Apr 072018
 
 April 7, 2018  Posted by at 12:32 pm Finance Tagged with: , , , , , , , , , , , ,  


Dorothea Lange Farmers’ supply co-op. Nyssa, Malheur County, Oregon 1939

 

 

It’s Dr. D again. Told you he’s on a roll. He remains convinced America can re-invent itself. If only because it must.

 

 

Dr. D: Herbert Stein’s Law states “What Can’t Go On Forever, Doesn’t.” This is a neat summary of the present trade and currency imbalance. China makes real goods and the U.S. consumes them by typing digits on a keyboard. This is the very definition of what cannot go on forever.

 

• How long do you expect a nation can make nothing and consume everything?

• How long do you expect a nation without manufacturing, without a workforce, and now without a viable military to remain pre-eminent?

• How long does wealth and influence remain in a nation that makes nothing, does nothing, and knows nothing?

 

Reminds me of that other Law: “A fool and his money should be parted as soon as possible”, for to be wealthy, and helpless, and dumb, is not a combination that lasts for very long.

Since China cannot send the U.S. free goods forever, ergo, they won’t. That means slowly or quickly, now or later, they will cut us off. Right now it appears that can never happen, but I assure you it will very soon. And what will the U.S. do then? Actually, that’s very simple: the U.S. will have to close a $600B trade deficit instantly. Roughly, that means the U.S. will no longer import $600B worth of goods and be $600B/year poorer, or $2,000/year per person. Nor is this unusual. History is rife with examples of nations that once were prosperous and were suddenly cut off: Spain and Greece come immediately to mind. So how does this happen?

The Core nation, the trading hub has failed dozens of times in history, from Venice to Holland, Spain to England, and although most of history was on a gold standard, nevertheless the same thing happened: repudiation and devaluation of the currency. That’s why a U.K. Pound is no longer a troy pound of pure silver ($192) and why the U.S. Dollar is no longer 1/20th ounce of gold ($267). So let’s run down how this might unfold.

Like other empires, the U.S. rose to prominence with hard work and industry. Like other empires, this personal and physical industry was the foundation of an effective military. This military eventually stood alone, leaving the U.S. to set the rules of trade, the rules of diplomacy, and the rules of conduct. Like other nations, the U.S. bent those rules in its own favor, both early and late. Like other nations, the natural way to take advantage was to run an overvalued currency, which draws in capital from all trading partners worldwide, creating a 100-year spiral of wealth and influence that seems truly endless.

However math, the cruelest of Mother Nature’s laws, is not fooled. If you bend the rules to create market distortions, those distortions are indeed created. If there were fair trade, a gold standard, a nation that increases their wealth would find its currency rise. A rising currency would dampen manufacturing and efficiency, the gold would flow back out, and the unfair advantage would be corrected. But only in a free market. Any market on Earth has an Army, and that Army’s job day and night is to make sure that unfair advantage does NOT end. Ask Smedley Butler.

 

Mother Nature is never deterred. However long it takes, she waits. Lacking fair trade, an abnormally strong currency does the only other thing it can: destroy the Core nation’s industry, totally and completely. More certain than a nuclear explosion, economics will not miss a single spot until the wrong is righted and the truth is out. At first the low-gain commodity industries go: mining, shipping, smelting; then their sooty kinsmen: heavy rail, ships, ports, transportation.

After that go the lighter industries: manufacturing, stamping, autos, and so on up to mainframes, silicon chips and phones, and with them, their children, manufacturing processes and R&D. However, as London and NY showed, you can forestall currency correction even now by moving market distortions into services and financial engineering. At this point, however, the Core nation has nothing left but Banks, Universities, and the Government/Military, and no underlying economy to support them.

However, what Charles Hugh Smith calls the fiefdoms of monopoly cartels and apparatchiks of the 1% now lead an empty parade, horse-whipping the uncompliant 99% into supporting an economy that exists only in their minds. And then “What can’t go on, doesn’t.” The empire collapses from within, to the total surprise of historians of the 1%, and the total lack of interest of the 99%, for whom it had already collapsed decades before.

And of the other side? Thanks to the overly-high currency of the Core nation, the perimeter nation has an artificially LOW currency. They didn’t do that, because they are by definition small and weak and aren’t using an army to set the rules. The artificially low currency leads to low costs, low labor, high enterprise, and in the mirror image of the Core nation, the constant INCREASE in manufacturing. The increase in wealth, and the addition of commodity goods, then heavy industry, then manufacturing, then R&D. Whose fault is that? Who used a worldwide army to enforce the very rules that gutted their homeland? Not the Vandals; not China. It was Rome; it was D.C.

What is this whole imbalance based on? In our case, the artificially strong dollar, backed by a worldwide U.S. military. So how must it end? With a weak dollar, falling real markets, and a U.S. military returning home.

You say this can’t happen? Yet it must happen. To say otherwise means China will give us free goods for 10,000 years, and the U.S. will get always weaker that whole time. So how does the transition go?

The U.S. financial bulwark cracks, being highest and most based on psychology, not reality, very likely in conjunction to a military failure or withdrawal, as in empire finance, the military and currency are equivalent. Slowly, then rapidly, the tide flows out, the U.S. dollar gets weaker, the Chinese Yuan gets stronger, and the whole process reversed as it should have done years ago.

 


(mind the log scale)

 

Mother Nature isn’t fooled, and those 70 years of repression and manipulation are made up in a few years.

Down on the ground, what happens is not that China shuts off free imports to the U.S. directly, with a political embargo, what happens is the U.S. is seen as a has-been and the U.S. dollar falls in purchasing power on the world market, raising the price of foreign goods in a “free” and “open” marketplace. Lacking manufacturing and the military power to stop it, the U.S. can’t hold off Mother Nature and the laws of physics any more.

Knowing this to be inevitable, how would a nation prepare? For one thing, you would need to kick-start your industry, post-haste. Anything that can be made internally will find its prices stabilize and not rise. Yet before the currency rates are corrected this face overwhelming headwinds. Second, as income will be lost and the borders will be shut off, you need to switch the focus of taxation from income to tariffs, from finance to real goods.

Third, you need to open your pipelines, ports, and infrastructure, and expand the required steel, oil by any means necessary, even armed standoffs. Fourth, you’ll need to shove the culture away from government support and subsidies that will soon disappear, and into self-reliance and productivity. Firth, you’ll need to downsize the government and especially the military, which will and must return home. Any of those platforms sound familiar?

 

Despite what you read, it’s not all bad. Just as “The arrogant people will be brought down, and high and mighty people will be humbled”, “Every valley shall be raised up, and every mountain and hill shall be made low; and the crooked shall be made straight, and the rough places smooth.”

 

This is a master reversal of all manipulations, of all imbalances that have reached extremes. As the U.S. – China trade deficit must balance, we know that Chinese goods must rise. But that also means the cost of production for U.S. goods must fall. This cost-advantage puts Americans back to work just as it did the Chinese, while the rise of the Yuan will make China rich, but less productive.

What’s more, as matters reverse, the U.S. will raise prices on their exports: food and oil, two things China must have and cannot get elsewhere. Agriculture is at an all-time, 1,000 year low and must rise. Stocks and housing are at an all-time high and must fall. In a reversal, the high prices fall, the low prices rise, that’s obvious. That’s what “reversal” means, that’s what “extreme” means.

As for manufacturing, the world is changing fast. Even China is opening “dark” factories that employ no people, only robots. That will be true here as well, which undercuts any labor savings they once had. There’s a few problems, however: robotic mega-factories only work with very large scale of identical goods that can source reliable, high-quality inputs. If oil is too high, and/or shipping or marketing fractures, those factories scale down, retool more, and therefore require more people than presently.

How is China going to have huge robotic mega-factories if half their export market can no longer afford them? If the U.S. and China split the market, aren’t all those factories half the size of present? Since the U.S. will now have low-cost people and raw materials, what advantage does China bring to offset shipping and tariffs? The “market” isn’t uniform. There was worldwide mass-integration of manufacturing between India and England and the world in 1910 too, yet it’s didn’t persist; it changed.

 

One way it can change is to leapfrog China. We hear about how the U.S. is a has-been as we are supporting legacy copper telephones while the 3rd world goes directly to fiber and cell, and this is true. However, China has mainlined on low-price, low-profit, mass-manufacturing. Why would anyone compete with them there? It’s irrational. Build a baseline and let them have all the low-profit, environment-destroying work they want, the U.S. can’t and won’t beat them there.

We can beat them by leapfrogging into technology that’s out there, but no one is revealing yet, things they haven’t done, but Americans are good at doing: innovating, high-tech, medical. Much as I hate high-tech and its panacea as an answer, yet I believe there are goods, ideas out there that can transform the way things work.

Look at the rapid development and uptake of LEDs for example. The patent office is filled with them, and an outsized number are American. We have superconducting maglev, field physics, material science of no-weight foam, color-shifting paint, hyperconducting graphite, and transparent concrete to name a few. All there, all unused. Let’s make an example case in a very large, very quiet investment.

Medical and Biotech are to some extent used up, with overpriced, mass-market pharmaceuticals being rejected by price and form even by the wider population. But that’s so last-century. The new biotech is going to take a blood or DNA sample and synthesize a drug specifically for your blood and DNA. They are going to create another organ, a blood transfusion no one but you can use.

In one way, this may be more expensive, and that’s good for profits, but in another way, they will work for you, much better and guaranteed, and therefore fix your health faster, spare you useless drugs, bad side effects, and actually work, and therefore be cheaper. What does it take to make them? A complete revolution in drug manufacturing. Multi-billion dollars’ worth of equipment, extremely unique development and patents, a 20 year head start.

 

Could you sell such a thing to the Chinese? You bet. Could they get off retail manufacturing and scoop us on it? Not a chance. So you see how such a thing could happen, even with a U.S. dollar falling and a hard readjustment ahead. And that’s just one.

If boutique and robotic goods are the new industries, what do we do with 200 million unemployed? We won’t have 200 million. That’s a consequence of the distorted extreme of our finance, our centralization, our currency. For one thing, we have only 100 million now and a lower dollar will definitely restore the competitive advantage of highly-productive U.S. workers. At the same time, if work requires fewer workers, we will find a solution. Why?

Because you can’t have 200 million unemployed. Not even 100 million. The resulting inequity and income disparity can and has caused a revolution. Faced with that, any nation will adjust because they must or perish. As difficult as Americans can be, they are a practical people above all. This has happened to dozens of nations in the past: Spain, France, Germany, England, China, Japan, and they all still exist. Things rotated out in the big wheel of time. New things were made and the old ones faded away, and we will too.

We’re going back to being just one of many nations, and a fair and productive one too. There are ways and we will find them. How can I be so sure? Because “What Can’t Go On Forever, Doesn’t,” and it won’t this time either.

 

 

Mar 282018
 
 March 28, 2018  Posted by at 9:36 am Finance Tagged with: , , , , , , , , , , , , ,  


Edvard Munch Spring in Johan Karl Street 1944

 

Steen Jakobsen Fears 30% Market Correction With Consumer ‘Maxed Out’ (CNBC)
China Says Kim Jong Un Agrees To Denuclearize Korean Peninsula (R.)
All The Personal Data That Facebook/Google Collect (Curran)
Mark Zuckerberg Agrees To Testify Before Congress Over Data Scandal (G.)
37 State Attorneys General Demand Answers From Zuckerberg (ZH)
Zuckerberg’s Refusal To Testify Before UK MPs ‘Absolutely Astonishing’ (G.)
Jimmy Carter: Trump Hiring Bolton ‘A Disaster For Our Country’ (USAT)
Brexit Referendum Won Through Fraud – Whistleblower (G.)
Austria Draws Scorn for Sitting Out Russian Diplomat Expulsions (BBG)
160 Countries Want To See Proof In Skripal Case – Russia’s UK Embassy (RT)
Tesla Just Months From A Total Collapse – Hedge Fund (MW)
The Missing Economic Measure: Wealth, not GDP (OWiD)

 

 

Goldilocks and Frankenstein.

Steen Jakobsen Fears 30% Market Correction With Consumer ‘Maxed Out’ (CNBC)

Stock markets could see a hefty fall in the coming months due to a slew of trends that point to a downturn in the global economy, one economist told CNBC. Steen Jakobsen, the often-bearish chief economist at Danish investment house Saxo Bank, cited several factors including growing credit loans, a widening fiscal deficit in the U.S., doubts over infrastructure spending plans and a potential trade war. “All the data we’ve seen over the last few weeks has basically been that the consumer is maxed out, we’ve seen that in credit card loans as well, so I think the consumer is done spending the money,” he told CNBC Tuesday. New data Tuesday showed that U.S. consumer confidence declined in March, falling below expectations and breaking a two month streak of gains.

“I think overall we have been pricing in for Goldilocks and we are closer to Frankenstein to be honest,” he said. He added that in a scenario of a potential sudden economic recession, he sees a possible market correction of between 25 and 30%. Jakobsen highlighted a “Goldilocks” scenario that he feels traders are mistakenly pricing in to markets, where fresh economic data are either not too hot or not too cold. Overall, the global economy is currently experiencing lower levels of unemployment and higher growth. Looking at 2018 in particular, many analysts hoped for strong global growth on the back of higher inflation and higher investment, but according to Jakobsen, these drivers “aren’t actually materializing.”

Instead, Jakobsen made a reference to the novel “Frankenstein,” arguing that the economy had been skewed by central bankers, who have injected trillions of dollars into the global economy to boost growth and investment. The first quarter of 2018 “started at more than 5% expected GDP; we are now significantly less than 2% for the (first quarter) expected, so I don’t really see things happening in the growth area,” Jacobsen added. “We’ve been at 2% exactly since the financial crisis, I don’t think we’re going to deviate from that,” he said.

Read more …

Again, he says it’s what his father and grandfather wanted. Perfect way to save face.

China Says Kim Jong Un Agrees To Denuclearize Korean Peninsula (R.)

China said on Wednesday it won a pledge from North Korean leader Kim Jong Un to denuclearize the Korean peninsula during a meeting with President Xi Jinping, who pledged in return that China would uphold its friendship with its isolated neighbor. After two days of speculation, China announced on Wednesday that Kim had visited Beijing and met Xi during what the official Xinhua news agency called an unofficial visit from Sunday to Wednesday. The trip was Kim’s first known journey abroad since he assumed power in 2011 and is believed by analysts to serve as preparation for upcoming summits with South Korea and the United States.

Beijing has traditionally been the closest ally of secretive North Korea, but ties have been frayed by North Korea’s pursuit of nuclear weapons and China’s backing of tough U.N. sanctions in response. Xinhua cited Kim as telling Xi that the situation on the Korean peninsula is starting to improve because North Korea has taken the initiative to ease tensions and put forward proposals for peace talks. “It is our consistent stand to be committed to denuclearisation on the peninsula, in accordance with the will of late President Kim Il Sung and late General Secretary Kim Jong Il,” Kim Jong Un said, according to Xinhua. North Korea is willing to talk with the United States and hold a summit between the two countries, he said.

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Zero Hedge with the entire Twitter thread by Dylan Curran. Does that wake you up?

All The Personal Data That Facebook/Google Collect (Curran)

The Cambridge Analytica scandal was never really about Cambridge Analytica. As we’ve pointed out, neither Facebook nor Cambridge Analytica have been accused of doing anything explicitly illegal (though one could be forgiven for believing they had, based on the number of lawsuits and official investigations that have been announced). Instead, the backlash to these revelations – which has been justifiably focused on Facebook – is so severe because the public has been forced to confront for the first time something that many had previously written off as an immutable certainty: That Facebook, Google and the rest of the tech behemoths store reams of personal data, essentially logging everything we do.

In response to demands for more transparency surrounding user data, Facebook and Google are offering users the option to view all of the metadata that Google and Facebook collect. And as Twitter user Dylan Curran pointed out in a comprehensive twitter thread examining his own data cache, the extent and bulk of the data collected and sorted by both companies is staggering. Google, Curran said, collected 5.5 gigabytes of data on him – equivalent to some 3 million Microsoft Word documents. Facebook, meanwhile, collected only 600 megabytes – equivalent to roughly 400,000 documents.

Another shocking revelation made by Curran: Even after deleting data like search history and revoking permissions for Google and Facebook applications, Curran still found a comprehensive log of his documents and other files stored on Google drive, his search history, chat logs and other sensitive data about his movements that he had expressly deleted. What’s worse, everything shown is the data cache of one individual. Just imagine how much data these companies hold in total.

Read more …

By now, shareholders may be his prime concern. Congress won’t hurt the CIA’s interests.

Mark Zuckerberg Agrees To Testify Before Congress Over Data Scandal (G.)

Facebook’s chief executive, Mark Zuckerberg, has agreed to testify before the United States Congress in the wake of a that has sent the company’s share price tumbling and prompted numerous investigations and lawsuits. Zuckerberg has accepted an invitation to testify before the House energy and commerce committee, according to an aide familiar with the discussions. A date has not yet been set, and the spokesperson for the House committee declined to confirm reports that the hearing was scheduled for 12 April. The Senate judiciary and commerce committees have also invited Zuckerberg to appear at hearings.

His decision to testify before the US Congress was first reported by CNN, and contrasts with his refusal to appear before members of parliament in the UK. The chair of a British committee of MPs on Tuesday said Zuckerberg’s decision to send other executives to the UK to answer questions on his behalf was “absolutely astonishing”. However, news of US congressional evidence paves the way for a major showdown for Zuckerberg, 33, who has come under increasing pressure from lawmakers and the general public to account for Facebook’s business practices since the company acknowledged last September that it had sold advertisements to Russian agents seeking to influence the US presidential election.

Read more …

Facebook took 30% of the loot. They sold their data perhaps thousands of times.

37 State Attorneys General Demand Answers From Zuckerberg (ZH)

37 “profoundly concerned” U.S. state and territory attorneys general fired off a letter to Facebook CEO Mark Zuckerberg on Monday, demanding answers over reports that personal user information from Facebook profiles was provided to third parties without the users’ knowledge or consent. “Most recently, we have learned from news reports that the business practices within the social media world have evolved to give multiple software developers access to personal information of Facebook users. These reports raise serious questions regarding consumer privacy”

The letter notes the 50 million Facebook profiles which may have been “misused and misappropriated by third-party software developers,” noting that Facebook “took as much as 30%” of payments made through applications used by Facebook users. “According to these reports, Facebook’s previous policies allowed developers to access the personal data of “friends” of people who used applications on the platform, without the knowledge or express consent of those “friends.” It has also been reported that while providing other developers access to personal Facebook user data, Facebook took as much as 30% of payments made through the developers’ applications by Facebook users.”

In other words – while a Facebook user may have agreed in the fine print to allowing the social media giant to hoover up their information – their “friends” did not. “These revelations raise many serious questions concerning Facebook’s policies and practices” reads the letter, which asks “were those terms of service clear and understandable, or buried in boilerplate where few users would even read them?”

Read more …

He’s just not that into you. Why talk to “the UK parliamentary committee investigating fake news” when he’s already agreed to speak to Congress?

Zuckerberg’s Refusal To Testify Before UK MPs ‘Absolutely Astonishing’ (G.)

Mark Zuckerberg has come under intense criticism from the UK parliamentary committee investigating fake news after the head of Facebook refused an invitation to testify in front of MPs for a third time. The chair, Damian Collins, said it had become more urgent the Facebook founder give evidence in person after oral evidence provided by the Cambridge Analytica whistleblower, Christopher Wylie. The MP said: “I think, given the extraordinary evidence we’ve heard so far today, it is absolutely astonishing that Mark Zuckerberg is not prepared to submit himself to questioning in front of a parliamentary or congressional hearing, given these are questions of fundamental importance and concern to his users, as well as to this inquiry.

“I would certainly urge him to think again if he has any care for people that use his company’s services.” Zuckerberg has been invited three times to speak to the committee, which is investigating the effects of fake news on UK democracy, but has always sent deputies to testify in his stead. MPs are likely to take a still dimmer view of his decision after he ultimately agreed to testify before Congress in the US. It was reported on Tuesday that the company is now considering strategy for his testimony. When the Commons committee travelled to Washington DC in February to obtain oral evidence from US companies, Facebook flew over its UK policy director rather than send a high-level executive to speak to the committee.

In response to the latest request, Facebook has suggested one of two executives could speak to parliament: Chris Cox, the company’ chief product officer, who is in charge of the Facebook news feed, or Mike Schroepfer, the chief technology officer, who heads up the developer platform. However, Theresa May declined to back Collins. Pressed by the committee chairman at the Commons liaison committee later in the day, the prime minister said “Mr Zuckerberg will decide for himself” whether to give evidence to parliament.

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The US has one sane person left. And he’s 93. Not that he’s the only one denouncing Bolton. But none of the rest do that nearly loud enough.

Jimmy Carter: Trump Hiring Bolton ‘A Disaster For Our Country’ (USAT)

Former president Jimmy Carter, one of the few U.S. officials who has traveled to North Korea and met with its leaders, expresses hope for the planned White House summit with Pyongyang but warns that President Trump may have made “one of the worst mistakes” of his tenure by naming John Bolton to the sensitive post of national security adviser. In an exclusive interview with USA TODAY, pegged to the publication of his new book titled Faith, Carter calls Bolton “a warlike figure” who backs policies the former president calls catastrophic. “Maybe one of the worst mistakes that President Trump has made since he’s been in office is his employment of John Bolton, who has been advocating a war with North Korea for a long time and even an attack on Iran, and who has been one of the leading figures on orchestrating the decision to invade Iraq,” Carter said. He called the appointment, announced last week, “a disaster for our country.”

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Perfect for Tony Blair et al. Maybe too perfect. Who cares about this guy’s views? Stick to the facts, please.

Brexit Referendum Won Through Fraud – Whistleblower (G.)

The EU referendum was won through fraud, the whistleblower Christopher Wylie has told MPs, accusing Vote Leave of improperly channelling money through a tech firm with links to Cambridge Analytica. Wylie told a select committee that the pro-Brexit campaign had a “common plan” to use the network of companies to get around election spending laws and said he thought there “could have been a different outcome had there not been, in my view, cheating”. “It makes me so angry, because a lot of people supported leave because they believe in the application of British law and British sovereignty. And to irrevocably alter the constitutional settlement of this country on fraud is a mutilation of the constitutional settlement of this country.”

Vote Leave has repeatedly denied allegations of collusion or deliberate overspending. When they , Boris Johnson, who fronted the campaign, said: “Vote Leave won fair and square – and legally. We are leaving the EU in a year and going global.” Wylie, who used to work for Cambridge Analytica, gave evidence in a nearly four-hour session before the digital, culture, media and sport select committee. He made a string of remarkable claims about Brexit and Cambridge Analytica, including that his predecessor, Dan Mursean, died mysteriously in a Kenyan hotel room in 2012 after a contract in the company turned sour. Wylie said it was striking that Vote Leave and three other pro-Brexit groups – ; Veterans for Britain, and Northern Ireland’s Democratic Unionist party – all used the services of the little-known firm Aggregate IQ (AIQ) to help target voters online.

Read more …

And Greece, Cyprus, Portugal, Bulgaria, Cyprus, Slovakia, Slovenia, Malta and Luxembourg. Belgium?!

Austria Draws Scorn for Sitting Out Russian Diplomat Expulsions (BBG)

Austria is drawing criticism from parts of the European Union for saying it couldn’t expel Russian diplomats on account of its neutrality. Chancellor Sebastian Kurz’s government, which includes nationalists that cooperate with Vladimir Putin’s party, declined to join the tough international response to a nerve-agent attack on a former Russian spy in England. Austria is a “builder of bridges between East and West” and wants to “keep channels open” to Moscow, it said. That position is “hardly compatible with EU membership” and there’s “a big difference between being part of the West and being a bridge between the West and the East,” former Swedish Foreign Minister Carl Bildt said Tuesday on Twitter.

Artis Pabriks, a former Latvian foreign minister who’s a member of the European Parliament, called Austria’s decision a “bad joke.” He asked: “Which other EU policies/decisions Kurz does not apply to Austria?” Kurz, whose People’s Party is part of the same political family as the parties of Bildt and Pabriks, said Monday that Austria backs the EU’s decision to pull its ambassador to Russia. In declining to take further measures, his government cited Austria’s neutrality, which the country adopted as a condition for ending its post-World War II occupation by the U.S., the Soviet Union, the U.K. and France in 1955.

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7 billion people do, too.

160 Countries Want To See Proof In Skripal Case – Russia’s UK Embassy (RT)

Scores of non-Western countries refuse to take the UK’s assertion that Russia was behind the incident in Salisbury at face value, demanding it present the evidence, Moscow’s embassy in London said. Some 160 states share that view. While many in the Western world, save several notable exceptions, united behind the UK as it accused Russia of poisoning the former spy with a military-grade toxic agent, many more countries have not been persuaded by the fiery rhetoric of British PM Theresa May, the spokesperson for Russia’s British embassy told Sputnik.

“Even if Mrs. May said that she was absolutely sure that Russia was responsible for the incident in Salisbury, she would have to present all evidence to Russia, the international community and the British public. This is the opinion of almost 160 countries which are not members of the Western bloc,” he said. “It is obvious that no one in the wider world would take British words for granted.” On Monday, following the lead of the UK, the US, 18 EU states and other European countries, Canada and Australia announced they would expel a number of Russian diplomats in solidarity with the UK. Washington alone ordered the expulsion of 60 diplomats, including 12 at the Russian mission to the UN, alleging they were covert intelligence operatives.

What became the largest collective expulsion of Russian diplomats in history was denounced by Moscow as an extremely unfriendly and unwarranted step. Still, there were voices in the West that refused to side with London until the evidence is laid out. Austria as well as Switzerland, both stressing their neutral country status, refused to follow suit. Cyprus, Portugal, Bulgaria, Cyprus, Slovakia, Slovenia, Malta and Luxembourg did not jump on the expulsion bandwagon either.

Read more …

Magic Muskroom.

Tesla Just Months From A Total Collapse – Hedge Fund (MW)

Unless Elon Musk “pulls a rabbit out of his hat,” Tesla will be bankrupt within four months, says John Thompson of Vilas Capital Management. “Companies eventually have to make a profit, and I don’t ever see that happening here,” he told MarketWatch. “This is one of the worst income statements I’ve ever seen and between the story and the financials, the financials will win out in this case.” Thompson manages $25 million and his Tesla short is the fund’s biggest position. To be fair, he’s been betting big against Tesla for years, which, of course, means he’s endured some brutal stretches. Last April, for instance, the stock hit a record high around the $300 mark, and Musk was right there to troll the Tesla bears.

From that point, the stock continued to break new ground, eventually topping out at $389.61. But despite Tesla’s strong performance in 2017, Thompson’s fund still managed to churn out a 65% gain for the year. Now, Tesla’s back to where it was when Musk fired off his “Shortville” tweet, and Thompson is confident his bet is about to pay off nicely. In fact, Thompson says if his prediction comes true, his fund could surge by another 50%. With that in mind, he says he’s investing $500,000 of his own money. “Tesla, without any doubt, is on the verge of bankruptcy,” he told clients in an email over the weekend.

He explained that funding will be hard to come by in the face of problems in delivering the Model 3, declining demand for the Model S and X, extreme valuation and a likely downgrade of its credit rating by Moody’s from B- to CCC. “As a reality check, Tesla is worth twice as much as Ford [estimate of the enterprise value of both companies], yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss,” Thompson said. “Further, Ford has $12 billion in cash held for ‘a rainy day’ while Tesla will likely run out of money in the next 3 months. I’ve never seen anything so absurd in my career.”

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Flows vs stocks. GDP is attractive if you want to make money with destruction.

The Missing Economic Measure: Wealth, not GDP (OWiD)

So, what is GDP? GDP is a measure of economic activity – in terms of market-based gross output – in a given period (often a year). This is of course useful in many ways. GDP growth, when captured accurately, has the potential to tell us about the pace of change and rising levels of consumption. Equally, a cessation of GDP growth can serve as an important red flag: stalling enterprises and increases in unemployed workers tend to imply hardship and losses in welfare. However, there are important changes that GDP does not shed light on, and indeed might give us incorrect signals about. Think about climate change, a critical issue that has been increasingly under the international spotlight. An economy can increase its CO2 emissions and drive up local pollutants – both clearly harmful to the long-term wellbeing of the population – while being rewarded with rising GDP figures.

Similarly, a natural disaster might harm people, destroy infrastructure, and require expensive emergency measures – yet thanks to a rise in spending, this too would temporarily register as an increase in GDP. On the flip side, beneficial endeavors such as attempting to stall the alarming rate of biodiversity loss or deforestation not only fail to register in our headline statistic; they might slow its growth. This is where wealth accounting comes in. Rather than measuring flows, as GDP does, wealth is an indicator of an economy’s underlying capital stocks. Wealth, if measured in detail, accounts for the assets such as natural capital, produced capital, and human capital that underpin growth and consumption possibilities, and in this way shows us viable development pathways.

In the event of a natural disaster or rising pollution, for example, while GDP might grow, wealth measures would alert us to the depletion of underlying physical and natural capital stocks and the need for targeted investment. A detailed enough balance sheet would thus theoretically allow for the sustainable management of an economy’s productive capital. Therefore, while GDP has little to say about whether a nation’s assets can sustain current consumption levels into the future, wealth measures can tell us exactly this. The relationship between wealth and GDP is analogous to company accounts: the balance sheet of a company describes the stock of useful assets owned by a company (akin to wealth), while the profit and loss statement describes the flows of revenue, costs, and net income that the company has been able to generate using those assets (akin to GDP).

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Jan 222018
 
 January 22, 2018  Posted by at 10:38 am Finance Tagged with: , , , , , , , , , , ,  


Joan Miró Personnages Rythmiques 1934

 

Richest 1% Took 82% Of New Global Wealth Last Year (Ind.)
42 People Hold Same Wealth As 3.7 Billion Poorest (G.)
Three Charts To Consider Ahead Of Monday’s Post-Government-Shutdown Open (ZH)
Republicans Float Minor Immigration Deal In Bid To End Deadlock (G.)
20 Senators Support Bipartisan Plan To Reopen Government (ZH)
US Shutdown Exposes ‘Chaotic Political System’ – China News Agency (R.)
FBI “Loses” Five Months Of Text Messages Between Anti-Trump Agents (AP)
Fed Scared to Death of Causing Global Financial Crash – Nomi Prins (USAW)
Macron Admits France Would Vote To Leave EU If Referendum Held (ZH)
Apple Leak Reveals Sudden iPhone X Cancellation (F.)
Assange a ‘Problem’, ‘More Than a Nuisance’ – Ecuador President (Sp.)
Opioids: The Big Money Is In Chronic Pain, Which Is Endless (NDN)

 

 

Either we stop this, or it’s pitchforks and guillotines.

Richest 1% Took 82% Of New Global Wealth Last Year (Ind.)

Growing inequality resulted in 82% of new global wealth going to the richest 1% last year, while the poorest half of the world saw their prosperity flatline, a report by Oxfam has shown. It means that of the $9.2tn increase in global wealth between July 2016 and June 2017, around $7.6tn (£6tn) went to 75 million people, while the bottom 3.7 billion saw no increase. It helped spark the sharpest increase in the number of billionaires ever recorded, to 2,043, with one created every two days, according to Oxfam’s report, published ahead of the annual World Economic Forum of global political and business leaders in Swiss ski resort Davos. The wealth of those billionaires increased by $762bn over 12 months, it added.

Mark Goldring, chief executive of Oxfam GB, said the statistics signal that “something is very wrong with the global economy”. “The concentration of extreme wealth at the top is not a sign of a thriving economy but a symptom of a system that is failing the millions of hard-working people on poverty wages who make our clothes and grow our food.” He said a living wage, “decent conditions” and equality for women were essential if work was to be a “genuine route out of poverty”. “If that means less for the already wealthy then that is a price that we – and they – should be willing to pay,” Mr Goldring added, as he pushed for a crackdown on tax avoidance and a revamp of business models that prioritise social benefit over shareholder returns.

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After everything western workers fought hard and often bloody fights for, how did we end up back in the Middle Ages again?

42 People Hold Same Wealth As 3.7 Billion Poorest (G.)

The development charity Oxfam has called for action to tackle the growing gap between rich and poor as it launched a new report showing that 42 people hold as much wealth as the 3.7 billion who make up the poorest half of the world’s population. In a report published on Monday to coincide with the gathering of some of the world’s richest people at the World Economic Forum in Davos, Oxfam said billionaires had been created at a record rate of one every two days over the past 12 months, at a time when the bottom 50% of the world’s population had seen no increase in wealth. It added that 82% of the global wealth generated in 2017 went to the most wealthy 1%.

The charity said it was “unacceptable and unsustainable” for a tiny minority to accumulate so much wealth while hundreds of millions of people struggled on poverty pay. It called on world leaders to turn rhetoric about inequality into policies to tackle tax evasion and boost the pay of workers. Mark Goldring, Oxfam GB chief executive, said: “The concentration of extreme wealth at the top is not a sign of a thriving economy, but a symptom of a system that is failing the millions of hardworking people on poverty wages who make our clothes and grow our food.” Booming global stock markets have been the main reason for the increase in wealth of those holding financial assets during 2017. The founder of Amazon, Jeff Bezos, saw his wealth rise by $6bn in the first 10 days of 2017 as a result of a bull market on Wall Street, making him the world’s richest man.

Oxfam said it had made changes to its wealth calculations as a result of new data from the bank Credit Suisse. Under the revised figures, 42 people hold as much wealth as the 3.7 billion people who make up the poorer half of the world’s population, compared with 61 people last year and 380 in 2009. At the time of last year’s report, Oxfam said that eight billionaires held the same wealth as half the world’s population. The charity added that the wealth of billionaires had risen by 13% a year on average in the decade from 2006 to 2015, with the increase of $762bn (£550bn) in 2017 enough to end extreme poverty seven times over. It said nine out of 10 of the world’s 2,043 dollar billionaires were men.

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What happens when price discovery is murdered.

Three Charts To Consider Ahead Of Monday’s Post-Government-Shutdown Open (ZH)

VALUE: The S&P 500 is trading at a Price-to-Sales ratio of 2.35x… a new record high for valuation…

GREED: The S&P 500 is up 8 of the last 9 weeks, 16 of the last 19 weeks, and 15 of the last 15 months (and 22 of the last 23 months – since The Shanghai Accord). This has pushed The S&P 500 to an RSI of 88.4… a new record high for overbought…

FEAR: The S&P 500 has averaged about four 5% declines – from peak to trough – annually since 1927, but volatility in US stocks has evaporated in recent years. Amid a reportedly robust global economy and still supportive global monetary policy, Friday’s 0.4% gain meant that the S&P 500 extended its streak to 395 days without a 5% reversal… a new a new record for tranquillity…

As The FT notes, the last time the S&P 500 suffered a 5% setback was in the global market carnage that followed the UK’s shock vote in June 2016 to leave the EU, which constitutes the last significant, if brief, bout of volatility in markets. The last time the US stock market suffered an actual correction – typically defined as a drop of over 10% from the recent peak — was in early 2016, when investors’ anxiety grew over the state of China’s economy. Some investors and analysts fear that the tranquillity is encouraging investors to stop buying protection against declines, or to making aggressive “short” bets on volatility staying low through complicated derivatives – which could exacerbate any turbulence that might erupt.

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Who’s going to blink first?

Republicans Float Minor Immigration Deal In Bid To End Deadlock (G.)

The US government shutdown edged closer to a resolution on Sunday night after a minor concession from the Senate majority leader, Mitch McConnell, who said he would allow a vote on immigration reform in February if Democrats agree to fund the government. However, one Democratic source cautioned that no deal had been reached. McConnell’s proposal represented the fruit of a bipartisan effort among moderates in both parties to resolve the shutdown, which began at midnight on Saturday. The shutdown was spurred by the inability of Congress to reach a deal to resolve the status of “Dreamers” – undocumented migrants brought into the United States as children. They had been protected from deportation until September 2017 when the Trump administration ended the Daca program, which had been created by Barack Obama.

Trump allowed a six-month grace period for Congress to give Dreamers permanent legal status through legislation. However, with that expiring in early March, Democrats, facing heavy pressure from immigration advocates, had pledged not to fund the government until a deal was reached. McConnell’s proposal would allow the Senate to debate and vote on an immigration deal if a broader bipartisan compromise was not reached in the next three weeks. Speaking on the floor, the top Senate Republican said he would push for a Monday vote on a short-term deal to fund the government through 8 February, as well as extend a popular health insurance program called Chip that provides healthcare coverage to nine million children for six years.

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Let’s keep it shut till summer, see what happens.

20 Senators Support Bipartisan Plan To Reopen Government (ZH)

With Senate Majority Leader Mitch McConnell calling for a procedural vote on a senate measure that would keep the federal government running through Feb. 8 to begin at 1 am Monday, a bipartisan group of senators signaled that they’re nearing an agreement to reopen the government following a Sunday afternoon meeting, the Hill reported. Georgia Senator Johnny Isakson said the group had reached a “consensus of understanding” – essentially agreeing to the broad strokes of a plan to satisfy recalcitrant Democrats and Republicans, per the Hill. As they left the meeting in Maine senator Susan Collins’s office, some members expressed optimism that they will reach an understanding, if not a final agreement, that would let them move forward. South Carolina Senator Lindsey Graham predicted that the group could cobble together a deal before the 1 am vote.

“Yeah because if it doesn’t happen tonight it’s going to be a lot harder,” he said, alluding to the fact that most federal agencies have elected to wait until Monday before implementing the terms of the shutdown (here’s a quick guide to what departments and services will be impacted by the shutdown)… As the BBC pointed out, the closure of many federal services will be felt around the country and hundreds of thousands of federal staff face unpaid leave. According to Politico, the senators took their proposal to McConnell and Senate Minority Leader Chuck Schumer after the 90-minute meeting. The plan would reopen the government through Feb. 8 and have McConnell commit on the Senate floor to holding an immigration vote before that date.

[..] this is the first time a government shutdown has happened while one party in this case, the Republicans – controls both Congress and the White House And according to the Associated Press, the 2013 shutdown left 800,000 government workers on temporary leave. The bipartisan group isn’t crafting separate legislation. Instead, senators say the bulk of their talks were about how to get 60 votes for the bill to fund the government through Feb. 8, paired with a commitment that will satisfy Democrats on bringing up an immigration bill. Since before the shutdown even began at 12:01 am ET on Saturday morning, Republicans and Democrats have traded accusations of blame. House Speaker Paul Ryan has said he would bring such a bill up for a vote in the House if it passes the Senate.

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Easy pickings.

US Shutdown Exposes ‘Chaotic Political System’ – China News Agency (R.)

The shutdown of the US government exposes “chronic flaws” in the country’s political system, China’s official news agency said on Sunday. Funding for federal agencies ran out at midnight on Friday in Washington after members of Congress failed to agree on a stopgap funding bill. “What’s so ironic is that it came on the first anniversary of Donald Trump’s presidency on Saturday, a slap in the face for the leadership in Washington,” the Xinhua news agency’s Liu Chang said in a commentary piece. The article said that the Trump administration had “backtracked” on policies supported by his predecessor, Barack Obama, including the Trans-Pacific Partnership trade agreement and US participation in the Paris climate agreement.

“If there was any legacy that has survived the transfer of power, it was the spirit of non-cooperation across party lines,” the commentary said. While Xinhua commentaries are not official statements, they offer a reflection of Beijing’s thinking. “The western democratic system is hailed by the developed world as near perfect and the most superior political system to run a country,” it said. “However, what’s happening in the United States today will make more people worldwide reflect on the viability and legitimacy of such a chaotic political system.”

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First the NSA a few days ago, now the FBI. Both should be under investigation, but who’s going to do the investigating?

Look, you and I have back-ups of our files. So do NSA and FBI. The only way to lose the info is to deliberately delete it, multiple times.

US intelligence is flipping the country the bird’s middle finger.

FBI “Loses” Five Months Of Text Messages Between Anti-Trump Agents (AP)

The Justice Department has turned over to Congress additional text messages involving an FBI agent who was removed from special counsel Robert Mueller’s investigative team following the discovery of derogatory comments about President Donald Trump. But the department also said in a letter to lawmakers that its record of messages sent to and from the agent, Peter Strzok, was incomplete because the FBI, for technical reasons, had been unable to preserve and retrieve about five months’ worth of communications. New text messages highlighted in a letter to FBI Director Christopher Wray by Sen. Ron Johnson, the Republican chairman of the Senate’s Homeland Security and Governmental Affairs Committee, are from the spring and summer of 2016 and involve discussion of the investigation into Hillary Clinton’s use of a private email server.

They reference Attorney General Loretta Lynch’s decision to accept the FBI’s conclusion in that case and a draft statement that former FBI Director James Comey had prepared in anticipation of closing out the Clinton investigation without criminal charges. Strzok, a veteran counterintelligence agent who also worked the Clinton email case, was reassigned last summer from the team investigating ties between Russia and Trump’s Republican presidential campaign after Mueller learned he had exchanged politically charged text messages — many anti-Trump in nature — with an FBI lawyer also detailed to the group. The lawyer, Lisa Page, left Mueller’s team before the text messages were discovered.

The Justice Department last month produced for reporters and Congress hundreds of text messages that the two had traded before becoming part of the Mueller investigation. Many focused on their observations of the 2016 election and included discussions in often colorful language of their personal feelings about Trump, Clinton and other public figures. Some Republican lawmakers have contended the communication reveals the FBI and the Mueller team to be politically tainted and biased against Trump — assertions Wray has flatly rejected. In addition to the communications already made public, the Justice Department on Friday provided Johnson’s committee with 384 pages of text messages, according to a letter from the Wisconsin lawmaker that was obtained by The Associated Press.

But, according to the letter, the FBI told the department that its system for retaining text messages sent and received on bureau phones had failed to preserve communications between Strzok and Page over a five-month period between Dec. 14, 2016, and May 17, 2017. May 17 was the date that Mueller was appointed as special counsel to oversee the Russia investigation. The explanation for the gap was “misconfiguration issues related to rollouts, provisioning, and software upgrades that conflicted with the FBI’s collection capabilities.”

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Are they really? You don’t think they may have seen this coming, and prepared for it?

Fed Scared to Death of Causing Global Financial Crash – Nomi Prins (USAW)

Two time, best-selling author Nomi Prins says central bankers have no idea how to stop the easy money policies that they started after the financial meltdown of 2008. Prins explains, “So, when the Fed says they are going to remove assets from their $4.5 trillion book by not reinvesting the interest payment . . . the reality is they haven’t really done that. They have reduced their book by about $10 billion off of $4.5 trillion since they mentioned they were going to start ‘tapering.” The media discusses this as a major tightening move. Somehow all of our economies have finally worked because of central bank activity. Growth is real. It’s all positive. The markets are evidence of that because of the levels they are at; and, therefore, these central banks, starting with the Fed, are going to reverse course of these last 10 years.

The reality is if you look at the actual activity of the central banks, beyond the Fed raising rates by a little bit, there hasn’t been and there isn’t being a reversal of course because they are scared to death that too much of a reversal is going to cause a major crash throughout the financial system. Everything is connected. All the banks are connected. Money flows around the world in less than nanoseconds, and all of it has the propensity to collapse if that carpet the central banks have created is dragged from beneath the floor of all this activity.”Prins, who just finished traveling the globe to research her upcoming book, thinks there is one big thing that can take the entire system down. Prins contends, “There hasn’t been any real growth in the real economy. That is an indication of the misfire of this entire plan.

There has been tremendous growth in stock markets and bond markets. If you look at localities or states or governments whose debt to GDP levels are well over 100%, in Japan it’s over 200%, in the United States it over 100%, and this is the same throughout the world. These are levels that they have never been, and they are all at their historic highs. That’s why debt will ultimately be the destructor of the system. In order for that to happen, the cheapness of money that allow states, municipalities and corporations to continue to borrow at these cheap levels has to go away. . . At some point, there will be a mistake. There might be a tiny smidge of an interest rate hike at some central bank, probably the Fed, which ripples throughout the system as a mistake, not because real growth has happened, and that’s why interest rates have been raised. That will incur defaults throughout the system.

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Macron defines European democracy. Straight faced.

Macron Admits France Would Vote To Leave EU If Referendum Held (ZH)

When Marine Le Pen lost last year’s French presidential election to Emmanuel Macron in what appeared to be a landslide, the establishment breathed a sigh of relief because not only was the notorious Eurosceptic populist defeated, but also the wind appeared to be turning, and after a tumultuous 2016, 2017 started off with a bang for the unelected Eurocrats in Brussels. After all, the people had spoken and they wanted more Europe (and Euro), not less. Or maybe not. The French president sent shockwaves across Europe after he conceded that French voters would quit the EU if France held an in/out referendum on continued membership in the Brussels-led bloc. Not surprisingly no other EU country has risked putting membership of the bloc to a public vote since Britain shocked member-states by voting to leave the bloc in 2016, despite polls which showed virtually no possibility of such an outcome.

In an interview with BBC’s Andrew Marr, Emmanuel Macron admitted that he would lose a French referendum on EU membership. Asked about the Brexit vote, the candid president told Marr: “I am not the one to judge or comment on the decision of your people.” But, he added “my interpretation is that a lot of the losers of globalisation suddenly decided it was no more for them.” Marr then pushed the French president, regarded by many as the EU’s new leader, on whether Britain’s decision was a one-off. Quoted by Express, the BBC journalist asked: “If France had had the same referendum, it might have had the same result?” Macron responded: “Yes, probably, probably. Yes. In a similar context. But we have a very different context in France” although he said he would not make it easy: “I wouldn’t take any bet though – I would have fought very hard to win.

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Got to admire the efforts to turn this into a positive story.

Apple Leak Reveals Sudden iPhone X Cancellation (F.)

It may be the smartphone of the moment, but a new leak reveals Apple AAPL -0.45% will soon cancel the iPhone X. And the source could not be more credible… In a new report obtained by AppleInsider, acclaimed KGI Securities’ analyst Ming-Chi Kuo says disappointing sales of the iPhone X will lead to the cancellation of the model “with production ceasing in the summer”. This would be the first time Apple has cancelled an iPhone model after just one generation since the iPhone 5C in 2014. Kuo, who has a long track record successfully revealing Apple’s plans, said disinterest in China is the main reason. In China big screens are king and the iPhone X’s polarising ‘notch’ is seen by Chinese consumers as removing too much usable space. Especially when the cheaper iPhone 8 Plus actually delivers slightly more.

The news also follows a new survey from Cowan which claims interest in new iPhones has hit an historic low. That said it is not all doom and gloom. While the iPhone X will not bring Apple the much anticipated sales ‘Super Cycle’, Kuo states Apple will see modest 5% growth in the first half of 2018. This comes from Apple having three premium models (iPhone 8, iPhone 8 Plus, iPhone X) on sale for the first time. Furthermore Kuo believes Apple will enjoy a better end to 2018 with 10% growth as the outgoing iPhone X will be replaced by a total of three new iPhone X-inspired designs: a second generation 5.8-inch iPhone X, 6.5-inch iPhone X Plus and a “$650-750” 6.1-inch iPhone SE replacement which will be fitted with Face ID. Apple hopes it will be the latter two which once again excite the Chinese market.

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Ecuador requires countries to stand with it.

Assange a ‘Problem’, ‘More Than a Nuisance’ – Ecuador President (Sp.)

In an interview the president of Ecuador, Lenin Moreno, stated that WikiLeaks founder Julian Assange is an “inherited problem” that has created “more than a nuisance” for his government. “We hope to have a positive result in the short term,” Lenin Moreno said in an interview with television networks. Ecuador wanted to resolve the Assange issue, so the Australian whistleblower was “granted Ecuadorian citizenship and a diplomatic rank so that he could leave the territory of the embassy” in London, Moreno said. “The problem persists,” the Ecuadorian president said, pointing out that the country’s Foreign Ministry intends to solve it “using the mediation of important people.” The head of state assured that their names will soon be made public.

The Ecuadorian government wants to see a “positive result” with Assange in a short time, Moreno added. Earlier, the Ministry of Foreign Affairs of Ecuador officially confirmed that the authorities granted citizenship to Julian Assange. According to El Universo, the number of his passport is listed in the relevant databases. This is confirmed on the website of the Internal Revenue Service, where the specified number corresponds to a person named Julian Paul Assange. According to the publication, citizenship was granted to him on December 21. Ecuador’s foreign minister, Maria Fernanda Espinosa, said that she fears that third party states may threaten Julian Assange’s life. She added that Assange won’t leave Ecuador’s Embassy in UK because there are no security guaranties.

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“The big money was not in acute pain, which goes away, or cancer pain, where patients die quickly..”

Opioids: The Big Money Is In Chronic Pain, Which Is Endless (NDN)

Opioids affect us in complex and mysterious ways . They don’t stop sensation, like local anesthetics. Instead, these drugs work by activating natural opioid receptors in our brains. They change our experience of pain. They replace pain, in part, with pleasure. Pain thresholds are built into us for powerful evolutionary reasons. Opioids make us feel good in the short term, but they also distort essential mechanisms necessary for survival in a Darwinian world. Tolerance is the body’s natural attempt to restore those mechanisms. We become less sensitive to opioids, and need higher doses for the same effect. Tolerance is the first step toward physical addiction; the two are linked. As tolerance rises, the risk of overdose and death follows closely behind. The time it takes for this process to occur is the key to understanding the opioid epidemic. A week or two of opioids may cause euphoria and pleasure, but it will rarely create physical addiction. Given a few months, however, anyone can be made into an opioid addict.

[..] In 1996 a single company, Purdue Pharmaceuticals, introduced a patented new opioid compound into the market with FDA approval. They called it OxyContin, and marketed it as a new drug. OxyContin wasn’t a new drug. It was simply a new pill designed to release an old drug — oxycodone — more slowly. Oxycodone was first synthesized in 1916, and is closely related to heroin. Since it releases oxycodone more slowly, OxyContin doesn’t have to be taken as often to relieve pain. That slower release also allowed Purdue to put higher doses of oxycodone into each pill. Purdue Pharma used this distinction as a pretext for claims that OxyContin was safer and less addictive than other opioids and therefore should be widely prescribed for pain of all kinds.

The FDA enabled this assertion, and the FDA examiner who approved OxyContin’s initial application took a job with Purdue shortly thereafter. Once the FDA approved the drug, Purdue unleashed a fraudulent marketing campaign designed to generate as many new OxyContin consumers as possible. A critical element of their strategy was to expand the traditional indications for opioid prescriptions beyond acute pain into the far more controversial category of chronic pain. Chronic pain is so broadly defined that tens of millions of patients became potential customers. This was hugely consequential. When drugs are approved by the FDA, health insurance pays for them. The big money was not in acute pain, which goes away, or cancer pain, where patients die quickly, but in chronic pain, which is endless.

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Dec 272017
 
 December 27, 2017  Posted by at 10:18 am Finance Tagged with: , , , , , , , , , ,  


Vincent van Gogh Landscape with snow 1888

 

World’s Wealthiest Became $1 Trillion Richer in 2017 (BBG)
The Rich Are Getting So Much Richer So Fast Their Spending Can’t Keep Up (CNN)
Germany – A Most Dangerous And Ridiculous Nation (Bilbo)
Britons Borrow An Average £452 Each On Credit Cards At Christmas (G.)
Bitcoin’s Rally Has Taken A Pause (BBG)
Case-Shiller 20-Home Price Index Just Shy Of 2006 Bubble Peak (Mish)
China Bets on More State Control for 2018 (Balding)
Eight Lawsuits Over Apple Defrauding iPhone Users By Slowing Devices (R.)
From Snowden To Russia-gate – The CIA And The Media (Moon of A.)
Italy Rescues More Than 250 Migrants In Mediterranean (R.)

 

 

They won’t be able to keep doing this without facing pitchforks.

World’s Wealthiest Became $1 Trillion Richer in 2017 (BBG)

The richest people on earth became $1 trillion richer in 2017, more than four times last year’s gain, as stock markets shrugged off economic, social and political divisions to reach record highs. The 23% increase on the Bloomberg Billionaires Index, a daily ranking of the world’s 500 richest people, compares with an almost 20% increase for both the MSCI World Index and Standard & Poor’s 500 Index. Amazon.com founder Jeff Bezos added the most in 2017, a $34,2 billion gain that knocked Microsoft co-founder Bill Gates out of his spot as the world’s richest person in October. Gates, 62, had held the spot since May 2013, and has been donating much of his fortune to charity, including a $4.6 billion pledge he made to the Bill & Melinda Gates Foundation in August.

Bezos, whose net worth topped $100 billion at the end of November, currently has a net worth of $99.6 billion compared with $91.3 billion for Gates. George Soros also gave away a substantial part of his fortune, revealing in October that his family office had given $18 billion to his Open Society Foundations over the past several years, dropping the billionaire investor to No. 195 on the Bloomberg ranking, with a net worth of $8 billion. By the end of trading Tuesday, Dec. 26, the 500 billionaires controlled $5.3 trillion, up from $4.4 trillion on Dec. 27, 2016. “It’s part of the second-most robust and second-longest bull market in history,” said Mike Ryan, chief investment officer for the Americas at UBS Wealth Management, on Dec. 18. “Of all the guidance we gave people over the course of this year, the most important advice was staying invested.”

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It’s curious to see that so many people are so blind to the notion of economies and societies needing a minimum level of balance. When that balance is destroyed, a reaction must automatically and inevitably follow. The rich could have gone on enjoying their privileges for a long time, but greed got in the way.

The Rich Are Getting So Much Richer So Fast Their Spending Can’t Keep Up (CNN)

It’s never a bad year to be rich, exactly. But 2017 turned out to be a particularly good one. Rich people are doing so well these days that their spending on luxury goods isn’t even keeping up. Luxury spending rose 5% globally in 2017, the management consulting firm Bain & Company found. But that is a fraction of the 40% rise in net worth that people in America’s top-tenth of income earners saw between 2013 and 2016, according to the Federal Reserve. “We used to see that the growth of luxury was closely correlated with the stock market,” said Milton Pedraza, chief executive officer of the Luxury Institute, a consulting firm for high-end brands. “The stock market and real estate have gone up so much that nobody wants to spend all that money. It’s impossible.”

The big increase in wealth has exacerbated a long-evolving financial split between those at the very top and those at the bottom, even as the robust economy has lifted many working people with jobs and higher wages. Here are some examples. The S&P 500 Index has risen 20% since the beginning of the year and the Dow Jones Industrial Average is up 25%, fattening portfolios and boosting dividends. To a certain extent, the benefits are shared through ownership of 401(k) accounts. But only about half of Americans participate in an employer-sponsored retirement fund, according to the Pew Research Center, and a much smaller 18.7% of Americans own stock directly. In both cases, market participation is skewed toward those with higher incomes, which means that the wealthy disproportionately benefit from Wall Street’s boom.

Home prices reached all-time highs, according to the Case-Shiller home price index. That’s especially the case in hot markets like Seattle and San Francisco, where many working people are already unable to afford ownership. Although homeownership is a source of middle class wealth, homeowners generally tend to be higher-income. According to the Census Bureau, 78.4% of families making more than the median income own homes, compared to 49.5% of those making less.

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Just another chapter in the ‘Rich Getting Richer’ files. This too will evoke a response.

Germany – A Most Dangerous And Ridiculous Nation (Bilbo)

Germany’s domination of the EMU is clear both in political and economic terms. The current political impasse within Germany will not change that. Once resolved the on-going government will continue in the same vein – running excessive fiscal surpluses and huge external surpluses. It can sustain those positions because it dominates European policy and can force the adjustment to these overall ‘unsustainable’ positions onto both its own citizens (lowering their material living standards), and, more obviously, onto citizens of other EMU nations, most noticeably Spain and Greece. If it couldn’t bully nations like Greece, Italy, Spain and even France, Germany’s dangerous domestic strategy would be less effective. If all EMU nations followed Germany’s lead – then there would be mass Depression throughout Europe. This dangerous and ridiculous nation is a blight.

Only by exiting the Eurozone and floating their currencies against the currency that Germany uses can these beleaguered EMU nations gain some respite. When the Europhile Left come to terms with that obvious conclusion things might change within Europe. The following graph (using IMF WEO data) shows the sectoral balances for Germany from 1991 to 2017 (the last year is estimated). It is an extraordinary graph really in the context of Germany’s integral role in the Economic and Monetary Union (EMU). Germany is part of a currency union and its outcomes are much more closely tied to the fortunes of its EMU partners than say a nation, such as Australia, which has its own currency and floats it on international markets. What you see are two distinct EMU periods, when Germany was in gross violation in one way or another of the Treaty rules (laws).

It is not overstating the case to say that the increased poverty and hardship for citizens within Europe is directly related to the German government’s obsession with fiscal and external surpluses and its intransigence when confronted about this. Germany has become a dangerous yet ridiculous nation. While the Financial Times article (Dec 22, 2017) – The fiscal surplus that Germany should spend – referred to “Germany’s fiscal surplus” as an: ..a chronic embarrassment of riches.. I would prefer to refer to it as an embarrassing example of policy vandalism and an illegal assault on the rules that Germany has signed up to follow. Why illegal? Because it is directly related to Germany’s violation of the Macroeconomic Imbalance Procedure, which specifies under its so-called Scoreboard Indicators that the “major source of macroeconomic imblances” includes a: “3-year backward moving average of the current account balance as% of GDP, with thresholds of +6% and -4%”.. So the upper warning threshold (for an external surplus) is 6% of GDP.

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Nicely put: “January should be a time for looking ahead but up and down the country millions of Brits will be looking over their shoulder at the cost of their festive spending..”

Britons Borrow An Average £452 Each On Credit Cards At Christmas (G.)

The Christmas spending hangover means that Britons who splurged on plastic will start 2018 owing an average of more than £450 on their credit cards – with many fearful the debt will still be haunting them by next Christmas. Nearly £8.5bn has been loaded on to cards to cover the cost of gifts and entertaining, according to research by the price comparison service uSwitch, which found nearly a fifth of consumers had exceeded their Christmas budget as they grappled with rising living costs. “January should be a time for looking ahead but up and down the country millions of Brits will be looking over their shoulder at the cost of their festive spending,” said Tashema Jackson, money expert at uSwitch.com which polled 4,000 consumers.

The survey found Britons had borrowed an average of £452 to cover the cost of the festivities. One annual survey found that the UK’s cheapest supermarket Christmas dinner cost 18% more than last year, as the impact of inflation and Brexit-related commodity costs made its way to the festive family table. Half of the respondents told uSwitch they were worried they would still be trying to clear the debt in December 2018. Nearly one in 10 were still paying off debts dating back to last Christmas.

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If you bought at $19,000 and used leverage, does this still feel like a pause?

Bitcoin’s Rally Has Taken A Pause (BBG)

Bitcoin’s rally took a pause Wednesday, suggesting it isn’t about to make another run at its record reached last week. The fervor that propelled the digital currency past $19,000, prompted in part by regulated U.S. derivatives exchanges starting to trade contracts based on the unit this month, has yet to return. Bitcoin traded around $15,947 as of 10:31 a.m. Tokyo time Wednesday, according to composite prices on Bloomberg, up 0.1% from late Tuesday though below that day’s high. “Nobody knows the ultimate value of this underlying asset,” Edward Stringham, president of the American Institute for Economic Research, said on Bloomberg Television. “We cannot predict whether it’s going to be zero or one million dollars or anything in between.”

For skeptics doubting whether individuals and businesses will truly start using bitcoin as a medium of exchange – as opposed to some officially backed digital currency – the short-lived rebound from the past week’s selloff portends further declines. “It’s much more likely once you’ve made a big downward movement like the one we made last week that you have a bigger and more complex correction,” Ric Spooner, a Sydney-based analyst at CMC Markets, told Bloomberg Television. “Once a market like this one locks into those patterns it becomes pretty good” to follow via chart-based analysis, he said. Spooner said it’s possible bitcoin could drop to $5,700 or $8,700 in coming months.

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“Congratulations. The Fed re-blew the housing bubble. In the misguided way in which the Fed calculates inflation, none of this is considered inflationary. Few new buyers can afford to buy.”

Case-Shiller 20-Home Price Index Just Shy Of 2006 Bubble Peak (Mish)

The Case-Shiller national home price index surged past the pre-recession high last year. The city composites lag. Steady gains continue in the Case-Shiller Home Price Indexes.

Case-Shiller Year-Over-Year Summary
• The National Home Price NSA Index reported a 6.2% annual gain in October, up from 6.1% in the previous month.
• The 10-City Composite annual increase came in at 6.0%, up from 5.7% the previous month.
• The 20-City Composite posted a 6.4% year-over-year gain, up from 6.2% the previous month.
• Seattle, Las Vegas, and San Diego reported the highest year-over-year gains among the 20 cities. In October, Seattle led the way with a 12.7% year-over-year price increase, followed by Las Vegas with a 10.2% increase, and San Diego with an 8.1% increase.

Nine cities reported greater price increases in the year ending October 2017 versus the year ending September 2017.

Case-Shiller Month-Over-Month Summary
• Before seasonal adjustment, the National Index, 10-City and 20-City Composites all posted a month-over-month gain of 0.2% in October.
• After seasonal adjustment, the National Index, 10-City and 20-City Composites all recorded a 0.7% month-over-month increase in October.
• Eleven of 20 cities reported increases in October before seasonal adjustment, while all 20 cities reported increases after seasonal adjustment.

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Xi cannot afford to even allow teh suggestion that he loses control; at the same time he needs to generate growth. He may well find the two contradict each other.

China Bets on More State Control for 2018 (Balding)

First, watch the data, not the New Year’s resolutions. While China touts deleveraging efforts, the data is mixed. The debt-to-GDP ratio in China is only up slightly from 2016 to 260%, though it is expected to top out at 327% in 2022. The moderation was due not to slowing debt growth, but a jump in commodity prices that pushed up nominal GDP. Watch debt growth in 2018: Prices are expected to fall again, raising debt-to-GDP. China still has not given up its debt habit. Second, the Federal Reserve rate hikes last year were likely to play a big role in Chinese policy. In retrospect, they did and did not. Interest rates in China are up sharply, with even interbank rates over one month up 1.5% since January 2017. Money market rates are up to 6.39% for 14-day repurchases.

Rate increases are putting pressure on Chinese corporate bonds given the overwhelmingly short-term nature of borrowing, which constantly resets rates. Oddly, even as U.S. interest rates increased, the dollar fell, with indexes down 9%. Though it is unclear why the dollar fell, if the Fed hikes four times as predicted by Goldman Sachs, this could cause the currency to reverse course. A strong dollar and rising U.S. rates will pressure China. Third, heading into the National Congress, I said watch out for Chinese politics. Though Premier Li Keqiang remains in office, Beijing clearly swept away any vestiges of market adherence. The installation of Party committees over the board of directors in foreign firms and major state-owned enterprises laid bare Beijing’s ambition. Communist Party strength would take priority over everything.

As we look into 2018, some of these themes carry forward, but with a twist. Beijing is solidifying its control over all aspects of the economy. The Party released new rules on overseas investments by firms and has enforced rules mandating that banks balance their foreign exchange transactions. After the Fed recently raised rates by 0.25%, the People’s Bank of China followed with a hike of only 0.05%, confident it can tame any potential outflows. If the Fed hikes another three times and the dollar does not drop another 10%, this would push interest rates in China for debt over six months close to an intolerable 8% and reduce foreign exchange reserves beneath the $3 trillion level.

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What a curious mistake.

Eight Lawsuits Over Apple Defrauding iPhone Users By Slowing Devices (R.)

Apple defrauded iPhone users by slowing devices without warning to compensate for poor battery performance, according to eight lawsuits filed in various federal courts in the week since the company opened up about the year-old software change. The tweak may have led iPhone owners to misguided attempts to resolve issues over the last year, the lawsuits contend. All the lawsuits – filed in U.S. District Courts in California, New York and Illinois – seek class-action to represent potentially millions of iPhone owners nationwide. A similar case was lodged in an Israeli court on Monday, the newspaper Haaretz reported. The company acknowledged last week for the first time in detail that operating system updates released since “last year” for the iPhone 6, iPhone 6s, iPhone SE and iPhone 7 included a feature “to smooth out” power supply from batteries that are cold, old or low on charge.

Phones without the adjustment would shut down abruptly because of a precaution designed to prevent components from getting fried, Apple said. The disclosure followed a Dec. 18 analysis by Primate Labs, which develops an iPhone performance measuring app, that identified blips in processing speed and concluded that a software change had to be behind them. One of the lawsuits, filed Thursday in San Francisco, said that “the batteries’ inability to handle the demand created by processor speeds” without the software patch was a defect. “Rather than curing the battery defect by providing a free battery replacement for all affected iPhones, Apple sought to mask the battery defect,” according to the complaint.

[..] The problem now seen is that users over the last year could have blamed an aging computer processor for app crashes and sluggish performance – and chose to buy a new phone – when the true cause may have been a weak battery that could have been replaced for a fraction of the cost, some of the lawsuits state.

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“Bezos and Omidyar obviously helped the NSA to keep more than 95% of the Snowden archive away from the public…”

From Snowden To Russia-gate – The CIA And The Media (Moon of A.)

The promotion of the alleged Russian election hacking in certain media may have grown from the successful attempts of U.S. intelligence services to limit the publication of the NSA files obtained by Edward Snowden. In May 2013 Edward Snowden fled to Hongkong and handed internal documents from the National Security Agency (NSA) to four journalists, Glenn Greenwald, Laura Poitras, and Ewen MacAskill of the Guardian and separately to Barton Gellman who worked for the Washington Post. Some of those documents were published by Glenn Greenwald in the Guardian, others by Barton Gellman in the Washington Post. Several other international news site published additional material though the mass of NSA papers that Snowden allegedly acquired never saw public daylight.

In July 2013 the Guardian was forced by the British government to destroy its copy of the Snowden archive. In August 2013 Jeff Bezos bought the Washington Post for some $250 million. In 2012 Bezos, the founder, largest share holder and CEO of Amazon, had already a cooperation with the CIA. Together they invested in a Canadian quantum computing company. In March 2013 Amazon signed a $600 million deal to provide computing services for the CIA. In October 2013 Pierre Omidyar, the owner of Ebay, founded First Look Media and hired Glenn Greenwald and Laura Poitras. The total planned investment was said to be $250 million. It took up to February 2014 until the new organization launched its first site, the Intercept. Only a few NSA stories appeared on it. The Intercept is a rather mediocre site.

Its management is said to be chaotic. It publishes few stories of interests and one might ask if it ever was meant to be a serious outlet. Omidyar has worked, together with the U.S. government, to force regime change onto Ukraine. He had strong ties with the Obama administration. Snowden had copies of some 20,000 to 58,000 NSA files. Only 1,182 have been published. Bezos and Omidyar obviously helped the NSA to keep more than 95% of the Snowden archive away from the public. The Snowden papers were practically privatized into trusted hands of Silicon Valley billionaires with ties to the various secret services and the Obama administration.

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The EU is actively assisting Libya’s slave trade. That is quite something to close off the year with.

Italy Rescues More Than 250 Migrants In Mediterranean (R.)

More than 250 migrants were rescued in the central Mediterranean during the night between Monday and Tuesday, Italy’s Coast Guard said. A statement said the migrants, in one large rubber dinghy and two small boats, were rescued in three missions by two ships, one from a non-governmental organization. Migrant arrivals to Italy have fallen by two-thirds year on year since July after officials working for the U.N.-backed government in Tripoli put pressure on people smugglers in the Libyan city of Sabratha to stop boats leaving. Italy is also bolstering the Libyan coast guard’s ability to turn back boats. Last week, the United Nations began bringing African refugees to Italy from Libya, evacuating them from detention centers whose conditions have been condemned by rights groups as inhumane.

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Nov 132017
 
 November 13, 2017  Posted by at 9:42 am Finance Tagged with: , , , , , , , , , ,  


Mark Twain in Nikola Tesla’s lab 1894

 

John Hussman Forecasts A Decade Of Stock Losses (BI)
One In Five American Households Have ‘Zero Or Negative’ Wealth (MW)
Top Tech Stocks’ $1.7 Trillion Gain Eclipses Canada’s Economy (BBG)
Bitcoin Plunges 29% From Record High (BBG)
The End Of “The End Of History” (Luongo)
Warnings From the “China Beige Book” (Rickards)
UK Government Tensions Rise After Leak Of ‘Orwellian’ Memo Sent To May (G.)
More Than A Third Of UK Home Sellers Cut Asking Price (G.)
Fossil Fuel Burning Set To Hit Record High In 2017 (G.)
The Decisions Behind Monsanto’s Weed-Killer Crisis (R.)
Weed-Killer Prompts Angry Divide Among US Farmers (AFP)
Millions On Brink Of Famine In Yemen As Saudi Arabia Tightens Blockade (G.)

 

 

Big fall, big rise and an even bigger fall.

John Hussman Forecasts A Decade Of Stock Losses (BI)

As the equity bull market has climbed into rarefied air, investors have continuously come up with new ways to rationalize the rally. Right now, they like to cite earnings growth, which has expanded for several quarters after a prolonged rough patch. They also frequently mention interest rates that, despite hawkish signals from central banks, have remained low, supplying the market with a seemingly endless supply of cheap money. On the other side of the spectrum, John Hussman, the president of the Hussman Investment Trust and a former economics professor, thinks that the investment community is unwisely ignoring the most stretched valuations in history on the heels of a nearly 300% bull market run. Ever the outspoken bear, Hussman says investors are being willfully ignorant, which has stocks at risk of a drop that could reach 63% and send the market spiraling into a full decade of negative returns.

It wouldn’t be the first time in history this has happened. But Hussman thinks this crash will be different, because the reasons for market instability are “purely psychological” this time around, according to a recent blog post. At the root of Hussman’s pessimistic market view are stock valuations that look historically stretched by a handful of measures. According to his preferred valuation metric — the ratio of non-financial market cap to corporate gross value-added (Market Cap/GVA) — stocks are more expensive than they were in 1929 and 2000, periods that immediately preceded major market selloffs. “US equity market valuations at the most offensive levels in history,” he wrote in his November monthly note. “We expect that more extreme valuations will only be met by more severe losses.”

Those losses won’t just include the 63% plunge referenced above – it’ll also be accompanied by a longer 10 to 12 year period over which the S&P 500 will fall, says Hussman. He cites the chart below, which shows how closely 12-year expected returns for the benchmark have historically tracked Market Cap/GVA, which is shown in inverted fashion. Note that the expected trajectory for Market Cap/GVA shows the S&P 500 veering into negative territory. The psychology behind the market’s willingness to accept lofty stock valuations stems from the flawed rationale that prices are justified by low interest rates, says Hussman. To him, the US economy is growing too slowly for this to be true, and that any belief to the contrary gives people false confidence.

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While other reports say some 70% live paycheck to paycheck. Which one is true? At least it should be clear that the US is not doing well at all.

One In Five American Households Have ‘Zero Or Negative’ Wealth (MW)

Millions of Americans are living on the edge. One in five households has zero or negative wealth, according to a report released this week by the Institute for Policy Studies, a progressive think tank based in Washington, D.C. What’s more, an even greater share of African-American (30%) and Latino (27%) households are “underwater” financially. The combined impact of $1 trillion in credit-card debt, $1.4 trillion in student loan debt, and stagnant wages are taking a toll. U.S. homes have regained value since the Great Recession, but many households have not. “Millions of American families struggle with zero or negative wealth, meaning they owe more than they own,” the report found. “This means that they have nothing to fall back on if an unexpected expense comes up like a broken down car or illness.” And inequality could get worse through new tax cuts for the wealthy.

President Trump’s tax proposals won’t give America’s middle class the reprieve they need to grow their wealth and recover from the financial crash, said Josh Hoxie, who heads up the Project on Opportunity and Taxation at the Institute for Policy Studies. A recent analysis by the Joint Committee on Taxation concluded that taxes would decline for all income groups, with the biggest percentage-point decline for millionaires. After-tax income would rise by nearly 7% for households earning over $1 million per year, compared to less than 2% for those earning between $50,001 and $1 million, as MarketWatch recently reported. And less than 1% for those earning less than $50,000, according to Ernie Tedeschi, an economist at Evercore IS investment banking advisory firm who worked in the Treasury Department under President Obama.

Looking at private income, such as earnings and dividends, and government benefits like Social Security, the income of families near the top increased roughly 90% from 1963 to 2016, while the income of families at the bottom rose less than 10%, according to a separate report released last month by the Urban Institute, a nonprofit policy group based in Washington, D.C., while most other groups have been left behind. And that gap between rich and poor is only going to get worse, Hoxie said. The wealthiest 25 individuals in the U.S., including co-founder Bill Gates, Amazon CEO Jeff Bezos and Facebook CEO Mark Zuckerberg, own $1 trillion in combined assets. These 25 — a group equivalent to the active roster of a major league baseball team — hold more wealth than the bottom 56% of the U.S. population.

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Completely nuts.

Top Tech Stocks’ $1.7 Trillion Gain Eclipses Canada’s Economy (BBG)

Between the FAANG quintet and China’s rivaling BAT companies, gains in the world’s top technology shares are nearing a whopping $1.7 trillion in market value this year. That’s more than Canada’s entire economy, and exceeds the worth of Germany’s biggest 30 companies put together. The eight tech giants – Facebook, Amazon, Apple, Netflix and Google parent Alphabet, as well as their Asian peers Baidu, Alibaba and Tencent – have amassed as much money in 2017 as PIMCO, one of the world’s biggest fund managers, has done in about 46 years. While the stocks have seen a meteoric rise this year, their combined market value came off highs last week amid a global selloff in which the year’s high flyers had a bigger retreat. A recent breakdown in the correlation between high-yield bonds and the tech-heavy Nasdaq 100 Index suggests the slide in junk may spread further.

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Confidence.

Bitcoin Plunges 29% From Record High (BBG)

Bitcoin plunged as the cancellation of a technology upgrade prompted some users to switch out of the cryptocurrency, spooking speculators who had profited from a more than 800% surge this year. The cryptocurrency has dropped 9.5% since late Friday, extending its slide from last week’s record to as much as 29%, according to data compiled by Coinmarketcap.com and Bloomberg. Bitcoin cash, a rival that split from the original bitcoin in August, has jumped nearly 40% since Friday. Bitcoin cash is gaining popularity because of its larger block size, a characteristic that makes transactions cheaper and faster than the original. When a faction of the cryptocurrency community canceled plans to increase bitcoin’s block size on Wednesday – a move that would have created another offshoot – some supporters of bigger blocks rallied around bitcoin cash.

The resulting volatility has been extreme even by bitcoin’s wild standards and comes amid growing interest in cryptocurrencies among regulators, banks and fund managers. While skeptics have called bitcoin’s rapid advance a bubble, it has become too big for many on Wall Street to ignore. Even after shrinking by as much as $38 billion since Wednesday, bitcoin boasts a market value of $101 billion. Supporters of bitcoin’s technology upgrade “are now switching support to bitcoin cash,” said Mike Kayamori, head of Tokyo-based Quoine, the world’s second most-active bitcoin exchange over the past day. “There’s a panic about what’s happening. People shouldn’t panic. Just hold on to both coins until we see how it plays out.”

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A different view from most.

The End Of “The End Of History” (Luongo)

The path to draining the swamp is a circuitous one but, in my mind, it’s hard to argue where things are headed. They are not headed towards confrontation with Iran but actually the opposite. The most rabidly anti-Iranian segment of the Saudi Royal house is impoverished and imprisoned. CNN will be sold and go out of business to allow for the Time-Warner/AT&T merger. Jeff Zucker is out. Add another scalp to Steve Bannon’s belt along with Harvey Weinstein, Kevin Spacey and so many to come. Will the vestiges of the neoconservative establishment in the U.S. and Israel continue to sabre-rattle and try to undermine what is happening? Yes.

They’ve been doing that since the day Trump was elected just over a year ago, but it hasn’t stopped the momentum. Why? Because Putin was on the job outmaneuvering them at every turn. Trump made a deal with the neocons back in August to cede them control of foreign policy and, in effect, outsourced cleaning up the Middle East to Putin. But, predictably they also didn’t follow through with their end of the bargain. Trump learned, like Putin did, the John McCain’s of the world don’t keep to their deals. They are ‘not agreement capable.’ And, as such, since the last failure to repeal Obamacare Trump has gone after every pillar of support these people had. It will end with Hillary Clinton’s indictment. But in the meantime it will look like the world is on the brink of world war.

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“Xi is ready to undertake reform of the financial system, which means shutting down insolvent companies and banks.”

Warnings From the “China Beige Book” (Rickards)

The China Beige Book, CBB, says that China had been covering up and smoothing over problems related to weak growth and excessive debt in order to provide a calm face to the world in advance of the National Congress of the Communist Party of China, which took place last month. CBB also makes it clear that the much-touted “rebalancing” of the Chinese economy away from investment and manufacturing toward consumption and spending has not occurred. Instead China has doubled down on excess capacity in coal, steel and manufacturing and has continued its policy of wasteful investment fueled with unpayable debt. It’s become obvious that the first cracks are starting to appear in China’s Great Wall of Debt. The Chinese debt binge of the past 10 years is a well-known story.

Chinese corporations have incurred dollar-denominated debts in the hundreds of billions of dollars, most of which are unpayable without subsidies from Beijing. China’s debt-to-equity ratio is over 300%, far worse than America’s (which is also dangerously high) and comparable to that of Japan and other all-star debtors. China’s trillion-dollar wealth management product (WMP) market is basically a Ponzi scheme. New WMPs are used to redeem maturing WMPs, while most of the market is simply rolled over because the underlying real estate and infrastructure projects cannot possibly repay their debts. A lot of corporate lending is simply one company lending to another, which in turns lends to another, giving the outward appearance of every company holding good assets, but in which none of the companies can actually pay its creditors.

It’s an accounting game with no real money behind it and no chance of repayment. All of this is well-known. What is not known is when it will end. When will confidence be lost in such a way that the entire debt house of cards crumbles? When will a geopolitical shock or natural disaster trigger a loss of confidence that ignites a financial panic? There was little prospect of this in the past year because President Xi Jinping was keeping a lid on trouble before the recently concluded National Congress of the Communist Party of China. With the congress behind him, Xi is ready to undertake reform of the financial system, which means shutting down insolvent companies and banks. Now the first bankruptcies have begun to appear.

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None of these people give one hoot about their country. They care about themselves only.

UK Government Tensions Rise After Leak Of ‘Orwellian’ Memo Sent To May (G.)

The tensions in Theresa May’s government intensified on Sunday night ahead of this week’s vital votes on the Brexit bill, as ministers accused Boris Johnson and Michael Gove of sending an “Orwellian” set of secret demands to No 10. As an increasingly weakened prime minister faces the possibility of parliamentary defeats on the bill, government colleagues have said they are aghast at the language used by the foreign secretary and the environment secretary in a joint private letter. The leaked letter – a remarkable show of unity from two ministers who infamously fell out during last year’s leadership campaign – appeared to be designed to push May decisively towards a hard Brexit and limit the influence of former remainers. It complained of “insufficient energy” on Brexit in some parts of the government and insisted any transition period must end in June 2021 – a veiled attack on the chancellor, Philip Hammond.

They urged the prime minister to ensure members of her top team fall behind their Brexit plans by “clarifying their minds” and called for them to “internalise the logic”. But the leak drew a bitter response from supporters of a soft Brexit, who suggested that May would now be forced to either discipline the pair or further weaken her position, which has already been tested by the recent resignations of Priti Patel and Michael Fallon and continuing pressure on Johnson and Damian Green. One cabinet minister told the Guardian: “It is not surprising that they [Gove and Johnson] would express their view. But what is surprising is that they would write this down and use this kind of language in a letter to the prime minister. “Some have described it as Orwellian, and it is. It is not helpful when people try and press their views in untransparent way.”

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It’s just starting. London falling.

More Than A Third Of UK Home Sellers Cut Asking Price (G.)

More than a third of home owners trying to sell their house have been forced to reduce their asking price, with the number of price cuts at their highest level since 2012, according to Rightmove. Traditionally house sellers are often forced to cut asking prices in the pre-Christmas period but this year the nation appears to be holding a collective autumn sale, said the property website. Rightmove, which claims to list 90% of the houses being sold in the UK, said 37% of current sellers had dropped their asking price, with a typical 0.8% or £2,392 price reduction. It also warned that those who recently put their property on the market were being too optimistic by not discounting by more. The mass price cut will be seen as further evidence that the market has slowed dramatically, particularly in London where prices have been falling.

Last week the Royal Institution of Chartered Surveyors said the overall UK property market had stalled. Rics also warned that it expected the market to remain subdued in the coming months as sales stay flat or fall in most regions. Rightmove director, Miles Shipside, said the slowdown in the housing market, the recent interest rate rise and the prediction that further rises were on the horizon suggested bigger reductions in house prices in the near future. “Given that the market has been price-sensitive for a while and a five-year high proportion of sellers are slashing their prices, some sellers and their agents are over-pricing. These sellers may well be asking themselves if they could have saved some time and stress by pricing a lot more conservatively at the start.”

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As you’re being pleasantly entertained with that dumb Paris agreement.

Fossil Fuel Burning Set To Hit Record High In 2017 (G.)

The burning of fossil fuels around the world is set to hit a record high in 2017, climate scientists have warned, following three years of flat growth that raised hopes that a peak in global emissions had been reached. The expected jump in the carbon emissions that drive global warming is a “giant leap backwards for humankind”, according to some scientists. However, other experts said they were not alarmed, saying fluctuations in emissions are to be expected and that big polluters such as China are acting to cut emissions. Global emissions need to reach their peak by 2020 and then start falling quickly in order to have a realistic chance of keeping global warming below the 2C danger limit, according to leading scientists. Whether the anticipated increase in CO2 emissions in 2017 is just a blip that is followed by a falling trend, or is the start of a worrying upward trend, remains to be seen.

Much will depend on the fast implementation of the global climate deal sealed in Paris in 2015 and this is the focus of the UN summit of the world’s countries in Bonn, Germany this week. The nations must make significant progress in turning the aspirations of the Paris deal into reality, as the action pledged to date would see at least 3C of warming and increasing extreme weather impacts around the world. The 12th annual Global Carbon Budget report published on Monday is produced by 76 of the world’s leading emissions experts from 57 research institutions and estimates that global carbon emissions from fossil fuels will have risen by 2% by the end of 2017, a significant rise.

“Global CO2 emissions appear to be going up strongly once again after a three-year stable period. This is very disappointing,” said Prof Corinne Le Quéré, director of the Tyndall Centre for Climate Change Research at the UK’s University of East Anglia and who led the new research. “The urgency for reducing emissions means they should really be already decreasing now.” “There was a big push to sign the Paris agreement on climate change but there is a feeling that not very much has happened since, a bit of slackening,” she said. “What happens after 2017 is very open and depends on how much effort countries are going to make. It is time to take really seriously the implementation of the Paris agreement.” She said the hurricanes and floods seen in 2017 were “a window into the future”.

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Farmers are using dicamba because they get it on their crops anyway from the neighbors. There’s not much time left to stop Monsanto from effectively owning all our food.

The Decisions Behind Monsanto’s Weed-Killer Crisis (R.)

In early 2016, agri-business giant Monsanto faced a decision that would prove pivotal in what since has become a sprawling herbicide crisis, with millions of acres of crops damaged. Monsanto had readied new genetically modified soybeans seeds. They were engineered for use with a powerful new weed-killer that contained a chemical called dicamba but aimed to control the substance’s main shortcoming: a tendency to drift into neighboring farmers’ fields and kill vegetation. The company had to choose whether to immediately start selling the seeds or wait for the U.S. Environmental Protection Agency (EPA) to sign off on the safety of the companion herbicide. The firm stood to lose a lot of money by waiting.

Because Monsanto had bred the dicamba-resistant trait into its entire stock of soybeans, the only alternative would have been “to not sell a single soybean in the United States” that year, Monsanto Vice President of Global Strategy Scott Partridge told Reuters in an interview. Betting on a quick approval, Monsanto sold the seeds, and farmers planted a million acres of the genetically modified soybeans in 2016. But the EPA’s deliberations on the weed-killer dragged on for another 11 months because of concerns about dicamba’s historical drift problems. That delay left farmers who bought the seeds with no matching herbicide and three bad alternatives: Hire workers to pull weeds; use the less-effective herbicide glyphosate; or illegally spray an older version of dicamba at the risk of damage to nearby farms.

The resulting rash of illegal spraying that year damaged 42,000 acres of crops in Missouri, among the hardest hit areas, as well as swaths of crops in nine other states, according to an August 2016 advisory from the U.S. Environmental Protection Agency. The damage this year has covered 3.6 million acres in 25 states, according to Kevin Bradley, a University of Missouri weed scientist who has tracked dicamba damage reports and produced estimates cited by the EPA. The episode highlights a hole in a U.S regulatory system that has separate agencies approving genetically modified seeds and their matching herbicides.

Monsanto has blamed farmers for the illegal spraying and argued it could not have foreseen that the disjointed approval process would set off a crop-damage crisis. But a Reuters review of regulatory records and interviews with crop scientists shows that Monsanto was repeatedly warned by crop scientists, starting as far back as 2011, of the dangers of releasing a dicamba-resistant seed without an accompanying herbicide designed to reduce drift to nearby farms.

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“Farmers need it desperately,” said Perry Galloway. “If I get dicamba on (my products), I can’t sell anything,” responded Shawn Peebles.”

Weed-Killer Prompts Angry Divide Among US Farmers (AFP)

When it comes to the herbicide dicamba, farmers in the southern state of Arkansas are not lacking for strong opinions. “Farmers need it desperately,” said Perry Galloway. “If I get dicamba on (my products), I can’t sell anything,” responded Shawn Peebles. The two men know each other well, living just miles apart in the towns of Gregory and Augusta, in a corner of the state where cotton and soybean fields reach to the horizon and homes are often miles from the nearest neighbor. But they disagree profoundly on the use of dicamba. Last year the agro-chemical giant Monsanto began selling soy and cotton seeds genetically modified to tolerate the herbicide. The chemical product has been used to great effect against a weed that plagues the region, Palmer amaranth, or pigweed – especially since it became resistant to another herbicide, glyphosate, which has become highly controversial in Europe over its effects on human health.

The problem with dicamba is that it vaporizes easily and is carried by the wind, often spreading to nearby farm fields – with varying effects. Facing a surge in complaints, authorities in Arkansas early this summer imposed an urgent ban on the product’s sale. The state is now poised to ban its use between April 16 and October 31, covering the period after plants have emerged from the soil and when climatic conditions favor dicamba’s dispersal.

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This is who we are. This is caused by people we support, that we call our friends.

Millions On Brink Of Famine In Yemen As Saudi Arabia Tightens Blockade (G.)

Abdulaziz al-Husseinya lies skeletal and appears lifeless in a hospital in Yemen’s western port city of Hodeidah. At the age of nine, he weighs less than one and a half stone, and is one of hundreds of thousands of children in the country suffering from acute malnutrition. Seven million people are on on the brink of famine in war-torn Yemen, which was already in the grip of the world’s worst cholera outbreak when coalition forces led by Saudi Arabia tightened its blockade on the country last week, stemming vital aid flows. Al-Thawra hospital, where Abdulaziz is being treated, is reeling under the pressure of more than two years of conflict between the Saudi-led coalition and Iranian-allied Houthi rebels. Its corridors are packed, with patients now coming from five surrounding governorates to wait elbow-to-elbow for treatment.

Less than 45% of the country’s medical facilities are still operating – most have closed due to fighting or a lack of funds, or have been bombed by coalition airstrikes. As a result, Al-Thawra is treating some 2,500 people a day, compared to 700 before the conflict escalated in March 2015. [..] Aid agencies are now warning that Yemen’s already catastrophic humanitarian crisis could soon become a “nightmare scenario” if Saudi Arabia does not ease the blockade of the country’s land, sea and air ports – a move that the kingdom insists is necessary after Houthi rebels fired a ballistic missile towards Riyadh’s international airport this month. United Nations humanitarian flights have been cancelled for the past week and the International Committee of the Red Cross (ICRC), along with Médecins Sans Frontières (MSF), have been prevented from flying vital medical assistance into the country.

More than 20 million Yemenis – over 70% of the population – are in need of humanitarian assistance that is being blocked. Following international pressure, the major ports of Aden and Mukalla were reopened last week for commercial traffic and food supplies, along with land border crossings to neighbouring Oman and Saudi Arabia, but humanitarian aid and aid agency workers remained barred from entering the country on Sunday. UN aid chief Mark Lowcock has said if the restrictions remain, Yemen will face “the largest famine the world has seen for many decades, with millions of victims”.

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Sep 282017
 
 September 28, 2017  Posted by at 1:52 pm Finance Tagged with: , , , , , , ,  


Koyaanisqatsi

 

The film Koyaanisqatsi was released in 1982. The title means ‘life out of balance’ in the language of the Hopi, a Native American tribe who live(d) mainly in what is now north-east Arizona. It is directed by Godfrey Reggio with music by Philip Glass and cinematography by Ron Fricke. There are no actors, and no dialogue. Philip Glass’s music underlies a series of film fragments that contrast the beauty of American nature with the noise and pollution mankind has added to it. Wikipedia:

The film consists primarily of slow motion and time-lapse footage of cities and many natural landscapes across the United States. The visual tone poem contains neither dialogue nor a vocalized narration: its tone is set by the juxtaposition of images and music. Reggio explained the lack of dialogue by stating “it’s not for lack of love of the language that these films have no words. It’s because, from my point of view, our language is in a state of vast humiliation. It no longer describes the world in which we live.”

Due to its initial success, Reggio and Glass made two sequels to the film, Powaqqatsi (1988), meaning “parasitic way of life” or “life in transition”, and Naqoyqatsi (2002) which means “life as war”, “civilized violence” and “a life of killing each other”. If you haven’t seen them, they come highly recommended.

 

 

Koyaanisqatsi is an fitting term to describe not only our world in general, but also our economies. They are severely out of balance, and getting more so every day. But economies, like nature, need at least a minimum in balance. If that disappears, this lack of balance will tip them over. It is somewhat strange that this is not being recognized, and not even discussed.

It’s as if people think that when almost all wealth goes to a select very few, an economy can still continue to function. It can’t. The rich getting continually richer means the poor getting poorer (as overall growth is slow or non-existent), until the latter reach a point where they can no longer afford even basic necessities. That’s when parts of an economy will start dying, in the same vein that parts of a living body, an organism, die off when the supply of blood, nutrients and oxygen is cut off.

For an economy to function, it needs money to flow through it the same way a body needs blood to flow. If all the money gets increasingly concentrated in just a small area, the economy stagnates. We measure the flow of money as velocity:

 

 

If that graph would describe a human body, it would be in an ambulance on the way to ER. The only times velocity of money have been as low as today was during a Great Depression and a World War.

The ever richer rich cannot spend enough to keep things moving. They can buy stocks and bonds and houses, but they can’t buy all the groceries and clothing that the poor and middle class no longer can. But it’s those things that keep the economy humming along.

An economy as unbalanced as the one we presently have is bound to perish. The rich are killing their own economies by trying to get richer all the time. And they have no idea that’s what happens. It’s sort of baked into their understanding of what capitalism is. Or neo-liberalism if you want.

We should look upon, and handle, our economies and societies as living, and vibrant, systems, but we’re miles away from any such understanding. Our education systems are gross failures when it comes to this, and our media, owned by the rich, support anything that will make them richer. Even though that is suicidal for everyone involved. We are a tragic species in many more ways than one.

This has nothing to do with political views, with socialism or communism or any ism, it’s a simple empirical observation. It’s not about ‘everyone deserves their fair share’, but about if they don’t get their share, no economy will be left to hand out any shares even to the rich. If the rich want to get richer, they will need a functioning economy to get there.

In other words, someone will have to call a halt, or at least a pause, to the pace at which they’re getting richer, or their quest for riches will become self-defeating. Literally every single human being can grasp this, but hardly anyone even considers it. At their peril.

Here’s just a small example from CNBC, there are thousands just like it:

The Top 1% Of Americans Now Control 38% Of The Wealth

America’s top 1% now control 38.6% of the nation’s wealth, a historic high, according to a new Federal Reserve Report. The Federal Reserve’s Surveys of Consumer Finance shows that Americans throughout the income and wealth ladder posted gains between 2013 and 2016. But the wealthy gained the most, driven largely by gains in the stock market and asset values. The top 1% saw their share of wealth rise to 38.6% in 2016 from 36.3% in 2013.

The next highest 9% of families fell slightly, and the share of wealth held by the bottom 90% of Americans has been falling steadily for 25 years, hitting 22.8% in 2016 from 33.2% in 1989. The top income earners also saw the biggest gains. The top 1% saw their share of income rise to a new high of 23.8% from 20.3% in 2013. The income shares of the bottom 90% fell to 49.7% in 2016.

Now, you may think: 38%, how bad is that?, and you may be forgiven for thinking that way. After all, you’re in a majority there. To understand the severity of what’s happening, you need to look at the trends:

 

 

This one from the New York Times, annotated by Charles Hugh Smith, is very revealing too. What happens is that just as we find ourselves in a stagnating/shrinking economy, the rich get richer fast. They can do that because central banks are releasing trillions of dollars in QE, but also because the system is geared towards eviscerating the poor, and increasingly the middle class as well:

 

 

And this is amplified by the ultra-low rates policies central banks have been pushing over the past decade. They allow for the ever poorer to keep up appearances of wealth by plunging into debt ever deeper, but they don’t allow for their living conditions, their jobs, their savings, their pensions, to recover. They do the exact opposite. As this graph from Mike Lebowitz, one of many to show the same trendline, goes to show:

 

 

This is not an American phenomenon, though it’s more pronounced stateside. And Trump’s tax reform plans promise to only make it worse. It looks like Bernie Sanders might be the only politician in the US to stop it, but what are the odds of that? We live in a system that is warranting economic suicide for everyone including its own proponents, and we’re blindly following it like so many lemmings.

The Koyaanisqatsi film doesn’t have a happy Hollywood ending, and it makes no pretense of it. Our Koyaanisqatsi economy will not end with ‘they lived happily ever after’ either. The protagonists wouldn’t know how to achieve that. They don’t understand what makes an economy run, and keeps it running.

And they don’t want to understand, because they think it’ll make them less rich. Nobody gives balance a second’s thought. Presumably because they think the system, like nature, will eventually balance itself. And they’re right in that. They just haven’t considered what that balancing act might mean for them personally.

if you’re rich, good on you. But don’t forget what made it possible for you to gather your riches, or you’ll lose them, and probably a lot more too.

 

 

 

Mar 112017
 
 March 11, 2017  Posted by at 9:38 am Finance Tagged with: , , , , , , , , , ,  


Robert Capa Warsaw, Poland 1948

 

US Jobs Report Means Fed Rate Hike Is A Bolt-On Certainty (G.)
US Household Wealth Has Never Been Higher Relative To Income (ZH)
Rising Household Debt A Concern Across Asia (TEP)
Sessions Asks 46 Obama-Era US Attorneys To Resign (R.)
Trump’s Revised Travel Ban Dealt First Court Setback (R.)
Trump To Ask Merkel For Advice On Putin, Ukraine (R.)
Nobel Economist Deaton Takes Aim At Rent-Seeking US Economy (MW)
US Regulators Reject Bitcoin ETF, Digital Currency Plunges (R.)
The Bag Holder and His Bag (Jim Kunstler)
New Island To Be Built In North Sea Under ‘Science-Fiction-Like’ Plan (Ind.)
General Flynn and the Strategic Deficit (K.)
Turkey Loses Momentum In Northern Syria As US Supports Kurds (ARA)
UN Accuses Turkey Of Abuses Against Kurds In Country’s Southeast (AlJ)
Greek Court To Rule On Turkey’s ‘Safe Country’ Status (K.)
Lagarde Insists On Greek Debt Restructuring (K.)
Roman Citizens Are Breaking The Law To Feed And Help Refugees (R.)
World Faces Worst Humanitarian Crisis Since 1945 – UN (G.)

 

 

Don’t be surprised if Yellen gets cold feet.

US Jobs Report Means Fed Rate Hike Is A Bolt-On Certainty (G.)

The latest US jobs report removes any lingering doubts about whether the Federal Reserve will raise interest rates next week. Following news that the world’s biggest economy generated 235,000 net new non-farm jobs in February, it is a bolt-on certainty that the central bank will push up the cost of borrowing by a quarter of a point. It is now almost 10 years since the start of the financial crisis ushered in a period of ultra-low interest rates and it has been clear for a while that the Fed is anxious to speed up the normalisation process. A healthy labour market is the key to that process and it would have taken a shockingly bad report to stay the bank’s hand. This was not it. Indeed, the financial markets have already moved on from next week to musing about how many more times the Fed will tighten during the course of 2017. The feeling is that two more rate rises are in prospect.

It certainly seems unlikely that next Wednesday’s rise will be the end of the matter. The report from the Bureau of Labour Statistics showed employment up by more than the 190,000 expected by Wall Street and unemployment at 4.7%. Annual wage growth is running at 2.8%. Policymakers at the Fed will look at this data and conclude that inflationary pressures are building as the economy approaches full employment. With US productivity so weak, the central bank will certainly be tempted to move again if and when earnings growth hits 3%. There was plenty for Donald Trump to welcome. A mild winter has resulted in a big increase in construction jobs. Manufacturing employment was also up. The only weak spot was retailing. The new president has plans for a big package of tax cuts and spending increases but fiscal easing will mean more aggressive tightening from the Fed, which is already starting to fret about the risks of the economy overheating.

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Print and borrow. Rinse and repeat.

US Household Wealth Has Never Been Higher Relative To Income (ZH)

For 45 years – until Alan Greenspan in 1994 – the average wealth-to-income of American households had held steady around 4.9x – but as of Q4 2016, for the first time in US history, household wealth has reached a point where it is 6.5 times large than inflation-adjusted household disposable income in America. As Bloomberg reports, the surge – driven by higher stock prices and property values, according to The Fed – pushed this measure of relative exuberance (think of it as the country’s price-to-earnings ratio) above the housing boom peak of mid-2000s and well above the dot-com bubble driven highs of the last 1990s. As Alliance Bernstein economist Joe Carson wrote in a note: “Economic and financial history do not always repeat, but sometimes they do.” So the question is – what happens next?

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Debt and wealth feel eerily similar.

Rising Household Debt A Concern Across Asia (TEP)

Government officials, policymakers, economists, bankers and experts gathered here for the Second Annual Asean Consumer and Household Debt Conference on Feb 22 and 23. The two-day event aimed to provide insight into the implications of household debt and the challenges faced by the policymakers. “Over the years, household financial liabilities as a share of personal disposable income has gone up in Asia,” said Akrur Barua, an economist at Deloitte Services LP, setting the tone for the conference. According to Barua, a number of factors have led to the rise in household debt in Asia. Rising incomes in Asia have resulted in higher consumer demand for products and services. Along with income growth, there is an increase in access to credit across Asian economies.

Post- 2008, policymakers also offered fiscal and monetary incentives to entice consumers to spend more. In addition, rising demand and a flow of liquidity led to a surge in asset prices, especially in the housing sector. With demand for housing remaining strong and house prices rising, the result has been a rapid increase in the value of housing loans or mortgages. “Cyclical credit outpaced cyclical growth from 2011 to 2015 in many Southeast Asian countries”, noted Vincent Conti, Asia-Pacific economist at Standard & Poor’s Ratings Services Singapore. According to Barua, the household debt burden in many Asian economies is now even higher than the US figure prior to 2009, before the global financial crisis (see Chart 1). In fact, Thailand, Malaysia, South Korea and Taiwan have crossed the 80% mark in household debt-to-GDP ratio.

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David Stockman on Twitter: “46 Obama US Attorneys must go ASAP. That means you, Preet Bharara. Enough self-righteous bullies with badges! “

Sessions Asks 46 Obama-Era US Attorneys To Resign (R.)

U.S. Attorney General Jeff Sessions abruptly asked the remaining 46 chief federal prosecutors left over from the Obama administration to resign on Friday, including Manhattan U.S. Attorney Preet Bharara, who had been asked to stay on in November by then President-elect Donald Trump. Although U.S. attorneys are political appointees, and the request from Trump’s Justice Department is part of a routine process, the move came as a surprise. Not every new administration replaces all U.S. attorneys at once. A Justice Department spokeswoman confirmed the resignation requests included Bharara, whose office handles some of the most critical business and criminal cases passing through the federal judicial system.

Bharara met with Trump in Trump Tower on Nov. 30. After, Bharara told reporters the two had a “good meeting” and he had agreed to stay on. On Friday, Bharara was unsure where he stood because he did not know if the person who contacted him about resigning was aware that Trump had asked him to remain in office, according to a source familiar with the matter. It was not immediately clear if all resignations would ultimately be accepted. A Justice Department spokesman said on Friday Trump had called Dana Boente, acting U.S. deputy attorney general, to decline his resignation. Trump also called Maryland U.S. Attorney Rod Rosenstein, his pick to take over as deputy attorney general, to keep him in his post, the spokesman said.

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Broader views are needed.

Trump’s Revised Travel Ban Dealt First Court Setback (R.)

A federal judge in Wisconsin dealt the first legal blow to President Donald Trump’s revised travel ban on Friday, barring enforcement of the policy to deny U.S. entry to the wife and child of a Syrian refugee already granted asylum in the United States. The temporary restraining order, granted by U.S. District Judge William Conley in Madison, applies only to the family of the Syrian refugee, who brought the case anonymously to protect the identities of his wife and daughter, still living in the war-torn Syrian city of Aleppo. But it represents the first of several challenges brought against Trump’s newly amended executive order, issued on March 6 and due to go into effect on March 16, to draw a court ruling in opposition to its enforcement.

Conley, chief judge of the federal court in Wisconsin’s western district and an appointee of former President Barack Obama, concluded the plaintiff “has presented some likelihood of success on the merits” of his case and that his family faces “significant risk of irreparable harm” if forced to remain in Syria. The plaintiff, a Sunni Muslim, fled Syria to the United States in 2014 to “escape near-certain death” at the hands of sectarian military forces fighting the Syrian government in Aleppo, according to his lawsuit. He subsequently obtained asylum for his wife and their only surviving child, a daughter, and their application had cleared the security vetting process and was headed for final processing when it was halted by Trump’s original travel ban on Jan. 27.

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Those are Merkel’s blind spots. And Greece.

Trump To Ask Merkel For Advice On Putin, Ukraine (R.)

President Donald Trump will ask Chancellor Angela Merkel for advice on how to deal with Russian President Vladimir Putin, U.S. officials said on Friday, as the U.S. and German leaders meet next week after sometimes pointed disagreements in recent months. Merkel will visit the White House on Tuesday for talks with Trump and a joint news conference in what will be their first face-to-face meeting since the new U.S. president took power on Jan. 20. They are expected to discuss Germany’s level of defense spending for the NATO alliance, the Ukraine conflict, Syrian refugees, the EU and a host of other issues, said three senior Trump administration officials who briefed reporters.

During the 2016 U.S. presidential campaign, Trump regularly criticized Merkel for her open-door refugee policy, contrasting it with what he promised would be tighter controls in the United States if he won office. Merkel has been a leading critic of Trump’s effort to ban travelers temporarily from seven Muslim-majority nations, a list that has since been pared back to six. “My expectation is that they’ll have a very positive, cordial meeting,” said one of the officials, who spoke on condition of anonymity. Trump has long expressed desire for warmer U.S. relations with Russia but some of his top Cabinet officials are skeptical. “The president will be very interested in hearing the chancellor’s views on her experience interacting with Putin,” said another official. “He’s going to be very interested in hearing her insights on what it’s like to deal with the Russians.”

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Deaton is no fool.

Nobel Economist Takes Aim At Rent-Seeking Banking, Healthcare Industries (MW)

Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might, said Nobel-winning economist Angus Deaton on Monday. If an entrepreneur invents something on the order of another Facebook, Deaton said he has no problem with that person becoming wealthy. “What is not OK is for rent-seekers to get rich,” Deaton said in a luncheon speech to the National Association for Business Economics. Rent seekers lobby and persuade governments to give them special favors. Bankers during the financial crisis, and much of the health-care system, are two prime examples, Deaton said. Rent-seeking is not only does not generate new product, it actually slows down economic growth, Deaton said.

“All that talent is devoted to stealing things, instead of making things,” he said. Another prime example of rent-seeking is that the Medicaid is funding opioid prescriptions for low-income workers, Deaton said. The results are workers who are becoming addicted and overdosing while profits are going to the Sacker family which owns Purdue Pharma that makes OxyContin. Deaton said he favors a single-payer health system only because our current part-private and part-public system is exquisitely designed to give opportunities for rent-seeking. “So I, who do not believe in socialized health-care, would advocate a single-payment system…because it will get this monster that we’ve created out of the economy and allow the rest of capitalism to flourish without the awful things that healthcare is doing to us,” he said.

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But door is left open.

US Regulators Reject Bitcoin ETF, Digital Currency Plunges (R.)

The U.S. Securities and Exchange Commission on Friday denied a request to list what would have been the first U.S. exchange-traded fund built to track bitcoin, the digital currency. Investors Cameron and Tyler Winklevoss have been trying for more than three years to convince the SEC to let it bring the Bitcoin ETF to market. CBOE Holdings’ Bats exchange had applied to list the ETF. The digital currency’s price plunged, falling as much as 18% in trading immediately after the decision before rebounding slightly. It last traded down 7.8% to $1,098. Bitcoin had scaled to a record of nearly $1,300 this month, higher than the price of an ounce of gold, as investors speculated that an ETF holding the digital currency could woo more people into buying the asset.

[..] “Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated,” the SEC said in a statement. “The commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop.” The regulators have questions and concerns about how the funds would work and whether they could be priced and trade effectively, according to a financial industry source familiar with the SEC’s thinking. [..] Advocates of the currency and the technology it relies on to document transactions, blockchain, were dismayed by the ruling. “How do we develop well-capitalized and regulated markets in the U.S. and Europe if financial innovators aren’t allowed to bring products to market that grow domestic demand for digital currencies like bitcoin?” asked Jerry Brito, executive director of Coin Center, an advocacy group.

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“RussiaGate — come on, let’s finally call it that —”

The Bag Holder and His Bag (Jim Kunstler)

[..] getting rid of Trump would only leave the Deep State with a bigger problem: itself. That is, an economy and a society that can’t be governed by any means. I think many professional observers-of-the-scene are missing something in this unspooling story: the Deep State is actually becoming more impotent and ineffectual, not omnipotent. Case in point: RussiaGate — come on, let’s finally call it that — the popular idea that Russia hacked the 2016 presidential election. It’s popular because it’s such a convenient excuse for the failure of a corrupt, exhausted, and brain-dead Democratic establishment. But all the exertions of the Deep State to put over this story since last summer were negated this week by two events.

First, there was former NSA Director James Clapper’s appearance on NBC’s Sunday Meet the Press show with Chuck Todd featuring the following interchange: CHUCK TODD: Does intelligence exist that can definitively answer the following question, whether there were improper contacts between the Trump campaign and Russian officials? JAMES CLAPPER: We did not include any evidence in our report, and I say, “our,” that’s N.S.A., F.B.I. and C.I.A., with my office, the Director of National Intelligence, that had anything, that had any reflection of collusion between members of the Trump campaign and the Russians. There was no evidence of that included in our report. CHUCK TODD: I understand that. But does it exist? JAMES CLAPPER: Not to my knowledge. And so what to make of the RussiaGate histrionics served up by CNN, The New York Times, the WashPo, NPR, and sundry tools as Senator Chuck Schumer (D–NY)?

What I make of it is a growing civil war in the government itself, and perhaps something arguably like sedition. Second matter: this week’s release of Wikileaks’ Vault-7 trove of purloined government documents. These seem to suggest that US Intel agencies have acquired the ability to spoof any activity on any sort of computer or program that makes it impossible to track the identity of any hacker and, what’s more, gives US Intel a tool to make any party appear culpable for any given case of hacking — meaning that if so called computer hacking “footprints” had been discovered linking Russia to the Hillary-DNC-Podesta emails, those footprints could have been engineered by US Intel itself… meaning further that any so-called “evidence” of Russian election hacking could not be proven one way or the other.

Now, this might be too fine a point for the RussiaGate partisans, but I don’t see how it fails to moot the issue. The partisans are still finding other ways to propagandize. On Thursday evening, NPR ran a story about Russia breaking a missile agreement with this wrap-up from correspondent David Welna: WELNA: Still unclear is how President Trump, an admirer of Russian President Vladimir Putin, might respond to Moscow’s defiance. David Welna, NPR News, Washington. That lapse of newsmanship is the kind of thing that makes me (a still-registered Democrat) want to support the defunding of NPR.

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Far too many people still claim we can replace our current energy consumption with renewables. That idea will have to die first.

New Island To Be Built In North Sea Under ‘Science-Fiction-Like’ Plan (Ind.)

A vast artificial island is to be built at Dogger Bank in the North Sea, complete with a harbour, airstrip and homes, to help provide a vast new supply of renewable energy, under plans drawn up by two companies with the blessing of the European Union. The North Sea Wind Power Hub would act as a hub for offshore wind turbines and a new place to put solar panels, according to the German and Dutch arms of electricity firm TenneT and Danish company Energinet. The firms will sign a deal creating a consortium to develop the plan further in Brussels on 23 March in the presence of European Energy Union Commissioner, Maos Sefcovic. Torben Glar Nielsen, Energinet’s Danish technical director, said: “Maybe it sounds a bit crazy and science fiction-like, but an island on Dogger Bank could make the wind power of the future a lot cheaper and more effective.”

It is thought the island – or possibly islands – could act as a hub for thousands of new wind turbines, which would eventually generate green electricity for more than 80 million people. Under the proposals, the island would be connected by electricity cables to the UK, Norway, the Netherlands, Germany, Denmark and Belgium. Mel Kroon, TenneT’s chief executive, said: “This project can significantly contribute to a completely renewable supply of electricity in north-west Europe. “TenneT and Energinet.dk both have extensive experience in the fields of onshore grids, the connection of offshore wind energy and cross-border connections.

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Flynn’s escapades as a foreign agent for Turkey are making Greeks very nervous.

General Flynn and the Strategic Deficit (K.)

It is as if a torpedo passed under our keel and we saw it only when it exploded elsewhere. The recent revelations from President Donald Trump’s former national security adviser, retired General Michael Flynn, showed that we had a close call. A lawyer for Flynn filed paperwork with the Justice Department declaring that last year he undertook lobbying work that “could be construed to have principally benefited the Republic of Turkey.” For the work between August and November, Flynn Intel Group Inc was paid 530,000 dollars. Flynn was forced to resign from the position of Trump’s top security aide in February when it emerged that although he had met with the Russian ambassador to the United States he had lied to Vice President Mike Pence about this, after which the latter repeated Flynn’s lies in public.

The extent of Flynn’s dealings with Russia and Turkey is not known, but it is clear that if he had not resigned he would have remained, at least, a former strong supporter of Turkey. On November 8, Flynn had published an opinion piece in The Hill, a Washington-based political newspaper, titled “Our ally Turkey is in crisis and needs our support.” Flynn argued that the United States should extradite the self-exiled cleric Fethullah Gulen, whom Turkish President Recep Tayyip Erdogan claims was behind the failed coup in Turkey last July. “We should not provide him safe haven,” Flynn wrote of Gulen. “In this crisis, it is imperative that we remember who our real friends are.”

On Wednesday, The Hill’s editor added a note to the piece, clarifying that the newspaper did not know that Flynn had been paid to write it, nor that the draft had been shown earlier to a Dutch company, Inovo BV, which, the note said, is “owned by a Turkish businessman with ties to Turkey’s president.” The Associated Press reported that according to the documents filed, Flynn, who was then a top aide to presidential candidate Trump, met in September with the Turkish ministers of foreign affairs and energy.

The cooperation ended in November, and though it is difficult to believe that Flynn was paid half a million dollars for one op-ed piece, we cannot claim that as national security adviser he would have made Turkish interests his priority. At the same time, can we really have expected him to have been completely unbiased in any Greek-Turkish dispute? We still don’t know the interests of people around the American president – who himself has business interests in Turkey, among other countries. Nothing is as it was. Prior US strategy cannot be taken for granted. This makes it imperative for our country to be clear about its own course, to implement its strategy calmly and decisively. We must avoid being caught up in the game of our excitable neighbors and keep our eyes on where we want to go.

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Things are only getting more confusing.

Turkey Loses Momentum In Northern Syria As US Supports Kurds (ARA)

Turkey has lost momentum in the war for northern Syria as the United States draws on Kurdish allies in the assault on ISIS-held Raqqa, but Ankara is still pressing Washington for a deal that allays its fears of Kurdish ascendancy. Syrian Kurdish groups meanwhile sense Washington is now more firmly behind them than before, a shift they hope will eventually aid their ambitions for autonomy after years of persecution by the Syrian government. One of the most complicated theatres in the multi-sided Syrian conflict, the war in the north has played out at lightning pace in the last few weeks with ISIS fighters either withdrawing or collapsing in swathes of territory. The Russian-backed Syrian army has benefited from this, creating a corridor to the Euphrates River that secures Aleppo’s water supplies and suggests at least tacit coordination with US-allied Kurdish militia – at Turkey’s expense.

In a swipe at Washington, Turkish Prime Minister Binali Yildirim said on Tuesday it was unfortunate that some of Turkey’s allies had chosen the Kurdish People’s Protection Units (YPG) as a partner in the fight against ISIS in Syria. “The field in Syria at the moment is really very complicated,” said a senior Turkish official, stressing the fast-moving nature of events and the urgent need for agreement. “Anything could happen at any moment.” “Such a harsh step in completely excluding Turkey there will cause a problem for relations between the countries,” the Turkish official said. “Hence a share point must be found. Talks are still continuing.”

[..] Ankara had hoped to advance its strategy in northern Syria by persuading Washington to abandon its Kurdish allies and switch support to Free Syrian Army (FSA) rebel groups for the final assault on Raqqa – a northern Syrian city that is ISIS’s de facto capital. But any hopes of this have faded in recent days. Conflicting US and Turkish agendas have surfaced clearly over Manbij, a city controlled by Kurdish-allied fighters since its capture from ISIS last year. A deployment of US forces there last week deterred a threatened Turkish attack. Foreign minister Mevlut Cavusoglu made clear Turkish sensitivities about the presence of Kurdish fighters in Manbij, a town Ankara sees as the next stepping stone in creation of a safe zone free of Kurdish influence west of the Euphrates. “We will not allow the YPG’s canton dreams (to come true),” NTV television cited Cavusoglu as saying. “If we go to Manbij and the PYD is there, we will hit them.”

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High time for EU, US to take a stand against Turkey, but the courage is failing.

UN Accuses Turkey Of Abuses Against Kurds In Country’s Southeast (AlJ)

A UN report has accused Turkish security forces of human rights violations during operations against Kurdish fighters in the country’s southeast, drawing an angry response by Turkey which rejected it as “biased”. The report by the UN Human Rights Office on Friday detailed accusations of massive infrastructure destruction, unlawful killings and other serious abuses committed between July 2015 and December 2016 following the collapse of a ceasefire. The outlawed Kurdistan Workers’ Party (PKK) and the Turkish state were engaged in a war for almost 30 years until a 2013 truce was declared and the two sides launched peace talks. The ceasefire largely held until the summer of 2015, and since then the two sides have been engaged in escalating clashes. Turkey, the US and the EU all consider the PKK a “terrorist” group.

The UN said that its study, which was carried through “remote monitoring”, was based on interviews, analysis of information provided by Turkey’s government and NGOs, as well as official records, open source documents, satellite images and other materials. Citing data from various sources, the report said that around 2,000 people were killed in the region between July 2015 and December 2016 amid security operations. “Reports generally put the number of local residents killed at approximately 1,200, of whom an unspecified number may have been involved in violent or non-violent actions against the state,” it said, adding that about 800 members of security forces were reportedly killed in clashes. More than 355,000 people were displaced and entire neighbourhoods were destroyed in various parts of southeastern Turkey, the report said.

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How could it possibly declare Turkey safe?

Greek Court To Rule On Turkey’s ‘Safe Country’ Status (K.)

Greece’s highest administrative court is expected to rule later this month on whether Turkey can be considered a safe country for refugees being returned under a deal with the European Union. The Council of State’s plenary on Friday heard arguments based on the appeal of two Syrian nationals whose asylum applications were rejected by the Greek Asylum Committee. The Syrians’ lawyers argued that the rejection is a violation of the UN Charter of Human Rights and the Geneva Convention as the committee based its decision solely on Turkey’s assurances, without a proper assessment of conditions in the neighboring country.

Another plaintiff acting on their behalf, the Greek Council for Refugees, has also raised questions regarding the partiality of the judges serving on the Asylum Committee’s panels. The appeal comes after seven judges at the Council of State’s Fourth Chamber ruled in favor of the Asylum Committee’s decision, saying that Turkey’s participation in the Geneva Convention defines it as a safe country. If the plenary upholds the Syrians’ appeal, this could undermine the deal signed between the European Union and Turkey a year ago for the latter to take back rejected asylum claimants in exchange for financial assistance.

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Yada yada.

Lagarde Insists On Greek Debt Restructuring (K.)

International Monetary Fund (IMF) chief Christine Lagarde has reiterated that Greece’s mountainous debt needs restructuring. Speaking to French newspaper Le Parisien, Lagarde insisted that the IMF can only join the Greek program if Athens implements more reforms and the country’s debt is made manageable. “We also need a sustainable debt,” she told the paper, adding that this could be done in different ways, including an extension of loan repayment periods and lower interest rates. She also said she was trying to convince European leaders to accept that Greece needs debt relief.

Meanwhile, representatives of Greece’s international creditors were expected to leave the capital on Friday without having reached an agreement with government officials on contentious issues including pension reform and overhauls to labor rights and the tax system. The IMF said some progress was made but differences “remain in important areas.” Despite the insistence by European officials that a conclusion of the bailout review is unlikely before May, the Greek government indicated that there is enough time for an agreement significantly sooner than that though probably not in time for a March 20 Eurogroup.

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Sounds very familiar 😉

Roman Citizens Are Breaking The Law To Feed And Help Refugees (R.)

Volunteers served macaroni in marinara sauce to dozens of migrants outside one of Rome’s biggest train stations this week, offering help to travelers largely ignored by institutions on the frontline of Europe’s migrant crisis. While other European cities including Milan have set up information centers and shelters for migrants, Rome has repeatedly cleared out impromptu camps citing security concerns. “We’ve had 13 evictions,” Andrea Costa, director of the Baobab Experience group of volunteers, said before the migrants settled in for a cold night. To keep from being cleared out yet again, volunteers cook meals at home and bring them to a bare plaza outside Tiburtina station where tents are set up at 9 p.m. and taken down in the early morning. There are now 50 migrants staying here, mostly from Africa, as they attempt to reach other European countries.

That number is expected to soar this summer with sea arrivals to Italy up 60% already this year after setting a record last year. “With boat arrivals at this pace, in a little while we’ll have hundreds of people to take care of,” Costa said. Baobab saw between 500 and 1,000 migrants per day last summer, and volunteers have helped almost 63,000 migrants over the past two years with no state funding – only donations. Robel Tesfit, a 27-year-old Eritrean-Ethiopian who everybody calls “Bob,” arrived in Italy by sea in 2015, hoping to reach Britain where he wanted “to play for Manchester United.” He never made it to Britain, and returned to Rome where he was granted asylum. Now he uses his knowledge of Italian, Arabic, Tigrinya and Amharic to help Baobab volunteers, who gave him food, shelter and advice on his journey.

Pointing to the men and women lining up for pasta, he said: “When I arrived, I was the same as them.” While Italy has shelters to house 175,000 asylum seekers, it does not fund structures for migrants in transit, in part because the European Union wants to stop migrants from moving on, not help them to do so. EU law says they must seek asylum in the country where they first set foot. At the end of last year, Rome set aside about 60 beds in a nearby Red Cross center for travelers and officials say they want to renovate a hotel near the station to provide beds for about 100 more.

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20 million people. And we think about the value of our houses. And where to go on holiday.

World Faces Worst Humanitarian Crisis Since 1945 – UN (G.)

The world faces the largest humanitarian crisis since the end of the second world war with more than 20 million people in four countries facing starvation and famine, a senior United Nations official has warned. Without collective and coordinated global efforts, “people will simply starve to death” and “many more will suffer and die from disease”, Stephen O’Brien, the UN under secretary-general for humanitarian affairs, told the security council in New York on Friday that He urged an immediate injection of funds for Yemen, South Sudan, Somalia and northeast Nigeria plus safe and unimpeded access for humanitarian aid “to avert a catastrophe.” “To be precise,” O’Brien said, “we need $4.4bn by July”. Unless there was a major infusion of money, he said, children would be stunted by severe malnutrition and would not be able to go to school, gains in economic development would be reversed and “livelihoods, futures and hope lost”.

UN and food organisations define famine as when more than 30% of children under age 5 suffer from acute malnutrition and mortality rates are two or more deaths per 10,000 people every day, among other criteria. “Already at the beginning of the year we are facing the largest humanitarian crisis since the creation of the United Nations [in 1945],” O’Brien said. “Now, more than 20 million people across four countries face starvation and famine.” O’Brien said the largest humanitarian crisis was in Yemen where two-thirds of the population — 18.8 million people — need aid and more than seven million people are hungry and did not know where their next meal would come from. “That is three million people more than in January,” he said.

[..] For 2017, O’Brien said $2.1bn was needed to reach 12 million Yemenis “with life-saving assistance and protection” but only 6% has been received so far. He announced that secretary-general Antonio Guterres will chair a pledging conference for Yemen on 25 April in Geneva. The UN humanitarian chief also visited South Sudan, the world’s newest nation which has been ravaged by a three-year civil war, and said “the situation is worse than it has ever been.” “The famine in South Sudan is man-made,” he said. “Parties to the conflict are parties to the famine — as are those not intervening to make the violence stop.” O’Brien said more than 7.5 million people need aid, up by 1.4 million from last year, and about 3.4 million South Sudanese are displaced by fighting including almost 200,000 who have fled the country since January.

“More than one million children are estimated to be acutely malnourished across the country, including 270,000 children who face the imminent risk of death should they not be reached in time with assistance,” he said.

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Nov 232016
 
 November 23, 2016  Posted by at 9:45 am Finance Tagged with: , , , , , , , , , ,  


Cyclone, Oklahoma, 1898

Dow 19,000 Is No Cause For Celebration (MW)
Global Wealth Update: 0.7% Of Adults Control $116.6 Trillion In Wealth (ZH)
We Could Be In A ‘Lost Decade’ Of Global Wealth Growth (CNBC)
Willing To Oppose Trump, Some Senate Republicans Gain Leverage (R.)
EU Draft Plan Eyes New Bank Creditor Class To Bear Losses (R.)
Economists Need To Get Into The Real World, Says BOE’s Haldane (Tel.)
Of Dunces, Fools, Drones and Heroes (Dmitry Orlov)
Renzi’s Party Wants Early Election in Italy If Referendum Lost (BBG)
Erdogan Says EU Lawmakers’ Vote On Turkish Membership ‘Has No Value’ (R.)
EU Finance Ministers To Discuss IMF, Greek Debt (Kath.)
Trump: ‘Open Mind’ On Quitting Climate Accords (AFP)
Sea Ice Reaches A New Low (Economist)

 

 

Arbitrary numbers.

Dow 19,000 Is No Cause For Celebration (MW)

The Dow Jones Industrial Average closed above 19,000 on Tuesday for the first time. How is this news? I’m sure you remember the spell-binding chase for the Dow to break 18,000, or those thrilling days when the Dow crossed 17,000, or hunted for 15,000. If you don’t remember those benchmark days – which occurred in December 2014 and July 2014 respectively, the latter being 14 months after the Dow had crossed 15,000 – then you also recognize that Dow 19,000 is equally no big deal, post-election rally notwithstanding. In fact, the Dow itself is no big deal. The Dow is the Kardashian of indexes – a celebrity benchmark, famous because it’s known rather than because of what it does.

Every round number on the index hits the news cycle hard, largely because there is so little real news out there. In early November, for example, people were talking about nine straight down days on the S&P 500 – the first nine-day losing streak in 36 years – as if that was somehow meaningful, even though the total decline on the index amounted to just 3.1%. (By comparison, the S&P 500’s last nine-day skid – which ended in December 1980 – shaved 9.4% off the index, according to FactSet). Tuesday’s headlines included a 13-day winning streak for the Russell 2000, its longest win streak in more than 20 years. The Russell benchmark gained roughly 15% during that stretch – an achievement largely unnoticed because it wasn’t the Dow or S&P 500.

Round numbers and little factoids are amusing and interesting, and are obvious fodder for the talking heads. Currently, the talk is whether the post-election rally can continue and if the Dow can roar on to 20,000, or if the quick rebound since the election has pushed us closer to a point of go-no-further. Focusing on the meaning of the Dow passing a landmark, however, misses the bigger point, which is that the Dow is a virtually meaningless benchmark. The Dow is important to people because it’s what they know, the staple of every market-oriented website, every radio-station market update, every newspaper’s daily business section, and the centerpiece of the 20 seconds of coverage that every national newscast guarantees the investing world each day.

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Criminal. And deadly. The ultimate pyramid scheme.

Global Wealth Update: 0.7% Of Adults Control $116.6 Trillion In Wealth (ZH)

Today Credit Suisse released its latest annual global wealth report, which traditionally lays out what is perhaps the biggest reason for the recent “anti-establishment” revulsion: an unprecedented concentration of wealth among a handful of people, as shown in its infamous global wealth pyramid, an arrangement which as observed by the “shocking” political backlash of the past few months suggests that the lower ‘levels’ of the pyramid are increasingly unhappy about.

As Credit Suisse tantalizingly shows year after year, the number of people who control just shy of a majority of global net worth, or 45.6% of the roughly $255 trillion in household wealth, is declining progressively relative to the total population of the world, and in 2016 the number of people who are worth more than $1 million was just 33 million, roughly 0.7% of the world’s population of adults. On the other end of the pyramid, some 3.5 billion adults had a net worth of less than $10,000, accounting for just about $6 trillion in household wealth. And inbetween is the so-called global middle class – those 1 billion people who rising anger at the status quo made Brexit and Trump possible.

[..] How about the very top? Things here are even more nuanced, with 28.9 million people whose net worth is between $1 and $5 million gradually tapering off to just 140,900 Ultra High Net Worth individuals who control more than $50 million in assets each. Of these, 50,800 are worth at least USD 100 million, and 5,200 have assets above USD 500 million. The total number of UHNW adults is about 3% higher than a year ago (4,100 individuals), and the increase has been relatively uniform across regions, except for the higher than average rise in Asia- Pacific countries (10%)

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How about a lost century?

We Could Be In A ‘Lost Decade’ Of Global Wealth Growth (CNBC)

Concerns that we are in a “lost decade” for global wealth growth have been given further credence by the latest “Global Wealth Report” released by the Credit Suisse Research Institute on Tuesday. According to the researchers, “In recent years, there has been a growing sense that the economic recovery is shallow, and has not reached all layers of society. Evidence from our global wealth database supports this view.” “While exchange rate movements sometimes obscure trends, wealth per adult and median wealth have grown well below their potential during the last nine years, compounding fears that we are in the midst of a lost decade for global wealth growth,” the paper continues.

The 1.4% rise in global wealth over the 12 month period to June 30 has only kept in line with population growth, meaning that for the first time since 2008 the wealth per adult measure has remained flat, according to the research. The paper burrows down into country level data which show that exchange rate fluctuations were the biggest drivers of changes in wealth for different nations over the period. Most notably, the 15% plunge in the British pound driven by Brexit translated to a $1.5 trillion loss for the U.K.. Meanwhile Japan’s 19% jump – which added $3.9 trillion to its wealth pile – was exactly aligned with gains in the yen as the Japanese currency bounced back from earlier weakness as its central bank was increasingly seen as running out of tools with which to force its depreciation.

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Trump will listen. But these folks must recognize why he won and they did not: they can’t command the room like he can.

Willing To Oppose Trump, Some Senate Republicans Gain Leverage (R.)

It is no surprise that Democrats in the U.S. Congress will oppose Donald Trump but the most important resistance to fulfilling the president-elect’s agenda is beginning to emerge from Republicans on Capitol Hill. A small number of influential Republicans in the Senate are threatening to block appointments to Trump’s administration, derail his thaw with Russia and prevent the planned wall on the border with Mexico. The party held onto control of the Senate at the Nov. 8 election but by only a thin margin, putting powerful swing votes in just a few hands. That empowers Republican Senate mavericks such as Rand Paul of Kentucky and Ted Cruz of Texas. Both were bitter rivals to Trump in the 2016 Republican presidential primary.

Paul, a libertarian lone wolf, says he will block Senate confirmations if Trump nominates either former New York Mayor Rudy Giuliani or former U.N. Ambassador John Bolton to be secretary of state. South Carolina’s Lindsay Graham has started publicly outlining places he might be willing to oppose Trump. He is against the Mexican border wall and is delivering warnings against Trump’s intention to revoke legal status for undocumented immigrants brought here as children – although that would not require congressional approval. Graham, a traditional Republican foreign policy hawk, strongly disagrees with Trump’s attempt to improve ties with Russia. “I am going to be kind of a hard ass” on Russia, Graham told reporters recently. “We can’t sit on the sidelines” and let cyber attacks blamed on Russia “go unanswered.”

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Accounting tricks are supposed to keep zombies alive.

EU Draft Plan Eyes New Bank Creditor Class To Bear Losses (R.)

European banks would be able to issue a new category of debt that could be wiped out in a crisis only after shares and bonds, but before more secured instruments, such as covered deposits, under a draft EU law seen by Reuters on Tuesday. The proposal aims at facilitating the building up of capital buffers for banks against losses at time when shares and bonds are losing value, forcing lenders to pay more to build the required cushions. The draft law, to be published by the European Commission on Wednesday, would create a new category of “non-preferred” debt instruments that would be bailed-in -suffer losses- only during a bank resolution, the draft text said.

The document is part of a wider legislative package aimed at reviewing EU rules on capital requirements for banks. Only debt instruments with a maturity of one year, and that are not derivatives, can be included in the new class. Lenders issuing such instruments will have to stress in contracts their ranking, which will be lower than secured debt such as covered deposits, derivatives or tax liabilities. The law is also aimed at creating a uniform ranking of bail-in-able liabilities across EU countries, which have so far applied in divergent ways new bail-in rules in force since the beginning of this year. The bail-in regime is meant to reduce costs to taxpayers in the event of a bank crisis, while increasing losses for the lenders’ creditors.

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The field is still very slow to wake up, even if more of them raise their -timid- voices.

Economists Need To Get Into The Real World, Says BOE’s Haldane (Tel.)

Economists are too detached from the real world and have failed to learn from the financial crisis, insisting on using mathematical models which do not reflect reality, according to the Bank of England’s chief economist Andy Haldane. The public has lost faith in economists since the credit crunch, he said, but the profession has failed to thoroughly re-examine its failings to come up with a new model of operating. Instead, he fears, it is still using the same failed analyses, and is still failing to speak effectively to the public. This applies to an all manner of areas, from studies of the financial meltdown to analysis of the Brexit vote. “The various reports into the economic costs of the UK leaving the EU most likely fell at the same hurdle. They are written, in the main, by the elite for the elite,” said Mr Haldane, writing the foreword to a new book, called ‘The Econocracy: the perils of leaving economics to the experts’.

The chief economist said that the Great Depression of the 1930s resulted in a major overhaul of economic thinking, led by John Maynard Keynes, who emerged “as the most influential economist of the twentieth century”. But the recent financial crisis and slow recovery has not yet prompted this great re-thinking. “Thus far at least, the present crisis has yet to spawn a Keynes for the twenty-first century. And nor have we witnessed any great leap forward analytically. Perhaps it is simply early days,” he said. “Salvation for the economics profession probably lies not among existing academic and policymaking dinosaurs, like me, but among the new generation of students of the discipline.” For now, economists need to focus on reviewing their models, accepting a diversify of thought rather than one solid orthodoxy, and on communicating more clearly.

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A bit hard to convey what Dmitry means in a news overview, you’ll have to read the article.

Of Dunces, Fools, Drones and Heroes (Dmitry Orlov)

Some time ago I posted three T-shirt designs, with no explanation as to why. “Here are some shirts,” I wrote, “reasonably priced, in all styles and colors, free shipping on orders over 100 USD, yadda-yadda.” Just as I expected, a few people got it, and a few of those ordered some shirts. The rest had no idea; some even confessed to that in the comments. That was a test. It was a success. Now that all eight of the planned designs are available, I offer the full explanation and rationale behind this, my latest humanitarian intervention/fundraising effort.

In all my travels and conversations, I have proven to myself beyond all doubt that the decision on who to talk to should have nothing to do with race, age, class, gender, ethnicity, nationality, IQ, profession/trade, educational level, criminal record, party affiliation, gang/militia membership, religious persuasion, military training/rank, drinking/drug habits and whatever else you might try to use to categorize people. Categorizing people based on their public attributes just doesn’t work. So, in determining who is worth talking to, all we have to go on is gut feeling, first impressions and happy accidents. But is this, I ask you, in any way optimal? No, it is not!

That is why I decided to step in and help. The eight designs may have some artistic merit, but they are not exactly art; in fact, they should be regarded as precision mental calibration instruments. Each design features a simple nautical motif consisting of a circle and the 16 compass points. Around the circle is a tag line. Inside the circle is a fish. The tag line is a pun about the fish. Confused? Read on! Each of the designs is a cognitive test. As you walk around wearing one of these shirts, looking for people worth talking to, you can apply specific methods, explained below, to interpret the way they react to your shirt. You can then make an objective determination as to whether a particular person is worth talking to. The determination is based on that staple of business consultants, Four-Quadrant Analysis.

In this case, the two dimensions being mapped are:
x-axis: Did the person get it? (No | Yes)
y-axis: Did the person laugh? (No | Yes)

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Yeah, bring in the old guard. The return of Monti. That’ll work miracles.

Renzi’s Party Wants Early Election in Italy If Referendum Lost (BBG)

Prime Minister Matteo Renzi’s party would seek early elections in Italy by the summer of 2017 if he loses a referendum on constitutional reform, according to a senior official. Lorenzo Guerini, deputy-secretary of Renzi’s Democratic Party, said in an interview that the group would try to reform the electoral system and then push for a fresh ballot if the “No” campaign wins on Dec. 4. He declined to say whether the premier would stay on to lead that effort or honor his promise to resign after a defeat, but he insisted Renzi would remain leader of the biggest party in parliament. “If there is the political will, we can work over a brief period on a new electoral law, and have elections with a new electoral law soon, by the summer of 2017,” Guerini said in his Rome office.

“If there are not the political conditions and the electoral reform is used as an excuse for a weak government surviving, we’re not interested.” Both the euro and Italian bonds have fallen this month amid concern that a rising populist mood will derail Renzi’s plans for reform and put another crack in the European project. The insurgent Five Star Movement is aiming to capitalize on a “No” vote to force Renzi out and wants another referendum, this time on Italy’s membership of the euro area. With Five Star just behind the Democratic Party in the polls, part of the Italian establishment is looking to hold off another vote until the current parliamentary term ends in February 2018.

Mario Monti, who headed a technocratic government between 2011 and 2013, said he expected there to be no early ballot whatever happens and said Italy should prioritize stability rather than rushing into another vote. “In case the ‘No’ were to win, I would expect first of all Mr Renzi to stay on after all,” Monti said Tuesday in an interview with Bloomberg Television’s Francine Lacqua. “If he at all costs wanted to leave, I would expect the president of the republic to form a new government with a new prime minister, but very much from the same center-left political spectrum which is now the Renzi majority.”

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I’m waiting till Putin takes revenge for the Russian jet downed last year. The West is too weak to take on Erdogan.

Erdogan Says EU Lawmakers’ Vote On Turkish Membership ‘Has No Value’ (R.)

Turkish President Tayyip Erdogan said on Wednesday that a vote by the European Parliament on whether to halt EU membership talks with Ankara “has no value in our eyes” and again accused Europe of siding with terrorist organizations. “We have made clear time and time again that we take care of European values more than many EU countries, but we could not see concrete support from Western friends … None of the promises were kept,” he told an Organisation of Islamic Cooperation (OIC) conference in Istanbul. “There will be a meeting at the European Parliament tomorrow, and they will vote on EU talks with Turkey … whatever the result, this vote has no value in our eyes.”

Leading members of the European Parliament on Tuesday called for a halt to EU membership talks with Turkey because of its broad purges in the wake of a failed July coup. More than 125,000 people – including soldiers, academics, judges, journalists and Kurdish leaders – have been detained or dismissed over their alleged backing for the putsch, in what opponents, rights groups and some Western allies say is an attempt to crush all dissent.

Erdogan said on Tuesday the measures had significantly weakened the network of U.S.-based cleric Fethullah Gulen, whose followers are accused of infiltrating state institutions over several decades and carrying out the coup attempt. Erdogan, and many Turks, were angered by the Western response to the putsch, viewing it as more concerned about the rights of the plotters than the gravity of the events themselves, in which more than 240 people were killed as rogue soldiers commandeered fighter jets and tanks. He has also repeatedly accused Europe of harboring members of the Kurdistan Workers Party (PKK) militant group, which has waged a three-decade insurgency against the Turkish state and is deemed a terrorist organization by the EU and United States.

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Get so sick of this. More reforms will be called for. Rinse and repeat.

EU Finance Ministers To Discuss IMF, Greek Debt (Kath.)

Finance ministers of core European Union countries are expected to meet later this week in Berlin to discuss the possible concessions Brussels could offer to secure the participation of the IMF in Greece’s third international bailout, paving the way for debt talks. Government officials suggest that the IMF, which has yet to decide whether to join Greece’s third bailout, is to blame for the slow process of talks between Greece and its creditors. In a media briefing on Tuesday, government spokesman Dimitris Tzanakopoulos acknowledged that the differences between Greece and its creditors remain too great for an agreement on all prior actions to be reached by the December 5 Eurogroup meeting and said that Athens was aiming for a political agreement by that time.

There is enough time until December 5 for agreements to be reached in talks on labor laws, fiscal issues and the overhaul of the Greek energy sector, Tzanakopoulos said, noting that the government has shown the political will necessary to achieve a breakthrough by the deadline. However, he said, this political will does not include “a willingness for new austerity measures and concessions on matters of principle such as labor rights.” Elaborating, government sources said authorities will not retract their demands for the restoration of collective labor contracts. If all differences have not been bridged by December 5, Greece’s creditors should issue a political decision and make good on their pledge to launch talks on debt relief, Tzanakopoulos said.

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Denouncing the CON21 accord is not the worst of things. Because it doesn’t achieve a thing.

Trump: ‘Open Mind’ On Quitting Climate Accords (AFP)

US President-elect Donald Trump said Tuesday he has an open mind about pulling out of world climate accords and admitted global warming may be in some way linked to human activity. “I think there is some connectivity. Some, something. It depends on how much,” he told a panel of New York Times journalists. Asked whether he would make good on his threat to pull the United States out of UN climate accords, he said: “I’m looking at it very closely. I have an open mind to it.” But he said he was also wanted to see how much the Paris climate accord “will cost our companies” and its impact on US competitiveness.

The Republican billionaire businessman has called climate change a “hoax” perpetrated by China and threatened to pull out of the agreement on limiting greenhouse gas emissions. The accord was reached in Paris in December 2015 after negotiations involving 195 countries. The worldwide pact to battle global warming took effect on November 4. The agreement sets a goal of limiting the rise in global temperatures to two degrees Celsius (3.6 degrees Fahrenheit) over pre-industrial revolution levels. The United States, the second biggest emitter of greenhouse gases after China, ratified the accord in early September, with strong backing from President Barack Obama.

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What are you going to do about it?

Sea Ice Reaches A New Low (Economist)

Measuring sea ice is difficult. Not only does it only appear in the most remote, inhospitable parts of the world, it is constantly either melting or forming. Since 1979, satellites have made the job easier, but they can give a misleading picture. Using satellite images to tot up the total area of sea ice risks mistaking surface melt for open water during the summer melting season. Scientists at the National Snow and Ice Data Center (NSIDC) in Colorado instead measure sea-ice extent by dividing the images into grids and counting any squares with more than 15% ice concentration as “ice covered”. Sea-ice extent is always larger than sea-ice area, but this method eliminates melt-season inaccuracies.

Scientists are interested in sea ice as a marker -and amplifier- of climate change. Its bright surface reflects 80% of the sunlight that hits it back into space. When it melts, the uncovered dark ocean surface absorbs 90% of the sunlight, which heats it up, causing more ice to melt. In recent years, the melting season in the Arctic has been ending later in the year, leading to less time for new ice to form. As a consequence, the total sea-ice extent in September 2016 was over 3m km2. smaller than in September 1980, although not as small as in September 2012, the worst year on record.

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Nov 072016
 
 November 7, 2016  Posted by at 10:30 am Finance Tagged with: , , , , , , , , ,  


NPC Auto wreck, Washington, DC April 1917

Betting Sites See Record Wagering On US Presidential Election (R.)
When Might We Know Who Won? Potentially Hours Earlier Than Usual (BBG)
Could Trump Or Clinton Face Impeachment As President? (John Crudele)
This Election Has Disgraced the Entire Profession of Journalism (Silverstein)
Much More Than Trump (Repost), by Robert Gore
Private Capital Allocation As Inefficient As In Great Depression (Beversdorf)
Housing ‘Wealth Creation’ Leads To National Wealth Destruction (Janda)
China Might Finally Give Wall Street What It Wants – 20 Years Late (WSJ)
Hong Kong Derails Property Streetcar (BBG)
Negative Bond Yields in Japan Don’t Look So Bad With Deflation (BBG)
Architect Of Euro In Stark Warning (BBC)
Obama Aiming To Make Lasting Impression With Athens Speech (Kath.)
Erdogan Blasts West As Turkey’s Kurdish Party Boycotts Parliament (R.)
Great Barrier Reef: What Have We Left For Our Children? (Naomi Klein)

 

 

How fitting.

Betting Sites See Record Wagering On US Presidential Election (R.)

The raucous, passionate and unpredictable 2016 U.S. presidential election is on track to notch another distinction: the most wagered-upon political event ever. With many opinion polls showing a tight race just one day before Tuesday’s election, record numbers of bettors are pouring millions into online platforms from Ireland to Iowa in the hope of capturing a financial windfall from a victory by Democrat Hillary Clinton or Republican Donald Trump. UK-based internet betting exchange Betfair said on Sunday its “Next President” market was set to become the most traded it had ever seen and expected to surpass even Brexit. By Sunday, roughly $130 million had been traded on who will become the next U.S. president, compared with $159 million on the Brexit referendum, Betfair spokeswoman Naomi Totten said.

The amount bet so far on the 2016 contest dwarfs the roughly $50 million laid on the 2012 race. “We think it is because (of) how raw the Brexit (vote) is in people’s minds – they’re not convinced yet that it’s a done deal,” Totten said. Most polls leading into Britain’s June 23 referendum predicted Britons would choose to remain in the EU. Instead, they voted to leave by a 52% to 48% margin. Betfair’s “Next President” market was by far the largest of more than 70 markets on the site related to the U.S. election. As of Friday, some $140 million has been put into play on markets ranging from who will win the popular vote to how many states each party will carry. On Ireland’s Paddy Power, which merged with Betfair earlier this year, the U.S. presidential election “is definitely on course to be the biggest political event,” said spokesman Féilim Mac An Iomaire. The site has had about $4.38 million bet on the race so far.

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Who needs the west?

When Might We Know Who Won? Potentially Hours Earlier Than Usual (BBG)

4. When might the public know who won? Potentially hours earlier than usual.

5. Why’s that? There’s a wrinkle this year that might undermine the tradition of major television networks holding off declaring a new president until polls close on the West Coast. Exit polling available to the networks and the Associated Press, combined with early returns in key districts, can point to a likely winner hours before the polls close. Since 1980, when Ronald Reagan’s landslide victory was called while West Coast polls were still open – spurring complaints that some voters didn’t see any reason to go to the polls — networks have resisted calling winners until a given state’s polls have closed.

6. Who’s challenging that arrangement this year? A startup company called VoteCastr plans to collect data from seven battleground states – Colorado, Florida, Nevada, New Hampshire, Ohio, Pennsylvania and Wisconsin – on Election Day, stream it through a mobile app and use it “to generate minute-by-minute projected outcomes.” The news website Slate.com will publish VoteCastr’s findings as they come in. “Publishing our data will help level the playing field, so that voters know as much as campaigns do,” Slate’s editor, Julia Turner, said.

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Not easy. Entirely new information would be needed.

Could Trump Or Clinton Face Impeachment As President? (John Crudele)

[..] .. might it be possible for Congress to initiate impeachment proceedings immediately after their swearing-in as president, whoever wins? I asked professor Eric Schickler, who is the chairman of Travers Department of Political Science at the University of California, Berkeley. “That is an interesting question”, Schickler said. “The conventional understanding of impeachment is that it is due to actions taken while in office. That is how it has traditionally been applied. But impeachment, as anyone who has lived through the Nixon and Bill Clinton eras knows, is ultimately a political decision”, says Schickler. “The Constitution does not define ‘high crimes and misdemeanors’, which is supposed to be the standard for an impeachable offense. “As such, there is discretion for Congress to define its range”, he added.

But Schickler says it would be a “serious case of political overreach for Congress to impeach after an election for actions taken before a person is in office. That s particularly so where those actions were known at the time of the election itself”, he says. OK, my turn again. So what he s saying is that an impeachment proceeding right after the election would really piss voters off. Then, how about a month after inauguration? Or six months? Or a year from now, when the economy still isn t buzzing (as it s unlikely to be) and people have had enough of our new president – whoever that may be. So let’s figure out what crimes we can come up with for Trump and Hillary Clinton. Clinton’s crimes are obvious. Her opponent has described her as a liar and a crook, and so have I.

She has nearly been indicted twice, and could easily have other offenses that are lurking in the background. She’s become very wealthy because of connections made while in public service. She’s had numerous shady real estate deals and even had a commodities transaction – admittedly long ago – that reeked. And there’s the e-mail controversy. And perhaps lying to Congress and the FBI. And things that may have occurred at the Clinton Foundation. And on and on and on. And if the Republicans keep control of Congress, it’s anyone’s guess if they will go after her. Trump’s “crimes” are a little harder to spot. He’s a pig, that’s for sure. But pinching someone in a bar or saying vulgar things on camera aren’t really impeachable unless, of course, the enemies in his own party decide that they’d prefer vice presidential candidate Mike Pence as a substitute.

Professor Michael J. Gerhardt, the Samuel Ashe Distinguished Professor of Constitutional Law at the University of North Carolina at Chapel Hill, says that a president “may be impeached based on serious misconduct committed prior to the time the individual entered the office he or she currently occupies.” A federal district judge, for instance, got impeached (which is like an indictment) and convicted for lying on a questionnaire he needed to fill out for the job. But there’s a catch, says Gerhardt. The misconduct has to be serious — which is a tricky term to define — and not considered at the time of the election. “It becomes a trickier case if the American people can be said to have ‘ratified’ the prior misconduct” by electing that person.

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Planet Ponzi speaks.

This Election Has Disgraced the Entire Profession of Journalism (Silverstein)

There’s nothing secret about the media’s anti-Trump stance. A formal declaration of war was launched on August 7, when Jim Rutenberg, the New York Times media columnist, wrote a story under the headline, “Trump Is Testing the Norms of Objectivity in Journalism.” Rutenberg wrote that journalists were in a terrible bind trying to stay objective because Trump, among other things, “cozies up to anti-American dictators,” has “put financial conditions on the United States defense of NATO allies,” and that his foreign policy views “break with decades-old …consensus.” Rutenberg made clear that he and other reporters viewed “a Trump presidency as something that’s potentially dangerous,” which required them to report on him with a particularly critical point of view. This, he said, would make journalists “move closer than you’ve ever been to being oppositional,” which would be “uncomfortable and uncharted territory.”

There are so many things wrong with all this that it’s hard to know where to start. Rutenberg’s comment about dictators was clearly a reference to Vladimir Putin, who is an authoritarian leader who Trump, to his shame, admires. However, Russia is not the world’s worst dictatorship — and has been far more effective at fighting ISIS than the Obama administration — and Hillary’s cordial relationship with the Saudi regime, to cite just one example, seems far more dangerous. But rethinking “the alliances that have guided our foreign policy for 60 years” — the alliances that have resulted in non-stop war since 9/11 and the U.S.’s current involvement in seven overseas conflicts — is not an acceptable position for a presidential candidate in Rutenberg’s view.

Furthermore, how is it that the media has derogated to itself the right to decide what candidates deserve special scrutiny and what policies are acceptable? In a democracy, that is supposed to be the voters’ job. And worst of all is Rutenberg’s statement about the role of journalists. “All governments are run by liars and nothing they say should be believed,” I.F. Stone once wrote. “Journalism is printing what someone else does not want printed: everything else is public relations,” said George Orwell. For those two self-evident reasons, being “oppositional” is the only place political journalists should ever be, no matter who is in power or who is campaigning. But for Rutenberg and the New York Times being oppositional is only “uncomfortable” when it comes to covering Hillary Clinton.

It didn’t seem uncomfortable at all when it came to running a story about Trump’s taxes based on three pages of a decades-old tax return that was sent anonymously or when it ran another story with the headline, “The 282 People, Places and Things Donald Trump Has Insulted on Twitter: A Complete List.” All during the campaign we have watched Hillary Clinton rehearse campaign themes and, almost as if by magic, the media amplifying those themes in seeming lockstep. The hacked emails from Clinton campaign chairman John Podesta have demonstrated that this was not mere happenstance, but, at least in part, resulted from direct coordination between the Clintonistas and the press.

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“..a chasm that cannot be straddled..”

Much More Than Trump (Repost), by Robert Gore

While the Kennedy assassination offered the American public a glimpse into the heart of darkness, only a few independent-minded skeptics challenged the Warren Commission whitewash. Vietnam was different; hundreds of thousands returned knowing not just that the so-called best and brightest couldn’t win the war, but that for years they had lied to the American public. In the following decades, it had to have been especially galling for the Vietnam veterans that the hippies, draft-deferred campus protesters, the “fortunate sons” (google Credence Clearwater Revival) whose numbers never came up, and the mockers of the values they held dear ended up among the elite. The Clintons, of course, became the prime example.

Disaffected veterans were the core of a group that would grow to millions, their “faith” in government and the people who ran it obliterated by its repeated failures and lies. Revolutions dawn when an appreciable number of the ruled realize their rulers are intellectual and moral inferiors. The mainstream media is filled with vituperative, patronizing, and insulting explanations of what’s “behind” the Trump phenomenon. It all boils down to revulsion with the self-anointed, incompetent, pretentious, hypocritical, corrupt, prevaricating elite that presumes to rule this country. It is, in a word, inferior to the populace on the other side of the yawning chasm, the ones they have patronized and insulted for decades, and the other side knows it.

Peggy Noonan is one of the few mainstream writers who has tried to understand, rather than insult or condemn, the Trump phenomenon. In a widely cited article, she ascribed it to the split between the “protected,” those who run the government and its allied institutions, and the “unprotected,” the government’s and its allies’ victims (“Trump and the Rise of the Unprotected,” The Wall Street Journal, 2/25/16). It was a nice try, but Ms. Noonan is attempting to straddle a chasm that cannot be straddled. She writes for the Journal, an establishment organ, some of whose writers have been either so clueless or disingenuous that they have denied the existence of an establishment. And ultimately, the protected-unprotected differentiation doesn’t fly.

Most Trump supporters don’t want the government to do something for them; they want the government to quit doing things to them. They viscerally revile the elite—it’s personal—and they want no part of that class or its government. They know how to take care of themselves, and many know the government hurts the most those whom it ostensibly protects.

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Whet can be done when demand is set to be weak for a long time?

Private Capital Allocation As Inefficient As In Great Depression (Beversdorf)

1) Economic policy objectives (monetary and fiscal) are meant to incentivize domestic private business investment, which drives incomes and the money multiplier effect, i.e. the engine of the economy.

2) Economic policy objectives have failed because CEO’s, the private capital allocators, simply cannot accommodate business investment when the demand function is as weak as we currently find it, no matter how available and how cheap the capital.

3) The demand function is weak because we misunderstood and ignored the side effects of trade policies and their reliance on new world economies that naturally have a lower money multiplier effect than old world economies.

4) A materially damaged demand function leads to a misallocation of resources; for the past 15 years capital has been and continues at an accelerating rate to be allocated to cash distribution (the most economically inefficient use of capital) rather than investment, further deteriorating the demand function (economic death spiral).

5) The only question that matters now then is; How do we get private sector capital allocators to allocate capital more efficiently? I’ll give you a hint, it requires indications of sustainable demand improvement and neither monetary nor fiscal policy have the capacity to generate sustainable demand improvement when the demand function is damaged to the point that CEO’s refuse to invest productively. This then requires a new economic policy framework, one that CAN generate sustainable demand improvement, which will allow capital allocators to invest productively.

We can understand the problem without villainizing any particular stakeholders by focusing on where we are today and delivering a viable solution. Mistakes were made and judging whether they were honest or malicious in nature is irrelevant to finding the solution. Our focus here is a solution.

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Bloated home prices strangle consumption, which is typically 50-70% of GDP.

Housing ‘Wealth Creation’ Leads To National Wealth Destruction (Janda)

Robertson cites two brunches a week, two coffees a day and a $60 dinner a week as areas where many Gen Ys could save some cash. Aside from the many responses I’ve heard from Gen Ys who don’t spend anything like this much on such items, when you add up the savings it really isn’t that much. On Robertson’s figures one could save just under $6,000 a year. Let’s be extra tight arse and cut out the booze, say $50 a week for $2,600 a year, save another $1,000 by holidaying up the coast in a caravan park instead of heading overseas and $400 more through buying cheaper clothes. So let’s assume it’s reasonable to cut $10,000 in expenses and let’s also assume, even though it’s unlikely given their other spending habits, that our hypothetical Gen Y already saves $5,000 a year from their post-tax, post-HECS/HELP repayment income.

With a median home price of $800,000 in Sydney, it would take a single person more than a decade to save a deposit, so more than five years for a couple who were both saving $15,000 a year. But first time buyers shouldn’t be buying the median, or middle-priced, home I hear boomers respond. Agreed. So let’s take the median apartment price instead. Given the number of studios and tiny one-bedders out there, the median unit price probably gets you a pretty small apartment within 10km of the CBD or a two-bedder somewhere further out. Surely the boomers can’t begrudge that as being excessively luxurious? That’s still $138,000 for a 20% deposit, not including stamp duty, legal and moving costs.

For a single person that’s still nine years of saving, or the best part of five for a couple, and that’s assuming home prices don’t keep rising faster than their incomes and the earnings on their savings, which has been the experience of the past four years. Even a deposit on a Melbourne apartment is six-and-a-half years of saving for a single and more than three years for a couple, again not including other unavoidable purchase costs. That’s the individual challenge that Gen Ys face, even those on pretty decent incomes which are becoming rarer in an increasingly part-time and casualised labour market. But what all of the analysis thus far has ignored is the macroeconomic cost. Imagine for a second that hundreds of thousands of Gen Ys gave up all their brunches and coffees – cafes across Australia would be going broke.

Who do they employ? Often Gen Ys. Likewise the restaurants, bars and retailers that would also be hit if Gen Y really did close their wallets completely. This illustrates the problem with an over-inflated housing market, it absolutely sucks the life out of every other part of the economy.

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“Chinese banks had a 10% share of investment-banking revenue in Asia [..] a decade ago… This year, that share has increased to 61%..”

China Might Finally Give Wall Street What It Wants – 20 Years Late (WSJ)

Beijing is considering allowing Wall Street firms to run their own investment-banking businesses on the mainland, according to people briefed on the discussions, a long-awaited step that would give them more access to China’s hard-to-crack domestic market. The move is being discussed as part of a new U.S.-China trade and investment framework. Firms such as Goldman Sachs and J.P. Morgan Chase potentially could operate investment-banking business in China on their own. Currently, the firms must pair with domestic brokerages in joint ventures. The people briefed on the discussions caution negotiations aren’t finalized. Details need to be hashed out with Chinese regulators, and any agreement would need to be ratified by the U.S. Senate.

The possibility of getting closer to the Chinese market is a breakthrough for Wall Street firms. Global banks have limited access to the $7.48 trillion stock markets of Shanghai and Shenzhen and China’s domestic bond market, compared with the ease they can operate in global markets such as London and Tokyo. Any change, however, would come at a late stage. China’s banks have large balance sheets and have become formidable rivals. The banks also have long relationships with corporate Chinese clients, some of whom may not recognize Western brand names.

Chinese banks had a 10% share of investment-banking revenue in Asia, excluding Japan and Australia, a decade ago, according to data provider Dealogic. This year, that share has increased to 61%, boosted by Chinese companies that prefer to do business with domestic firms. Although U.S. banks have spent heavily to bulk up operations in the region, their share has declined since 2000, from 43% to just 14% so far this year, according to Dealogic.

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Popping bubbles before they become tumors.

Hong Kong Derails Property Streetcar (BBG)

When pro-market authorities tamper with prices to cool asset bubbles, economists speak of “throwing sand in the wheels of finance.” Having emptied its bucket of sand without stanching the desire to own property, Hong Kong decided to derail the out-of-control streetcar in a pit of exorbitant taxation. Considering the more painful alternative, it’s a wise move. Now that foreigners, including all-important mainland Chinese buyers, must pay a 30% stamp duty to buy overpriced shoeboxes, transactions could drop by 70%, Bloomberg News reported. Weaker demand might jolt earnings of the city’s developers. That’s what the biggest drop in 16 months in Cheung Kong Property’s shares suggested Monday. A more violent reaction, which might have occurred as Hong Kong’s U.S.-linked interest rates rose, may have been avoided.

As Gadfly pointed out, Hong Kong property has been a magnet for the kind of speculative frenzy that Singapore managed to tame. A gush of money out of the People’s Republic and into something – anything – in Hong Kong is the main reason a skilled worker in the territory was being asked to hand over seven years’ more wages than his Singapore counterpart to own the roof over his head. Even as Hong Kong’s pro-democracy activists are ticked off by Beijing for trying to chart an independent political course, the city can exert more control over its economic destiny by making the world’s least affordable housing a little less so. Not only will the 30% tax dissuade mainland buyers, it also could also put an end to speculative land purchases by Chinese developers.

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Well, let’s all get us some deflation then.

Negative Bond Yields in Japan Don’t Look So Bad With Deflation (BBG)

If you thought Japan’s negative yields don’t offer any value, take a look at the nation’s fall back into deflation. The 10-year Japanese government bond yield of minus 0.065% turns into a real yield of about 44 basis points, near a three-year high, after accounting for consumer prices. The figure beats the U.S. 10-year real yield of about 30 basis points. The Bank of Japan last week acknowledged its negative short-term interest rates and its plan to control the yield curve will need more time to push up living costs. It forecast 2% inflation won’t be achieved until the year ending March 2019. Bondholders are the beneficiaries, with Japan’s debt market little changed over the past month, even as Treasuries dropped 0.4%, based on the Bloomberg World Bond Indexes.

“Even with the BOJ being vigilant about controlling bond levels, Japanese yields are on a gradual declining path given the lack of conviction that prices will rise,” said Souichi Takeyama at SMBC Nikko Securities Inc. in Tokyo, a unit of Japan’s second-biggest lender. “There is a lack of concern about inflation.” The government will test demand when it sells 10-year debt Tuesday and 30-year bonds on Thursday. Japanese consumer prices are falling at a year-on-year pace of 0.5%, matching the biggest declines since 2013, giving bondholders reason to stick with the securities at a time when the central bank is trying to hold nominal 10-year yields at about zero. In the U.S., investors get 1.80%. Japan’s 40-year bond is more attractive at 0.575%, or a real yield exceeding 1%.

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Wonder how much he blames himself for.

Architect Of Euro In Stark Warning (BBC)

A founding father of monetary union has given a damning assessment of the euro bloc, saying that not incorporating an exit strategy was a mistake. Prof Otmar Issing told the BBC’s Wake up to Money that faultlines across the eurozone remain, citing economic weakness in Greece, Portugal and Italy. The ECB’s first chief economist also warned about the impact of negative interest rates. And he said political pressures threatened central banks’ independence. Prof Issing told the BBC that structural problems in the eurozone and dwindling public support in some countries were still major problems. The euro currency was “stable and performing much better than expected”, he said. “But I wish I could say the same about the euro area.”

Countries that tipped the bloc into recession during the global financial meltdown were still in serious economic trouble. Greece was in “permanent crisis”, and economic reforms in Portugal and Italy were either on hold or being reversed, the professor said. Prof Issing, a former adviser to Germany’s Chancellor Angela Merkel, has in recent years become suspicious of the euro project he helped to create, warning that it would collapse without reform. He told the BBC that it was a “mistake in the construction of the whole arrangement that once a member, you remain a member for eternity”. It meant that countries not complying with the eurozone’s economic and budgetary rules “can blackmail the others”. Allowing a temporary exit would, for example, have helped Greece to reform its economy so that it could then return later in better financial health.

However, some countries should never have joined the euro in the first place, he said, without naming names. They “were not yet ready to thrive under a single monetary policy and one central bank”. Prof Issing is also increasingly concerned about central banks’ use of zero or negative interest rates in a bid to stimulate growth. The policy has been used by, among others, the ECB, Japan, Switzerland and Sweden It is hindering the recovery of banks, he said, adding: “If it persists for longer, then I think we will see dramatic consequences for insurance companies and pension schemes.” Furthermore, “the longer zero interest rates continue, the more difficult it will be to exit from this situation”.

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A lasting impression accompanied by Victoria Nuland and new ambassador to Greece Geoffrey Pyatt. Athens has better be very careful with the Ukraine star couple in place.

Obama Aiming To Make Lasting Impression With Athens Speech (Kath.)

US President Barack Obama is planning to deliver what American officials have described to Kathimerini as a “legacy speech” when he visits Athens on November 15. Although the details of the president’s trip have not been finalized, officials in Washington indicated that Obama intends to make a statement that resonates when he comes to Greece. One official likened it to the historic speech delivered by John F. Kennedy when he visited Berlin in 1962. Obama is expected to make extensive references to democracy and how it has endured in Greece despite its recent problems. The US president is also due to highlight the need for Athens to receive debt relief and for the Greek government to persist with structural reforms.

Obama is expected to tread carefully on the issue of debt so that his comments do not appear as an attack on German Chancellor Angela Merkel, who he considers an important partner and who he will be visiting after his trip to Athens. Sources said that the American president’s speech will also contain a message for Turkey. Obama wants to draw attention to the refugee crisis during his visit to Greece but due to security concerns a visit to the island of Lesvos has been ruled out. There is, however, a possibility that he will visit a refugee camp in Attica.

It is not yet known who will accompany the American leader on his visit but the impression is that First Lady Michelle Obama will not accompany him on the trip. There has been no final decision on whether Treasury Secretary Jack Lew will also travel to Athens. It is considered likely that Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland and Special Envoy for International Energy Affairs Amos Hochstein will be part of the team that will fly to Greece from Washington.

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Prediction: “we” are going to let this run awfully out of control.

Erdogan Blasts West As Turkey’s Kurdish Party Boycotts Parliament (R.)

Turkish President Tayyip Erdogan accused Europe on Sunday of abetting terrorism by supporting Kurdish militants and said he did not care if it called him a dictator. Turkey drew international condemnation for the arrest on Friday of leaders and lawmakers from the pro-Kurdish Peoples’ Democratic Party (HDP), the second-largest opposition grouping in parliament, as part of a terrorism investigation. The government accuses the HDP, which made history last year by becoming the first Kurdish party to win 10% of the vote and enter parliament, of financing and supporting an armed Kurdish insurgency, which it denies. The HDP announced a partial boycott of parliament on Sunday, saying it was “halting its legislative efforts” and that its deputies would stop participating in sessions of the legislature or meetings of parliamentary commissions.

“I don’t care if they call me dictator or whatever else, it goes in one ear, out the other. What matters is what my people call me,” Erdogan said in a speech at an Istanbul university, where he was receiving an honorary doctorate. Erdogan and the government are furious at what they see as Western criticism of their fight against the Kurdistan Workers Party (PKK) militant group, which has waged a three-decade insurgency for Kurdish autonomy and whose allied groups in Syria enjoy U.S. support in the fight against Islamic State. Erdogan said the PKK, listed as a terrorist group by the EU and US, had killed almost 800 members of the security forces and more than 300 civilians since a ceasefire in the largely Kurdish southeast collapsed last year. [..] “Europe, as a whole, is abetting terrorism. Even though they declared the PKK a terrorist organisation, this is clear,” Erdogan said. “We see how the PKK can act so freely and comfortably in Europe.”

HDP co-leaders Selahattin Demirtas and Figen Yuksekdag were jailed pending trial on Friday after refusing to give testimony in a probe linked to “terrorist propaganda”. Ten other HDP lawmakers were also detained, though some were later released. The US expressed deep concern, while Germany and Denmark summoned Turkish diplomats over the Kurdish arrests. European Parliament President Martin Schulz said the actions “call into question the basis for the sustainable relationship between the EU and Turkey”. “After discussions with our parliamentary group and our central executive board, we have decided to halt our legislative efforts in light of everything that has happened,” HDP spokesman Ayhan Bilgen said in a statement read out in front of the party’s offices in Diyarbakir and broadcast online. HDP officials would consult with the party’s supporters, many of whom are in the largely Kurdish southeast, and could then consider a full withdrawal from parliament, he said.

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“Climate change is intergenerational theft.”

Great Barrier Reef: What Have We Left For Our Children? (Naomi Klein)

There is no question that the strongest emotions I have about the climate crisis have to do with Toma and his peers. I have flashes of sheer panic about the extreme weather we have already locked in for them. But even more intense than this fear is the sadness about what they won’t ever know. These kids are growing up in a mass extinction, robbed of the cacophonous company of being surrounded by so many fast-disappearing life forms. According to a new WWF report, since I was born in 1970 the number of wild animals on the planet has dropped by more than half – and by 2020 it is expected to drop by two-thirds. What a lonely world we are creating for these kids. And what more powerful place to illustrate that absence than the Great Barrier Reef, on the knife-edge of survival?

So this film shows the reef through Toma’s eyes. He’s too young to understand concepts like coral bleaching and dying – it’s tough enough for him to understand that coral was ever alive in the first place. It also shows the Great Barrier Reef through the eyes of his mother: moved by the beauty that remains, heartbroken and infuriated by what has been lost. Because what has happened to this wondrous part of the world is not just a tragedy, it’s a crime. And the crime is still very much in progress, with our respective governments busily clearing the way for new coalmines and new oil pipelines.

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


DPC Near Lewiston, Minnesota – The Pulpit. 1899

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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Maybe Draghi and Kuroda can buy them all.

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

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

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

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

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

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

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

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

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As Merkel pushes back.

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

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

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

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“..the data told them to…”

Why the Fed Destroyed the Market Economy (Gordon)

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

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

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

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

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

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

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

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

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Barton Gellman takes down an idiot report.

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

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

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

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

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

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

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But they control.

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

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

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

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

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

The Intellectual Yet Idiot (Taleb)

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

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

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

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

The Existential Madness of Putin-Bashing (Robert Parry)

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

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

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

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

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Why?

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

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

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

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