Jan 212017
 
 January 21, 2017  Posted by at 10:57 am Finance Tagged with: , , , , , , , ,  3 Responses »


Bettmann/Getty Minimum Wage 1963

Trump’s Declaration of War (Paul Craig Roberts)
The Audacity of Trump (WSJ)
Trump Trade Strategy Starts With Quitting TPP – White House (R.)
Trump, in Oval Office, Signs First Order on Obamacare (R.)
Trump Reverses Obama’s Mortgage Fee Cuts on First Day (BBG)
Far-Right Leaders Meet To Discuss ‘Free Europe’ Vision (R.)
As Housing Bubble Pops, Chinese Real Estate Firms Halt Monthly Pricing Data (ZH)
The Curse of Econ 101 (Atlantic)
Economics, Society, And The Environment (EI)
Turkish Parliament Approves Constitutional Reform, Expanded Powers For Erdogan
With New Constitution, Erdogan Eyes For One-Man Rule (GP)
Greek Have Lost Wealth Worth One Year’s GDP Since 2009 (Kath.)

 

 

Who are Trump’s real enemies? There’s no easy answer. PCR concludes: “President Trump has declared a war far more dangerous to himself than if he had declared war against Russia or China.”

Trump’s Declaration of War (Paul Craig Roberts)

President Trump’s brief inaugural speech was a declaration of war against the entirety of the American Ruling Establishment. All of it. Trump made it abundantly clear that Americans’ enemies are right here at home: globalists, neoliberal economists, neoconservatives and other unilateralists accustomed to imposing the US on the world and involving us in endless and expensive wars, politicians who serve the Ruling Establishment rather than the American people, indeed, the entire canopy of private interests that have run America into the ground while getting rich in the process. If truth can be said, President Trump has declared a war far more dangerous to himself than if he had declared war against Russia or China.

The interest groups designated by Trump as The Enemy are well entrenched and accustomed to being in charge. Their powerful networks are still in place. Although there are Republican majorities in the House and Senate, most of those in Congress are answerable to the ruling interest groups that provide their campaign funds and not to the American people or to the President. The military/security complex, offshoring corporations, Wall Street and the banks are not going to roll over for Trump. And neither is the presstitute media, which is owned by the interest groups whose power Trump challenges. Trump made it clear that he stands for every American, black, brown, and white. Little doubt his declaration of inclusiveness will be ignored by the haters on the left who will continue to call him a racist just as the $50 per hour paid protesters are doing as I write.

Indeed, black leadership, for example, is enculturated into the victimization role from which it would be hard for them to escape. How do you pull together people who all their lives have been taught that whites are racists and that they are the victims of racists? Can it be done? I was just on a program briefly with Press TV in which we were supposed to provide analysis of Trump’s inaugural speech. The other commentator was a black American in Washington, DC. Trump’s inclusiveness speech made no impression on him, and the show host was only interested in showing the hired protesters as a way of discrediting America. So many people have an economic interest in speaking in behalf of victims that inclusiveness puts them out of jobs and causes.

So along with the globalists, the CIA, the offshoring corporations, the armaments industries, the NATO establishment in Europe, and foreign politicians accustomed to being well paid for supporting Washington’s interventionist foreign policy, Trump will have arrayed against him the leaders of the victimized peoples, the blacks, the hispanics, the feminists, the illegals, the homosexuals and transgendered. This long list, of course, includes the white liberals as well, as they are convinced that flyover America is the habitat of white racists, misogynists, homophobes, and gun nuts. As far as they are concerned, this 84% of geographical US should be quarantined or interred.

Read more …

WSJ licking up to power?

The Audacity of Trump (WSJ)

Donald J. Trump takes the oath of office on Friday facing unprecedented opposition but also an extraordinary opportunity. He confronts the paradox of a country skeptical that he has the personal traits for the Presidency but still hopeful he can fulfill his promise to shake up a government that is increasingly powerful even as it fails to work. In this respect he is the opposite of President Obama, whom Americans admire personally but see as a failure in delivering on his promises. Mr. Trump begins his Presidency without a reservoir of personal goodwill, so more than most Commanders in Chief he will have to win over Americans with results. He will have to do this, moreover, against a political opposition that is blunt and relentless in wanting him to fail. Inaugurations are typically moments of political unity and appeals to larger national purpose, but Mr. Trump will get no honeymoon.

Democratic leaders are calling his election illegitimate, and most of the media wants Mr. Trump to implode—for reasons of partisanship, ideology or simply to vindicate their view during the campaign that he couldn’t and shouldn’t win. No President since Nixon will face a more hostile resistance in the press and permanent bureaucracy. Yet rather than rage against this hostility, Mr. Trump should view it as an opportunity. So many elites expect him to fail that even small early successes will confound them. So many on the left are predicting the rise of fascism that he can make them look foolish by working well with Congress. So many in the media will portray him as the leader of a gang of billionaires that he can turn the tables with an up-from-poverty and education choice campaign.

Mr. Trump owes his narrow election victory to center-right and independent voters who decided he was a risk worth taking. Notably, they seem to be reserving judgment. In the new Wall Street Journal/NBC News poll, Mr. Trump’s personal popularity rating is 10 points underwater, 38% positive, 48% negative—the lowest of any modern President at inauguration. But as notably, the public is better disposed to Mr. Trump’s agenda than to his character and temperament. Tax reform, a faster campaign against Islamic State, improving roads and bridges, and fixing health care enjoy widespread support. If voters are ambivalent about Mr. Trump personally, he has a policy opening to earn their support.

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Hard not to be happy about this.

Trump Trade Strategy Starts With Quitting TPP – White House (R.)

The new U.S. administration of President Donald Trump said on Friday its trade strategy to protect American jobs would start with withdrawal from the 12-nation Trans-Pacific Partnership (TPP) trade pact. A White House statement issued soon after Trump’s inauguration said the United States would also “crack down on those nations that violate trade agreements and harm American workers in the process.” The statement said Trump was committed to renegotiating another trade deal, NAFTA, which was signed in 1994 by the United States, Canada and Mexico. “For too long, Americans have been forced to accept trade deals that put the interests of insiders and the Washington elite over the hard-working men and women of this country,” it said.

“As a result, blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base.” The statement said “tough and fair agreements” on trade could be used to grow the U.S. economy and return millions of jobs to America. “This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers.” If NAFTA partners refused to give American workers a fair deal in a renegotiated agreement, “the President will give notice of the United States’ intent to withdraw from NAFTA,” the statement added.

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Better get a replacement fast. You don’t want stories of people dying due to lack of access to health care, in your first weeks or months.

Trump, in Oval Office, Signs First Order on Obamacare (R.)

President Donald Trump directed government agencies on Friday to freeze regulations and take steps to weaken Obamacare, using his first hours in the White House to make good on a campaign promise to start dismantling his predecessor’s healthcare law. Heading into the Oval Office shortly after the conclusion of his inaugural parade, Trump signed an order on the Affordable Care Act that urged government departments to “waive, defer, grant exemptions from, or delay the implementation” of provisions that imposed fiscal burdens on states, companies or individuals. It also called for efforts to give states greater flexibility in implementing healthcare programs while developing “a free and open market in interstate commerce for the offering of healthcare services and health insurance.”

Health experts had speculated that Trump could expand exemptions from the so-called individual mandate, which requires Americans to carry insurance or face a penalty, or the requirement that employers offer coverage. Experts also believe the administration could try to reduce the “essential benefits,” such as maternity care and mental health services, that insurance plans must cover. The White House did not provide further details about the executive order. Trump’s spokesman Sean Spicer said the White House also directed an immediate regulatory freeze for all government agencies in a memo from Trump’s chief of staff, Reince Priebus. He did not offer details. Repealing and replacing the Affordable Care Act, one of former President Barack Obama’s signature laws, was a central pledge for Trump during the presidential election campaign.

Republicans in the U.S. Congress have not yet laid out a plan to recast the insurance program. In a hastily arranged ceremony, surrounded by some of his aides, Trump sat behind the presidential Resolute Desk and signed the order. He also signed commissions for his newly confirmed defense secretary, James Mattis, and his homeland security secretary, John Kelly. Trump spoke briefly about his day with reporters. “It was busy, but good. It was a beautiful day,” he said. Vice President Mike Pence then swore in Mattis and Kelly in a separate ceremony. There were other signs of change in the Oval Office, which Obama vacated on Friday morning. Golden drapes hung where crimson ones had earlier in the day and new furniture dotted the room.

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The entire US housing system is such a mess it’s hard to know where to begin. Whatever happens, it will be painful.

Trump Reverses Obama’s Mortgage Fee Cuts on First Day (BBG)

Soon after Donald Trump was sworn in as president, his administration undid one of Barack Obama’s last-minute economic-policy actions: a mortgage-fee cut under a government program that’s popular with first-time home buyers and low-income borrowers. The new administration on Friday said it’s canceling a reduction in the Federal Housing Administration’s annual fee for most borrowers. The cut would have reduced the annual premium for someone borrowing $200,000 by $500 in the first year. The reversal comes after Trump’s team criticized the Obama administration for adopting new policies as it prepared to leave office. In the waning days of the administration, the White House announced new Russia sanctions, a ban on drilling in parts of the Arctic and many other regulations.

Last week, Obama’s Housing and Urban Development secretary, Julian Castro, said the FHA would cut its fees. The administration didn’t consult Trump’s team before the announcement. Republicans have argued in the past that reductions put taxpayers at risk by lowering the funds the FHA has to deal with mortgage defaults. [..] A letter Friday from HUD to lenders and others in the real-estate industry said, “more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.” Senate Democratic leader Chuck Schumer of New York took to the chamber’s floor to denounce the reversal. “It took only an hour after his positive words on the inaugural platform for his actions to ring hollow,” Schumer said. “One hour after talking about helping working people and ending the cabal in Washington that hurts people, he signs a regulation that makes it more expensive for new homeowners to buy mortgages.”

Mark Calabria, director of financial regulation studies for the libertarian Cato Institute, said it was appropriate for the administration to examine last-minute decisions by its predecessor, “especially when those decisions appear to be purely motivated by politics.” Ben Carson, Trump’s nominee to lead HUD, FHA’s parent agency, said at his confirmation hearing last week that he was disappointed the cut was announced in Obama’s final days in office. The FHA sells insurance to protect against defaults and doesn’t issue mortgages. It is a popular program among first-time home buyers because it allows borrowers to make a down payment of as low as 3.5% with a credit score of 580, on a scale of 300 to 850. The Obama administration announced last week it would cut the insurance premium by a quarter of a %age point to 0.60%, effective on Jan. 27.

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The products of a failed consensus system. Or in other words: “While you were sleeping”. Obama’s last phone call from the White House was to Merkel, not a coincidence.

Far-Right Leaders Meet To Discuss ‘Free Europe’ Vision (R.)

Far-right populist leaders from Germany, France, Italy and the Netherlands meet in the German city of Koblenz on Saturday to present their vision for “a free Europe” that would dismantle the European Union. Marine Le Pen, who is expected to make it into a May 7 second-round run-off for the French presidency, is due to speak at the meeting, along with Frauke Petry of the anti-immigration Alternative for Germany (AfD). They will be joined by Geert Wilders, leader of the Dutch far-right Freedom Party (PVV) who was last month convicted of discrimination against Moroccans, and Matteo Salvini of the Northern League who wants to take Italy out of the euro. Emboldened by Britons’ vote last year to leave the European Union, the leaders are meeting under the slogan “Freedom for Europe” and aim to strengthen ties between their like-minded parties, whose nationalist tendencies have hampered close collaboration in the past.

“This gives us an opportunity to see how we stand with other European parties,” a spokeswoman for Salvini said. Le Pen told France’s Radio Classique that the meeting was proof that her party was not isolated. “It is therefore the revolution of the people that we are taking part in. It is obviously very important to show that the cooperative Europe we want to achieve (is reflected) in our cooperation,” she said. Several leading German media have been barred from the meeting, which is being organized by the Europe of Nations and Freedom (ENF), the smallest group in the European Parliament, in a year when the parties are hoping for electoral breakthroughs. Populist anti-immigration parties are on the rise across Europe as high unemployment and austerity, the arrival of record numbers of refugees and militant attacks in France, Belgium and Germany feed voter disillusionment with traditional parties.

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“Judged by current conditions, we won’t publish it in the future..”

As Housing Bubble Pops, Chinese Real Estate Firms Halt Monthly Pricing Data (ZH)

That didn’t take long. Earlier this week we reported that after 19 straight months of continued acceleration in home prices, China’s latest housing bubble may have finally burst (again) after December prices in the 70 cities tracked by the NBS, rose by 12.7%, below the 12.9% annual growth rate in the previous month – the first annual decline in nearly 2 years. Fast forward to Friday, when at least two major Chinese private providers of home price data stopped publishing the figures, just as the housing market is stating to cool off at a dramatic pace across all Tier cities. According to Reuters, the China Index Academy, a unit of U.S.-listed Fang Holdings, has stopped distributing monthly housing price index data for 100 cities that it usually issued at the start of the month. The academy said it had suspended distribution indefinitely, without giving a reason for the suspension.

“I don’t know who exactly is making the order, and it’s not mandatory,” said a source with knowledge of the matter, who declined to be identified as the topic is a sensitive one. Home price data from private providers tends to show sharper increases than official data from the National Bureau of Statistics (NBS), which publishes monthly and annual %age changes in 70 major cities. It also overextends on the downside, which according to official data, has now begun, and may explain the self-imposed censorship. Since last summer, in an attempt to cool the overheating housing market, China’s government had levied curbs on buying and ownership to rein in soaring prices and limit asset bubble risks. E-house China, another influential private real estate consultancy also indefinitely suspended its monthly housing price index for 288 cities.

“Judged by current conditions, we won’t publish it in the future,” said Cherilyn Tsui, a public relations officer at CRIC, the consultancy’s real estate research branch. “We stopped distributing prices data a few months ago. At first it was just no external distribution, but now even internally we don’t distribute any more,” she told Reuters. While Tsui said she did not know the reason for the halt, she added that data on sales volumes and inventories would still be published. “Housing prices are an extremely sensitive matter right now,” a second source with knowledge of the matter told Reuters. Perhaps the reason is that having created a massive bubble to the upside, Beijing is hoping to delay the descent in prices in order to attain a smooth landing at a time when China is already faced with record capital outflows, a plunging currency and all time high levels of debt.

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Treating people like tradable resources is always a bad idea.

The Curse of Econ 101 (Atlantic)

In a rich, post-industrial society, where most people walk around with supercomputers in their pockets and a person can have virtually anything delivered to his or her doorstep overnight, it seems wrong that people who work should have to live in poverty. Yet in America, there are more than ten million members of the working poor: people in the workforce whose household income is below the poverty line. Looking around, it isn’t hard to understand why. The two most common occupations in the United States are retail salesperson and cashier. Eight million people have one of those two jobs, which typically pay about $9–$10 per hour. It’s hard to make ends meet on such meager wages. A few years ago, McDonald’s was embarrassed by the revelation that its internal help line was recommending that even a full-time restaurant employee apply for various forms of public assistance.

Poverty in the midst of plenty exists because many working people simply don’t make very much money. This is possible because the minimum wage that businesses must pay is low: only $7.25 per hour in the United States in 2016 (although it is higher in some states and cities). At that rate, a person working full-time for a whole year, with no vacations or holidays, earns about $15,000—which is below the poverty line for a family of two, let alone a family of four. A minimum-wage employee is poor enough to qualify for food stamps and, in most states, Medicaid. Adjusted for inflation, the federal minimum is roughly the same as in the 1960s and 1970s, despite significant increases in average living standards over that period. The United States currently has the lowest minimum wage, as a proportion of its average wage, of any advanced economy, contributing to today’s soaring levels of inequality. At first glance, it seems that raising the minimum wage would be a good way to combat poverty.

The argument against increasing the minimum wage often relies on what I call “economism”—the misleading application of basic lessons from Economics 101 to real-world problems, creating the illusion of consensus and reducing a complex topic to a simple, open-and-shut case. According to economism, a pair of supply and demand curves proves that a minimum wage increases unemployment and hurts exactly the low-wage workers it is supposed to help. The argument goes like this: Low-skilled labor is bought and sold in a market, just like any good or service, and its price should be set by supply and demand. A minimum wage, however, upsets this happy equilibrium because it sets a price floor in the market for labor. If it is below the natural wage rate, then nothing changes. But if the minimum (say, $7.25 an hour) is above the natural wage (say, $6 per hour), it distorts the market. More people want jobs at $7.25 than at $6, but companies want to hire fewer employees. The result: more unemployment.

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I could write a lot about this. For now let’s just say that the lack of virtually any discussion of energy shows just how poor a field economics is. One other thing: one must at least bring to the table that the 2nd law of thermodynamics contradicts the very term ‘sustainable’.

Economics, Society, And The Environment (EI)

A common view of some is that the relationship between economics and the environment is that environmental considerations are “externalities” for economic systems. In other words, effects produced by economic activity in the environment result from a limited overlap between the economic “system” and the environment, such as the diagram shown (from Giddings, Hopewood and O’Brien): The diagram above is adopted by some to describe the fields of enivonmental economics and environmental science. EnviromentalScience.org describes their discipline: “Environmental economics is an area of economics dealing with the relationship between the economy and the environment. Environmental economists study the economics of natural resources from both sides – their extraction and use, and the waste products returned to the environment. They also study how economic incentives hurt or help the environment, and how they can be used to create sustainable policies and environmental solutions.”

This seems a resonable description. But the accompanying diagram indicates a lack of understanding of the scope of the field. Giddings, Hopewood and O’Brien point out the logical shortcomings of the traditional concept above, and suggest a more correct way of conceptualizing the relationships: “A more accurate presentation of the relationship between society, economy and environment than the usual three rings is of the economy nested within society, which in turn is nested within the environment (Figure 2). Placing the economy in the centre does not mean that it should be seen as the hub around which the other sectors and activities revolve. Rather it is a subset of the others and is dependent upon them. Human society depends on environment although in contrast the environment would continue without society (Lovelock, 1988). The economy depends on society and the environment although society for many people did and still does (although under siege) exist without the economy.”

The importance of recognizing that all of society is a subset of functions within the environment is that society cannot violate the proven physical laws of the physical world (actually universe, but we will return to that thought later). Likewise, the economy exists totally within society so economics must also obey the same physical laws. Steve Keen has argued that the forgotten parameter in economics is energy. Whereas economists develop models and theories based on labor and capital as the components of production, energy should also be explicitly defined as separate and co-variant with labor and capital. Keen argues that failure to do so has led economists to propose models and theories which violate the fundamental laws of our environment, the Laws of Thermodynamics.

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This will not end well.

Turkish Parliament Approves Constitutional Reform, Expanded Powers For Erdogan

In a night-long session, lawmakers voted in favor of a set of amendments presented by the ruling Justice and Development Party (AKP), which was founded by current President Recep Tayyip Erdogan in 2003. The reform bill is designed to widen Erdogan’s powers, who presently only occupies a largely ceremonial role. The bill cleared the minimum parliamentary threshold necessary to put the measures to a national referendum for final approval, which could be held as early as in the spring. The vote took place with 488 lawmakers out of the 550-seat assembly in attendance. A total of 339 parliamentarians voted in favor of the motion and 142 against it, while five cast empty ballots and two of the votes were ruled out as invalid.

The measure required at least 330 votes to be approved and be put forward to a plebiscite. Some of the lawmakers not attending the vote were absent on account of remaining in detention; as part of a wide-ranging purge on dissidents Turkey has detained opposition HDP politicians, whom it accuses of having ties to the outlawed Kurdistan Workers’ Party (PKK). Turkish Prime Minister Binali Yildirim celebrated the result saying “we are now entrusting this to the people, its actual owners. Now it’s the people’s word. It is the people’s decision.” Critics, however, say the amendments will weaken checks and balances in Turkey’s democracy, leading to too much power being consolidated in the office of the president.

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More detail; looks Google translated, but may just be poorly written.

With New Constitution, Erdogan Eyes For One-Man Rule (GP)

The Turkish Republic is on the throes of a radical transformation, even regime change, as Parliament completed 2nd round of voting 18-article constitutional reform bill, which gives expanded powers to President Recep Tayyip Erdogan in a way that removes last vestiges of separation of powers. While the world watch inauguration ceremony of U.S. President Donald J. Trump, Turkish Parliament paved way for a referendum to significantly expand powers of Mr. Erdogan, the president’s long-held political ambition. The breathtaking speed of the first round vote was a clear-cut indication of a strong will on behalf of government and its ardent backer, opposition Nationalist Movement Party (MHP) to quickly push through the controversial package.

The vote reflected the emergence of a new alignment in the Turkish political landscape, formation of an Islamist-nationalist front that harbor similar views on a number of political issues concerning the fate of the country. While the first round of voting was a scene of brawls among men, the 2nd round was women’s turn. The fighting among differing factions in Parliament reflected the deep divide the voting created in the society, with critics blasting the government for transforming the country’s regime from a parliamentary democracy into a the rule of a strongman. Aylin Nazliaka, an independent lawmaker, handcuffed herself to the rostrum to protest the voting, prompting a scuffle that hospitalized several female lawmakers. What constitutional bill brings to Turkey is at the core of ensuing debates amid ongoing emergency rule that rendered free discussion of the proposed changes in public sphere near impossible.

While dozens of national TV channels live aired Mr. Erdogan’s address to village administrators in the presidential palace a few days ago, almost no TV station broadcasted the parliamentary session where lawmakers squabbling over momentous decisions that have the power of shattering roots of the republic’s established system. A CHP lawmaker set his own “studio” in Parliament to bypass the censorship. For supporters of the bill, the shift to executive presidency long sought by President Erdogan will provide a bulwark against return to fragile coalition governments of the past. But for the critics of the proposal, it will cement Erdogan’s power and turn Turkey into a dictatorship with scrapping checks and balances, regarded as central pillars of any democratic system. Main opposition CHP says the new scheme will create one-man dictatorship.

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Not sure that reporting “data show that the net wealth per adult Greek inhabitant amounted to €114,000 in 2009” helps. Let alone that it’s correct.

Greek Have Lost Wealth Worth One Year’s GDP Since 2009 (Kath.)

The wealth of Greeks shrank by €167 billion during the years of the financial crisis – i.e. almost one year’s GDP – according to a survey by Credit Suisse included in the weekly bulletin of the Hellenic Federation of Enterprises (SEV). The Swiss bank estimates the net wealth of Greeks – that is with their loans deducted – at €856 billion, against €1,023 billion in 2009, just before the country entered the bailout process.The data show that the net wealth per adult Greek inhabitant amounted to €114,000 in 2009, while in the rest of Europe it came to €93,000 per adult inhabitant. According to SEV, what puts Greece in a different category to the rest of Europe is the excessive borrowing.

SEV stresses that what is not obvious in the data on the fortune of Greek people and is not sufficiently presented is the huge deficits of the local social security system that will continue to absorb considerable resources in the future, putting a lid on the country’s growth unless tackled sufficiently. In practice, the older generations have not just borrowed from the savings of fellow Europeans, but also from the future savings of their children.

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Nov 132016
 
 November 13, 2016  Posted by at 5:57 pm Finance Tagged with: , , , , , , , , ,  16 Responses »


Esther Bubley Waiting for Greyhound bus trip from Memphis to Louisville, KY 1943

 

Been scribbling several some post-election notes over the past few days, it seemed a good idea to not publish things too soon after the upset, even if I at least had the advantage that it wasn’t that much of a surprise or upset. But I’ve read far too many people too eager to write about how they haven’t moved an inch, and too many others who have -mostly reluctantly- moved but don’t know how or where to. It’s okay to think about such matters first, guys and dolls. Make that: it’s better. There’s too much nonsense out there as is. Why bother adding to the pile? Here’s a few thoughts in no particular order:

 

 

The transition we find ourselves in, into an era as profoundly different as it will be from the one that preceded it, can only possibly be chaotic. Smooth is not an option. Because it takes much time for people to recognize let alone accept that there is such a transition to begin with, and not everyone acknowledges or accepts it at the same time. Many never will at all, they will be left behind in their own realities tied down by the chains of what once was.

This transition is the one away from economic growth and globalization -centralization in general- and towards smaller, less centered and grandiose, politics and markets. It is not an idealistic transition towards self-sufficiency, it’s simply and inevitably what’s left once unfettered growth hits the skids. It doesn’t have to be anywhere near as bad as people would have you believe, or at least not necessarily so. What could make it real bad, though, is the widespread resistance and denial which seem certain to meet it.

Our entire worldviews and ‘philosophies’ are based on ever more and ever bigger and then some, and our entire economies are built upon it. That has already made us ignore the decline of our real markets for many years now. We focus on data about stock markets and the like, and ignore the demise of our respective heartlands and flyover countries, even as we experience Brexit and Trump and similar movements set to come to many more countries.

Donald Trump looks very much like the ideal fit for this transition – but nor because he understands the issue itself, or its implications. What matters is he promises to bring back jobs to America, and that’s what the country needs. Not so they can then export their products, but to consume them at home, and sell them in the domestic market.

That is the future of the world post-growth, and post-globalization. Every country and every society needs to focus on self-reliance, not as some idealistic luxury choice, but as a necessity. And that is not as bad or terrible as people would have you believe, and it’s not the end of the world. What would be terrible is if all we do is try and restart growth and globalization, because that would be a hideous waste of time and resources.

You’ll be flooded in the years to come, even more than today if you can imagine, with terms like protectionism and isolationism and even populism, but ignore all that. There’s nothing economically -let alone morally- wrong with people producing what they and their families and close neighbors themselves want and need without hauling it halfway around the world for a meagre profit, handing over control of their societies to strangers in the process.

There’s nothing wrong or negative with an American buying products made in America instead of in China. At least not for the man in the street. It’s not a threat to our ‘open societies’, as many claim. That openness does not depend on having things shipped to your stores over 1000s of miles, that you could have made yourselves at a potentially huge benefit to your local economy. An ‘open society’ is a state of mind, be it collective or personal. It’s not something that’s for sale.

 

 

Earlier this week I read what looks to be an apt observation: ‘Every white person in New York who didn’t vote for Trump is now out in the streets protesting against him’. But the people who protest now are miles off target and months too late: they should have stood up for Bernie when it became clear that the Hillary camp and the DNC conspired to oust him. Indeed, Bernie himself should have stood up back then, not for himself but for his supporters; they would have stood up with him.

Whether they all like it or not, being asleep and/or silent when big things happen that count, does carry a price. If you drop the ball, you can’t just pick it back up again and pretend it didn’t fall. Shouting ‘not my president’ in the wake of an election is a sign of weakness, no matter how well-intentioned. The protests should have taken place before the election, not after.

Moreover, to a large extent people are up in protest against the image the Hillary campaign and the media have painted of Trump, not the man himself. A difference they cannot see. Would these same people have been protesting if Hillary had won? No, they wouldn’t. But why?

Many voices expressed the wish that Americans would vote for Hillary, a story about a woman and a glass ceiling, instead of for the male and allegedly sexist and misogynist Donald Trump. Simply because she’s a woman, and it’s time for a female president.

These voices have been consistently and for a long time been blind to the fact that Hillary’s campaign and Foundation, in legal, shady and downright illegal ways, have long been financed to a substantial degree by uber-rich men in charge of Middle East oil extracting nations who have far more misogynist views and attitudes towards women than Trump will ever have.

These men carry things like misogyny, racism, xenophobia and homophobia high and proudly in their banners. Also, they’re well on their way towards obliterating not just an entire country in Yemen, but indeed an entire people, all with the enthusiastic support of Obama, Hillary and their friends and donors in the arms industry. And lest we forget, they sponsor ISIS too. Is that the future Americans want?

 

 

The bright side is the chances of a war with Russia have gone down substantially. While the odds have gone up dramatically of much fewer US servicemen and -women being sent abroad to engage in endless and countless battles and wars that never seemed to have much to do with the US, going back all the way to Korea and Vietnam.

How can either of these things can be perceived as negative? The continuation and expansion of -often proxy- hostilities versus Moscow would have been cast in stone had Hillary been elected, it was a milestone of her entire campaign. And a major part of this would have been fought at some desert location in the Middle East.

Where America has needlessly squandered the lives of many of its young and finest, to and in a mad scramble over control of oil resources which has resulted in nothing but a shapeless chaos that has equally needlessly killed millions of people, sent millions of others fleeing their homes and razed entire ancient civilizations, accomplishments that will follow America around the world for many years to come. Is that the future Americans want? Double down?

There’s -undeniably- still a risk that Donald Trump will succumb to the mighty hand of the military industrial complex. But at the same time, he may well be the country’s -and the world’s- best if not only chance at making that hand that much less mighty. There may be many things wrong with Trump -there are- but being in the pockets of arms manufacturers and other doctors of death is so far not among them, to our best knowledge.

 

 

Hillary and her crowd ran the entire election process from inside a cocoon, built largely on hubris and a lack of contact with the world outside. They had the media so much on their side that TV and newspapers became part of the Hillary cocoon, and reporters got locked into a groupthink mode that then in its turn infected the campaign itself.

What I mean is you can’t stop at saying Trump is a disaster, so let’s pick the other side, it was always very much a choice between two disasters. And at the same time, as I wrote at the Automatic Earth the day of the election, the US presidency is a poisoned chalice. There’s nothing simple about this.

Trump means a big clean-up for the GOP, and the Hillary loss means the chance for the Democrats to do the same. You bet those folks realize achingly well they could have won with Bernie. Hopefully that wing can take over substantially from the lying conniving machinery the DNC has turned out to be.

Someone summed it up as: Trump swept aside the Republicans, the Democrats, the Bush dynasty and the Clinton dynasty, all in one fell swoop, and we should perhaps be thankful to him for that.

 

 

Trump has run his campaign catering to the anger that exists among Americans. And people experience and label that as ‘terrible’ and ‘awful’. His Republican friends and opponents find it terrible, because it scares the bejeezus out of them, and they’re too scared to go anywhere near that anger. Trump embraced the anger. Because he knew from the start, instinctively, that it was the only way he could win.

And you can think like the majority of your peers do, that all that commingling with the anger, with racists and bigots and what have you, is inexcusable. But what you miss out on if you take that approach and hold on to it, is that in that case the anger does not get addressed at all. It’s instead left free to just wander over the land and fester and grow on society, out of reach of politics, media, everything.

A certain by now very vilified cartoonist explained that what Trump does is to ‘feel’ what the angry crowd wants, and then play into it by making over the top statements targeted at the anger. That way this crowd will follow him, gather around him. This has worked like a charm. But no, that doesn’t make him look like a certain German dictator.

Because it does not mean that Trump is going to literally do everything he said in the over the top statements he made. It’s all just a basic sales trick. Trump makes the angry people feel like he knows, and cares about, their grievances. Just like a car salesman makes you think he knows just what you want and need in a car, and praises the assets of that car in such a way that it touches that part of you which makes you want the car.

But that doesn’t mean at the end of the day he’ll drive the same car home that you just bought off of him. He makes you think he is like you, and knows what you want, so he can sell you that car. That’s all. He’s judged you to be the right ‘target’ for that vehicle.

That is how Trump has reeled in America’s hidden anger, how he has gathered its lost hidden mob. And before you say anything else, it’s perhaps a good idea to wonder where that anger would go without Trump. Because it’s not going to go away by itself. It’s been growing and festering for a long time, and it’s well-armed, lest you forget.

The question then becomes: would America be a better, or a safer, place if the entire angry part of its population had again, and still, been ignored by everyone? Or is it better to have them gathered under the umbrella of Donald Trump? Take your pick. Don’t be shy.

Another way to phrase the issue is this: without the exact same sales tactics that Trump used to ‘gather the anger’ around him, the TV ads (most ads in general) you see on a daily basis would look completely different. Whatever products these ads sell, from detergents to cars, they do it by referring to your unconscious, not your rational abilities.

The ads, like Trump, sell feelings, not facts (if you don’t get that, you’re lost).

Yet nobody would think of taking the companies whose products are advertized this way to court -nobody even gets really angry with them- because the happy smily people and unending open roads bathed in sunshine from the ads do not magically appear once you purchase the product. We would even find that crazy, that anyone might take the images shown in the ads, literally.

We should interpret Trump’s campaign words along those same lines, the same way we ‘undergo’ the ads that play to our subconscious. The problem is, how do you do that? How do you interpret what you are largely unaware of on a rational level?

The president-elect will now need the same skills in order to ‘come down that mountain’ without antagonizing each and every side of the discussion, of the nation. He’ll have to convince the liberal camp that he didn’t mean everything he said in a literal sense, while at the same time keeping his ‘angry mob’ satisfied that he will do enough of what he promised them.

That will take a lot of persuading. But at the same time that happens to be the one thing he’s really good at. He’ll have to convince his voters that he’s not breaking his promises, just adjusting them in ways that will, if at all possible, be even more beneficial to them than the original ones.

Difficult, but if he can convince them that there are signs, delivered relatively fast, that their living conditions are improving, he may succeed. They just vent their anger at people that are visibly not themselves, but that’s not where the anger stems from.

 

 

There are all sorts of nasty things going on, racists and supremacist etc. But you can’t say that Trump caused that to happen. The most you could say is that he gives the people involved in that stuff the idea that because someone finally hears them, they can, are allowed to, make themselves heard.

But just because a few loose cannons let loose, doesn’t mean America has 60 million loose cannons who all voted for Trump and should all be condemned including Trump himself for good measure because there’s a few incidents. Not only is that a misinterpretation of what goes on, it prevents you from understanding what lies behind.

Those incidents at least have a lot to do with the fact that so many ignored Americans live in what Washington has long considered flyover country. It would be a lot more positive and productive at this point in time if everyone looks at what they themselves have gotten wrong over the past years -not just this election campaign- before pointing fingers at everyone but themselves.

But seeing the dug-in heels in Britain almost five months after the Brexit vote, it’s hard to get your hopes up about people coming together, or even doing some genuine introspection. It’s easier to just remain stuck in your comfy little rut.

Thing is, the world is rapidly changing -it already has-, America is changing, Britain is, and many more countries will, it just takes an election to show how much. We’re transitioning to a next phase, and trying to deny we are with all our might, good luck and good night.

Or in a more poetic fashion – we can do that too-:

 

the blizzard of the world
has crossed the threshold
and it has overturned
the order of the soul

 

 

 

 

Nov 082016
 
 November 8, 2016  Posted by at 4:59 pm Finance Tagged with: , , , , , , , ,  2 Responses »


Joe Schwartz/Jewish Museum May Day Parade, New York City 1936

Neither candidate in the US presidential election has had many specifics to offer on their economic ideas and projected policies, and that may be a smart move for both. If only because none of the two has indicated any real understanding of what awaits America as per November 9. And I don’t mean where the stock markets will be tomorrow morning, or the price of gold, though short term volatility is obviously certain.

The November 7 rally on Wall Street made plenty clear where everyone’s bets are placed -on Hillary-, so much so that there’s not much of a rally left if she wins. A Trump win could well see some panic, downward pressure for the dollar and stocks, upward pressure for gold, but there’s no telling how long that would last.

It’s the medium to long term future that’s far more interesting. Because who wins makes no difference for the reality of the US economy. It’s been abysmal for years, and there are no plans available for turning that around. Government debt – across the board- and budget deficits don’t help, but they’re not the biggest deal; the US controls its own currency.

It’s private debt, consumer debt, that will offer the winner his or her poisoned chalice. With 94 million Americans not counted as part of the workforce, and untold million others in jobs that pay hardly or no living wage, with so many millions of jobs that no longer pay sufficient or even any benefits, consumer spending has nowhere to go but down.

In an economy where that spending is good for 70% of GDP -perhaps a bit less by now, a bad enough sign-, taking spending power away from people is deadly. The only way people have been able to either keep up appearances or even just make ends meet is going into debt.

 

 

This graph from Wolf Richter shouldn’t really need any explanation, but people have been so numbed by endless repetitions of sunny skewed data that it does. Sure, mortgage debt no longer looks as bad, thanks to foreclosures, jingle mail etc. So Wolf depicts debt without mortgages.

In just 9 years, from let’s say Bear Stearns to roughly this summer, consumer debt in America has gone up more than 50% ex-mortgages. And it’s not as if it was low in 2007, quite the contrary. The graph shows us what the American economy has survived on. It’s as plain vanilla as that. It’s the only graph you need, all the rest is just decoration. And it’s every inch as scary as it looks.

There was a time when America worked for its money, for its homes, for its cars, its healthcare, for the education of its children. There was a time when America produced and sold enough to be able to afford all that. Those days are long gone. Today, the prospect is one of borrowing more money to be able to pay back what you borrowed yesterday.

If and when interest rates start to rise, either in and of themselves or because the Fed has an epiphany, all that debt will get much harder, and much more expensive, to repay. Increasingly, Americans will unceremoniously and rapidly start to fall off the back end of the truck, and one by one lower consumer spending even more.

There’s nothing a new president can do about this. There is a slight difference, granted, in that Hillary largely thinks she can let things continue as they have -but look at that graph, they cannot continue!-, while Donald Trump wants to tear up international trade deals and bring back jobs to America.

Trump’s idea look a tad wiser, but so much manufacturing infrastructure has been obliterated that there’s no telling how fast it can be rebuilt. It’ll take years, for sure. Moreover, America cannot produce most items as cheap as many other countries can, so already squeezed consumers will get squeezed even more.

It’ll have to be back all the way to Henry Ford, paying people more so they can afford what they produce. But, again, look at that graph. If Americans didn’t have that debt burden, and again that’s ex-mortgages, the ‘Ford model’ might have been more feasible. It is not now.

Either of the candidates would have had to base their campaigns on a story of ‘we need to take a few steps back in order to do better later’, and that’s still a politically deadly message in today’s realm of eternal growth, fictional as it may be. People will vote for the better promise, not for the more realistic one. After all, how can they tell? It’s not as if the media will enlighten them.

There’s only one set of possible circumstances under which people will even just accept the ‘few steps back’ idea, and that’s wartime. Which is exactly what Hillary seems to be going for, judging from her neverending anti-Russia, anti-Putin and anti-Assad ‘utterances’ that look very hard to step back from. Maybe she understands America’s economic predicament better than I think?!

I like Wikipedia’s definition of a Pyrrhic victory, couldn’t hardly have put it better myself: “A Pyrrhic victory is a victory that inflicts such a devastating toll on the victor that it is tantamount to defeat. Someone who wins a Pyrrhic victory has been victorious in some way. However, the heavy toll negates any sense of achievement or profit.”

That sounds about right. I just have the idea that Hillary would enjoy it a bit more, and more blindly, than the Donald would. But it wouldn’t make much difference regardless. Obama’s had the luck that he’s been able to hide the economic downfall on his watch behind a $10+ trillion increase in the Fed balance sheet and a multiple trillion, 50% increase in household debt.

The next president won’t have any such gift thrown into their laps. The new president will have to empty the poisoned chalice.

Imagine being -almost- 70 years old, well-off, and still wanting that job. What’s that make a body? In urgent need of a lifetime of therapy? Mariana Trench-deep unhappy?

And on top of that both candidates already know close to half the country hates their guts to begin with.

Remember, not even Socrates could beat the poisoned chalice.

 

 

Oct 282016
 
 October 28, 2016  Posted by at 9:11 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle October 28 2016


Theodor Horydczak Washington Monument 1933

China Capital Flight Flashes Warning As Authorities Prick Property Bubble (AEP)
Unacceptable Cures for the Days Ahead (Dent)
Japan Consumer Prices Keep Falling, Household Spending Slips (BBG)
Bank of Japan Loses Bark And Bite Under Humbled Kuroda (R.)
The Gap Between Poor And Rich Regions In Europe Is Widening (Economist)
Xi Jinping Becomes ‘Core’ Leader Of China (R.)
Waking Up in Hillary Clinton’s America (Nomi Prins)
Donald Trump Has Won, Even If He Loses The US Election (Malmgren)
Why Is the Foreign Policy Establishment Spoiling for More War? (Kucinich)
Assange First Interview Since Being Censored (JJ)
Wither Democracy (Lessig)
Calais Children Abandoned At Former ‘Jungle’ Camp Site (EuO)

 

 

“The worry is a “negative feedback loop between a weakening yuan and capital flight”.

China Capital Flight Flashes Warning As Authorities Prick Property Bubble (AEP)

Capital outflows from China are accelerating. The hemorrhage has reached the fastest pace since the currency panic at the start of the year. The latest cycle of credit-driven expansion has already peaked after 18 months. Beijing has had to slam on the brakes, scrambling to control property speculation that the Communist authorities themselves deliberately fomented. How this episode could have happened is astonishing, given that premier Li Keqiang has warned repeatedly that excess credit is becoming dangerous and will ultimately doom China to the middle income trap. It will be clear by early to mid 2017 that the economy is rolling over and that the underlying ‘quality of growth’ has deteriorated yet further. “We think the recovery will run out of steam early next year,” said Chang Liu from Capital Economics.

This stop-go rotation – an all-too familiar pattern – coincides with an incipient liquidity squeeze in global finance as dollar LIBOR and Eurodollar rates ratchet upwards. A rate rise by the US Federal Reserve will clinch it. Since the commodity rebound is in great part driven by demand for Chinese industry and construction – and by a touching belief that China’s economy will sail majestically through 2017 – this looming slowdown spells trouble. Stress is already visible in the capital account. Morgan Stanley estimates that net outflows reached $44bn in September. Capital Economics thinks the figure was closer to $55bn, led by a surge in purchases of off-shore securities through the Shanghai-Hong Kong Stock Connect Scheme.

This does not yet match the capital flight seen late last year when a mismanaged shift in exchange rate policy set off outflows averaging $70bn a month, and triggered the global equity rout of January and February. But it is nearing a neuralgic threshold for currency traders. Beijing is clearly alarmed. Nikkei’s Yusho Cho reports that the authorities have ordered banks in Shanghai and Guangzhou to restrict access to foreign currency, and have imposed a “gag order” to keep it quiet. Institutions must now justify why they need foreign exchange. The worry is a “negative feedback loop between a weakening yuan and capital flight”. The central bank (PBOC) spent roughly $50bn defending the yuan last month, but this has not stopped the exchange rate sliding to 6.77 against the dollar – the weakest in six years.

The PBOC has burned through $800bn of foreign reserves since mid-2014, when they peaked at $4 trillion. It still has ample fire-power but bond sales automatically tighten China’s internal monetary policy since it is hard to sterilize the effect, and tightening may the last thing they want if the economy is slowing hard next year. “Our view is that the RMB (yuan) will depreciate 20pc against the US dollar to 8.1 by the end of 2018 as deflation of the property bubble leads to more capital outflows,” Zhiwei Zhang from Deutsche Bank. “This is deflationary for global trade.”

Read more …

Velocity of money is the no. 1 Deflation indicator.

Unacceptable Cures for the Days Ahead (Dent)

Then Dr. Lacy Hunt took the stage… As I was telling Boom & Bust subscribers in their 5 Day Forecast email on Monday, he’s the only economist (outside of Steve Keen from Australia, who’s currently in hibernation in London) that I recommend you to follow. He’s classically trained and deeply knowledgeable, and goes beyond the theoretical nature of his chosen field. He understands how debt and financial bubbles build and deleverage, a rarity among economists today. And he has possibly the best explanation of money velocity. Basically, it’s a sign of how productive investment in the economy is. Productive investment creates more profits, jobs and expansion, and hence, greater M2 velocity. Speculation, stock buybacks or empty buildings do not. His money velocity chart was my favorite of the conference.

With this single chart, Lacy shows the level and falling trends for money velocity across the U.S., Europe, Japan and China. And as you can see, the most unproductive investment is in China! See, solid proof from perhaps the most competent economist in America! Building stuff for no one isn’t productive for the economy. This is the most concrete proof yet of something that should be obvious. Despite 6-10% growth rates, China’s money velocity is even lower than Japan’s most dismal “coma economy” that is surviving solely on endless QE as they age and see exponential growth in debt levels… Do you get this? China is worse than Japan when you reflect the truth of money velocity. You can also see why we are the best house in a bad neighborhood. Our money velocity, despite continually slowing since 2000, is 50% stronger than the euro and three times that of Japan and China.

Read more …

The end of Abenomics nears..

Japan Consumer Prices Keep Falling, Household Spending Slips (BBG)

Japan’s consumer prices fell for a seventh straight month and household spending slumped again in September, underscoring the challenges Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda face in trying to revive the world’s third-largest economy. The downbeat inflation and spending data came despite an increasingly tight labor market. The unemployment rate slipped to 3% in September, equal to the lowest since 1995. The low jobless figure hasn’t yet resulted in significant wage gains, a key element of efforts to reflate Japan’s economy.

Read more …

…and that is also the end of Kuroda.

Bank of Japan Loses Bark And Bite Under Humbled Kuroda (R.)

As his term winds down, Bank of Japan Governor Haruhiko Kuroda has retreated from both the radical policies and rhetoric of his early tenure, suggesting there will be no further monetary easing except in response to a big external shock. In a clear departure from his initial “shock and awe” tactics to jolt the nation from its deflationary mindset, he has even taken to flagging what little change lies ahead, trying predictability where surprise has failed. This new approach will be on show next week, when the BOJ is set to keep policy unchanged despite an expected downgrade in forecasts that could show Kuroda won’t hit his perpetually postponed 2% inflation target before his five-year term ends in April 2018. “The days of trying to radically heighten inflation expectations with shock action are over,” said a source familiar with the BOJ’s thinking. “No more regime change.”

Kuroda told parliament last week that while the BOJ might again stretch the timing for its inflation target, he saw no need to ease at the Oct. 31-Nov. 1 policy meeting. “There may be some modification to our forecast that inflation will hit our 2% target during fiscal 2017,” he said, the first time he has offered hints on upcoming projections. In the past, the market has learned to expect the unexpected. In 2013, when the BOJ deployed its massive asset-buying program, dubbed “quantitative and qualitative easing” (QQE), his shock therapy boosted stocks and weakened the yen. Further surprises came with an expansion of QQE in October 2014, and then the switch to negative rates early in 2016, which he had denied was an option just days before. But the law of diminishing returns bought him less bang for each buck.

Read more …

Nice research, the graph shows hoe German data hide the sinking of Europe. Quite poorly reported, though.

The Gap Between Poor And Rich Regions In Europe Is Widening (Economist)

The beautiful but rubbish-strewn streets of Catania, Sicily’s second-biggest city, are a world away from swanky Trento, in the country’s richer north. About a quarter of Sicilians are “severely materially deprived”—meaning that they cannot afford things like a car, or to heat their home sufficiently—compared with just 5% in Trento. Italy is not unique. In many places, the divide within countries appears to be getting worse. According to an analysis by The Economist, the gap between richer and poorer regions of euro-zone countries has increased since the financial crisis. Our measure of regional inequality looks at the average income per head of a country’s poorest region, expressed as a%age of the income of that country’s richest part. The weighted average for 12 countries shows that regional inequality was declining in the years leading up to the financial crisis of 2007-08, but has increased since then (see chart).

The poorest area in Slovakia, the euro zone’s most geographically unequal economy, now has an income per person of just 28% of the richest, a slight fall from before the crisis. In Calabria, Italy’s poorest region, income per person as a share of the country’s best-off part, the province of Bolzano, was 45% in 2007 but is only 40% now. Elsewhere poor regions of the euro zone have seen income falling in both relative and absolute terms. An exception is Germany: in its once-communist east, excluding Berlin, GDP per person reached 67% of that in former West Germany last year. (Most of the catch-up took place in the early 1990s, but continues more slowly.) Deindustrialisation is partly to blame. Most of the euro zone’s 19 members have fewer manufacturing jobs than in 2008.

Manufacturing employment is high in many of Europe’s poorer countries, but they have lost international competitiveness in part because of an overvalued euro. Tight public spending also plays a role. Since 2008 the number of civil servants in the euro zone has fallen by about 6%. This has often hurt needy regions most. Cuts in welfare benefits also hit harder. A paper by Luca Agnello, Giorgio Fazio and Ricardo Sousa, three economists, found that austerity led to higher regional inequality in 13 European countries between 1980 and 2008. This suggests that the problem will continue: public funds will be tight for years to come, while weak public spending on education and infrastructure will crimp future growth. Even if the euro zone starts to grow strongly again, the geographical scars will be plain to see.

Read more …

China will be calling out loud for a strong leader as its economy grinds to a halt.

Xi Jinping Becomes ‘Core’ Leader Of China (R.)

China’s Communist party has given the president, Xi Jinping, the title of “core” leader, putting him on par with previous strongmen Mao Zedong and Deng Xiaoping, but signalled his power would not be absolute. A lengthy communique released after a four-day meeting of senior officials in Beijing emphasised the importance of collective leadership. The system “must always be followed and should not be violated by any organisation or individual under any circumstance or for any reason”, the party said. But all members should “closely unite around the central committee with comrade Xi Jinping as the core”, said the document, released through state media. The core leader title marks a significant strengthening of Xi’s position before a key party congress next year, at which a new standing committee, the pinnacle of power in China, will be constituted.

Since assuming office almost four years ago, Xi has rapidly consolidated power, including heading a group leading economic change and appointing himself commander-in-chief of the military, though as head of the central military commission he already controlled the armed forces. While head of the party, the military and the state, Xi had not previously been given the title “core”. Deng coined the phrase “core leader”, and said he, Mao Zedong and Jiang Zemin were core leaders, meaning they had almost absolute authority and should not be questioned. Xi’s immediate predecessor, Hu Jintao, was never called the “core”. The plenum meeting paves the way for a congress, held every five years, in autumn 2017, at which Xi will further consolidate his power and which could indicate who may replace him at the 2022 congress.

Read more …

Nomi’s very mild and polite.

Waking Up in Hillary Clinton’s America (Nomi Prins)

To date, $10 trillion worth of assets sits on the books of the Big Six banks. Since 2008, these same banks have copped to more than $150 billion in fines for pre-crisis behavior that ranged on the spectrum of criminality from manipulating multiple public markets to outright fraud. Hillary Clinton has arguably taken money that would not have been so available if it weren’t for the ill-gotten gains those banks secured. In her usual measured way, albeit with some light admonishments, she has told them what they want to hear: that if they behave – something that in her dictionary of definitions involves little in the way of personalized pain or punishment – so will she.

So let’s recap Hillary’s America, past, present, and future. It’s a land lacking in meaningful structural reform of the financial system, a place where the big banks have been, and will continue to be, coddled by the government. No CEO will be jailed, no matter how large the fines his bank is saddled with or how widespread the crimes it committed. Instead, he’s likely to be invited to the inaugural ball in January. Because its practices have not been adequately controlled or curtailed, the inherent risk that Wall Street poses for Main Street will only grow as bankers continue to use our money to make their bets. (The 2010 Dodd-Frank Act was supposed to help on this score, but has yet to make the big banks any smaller.)

And here’s an obvious corollary to all this: the next bank-instigated economic catastrophe will not be dealt with until it has once again crushed the financial stability of millions of Americans. The banks have voted with their dollars on all of this in multiple ways. Hillary won’t do anything to upset that applecart. We should have no illusions about what her presidency would mean from a Wall Street vs. Main Street perspective. Certainly, JPMorgan Chase CEO Jamie Dimon doesn’t. He effectively endorsed Hillary before a crowd of financial industry players, saying, “I hope the next president, she reaches across the aisle.” For Wall Street, of course, that aisle is essentially illusory, since its players operate so easily and effectively on both sides of it. In Hillary’s America, Wall Street will still own Main Street.

Read more …

“Reality TV Land will immediately install itself in the Oval Office if he wins. Then, anything goes.”

Donald Trump Has Won, Even If He Loses The US Election (Malmgren)

Donald Trump has already won the US presidential election and Hillary Clinton has already lost it, even if she emerges with the title of commander-in-chief. It is already apparent that Trump will not skulk off the global stage. Nor will he have to. Consider what happens if he loses the presidential race. He will most likely launch a reality TV show that will undoubtedly attract a record number of viewers. From this ridiculously unconstrained and lucrative perch, he’ll relentlessly attack President Clinton, the Republican Party and the Democratic Party alike. In retrospect, it will be clear that his entire campaign was a trailer for the blockbuster show that follows. In this way he will continue to influence, if not dominate, public opinion.

[..] he won’t go away. Neither will the forces that swept him to the top of politics: the anger, the loss, the sense of unfairness, the inability of the traditional parties to deliver a better outcome for most Americans. Meanwhile, the expectation that a Clinton presidency could conquer these forces is also likely to be proved false. The Oval Office is a highly constrained place that limits the influence of its occupant especially in the face of broader political disarray. She can try and set the tone but the rest of the political establishment looks too dysfunctional, and largely unwilling, to be able to help her. Her presidency seems set to open with high expectations and low approval ratings. Trump, however, could move to the next phase of his career with low expectations and high TV ratings.

Both have faced threats of prosecution throughout this long and increasingly ugly campaign. But, does Trump care if the courts or the government put his tax returns or the sexual allegations against him to the test? He won’t. Will he care if his emails are leaked? No. The real “public prosecutor” for Trump is the Fourth Estate – the media. It will prosecute him just as relentlessly if he becomes commander-in-chief but probably with the same limited impact. Will it matter to Clinton if her emails, from the past or future, are displayed to the public? Will it matter if the Clinton Foundation faces further allegations of “crooked” behaviour? But, we live in the internet age. The real “public prosecutor” for Clinton is and will remain Julian Assange and Wikileaks. His sights will continue to be firmly set on her. He does not care about Trump and Trump doesn’t care about him. Once again, Trump wins.

Trump’s only real threat of looking like the loser comes if the polls are wrong and he ends up winning. Many wonder whether he really wants the job. After all, the Oval Office is the political equivalent of a straightjacket. In theory, Trump won’t be able to shoot words from the hip so freely once he is sitting in the big shiny chair with his finger on the literal and metaphorical button. But, Reality TV Land will immediately install itself in the Oval Office if he wins. Then, anything goes. In the meantime, he will “win” in his effort to redefine America’s political landscape. As president, it won’t matter to him if the House and Senate block him. He is not concerned with process. His job is to break down the traditional political establishment.

Read more …

“Any report advocating war that comes from any alleged think tank ought to be accompanied by a list of the think tank’s sponsors and donors..”

Why Is the Foreign Policy Establishment Spoiling for More War? (Kucinich)

The American people are fed up with war, but a concerted effort is being made through fearmongering, propaganda, and lies to prepare our country for a dangerous confrontation, with Russia in Syria. The demonization of Russia is a calculated plan to resurrect a raison d’être for stone-cold warriors trying to escape from the dustbin of history by evoking the specter of Russian world domination. It’s infectious. Earlier this year the BBC broadcast a fictional show that contemplated WWIII, beginning with a Russian invasion of Latvia (where 26% of the population is ethnic Russian and 34% of Latvians speak Russian at home). The imaginary WWIII scenario conjures Russia’s targeting London for a nuclear strike.

No wonder that by the summer of 2016 a poll showed two-thirds of UK citizens approved the new British PM’s launching a nuclear strike in retaliation. So much for learning the lessons detailed in the Chilcot report. As this year’s presidential election comes to a conclusion, the Washington ideologues are regurgitating the same bipartisan consensus that has kept America at war since 9/11 and made the world a decidedly more dangerous place. The DC think tanks provide cover for the political establishment, a political safety net, with a fictive analytical framework providing a moral rationale for intervention, capitol casuistry. I’m fed up with the DC policy elite who cash in on war while presenting themselves as experts, at the cost of other people’s lives, our national fortune, and the sacred honor of our country.

Any report advocating war that comes from any alleged think tank ought to be accompanied by a list of the think tank’s sponsors and donors and a statement of the lobbying connections of the report’s authors. It is our patriotic duty to expose why the DC foreign-policy establishment and its sponsors have not learned from their failures and instead are repeating them, with the acquiescence of the political class and sleepwalkers with press passes.

Read more …

“As I said it has long been our analysis that Hillary Clinton will win the election because she has all the establishments on her side..”

Assange First Interview Since Being Censored (JJ)

“Wikileaks is one of the fighting dogs that has a lot of energy and runs around fighting all the time. It is built to fight it loves nothing more than to fight. And so when my internet was cut off we had long ago made strategic contingency plans for exactly this situation. So despite bombs raining down on us from statements by high US officials, media and so on this is exactly the sort of situation we enjoy so there was not even one day pause. We just continued on publishing the next day even though I was cut off from my team.” “As I said it has long been our analysis that Hillary Clinton will win the election because she has all the establishments on her side and we can see it in terms of polling.

If someone like Donald Trump – who has a great many problems I’m sure all of you are aware of it – but if he managed to get up to the 48% or 50% level in the polling which he has just on two occasions across the different polls united, immediately those big media networks and the funders get together and smash him back down. So I don’t think there’s any chance of Donald Trump winning the election. That would probably be bad inside the United States. It would probably be good outside the United States. Even with the amazing material we have published and will continue to publish because even though we publish it and there’s a lot of people reading it on the internet directly, most of the media originations in the United States are very strongly aligned with Hillary Clinton.

Two reasons really, a lot of them are owned by big businesses which are owned by banks which like Hillary Clinton. And the other is a class reason. Most journalists and media workers are very middle class and Donald Trump represents in their minds, white trash. So to do anything that looks to be like it might be supporting Donald Trump looks like you’re supporting white trash. And to those rivals that they have within their class they are white trash. So it lowers their social status and that’s a very dangerous thing to do in an institution, to have your social status lowered, because someone might get your job or the job that you want to have within the institution. So there is a lot of conformity and fear around criticizing Hillary Clinton in any way at all and it reduces the impact of even very significant material that is being released.”

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Can Iceland give the world back its lost democracy?

Wither Democracy (Lessig)

On the eve of the Icelandic Elections… WITHER DEMOCRACY, by Professor Lawrence Lessig, speaking from the University of Iceland. Lessig explains how democracy has failed the US and other citizens of the world, and how Iceland is on the brink of implementing an entirely new and improved system, based on a PEOPLE’S CONSTITUTION. Yes, it’s a world first, but then Iceland was the first country ever to form a parliament. Lester Lawrence “Larry” Lessig III is an American academic, attorney, and political activist. He was the co-founder, with our beloved Aaron Swartz, of Creative Commons. He is the Roy L. Furman Professor of Law at Harvard Law School; and the former director of the Edmond J. Safra Center for Ethics at Harvard University.

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Our moral bankruptcy in all its splendor.

Calais Children Abandoned At Former ‘Jungle’ Camp Site (EuO)

Scores of children have been left out in the cold, after French authorities flattened the make-shift migrants camp in Calais, in northern France, earlier this week. Journalists report that around a hundred children were sleeping rough on the remains of the camp, among burned-out shacks and riot police. The Guardian spoke to children who had been lured off the camp site, with promises of being transferred to reception centres where their asylum claims would be assessed. Instead, riot police cornered the group while bulldozers razed the camp. Media and NGO reports of the children’s treatment triggered protests of British home secretary Amber Rudd, who told her French counterpart, Bernard Cazeneuve, on Thursday, that children remaining in Calais had to be properly protected.

Cazeneuve later issued a statement saying he was surprised by Rudd’s declaration. He said France had given shelter to 1,451 minors since 17 October recalling that Britain had a legal duty to take those children that have a link to the UK, for instance through family. 274 children have been allowed to travel to the UK in the last two weeks. The decision to clear the camp came from French president Francois Hollande, calling it a ”humanitarian emergency” during a visit in September. French authorities started evacuating the camp, also known as the Jungle, on Monday (24 October) and said they had relocated almost all of the 6,000 people estimated to have been living there to other parts of France. [..] British baroness Shas Sheehan, who has been working as a volunteer teacher in the camp prior to its dismantlement, accused France and the UK of human rights violations, pointing to official assurances by both sides that the site wouldn’t be demolished before all the children were safeguarded.

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Oct 262016
 
 October 26, 2016  Posted by at 9:52 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle October 26 2016


Dorothea Lange Depression refugee family from Tulsa, Oklahoma 1936

The Euro Has Been A Disaster For Southern European Production (Gefira)
Washington: Don’t Think It’s Over When Trump Loses (Steve Keen)
213 North American Oil Industry Companies Have Now Declared Bankruptcy (FF)
China Tightens Capital Controls Amid Yuan’s Continuing Slide (Nikkei)
London House Prices Forecast to Plunge as Brexit Chokes Market (BBG)
AT&T Is Spying On Americans For Profit (DB)
The US Is Currently Bombing Seven Countries (PF)
Trump Says Clinton Policy On Syria Would Lead To World War Three (R.)
Most Americans Do Not Feel Represented By Democrats Or Republicans (G.)
The Biggest F*ck Ever Recorded In Human History (Michael Moore)
Antarctic Glaciers Are Melting at a ‘Staggering’ Rate (Gizm.)

 

 

Why it has to stop. Or rather, why it will be stopped.

The Euro Has Been A Disaster For Southern European Production (Gefira)

Some say that the common currency prevents less productive economies from cheating by weakening their national currencies and forces them to become more efficient and competitive. Industrial production data shows that it is not the case. Italy, France, Greece and Portugal have not only stopped producing more; they are producing now less than in 1990! The decay started immediately after the introduction of the euro in 2002! The OECD industrial production data analysis leads to the following conclusions: 1. since 1990 industrial production (manufacturing and construction included) has been growing in volume at large, even in the most developed countries; 2. the disproportion between industrial output in Germany and two other biggest euroarea economies, Italy and France, occurred already just after the 2001-2002 crisis; 3. Southern Europe’s economies have lost their ability to rebound in industrial production alongside the adoption of the euro.

1. Industrial output can increase In most of the most developed countries in the world industrial production has grown in volume since 1990, although a great deal of manufacturing capacities have been moved from the West to the emerging markets. Moreover, in countries like the USA, Israel, Switzerland, Austria and Germany the output has surpassed the 2008 pre-crisis levels. However, if we take a look at the euroarea or the Group of Seven (G7), then numbers are still lower than in 2008 but definitely higher than in 1990.

2. The euroarea has a problem A closer look at the European industrial production numbers gives a clear signal: something bad has happened after 2000. Before the introduction of euro, production trends ran more or less in the same direction. Meanwhile after the 2001-2002 crisis, French and Italian output did not rebound, while production in Germany expanded enormously and was able to reach the 2008 level quickly after the last crisis. Industry in France and Italy not only has not rebounded but also has started to curb.

3. Southern Europe will not rebound with the euro
Countries with a sovereign currency can easily build up their economies because of one simple mechanism: depreciation. A relatively strong currency (strong in comparison to the economic condition) would not have to be a problem for Italy or Greece if there still were some capacities for more debt. Then internal consumption could prop up industrial production. But Spain, Greece, Italy and Portugal have had neither a weak sovereign currency nor the possibility of incurring more debt.

Industry is very important for the economy, as it creates jobs and innovations. The euroarea in the current form is preventing Southern Europe’s industry from developing because of a different type of economy there. “Roman” economies are not worse than than Germany’s. They just need other tools, so restricting all these various economies in the German fashion will destroy the euro as well as the European unity.

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Steve Keen on which employment numbers are actually relevant. Curious to see how many people think Hillary’s got it in the bag. As an example, here’s a Bloomberg poll that just came out:

Washington: Don’t Think It’s Over When Trump Loses (Steve Keen)

Trump’s fans certainly have their “dark fantasies”, but Washington and Krugman have a “bright fantasy” if they believe that unemployment is genuinely low. My favourite and unimpeachable proof that this is false is an easily-obtained data series: the percentage of Americans aged 25-54 who have a job. While the “Unemployment Rate” is back within half a per cent of its pre-crisis low, the percentage of Americans aged 25-54 who have a job today is 2% lower than it was before the crisis. Perhaps an even more important fact that explains the anger behind Trump (and Sanders too, before he was eliminated by the Democratic Party’s peculiar primary process) is that the employment rate actually peaked in 2000, and even after this recovery, it is still 4% lower than in 2000 (78% today versus 82% in 2000).

What that means in terms of people with jobs is even more telling. The number of people aged 25-54 with a job in the USA peaked at 104.7 million in December 2007. It bottomed at 100.3 million in October 2013, and as of February 2015 (the most recent data) it was 101.2 million. So when Washington is talking about achieving “full employment” again, there are still more than 3 million less people employed today than in 2007. Demographic change has caused this segment of the population to decline since December 2007—from 126 million then to 125 million in February 2015—but that still means 2 million more people are unemployed today than in 2007. So if you look at the unemployment rate, everything is wonderful. That seems to be what Washington insiders—all with well-paying jobs—are doing. But if you look at the employment rate, the economy is still in the doldrums. Which series is telling the truth about the US economy?

The employment to population ratio is telling the truth, because it’s derived by asking employers how many people they have on their payroll. The unemployment rate, on the other hand, lies about the real level of unemployment, because it is derived by asking individuals whether they fulfil a number of criteria, including whether they have looked for a job in the last 4 weeks. The employment ratio accurately tells you the number of people receiving a salary; the unemployment ratio does not accurately tell you who is not receiving one. It’s no comfort to someone not receiving a salary to be told that they are not also unemployed, according to the official definition. Their justified reaction is to tell the “official definition” what to do with itself.

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A few billion here and a few billion there in debt.

213 North American Oil Industry Companies Have Now Declared Bankruptcy (FF)

Fewer and fewer oil exploration and production companies are declaring bankruptcy. But more oilfield service companies are. So far this month, only one North American E&P firm filed for Chapter 11 protection, according to data released on Tuesday by the Dallas law firm Haynes & Boone. That’s down from two in September, three in August and four in July. But it’s been an especially tough few months for service companies. As crude prices began crashing in 2014, drillers started idling rigs. That led to fewer jobs for the companies that make their money helping producers pump oil and gas. Moreover, when producers did hire service companies, they often forced them to heavily discount their rates.

Eight service companies filed this month. Seven filed last month, and eight again the month before. Almost 50 have filed in the last six months, half of the 108 over two years. In total, 213 North American oil and gas companies have now filed for bankruptcy since the start of 2015, listing more than $85 billion in debt. The most recent exploration firm: the private oil and gas company Mountain Divide, based in Montana, filed on Oct. 14, and listed $83 million in debt. On the oilfield services side, Houston-based Key Energy Services filed on Monday, with more than $1 billion in debt. And Basic Energy Services, headquartered in Fort Worth, said Monday it had reached an agreement with debt holders to file by Tuesday.

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While at the same time letting Chinese foreign purchases escalate.

China Tightens Capital Controls Amid Yuan’s Continuing Slide (Nikkei)

China has toughened restrictions on capital flows to prevent a negative feedback loop between a weakening yuan and capital flight. The State Administration of Foreign Exchange has introduced new capital measures in areas such as Shanghai and Guangzhou since the beginning of autumn, asking foreign and regional banks to cap the amount of foreign currency they will sell to customers during 2016. These limits, though ostensibly up to banks’ discretion, are set by negotiation with authorities and so are essentially directed by the government, a financial sector source said. A gag order has been imposed surrounding the measures, the source said. Some banks apparently have set steep exchange rates to pre-emptively curb foreign currency sales, a practice that could pose issues for foreign companies in China trying to repatriate earnings, for example.

China’s trade has flagged in recent months, with exports dropping 10% in September from the year-earlier level in dollar terms. The prospect of an interest rate hike in the U.S., meanwhile, has market players expecting further declines in the yuan’s value. Stashing assets abroad, rather than keeping them in China, is increasingly seen as the safer option. This view has led to further selling of the yuan, giving rise to a downward spiral that capital controls aim to break. Both the foreign exchange regulator and the People’s Bank of China have given banks several directives this year to curb outflows and the currency’s slide. Institutions are asked to report on corporate clients’ plans for buying foreign currency. Large fund transfers that involve foreign currency purchases must be explained by the institutions ahead of time. Individuals traveling overseas are asked to make reservations when exchanging money.

The yuan continues to depreciate despite these efforts. The central bank Tuesday set its daily guidance rate for the Chinese currency at 6.77 yuan to the dollar – just a little shy of the 6.82- to 6.83-to-the-dollar range at which the yuan was fixed for nearly two years following the September 2008 financial crisis. At the time, the goal was to prevent the currency from strengthening to stave off an economic slump. The concern now is that the yuan will become weaker and capital will flow out.

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The best thing to could happen in Britain.

London House Prices Forecast to Plunge as Brexit Chokes Market (BBG)

London property prices are set to fall next year as uncertainty about Britain’s exit from the EU damps the U.K. housing market, according to the Centre for Economics and Business Research. London, and especially the priciest areas of the capital’s housing market, will be most affected, with prices dropping 5.6% in 2017, according to the consultancy’s predictions. Across the U.K., while property value growth will accelerate to 6.9% in 2016, it’s set to slow to 2.6% next year. “Nervousness and uncertainty are starting to show,” said Kay Daniel Neufeld, an economist at Cebr. “We expect to see house-price growth across the U.K. slowing considerably in the fourth quarter of 2016, a trend that is set to continue in 2017.”

While the housing market was already facing headwinds from tax changes before June’s EU referendum, investors are becoming increasingly nervous about the possibility of a so-called hard Brexit. That could see the U.K. giving up membership of Europe’s single market for goods and services to secure greater control of immigration. Accelerating inflation, increasing unemployment and slowing business investment are all set to weigh on house prices, while curbs on migration and a retreat from the single market could slow demand from international buyers, the Cebr said.

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Wait till we find out what Google does.

AT&T Is Spying On Americans For Profit (DB)

In 2013, Hemisphere was revealed by The New York Times and described only within a Powerpoint presentation made by the Drug Enforcement Administration. The Times described it as a “partnership” between AT&T and the U.S. government; the Justice Department said it was an essential, and prudently deployed, counter-narcotics tool. However, AT&T’s own documentation—reported here by The Daily Beast for the first time—shows Hemisphere was used far beyond the war on drugs to include everything from investigations of homicide to Medicaid fraud. Hemisphere isn’t a “partnership” but rather a product AT&T developed, marketed, and sold at a cost of millions of dollars per year to taxpayers.

No warrant is required to make use of the company’s massive trove of data, according to AT&T documents, only a promise from law enforcement to not disclose Hemisphere if an investigation using it becomes public. These new revelations come as the company seeks to acquire Time Warner in the face of vocal opposition saying the deal would be bad for consumers. Donald Trump told supporters over the weekend he would kill the acquisition if he’s elected president; Hillary Clinton has urged regulators to scrutinize the deal. While telecommunications companies are legally obligated to hand over records, AT&T appears to have gone much further to make the enterprise profitable, according to ACLU technology policy analyst Christopher Soghoian.

“Companies have to give this data to law enforcement upon request, if they have it. AT&T doesn’t have to data-mine its database to help police come up with new numbers to investigate,” Soghoian said. AT&T has a unique power to extract information from its metadata because it retains so much of it. The company owns more than three-quarters of U.S. landline switches, and the second largest share of the nation’s wireless infrastructure and cellphone towers, behind Verizon. AT&T retains its cell tower data going back to July 2008, longer than other providers. Verizon holds records for a year and Sprint for 18 months, according to a 2011 retention schedule obtained by The Daily Beast.

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Just so you know.

The US Is Currently Bombing Seven Countries (PF)

For this fact check, we wondered if the U.S. is bombing seven countries. That at least has been so: In September 2014, PunditFact rated True a bombed-countries claim by Ryan Lizza of The New Yorker. Lizza referred to President George W. Bush and his successor, Barack Obama, in a tweet that said: “Countries bombed: Obama 7, Bush 4.” At the time, the U.S. on Obama’s watch had bombed Afghanistan, Iraq, Pakistan, Somalia, Yemen, Libya and Syria. When we asked Stein for her backup information, spokeswoman Meleiza Figueroa pointed out various web posts including a September 2014 CNN news story stating that Obama had ordered air strikes in seven countries through the bulk of his eight years in the office.

[..] The Bureau of Investigative Journalism, a nonprofit news service based at City University London, maintains a running list of U.S. military actions in a number of countries. The bureau annotates each incident with links to press reports. When we looked, the bureau’s accounts by country indicated the latest U.S drone strike in Pakistan occurred in May 2016; the latest strike in Somalia was in September 2016; and the latest U.S. strikes in Yemen and Afghanistan were in October 2016. Separately, we noticed, the Department of Defense said in an Oct. 11, 2016, web post that countries including the U.S. battling the Islamic State of Iraq and the Levant, or ISIL, have conducted 15,634 air strikes to date – 10,129 in Iraq, 5,505 in Syria – with the U.S. conducting 6,868 in Iraq and 5,227 in Syria. In a Sept. 30, 2016, post, the U.S. Air Force said attacks from the air have affected ISIL’s “ability to fight and conduct operations in Iraq, Syria and Afghanistan.”

Too, in August 2016, the New York Times reported the U.S. had “stepped up a new bombing campaign against the Islamic State in Libya, conducting its first armed drone flights from Jordan to strike militant targets” in Libya’s coastal city of Sirte. That news story quoted Obama saying during a news conference that the airstrikes were critical to helping Libya’s fragile United Nations-backed government to drive Islamic State militants out of Sirte, which the group has controlled since June 2015. Obama promised the air campaign would continue as long as necessary to make sure that the extremist group “does not get a stronghold in Libya,” the newspaper said.

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Trump -rightly- mirrors something I said a few days ago in Ungovernability “..her harsh criticism of Putin raised questions about “how she is going to go back and negotiate with this man who she has made to be so evil,” if she wins the presidency.”

Trump Says Clinton Policy On Syria Would Lead To World War Three (R.)

U.S. Republican presidential nominee Donald Trump said on Tuesday that Democrat Hillary Clinton’s plan for Syria would “lead to World War Three,” because of the potential for conflict with military forces from nuclear-armed Russia. In an interview focused largely on foreign policy, Trump said defeating Islamic State is a higher priority than persuading Syrian President Bashar al-Assad to step down, playing down a long-held goal of U.S. policy. Trump questioned how Clinton would negotiate with Russian President Vladimir Putin after demonizing him; blamed President Barack Obama for a downturn in U.S. relations with the Philippines under its new president, Rodrigo Duterte; bemoaned a lack of Republican unity behind his candidacy, and said he would easily win the election if the party leaders would support him.

“If we had party unity, we couldn’t lose this election to Hillary Clinton,” he said. On Syria’s civil war, Trump said Clinton could drag the United States into a world war with a more aggressive posture toward resolving the conflict. Clinton has called for the establishment of a no-fly zone and “safe zones” on the ground to protect non-combatants. Some analysts fear that protecting those zones could bring the United States into direct conflict with Russian fighter jets. “What we should do is focus on ISIS. We should not be focusing on Syria,” said Trump as he dined on fried eggs and sausage at his Trump National Doral golf resort. “You’re going to end up in World War Three over Syria if we listen to Hillary Clinton.”

[..] On Russia, Trump again knocked Clinton’s handling of U.S.-Russian relations while secretary of state and said her harsh criticism of Putin raised questions about “how she is going to go back and negotiate with this man who she has made to be so evil,” if she wins the presidency.

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“Less than half the public (43%) say they have a great deal of confidence that their vote will be counted accurately..”

Most Americans Do Not Feel Represented By Democrats Or Republicans (G.)

As they go to the polls in a historic presidential election, more than six in 10 Americans say neither major political party represents their views any longer, a survey has found. Dissatisfaction with both Democrats and Republicans has risen sharply since 1990, when less than half held that neither reflected their opinions, according to research by the Public Religion Research Institute (PRRI). The seventh annual 2016 American Values Survey was carried out throughout September among a random sample of 2,010 adults in all 50 states. Both party establishments have been rattled by the outsider challenges of Donald Trump, who was successful in winning his party’s nomination, and Bernie Sanders, who was not. In a year that seems ripe for third-party candidates, Libertarian Gary Johnson and Jill Stein of the Green party are seeking to capitalise but have fallen back in the polls in recent weeks.

61% of survey respondents say neither political party reflects their opinions today, while 38% disagree. 77% of independents and a majority (54%) of Republicans took this position, while less than half (46%) of Democrats agree. There was virtually no variation across class or race. Both Democratic presidential nominee Hillary Clinton and Republican standard bearer Trump continue to suffer historically low favourability ratings, with less than half of the public viewing each candidate positively (41% v 33%). Clinton is viewed less favourably than the Democratic party (49%), but Trump’s low rating is more consistent with the Republican party’s own favourability (36%).

The discontent with parties and candidates extends to the electoral process itself, which Trump claims is rigged against him. Less than half the public (43%) say they have a great deal of confidence that their vote will be counted accurately, while 38% have some confidence and 17% have hardly any confidence. [..] The PRRI found that pessimism about the direction of the US is significantly higher today (74%) than it was at this time during the 2012 presidential race, when 57% of the public said the country was on the wrong track.

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Slightly confused: I thought he was pro-Hillary?!

The Biggest F*ck Ever Recorded In Human History (Michael Moore)

I know a lot of people in Michigan that are planning to vote for Trump and they don’t necessarily agree with him. They’re not racist or redneck, they’re actually pretty decent people and so after talking to a number of them I wanted to write this. Donald Trump came to the Detroit Economic Club and stood there in front of Ford Motor executives and said “if you close these factories as you’re planning to do in Detroit and build them in Mexico, I’m going to put a 35% tariff on those cars when you send them back and nobody’s going to buy them.” It was an amazing thing to see. No politician, Republican or Democrat, had ever said anything like that to these executives, and it was music to the ears of people in Michigan and Ohio and Pennsylvania and Wisconsin – the “Brexit” states.

You live here in Ohio, you know what I’m talking about. Whether Trump means it or not, is kind of irrelevant because he’s saying the things to people who are hurting, and that’s why every beaten-down, nameless, forgotten working stiff who used to be part of what was called the middle class loves Trump. He is the human Molotov Cocktail that they’ve been waiting for; the human hand grande that they can legally throw into the system that stole their lives from them. And on November 8, although they lost their jobs, although they’ve been foreclose on by the bank, next came the divorce and now the wife and kids are gone, the car’s been repoed, they haven’t had a real vacation in years, they’re stuck with the shitty Obamacare bronze plan where you can’t even get a fucking percocet, they’ve essentially lost everything they had except one thing – the one thing that doesn’t cost them a cent and is guaranteed to them by the American constitution: the right to vote.

They might be penniless, they might be homeless, they might be fucked over and fucked up it doesn’t matter, because it’s equalized on that day – a millionaire has the same number of votes as the person without a job: one. And there’s more of the former middle class than there are in the millionaire class. So on November 8 the dispossessed will walk into the voting booth, be handed a ballot, close the curtain, and take that lever or felt pen or touchscreen and put a big fucking X in the box by the name of the man who has threatened to upend and overturn the very system that has ruined their lives: Donald J Trump.

They see that the elite who ruined their lives hate Trump. Corporate America hates Trump. Wall Street hates Trump. The career politicians hate Trump. The media hates Trump, after they loved him and created him, and now hate. Thank you media: the enemy of my enemy is who I’m voting for on November 8. Yes, on November 8, you Joe Blow, Steve Blow, Bob Blow, Billy Blow, all the Blows get to go and blow up the whole goddamn system because it’s your right. Trump’s election is going to be the biggest fuck ever recorded in human history and it will feel good.

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“.. like ice cubes rising as a soft drink is poured into a glass.”

Antarctic Glaciers Are Melting at a ‘Staggering’ Rate (Gizm.)

Scientists have long viewed the Amundsen sea embayment as the Achilles heel of West Antarctica, with papers in the 1970s and ‘80s describing it as “uniquely vulnerable,” “unstable,” and the “weak underbelly” of the continent. The fear, then and now, was that warm ocean waters lapping against the foot of the glaciers could cause the ice to pop up off of its rocky floor, like ice cubes rising as a soft drink is poured into a glass. When ice detaches from its so-called “grounding line,” it kickstarts a chain reaction that can trigger a lot of melting. “When water gets between ice and land, it moves quickly, bringing lots of heat in, and melting the ice above it more rapidly,” said Thomas Wagner, the director of NASA’s polar science program. “The Amundsen sea embayment is a place where we know this is happening.”

Indeed, satellite and radar data show that two of West Antarctica’s largest glaciers, Pine Island and Thwaites, have seen their grounding line retreat many miles since 2000, causing fresh water to pour off the ice and into the ocean. This process is so effective that glaciologists recently declared the total collapse of the Amundsen sea embayment—whose glaciers contain enough water to raise global sea levels by four feet—to be “unstoppable.” Here’s the rub: We still have no idea how quickly all of that ice will go, meaning we have no idea whether to prepare for a lot more sea level rise in ten years, in a generation, or at the end of the century. A new study, led by glaciologist Ala Khazendar of NASA’s Jet Propulsion Laboratory, points to ice disappearing sooner rather than later.

For years, NASA has been conducting an airborne campaign called Operation Ice Bridge, flying across sections of our planet’s north and south polar ice sheets and using ground-penetrating radar to measure changes beneath the surface. When Khazendar examined Ice Bridge’s datasets for the Amundsen sea embayment, he realized that NASA flew almost exactly the same path in 2009 that it did in 2002. “This presented an excellent opportunity to look at how ice thickness changed,” he said.

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NOTE: we know our Comments section doesn’t function properly. We’re looking into it.

Oct 212016
 
 October 21, 2016  Posted by at 9:43 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle October 21 2016


Lewis Wickes Hine Game of craps. Cincinnati, Ohio 1908

 

 

NICOLE FOSS is the keynote speaker tonight, October 21, at the

Community Solutions Conference
McGregor Hall, Antioch College
Yellow Springs, Ohio
7.30 pm

 

 

Dollar Near 7-Month High As Euro Slides, Asia Slips (R.)
Another Thing Trump, Hillary Get Wrong In This Election: The National Debt (F.)
Trump’s Candidacy – the Good and the Bad of It (Stockman)
China Property Prices Rise At Fastest Pace On Record In September (CNBC)
Yuan Hits Record Low Against Dollar in Offshore Trading (WSJ)
China’s Property Frenzy Spurs Risky Business (WSJ)
China’s Local Governments Are Getting Into The Venture Capital Business (BBG)
The Sharing Economy is Creating a Dickensian World (Das)
‘Lions Hunting Zebras’: Ex-Wells Fargo Bankers Describe Abuses (NYT)
Washington Foreign Policy Elites Not Sorry To See Obama Go (WaPo)
Hacking Democracy (ZH)
Italy Shields Russia From EU Sanctions Threat (EUO)
Draghi Says Athens Should Focus On Reforms, And The Eurozone On Debt (Kath.)
126,956 Greeks Work In Private Sector For €100 Per Month (KTG)

 

 

“The European Central Bank removed a source of immediate risk for traders by revealing that it did not discuss tapering its QE program at this month’s meeting..”

Dollar Near 7-Month High As Euro Slides, Asia Slips (R.)

Asian stocks were mostly lower on Friday as the dollar climbed to seven-month highs against a basket of currencies and dragged down crude oil prices, cooling investor risk appetite. The greenback was boosted by a fall in the euro after the ECB shot down talk it was contemplating tapering its monetary easing – sending the common currency to its lowest since March. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3%. South Korea’s Kospi lost 0.4% and Australian stocks shed 0.1%, weighed down by a retreat in energy shares. Singapore fell 0.4% while Shanghai added 0.3%. Japan’s Nikkei rose 0.3% , brushing a six-month high, as the yen weakened against the dollar.

U.S. stocks ended a choppy session on Thursday slightly lower as investors digested the latest round of earnings, with a sharp drop in telecoms offset by gains in healthcare. The ECB left its ultra-loose monetary policy unchanged on Thursday but kept the door open to more stimulus in December, with ECB President Mario Draghi dousing recent market speculation that the central bank may begin tapering its €1.7 trillion asset-buying program. “The European Central Bank removed a source of immediate risk for traders by revealing that it did not discuss tapering its QE program at this month’s meeting,” wrote Ric Spooner, chief market analyst at CMC Markets. “Decisions are being deferred until December pending the outcome of research – meaning that meeting will be a key focus for markets.”

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Debt explained in the vein of Steve Keen.

Another Thing Trump, Hillary Get Wrong In This Election: The National Debt (F.)

As if there aren’t enough things to be upset about as it is, here’s another: neither candidate’s position on the debt and the deficit makes economic sense (something they each reinforced in last night’s Las Vegas debate). If they act on their campaign promises, we will most certainly be facing an economic downturn, if not an outright disaster. 1. Public sector deficits must, by definition, be private sector surpluses. If one entity spends more than it earns (the public sector) then another must earn more than it spends (you and me). This is an inescapable accounting identity. 2. Public sector debt must, by definition, be a private sector asset. If one entity adds liabilities, another adds assets–another inescapable law of accounting. 3. It is impossible for a nation to be forced to default in debt denominated in its own currency. Not unlikely, not improbable, but impossible. This is not my opinion, it’s a fact, albeit a poorly known one.

4. U.S. public debt to foreign countries like China has nothing to do with the budget deficit. It’s a result of the trade deficit. The federal government’s budget could have been in surplus for the past 100 years, but whenever we buy more from China than we sell to them, they have leftover cash which they use to buy our financial assets. These may include but are not limited to Treasury Bills. No amount of budget balancing will affect debt to China. 5. The private sector cannot consistently generate sufficient demand to create jobs for everyone who wants one. As technology and productivity have increased, so it has become more difficult. Entrepreneurs cannot be blamed for adding self-checkout lanes, they have families and stockholders. But it means the store can sell the same volume of output with fewer employees–unemployment therefore rises.

Hence, we need the public sector to spend in deficit so that a.) the private sector can net save and b.) jobs are created to supplement those generated by the market system. And it creates neither a default risk nor inflation–unless we are already at full-employment, which means we don’t need to be spending that much in the first place! It is noteworthy that when, in the midst of the Great Depression, the government decided to try to reduce the deficit, unemployment jumped from 14% (after having fallen from nearly 25%) to 19%. Once WWII hit, however, any worries about government spending went right out the window and unemployment plummeted to 1.9%. There’s no reason we can’t be there right now. Only bad policy can stand in our way.

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Dave’s new book, Trumped, is out. “God help America if she becomes president.

Trump’s Candidacy – the Good and the Bad of It (Stockman)

America is heading for a devastating financial collapse and prolonged recession that will make the last go-round look tame by comparison. The entire recovery is one giant Potemkin village of phony economics and egregious financial asset inflation. It isn’t even a mixed or debatable story. Beneath the “all is awesome” propaganda of the establishment institutions is a broken system hurtling toward ruin. For example, during the month of July 2016, when the Democrats were convening in Philadelphia to confirm a third Obama term and toast 25-years of Bubble Finance, exactly 98 million Americans in the prime working ages of 25 to 54 years had jobs, including part-time gigs and self-employment. That compares to 98.1 million during July 2000. That’s right. After 16 years of the current regime we have 5 million more prime working age Americans and not a single one of them with a job.

At the same time, the number of persons in households receiving means-tested benefits has risen from 50 million to 110 million. Even as the economic wagon has faltered and become loaded with dependents, however, the financial system has grown by leaps and bounds. For example, during those same 16 years public and private debt outstanding in America has risen from $28 trillion to $64 trillion. The value of publicly traded equity has increased from $25 trillion to $45 trillion. And the net worth of the Forbes 400 has nearly doubled from $1.2 trillion to $2.4 trillion. In a word, the U.S. economy is a ticking time bomb. Main Street economics and Wall Street finance have become radically and dangerously disconnected owing to the reckless falsification of financial markets by the Fed and Washington’s addiction to endless deficits and crony capitalist bailouts and boodle.

There is not a remote chance that this toxic brew can be sustained much longer. Under those circumstances the very last thing America will need in 2017–18 when it hits the fan is a lifetime political careerist and clueless acolyte of the state who knows all the right words and harbors all the wrong ideas. Indeed, during the coming crisis America will need a brash disrupter of the status quo, not a diehard defender. Yet when the Dow index drops by 7,000 points and unemployment erupts back toward double digits, Hillary Clinton’s only impulse will be to double down. That is, to fire-up the printing presses at the Fed from red hot to white heat, plunge the nation’s fiscal equation back into multi-trillion deficits and crank-out Washington’s free stuff like never before.

A combination of a Clinton White House and the devastating day of reckoning just ahead would result in Big Government on steroids. It would also tilt the Imperial City toward war in order to distract the nation’s disgruntled voters in their tens of millions. Indeed, her prospective war cabinet — including Victoria Nuland and Michéle Flournoy — is comprised of the actual architects of Washington’s unprovoked NATO siege on Russia’s own doorsteps. God help America if she becomes president.

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And Beijing keeps pretending they want to cool it down.

China Property Prices Rise At Fastest Pace On Record In September (CNBC)

China property prices rose at the fastest pace on record in September, fueling fears of a market bubble in the world’s second-largest economy. Property prices climbed 11.2% on-year in September in 70 major cities while prices were up 2.1% from August, according to Reuters calculations using data from the National Bureau of Statistics. In August, prices rose 9.2% from a year ago. Home prices in the second-tier city of Hefei recorded the largest on-year gain at 46.8%, compared with on-year gains of 40.3% in August. Top August performer Xiamen posted an on-year rise of 46.5% against an increase of 43.8% in August. Prices in Shenzhen, Shanghai and Beijing rose 34.1%, 32.7% and 27.8% on an annual basis respectively, according to Reuters.

Underpinning the strong growth was simply “debt” said independent analyst, Fraser Howie, who is also co-author of “Red Capitalism” and “Privatizing China.” “A decade ago you could make a case for strong property in China (with) genuine demand and relatively low leverage in the sector. This is certainly not the case now. You are seeing a lot of leverage in the property sector, both retail and commercial,” he told CNBC’s “Squawk Box”. The quick gains in property prices in China came after the Chinese government introduced measures aimed at boosting home sales earlier this year to reduce large inventories in an effort to limit an economic slowdown. Recent fears of overheating, however, prompted local governments in China to announce a flurry of property market cooling measures in recent weeks. Any impact from those measures was not reflected in the latest data.

Despite the property cooling measures, Howie said the broad theme of how the Chinese government was responding to the situation was recurrent. “For five to six years or so, you have on-again-off-again cooling measures in the property market, trying to make property more affordable and it’s still nowhere near affordable,” he added. The Chinese government, he said, “has no clear plan”. “It’s just a bubble, they try to pull it back; they rein it in a bit, they let it go again when it impacts the real economy.”

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It’s gettiing time for the IMF to comment on this.

Yuan Hits Record Low Against Dollar in Offshore Trading (WSJ)

The yuan hit a record low against the U.S. dollar in offshore trading Friday after strong earnings on Wall Street and weakness in the euro boosted the strength of the greenback. The dollar reached a high of 6.75651 against the Chinese currency, which trades freely around the clock in offshore markets such as Hong Kong, its biggest trading center. It was last trading up 0.2% at 6.7582. The yuan has been traded outside China since 2010. Hong Kong’s markets are closed today as a typhoon lashes the city, with the yuan breaching its previous record around 7.41 a.m. local time, typically a time when market liquidity is thin. The People’s Bank of China later set its daily reference rate for the yuan traded in mainland China at 6.7558 against the U.S. dollar.

Onshore, the yuan is allowed to trade 2% either side of this level. The currency last traded at 6.7519 against the greenback, while its offshore counterpart weakened further after the fixing. “Overnight we saw a broadly stronger U.S. dollar,” says Qi Gao, Asia foreign exchange strategist at Scotiabank. He anticipates further strength in the greenback in the weeks running up to the U.S. Federal Reserve’s December meeting, at which the central bank may deliver its first rate increase in a year.

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“This is actually what we’re told by banks’ client managers to do to meet [regulatory] requirements.”

China’s Property Frenzy Spurs Risky Business (WSJ)

Xiong Meifang was about $30,000 short two months ago for a 30% down payment on an $895,000 apartment in the southern part of Beijing. To make up the difference, the 31-year-old graphic designer took out a line of credit from a national bank. She said the bank told her she could use the loan however she wanted. China bans borrowing for down payments. A surge in such financing offered by nonbank lenders earlier this year led to a regulatory clampdown. But as banks increasingly turn to mortgage lending, there are new signs of risky practices. In some instances, banks offer credit lines to borrowers buying apartments with few questions asked. In others, banks work with independent loan brokers or property agents to funnel money into down-payment financing.

Data released Tuesday showed medium- and long-term household loans, almost all of which are mortgages, made up 60% of all new loans created in the third quarter, up from 47% in the second quarter and 23% in the first. Easy credit has fanned a property-buying craze in many Chinese cities this year, helping shore up an otherwise weak economy. Government data on Wednesday showed GDP expanded by 6.7% from a year earlier in the third quarter, matching expectations, largely on the strength of the hot property market and loose monetary policies. In the past two weeks, two dozen cities have asked banks to tighten home-lending standards. Financial regulators are seeking to rein in the relatively new practice of banks working with brokers and others, such as developers, to help home buyers come up with down payments.

[..] On paper, the purpose of the loan can’t be for the home purchase itself. But the company could help arrange a contract with, say, a decorator, to show a bank that the loan would be for home decoration, the representative said, adding that ultimately the bank can’t check how the money is used. [The broker] charges a 3% flat fee on the amount of any loans it helps arrange. “It’s all legal, of course,” said the representative. “This is actually what we’re told by banks’ client managers to do to meet [regulatory] requirements.”

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While they have huge debts with the shadow banks. What could go worng?

China’s Local Governments Are Getting Into The Venture Capital Business (BBG)

China’s next billion-dollar startup could have backing from an investor with more money than Warren Buffett and a knack for promoting spicy duck-neck delicacies. The Hubei provincial government is armed with 547 billion yuan ($81 billion) earmarked for investments that can diversify a job base dependent on steel, mining and cars. And the bureaucrats in the heartland region along the Yangtze River are letting professionals do the work – allocating the money to investment houses Sequoia Capital, TCL Capital and CBC Capital. Local governments across China are getting into the venture-capital business, deploying a combined 3 trillion yuan as the Communist Party resolves to modernize the economy and reduce debt-fueled spending on infrastructure. The money is meant to spur development of biotechnology, internet and high-end manufacturing companies that can replace the stumbling heavy industries sapping economic growth.

“Our focus is more on the sector than the return,” said Wang Hanbing, who oversees $6 billion as chairman of the Yangtze River Industry Fund, one of several using Hubei government money. “We encourage people to bring real jobs back to Hubei.” China is grappling with a profusion of economic difficulties such as declining exports, surging home prices and skyrocketing corporate debt. The State Council signaled last month it had a bigger appetite for venture capital, urging local administrations to play a leading role and promising to level the playing field for foreign VC funds. Policy makers want to curb the proliferation of borrowing by regional authorities to pay for infrastructure projects that prop up growth. Local government financing vehicles borrow on behalf of governments, which often are barred from doing so. Through September, the debt issued by more than 1,600 such vehicles soared 47% from a year ago to 1.5 trillion yuan.

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The same effect as globalization: bring down wages..

The Sharing Economy is Creating a Dickensian World (Das)

Cheerleaders frame the sharing economy in lofty utopian terms: The sharing economy isn’t business but a social movement, transforming relationships between people in a new form of internet intimacy and humanitarianism. Exchanges are economic. Buyers are primarily concerned about access to services at low costs rather than social objectives. Providers are motivated by money, using their assets and labor to get by in an unforgiving and poor economic environment.

The major financial backers of the sharing economy aren’t philanthropists. They are Wall Street and Silicon Valley’s 1%, related venture-capital firms and a few institutional investors, such as sovereign-wealth funds. The amount of capital provided is substantial. Given the normal five-to-seven-year cycle for such investments, the pressure to deliver results will increase, bringing it into conflict with the social or altruistic objectives espoused. Ultimately, the sharing economy will influence how traditional businesses operate. Traditional automobile makers could offer a car-sharing service, such as BMW’s Drive Now. Users can access a car as needed, paying only for usage. These types of changes may decrease rather than increase revenue as it substitutes hiring arrangements for outright purchases.

But perhaps the real issue is that the sharing economy reverses progress in labor markets. Whatever the gains from increased efficiency, it recreates a Dickensian world for a part of the population. Formal employment protects labor from exploitation and deprivation to varying degrees. The sharing economy transfers the risk of economic uncertainty from the employer to the employee with potentially tragic consequences. Most important, the underlying economic premise is false. Consumption constitutes 60%-70% of activity in advanced economies. In 1914, Henry Ford doubled his workers’ pay from $2.34 to $5 a day, recognizing that paying people more would enable them to afford the cars they were producing. Reduction of income levels and employment security ultimately reduces consumption and economic activity, impoverishing most within societies.

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They should take the lot of them, everyone involved, and ban them from ever working in banking or finance again.

‘Lions Hunting Zebras’: Ex-Wells Fargo Bankers Describe Abuses (NYT)

Mexican immigrants who speak little English. Older adults with memory problems. College students opening their first bank accounts. Small-business owners with several lines of credit. These were some of the customers whom bankers at Wells Fargo, trying to meet steep sales goals and avoid being fired, targeted for unauthorized or unnecessary accounts, according to legal filings and statements from former bank employees. “The analogy I use was that it was like lions hunting zebras,” said Kevin Pham, a former Wells Fargo employee in San Jose, Calif., who saw it happening at the branch where he worked. “They would look for the weakest, the ones that would put up the least resistance.”

Wells Fargo would like to close the chapter on the sham account scandal, saying it has changed its policies, replaced its chief executive and refunded $2.6 million to customers. But lawmakers and regulators say they will not let it go that quickly, and emerging evidence that some victims were among the bank’s most vulnerable customers has given them fresh ammunition. This week, three members of the Board of Supervisors in San Francisco, Wells Fargo’s hometown, introduced a resolution calling on the city to cut all financial ties with the bank. They cited both the recent scandal and past cases — particularly the $175 million that Wells Fargo paid in 2012 to settle accusations that its mortgage brokers had discriminated against black and Hispanic borrowers.

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You may not like Trump, but do you like war any better?

Washington Foreign Policy Elites Not Sorry To See Obama Go (WaPo)

There is one corner of Washington where Donald Trump’s scorched-earth presidential campaign is treated as a mere distraction and where bipartisanship reigns. In the rarefied world of the Washington foreign policy establishment, President Obama’s departure from the White House – and the possible return of a more conventional and hawkish Hillary Clinton — is being met with quiet relief. The Republicans and Democrats who make up the foreign policy elite are laying the groundwork for a more assertive American foreign policy, via a flurry of reports shaped by officials who are likely to play senior roles in a potential Clinton White House. It is not unusual for Washington’s establishment to launch major studies in the final months of an administration to correct the perceived mistakes of a president or influence his successor.

But the bipartisan nature of the recent recommendations, coming at a time when the country has never been more polarized, reflects a remarkable consensus among the foreign policy elite. This consensus is driven by a broad-based backlash against a president who has repeatedly stressed the dangers of overreach and the need for restraint, especially in the Middle East. “There’s a widespread perception that not being active enough or recognizing the limits of American power has costs,” said Philip Gordon, a senior foreign policy adviser to Obama until 2015. “So the normal swing is to be more interventionist.” In other instances, the activity reflects alarm over Trump’s calls for the United States to pull back from its traditional role as a global guarantor of security.

“The American-led international order that has been prevalent since World War II is now under threat,” said Martin Indyk, who oversees a team of top former officials from the administrations of Obama, George W. Bush and Bill Clinton assembled by the Brookings Institution. “The question is how to restore and renovate it.”

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Very clear video. But then, it was of course always a stupid thing to claim that US elections cannot be rigged.

Hacking Democracy (ZH)

“Those who cast the votes decide nothing. Those who count the votes decide everything.” – Joe Stalin.

With the mainstream media lambasting Trump for daring to suggest the election process is rigged – despite hard evidence – this is the hack that proved America’s elections can be stolen using a few lines of computer code. The ‘Hursti Hack’ in this video is an excerpt from the feature length Emmy nominated documentary ‘Hacking Democracy’. The hack of the Diebold voting system in Leon County, Florida, is real. It was verified by computer scientists at UC Berkeley.

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Brussels is as crazy as the US Democrats.

Italy Shields Russia From EU Sanctions Threat (EUO)

Italy has shielded Russia and Syria from a threat of new sanctions, amid warnings by some leaders that Russia was trying to “weaken” the EU. EU leaders said in a joint statement in Brussels on Thursday (20 October) that: “The EU is considering all available options, should the current atrocities [in Syria] continue.” They also urged “the Syrian regime and its allies, notably Russia” to “bring the atrocities to an end”, referring to Russian and Syrian airstrikes on the city of Aleppo in Syria that have caused severe civilian casualties. Germany, France, and the UK had wanted to threaten sanctions more explicitly.

“The EU is considering all options, including further restrictive measures targeting individuals and entities supporting the regime, should the current atrocities continue”, they had suggested saying. Italian prime minister Matteo Renzi led opposition, also shared by some other states, to the threat, diplomats said. He said while leaving the summit that “if we want to speak with Russia then we have to leave the door open”. He also said he did not think “that the difficult situation in Syria could be solved by additional sanctions on Russia”.

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Europe has but one purpose: to humiliate Greece. Britain better watch out.

Draghi Says Athens Should Focus On Reforms, And The Eurozone On Debt (Kath.)

European Central Bank President Mario Draghi on Thursday called on the Greek government to focus its efforts on implementing reforms agreed with the country’s creditors, noting that the ECB will examine the issues of Greece’s debt sustainability and its possible involvement in the Central Bank’s quantitative easing program when the time is right. “Discussions on the sustainability of the Greek debt continued” at an ECB meeting earlier in the day, he said. “We expressed concern, and steps should be taken.” Draghi said the ECB will conduct its own independent assessment of Greece’s debt.

“When the time comes we will examine independently the issue of the debt sustainability,” Draghi said, adding that “until then it is premature to speculate and weave scenarios,” an apparent reference to Greek calls for inclusion in the ECB’s QE program. Draghi appeared to indicate that the ECB would proceed with its assessment of Greece’s debt once there has been action from both sides: work from Athens in implementing reforms and action from Greece’s eurozone partners in lightening its debt burden. The timing of Draghi’s comments was significant. They came a day before Greek Prime Minister Alexis Tsipras is to meet with German Chancellor Angela Merkel on the sidelines of an EU leaders’ summit in Brussels for talks that are expected to touch on Greece’s debt problem and the progress of reforms.

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As supermarket prices are as high as in the rest of Europe.

126,956 Greek Workers Earn €100 Per Month, 343,760 Between €100 and €400 (KTG)

When it comes to escape the nightmare of unemployment, one may grab all possible and impossible opportunities and even accept jobs with wages that let you come home with a loaf of bread, two tomatoes and a tiny piece of cheese. The data released by the Labor Ministry are shocking: 126,956 employees in the private sector are paid a gross monthly salary of €100. 343,760 employees are paid monthly salaries between €100 and €400 gross. This category of workers have part-time or rotating work contracts. Working time: 2-3 days per week or even a few hours a week. €100 per month gross could be €55-60(?) net – enough to cover transport cost and make a living at €1 per day. PS a friend recently got a job for €300 gross – net should be around €250-230. Working hours are 4 hours per day, four days per week. She has been jobless for 4 years.

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Oct 202016
 
 October 20, 2016  Posted by at 9:48 am Finance Tagged with: , , , , , , , , , ,  2 Responses »


Thomas Eakins Walt Whitman 1891

Fed Risks Repeating Lehman Blunder As US Recession Storm Gathers (AEP)
ECB Urges EU To Curb Virtual Money On Fear Of Losing Control (R.)
Saudi Arabia’s Bond: a Defining Trade for 2016 (WSJ)
How do Clinton and Trump’s Tax Plans Compare? (TF)
Trump is a Pink Elephant (Scott Adams)
California Launches Criminal Probe Into Wells Fargo Account Scandal (R.)
Who’s Powering the War on Cash? (DQ)
The Cult Of The Expert – And How It Collapsed (G.)
Theresa May To Tell EU Leaders ‘There Will Be No Second Referendum'(G.)
Australia Housing Boom Peak Has Passed – Morgan Stanley (BBG)
Did the White House Declare War on Russia? (Stephen F. Cohen)
What Obama’s Record Deportations Look Like (I’Cept)
Use Of Strongest Antibiotics Rises To Record Levels On European Farms (G.)

 

 

“The Bank for International Settlements estimates that 60pc of the world economy is locked into the US currency system, and that debts denominated in dollars outside US jurisdiction have ballooned to $9.8 trillion.”

Fed Risks Repeating Lehman Blunder As US Recession Storm Gathers (AEP)

The risk of a US recession next year is rising fast. The Federal Reserve has no margin for error. Liquidity is suddenly drying up. Early warning indicators from US ‘flow of funds’ data point to an incipent squeeze, the long-feared capitulation after five successive quarters of declining corporate profits. Yet the Fed is methodically draining money through ‘reverse repos’ regardless. It has set the course for a rise in interest rates in December and seems to be on automatic pilot. “We are seeing a serious deterioration on a monthly basis,” said Michael Howell from CrossBorder Capital, specialists in global liquidity. The signals lead the economic cycle by six to nine months. “We think the US is heading for recession by the Spring of 2017. It is absolutely bonkers for the Fed to even think about raising rates right now,” he said.

The growth rate of nominal GDP – a pure measure of the economy – has been in an unbroken fall since the start of the year, falling from 4.2pc to 2.5pc. It is close to stall speed, flirting with levels that have invariably led to recessions in the post-War era. “It is a little scary. When nominal GDP slows like that, you can be sure that financial stress will follow. Monetary policy is too tight and the slightest shock will tip the US into recession,” said Lars Christensen, from Markets and Money Advisory. If allowed to happen, it will be a deeply frightening experience, rocking the global system to its foundations. The Bank for International Settlements estimates that 60pc of the world economy is locked into the US currency system, and that debts denominated in dollars outside US jurisdiction have ballooned to $9.8 trillion.

The world has never before been so leveraged to dollar borrowing costs. BIS data show that debt ratios in both rich countries and emerging markets are roughly 35 percentage points of GDP higher than they were at the onset of the Lehman crisis. This time China cannot come to the rescue. Beijing has already pushed credit beyond safe limits to almost $30 trillion. Fitch Ratings suspects that bad loans in the Chinese banking system are ten times the official claim. The current arguments over Brexit would seem irrelevant in such circumstances, both because the City would be drawn into the flames and because the eurozone would face its own a shattering ordeal. Even a hint of coming trauma would detonate a crisis in Italy.

[..] The velocity of M1 money in the US has continued to slow, hitting a 40-year low of 5.75 over the summer, and markets are only just awakening to the unsettling thought that China’s latest boomlet has already topped out. Beijing is having to hit the brakes again. Crossborder said new rules for money market funds that came into force this month have complicated the picture, causing the stock of US commercial paper to shrivel by $200bn. Yet there are ways to filter out some of these effects. The plain fact is that 3-month lending rates in the off-shore ‘eurodollar’ markets in London have tripled since July to 0.93pc, sharply tightening conditions for global finance. Investors may have been too complacent in discounting these gyrations as part of a regulatory hiccup when something more sinister is emerging.

[..] Albert Edwards from Societe Generale says gross domestic income (GDI) was the most accurate gauge of the economy as the pre-Lehman crisis unfolded, and this measure has been flat for the last two quarters.”The pronounced weakness of GDI relative to GDP might be an ominous omen, for it may well be indicating that a US recession is already underway – just as it was in 2007,” he said.

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A central bank that tells politicians what legislation it desires can never again claim independence anymore.

ECB Urges EU To Curb Virtual Money On Fear Of Losing Control (R.)

The European Central Bank wants EU lawmakers to tighten proposed new rules on digital currencies such as bitcoin, fearing they might one day weaken its own control over money supply in the euro zone. The European Commission’s draft rules, aimed at fighting terrorism, require currency exchange platforms to increase checks on the identities of people exchanging virtual currencies for real ones and report suspicious transactions. In a legal opinion published on Tuesday, the ECB said EU institutions should not promote the use of digital currencies and should make clear they lack the legal status of currency or money.

“The reliance of economic actors on virtual currency units, if substantially increased in the future, could in principle affect the central banks’ control over the supply of money … although under current practice this risk is limited,” the ECB said in the opinion for the European Parliament and Council. “Thus (EU legislative bodies) should not seek in this particular context to promote a wider use of virtual currencies.” The ECB argues the Commission’s proposal does not go far enough as it does not cover the use of virtual money to buy goods and services. “Such transactions would not be covered by any of the control measures provided for in the proposal and could provide a means of financing illegal activities.”

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Dissaving.

Saudi Arabia’s Bond: a Defining Trade for 2016 (WSJ)

Want a single instrument that wraps together nearly every big political, financial and economic theme in today’s world? Saudi Arabia’s mammoth $17.5 billion bond issue, marking its debut in international markets, is it. The size of the deal is impressive but actually the least important thing about it. Big bond deals tend to build a momentum of their own. But it does speak to the search for yield. The $6.5 billion 30-year portion of Saudi Arabia’s bond is set to pay 2.1 percentage points more in yield than a comparable U.S. Treasury, or around 4.6%. That is a sizeable pickup in a world where developed-market bond yields are on the floor or in negative territory. That Saudi Arabia is doing the deal at all is a more telling factor: The oil bounty that has propelled the economy has run dry.

The 18-month-long rout in oil prices that started in 2014 sent the country hurtling from a budget surplus to a deficit in 2015 of 15.9% of GDP that is set to narrow only to 13% in 2016, according to the IMFd. In 2013, government debt stood at just 2.2% of GDP, according to Moody’s. By 2017, it is forecast to be 22.9%. The level isn’t a source of concern, but the swift change shows the country’s stark reversal of fortunes. In the near term, buyers of the bonds are betting largely on oil. Swings in the price are likely to have a direct impact on the perception of Saudi Arabia as a credit. The recovery in oil prices, which stand close to their high of the year, has eased concerns about financial stability and helps explain some of the enthusiasm for the deal. But further ahead, this is a bet on the ability and willingness of the country to transform itself while maintaining social and political stability.

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Explanations at the link. h/t Mish

How do Clinton and Trump’s Tax Plans Compare? (TF)

Both Hillary Clinton and Donald Trump have released tax plans during the campaign. The Tax Foundation has analyzed both the plans using our Taxes and Growth (TAG) model to estimate how their plans would impact taxpayers, federal revenues, and economic growth. Below, is a chart that contains all you need to know about the candidates’ plans.

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“..if you are afraid that Donald Trump is a racist/sexist clown with a dangerous temperament, you have been brainwashed by the best group of brainwashers in the business right now..”

Trump is a Pink Elephant (Scott Adams)

Here’s a little thought experiment for you: If a friend said he could see a pink elephant in the room, standing right in front of you, but you don’t see it, which one of you is hallucinating? Answer: The one who sees the pink elephant is hallucinating. Let’s try another one. If a friend tells you that you were both abducted by aliens last night but for some reason only he remembers it, which one of you hallucinated? Answer: The one who saw the aliens is hallucinating. Now let’s add some participants and try another one. If a crowd of people are pointing to a stain on the wall, and telling you it is talking to them, with a message from God, and you don’t see anything but a stain, who is hallucinating? Is it the majority who see the stain talking or the one person who does not? Answer: The people who see the stain talking are experiencing a group hallucination, which is more common than you think.

In nearly every scenario you can imagine, the person experiencing an unlikely addition to their reality is the one hallucinating. If all observers see the same addition to their reality, it might be real. But if even one participant can’t see the phenomenon – no matter how many can – it is almost certainly not real. Here I pause to remind new readers of this blog that I’m a trained hypnotist and a student of persuasion in all its forms. I’ve spent a lifetime trying to learn the tricks for discerning illusion from reality. And I’m here to tell you that if you are afraid that Donald Trump is a racist/sexist clown with a dangerous temperament, you have been brainwashed by the best group of brainwashers in the business right now: Team Clinton. They have cognitive psychologists such as Godzilla advising them. Allegedly.

I remind you that intelligence is not a defense against persuasion. No matter how smart you are, good persuaders can still make you see a pink elephant in a room where there is none (figuratively speaking). And Clinton’s team of persuaders has caused half of the country to see Trump as a racist/sexist Hitler with a dangerous temperament. That’s a pink elephant. As a public service (and I mean that literally) I have been trying to unhypnotize the country on this matter for the past year. I don’t do this because I prefer Trump’s policies or because I know who would do the best job as president. I do it because our system doesn’t work if you think there is a pink elephant in the room and there is not. That isn’t real choice. That is an illusion of choice.

Trump represents what is likely to be a once-in-a-lifetime opportunity to bring real change to a government that is bloated and self-serving. Reasonable people can disagree on policies and priorities. But Trump is the bigger agent for change, if that’s what you think the country needs. I want voters to see that choice for what it is. And it isn’t a pink elephant. If you are wondering why a socially liberal and well-educated cartoonist such as myself is not afraid of Trump, it’s because I don’t see the pink elephant. To me, all anti-Trumpers are experiencing a shared illusion.

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If you don’t even jail people for this kind of stuff, your justice system is fast eroding.

California Launches Criminal Probe Into Wells Fargo Account Scandal (R.)

The California Attorney General’s Office has launched a criminal investigation into Wells Fargo over allegations it opened millions of unauthorized customer accounts and credit cards, according to a seizure warrant seen by Reuters. Attorney General Kamala Harris authorized a seizure warrant against the bank that seeks customer records and other documents, saying there is probable cause to believe the bank committed felonies. The probe marks the latest setback for the bank in a growing scandal that led to the abrupt retirement of its chief executive officer, monetary penalties, compensation clawbacks, lost business and damage to its reputation.

[..] This is at least the second criminal probe to be opened into Wells Fargo since last month. In September a source told Reuters that federal prosecutors are also looking into the matter. An affidavit filed by Special Agent Supervisor James Hirt with the California Department of Justice reveals that interviews with possible victims of the fraud have already started. One victim, identified only as “Ms. B,” told the investigator that she had declined a request by a Wells Fargo teller in late 2011 or 2012 to open new accounts. But sometime in late 2013 or early 2014, she started to receive notices that she and her husband “allegedly owned on three life insurance policies held by the bank,” the affidavit says.

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Everyone with power is.

Who’s Powering the War on Cash? (DQ)

[..] cash’s days are numbered, as technological advances and changes in generational priorities dampen its allure. The world is brimming with individuals and institutions determined to put it out of its misery. Top of the list are the world’s central banks, which have the perfect motive for whacking cash: i.e. to make negative interest rates an eternal — or at least, more enduring — reality. And the only way to do that is to stop depositors from cashing out, as the Bank of England chief economist Andrew Hadlaine all but admitted in 2014. Japan and Europe are already deep into negative territory, and Fed Chair Janet Yellen has already said that the U.S. should be prepared for the same outcome. But as long as cash exists, there’s no way of preventing depositors from doing the logical thing – i.e. taking their money out of the bank and parking it where the erosive effects of NIRP can’t reach it.

Central banks are not the only ones who dream of a cash-free world. For credit card companies, cash is the ultimate rival. As such, it’s no surprise that the likes of Visa and MasterCard are among those pushing the hardest for a cashless economy. For banks, the benefits are no less obvious, including cost cuts, greater control over the flow of customer funds, and larger fees. As for politicians, Eurocrats and global plutocrats, including the senior servants of the IMF, World Bank and United Nations, they will enjoy even greater access to and dominion over the people’s funds. What better way of controlling the people than by controlling their access to the money they need to survive? It would amount to what Martin Armstrong calls “totalitarian control over the economy.”

These powerful agents have already created a perfect platform for achieving their dream: The Better Than Cash Alliance (BTCA), a UN-hosted partnership of governments, companies and international organizations. Its purpose, in its own words, is “to accelerate the transition from cash to digital payments globally through excellence in advocacy, knowledge and services to members.” The Better Than Cash Alliance’s membership list reads like a who’s who of some of the world’s most influential corporations and institutions. They include Coca Coca, Visa and Mastercard. Apple is, for now, conspicuously absent from the list, but in its place representing the tech industry is the Bill and Melinda Gates Foundation.

Also on the list are the Citi Foundation, the US Agency for International Development (USAID), and the World Saving Banks Institute, which represents 7,000 retail and savings banks worldwide. Member institutions range from powerful private foundations — including the Ford Foundation and the Clinton Development Initiative — to a bewildering alphabet soup of UN organizations, including WFP (the World Food Programme), UNFPA (the UN Population Fund), UNPD (the UN Development Program), IFAD (the International Fund for Agricultural Development) and UNCDF (the UN Capital Development Fund).

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Interesting theme, but in an article of this length, confining your self to central bankers only seems a shame.

The Cult Of The Expert – And How It Collapsed (G.)

When the history is written of the revolt against experts, September 2008 will be seen as a milestone. The $85bn rescue of the American International Group (AIG) dramatised the power of monetary gurus in all its anti-democratic majesty. The president and Congress could decide to borrow money, or raise it from taxpayers; the Fed could simply create it. And once the AIG rescue had legitimised the broadest possible use of this privilege, the Fed exploited it unflinchingly. Over the course of 2009, it injected a trillion dollars into the economy – a sum equivalent to nearly 30% of the federal budget – via its newly improvised policy of “quantitative easing”. Time magazine anointed Bernanke its person of the year. “The decisions he has made, and those he has yet to make, will shape the path of our prosperity, the direction of our politics and our relationship to the world,” the magazine declared admiringly.

The Fed’s swashbuckling example galvanized central bankers in all the big economies. Soon Europe saw the rise of its own path-shaping monetary chieftain, when Mario Draghi, president of the European Central Bank, defused panic in the eurozone in July 2012 with two magical sentences. “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” he vowed, adding, with a twist of Clint Eastwood menace, “And believe me, it will be enough.” For months, Europe’s elected leaders had waffled ineffectually, inviting hedge-fund speculators to test the cohesion of the eurozone. But now Draghi was announcing that he was badder than the baddest hedge-fund goon. Whatever it takes. Believe me.

In the summer of 2013, when Hollywood rolled out its latest Superman film, cartoonists quickly seized upon a gag that would soon become obvious. Caricatures depicted central-bank chieftains decked out in Superman outfits. One showed Bernanke ripping off his banker’s shirt and tie, exposing that thrilling S emblazoned on his vest. Another showed the bearded hero hurtling through space, red cape fluttering, right arm stretched forward, a powerful fist punching at the void in front of him. “Superman and Federal Reserve chairman Ben Bernanke are both mild-mannered,” a financial columnist deadpanned. “They are both calm, even in the face of global disasters. They are both sometimes said to be from other planets.”

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They’re going to roast her today, and not in a funny way.

Theresa May To Tell EU Leaders ‘There Will Be No Second Referendum'(G.)

Theresa May is to warn her 27 fellow European Union leaders over a working dinner in Brussels that Britain’s decision to leave is irreversible and there can be no second referendum. Thursday’s meeting of the European council will be the prime minister’s first opportunity to address the leaders of all the other member states since the UK voted to leave the European Union in June. Donald Tusk, the European council president, has insisted Britain’s future relationship with the EU will not be on the formal agenda for the two-day meeting, but he will give May the opportunity to set out the “current state of affairs in the country” over coffee at the end of the meal.

A No 10 source said she would tell her fellow EU leaders: “The British people have made a decision and it’s right and proper that that decision is honoured. There will be no second referendum. The priority now has got to be looking to the future, and the relationship between the UK, once we leave”. The source added that the prime minister would also seek to reassure the other member states, amid growing fears that Brexit could unleash political and economic instability in Britain and the rest of Europe. “She wants the outcome at the end of this process to be a strong UK, as a partner of a strong EU,” the source said. “She doesn’t want the process of the UK leaving to be damaging for the rest of the EU. She wants it to be a smooth, constructive, orderly process.”

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Painful times ahead.

Australia Housing Boom Peak Has Passed – Morgan Stanley (BBG)

Australia’s housing boom has passed its peak, with a looming apartment glut set to lead to a sharp slowdown in future developments, according to Morgan Stanley. The slowdown in construction will hurt economic growth, put 200,000 jobs at risk and prompt the central bank to resume cutting interest rates next year, Morgan Stanley analysts led by Daniel Blake said in a note dated Oct. 19. “We believe the growth contribution from the housing boom has already peaked and look for a plateau over 2017 and decline through 2018,” the analysts said. The housing industry is also facing a “more imminent credit crunch” for purchases and developments, they said. “The greatest vulnerability is settlement risk on the 160,000 apartments we forecast being completed through the end of 2017,” they said in the report.

“Listed developers report low failure rates currently, but also confirm credit availability has tightened, especially for foreign investors. Non-bank credit is moving to plug the gap at higher interest rates, but we expect some projects will land with the receiver.” Shares of developer Lendlease Group slumped as much as 5.5% in Sydney trading Thursday after the company flagged a slowdown in building activity, saying Sydney apartment activity is peaking and the Melbourne apartment sector is facing a high level of supply. In May, all 391 apartments offered by Lendlease at a project in Sydney were snapped up in just four hours. A national housing oversupply of about 100,000 dwellings will develop by 2018, Morgan Stanley said, as a glut of apartment projects are completed, particularly in Sydney and Melbourne.

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Cohen is the no. 1 American expert on Russia. Audio file at the link.

Did the White House Declare War on Russia? (Stephen F. Cohen)

Nation Contributing Editor Stephen F. Cohen and John Batchelor continue their weekly discussions of the new US-Russian Cold War. Cohen reports that a statement by Vice President Joe Biden on NBC’s Meet the Press on October 16, released on October 14, stunned Moscow (though it was scarcely noted in the American media). In response to a question about alleged Russian hacking of Democratic Party offices, in order to disrupt the presidential election and even throw it to Donald Trump, Biden said the Obama administration was preparing to send Putin a “message,” presumably in the form of some kind of cyber-attack.

The Kremlin spokesman and several leading Russian commentators characterized Biden’s announcement as a virtual “American declaration of war on Russia” and as the first ever in history. Cohen observed that at this fraught stage in the new US-Russian Cold War, Biden’s statement, which clearly had been planned by the White House, could scarcely have been more dangerous or reckless—especially considering that there is no actual evidence or logic for the two allegations against Russia that seem to have prompted it. Biden was reacting to official US charges of Kremlin hacking for political purposes. Cohen points out that in fact no actual evidence for this allegation has been produced, only suppositions or, as Glenn Greenwald has argued, “unproven assertions.”

While the US political-media establishment has uncritically stated the allegation as fact, a MIT expert, professor Theodore Postol, has written that there is “no technical way that the US intelligence community could know who did the hacking if it was done by sophisticated nation-state actors.” Instead, Cohen suggests, the charges, leveled daily by the Clinton campaign as part of its McCarthyite Kremlin-baiting of Donald Trump, are mostly political, and he laments the way US intelligence officials have permitted themselves to be used for this unprofessional purpose. Moreover, it is far from clear that the Kremlin actually favors Trump, despite Clinton’s campaign claims.

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“Obama is now on pace to deport more people than the sum of all 19 presidents who governed the United States from 1892-2000..”

What Obama’s Record Deportations Look Like (I’Cept)

Donald Trump noted during the third presidential debate that the Democratic president, Barack Obama has deported millions of people. Indeed, Obama has deported more people than any modern president. From January, at Fusion.net: “Donald Trump’s bilious blather about immigrants reminds us—more often than most people need reminding—that words matter. But the Obama administration’s recent wave of police-state raids on Central American women and children, whose only crime is poverty and a lack of proper paperwork, reminds us that actions matter too. When it comes to getting tough on immigration, Republican candidates talk the talk, but Obama walks the walk. Obama has deported more people than any U.S. president before him, and almost more than every other president combined from the 20th century.

“Immigration-flow numbers are staggering in both directions. In 2014, it’s estimated that more than 200,000 Central Americans tried to emigrate to the United States without documentation. But the Obama government has been deporting them as fast as it can. Since coming to office in 2009, Obama’s government has deported more than 2.5 million people—up 23% from the George W. Bush years. More shockingly, Obama is now on pace to deport more people than the sum of all 19 presidents who governed the United States from 1892-2000, according to government data.

“And he’s not done yet. With the clock ticking down his final months in office, Obama appears to be running up the score in an effort to protect his title as deporter-in-chief from future presidents. To pad the numbers, Homeland Security is now going after the lowest-hanging fruit: women and children who are seeking asylum from violence in Central America. “This is the only time I remember enforcement raids on families of women and children who are fleeing some of the most violent places on the planet,” says Royce Bernstein Murray, director of policy for the National Immigrant Justice Center.

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Intelligent species.

Use Of Strongest Antibiotics Rises To Record Levels On European Farms (G.)

Use of some of the strongest antibiotics available to treat life-threatening infections has risen to record levels on European farms, new data shows. The report reinforces concerns about the overuse of antibiotics on farms, following revelations from the Guardian of the presence of the superbug MRSA in UK-produced meat, in imported meat for sale in UK supermarkets, and on British farms. According to the data from the European Medicines Agency, medicines classified as “critically important in human medicine” by the World Health Organisation appear to be in frequent use on farm animals across the major countries of the EU, including the UK.

This comes in spite of WHO advice that, because of their importance, these drugs should be used only in the most extreme cases, if at all, in treating animals. The latest report from the EMA collates data from member states on the sales of antibiotics for veterinary purposes in 2014, and shows that antibiotic use on farms fell by about 2% on the previous year overall, and by as much as 12% in many countries. But this disguises the rise in the use of the strongest medicines, such as colistin, which is a last resort for life-threatening human illness. The percentage of antibiotics sales made up by the most potent antibiotics remained steady or in some cases increased slightly, indicating an increase in the amount of so-called critically important antibiotics used.

For instance, sales of fluoroquinolones – the newest versions of which are used to treat life-threatening illnesses including pneumonia and Legionnaire’s disease – stood at 141 tonnes across the countries surveyed in 2013, and rose to 172 tonnes in 2014. Sales of macrolides, also classed as critically important to human health, rose from 59 to 67 tonnes in the same period. This shows that efforts to prevent the drugs most crucial for human health from being used in farming are failing.

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Oct 132016
 
 October 13, 2016  Posted by at 8:39 am Finance Tagged with: , , , , , , , , ,  2 Responses »


G. G. Bain 100-mile Harkness Handicap, Sheepshead Bay Motor Speedway, Brooklyn 1918

China September Exports Plunge 10%, Imports Down 1.9% (R.)
Wave Of China Property Tightening Hits Home Sales During Holiday Week (R.)
Chinese Firms Unveil Debt Swaps As Beijing Struggles To Reduce Leverage (R.)
US Mortgage Applications Down 6%, Rates Rise (CNBC)
Where Will All the Money Go When All Three Market Bubbles Pop? (CHSmith)
If Europe Insists On A Hard Brexit, So Be It (AEP)
Brexit Means Whatever The EU Says It Means (Luyendijk)
ECB Says Greece Needs Clarity on Debt to Regain Market Access (BBG)
Steve Keen: A Renegade Economist Has A Plan For Reducing Global Debt (RV)
Pension Benefits In Tiny California Town Slashed As ‘Ponzi Scheme’ Exposed (ZH)
Dumped Apartment Projects ‘Groundhog Day’ To Global Financial Crisis (NZ Herald)
Wells Fargo CEO John Stumpf Steps Down, Walks Away With $120 Million (WSJ)
Moscow Officials Told To Immediately Bring Back Children Studying Abroad (ZH)
Putin Ally Tells Americans: Vote Trump Or Face Nuclear War (R.)
“We Are At War And You Are The Front-line Troops In This War” (I’Cept)
The Global Seed And Chemical Industry Is Undergoing A Rapid Realignment (BBG)
Monsanto Dismisses ‘People’s Tribunal’, ‘Moral Trial’ As A Staged Stunt (G.)
Cut Funds To EU States That Turn Away Refugees, Italy Urges (R.)

 

 

All you need to know about the state of world trade.

China September Exports Plunge 10%, Imports Down 1.9% (R.)

China’s September exports fell 10% from a year earlier, far worse than expected, while imports unexpectedly shrank 1.9% after picking up in August, suggesting signs of steadying in the world’s second-largest economy may be short-lived. That left the country with a trade surplus of $41.99 billion for the month, the General Administration of Customs said on Thursday. Analysts polled by Reuters had expected imports to rise 1%, after unexpectedly advancing 1.5% in August for the first time in nearly two years on stronger demand for coal as well as other commodities such as iron ore which are feeding a construction boom.

Exports had been expected to fall 3%, slightly worse than in August as global demand for Asian goods remains stubbornly weak. Analysts had expected the trade surplus to expand to $53 billion in September from August’s $52.05 billion. The September import reversal raises questions over the strength of the recent recovery in domestic demand, Julian Evans-Pritchard at Capital Economics said in a note after the data. “The data we have so far suggests that a drop in import volumes of a number of key commodities, including iron ore and copper, are partly responsible,” he said.

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Xi continues to do two opposite things: blow bubbles and deflate them at the same time. My guess is there’s a time limit on that game.

Wave Of China Property Tightening Hits Home Sales During Holiday Week (R.)

A wave of restrictions imposed on housing markets in major Chinese cities last week have unnerved some buyers and developers, cutting the area of new homes sold in places such as Beijing and Shenzhen by more than half. More than 20 cities have imposed measures, including higher mortgage downpayments, to cool hot property markets that have raised official alarm in Beijing and fresh concerns about China’s ballooning debt. Last week was a public holiday to mark National Day, traditionally a high season for property sales. Property agents said prices of new homes sold in the southern city of Shenzhen and in Beijing dropped 20% last week to entice buyers, compared with the previous week.

“The new tightening measures are quite stringent,” said Alan Cheng, general manager of realtor Centaline Shenzhen. “It’s a blow to confidence and people are worried that prices will drop, so they are observing from the sidelines now.” The latest restrictions varied from city to city, but included higher mortgage downpayments for second and third-time home buyers, in a bid to stem the flow of cash into the red-hot property market. China’s home prices rose 9.2% in August from a year earlier, official data shows. But in Shenzhen, they increased almost 37%, in Beijing more than 23% and in Shanghai topped 30%. Such hefty price rises have been common all year in these so-called Tier 1 cities. The rally has prompted a frenzy among some buyers. In some cases, couples divorced to find a way around buying restrictions.

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How to make debt go away. Transfer it from state-owned firms to state-owned banks. Yeah, that should work..

Chinese Firms Unveil Debt Swaps As Beijing Struggles To Reduce Leverage (R.)

Chinese firms are moving rapidly to announce debt restructuring plans following the release of government guidelines on Monday, as policymakers experiment with ways to rein in the country’s ballooning corporate debt. China Construction Bank, the nations’ second-largest lender by assets, has been reported in two deals to help big, debt-laden state companies in as many days, and other Big Four banks are expected to follow soon. Chinese companies sit on $18 trillion in debt, equivalent to about 169% of GDP, according to the most recent figures from the Bank for International Settlements. Most of it is held by state-owned firms. Construction Bank will conduct a debt-to-equity swap with Yunnan Tin Group, the world’s biggest tin producer and exporter, to cut its debt and financing costs, Xinhua reported on Wednesday.

Separately, the bank on Tuesday announced the launch of a 24 billion yuan ($3.60 billion) debt restructuring fund to help struggling Wuhan Iron and Steel. Although the statement from CCB did not specify the planned operations of the fund, official media reported that the debt reduction would be accomplished primarily through debt-to-equity swaps. CCB will give Yunnan Tin 2.35 billion yuan next week in its first round of investment to swap some high-interest debt, Xinhua reported, without spelling out further details of the deal. The guidelines for debt-to-equity swaps, mooted as one solution to China’s growing corporate debt overhang, have been in development for months. However, some senior bankers and analysts have been outspoken critics of the idea, saying it risks saddling banks with ownership stakes in weak companies which Beijing sees as too big or too sensitive to fail [..]

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Actual rates are starting to creep up no matter what central banks do. Sign of the times.

US Mortgage Applications Down 6%, Rates Rise (CNBC)

As pumpkins pop up on front porches across the nation, the highest interest rates in a month are scaring consumers away from the mortgage market. Total mortgage application volume fell 6% on a seasonally adjusted basis for the week ended Oct. 7, compared to the previous week, according to the Mortgage Bankers Association. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.68%, from 3.62%, with points increasing to 0.35 from 0.32 (including the origination fee) for 80% loan-to-value ratio loans.

“As incoming economic data reassured investors regarding U.S. growth, and financial markets returned to viewing a December Fed hike as increasingly likely, mortgage rates rose to their highest level in a month last week,” said Michael Fratantoni, chief economist at the MBA. “Total and refinance application volume dropped to their lowest levels since June as a result.” Applications to refinance a home loan, which are highly rate-sensitive, have been falling for weeks, and took another 8% dive last week, seasonally adjusted. Mortgage applications to purchase a home fell a smaller 3% for the week and are 27% higher than one year ago. Comparisons to last year may be skewed, however, as new mortgage rules went into effect last October that pulled demand forward and then delayed mortgage processing.

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Charles asks: “Where will the money fleeing deflating bubbles go?”. But doesn’t add that much of it will simply evaporate. That’s what happens when bubbles pop.

Where Will All the Money Go When All Three Market Bubbles Pop? (CHSmith)

Everyone who’s not paid to be in denial knows stocks, bonds and real estate are in bubbles of one sort or another. Real estate is either an echo bubble or a bubble that exceeds the previous bubble, depending on how attractive the market is to hot-money investors.

Here’s a look at the inflation-adjusted S&P 500 (SPX) and margin debt: yep, a bubble.

With the Fed funds rate pinned to near-zero, bonds are in a bubble as well.

[..] Where will the money fleeing deflating bubbles go? Since the stock, bond and real estate markets are all correlated, it’s a question with no easy answer. What would $10 trillion seeking safe haven do to small asset classes such as precious metals, bitcoin, and tradable (liquid) sectors of the commodities markets? If the bubbles in bonds, stocks and real estate all pop, what markets will be left that can absorb trillions of hot money sloshing around? the short answer is: none. The chaos that will arise as trillions of dollars, yen, yuan and euros, etc. try to crowd through the fire exits as the asset bubbles pop will be monumental, and the the spikes in small asset class prices as the hot money floods in will be equally monumental.

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At least Ambrose doesn’t whine as much as many Brits do. “What [Hollande] is also admitting – à son insu – is that the union is held together only by fear. He might as well write its epitaph.” He’s writing his own epitaph, too.

If Europe Insists On A Hard Brexit, So Be It (AEP)

There may be serious economic trials ahead as we extract ourselves from the EU after more than forty years, but the slump in sterling is not one of them. The devaluation is necessary and desirable. The pound is now near ‘fair value’ based on the real effective exchange rate used by the IMF. All that has happened is a correction of the extreme over-valuation of sterling before Brexit, caused by capital inflows. This left the country with the worst current account deficit in peace-time since records began in the 18th Century. The fall is roughly comparable to the devaluation from 2007 to 2008 – though the same financial elites who talk so much of Armageddon today played it down on that occasion, mindful that their own banking crisis was the trigger. We can argue over how much the 2008 devaluation helped but it clearly acted as shock absorber at a crucial moment.

It was in any case a far less painful way to restore short-term competitiveness than the ‘internal devaluations’ and mass unemployment suffered by the eurozone’s Club Med bloc. But there is a deeper point today that is often overlooked. Central banks across the developed world are caught in a deflationary trap. The ‘Wicksellian’ or natural rate of interest has been falling ever lower with each economic cycle and is now at or below zero in half the global economy, a full seven years into the expansion. This paralyses monetary policy and has dark implications for the next downturn. It is why central banks are desperately trying to drive down their currencies to gain a little breathing room, or in the case of the US Federal Reserve to stop the dollar rising. By the accident of Brexit, Britain has pulled off a Wicksellian adjustment that eludes others.

With luck, the economy may even generate a few flickers of inflation, enough to let the Bank of England raise interest rates and start to restore ‘intertemporal’ equilibrium. Personally, I have been in favour of a “soft Brexit” that preserves unfettered access to the single market and passporting rights for the City, but not at any political cost – and certainly not if it means submitting to the European Court, which so cynically struck down our treaty opt-out on the Charter in a grab for sweeping jurisdiction. But what has caused me to harden my view – somewhat – is the open intimidation by a number of EU political leaders. “There must be a threat,” said French president Francois Hollande. “There must be a price… otherwise other countries or other parties will want to leave the European Union.”

These are remarkable comments in all kinds of ways, not least in that the leader of a democratic state is threatening a neighbouring democracy and military ally. What he is also admitting – à son insu – is that the union is held together only by fear. He might as well write its epitaph.

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Yet another example of why Britain should be delighted to leave the EU. But isn’t.

Brexit Means Whatever The EU Says It Means (Luyendijk)

If you still believe Britain will get a sweet deal out of Brexit because “the EU needs the UK more than vice versa”, ask yourself: why don’t we hear European politicians pleading with Britain “not to punish the EU over Brexit”? Why is the pound plunging against the euro and not the other way around? Why do we not hear of companies escaping from the EU to “free-trading Britain” while there is almost a traffic jam in the other direction? Why do EU leaders look rather relaxed when Brexit comes up, even cracking the odd joke or two about sending the British foreign minister, Boris Johnson, a copy of the Lisbon treaty so he can read up on reality? The negotiating cards with the EU are “incredibly stacked our way”, the Brexit minister, David Davis, told the House of Commons on Monday.

The cards certainly are “incredibly stacked” – but not in the way Davis imagines. To understand why, get a map of the EU and find Slovenia, a nation of 2 million people. No, that is Slovakia, with 5.4 million, almost three times bigger. Next look up Lithuania (population: 3.3 million), Latvia (2 million), Estonia (1.3 million) and Luxembourg (500,000). Now repeat after me: all these EU members, as well as the other 21, hold veto power over whatever deal the UK (65 million) manages to negotiate with the EU (population: 508 million). That is right, 1.2 million Cypriots can paralyse the British economy by blocking a deal, and the same holds true for Malta (400,000). Did I mention the Walloon parliament in Namur (get that atlas out again) has veto power too? And then there is, of course, the European parliament in Strasbourg.

Brexiteers argue that the EU takes ages to conclude trade deals so Britain is better off striking them on its own. The former is certainly true. Consider the Walloons currently threatening to derail an EU trade deal with Canada. But how does EU institutional sluggishness square with the Brexiteers’ promise that the EU is even capable of concluding a swift Brexit deal with the UK, even if it wanted to do? It doesn’t. And this is true even before we look at whether the EU would have an interest in making things easy for Britain. Remember how, before the EU referendum, David Cameron went to Brussels threatening to support leave unless he was given a range of “concessions”? Well, two can play that game, now that the tables have turned – except the EU has 27 nations. That is a lot of scope for blackmail à l’anglaise.

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A new torture technique. It’s a Good Cop Bad Cop set-up, but with three parties: EU, ECB and IMF, who keep on blaming both each other and the suspect, who may be innocent but is never released.

ECB Says Greece Needs Clarity on Debt to Regain Market Access (BBG)

Greece won’t regain stable access to international bond markets unless creditors ease repayment terms on the country’s bailout loans, ECB Executive Board member Benoit Coeure said. The country cannot gain “solid and long-lasting market access without the clarity about the sustainability of Greek debt,” Coeure told European Parliament lawmakers on Wednesday, adding that the IMF should stay fully involved in the Greek bailout to ensure fair treatment in Greek debt talks. “There are serious concerns about the sustainability of Greek public debt,” the Frenchman said during the hearing. “We are looking forward to a solution that can reassure markets, restore confidence in the dynamics of public debt, allow the full involvement of the IMF in the program – which would enhance the program’s credibility – and restore market access for Greece ahead of the end of the program in July 2018.”

The IMF is at loggerheads with Greece’s European creditors as the Washington-based lender insists on concrete and quantified relief measures before extending any more loans to the continent’s most-indebted state. While the institution acknowledges that a nominal haircut on Greek bailout loans is implausible, it has demanded more concessionary repayment terms, including extensions of maturities and a cap on interest rates. Wolfgang Schaeuble has said the source of Greece’s woes is a lack of competitiveness, not elevated debt levels, and reiterated calls earlier this week for the IMF to contribute to Greek bailout loans. The ECB “very much” believes that the IMF should be on board when devising a solution for Greek debt, Coeure said. The ECB has excluded Greek government bonds from its asset-purchase program, pending “an additional level of safeguards and clarity on debt sustainability.”

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Bit hard to find the best part. There’s a RealVision interview connected to it.

Steve Keen: A Renegade Economist Has A Plan For Reducing Global Debt (RV)

What he is really focused on is here is reducing the debt burden and is inspired by US philanthropist Richard Vague, who started two US credit card companies, First USA and Juniper Financial — and now campaigns against excessive debt. “We have to cope with the residue, and it’s created this enormous pile of elephant dung of debt. We have to get rid of it. I’m simply being practical about how do we get rid of it,” Keen said. “He’s a totally realistic man (Vague), totally feet-on-the-ground personality. And he said, when you look at history, there has never been a successful episode of de-leveraging by growing out of it. It’s been debt write offs every last time. Somehow debts have been written off whether it’s being done at the individual scale by individual bankruptcies or some sort of collective action.

“We can’t get rid of it by market mechanisms, and we can’t grow our way out of it. “So we’ve got this pile of elephant dung we need to get rid of. Let’s work out a way of doing it. Richard’s way is to let the banks write debt off over like a 30-year amortization period. So you have somebody who has got a $1million dollar mortgage, you write it down to half a million, in one year, that half a million loss by the bank would wipe the bank out. You let them out of that over 30 years. That why they can cope with it, and you get a recovery that way. “Mine is to say let’s use the state’s capacity to create money to do the cancellation. But whatever way you go about it, you’ve got to reduce that pile of elephant dung we call accumulated private debt.”

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Tidings of things to come.

Pension Benefits In Tiny California Town Slashed As ‘Ponzi Scheme’ Exposed (ZH)

For the tiny little town of Loyalton, California, with a population of only 700, a failure of city council members to understand the difference between the calculation of a regular everyday pension liability and a “termination liability” has left 4 residents at risk of losing their pensions from Calpers. According to the New York Times, the town of Loyalton decided to drop out of Calpers back in 2012 in order to save some money but what they got instead was a $1.6mm bill which was more than their annual budget. For those who aren’t familiar with pension accounting, we can shed some light on the issue faced by Loyalton. There are two different ways to calculate the present value of pension liabilities. One methodology applies to “solvent”, fully-functioning pension funds (we call this the “Ponzi Methodology”) and the other applies to pensions that are being terminated (we call this one “Reality”).

Under the “Ponzi Methodology,” pension funds, like Calpers, discount their future liabilities at 7.5% in order to keep the present value of their liabilities artificially low. That way, pension funds can maintain the illusion that they’re solvent and the Ponzi scheme can continue on so long as there are enough assets to cover annual benefit payments. Now, the managers of the pension funds aren’t actually dumb enough to believe that the “Ponzi Methodology” accurately reflects the true present value of future liabilities because they know that, particularly in light of current Central Banking policies around the world, their actual long-term returns will be much lower than 7.5%. Therefore, they have a completely separate, special calculation that applies when towns, like Loyalton, want to exit their plan.

This “termination liability”, or what we refer to as “Reality”, uses a discount rate closer to or even below risk-free rates which means the present value of the future liabilities is much higher. As a quick example, lets just assume that Loyalton’s 4 pensioners draw $225,000 per year, in aggregate pension benefits, and enjoy a 2% annual inflation adjustment. Assuming a 7.5% discount rate, the present value of that liability stream is about $2.9mm. However, if the discount rate drops to 2%, the present value of those liabilities surges to $4.5mm…hence the $1.6mm bill sent to the Loyalton City Council.

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And so it begins (again).

Dumped Apartment Projects ‘Groundhog Day’ To Global Financial Crisis (NZ Herald)

The collapse of property developments in Auckland as banks refuse to fund projects due to blowouts in construction and labour costs, is “almost groundhog day” to the run-up of the global financial crisis in 2007/2008 says John Kensington, the author of KPMG’s Financial Institutions Performance Survey. The most recent development to be cancelled is the Flo apartment project in Avondale. Buyers’ 10% deposits were refunded this week as the developer cited funding and construction cost issues. Speaking to BusinessDesk, Kensington said exactly the same thing was happening at the start of the GFC. “Banks were looking at property development opportunities back then, and going, ‘we’ve got a record rise in prices, we’ve got shortages of materials, we’ve got shortages of labour, we don’t think this property development has been correctly analysed, we don’t think it’s going to work’, so they declined to fund it.”

Kensington said this year was different because the finance companies were diminished and no longer in a position to take up the slack. “The money went to finance companies [before the GFC] who, having got the money, had to find a home and probably invested in the very things the banks had said no to. At least this time round there is not as strong a property finance company sector there to take up the slack when the banks said no. I’m sure if there was, they would happily bank some of this.” He added that there was a “real strain on the construction industry, labour costs are blowing out, and there are some shortages of building materials”. Prime Minister John Key yesterday told the Herald he stood by comments that young people should be looking to buy apartments as their first home.

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So go after him, I dare you.

Wells Fargo CEO John Stumpf Steps Down, Walks Away With $120 Million (WSJ)

Wells Fargo Chairman and CEO John Stumpf, under fire for the bank’s sales-tactics scandal and his own handling of its fallout, is stepping down from both roles, effective immediately, the bank said Wednesday. Mr. Stumpf will be replaced as head of the third-largest U.S. bank by assets by President and COO Timothy J. Sloan, who was widely seen as his heir apparent. Mr. Stumpf won’t receive a severance package, the bank said. The board, at Mr. Stumpf’s own recommendation, had previously decided he should relinquish $41 million in unvested equity, one of the biggest-ever forfeitures of pay by a bank chief. He still retires with tens of millions of dollars earned during roughly 35 years at the bank. Mr. Stumpf’s departure comes after he was subjected to two grillings on Capitol Hill in which he was attacked by both Democrats and Republicans.

The bank also faces numerous federal and state inquiries into its sales-practices issues, including from the Justice Department. The toppling of Mr. Stumpf, 63 years old and just shy of his 10th year as CEO, marks a stunning comedown for a firm that largely passed through the financial crisis unscathed and which was seen as a reliable Main Street lender. That reputation was shattered by the sales-tactics scandal, which revealed that bank employees had opened as many as two million accounts without customers’ knowledge. The bank has said it regrets the improper behavior, has ended sales goals for retail-bank employees and has been refunding customers improperly charged.

The problems came to light Sept. 8 when Wells Fargo agreed to a $185 milion fine and enforcement action with regulators. That settlement also brought to light that the bank had fired 5,300 employees over a five-year period for improper behavior. This underscored the breadth of problems related to a hard-charging sales culture that pushed bankers to sell multiple products to individual customers.

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Curious report.

Moscow Officials Told To Immediately Bring Back Children Studying Abroad (ZH)

In Europe, when it gets serious, you have to lie… at least if you are an unelected bureaucrat like Jean-Claude Juncker. In Russia, however, when it gets serious, attention immediately turns to the children. Which is why we read a report in Russian website Znak published Tuesday, according to which Russian state officials and government workers were told to bring back their children studying abroad immediately, even if means cutting their education short and not waiting until the end of the school year, and re-enroll them in Russian schools, with some concern. The article adds that if the parents of these same officials also live abroad “for some reason”, and have not lost their Russian citizenship, should also be returned to the motherland. Znak cited five administration officials as the source of the report.

The “recommendation” applies to all: from the administration staff, to regional administratiors, to lawmakers of all levels. Employees of public corporations are also subject to the ordinance. One of the sources said that anyone who fails to act, will find such non-compliance to be a “complicating factor in the furtherance of their public sector career.” He added that he was aware of several such cases in recent months. It appears that the underlying reason behind the command is that the Russian government is concerned about the optics of having children of the Russian political elite being educated abroad, while their parents appear on television talking about patriotism and being “surrounded by enemies.”

While we doubt the impacted children will be happy by this development, some of the more patriotic locals, if unimpacted, are delighted. Such as Vitaly Ivanov, a political scientist who believes that the measure to return children of officials from studying abroad, is “long overdue.” According Ivanoc, the education of children of the Russian elite abroad is subject to constant ridicule and derision against the ruling regime. “People note the hypocrisy of having a centralized state and cultivating patriotism and anti-Western sentiment, while children of government workers study abroad. You can not serve two gods, one must choose.”

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“..if they vote for Hillary it’s war. It will be a short movie. There will be Hiroshimas and Nagasakis everywhere.”

Putin Ally Tells Americans: Vote Trump Or Face Nuclear War (R.)

Americans should vote for Donald Trump as president next month or risk being dragged into a nuclear war, according to a Russian ultra-nationalist ally of President Vladimir Putin who likes to compare himself to the U.S. Republican candidate. Vladimir Zhirinovsky, a flamboyant veteran lawmaker known for his fiery rhetoric, told Reuters in an interview that Trump was the only person able to de-escalate dangerous tensions between Moscow and Washington. By contrast, Trump’s Democratic rival Hillary Clinton could spark World War Three, said Zhirinovsky, who received a top state award from Putin after his pro-Kremlin Liberal Democratic Party of Russia (LDPR) came third in Russia’s parliamentary election last month.

Many Russians regard Zhirinovsky as a clownish figure who makes outspoken statements to grab attention but he is also widely viewed as a faithful servant of Kremlin policy, sometimes used to float radical opinions to test public reaction. “Relations between Russia and the United States can’t get any worse. The only way they can get worse is if a war starts,” said Zhirinovsky, speaking in his huge office on the 10th floor of Russia’s State Duma, or lower house of parliament. “Americans voting for a president on Nov. 8 must realize that they are voting for peace on Planet Earth if they vote for Trump. But if they vote for Hillary it’s war. It will be a short movie. There will be Hiroshimas and Nagasakis everywhere.”

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Nice country to live in.

“We Are At War And You Are The Front-line Troops In This War” (I’Cept)

“That’s the next wave in the militarization of police,” Atkinson told The Intercept in an interview. “What we found was a whole slew of retired military officers now in the private sector now selling the exact same surveillance technology that they just got back from Iraq and Afghanistan with to local law enforcement for small money on the dollar.” The intent of “Do Not Resist,” Atkinson said, is to provide a glimpse inside the realities of American policing, challenge the policing-for-profit model that has caused departments in economically depressed communities to treat their citizens as walking ATM machines, call out a warrior culture that divides law enforcement from the public they’re sworn to serve, and flag the dangers of war-zone technologies being applied domestically.

[..] All told, the team traveled to 19 states, went on roughly 20 police ride-a-longs, observed half a dozen raids, and interacted with hundreds of police officers. The hope was to be on-hand for an incident in which a SWAT team’s use of heavy weapons would be unquestionably warranted. “I thought the whole time I would be able to show something that would kind of reflect the entire scope of what a SWAT officer might go through sometimes, where you actually do need the equipment,” Atkinson explained.

Instead, the filmmaker repeatedly found himself watching police with military-grade weaponry executing dubious search warrants. The frequency of the raids was particularly shocking, with one of the officers in the film claiming his team does 200 such operations a year. By comparison, Atkinson notes, his father performed a total of 29 search warrant raids over his entire 13 years in SWAT – according to some estimates, SWAT teams now carry out between 50,000 to 80,000 raids across the country annually. “The search warrants, we’re told, are always used for massive drug dealers and kingpins, and then we run in these homes and we never found anything,” Atkinson said.

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The real problem is that such a thing as a ‘seed and chemical industry’ exists at all. That agriculture has been just about fully taken over by 100+ year-old chemical companies that started out supplying death and now seek to control life, control our food to sell their chemicals, which our food doesn’t need.

The Global Seed And Chemical Industry Is Undergoing A Rapid Realignment (BBG)

The global seed and chemical industry is undergoing a rapid realignment, with three massive deals in less than a year. Last month, Bayer clinched a bid to buy Monsanto, the world’s biggest seed company, for $66 billion, ending a months-long chase. DuPont and Dow Chemical plan a $59 billion merger of equals, while China National Chemical waits to complete its $43 billion takeover of Swiss seed maker Syngenta. While the dominant players get bigger, some independents look for advantages in research and development. About two-thirds of Stine’s employees work in R&D using traditional breeding techniques to improve corn and soybean genetics. The company sells these improved seeds to farmers and also licenses them to bigger companies like Monsanto that, as part of the bargain, give Stine Seed priority access to the newest genetically modified traits that help farmers control weeds and bugs.

Closely-held companies account for about 20% of U.S. sales in corn seed and 22% in soybeans, according to Todd L. Martin, executive director of the Independent Professional Seed Association, which has 118 regular members. The bulk of Stine Seed profit comes from licensing its genetics research to bigger rivals. But customer backlash from the big mergers means the company’s revenue from its retail sales could “easily double,” Stine said. The company declined to provide sales figures. Smaller companies also may find an edge over pricier biotech products, said Jason Miner, an analyst at Bloomberg Intelligence. The market for seeds with multiple traits to control different types of insects and to withstand multiple weed killers may have reached a saturation point, he said. “Traditional breeding may actually be on the rise,” Miner said. “Farmers are less interested in speculating on high-cost, potential yield boosters. They want cost-effective solutions.”

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Get farmers to stop buying the stuff.

Monsanto Dismisses ‘People’s Tribunal’, ‘Moral Trial’ As A Staged Stunt (G.)

International judges will take evidence from 30 witnesses and “victims” of US agri-business Monsanto in an attempt by hundreds of grassroots groups to hold the company accountable for what they allege are human rights violations, crimes against humanity, and “ecocide”, or widespread environmental damage. High-profile witnesses, including former UN special rapporteur on the right to food Olivier De Schutter, will give evidence alongside Argentine doctors, Mexican beekeepers and toxicologists and scientists from 15 countries. The five judges will deliver what is expected to be a lengthy advisory legal opinion. The three-day peoples’ tribunal, which will be held in The Hague this weekend, will adopt the format of the UN’s international court of justice but will have no standing in law.

Organisers have described the hearing as a “moral trial” and “a test of international law”. “It aims to assess the allegations of harm made against Monsanto as well as the human health and environmental damages caused by the company throughout its history,” said a spokeswoman in London. The agro-chemical company, which is the subject of a £51bn takeover by German conglomerate Bayer, has declined to take part, or to defend its history at the tribunal. The company, which manufactured hundreds of thousands of tonnes of Agent Orange for use as a chemical weapon in the Vietnam war, is the world’s biggest genetically modified seed corporation. Monsanto developed toxic polychlorinated biphenyls and also makes glyphosate, the primary ingredient in Roundup, a widely used but controversial herbicide.

The firm’s accusers in The Hague will hold it and other major chemical companies primarily responsible for developing an unsustainable system of farming. “Monsanto promotes an agro-industrial model that contributes at least one-third of global anthropogenic greenhouse gas emissions; it is also largely responsible for the depletion of soil and water resources, species extinction and declining biodiversity, and the displacement of millions of small farmers worldwide. This is a model that threatens peoples’ food sovereignty by patenting seeds and privatising life”, said the spokeswoman.

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Everyone’s happy to saddle Italy with the problem, same as Greece. It’s what the EU stands for.

Cut Funds To EU States That Turn Away Refugees, Italy Urges (R.)

Eastern states that continue to refuse to take in refugees to help frontline countries in Europe’s migration crisis should have their EU funding cut, Italian Prime Minister Matteo Renzi said on Wednesday. Italy is the main destination for the waves of migrants fleeing violence and poverty in Africa. It is housing 160,000 asylum seekers out of more than 460,000 refugees who have reached its shores from North Africa since the start of 2014. Of 39,600 refugees due to be relocated from Italy under an EU quota plan, so far only 1,300 have been moved, according to the European Commission. While outlining his priorities for the EU’s next summit meeting on Oct. 20-21 in Brussels, Renzi told parliament: “It’s necessary that Italy be the promoter of a very tough position toward those countries that have received a lot of money for belonging to the bloc to relaunch their territories, and who are shirking their commitments to relocate immigrants.”

Poland, Hungary and other formerly communist states are firmly opposed to relocation quotas for refugees and say immigration, especially from the Muslim cultures of the Middle East, would disrupt their homogeneous societies. They also object to paying penalties for not taking people in. The financial transfers to less-developed areas of the EU from which they benefit, and which Renzi was referring to in his comments, absorb a large portion of the current €1 trillion EU long-term budget. The proposal for the next EU budget, for the 2021-27 period, is supposed to be completed by the end of next year. “The positive aspects of belonging to the EU must be balanced by the duties that come with membership,” Renzi said.

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Oct 122016
 
 October 12, 2016  Posted by at 9:28 am Finance Tagged with: , , , , , , , , , ,  3 Responses »


NPC “Largest electric locomotive and Congressman John C. Schafer” 1924

October 14 Is A $7 Trillion Moment of Truth in Markets (BBG)
Pound Sterling Behaves Like An Emerging Market Currency (Ind.)
Royal Bank of Scotland’s Vampire Unit Guilty Of Financial Terrorism (Fraser)
China Weakens Yuan Fixing for Sixth Day, Fuels Depreciation Talk (BBG)
China Banks May Need $1.7 Trillion Capital Injection To Cover Bad Loans (R.)
China Cities Face End of Fairy Tale as Default Risks Rise (BBG)
Tokyo Apartment Prices To Fall 20% Or More: Deutsche (BBG)
Are Rising House Prices Good For The Economy? (Ahuri)
Bank of Russia Governor Says Oil Rally Can Mean Much Faster Easing (BBG)
The Truth About the War in Aleppo (David Stockman)
Oops! – A World War! (Dmitry Orlov)
Wounded Elephant (Jim Kunstler)
Neoliberalism Is Creating Loneliness That’s Wrenching Society Apart (Monbiot)
Obituary: Great Barrier Reef – 25 Million BC-2016 – (OO)
More Than 11,200 Migrants Stranded On Aegean Islands (Kath.)

 

 

The return of LIBOR.

October 14 Is A $7 Trillion Moment of Truth in Markets (BBG)

If the London Interbank Borrowing Rate was a musical artist, or an actor, or a sports team, we’d be calling 2016 its comeback year. Not since the financial crisis of 2008 has Libor, to which almost $7 trillion of debt including mortgages, student loans and corporate borrowings, is pegged – experienced such a surge. The three-month U.S. dollar Libor rate has jumped from 0.61% at the start of the year to 0.87% currently – a 42% rise – ahead of money market reform that’s due to come into effect on Oct. 14. The new rules require prime money market funds – an important source of short-term funding for banks and companies – to build up liquidity buffers, install redemption gates, and use ‘floating’ net asset values instead of a fixed $1-per-share price.

While the changes are aimed at reinforcing a $2.7 trillion industry that exacerbated the financial crisis, they are also causing turmoil in money markets as big banks adjust to the new reality of a shrinking pool of available funding. Some $1 trillion worth of assets have shifted from prime money market funds into government money market funds that invest in safer assets such as short-term U.S. debts. The exodus has driven up Libor rates as banks and other corporate entities compete to replace the lost funding. Now, analysts are debating whether the looming Oct. 14 deadline will mark a turning point for the interbank borrowing rate, as money markets acclimatize to a new reality.

While analysts at Deutsche Bank believe that Libor may be poised to tighten when compared to other benchmark interest rates after Oct. 14, their counterparts at TD Securities speculate that Libor will “head higher” and the spreads won’t “compress anytime soon.”

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But Britons just keep fighting and blaming each other.

Pound Sterling Behaves Like An Emerging Market Currency (Ind.)

Is the British pound the Mexican peso? Amid rising fears that the UK will take a big economic hit from its move to leave the European Union, the correlation between the pound and an index of emerging-market currencies has jumped to levels last seen in the run-up to the Brexit vote. “Investors are increasingly casting UK assets in an emerging-market light, amid a fundamental re-appraisal of the country’s medium- to long-term economic fortunes,” Chris Scicluna, London-based strategist at Daiwa Capital Markets, said. On Tuesday, the pound fell for a fourth day, tumbling 0.49% to below $1.23, bringing its year-to-date fall against the dollar to 17% — the worst among 16 major peers.

“The pound is the purest expression of investors’ fears about political risk in developed markets,” Nicholas Spiro at Lauressa Advisory wrote in a note to clients on Monday. “While the Mexican peso — the most liquid emerging market currency and the most reliable gauge of ‘Trump risk’ — has given sterling a run for its money this year, it’s the pound that has become a proxy for politically-driven volatility in markets.” While developed-country government bonds typically benefit from safe-haven buying during bouts of market nerves, the dynamic is now in reverse, with the pound and government bonds falling in tandem, and the UK 10-year note yielding 0.98% compared with 0.52% in mid-August. While global bond markets have sold off this month, amid expectations of tighter monetary policies, UK yields have outpaced rises in the US and euro-area countries.

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This story is fast moving beyond belief. A state owned bank that kills off 1000s of businesses to make a quick buck?!

Royal Bank of Scotland’s Vampire Unit Guilty Of Financial Terrorism (Fraser)

We all know that the Royal Bank of Scotland went rogue under Fred Goodwin. What was less clear – until yesterday anyway – was that, eight years after it was saved from oblivion thanks to Gordon Brown and Alistair Darling’s £850 billion bailout package, the bank appears be no less of a rogue institution today. A data dump of thousands of RBS documents leaked to Buzzfeed News and the BBC has demonstrated that the bank had a policy of pushing small business customer firms to the wall in order to grow its own profits, increase bonuses for staff and rebuild its tattered balance sheet in the wake of its near collapse. There have been many, many credible reports of such activity – essentially killing viable businesses for profit – over the past five years or so but, as the former business secretary Vince Cable told Newsnight last night, “there is now a smoking gun”.

What Kremlinologists of the bank knew before yesterday was that RBS, today 73% owned by UK taxpayers, together with its sister banks NatWest and Ulster Bank, had left a trail of destruction which some have described as a corporate holocaust across the UK’s and Ireland’s small and medium-sized company base, that they had been seeking to save their own skins at their customer firms’ expense, and that tens of thousands of business customers had been affected. For example, I revealed in my book Shredded: Inside RBS The Bank That Broke Britain how RBS was engaged in a form of “financial terrorism” with a view to bolstering its own balance sheet from August 2008 onwards.

In the book, I revealed that, in May 2009, RBS instituted a policy of cherry-picking businesses from across its UK and Irish customer base operating in sectors including care homes, pubs, nurseries, nightclubs, hotels, retail units, industrial units and farms etc. – for referral to its “vampire unit”, global restructuring group. The referrals often followed what I called “manufactured defaults”, which meant the bank engineered a covenant breach or an LTV breach either through a phoney “drive by” valuation of the customer’s property assets delivered by a tame firm of chartered surveyors or in some instances a missold swap.

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“They do want the depreciation; they just don’t want it to happen quickly..”

China Weakens Yuan Fixing for Sixth Day, Fuels Depreciation Talk (BBG)

China’s central bank weakened the yuan’s reference rate for a sixth day, the longest run of cuts in nine months, amid speculation policy makers will allow further declines as the dollar rises. The next possible target is 6.83 against the greenback, with a potential Federal Reserve interest-rate increase supporting the dollar, said Shaun Osborne at Bank of Nova Scotia in Toronto. The People’s Bank of China may need to step up efforts to prevent market fears over any sharp depreciation, according to a Scotiabank report written by Singapore-based foreign-exchange strategist Qi Gao. The PBOC set its daily fixing at 6.7258 against the dollar, extending a six-day weakening run to 0.9%.

The onshore yuan extended declines from a six-year low to drop 0.06% to 6.7228 as of 9:49 a.m. in Shanghai, while the offshore rate climbed 0.07%. The Chinese currency has fallen 6.5% against a 13-currency index this year. “The yuan’s depreciation against the dollar and versus a trade-weighted basket are both intentional policy choice,” said Cliff Tan, a currency strategist in Hong Kong at Bank of Tokyo-Mitsubishi UFJ. “They do want the depreciation; they just don’t want it to happen quickly. Our forecast is still 6.80 at the end of this year, and it looks like the currency is headed there.”

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“S&P expects Beijing will continue to allow rapid credit growth over the next 12-18 months before attempting to rein it in…”

China Banks May Need $1.7 Trillion Capital Injection To Cover Bad Loans (R.)

Rising debt levels will worsen the credit profiles of China’s top 200 companies this year, requiring the country’s banks to raise as much as $1.7 trillion in capital to cover a likely surge in bad loans, S&P Global said in reports on Tuesday. The study sees little scope for improvement in 2017 amid worsening leverage and excess capacity in almost all sectors. Debt has emerged as one of China’s biggest challenges, with the country’s debt load rising to 250% of GDP. Excessive credit growth is signaling an increasing risk of a banking crisis in the next three years, the Bank of International Settlements (BIS) warned recently. 70% of the companies in the S&P survey were state owned, and they accounted for $2.8 trillion or 90% of the total respondents’ debt.

S&P estimated the problem credit ratio at Chinese banks was already at 5.6% at end-2015. In a downside scenario of unabated credit growth, that could worsen to 11-17%. In such a situation, banks would need as much as $1.7 trillion in recapitalization by 2020, S&P estimated. Even under a base case scenario, they would require $500 billion. That compares with China’s last big bank debt cleanup some two decades ago, when an estimated 4 trillion yuan ($600 billion) was spent on restructuring as of late 2005, according to a report for French economics thinktank CEPII. S&P expects Beijing will continue to allow rapid credit growth over the next 12-18 months before attempting to rein it in, implying risks would heighten in one to two years.

The IMF has warned China its credit growth is unsustainable, with companies sitting on $18 trillion in debt, equivalent to about 169% of GDP. Chinese banks’ non-performing loans are already at nearly 2%, the highest since the global financial crisis in 2009, according to the China Banking Regulatory Commission (CBRC). But some analysts believe the ratio could be as high as between 15 and 35%, as many banks are slow to recognize problem loans or park them off balance sheet, and as lenders come under political pressure from local governments to roll over bad loans to prevent job losses and defaults.

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LGFVs are the domain of shadow banks.

China Cities Face End of Fairy Tale as Default Risks Rise (BBG)

Finance firms that help keep cash flowing to China’s towns, cities and provinces face rising risks of landmark bond defaults just as they turn to global markets for funds. China’s economic slowdown is weighing on revenue at regional governments, hampering their ability to support the 5.3 trillion yuan ($789 billion) of outstanding onshore notes from local-government financing vehicles, which have yet to suffer nonpayments. Such issuance fell 18% last quarter as regulators curbed sales, forcing some to seek funds overseas. Financing units in provinces including Hunan, Jiangsu, Hubei and Sichuan are considering or planning U.S. currency notes, people familiar with the matters have said.

Warning signs are spreading. In the nation’s northeast, Changchun Urban Development & Investment Holdings Group was downgraded by Fitch Ratings last month. In the once-booming coal town of Ordos in Inner Mongolia, Yijinhuoluoqi Hongtai City Construction Investment & Development Co. had 189.5 million yuan of borrowings overdue as of March 31, according to Pengyuan Credit Rating, which downgraded it to A+ from AA- in May. “I don’t believe in the fairy tale that no LGFV will default,” said Terence Cheng, chief investment officer in at HuaAn Asset Management in Hong Kong. “Even China’s state-owned enterprises have been allowed to default. There is no absolute guarantee that an LGFV will not default.”

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Japan’s a big risk for bursting bubbles.

Tokyo Apartment Prices To Fall 20% Or More: Deutsche (BBG)

The Bank of Japan’s shift to controlling bond yields is driving up mortgage rates, prompting Deutsche Bank to predict Tokyo apartment prices may fall 20% or more by 2018. The BOJ’s negative-rate policy was already hurting buyer sentiment, and its move to boost longer-term yields is a double-blow to the industry, according to Yoji Otani, a real estate analyst at Deutsche Bank in Tokyo. The 35-year fixed mortgage rate has climbed for two straight months after touching a record low of 0.9% in August, and sales of new condominiums in Tokyo this year have fallen to the lowest since the nation’s property bubble collapse in the early 1990s.

“The one positive thing about negative rates was that it lowered borrowing costs, and now that is going to end,” said Otani, who expects prices to fall 20% to 30% by the end of 2018. “The collapse of this silent bubble has begun.” Banks have already started raising fixed-mortgage interest rates and some lenders may be charging customers 2% or more within two years under the BOJ’s current yield policy, according to Credit Suisse. The adoption of the new monetary policy is in effect a form of tapering and the cost of home loans will rise as the central bank becomes less aggressive in its bond purchase program, according Masahiro Mochizuki, a real estate analyst at the Swiss bank.

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Interesting findings on how Australia is the nation full of ATMs. Perverse consequences (“why Australian multi-factor productivity stopped growing at the turn of the millennium.”). h/t Yves

Are Rising House Prices Good For The Economy? (Ahuri)

Overall, the results indicate that a $1,000 increase in housing wealth is associated with an increase in debt of approximately $240 per annum. This is a large response compared to the magnitudes found in studies in the United States and United Kingdom… House price increases are associated with larger increases in total indebtedness for home owners with higher initial loan-to-value (LTV) ratios. Home owners with larger values of non-mortgage debt as well as higher LTV ratios are more sensitive to house price movements compared to other home owners… The take-up of further mortgage debt among vulnerable highly leveraged households exposes them to income, housing and financial market shocks.

The results are in contrast to the general belief in Australia that debt is held by those most able to service it—higher income and high-wealth households. Macroeconomic policy-makers should interpret high levels of debt and rising household debt-to-income ratios in Australia carefully. Overall, the findings show that house price changes influence household debt through two channels: a direct wealth effect and an indirect collateral effect via the household’s borrowing capacity. That is, some households face borrowing constraints and, for these households, rising house prices increase the value of their property that may be used as security for a loan and thereby loosen the borrowing constraints… Our results indicate that in response to increasing house prices, some home owners, especially home owners with low debt, engage in debt financing of consumption (involving extracting equity from their home).

Other home owners, especially those with relatively high debt levels refinance existing mortgages or adjust existing debt portfolios. The most important responses are in labour participation and hours of work by women, both partnered and single. The effect is strongest among the older cohort of women and is associated with early retirement for those experiencing above average housing wealth gains. Younger partnered men and women exhibit a reduction in hours of work in response to the gain in housing wealth. That is, these gains in wealth effectively fund time away from work to undertake non-market activities such as providing household care for children, ageing parents, undertaking volunteer work or enjoying more leisure.

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Putin and his people are talking up the price of oil. So far, it works to an extent.

Bank of Russia Governor Says Oil Rally Can Mean Much Faster Easing (BBG)

Russian central bank Governor Elvira Nabiullina is growing confident that her country’s biggest vulnerability can turn into an asset. The Bank of Russia, which last month issued an unprecedented commitment to leave borrowing costs unchanged the rest of the year, will face an easier path to interest-rate cuts if oil prices rise further, Nabiullina said in a Bloomberg Television interview in Moscow on Tuesday. While Brent crude has almost doubled from a 12-year low in January, the central bank’s “moderately tight” stance allowed for only two reductions in 2016 before policy makers all but shut the door on more monetary easing this year.

“If there is a higher oil price, then it can lead to a stronger ruble, and – through the foreign-exchange channel – that in turn can cause a more rapid decline in inflation expectations, slowing inflation,” Nabiullina said. “Then we can ease monetary policy much faster.” The outlook marks a rare signal by the central bank that it’s open to deeper monetary easing as its chase of an inflation goal enters the final stretch. Policy makers are targeting price growth of 4% by end-2017 and see it reaching 5.5% to 6% in 2016 after overshooting their forecasts for a fourth consecutive year in 2015. Oil traded near a 15-month high after rising 3.1% Monday, when Putin said at a conference in Istanbul that his country is willing to join efforts by OPEC to stabilize the market through a production freeze or cut.

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The War Party. Read. Time to venture outside the narrative machine.

The Truth About the War in Aleppo (David Stockman)

This is starting to sound pretty ominous. The Washington War Party is coming unhinged and appears to be leaving no stone unturned when it comes to provoking Putin’s Russia and numerous others. The recent collapse of cooperation in Syria – based on the false claim that Assad and his Russian allies are waging genocide in Aleppo – is only the latest example. So now comes the U.S. Army’s chief of staff, General Mark Milley, doing his best imitation of Curtis LeMay in a recent speech dripping with bellicosity. While America has no industrial state enemy left on the planet that can even remotely challenge its economic might, technological superiority and overwhelming military power, General Milley unloaded a fusillade of bluster at the Association of the United States Army’s annual meeting in Washington DC:

“The strategic resolve of our nation, the United States, is being challenged and our alliances tested in ways that we haven’t faced in many, many decades,” Army Chief of Staff Gen. Mark Milley told the audience. “I want to be clear to those who wish to do us harm … the United States military – despite all of our challenges, despite our [operational] tempo, despite everything we have been doing – we will stop you and we will beat you harder than you have ever been beaten before. Make no mistake about that.” That is rank nonsense. We are not being “tested” by anyone. To the contrary, Imperial Washington is provoking tensions and confrontations everywhere – from the South China Sea to Syria, Iraq, Yemen, Libya, the Black Sea, the Baltics and Ukraine – that have no bearing whatsoever on the safety and security of the citizens of Spokane WA, Topeka KS and Springfield MA.

Indeed, the clear and present danger to peace and freedom in the homeland lies not in the machinations of foreign capitals, but in the arrogant and bombastic groupthink that has overtaken the denizens of the Imperial City. The latter is again on display in the full-throated fulminations about the siege of Aleppo being emitted by the Washington War Party and its trained poodles in the establishment media – most especially the New York Times. We are told that the Russian Air Force and Assad’s military are targeting schools, hospitals and the 200,000 or so civilians of Eastern Aleppo for indiscriminate bombing and slaughter.

It’s shades of Benghazi 2011 all over again – an incipient genocide that Washington must stop in the name of R2P (Responsibility to Protect). No it’s not! What is happening in Aleppo is a raging sectarian civil war and a proxy battleground for the regional political maneuvers of Turkey, Saudi Arabia and Iran. They are none of America’s business and haven’t been since the so-called Arab spring uprising spread to Syria in 2011. Indeed, Syria is a lawless, bombed-out, economically decimated failed state today owing to Washington’s heavy-handed intervention at the behest of the War Party’s bloody twin sisters. That is, the neocons and the R2P liberal interventionist claque around Hillary Clinton, including UN Ambassador Samantha Powers and National Security Council head Susan Rice.

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Does Dmitry rely too much on Russian rationalism as the main factor?

Oops! – A World War! (Dmitry Orlov)

Over the past week or so I’ve been receiving a steady stream of emails demanding to know whether an all-out nuclear war is about to erupt between the US and Russia. I’ve been watching the situation develop more or less carefully, and have been offering my opinion, briefly, one on one, to a few people’s great relief, and now I will attempt to spread the cheer far and wide. In short, on the one hand, all-out nuclear annihilation remains quite unlikely, barring an accident. But, on the other hand, such an accident is by no means impossible, because when it comes to US foreign policy “Oops!” seems to be the operative term.

One reason to be cheerful is that any plan to attack Russia is bound to become mired in bureaucracy. Battle plans are developed by mid-rank people within the US military establishment, approved and forwarded up the chain of command by higher-rank people and finally signed off on by the Pentagon’s top brass and their civilian political accomplices. The top brass and the politicians may be delusional, megalomaniacal and inadvertently suicidal, but the mid-rank people who develop the battle plans are rarely suicidal. If a particular plan has no conceivable chance of victory but is quite likely to lead to them and their families and friends becoming vaporized in a nuclear blast, they are unlikely to recommend it.

Another reason to be cheerful is that Russia has carefully limited the Pentagon’s options. One plan that, in the popular imagination, could lead to an all-out war with Russia, would be the imposition of a no-fly zone over Syria. What many people miss is that it is not possible to impose a no-fly zone on a country with a sufficiently powerful air defense system, such as Syria. As a first step, the air defense system would have to be taken out, and the air campaign to do so would be very expensive and incur massive losses in both equipment and personnel. But then the Russians made this step significantly worse by introducing their S-300 system. This is an autonomous, tracked, mobile system that can blow objects out of the sky over much of Syria and some of Turkey. It is very difficult to keep track of, because it can use “shoot and scoot” tactics, launching an attack and crawling away in a random direction over rough terrain.

Last on my list of reasons why war with Russia remains unlikely is that there isn’t much of a reason to start one, assuming the US behaves rationally. Currently, the biggest reason to start a war is that the Syrian army is winning the conflict in Aleppo. Once Aleppo is back in government hands and the US-supported jihadis are on the run, the Syrian civil war will largely be over, and the rebuilding will begin.

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“..who will emerge from the rubble? I suspect it will be someone we haven’t heard of before, just as Bonaparte was unheard of in France in 1792..”

Wounded Elephant (Jim Kunstler)

It is getting to be too late to sort out all the confusion sown by this horrific campaign. From here on its really more a matter of the dust settling. In background of it all looms the train-wreck of global finance, which will be the true determinant of what the American people will have to do in the years ahead. During the weeks of the election distraction, the European banks struggle to conceal their insolvency while the politicians of Euro-land desperately try to paper over the cracks in these fracturing institutions. Few can tell what is actually happening in China’s banking system, but it’s sending out ominous tremors that are hard to ignore.

But be sure it is all daisy-chained right into Wall Street and the US banks. The potential for wrecking markets and currencies around the world is extreme at this moment. It may only be a matter of whether it happens before or after the election. Then we’ll see what happens when financial institutions can’t trust each other. Trade stops. Economies crumble. Pretenses evaporate. If it gets bad enough, the shelves of the supermarkets go bare in three days and you’re living in a permanent hurricane disaster without the wind and rain. Believe me, that will be bad enough. Hillary, if elected, will not get to play FDR-2. Rather, she’ll be stuck in the role of Hoover, the Return, presiding over a freight elevator of an economy with a broken cable.

Expect problems with the US dollar. Expect “emergency” actions. Expect the unintended consequences of those actions. If there is one outstanding upshot of these “debates” it must be their staggering failure to reassure the American public that they can expect effective leadership through the hardships ahead. There must be many others out there like myself wondering who will emerge from the rubble? I suspect it will be someone we haven’t heard of before, just as Bonaparte was unheard of in France in 1792. This is not entirely a nation of clowns, though it feels like that lately.

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Uh, no, George; that’s quite a big miss. The process of loneliness emerging as a result of breaking social ties goes back way further than neoliberalism. Try the nuclear family. Try how we design our homes and cities.

Neoliberalism Is Creating Loneliness That’s Wrenching Society Apart (Monbiot)

What greater indictment of a system could there be than an epidemic of mental illness? Yet plagues of anxiety, stress, depression, social phobia, eating disorders, self-harm and loneliness now strike people down all over the world. The latest, catastrophic figures for children’s mental health in England reflect a global crisis. There are plenty of secondary reasons for this distress, but it seems to me that the underlying cause is everywhere the same: human beings, the ultrasocial mammals, whose brains are wired to respond to other people, are being peeled apart. Economic and technological change play a major role, but so does ideology. Though our wellbeing is inextricably linked to the lives of others, everywhere we are told that we will prosper through competitive self-interest and extreme individualism.

In Britain, men who have spent their entire lives in quadrangles – at school, at college, at the bar, in parliament – instruct us to stand on our own two feet. The education system becomes more brutally competitive by the year. Employment is a fight to the near-death with a multitude of other desperate people chasing ever fewer jobs. The modern overseers of the poor ascribe individual blame to economic circumstance. Endless competitions on television feed impossible aspirations as real opportunities contract. Consumerism fills the social void. But far from curing the disease of isolation, it intensifies social comparison to the point at which, having consumed all else, we start to prey upon ourselves.

Social media brings us together and drives us apart, allowing us precisely to quantify our social standing, and to see that other people have more friends and followers than we do. As Rhiannon Lucy Cosslett has brilliantly documented, girls and young women routinely alter the photos they post to make themselves look smoother and slimmer. Some phones, using their “beauty” settings, do it for you without asking; now you can become your own thinspiration. Welcome to the post-Hobbesian dystopia: a war of everyone against themselves. Is it any wonder, in these lonely inner worlds, in which touching has been replaced by retouching, that young women are drowning in mental distress?

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One in a long line of obituaries, but a significant one. Many thousands of spcies will die with the reef.

Obituary: Great Barrier Reef : 25 Million BC-2016 (OO)

The Great Barrier Reef of Australia passed away in 2016 after a long illness. It was 25 million years old. For most of its life, the reef was the world’s largest living structure, and the only one visible from space. It was 1,400 miles long, with 2,900 individual reefs and 1,050 islands. In total area, it was larger than the United Kingdom, and it contained more biodiversity than all of Europe combined. It harbored 1,625 species of fish, 3,000 species of mollusk, 450 species of coral, 220 species of birds, and 30 species of whales and dolphins. Among its many other achievements, the reef was home to one of the world’s largest populations of dugong and the largest breeding ground of green turtles.

The reef was born on the eastern coast of the continent of Australia during the Miocene epoch. Its first 24.99 million years were seemingly happy ones, marked by overall growth. It was formed by corals, which are tiny anemone-like animals that secrete shell to form colonies of millions of individuals. Its complex, sheltered structure came to comprise the most important habit in the ocean. As sea levels rose and fell through the ages, the reef built itself into a vast labyrinth of shallow-water reefs and atolls extending 140 miles off the Australian coast and ending in an outer wall that plunged half a mile into the abyss. With such extraordinary diversity of life and landscape, it provided some of the most thrilling marine adventures on earth to humans who visited. Its otherworldly colors and patterns will be sorely missed.

[..] The Great Barrier Reef was predeceased by the South Pacific’s Coral Triangle, the Florida Reef off the Florida Keys, and most other coral reefs on earth. It is survived by the remnants of the Belize Barrier Reef and some deepwater corals.

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And winter is coming, also in Greece.

More Than 11,200 Migrants Stranded On Aegean Islands (Kath.)

Authorities say 162 migrants and refugees have arrived on Greece’s Aegean islands in the past 24 hours, raising the total number to 11,215. Authorities say 38 arrivals were reported on Samos, 38 on Chios and 22 on Lesvos. The number of individuals sheltered on Samos has increased by about 40% over the past 10 days, officials say. On Tuesday, State Minister Alekos Flabouraris chaired a meeting on immigration strategy where it was decided that migrants will be gradually moved out of an overcrowded facility on the island, while there are plans to build a second facility to detain migrants who commit violations.

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Sep 222016
 
 September 22, 2016  Posted by at 8:24 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle September 22 2016


Harris&Ewing Harding inauguration 1921

The Global Economic Outlook: Dark Clouds Ahead (Guardian Ed.)
UN Fears Third Leg Of Global Financial Crisis – With Epic Debt Defaults (AEP)
Major Trend Forecast For The Rest Of 2016 (Celente)
Report Highlights Rising US Poverty (D&C)
In Places With Fraying Social Fabric, a Political Backlash Rises (WSJ)
Greek Bakers Unite To Give Away Bread To Those Too Poor To Afford It (KTG)
Young Britons Live In ‘Suspended Adulthood’ (G.)
It’s Not Just Consumers That Are Living Paycheck To Paycheck (BBG)
Divided Fed Holds Fire, Signals 2016 Rate Increase Still Likely (BBG)
Bank of Japan’s Inflation Overshoot Deepens Policy Innovation (BBG)
Real Estate Gets Its Seat At The S&P 500 Table (Forbes)
With Mortgage Rates So Low, Why Are So Many People Still Renting? (Time)
House-Flippers Are Back, With Anonymous Funding (BBG)
China Chalks Up $667-Billion Debt Pile Over Toll Roads (R.)
Wells Fargo Too Arrogant To Own Up To Its Fraudulent Ways (WaPo)
27 US Senators Rebel Against Arming Saudi Arabia (I’Cept)
A First Step for Syria? Stop the Killing (Jimmy Carter)
Apologizing to My Daughter for the Last 15 Years of War (Van Buren)

 

 

Actually not all that bad from the Guardian Ed. staff. Though they predictably conclude with plain silliness: In the long run, this failed globalisation needs to be turned into something more sustainable and more inclusive, built on higher wages, robust tax systems and strong public safety nets.

The Global Economic Outlook: Dark Clouds Ahead (Guardian Ed.)

Eight years ago this month, a bank collapsed, Wall Street went into meltdown and the world economy plunged into crisis. Trillions were lost in output ($22tn in the US, within just five years), millions of workers were made redundant (8.8 million in America’s great recession, 1.2 million in the UK) and thousands of promises were made by politicians and policymakers – everyone from Barack Obama and Gordon Brown to David Cameron and Christine Lagarde – that things would change. Yet, nearly a decade later, what is most striking is how little has changed. In the US, the UK and the rest of the developed world, policymakers talk of the “new mediocre”, so tepid is economic performance. And in the developing world things look even worse.

Such is the message from two of the world’s leading economic thinktanks, the OECD and the UN Conference on Trade and Development (Unctad). Both their reports on Wednesday were thick with cloud and short on silver lining. Yes, the OECD believes that Brexit Britain will have a slightly easier time this year – but that will be followed by a far choppier 2017. And the Unctad report is even more troubling. The biggest single warning it makes is that the world is on the verge of “entering a third phase of the financial crisis”. What began in the US subprime housing market before roiling Europe’s governments is likely to rear its head again – this time in Latin America, Africa and other poor countries. What will do for them, believe the Unctad researchers, is what also did for America and Europe: debt.

Much of the cheap money created by the Fed, the BOE and the ECB has been pushed by financial speculators into the higher-yielding markets of South Africa, Brazil and India, among others. Economists at the Bank for International Settlements, the central banks’ central bank, reckon that $9.8tn was pumped out in foreign bank loans and bonds in the first half-decade after the Lehman Brothers collapse. Unctad calculates that around $7tn of that was pushed through to emerging markets. By any standards, that is a flood of credit – one that was encouraged by panicky policymakers.

Wasn’t it the turn of China and the rest to pick up the slack in the global economy? Except now developing countries are lumbered with a gigantic private debt mountain to pay down. The private, non-financial sector across the developing world has debt service obligations worth nearly 150% of its income. The comparable figure for the developed world, by contrast, is just above 80%. And now developing countries are hobbling along rather than sprinting ahead, while commodity prices have tanked. To make matters worse, companies will typically have borrowed in US dollars and invested in their local currencies – but the strength of the dollar will make those loans all the harder to repay.

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“What is clear is that world will soon need a massive and coordinated spending push by governments to create demand and bring the broken global system back into equilibrium. UNCTAD is entirely right about that. If this does not happen, it is sauve qui peut.”

UN Fears Third Leg Of Global Financial Crisis – With Epic Debt Defaults (AEP)

The third leg of the world’s intractable depression is yet to come. If trade economists at the United Nations are right, the next traumatic episode may entail the greatest debt jubilee in history. It may also prove to be the definitive crisis of globalized capitalism, the demise of the liberal free-market orthodoxies promoted for almost forty years by the Bretton Woods institutions, the OECD, and the Davos fraternity. “Alarm bells have been ringing over the explosion of corporate debt levels in emerging economies, which now exceed $25 trillion. Damaging deflationary spirals cannot be ruled out,” said the annual report of the UN Conference on Trade and Development (UNCTAD). We know already that the poisonous side-effect of zero rates and quantitative easing in the US, Europe, and Japan was to flood developing nations with cheap credit, upsetting their internal chemistry and drawing them into a snare.

What is less understood is just how destructive this has been. Much of the money was wasted, skewed towards “highly cyclical and rent-based sectors of limited strategic importance for catching up,” it said. Worse yet, these countries have imported the deformities of western finance before they are ready to cope with the consequences. This has undermined what UNCTAD calls the “profit-investment nexus” that ultimately drives growth and prosperity. The extraordinary result is that some countries are slipping backwards, victims of “premature deindustrialisation”. Many of them have fallen further behind the rich world than they were in 1980 despite opening up their economies and following the global policy script diligently.

The middle income trap closed in on Latin America and the non-oil states of the Middle East a long time ago, but now it is beginning to close in such countries as Malaysia and Thailand, and in some respects China. “The benefits of a rushed integration into international financial markets post-2008 are fast evaporating,” it said. Yet the suffocating liabilities built up over the QE years remain. UNCTAD says corporate debt in emerging markets has risen from 57pc to 104pc of GDP since the end of 2008, and much of this may have to written off unless there is a world policy revolution. “If the global economy were to slow down more sharply, a significant share of developing-country debt incurred since 2008 could become unpayable and exert considerable pressure on the financial system,” it said.

“There remains a risk of deflationary spirals in which capital flight, currency devaluations and collapsing asset prices would stymie growth and shrink government revenues. As capital begins to flow out, there is now a real danger of entering a third phase of the financial crisis which began in the US housing market in late 2007 before spreading to the European bond market,” it said. These are deeply-disturbing assertions. The combined US subprime and ‘Alt-A’ property exposure before the Lehman crisis was just $2 trillion, and Greece’s debts were trivial. What UNCTAD is talking about is an order of magnitude larger.

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Haven’t featured Celente in ages…

Major Trend Forecast For The Rest Of 2016 (Celente)

Central bank policies rule the financial world. Their never-in-the-history-of-the-world negative and historically low interest rate policies, plus massive government and corporate bond buying schemes have enriched equity markets but not the general economy… “In fact, what we have been forecasting and reporting since 2010, the Bank for International Settlements confirmed this week with its warning that central bank behavior, not economic fundamentals, hold sway over markets. Claudio Borio, head of the monetary and economic department of the BIS questioned whether “market prices fully reflect the risk ahead,” and “doubts about valuations seem to have taken hold in recent days.” Indeed true price discovery is dead.

Despite massive Federal Reserve intervention in the US that has driven the Dow and NASDAQ to new highs, S&P 500 companies reported five straight quarters of year-over-year declines. Also on the market fundamental front, with retail sales down 0.3% in August, there was no back-to-school-splurge. The service sector, the main economic driver of the United States economy, fell to its lowest level since 2010. Despite “experts” forecasting US GDP to rise 3% in 2016, it’s slogged along at an annualized 1% for the first two quarters. Just yesterday it was reported that housing starts in the US came in at an annualized rate of 1.14 million in August, well below the expected 1.19 million while construction permits fell 0.4% to a 1.14 million-unit rate last month.

And while President Obama chastised “Anyone claiming that America’s economy is in decline is peddling fiction,” US economic growth since the recession ended is tracking at its weakest pace of any expansion since 1949. As the BIS report concludes, “A more balanced policy mix is essential to bring the global economy into a more robust, balanced and sustainable expansion.” Yet, today, all equity eyes are concentrated more on central bank maneuvers than market fundamentals. In Japan, with new data showing exports falling 9.6% and imports down 17.3% in August, the focus is on what new schemes the Bank of Japan will invent to boost the economy despite its long proven track record of failure.

Similarly, later today in the US, the markets await news of if, and when, the Fed will raise interest rates. Yet, as the data proves since the Panic of ’08, central banks’ “policy mix” has failed …and we forecast despite pending measures, they will continue to fail to generate true economic growth. Thus we forecast continued equity market volatility with increasing prospects for a market meltdown.

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There should have been much more of this. People would have understood the world they live in so much better. The lack of this sort of analysis gives birth to Brexit and the Donald.

Report Highlights Rising US Poverty (D&C)

Among the troubling statistics in a new report released Tuesday was the rising concentration of poverty in city neighborhoods, and expanding number of census tracts where the poverty rate stood at 40% or higher. The count of high-poverty census tracts has nearly doubled in the city, from 19 to 37 since 2000. Fully one-third of Rochester residents live in poverty, and nearly another third require some outside assistance to get by, according to estimates in the ACT Rochester and Rochester Area Community Foundation update to its 2013 report on the state of poverty and self-sufficiency across the Greater Rochester region. The numbers are a near mirror-image of the suburbs, where more than two-thirds of residents are self-sufficient. And while the poverty rate in the nine-county Greater Rochester region continues to creep upward, it remains below state and national averages, the report shows.

“We don’t really have a poverty problem,” said Edward Doherty, a Strategic Community Intervention associate who served as project manager and editor of the report, and is active in local efforts to combat poverty. “We have a concentration of poverty problem.” Rochester has the third-highest concentration of poverty in the nation. And a significant segment of that population is female-headed families with children younger than 18. Though accounting for 17% of the population, the report found, the city has 36% of such households, and that population has a staggering poverty rate of 59.9%. Doing the math, the report estimates these families account for nearly half of all people living in poverty in the city, and these children account for more than 80% of all poor children in the city.

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This is changing the world, all over the world. Poverty and loss hidden from us by media and political propaganda.

In Places With Fraying Social Fabric, a Political Backlash Rises (WSJ)

Reading, Pa.— The buckling of social institutions fundamental to American civic life is deepening a sense of pessimism and disorientation, while adding fuel to this year’s rise of political populists like Donald Trump and Bernie Sanders. Here and across the U.S., key measures of civic engagement ranging from church attendance to civic-group membership to bowling-league participation to union activity are slipping. Unlocked doors have given way to anxiety about strangers. In Reading, tension between longtime white residents and Hispanic newcomers has added to the unease. For Mr. Martin, social and economic setbacks led him to support Mr. Sanders, who he figured would stick it to the big businesses Mr. Martin feels have sold out working people.

Other people here find resonance in Mr. Trump’s message that the U.S. has skidded so far off course that it needs to lock out immigrants and block imports to recover an era of greatness. “When you lose the family unit and you lose the church community, you are losing a whole lot,” says Bonnie Stock, a retired teacher in Reading and Trump supporter, who says the church where she was baptized is dying from lack of young members. “People are looking at Trump because most of us see this [country] isn’t working,” she says. Ms. Stock figures Mr. Trump’s business experience would help him better attack societal problems like drug addiction.

Across the U.S., the Republican presidential nominee has his firmest support among the white working class. In the Republican primaries, he carried all but nine of the country’s 156 counties where at least 85% of the adult population was whites without four-year college degrees. Mr. Trump won 64% of the vote in Berks and Schuylkill counties, where noncollege whites were 66% of the adult population as of 2014. In Berks County, once famous for the Reading Railroad stop on the Monopoly board game, social ills have been exacerbated by a 30% decline in manufacturing jobs and 6% fall in inflation-adjusted median income since 1995.

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In case you’re wondering why the Automatic Earth tries so hard to help the poorest Greeks. These are the very people your generous donations assist. The problem is their numbers are rising fast.

But we’re not going to give up. I’m breaking my head over the next steps in the process. We need to do something big for Christmas. Meanwhile, please keep donating through our Paypal widget, top left corner of the site, in amounts that end in $0.99 or $0.37.

Greek Bakers Unite To Give Away Bread To Those Too Poor To Afford It (KTG)

Did you know that there are people in Greece who cannot afford to buy even a loaf of bread at a cost of €0.60 – €0.70? Almost a year after Greece surrendered into the arms of the international lenders and the IMF and the austerity cuts started to affect people’s lives, a bakery in our neighborhood was offering a bread at a special price for pensioners and unemployed. The special price was just half a euro. At one point, I remember that more and more people were going to this bakery and asking for bread from the previous day for a couple of cents or even free of charge. Two days ago, the grim Greek reality hit me again. I was at the bakery sometime at noon. All different kinds of bread loafs were waiting for customers, nicely set in order, one by one, next to each other.

Yet, somewhere, in a corner at one of the lower shelves there was a group of breads: several loaves, long and round, white and wholewheat, a couple of baguettes. “What are these?” I asked the baker and he answered “This is bread from yesterday, for the poor. We give it free of charge.” He told me further, that he had 6-7 returning customers who come every second day for the bread from yesterday. Mostly elderly, pensioners. And “maybe 2-3 people per day,” people he does not know who just step in and ask for “old bread for free.” The problem of poverty is not widespread only in Athens, where the cost of living is much higher than in the countryside. Today, I read about the action of the Bakers’ Association in Kozani, in Northern Greece. Customers can buy extra bread for those in need, while the bakers will keep records of the “Bread on the waiting” – as they call their action – and give it to those who cannot afford it.

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As I’ve written before: and still everyone says they love their kids.

Young Britons Live In ‘Suspended Adulthood’ (G.)

Despair, worries about the future and financial pressures are taking a toll on millions of young Britons, according to a poll which found young women in particular were suffering. Low pay and lack of work in today’s Britain are resulting in “suspended adulthood”, with many living or moving back in with their parents and putting off having children, according to the poll of thousands of 18 to 30-year-olds. Large numbers describe themselves as worn down (42%), lacking self-confidence (47%) and feeling worried about the future (51%).

The Young Women’s Trust, the charity that commissioned the polling by Populus Data Solutions, warned that Britain was facing a “generation of young people in crisis” as it called on the government to take steps including creating a minister with responsibility for overall youth policy. Young women are being particularly affected. The percentage of women reporting that they lacked self-confidence was 54%, compared with 39% of young men. While four in 10 young people said they felt worn down, the percentage for young women was 46% compared with 38% of men. One in three said they were worried about their mental health, including 38% of young women and 29% of young men.

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US small business dances on the edge. They account for 50% of GDP and more than 50% of new job creation.

It’s Not Just Consumers That Are Living Paycheck To Paycheck (BBG)

As Federal Reserve officials gather to issue their monthly assessment of the world’s largest economy, a new study lays bare the extent to which many small firms are pressed for cash. “Most small businesses are operating on very small margins,” Diana Farrell, CEO of the JPMorgan Chase Institute, an in-house think tank that uses data from the bank to analyze the economy. “The small business sector is less full of future Googles and Ubers and tons and tons of very small operators living month to month,” she said in a phone interview. The companies in question may be small, but they represent an outsized share of the U.S. economy.

According to the Small Business and Entrepreneurship Council, they account for roughly 50% of GDP and more than 50% of new job creation — a metric that’s closely watched by the Fed in determining whether the economy can withstand a constriction in financing conditions. Yet even though they’re contributing a great deal to the economy there remains ignorance about their financial health, Farrell added. On average, the companies surveyed have just 27 days worth of cash reserves — or money to cover expenses if inflows suddenly stopped — according to the JPMorgan study, which analyzed 470 million transactions by 570,000 small business last year. Restaurants typically hold the smallest cash buffers, with just 16 days of reserves, while the real-estate sector boasts the biggest, at 47 days.

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These people get far too much attention. That makes them feel much too important. We should ignore them. After taking their undemocratic powers away.

Divided Fed Holds Fire, Signals 2016 Rate Increase Still Likely (BBG)

A divided Federal Reserve left its policy interest rate unchanged to await more evidence of progress toward its goals, while projecting that an increase is still likely by year-end. “Near-term risks to the economic outlook appear roughly balanced,” the Federal Open Market Committee said in its statement Wednesday after a two-day meeting in Washington. “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” The sixth straight hold extends U.S. central bankers’ run of getting cold feet amid risks from abroad and inconsistent signs of economic strength.

Now the focus will shift to December as the Fed’s likely last chance to raise interest rates in 2016 – a move that depends on how the economy, inflation and markets fare in the months surrounding a contentious presidential election. “The statement is much more hawkish than I thought it would be,” said Stephen Stanley at Amherst Pierpont Securities in New York, who said he expects a rate increase in December. “That just tells you they are revving up the engines.” Three officials, the most since December 2014, dissented in favor of a quarter-point hike. Esther George, president of the Kansas City Fed, voted against the decision for a second straight meeting. She was joined by Cleveland Fed President Loretta Mester – in her first dissent – and Eric Rosengren, head of the Boston Fed, whose previous dissents called for easier policy.

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Uh, no: The need for yet another overhaul of the BOJ’s policy framework [..] speaks to the deep-seated challenges facing policy makers. Actually, it speaks to the utter failure of all ‘policies’ up till now.

Bank of Japan’s Inflation Overshoot Deepens Policy Innovation (BBG)

The first major central bank to adopt quantitative easing in the modern era has innovated again. BOJ Governor Haruhiko Kuroda and his colleagues adopted a pledge of “overshooting” their 2% inflation target, an idea floated by central bankers including Federal Reserve Bank of Chicago President Charles Evans, but not formally adopted up to now. They also unveiled a strategy of targeting short- and longer-term rates to provide the economy with cheap borrowing costs. Since taking the helm in 2013, Kuroda had previously pursued a QE-on-steroids policy to shock Japan out of deflation. Yet after three and a half years, he was running into increasing concerns about the sustainability of the purchases of government bonds, which have run at about 15% of gross domestic product annually.

The adoption of a negative interest rate on some bank reserves resulted in an outcry from banks, and – for a time – an alarming plunge in yields even on longer-dated securities. The Federal Reserve had a cap on long-term yields back in the 1940s, as part of the U.S. government’s efforts to keep down wartime and postwar debt financing. But a strategy of targeting the yield curve as a reflation initiative is new to the major central banks of today. “The BOJ had to do something revolutionary out of necessity – they are concerned about sustainability,” said Yuji Shimanaka at Mitsubishi UFJ Morgan Stanley Securities. The need for yet another overhaul of the BOJ’s policy framework – this is the third iteration under Kuroda alone – speaks to the deep-seated challenges facing policy makers. Japan’s consumer prices slumped 0.5% in July from a year before, far from the 2% gains targeted “at the earliest possible time.”

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There are still scores of greater fools out there… This time lured by low rates.

Real Estate Gets Its Seat At The S&P 500 Table (Forbes)

In case you haven’t noticed, the S&P 500 Index is looking a little different these days. Once a sub-industry of the financial sector, real estate now has its own zip code in the universe of blue chip stocks. It’s the first time since 1999 that such a change has been made to the S&P’s composition. The new sector has a weighting of nearly 3%, all of it taken out of financials. Real estate’s promotion should attract more institutional and individual investors to the space. It tells them this is no longer a niche market but one with a distinct and significant presence, with its own unique business drivers.

This has been a long time coming, to be perfectly honest. Ever since the housing and financial crisis, real estate investment trusts (REITs) have been pulling in some serious cash as more become available for trading on the New York Stock Exchange and elsewhere. Altogether, REITs currently have a market cap of over $1 trillion, according to REIT.com. With investors on the hunt for yield, it’s not hard to see why. As of August 31, the FTSE NAREIT All Equity REITs Index yielded an average of 3.61%, compared to the S&P 500’s 2.11%. During 2015, stock exchange-listed REITs paid out a whopping $46.5 billion in dividends.

Looking just at the residential housing market, business is definitely booming. With 30-year mortgage rates at below 3.5%, the market is scorching hot in many parts of the U.S.—so much so, some builders are reporting a shortage in construction workers to meet demand. New construction starts rose to 1.2 million in July, beating analysts’ forecasts and suggesting the U.S. housing market appears to have finally made a full recovery eight years following the recession, with Bloomberg calling this the “strongest home sales since the start of the economic expansion.”

Trouble could be brewing, however. As I shared with you last month, millennials just aren’t buying homes at the same rate we’ve historically seen from 18- to 34-year-olds. There are many theories as to why this is, from millennials delaying starting families to focus on careers, to a loss of trust in homeownership as a reliable investment or even as an institution, to a preference to rent. This trend has contributed to the lowest U.S. homeownership rate in five decades. How can this be? How could there be both massive housing demand and yet declining home ownership?

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“On average, homeowners paid 28% more in mortgage payments than renters did in monthly rent.”

With Mortgage Rates So Low, Why Are So Many People Still Renting? (Time)

With interest rates lower than they have been for years, many people still find that renting is more budget-friendly than a monthly mortgage payment. This is not true in all parts of the U.S., but a study by Robert W. Baird & Co. shows that living in one of the biggest housing markets in the country is often more expensive. The study looked at 28 different cities, and found that U.S. homeowners in 24 of the cities paid more than those who rent. On average, homeowners paid 28% more in mortgage payments than renters did in monthly rent. The study looked at properties with ratings of four or five stars to keep variables to a minimum.

The study also made some assumptions, such as that all mortgages were 30-year fixed loans, that all homeowners made a down payment of 15%, and that all mortgages included private mortgage insurance, homeowners’ insurance, and taxes. Of the 28 different markets examined, it was more affordable to own than to rent in Baltimore, Maryland, Tampa, Florida, Jacksonville, Florida, and Norfolk/Richmond, Virginia. Of the remaining 24 cities, 15 showed a 20% or higher difference in the cost of renting versus the cost of owning. These differences were due to factors such as the increase in housing prices and the fact that there are few houses on the market in many of these areas.

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More fallout from the war on interest rates.

House-Flippers Are Back, With Anonymous Funding (BBG)

Alex Sifakis never raised this much money this fast. The house flipper from Jacksonville, Florida, crowdfunded nine deals totaling more than $9 million through RealtyShares over the last two and a half years. A July deal for $1 million took him just 12 hours. “Generally, raising money takes so much time,’’ said Sifakis, 33. “This offers so much flexibility and time savings. It’s so much better than going to family offices, banks or Wall Street firms.’’ House flippers and property developers are increasingly crowdfunding — tapping the virtual wallets of anonymous internet backers on platforms such as RealtyShares, LendingHome, PeerStreet and Patch of Land. For riskier ventures, such as building new homes and buying, renovating and selling existing ones, they’re finding quick financing can be easier to get online than from banks.

That’s contributed to an increase in home flipping. In the second quarter, 39,775 investors bought and sold at least one house, the most since 2007, according to ATTOM Data Solutions. The crowdfunding sites are part of the multibillion-dollar ecosystem of marketplace lenders, like LendingClub Corp. and Prosper Marketplace Inc., that match users who need money with people who want to provide it for anything from debt consolidation to elective medical procedures. That business hasn’t always run smoothly. LendingClub is going through a rough stretch after years of rapid growth. In May, its founder and chief executive officer resigned amid an internal probe into a botched loan sale, sending LendingClub’s shares tumbling. So far, there have been few defaults in real estate crowdfunding deals. When they happen, the platforms say they’ll pay investors the proceeds from property sales.

The business has other potential pitfalls. When it comes to real estate, faster isn’t always better. Wall Street’s home-mortgage machine of the mid-2000s valued speed over accuracy, with disastrous results, though most crowdfunding sites cater to investors and not homebuyers. Also, clicking for capital can be exploited by fraudsters who may not be who they say they are, according to Sara Hanks, co-founder and CEO of CrowdCheck, which provides due-diligence services for online investors. “We’ve seen some things where the entity that’s supposed to own the property doesn’t actually own it,’’ she said.

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“..40% of China’s expressways were built between 2010 and 2015..”

China Chalks Up $667-Billion Debt Pile Over Toll Roads (R.)

China’s toll roads have stacked up a debt pile of 4.45 trillion yuan ($666.96 billion), with almost 80% of their annual income last year going to repay loans, the transport ministry said, as the country accelerates road building. Beijing has cranked up state spending on infrastructure to support economic growth as private sector investment falters, and efforts to lure investors into private-public partnerships to build projects such as toll roads have had few successes. The ministry published the 2015 figures late on Tuesday in a report that comes as global investors express growing concern over China’s overall credit, much of which has gone to build infrastructure. The toll road network’s debt grew an annual 15.7% last year, far outpacing income growth of 4.6%, the ministry said in the report.

“Although China’s toll road debt is relatively large, this is just a phase,” state newspaper the People’s Daily quoted Sun Yonghong, an official of the ministry’s highway division, as saying. “In the long run, the risks are controllable.” About three-quarters of 2015 revenue of 409.78 billion yuan went to paying down debt and interest, as banks sought payment of the principal one year after project completions, Sun said. Toll roads make up less than 4% of China’s road network, which stretches 4.5 million km (2.8 million miles). Sun said much of the debt was incurred to build expressways, and accumulation would slow as the road network matured. Almost 40% of China’s expressways were built between 2010 and 2015, at a cost of 3.32 trillion yuan, about 2.23 trillion yuan of which was paid through loans, he said.

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Sickening.

Wells Fargo Too Arrogant To Own Up To Its Fraudulent Ways (WaPo)

The 2008 financial collapse was eight years ago this month — and the big banks are back to their old shenanigans. Venerable Wells Fargo has engaged in behavior that would have made a robber baron blush: It pressured low-wage workers with unrealistic sales targets, so these workers created 2 million bogus accounts over five years, causing customers to be hit with fees and damage to their credit ratings. About 5,300 workers have been fired and $185 million in penalties assessed to the bank, but not a single high-level executive has been sacked or even forced to give back the tens of millions of dollars in pay earned based on the fraud. When Wells Fargo chairman and CEO John Stumpf sat before the Senate Banking Committee this week, he represented a bank too big to fail, too sprawling to manage and too arrogant to own up to its failures.

Can’t Wells Fargo take back some of the executive payouts? “I’m not an expert in compensation,” Stumpf said. Would he commit to investigate whether the fraud began in earlier years? “I can’t tell you that today.” Did he learn about the fraud before reading about it in the Los Angeles Times? “I don’t remember the exact time frame.” Stumpf informed the senators that what Wells Fargo did “was not a scam,” disputed that “this is a massive fraud” and said he had no idea “why people did this.” Sen. Jerry Moran, R-Kan., encouraged Stumpf to “make certain that the employees are not the scapegoat for behavior at higher levels.” Stumpf repeated that “the 5,300, for whatever reason, they were dishonest, and I’m not scapegoating.” If high-level bankers didn’t go to prison for the subprime high jinks that caused the 2008 crash, it’s a safe bet that none will in the Wells Fargo scandal either.

But if arrogance were a criminal offense, Stumpf would be looking at a life sentence. The bank’s fraud, and the executive’s insolence, may have one salutary result: It takes off the agenda any plan to dismantle the Consumer Financial Protection Bureau, one of the post-2008 regulatory creations and a top target of Donald Trump and congressional Republicans. The Los Angeles city attorney and the Los Angeles Times may deserve more credit for exposing the wrongdoing, but the audacity at Wells Fargo shows that the industry isn’t about to police itself. Stumpf also managed to create rare bipartisan unity on the Banking Committee – in condemnation of his actions. Sherrod Brown, D-Ohio, was “stunned.” Dean Heller, R-Nev., compared him to Sgt. Schultz of “Hogan’s Heroes.” Robert Menendez, D-N.J., called the actions “despicable.” Patrick J. Toomey, R-Pa., told Stumpf: “This isn’t cross-selling, this is fraud.”

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“Let’s ask ourselves whether we are comfortable with the United States getting slowly, predictably, and all too quietly dragged into yet another war in the Middle East.”

27 US Senators Rebel Against Arming Saudi Arabia (I’Cept)

A Senate resolution opposing a $1.15 billion arms transfer to Saudi Arabia garnered support from 27 senators on Wednesday, a sign of growing unease about the increasing number of civilians being killed with U.S. weapons in Yemen. A procedural vote to table the resolution passed 71-27. The Obama administration announced the transfer last month, the same day the Saudi Arabian coalition bombed a potato chip factory in the besieged Yemeni capital. In the following week, the Saudi-led forces would go on to bomb a children’s school, the home of the school’s principal, a Doctors Without Borders hospital, and the bridge used to carry humanitarian aid into the capital. Saudi Arabia began bombing Yemen in March 2015, four months after Houthi rebels from Northern Yemen overran the capitol, Sanaa, and deposed the Saudi-backed ruler, Abdu Rabbu Mansour Hadi.

In addition to providing Saudi Arabia with intelligence and flying refueling missions for its air force, the United States has enabled the bombing campaign by supplying $20 billion in weapons over the past 18 months. In total, President Obama has sold more than $115 billion in weapons to the Saudi kingdom – more than any other president. After the White House failed to respond to a letter from 60 members of Congress requesting that the transfer be delayed, Sens. Chris Murphy, D-Conn., and Rand Paul, R-Ky., introduced a resolution condemning the arms sale. Paul and Murphy said they had planned to pursue binding legislation if their resolution was successful. “It’s time for the United States to press ‘pause’ on our arms sales to Saudi Arabia,” Murphy said. “Let’s ask ourselves whether we are comfortable with the United States getting slowly, predictably, and all too quietly dragged into yet another war in the Middle East.”

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Carter’s a real man. No Clinton, Bush or Obama is fit to shine his shoes.

A First Step for Syria? Stop the Killing (Jimmy Carter)

The announcement this month of a new cease-fire agreement in Syria is good news. But a lack of trust among the Syrian belligerents and their foreign supporters means this agreement, like the one that came before it, is vulnerable to collapse. It is already showing severe signs of strain. Over the weekend, the United States accidentally bombed Syrian government troops. On Monday, the Syrian military declared it would no longer respect the deal, resumed airstrikes on Aleppo, and even a humanitarian aid convoy was bombed. Still, there is reason for hope. If Russia and the United States were willing to come far enough in their negotiations to reach this deal, these setbacks can be overcome. The targeting of the humanitarian convoy, a war crime, should serve as an added impetus for the United States and Russia to recommit to the cease-fire.

The two parties were well aware of the difficulties as they spent a month negotiating the cease-fire’s terms. The agreement can be salvaged if all sides unite, for now, around a simple and undeniably important goal: Stop the killing. It may be more likely than it sounds. Reliable sources estimate the number of Syrians killed to date at almost half a million, with some two million more people wounded. Well over half of the country’s 22 million prewar population has been displaced. These shocking numbers alone should convince all concerned that war itself is the greatest violation of human rights and the ultimate enemy of Syria. If this cease-fire is to last, the United States and Russia must find ways to work beyond the lack of trust that undermined the previous cease-fire, in February.

The countrywide cessation of hostilities that began then started to crumble within two months, with battles in much of the countryside around Damascus, central and northern Syria, and Aleppo. The resumption of the conflict led in April to the suspension of UN-sponsored peace talks in Geneva. However, a strong effort was made earlier in the year when the United States and Russia pressed their respective allies to pause the fighting and give the negotiations a chance. But the American and Russian expectation that they reach an agreement on issues of transitional governance by Aug. 1 was unrealistic. After five years of killing, and before any semblance of trust could be established, pushing the Syrian parties and their supporters to agree on power-sharing was seen as too threatening by some and too inadequate by others. Unsurprisingly, they reverted to violence.

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A lovely letter.

Apologizing to My Daughter for the Last 15 Years of War (Van Buren)

I recently sent my last kid off for her senior year of college. There are rituals to such moments, and because dad-confessions are not among them, I just carried boxes and kept quiet. But what I really wanted to say to her — rather than see you later, call this weekend, do you need money? – was: I’m sorry. Like all parents in these situations, I was thinking about her future. And like all of America, in that future she won’t be able to escape what is now encompassed by the word “terrorism.” Terrorism is a nearly nonexistent danger for Americans. You have a greater chance of being hit by lightning, but fear doesn’t work that way. There’s no 24/7 coverage of global lightning strikes or “if you see something, say something” signs that encourage you to report thunderstorms.

So I felt no need to apologize for lightning. But terrorism? I really wanted to tell my daughter just how sorry I was that she would have to live in what 9/11 transformed into the most frightened country on Earth. Want the numbers? Some 40% of Americans believe the country is more vulnerable to terrorism than it was just after September 11, 2001 – the highest%age ever. Want the apocalyptic jab in the gut? Army Chief of Staff General Mark Milley said earlier this month that the threat remains just as grave: “Those people, those enemies, those members of that terrorist group, still intend – as they did on 9/11 – to destroy your freedoms, to kill you, kill your families, they still intend to destroy the United States of America.” All that fear turned us into an engine of chaos abroad, while consuming our freedoms at home.

And it saddens me that there was a different world, pre-9/11, which my daughter’s generation and all those who follow her will never know. [..] After the last cardboard boxes had been lugged up the stairs, I held back my tears until the very end. Hugging my daughter at that moment, I felt as if I wasn’t where I was standing but in a hundred other places. I wasn’t consoling a smart, proud, twenty-something woman, apprehensive about senior year, but an elementary school student going to bed on the night that would forever be known only as 9/11. Back home, the house is empty and quiet. Outside, the leaves have just a hint of yellow. At lunch, I had some late-season strawberries nearly sweet enough to confirm the existence of a higher power. I’m gonna really miss this summer.

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