – a 49% rise from 2010, according to an analysis of official figures by the House of Commons Library. At the same time, there was a fall of 1% in overall long-term youth unemployment and a 2% fall among young white people. Labour described the findings as shameful and accused the coalition of abandoning an already marginalised group of young people.

“These figures are astonishing,” said the shadow justice secretary Sadiq Khan. “At a time where general unemployment is going down and employment is going up, it is doing the reverse for this group… we have got a generation that is being thrown on the scrapheap, and what compounds it is that a disproportionate number are black, asian, minority ethnic.” Labour said the government was paying the price for abandoning many of the measures introduced by the previous government to tackle disadvantage in BME communities – including equality impact assessments. It said the coalition’s work programme had concentrated on the “low-hanging fruit” in the job market instead of trying to help those in more challenging circumstances.

“This is going to lead to problems for years to come,” said Khan. “How can we tackle issues around lack of BAME people in the judiciary, civil service or the boardroom if they can’t even get a job as a young person? We are stopping a generation fulfilling their potential and that is not just a problem for them as individuals or their wider families, it is a problem for all of us.” .

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Sounds familiar: “They’re too scared to spend because they don’t know what the next day will hold.”

Suburb With 27% Jobless Shows Danger of Australian Recession (Bloomberg)

In a shopping center full of sale signs in Broadmeadows, a Melbourne suburb with 27% unemployment, Soney Kul is struggling to shift half-price jewelry. “People don’t want to spend,” the 27-year-old said, gesturing at the sparsely-filled display cases in his family-owned store, Altinbas. “They’re too scared to spend because they don’t know what the next day will hold.” After a decade-long mining boom powered by Chinese demand, Australia’s economy is falling back to earth fast. Among the worst hit are industrial areas like Broadmeadows, whose Ford Motor Co. plant will shut after a record-high currency made operations untenable, and the slowdown is spreading. Only four months after economists were forecasting interest-rate increases in 2015, the country’s central bank has cut its benchmark to a fresh record low.

Goldman Sachs estimates a one-in-three chance Australia will fall into recession in the next 12 months. Australians’ wage growth last quarter matched a record-low pace and prices of the country’s key commodity exports were down 27% in February from a year earlier. “You’re at stall speed,” Tim Toohey, chief economist for Goldman Sachs in Australia, said of national income growth. “It’s that level of uncertainty, and excess capacity in the labor market, that is continuing to be the main story on why consumers aren’t engaging.” Australia’s jobless rate stands at a 12 1/2-year high of 6.4% and there are a growing number of pockets in the nation where it’s much worse.

Suburbs like Broadmeadows and Elizabeth in South Australia are dominated by manufacturers that received little benefit from China’s surging demand for raw materials, while suffering the fallout from an overvalued currency driven up by the commodities boom. Across Australia, regions with unemployment of 10% or more of the workforce rose to 13.3% of all areas in the third quarter from 10.9% of the total a year earlier, according to government data released in December. In response, the central bank cut its benchmark interest rate last month for the first time in more than a year, saying growth would stay “below trend” and unemployment peak at a higher level for longer than it previously expected. Traders are pricing in almost two more reductions over the next 12 months from the current record low of 2.25%.

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And I will sell them my Brooklyn Bridge… Well, you know, either that or I’ll get myself the same brand of printing press that the Chinese have.

Chinese Tourists Are Headed Your Way With $264 Billion

Book your holiday now, before a wave of 174 million Chinese tourists snap up the best bargains. Already the most prolific spenders globally, the number of Chinese outbound tourists is tipped to soar further as the millennial generation spreads its wings. Here are the numbers: 174 million Chinese tourists are tipped to spend $264 billion by 2019 compared with the 109 million who spent $164 billion in 2014, according to a new analysis by Bank of America Merrill Lynch. To put that in perspective, there were just 10 million Chinese outbound tourists in 2000. How much is $264 billion? It’s about the size of Finland’s economy and bigger than Greece’s.

“China-mania spread globally in the past few years, akin to when the Japanese started travelling some 30 years ago, when the world went into frenzy then, pandering to Japanese customers’ needs,” the analysts wrote. “In our view, this is going to be bigger and will last longer given China’s population of 1.3 billion vs Japan’s population of 127 million.”

Millennials, or 25- to 34- year olds, are expected to make up the bulk of Chinese tourists at 35% of the total, followed by 15- to 24- year olds accounting for around 27%. Only about 5% of China’s 1.3 billion populace are thought to hold passports, meaning the potential for outbound tourism is vast. The projected boom could be good news for the global economy. The Chinese are the world’s biggest consumers of luxury goods, with half of that spending done overseas. Chinese visitors to the U.S. have risen more than 10% since 2009, the fastest pace for a destination outside of Asia. Australia, France and Italy are also popular.

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Very interesting.

The Year Humans Started to Ruin the World

Astronomers have been telling us for nearly 500 years that humanity is not the most important thing in the universe. Evolutionary biologists established long ago that we’re not even the greatest show on earth. Now, geologists—the scientists who literally decide what on earth is going on—may reach the opposite conclusion: Humanity is the most powerful force on the planet, shaping the environment more than water, wind, or plate tectonics. Fifteen years ago, two prominent researchers suggested that the earth has formally entered a phase of human domination. Unless there’s some unforeseen calamity caused by volcanic activity or a meteor, they argued, “mankind will remain a major geological force for many millennia, maybe millions of years, to come.”

Nobel prize-winning chemist Paul Crutzen and University of Michigan biologist Eugene Stoermer called this new episode in planetary history the Anthropocene Epoch. The idea has been gaining steam in both the scientific and mainstream press for several years. Enough scientists have bought into the idea that this week, the journal Nature dedicates more than nine pages to the next logical question: If we have crossed into the Anthropocene—which “appears reasonable,” they write with understatement—when did it begin? Geologists are quite insistent on physical evidence. Wherever possible, each of the planet’s eons, eras, periods, epochs, and ages are distinguished with a “golden spike,” a physical marker somewhere in rock, glacier, or sediment that signals evidence of big changes in the earth’s operating system. It needn’t be gold, or even a spike, but without satisfying the International Commission on Stratigraphy’s requirements (which includes several additional procedural hurdles), there will be no new epoch.

The Nature article, by Simon Lewis of University College London and Mark Maslin of the University of Leeds, evaluates nine possibilities that others have put forward as the starter’s pistol of the Anthropocene Epoch. The episodes reach as far back as tens of thousands of years ago, when people hunted large mammals to extinction. Others are as recent as the post-World War II period, when such “persistent industrial chemicals” as plastics, cement, lead, and other fruits of the laboratory started to find their way into nature. The authors ultimately dismiss all but two of the examples because the events were too local (rice farming in Asia) and happened over too long a time span (the extinction of large mammals), which are two main obstacles to a golden spike. The two dates that meet their standard are 1610 and 1964.

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