wealth Archives - Page 2 of 3 - The Automatic Earth

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.

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%)

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.

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.”

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.

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.

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)

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.”

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.

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.

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.

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.

Debt Rattle November 7 2016

Nov 072016

November 7, 2016 Posted by Raúl Ilargi Meijer at 10:30 am Finance Tagged with: deflation, Greece, Hillary, impeachment, journalism, Nuland, reef, Trump, Turkey, wealth 2 Responses »

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.

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.

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.

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.

“..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.

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.

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.

“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.

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.

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%.

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”.

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.

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.

“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.

Debt Rattle September 17 2016

Sep 172016

September 17, 2016 Posted by Raúl Ilargi Meijer at 9:01 am Finance Tagged with: Fed, IMF, IYI, media, Putin, Russia, Snowden, Syria, Trump, VW, wealth 1 Response »

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.

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.

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.

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.

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.

“..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.

“..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.

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.

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.

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.

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.

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.

Debt Rattle August 30 2016

Aug 302016

August 30, 2016 Posted by Raúl Ilargi Meijer at 8:19 am Finance Tagged with: Apple, Banks, bubble, Dotcom, food bank, Greece, jobless, oil, refugees, water, wealth 3 Responses »

Wynand Stanley Ice-packed Buick motor stunt, San Francisco 1922

• Banks Get Ready For ‘Economic Nuclear Winter’ (CNBC)

• The “Devastating” Truth Behind America’s Record Household Net Worth (ZH)

• We Have Passed The Peak Of The Bubble (Maloney)

• Oil Discoveries at 70-Year Low (BBG)

• House Price Gloom In Canada A Lesson For Australia (AFR)

• Unemployed Italians Lead Europe in Abandoning Job Hunt (BBG)

• Apple Facing Back Taxes Running Into Billions Over Ireland Deal (G.)

• Life After Community Death: A Food Bank (G.)

• Judge: Kim Dotcom Can Livestream Legal Fight Against The US (AP)

• 60% Of South Asia’s Groundwater Too Contaminated To Use (AFP)

• China Regulator To Curb News That Promotes ‘Western Lifestyles’ (R.)

• EU Seeks To Protect Greek Statistics Office From Its Own Government (BBG)

• Greek GDP Contraction In First Half 2016 Was Worse Than Thought (Kath.)

• Turkey Warns Refugee Deal To Collapse Unless EU Grants Visa-Free Travel (Kath.)

• 6,500 Migrants Rescued Off Libya Coast Overnight By Italian Coastguard (AFP)

Beautiful Brexit as the bubble burster.

• Banks Get Ready For ‘Economic Nuclear Winter’ (CNBC)

The first half of 2016 has been a roller-coaster for financial markets. A combination of uncertainties surrounding the U.K.’s vote to leave the European Union and weaker-than-expected corporate earnings results across the region means a tough second half looms. European banks, in particular, have had a very tough six months as the shock and volatility around Brexit sent banking stocks south. Major European banks like Deutsche Bank and Credit Suisse saw their shares in free-fall after the referendum’s results were announced. In the U.K., RBS was the worst-hit, with its shares plunging by more than 30% since June 24. The current uncertainty over when the U.K. will start the process of quitting the EU has banks on tenterhooks. But a source told CNBC that banks are “preparing for an economic nuclear winter situation.”

Speaking on the condition of anonymity due to the sensitive nature of the topic, a source from a major investment bank told CNBC that financial services firms have put together a strategy in place that takes into account the worst-case scenario that could happen by the end of this year. “This could mean triggering Article 50, referendum in other European nations leading to a break-up of the euro or sterling hitting below $1.20 or lower. The banks are ready for anything now,” the source said. The source further explained that the challenge in 2016 is nothing compared to when the Lehman Brothers collapsed in 2008 and the banking sector is this time a lot more resilient. “Markets hate uncertainty and the events this year have unfortunately created a lot of mystery around what is going to happen next.”

It’s all a bubble.

• The “Devastating” Truth Behind America’s Record Household Net Worth (ZH)

Every quarter, as part of its Flows of Funds statement, the Fed releases a detailed breakdown of America’s assets and liabilities, of which the most interesting section is the one dealing with US household wealth and debt, and most importantly, their net worth. The last such release in June showed that as of March 31, total US household assets rose decidedly above $100 trillion, hitting an all time high $102.6 trillion, offset by $14.5 trillion in liabilities, resulting in $88.1 trillion in household net worth. It is worth noting that of this $100+ trillion in assets, 69% was in the form of financial assets (stocks, mutual funds, pensions, deposits, etc), and only $31.5 trillion was real, tangible assets including $26 trillion worth of real estate.

[..] as Pedro da Costa points out, when one looks beneath the surface, a “devastating” picture emerges: US inequality like no-one has seen it before. To help with this peek behind the scenes, we look at the latest, just released CBO report on Trends in Family Wealth, which shows that far from equitable, US wealth has never been so skewed. The picture in question:

Here are the CBO report’s summary findings: In 2013, aggregate family wealth in the United States was $67 trillion (or about four times the nation’s gross domestic product) and the median family (the one at the midpoint of the wealth distribution) held approximately $81,000, the Congressional Budget Office estimates. For this analysis, CBO calculated that measure of wealth as a family’s assets minus its debt. CBO measured wealth as marketable wealth, which consists of assets that are easily tradable and that have value even after the death of their owner. Those assets include home equity, other real estate (net of real estate loans), financial securities, bank deposits, defined contribution pension accounts, and business equity. Debt is nonmortgage debt, including credit card debt, auto loans, and student loans, for example.

But to get to the stunning punchline, one has to read The section on How Is the Nation’s Wealth Distributed? Here is the answer: In 2013, families in the top 10% of the wealth distribution held 76% of all family wealth, families in the 51st to the 90th percentiles 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 percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt.

“These people are just absolutely dangerous. They are going to drag the entire world economy down.”

• We Have Passed The Peak Of The Bubble (Maloney)

What the central banks are doing has never worked and they keep on trying – you just hit that nail a little bit harder each time because it isn’t working. They have these theories and they think that the theory is correct that this – and no matter what the results are they say well, we just didn’t do enough of it. Japan has been trying this for 30 years now and it hasn’t worked. These people are just absolutely dangerous. They are going to drag the entire world economy down. You talked about the helicopter money that is now happening in Europe and so on. That is going to be coming to the United States soon. Coming to a Central Bank near you. It always has damaging results. They don’t look at this. It is a huge wealth transfer.

The immorality of an entity and everywhere I go I take a look at – when I would go speak in Singapore or Australia, New Zealand, Malaysia, Colombia, Peru doesn’t matter – Russia – everywhere I go I take a look, I go on the websites of the central bank for that country and I start gathering information. I haven’t found a central bank that is part of the government. They are all private. Here is a private entity that is allowed to create currency and now they are buying bonds from corporations? They can buy stocks. When they write a check and they buy something, currency is created and it enters circulation. A very large portion of it is Fanny Mae and Freddy Mac stuff. It is the mortgage backed securities. And so that means that they own real estate. This private corporation is able to counterfeit and purchase real estate legally. The morality of this is insane.

Keynesian economics isn’t even remotely plausible. But it’s what is taught all over the world. They don’t understand fundamental economics. This is the problem that we have: all economies on the planet are being run by economists that don’t understand economics. The purchasing power that is contained in currency is basically the agreement that we have as a society that we are all going to use that currency and we trust that currency and we store hours of our lives. We trade hours of our lives for currency. We work. That is the purchasing power. Then that currency measures the goods and services in a society. The true wealth.

They think that they can actually print wealth. When they print new units of currency, the only way it can get purchasing power is the moment that it is spent in the circulation – it has to steal it from somewhere else because it is empty when it comes into existence. There is no work that went into it. There are no hours of life traded for it. There is no product or service that it represents until it is spent in circulation and then it steals that purchasing power from all other units of currency. It is fraud. It is theft. They can’t actually stimulate an economy. All they can do is warp it. They can steal purchasing power from some areas of the economy and transfer it to another area of the economy pushing that area into a bubble. It is very, very disruptive.

“EIA estimates that global oil demand will grow from 94.8 million barrels a day this year to 105.3 million barrels in 2026. “ I do not.

• Oil Discoveries at 70-Year Low (BBG)

Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand. With oil prices down by more than half since the price collapse two years ago, drillers have cut their exploration budgets to the bone. The result: Just 2.7 billion barrels of new supply was discovered in 2015, the smallest amount since 1947, according to figures from consulting firm Wood Mackenzie. This year, drillers found just 736 million barrels of conventional crude as of the end of last month. That’s a concern for the industry at a time when the U.S. EIA estimates that global oil demand will grow from 94.8 million barrels a day this year to 105.3 million barrels in 2026.

While the U.S. shale boom could potentially make up the difference, prices locked in below $50 a barrel have undercut any substantial growth there. New discoveries from conventional drilling, meanwhile, are “at rock bottom,” said Nils-Henrik Bjurstroem at Oslo-based consultant Rystad Energy. “There will definitely be a strong impact on oil and gas supply, and especially oil.” Global inventories have been buoyed by full-throttle output from Russia and OPEC. They’ve flooded the world with oil despite depressed prices as they defend market share. But years of under-investment will be felt as soon as 2025, Bjurstroem said. Producers will replace little more than one in 20 of the barrels consumed this year, he said.

We rapidly get used to seeing bubbles as new normal.

• House Price Gloom In Canada A Lesson For Australia (AFR)

A commodity economy with record-breaking property prices, fuelled by ultra-low interest rates and Chinese buyers, raises taxes on foreign homebuyers. While the scenario is eerily similar to Australia, it is actually Canada and early signs are the property market is rapidly cooling. The unravelling could offer insight for Australians contemplating the state of the expensive local real estate market. A record one in five Canadians expect house prices to fall. The number of property price pessimists has nearly doubled since a 15% foreign buyer tax on Vancouver homes took effect on August 2. In the first two weeks since the tax came into effect, home sales fell 51% in the metropolitan area, the Real Estate Board of Greater Vancouver said.

Nanos Research chairman Nik Nanos told The Australian Financial Review that real estate was the “canary in the mine” for the Canadian economy and the foreign acquirer tax has had an immediate “chill” effect on confidence. “If we see a significant slide in confidence in real estate there will be an immediate negative knock-on effect on the Canadian economy because right now there is no energy [oil] economy to fall back on,” he said. The price of Canada’s biggest export, oil, has crashed over the past two years, much like iron ore and coal prices in Australia. Like Sydney and Melbourne, real estate prices in Canada’s most-liveable cities have surged in recent years.

A combination of low borrowing costs, strong demand, limited housing supply because of red tape and, anecdotally, foreign buyers mainly from China seeking to park their money in perceived safe havens offshore, pushed up values. Vancouver house prices soared 30% in the year ended May 31, and prices shot up 15% in Canada’s biggest city of Toronto. The median price for detached houses in Vancouver jumped to $C1.6 million.

And you think this Union can stay together?

• Unemployed Italians Lead Europe in Abandoning Job Hunt (BBG)

Going from the final quarter of 2015 through March of this year, 37% of unemployed Italians gave up their job search, while only 13% landed new work and a full half found their status unchanged. On the opposite end of the scale, very few Greeks – just 1% – gave up their job hunt while only 4% found new employment in the economically hard-pressed nation.

Deductible from its US taxes.

• Apple Facing Back Taxes Running Into Billions Over Ireland Deal (G.)

Apple could face back taxes running into billions with the European commission expected to rule against the company on Tuesday over its arrangements with the Irish government. A ruling by Margrethe Vestager, the European competition commissioner, could make Apple liable for billions of euros. Irish officials expect the commission to declare the arrangements unlawful under state aid rules. A decision against Apple and Ireland after a two-year investigation would rebuff US efforts to persuade the commission to drop its interest amid warnings about retaliation from Washington. The commission has been investigating whether Apple’s tax deals with Ireland, which have allowed the company to pay very little tax on income earned throughout Europe, amounted to state aid.

The commission opened a formal inquiry in September 2014 after publishing preliminary findings suggesting deals between Apple and Ireland in 1991 and 2007 involved state aid that was incompatible with the EU’s internal market. Apple and Ireland have denied repeatedly that they have a special deal. Tim Cook, Apple’s chief executive, has called the investigation “political crap” and said his company and Ireland would appeal against a ruling that Apple received state aid. The investment bank JP Morgan has warned that if the commission requires Apple to retroactively pay the Irish corporate tax rate of 12.5% on the pre-tax profits it collected via Ireland it could cost the company as much as $19bn.

Of course I can’t read a story like this about a food bank in Britain without thinking about the project you and I are supporting in Greece -all over Greece. Where conditions are much worse still. I hope the Brits who read this realize that.

• Life After Community Death: A Food Bank (G.)

I never expected to leave a food bank feeling optimistic. To visit a kitchen serving hundreds of free summer-holiday meals to kids who might otherwise go hungry – and come away pondering the lessons Westminster, and especially Jeremy Corbyn’s Labour party, should learn. But then, until last week, I hadn’t met the two women who run the Neo cafe. To understand what an achievement Neo is, you have to see what it’s up against. There’s the area, for a start: Birkenhead, now practically a byword for social deprivation. In parts of this town the life expectancy for baby boys is lower than in North Korea. Since the Brexit vote there’s been a boom in hand-waving commentary on “left-behind” Britain.

The columnists and studio guests should come here for a day, and see what their talking points look like as lived experience. Industrial decline? The once great shipbuilder Cammell Laird still clings on, but many of the other big employers have been wiped out. Insecure work? The usual features of an exploitative jobs market are all present, from zero-hours contracts and temp agencies to, most of all, low wages. And of course austerity, from benefit sanctions to multimillion pound cuts at Wirral council. Impose such conditions on a family and you create misery. Push them across an entire community and you get breakdown.

Widespread economic insecurity produces social instability. Relationships fail. Colin, a twentysomething on temp work, describes how his partner had to move out because “I couldn’t make my pay packet feed two”. Stop-start work makes planning budgets hard enough – it makes planning families impossible. Neighbours move in then move out, so you never know who’s living next door – and you’d all rather leave. One grandmother, Wendy, remembers how she cried on being offered a council house in Rock Ferry, the patch of town that’s home to Neo. Then Anne and Trish chip in with other problems: druggies and no-go areas, so that a kid from this estate can’t go to that one. Here, the horizons have shrunk so far that the neighbourhood can seem like a trap.

Good. Let’s hear it.

• Judge: Kim Dotcom Can Livestream Legal Fight Against The US (AP)

Internet entrepreneur Kim Dotcom will be allowed to livestream his legal bid to halt his extradition to the United States, a New Zealand judge ruled Tuesday. Dotcom and three of his colleagues are appealing a December lower-court decision which allows them to be extradited to the U.S. to face conspiracy, racketeering and money-laundering charges. If found guilty, they could face decades in jail. Dotcom’s lawyer Ira Rothken told AP he was pleased with the decision. “It provides everybody in the world with a seat in the gallery of the New Zealand courtroom,” Rothken said. “It’s democracy at its finest.” Rothken said the livestreaming would begin Wednesday on YouTube. He said there would be a 20-minute delay to prevent any evidence that was protected by the court from becoming public. The appeal is expected to last six weeks.

Justice Murray Gilbert, the New Zealand judge hearing the appeal, had asked other media about Dotcom’s request and didn’t receive any objections. Rothken said the U.S. had opposed the plan on the basis it could taint a potential jury pool and could cede court control over evidence. December’s lower-court ruling came nearly four years after the U.S. shut down Dotcom’s file-sharing site Megaupload, which prosecutors say was widely used by people to illegally download songs, television shows and movies. Megaupload was once one of the internet’s most popular sites. Prosecutors say it raked in at least $175 million and cost copyright holders more than $500 million. But Dotcom and colleagues Mathias Ortmann, Bram van der Kolk and Finn Batato argue they can’t be held responsible for people who chose to use the site for illegal purposes.

Rothken said the lower-court judge made an error of law in his ruling, and that broad safe-harbor provisions protect internet service providers from the types of charges his clients face.

750 million people. Add China’s polluted water, and you get well over a billion.

• 60% Of South Asia’s Groundwater Too Contaminated To Use (AFP)

60% of the groundwater in a river basin supporting more than 750 million people in Pakistan, India, Nepal and Bangladesh is not drinkable or usable for irrigation, researchers have said. The biggest threat to groundwater in the Indo-Gangetic Basin, named after the Indus and Ganges rivers, is not depletion but contamination, they reported in the journal Nature Geoscience. “The two main concerns are salinity and arsenic,” the authors of the study wrote. Up to a depth of 200m (650ft), some 23% of the groundwater stored in the basin is too salty, and about 37% “is affected by arsenic at toxic concentrations”, they said.

The Indo-Gangetic basin accounts for about a quarter of the global extraction of groundwater – freshwater which is stored underground in crevices and spaces in soil or rock, fed by rivers and rainfall. Fifteen to twenty million wells extract water from the basin every year amid growing concerns about depletion. The new study – based on local records of groundwater levels and quality from 2000 to 2012 – found that the water table was in fact stable or rising across about 70% of the aquifer. It was found to be falling in the other 30%, mainly near highly populated areas.

Xi trying to assert power he doesn’t have.

• China Regulator To Curb News That Promotes ‘Western Lifestyles’ (R.)

China will crack down on social and entertainment news that promotes improper values and “Western lifestyles”, the country’s broadcasting regulator said, the latest effort at censorship in an already strictly regulated media environment. President Xi Jinping has embarked on an unprecedented drive to censor media that do not reflect the views of Communist Party leaders. Authorities have already issued rules limiting “foreign-inspired” television shows and put tougher penalties on the spread of rumors via social media. Social and entertainment news must be dominated by mainstream ideologies and “positive energy”, the official Xinhua news agency said late on Monday, citing the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT).

News content should not make improper jokes, defile classics, or “express overt admiration for Western lifestyles”, the regulator said in a circular, according to Xinhua. “They should also avoid putting stars, billionaires or Internet celebrities on pedestals”, and not advocate overnight fame or hype family disputes, Xinhua said. China’s legislature this week is also reviewing a draft law that would require film industry workers to maintain excellent “moral integrity”, after recent cases in which celebrities had been arrested for drug offences and prostitution, Xinhua said in a separate report. Xi has been explicit that media must follow the party line, uphold the correct guidance on public opinion and promote “positive propaganda”. The term “positive energy” is a catch phrase that has been favored by China’s propaganda and internet authorities under Xi, referring to content that is morally uplifting and patriotic.

A curious case of Brussels intervention. There’s nary a soul in Greece who doubts that Georgiou greatly exaggerated the Greek budget deficit in 2009 in order to make an EU bailout inevitable. Now the EU wants to label Greece’s scrutiny of this as “political interference in administrative matters”. But matters such as these can be investigated in simple ways: an objective look at the numbers. That’s not politics, but accounting. Thing is, if Georgiou did this, it was in collusion with the EU.

• EU Seeks To Protect Greek Statistics Office From Its Own Government (BBG)

Greece’s finance chief said the next international aid payout to the country may be delayed as the European Union stepped up warnings about domestic political meddling in the Greek state. Finance Minister Euclid Tsakalotos raised the possibility of the government in Athens failing to qualify on time for a €2.8 billion disbursement due in September from the euro area. That’s what remains of a €10.3 billion tranche that finance ministers approved in principle three months ago. “If there is a delay, it’ll be days not weeks,” Tsakalotos told Bloomberg News in Brussels on Monday before a meeting with EU Economic Affairs Commissioner Pierre Moscovici. “Part of the reason for the meeting is to discuss the process to ensure there aren’t delays.”

Slipping timetables have been a regular feature of loan payouts to Greece since it first turned to the euro area and the IMF for a rescue in 2010. Now in it’s third bailout, the country faces continued creditor warnings about backsliding on overhauls that are a condition for aid. The European Commission sent the latest salvo to Athens, saying on Monday that criticism of the former head of Greece’s statistical agency by allies of Prime Minister Alexis Tsipras risks undermining the credibility of Greek fiscal data. The commission, the EU’s executive arm, said the Greek government must push ahead under its aid program with commitments to curb political interference in administrative matters.

“The commission has long urged the implementation of the pillar of the program related to the modernization of the Greek state and public administration,” Margaritis Schinas, chief spokesman at the 28-nation body, told reporters in Brussels. “This also includes the need to depoliticize the Greek administration.” The political controversy centers on Andreas Georgiou, who faces felony charges in Greece for reporting a 2009 budget deficit that was more than five times the EU limit and that unleashed the euro-area debt crisis. The EU has vouched for data submitted by the Hellenic Statistical Authority under Georgiou from 2010 to 2015 and validated by EU statistics office Eurostat.

Greek Minister of State Nikos Pappas, Tsipras’s closest aide, asked publicly in early August whether Georgiou inflated the spending gap to force the country into a rescue. Avgi, a newspaper affiliated with Tsipras’s anti-austerity Syriza party, labeled Georgiou an “executioner” in an Aug. 4 editorial.

And the Troika ensures it can only go downhill from here.

• Greek GDP Contraction In First Half 2016 Was Worse Than Thought (Kath.)

The contraction of the Greek economy in the first half of the year has turned out to be greater than originally estimated. The revised data released on Monday by the Hellenic Statistical Authority (ELSTAT) recorded a bigger drop in GDP on an annual basis, which will make it even more difficult for the government to meet the fiscal targets set for this year. Using previously unavailable data, ELSTAT has now calculated that first quarter GDP declined by 1% and not 0.8% year-on-year, while in the April-June period it fell by 0.9% and not 0.7% as originally thought.

That was the fourth consecutive quarter with a GDP contraction. Consumer spending fell 1.9% in the second quarter on an annual basis, exports of goods and services contracted 11.4% (with goods increasing 2.98% and exports dropping 26.5%), while imports declined 7.1%. Gross capital investments posted a 7% increase. On a quarterly basis, consumer expenditure dropped 0.2% from the first quarter, investment rose 1%, exports fell 1% and imports shrank 0.4%, ELSTAT data showed.

Any attempt at granting visa-free travel now would break up the EU.

• Turkey Warns Refugee Deal To Collapse Unless EU Grants Visa-Free Travel (Kath.)

In an interview with Kathimerini published on Tuesday, Turkish Foreign Minister Mevlut Cavusoglu has warned the EU that if it doesn’t grant Turkish citizens via-free travel to Europe by October “at the latest,” then Ankara will not continue implementing a deal struck in March with Brussels to stem the flow of migrants to Europe. “Despite the fact that irregular migration in the Aegean is now under control, we do not see the EU keen on delivering its promises,” he said, insisting that Turkey cannot continue on its own to stop irregular migration toward the EU while the latter does not assume its obligations. “We expect visa liberalization for Turkish citizens at the latest in October 2016,” said Cavusoglu, who was on an unofficial visit to Crete yesterday and held talks with his Greek counterpart Nikos Kotzias, stressing the potential to further develop Greek-Turkish relations.

Visa liberalization was one of the conditions set by Turkey to sign up to the agreement, which was criticized by human rights groups, to stop the influx of migrant arrivals to Europe which reached more than a million last year. “We did our share in this cooperation… We have prevented new loss of lives and crushed migrant smuggling rings.” The EU missed a deadline late June for the granting of visa-free travel for Turks, saying it had not met all 72 pre-conditions set by Brussels to grant visa-fee travel. The EU also demanded Ankara review its anti-terrorism law. Ankara refused, saying it is critical in its fight against Islamic State and Kurdish militants.

Numbers are rising again. This will stop only when we stop bombing and squeezing these people.

• 6,500 Migrants Rescued Off Libya Coast Overnight By Italian Coastguard (AFP)

Around 6,500 migrants were rescued off the coast of Libya, the Italian coastguard said, in one of its busiest days of life-saving in recent years. Dramatic images of one operation showed about 700 migrants crammed onto a fishing boat, with some of them jumping off the vessel in life jackets and swimming towards rescuers. A five-day-old baby was among those rescued along with other infants and was airlifted to an Italian hospital, according to Doctors Without Borders (MSF), which took part in operations.

“The command centre coordinated 40 rescue operations” that included vessels from Italy, humanitarian organisations as well as the EU’s border agency Frontex, saving 6,500 migrants, the coastguard wrote on Twitter. “We’ve been particularly busy today,” a spokesman for the Italian coastguard told AFP. On Sunday more than 1,100 migrants were rescued in the same area. The total number of arrivals in Italy this year now stands at 112,500, according to the UN’s refugee agency and the coastguard, slightly below the 116,000 recorded by the same point in 2015.

Debt Rattle August 19 2016

Aug 192016

August 19, 2016 Posted by Raúl Ilargi Meijer at 9:51 am Finance Tagged with: breakdown, China, collapse, gulag, housing, Mongolia, refugees, Vancouver, war crimes, wealth 2 Responses »

Walker Evans Waterfront in New Orleans. French market sidewalk scene 1935

• Paul Singer: Market ‘Breakdown’ To Be ‘Sudden, Intense, And Large’ (CNBC)

• Vancouver Housing Market Implodes: Average Price Plunges 20% In 1 Month (ZH)

• UK’s £8.8 Trillion Wealth Owes Much to Housing (BBG)

• Moody’s Lowers Outlook On Australia Banks To Negative (R.)

• China’s Secret Lists of Zombie Borrowers Leave Banks in the Dark (BBG)

• As China Shrinks, Mongolia Has an Epic Economic Meltdown (BBG)

• Stiglitz: The Euro Is On Course To Fail (Economist)

• The Subtle Tyranny of Blockchain (Thomas)

• It’s Time to Abolish the DEA and America’s “War on Drugs” Gulag (CHS)

• The US Is Promoting War Crimes In Yemen (G.)

• Greek Coast Guard Rescues Dozens Of Migrants Stuck On Islet (AP)

• The Fishermen of Lesbos (Hakai)

“Experience doesn’t count for much, and extreme confidence may be fatal.”

• Paul Singer: Market ‘Breakdown’ To Be ‘Sudden, Intense, And Large’ (CNBC)

In a bleak new letter to investors, Paul Singer’s Elliott Management warns that the bond market is “broken” and that when the central bank actions of recent years no longer ward off a market downturn, the subsequent loss of confidence could be severe. The fund’s recent investor letter, which covers the second quarter, notes that Elliott’s managers are currently seeing “what is in many ways the most peculiar period we have faced in 39 years.” Too much power has been ceded to central banks, the letter adds, the value of money has been debased, inflation is probably inevitable, and when it happens, it could be swift and impossible to tamp down.

Elliott is a $28 billion fund founded in 1977 by Singer, now its president. The fund is up more than 6% for the year through July, according to an investor. Given the persistence of low or negative yields on government and other bonds and the continued stampede to buy them nonetheless, today’s environment marks “the biggest bond bubble in world history,” and “the global bond market is broken,” the investor letter states. The letter discusses, at some length, the oddity of an investor mentality that flies to an asset class regarded as a “safe haven” even when there are low or nonexistent returns attached to it and no guarantee that current conditions will persist.

In one wry aside, the letter suggests a safety warning be attached to the $12 trillion government bond market now trading at negative yields: “Hold such instruments at your own risk; danger of serious injury or death to your capital!” Trading in this market is particularly difficult, it adds. “Everyone is in the dark,” Elliott notes. “Experience doesn’t count for much, and extreme confidence may be fatal.” Moreover, “the ultimate breakdown (or series of breakdowns) from this environment is likely to be surprising, sudden, intense, and large.”

Coming soon to a theater near you. Denmark, Holland, Australia, New Zealand, UK, the list is long.

• Vancouver Housing Market Implodes: Average Price Plunges 20% In 1 Month (ZH)

It appears that the Vancouver housing market has slammed shut. Which is hardly a surprise: virtually everyone saw it coming, the only question was when. Eilers says he’s been warning of a real estate slow-down for at least a year due to the region’s unsustainable and unsupportable prices. West Vancouver, where he does a large part of his business, had a benchmark detached home price of almost $3.4 million in July according to the Real Estate Board of Greater Vancouver. “The market in West Van is up 450 per cent since 2001. So is everyone making 600 per cent more income than they were so they can pay their taxes and buy their houses? Of course not. So how is this inflation been financed? By off-shore money and record debt.”

Precisely what we said at the start of the year when we first heard horror stories about Chinese buyers paying cash, sight unseen, for any and every local luxury, and not so luxury home. It appears that it is not just the 15% luxury tax implemented on on July 25 that has burst the bubble: according to Eilers sales were dropping even before the tax. According to the data, July was another slow month in West Vancouver with only 44 sales, down from 80 in 2015. June saw 74 sales, also down from 102 the year before. The pattern has left the market “devastated”, Eilers adds. While it may be too early to make a definitive conclusion, after all while earlier this month, the REBGV released its statistics for the month of July, saying the data showed the market had slowed down to “normal levels”, there was still no official August data available, and thus no actual indication of the slowdown.

Fortunately for buyers, real-time data proves otherwise. Zolo, a Canadian real estate brokerage, keeps track of MLS home sales in real-time and reports prices as an average rather than the “benchmark price” used by the REBGV. It currently shows a major correction underway in most Metro Vancouver markets. According to the website, the City of Vancouver currently has an average home price of $1.1 million, down 20.7% over the last 28 days and down 24.5% over the last three months. The average detached home is $2.6 million, down 7% compared to three months ago.

What a bubble looks like. This is going to be painful. Re: Vancouver.

• UK’s £8.8 Trillion Wealth Owes Much to Housing (BBG)

The total net worth of the U.K. at the end of 2015 was £8.8 trillion ($11.6 trillion), the Office for National Statistics said in London on Thursday. Much of the £493 billion jump from a year earlier came from the £355 billion increase in the value dwellings. The data also showed the U.K. was ahead of other G-7 countries in terms of growth of non-financial assets in 2014.

More housing shock, more pain to come. “The strong price appreciation of residential real estate has been driving an increase in household debt to a record high..”

• Moody’s Lowers Outlook On Australia Banks To Negative (R.)

Moody’s has lowered its outlook on Australia’s banks to negative from stable, warning of sluggish profit growth due to slow wage increases, record-low interest rates, strong lending competition and rising household debt. The agency said the banks, whose credit ratings are among the highest in the world, could be hurt by an increase in problem loans among mining companies and households in mining-dependent states. Moody’s action came after S&P in July also placed major Australian banks’ AA- ratings on negative outlook, in a signal that a downgrade was possible. Both agencies rate the banks one rung below the highest, triple-A, investment grade. A downgrade would make financing more expensive for banks at a time when regulators want them to put aside more cash to weather any repeat of the global financial crisis.

Australia’s highly profitable “Big Four” banks – National Australia Bank, ANZ Banking Group, Westpac and Commonwealth Bank – emerged from the financial crisis relatively unscathed but are facing questions over their capital levels, slowing earnings growth and rising bad debts. “The outlook change reflects Moody’s expectation of a more challenging operating environment for banks in Australia for the remainder of 2016 and beyond,” Frank Mirenzi, a vice president and senior analyst at Moody’s, said in a statement. He noted that profit growth could slow and asset quality decline, and make banks and consumers more vulnerable to economic shocks. “The strong price appreciation of residential real estate has been driving an increase in household debt to a record high,” Mirenzi noted.

China would collapse if not for the shadow banks. It’s fully addicted.

• China’s Secret Lists of Zombie Borrowers Leave Banks in the Dark (BBG)

There’s a list Ni Baixiang, head of Industrial & Commercial Bank of China’s Jiangxi branch, would love to get his hands on. Commonly referred to as the “zombie list,” it’s compiled by Jiangxi regional authorities and holds the names of the most deadbeat of borrowers: state-owned companies deemed too weak to survive and destined to be wound down. In short, the kind of enterprises banks already weighed down by rising bad loans want to steer well clear of. Only, neither Ni nor his competitors in Jiangxi are allowed to know who they are. “They won’t tell us because if we know, we’ll lose confidence,” Ni, whose bank is China’s largest, told reporters after a press briefing in Beijing earlier this month.

Ni’s dilemma underscores the challenge China faces as it tries to stem a tide of bad loans while carrying out an orderly restructuring of a state corporate sector burdened by overcapacity and bloated bureaucracies. Several provincial governments are withholding information on zombie borrowers from banks for fear that they’ll cut off financing immediately, according to officials who asked not to be identified. In several provinces, government-compiled lists of zombie companies are also kept secret from local banking regulators, the people said, asking not to be named discussing sensitive information. Knowing which state-owned companies get the “zombie” designation can be crucial for bankers because authorities ultimately decide whether they’ll fail, and local officials often meddle in banks’ lending decisions.

An economy growing at the slowest pace in a quarter century is adding urgency to President Xi Jinping’s push to steer China away from the investment-led model it’s relied on in the past. A key part of that is restructuring industries saddled with overcapacity, such as steel, cement and coal. McKinsey estimates that shedding surplus industrial capacity could add $5.6 trillion to the economy between now and 2030.

China’s making up the numbers it goes along, but here’s how we find out how it’s really doing.

• As China Shrinks, Mongolia Has an Epic Economic Meltdown (BBG)

Back in 2008, Mongolia honored its revered national hero Genghis Khan with an enormous, stainless steel statue on the bank of the Tuul River about a half-hour’s drive outside of the capital of Ulaanbaatar. The 13th century conqueror’s name graces the capital’s international airport and his image is also plastered on the tugrik, the local currency. Right now, Khans aren’t getting much respect. The government, having burned through much of its foreign currency reserves, faces a crushing debt burden and is having trouble meeting its civil service payroll. On Thursday, the central bank hiked its benchmark interest rate by a remarkable 4.5 percentage points to 15% to prop up the tugrik, the world’s worst performing currency in August.

Mongolia, a mineral-rich and landlocked $12 billion economy bordering Russia and China, is staring at a full-blown balance of payments crisis. It’s caused barely a ripple in global financial markets, but the nation’s economic meltdown offers instructive lessons to far bigger resource-reliant economies like Brazil, Venezuela, Russia and Saudi Arabia. This is an economy that gives new meaning to what economists call the resource curse. An overabundance of natural resources can result in lopsided economic growth, government waste and boom-bust cycles that can leave a country’s finances in tatters. “Mongolia should be much richer than it is,” said Lutz Roehmeyer, a money manager at Landesbank Berlin Investment. “There is nowhere else in the world where it is so easy to dig up resources without any problems and sell the commodities to China with such low transportation costs.”

It’s way too late to save the euro.

• Stiglitz: The Euro Is On Course To Fail (Economist)

Those in search of an antidote to the anxieties that arise from Britain’s vote to leave the European Union should avoid the latest book from Joseph Stiglitz. Its subject is the euro, which has hitherto been the main font of fears for Europe and (his analysis suggests) will soon be once again. It is a meaty subject, suited to a big-name economist. Mr Stiglitz has won a Nobel prize, served as a feather-ruffling chief economist for the World Bank and written several books with a fair claim to prescience, notably, “Globalisation and Its Discontents”, published in 2002. The main argument of his new book is that, on its current course, the euro is certain to fail—and indeed, that it was fatally flawed from birth.

It entails a fixed exchange rate and a single interest rate for its members, which means countries must forgo the option to devalue in times of economic weakness. To make up for that loss, the euro’s architects should have created institutions, such as jointly issued bonds, mutual backing of bank deposits and a common fund for unemployment insurance, so the costs of righting each economy are shared. Instead the burden falls on individual countries through austerity policies, such as tax rises and wage cuts. The results have been ugliest in Greece, where national income has shrunk by a quarter since 2007 and where the unemployment rate is 24%. There is still time to put in place better policies, thinks Mr Stiglitz. But an amicable divorce would be preferable to the current situation, which puts the considerable achievement of European integration at risk.

A good chunk of the book is taken up with a critique of policymakers’ efforts to address the euro crisis. Mr Stiglitz rightly takes issue with the blame-the-victim analysis of the euro’s failings that is commonly heard in Germany. The persistent trade surpluses of Germany and the vast deficits of boomtime Spain, Portugal and Greece are two sides of the same coin. Indeed, in a world short of aggregate demand, German thrift is the bigger failing, argues Mr Stiglitz. He favours the remedy, first proposed by John Maynard Keynes, of forcing creditor countries to adjust by taxing their trade surpluses.

“In any protocol, everyone has to act the same. But in a blockchain like Ethereum, everyone has to think the same.”

• The Subtle Tyranny of Blockchain (Thomas)

The past months have become a new chapter in the evolution of blockchain technology. Ethereum’s fork in the wake of the DAO hacks. Bitcoin’s almost-fork in the wake of the (still unresolved) block size debate. All of this is leading to the growing frustration and even disillusionment of key figures in the crypto-currency community. I left the Bitcoin community in 2012 for very similar reasons. In 2011, I was part of the group that helped Gavin Andresen design the Pay-to-Script-Hash (P2SH) feature. The design wasn’t very complex, it was backwards-compatible and provided crucial building blocks for improving Bitcoin’s security and performance. Unfortunately, getting it deployed turned out to be very political.

It was easy to extrapolate from this change to more advanced functionality still on the roadmap and get depressed about our chances to make important progress in the future. As the Bitcoin price rose, the number of stakeholders expanded and the amount of money at stake increasingly dominated the technical discussion. With this context in mind, the recent situation with Ethereum is not surprising in the slightest. As a blockchain grows, the larger and highly vested userbase becomes more and more difficult to shepard. When combined with time pressure (i.e. the 27-day DAO split creation period), something had to give. There wasn’t enough time to get the sort of buy-in and preparation needed to safely hardfork a system like Ethereum.

At the root of the difficulty in updating blockchains is the need to maintain shared state. In any protocol, everyone has to act the same. But in a blockchain like Ethereum, everyone has to think the same. Everyone’s memory (also known as “state” in computer science terms) has to be exactly the same and evolve according to the same rules. Shared state adds tremendous complexity and that has a big impact on developers: Blockchains are a pain to work with. Everyone who has done it knows what I’m talking about. The fact that blockchain has been largely ignored by major tech companies and embraced by the financial industry is partly because that industry has a relatively high tolerance for arcane and complex systems.

To once again quote Michael Moore: You can’t declare war on a noun.

• It’s Time to Abolish the DEA and America’s “War on Drugs” Gulag (CHS)

It’s difficult to pick the most destructive of America’s many senseless, futile and tragically needless wars, but the “War on Drugs” is near the top of the list.Prohibition of mind-altering substances has not just failed–it has failed spectacularly, and generated extremely destructive and counterproductive consequences. What was the result of the Prohibition of alcohol in the 1920s? Prohibition instantly criminalized 40+% of the adult populace and created hugely profitable criminal organizations. What was the result of the “War on Drugs”? This modern-day Prohibition instantly criminalized large swaths of the adult populace and created hugely profitable criminal organizations. If you want to increase drug use, criminalize innocent citizens and spawn gargantuan criminal organizations, then by all means declare “war” via Prohibition.

The results of Prohibition/War on Drugs are so visibly perverse and so destructive that the entire enterprise is sickeningly Orwellian. The well-paid apologists for Prohibition/War on Drugs claim that imprisoning millions of people “helps” them avoid drugs. If you think being tossed in prison for a few years “helps” people, then step right up and accept a fiver (5-year sentence) in an American prison, which is essentially a factory that produces one product: people damaged by imprisonment, deprived of their full citizenship, hobbled by a felony conviction–ex-con beneficiaries of years of tutorials by hardened criminals. This is as Orwellian as the Vietnam War’s famous “It became necessary to destroy the town to save it.”

If you think throwing millions of people in prison “helps” them or society, you are either insane or you’re making a living in the gulag or our sick system of “justice”. If you don’t think America has a “War on Drugs” Gulag, please glance at this chart of Americans in jail and prison – many for drug-related offenses:

“..inside Yemen this is not perceived to be a Saudi bombing campaign, this is a US bombing campaign..”

• The US Is Promoting War Crimes In Yemen (G.)

Saudi Arabia resumed its appalling war in Yemen last week and has already killed dozens more civilians, destroyed a school full of children and leveled a hospital full of sick and injured people. The campaign of indiscriminate killing – though let’s call it what it is: a war crime – has now been going on for almost a year and a half. And the United States bears a large part of the responsibility. This US-backed war is not just a case of the Obama administration sitting idly by while its close ally goes on a destructive spree of historic proportions. The government is actively selling the Saudis billions of dollars of weaponry. They’re re-supplying planes engaged in the bombing runs and providing “intelligence” for the targets that Saudi Arabia is hitting.

Put simply, the US is quite literally funding a humanitarian catastrophe that, by some measures, is larger than the crisis in Syria. As the New York Times editorial board wrote this week: “Experts say the coalition would be grounded if Washington withheld its support.” Yet all we’ve heard is crickets. High-ranking Obama administration officials are hardly ever asked about the crisis. Cable television news has almost universally ignored it. Both the Clinton and Trump presidential campaigns have been totally silent on this issue despite their constant arguing over who would be better at “stopping terrorism”. Beyond the grotesque killing of civilians, it’s clear at this point that the Saudis’ bombing campaign has also boosted al-Qaida in the Arabian Peninsula (Aqap) to a level which Reuters described as “stronger and richer” than anytime in its 20-year history.

Jake Tapper commendably broke the television news blackout about Yemen on his CNN show on Wednesday. Senator Chris Murphy of Connecticut, one of the very few elected representatives talking about the crisis, told Tapper that “it’s wild to me” that the Congress isn’t debating the “unauthorized” war in Yemen. The Saudis “could not do it without the United States”, he said. “We have made the decision to go to war in Yemen” – against Saudi Arabia’s enemies, not ours – without any debate. “If you talk to Yemenis, they will tell you that inside Yemen this is not perceived to be a Saudi bombing campaign, this is a US bombing campaign,” Murphy continued. “What’s happening is we are helping to radicalize the the Yemeni population against the United States.”

Not from Turkey. Lybia is more likely.

• Greek Coast Guard Rescues Dozens Of Migrants Stuck On Islet (AP)

Greece’s coast guard rescued dozens of migrants Friday whose boat ran aground on a deserted islet off the coast of southwestern Greece, hundreds of miles from the usual entry point of migrants into the European Union nation. The boat carrying about 70 people ran aground overnight on the tiny islet of Sapientza, off the southwestern tip of the Peloponnese, the coast guard said. The vast majority of migrants reach Greece’s eastern Aegean islands a few miles from the Turkish coast.

Coast guard vessels picked up the migrants Friday morning, ferrying them to the mainland where they were to be registered. It was not immediately clear what type of boat they had been on, where they had set sail from or where they had been sailing to. Separately, government figures showed 261 migrants or refugees arrived on Greek islands in the 24 hours from Thursday morning to Friday morning – a jump compared to recent figures, which had ranged from a few dozen to about 150 per day. Of those who arrived in the last 24 hours, the vast majority – 139 people – reached the eastern Aegean island of Lesvos. The rest arrived on Chios, Samos, Leros and Karpathos.

Endearing.

• The Fishermen of Lesbos (Hakai)

The Greek island of Lesbos is at the forefront of the refugee crisis as boatload after boatload of men, women, and children fleeing conflict in Syria, Iraq, Afghanistan, and elsewhere arrive on its shores. While citizen volunteers, NGOs, and governments claim much of the spotlight for rescue and recovery efforts, local people—especially those most experienced on the water—play a vital role, even at risk to their livelihoods and, perhaps, personal health. Greek video journalist Nikolia Apostolou introduces us to Lesbos fishermen on the front lines.

Video of The Fishermen of Lesbos

Debt Rattle July 23 2016

Jul 232016

July 23, 2016 Posted by Raúl Ilargi Meijer at 9:30 am Finance Tagged with: Brexit, debt, instability, Lagarde, petrodollar, refugees, wealth 7 Responses »

Jack Delano Conductor picks up message from operator on the Atchison, Topeka & Santa Fe 1943

• Britain’s Economy Shrinking At Fastest Rate Since 2009 (G.)

• Chinese Companies are Turning Japanese (BBG)

• Lagarde Seen Likely to Avoid Jail Time, Keep IMF Job Amid Trial (BBG)

• The Great Period of Instability (G&M)

• Inequality: The Nexus of Wealth and Debt (Coppola)

• The Rise and Fall of the Petrodollar System (Grass)

• Trumped! A Nation On The Brink Of Ruin (David Stockman)

• Nearly 3,000 Dead In Mediterranean Already This Year (R.)

The fear campaign still works like a charm.

• Britain’s Economy Shrinking At Fastest Rate Since 2009 (G.)

The Bank of England and the Treasury are under increasing pressure to prevent Britain from sliding into recession after a wide-ranging health check of the economy completed since the referendum showed the sharpest downturn in activity since the peak of the financial crisis seven years ago, Service industries ranging from banks to restaurants, hedge funds, bars, gyms and hairdressers were all affected by what was described as as a “dramatic deterioration” in business confidence that suggests the economy is on course to shrink by 0.4% in the third quarter unless conditions improve. The City now expects the Bank to deliver a package of immediate support – including a cut in interest rates and a resumption of its quantitative easing programme – when its monetary policy committee meets early next month.

Philip Hammond, the new chancellor, admitted that confidence had been dented by the surprise of Brexit vote and dropped a broad hint that he was contemplating spending increases and tax cuts for his autumn statement. In the first major survey of business activity and confidence since the referendum on 23 June, the services sector was particularly hard hit, showing its biggest drop on record. Manufacturing dropped to its lowest level since February 2013, according to Markit, which compiles the data in its purchasing managers’ index (PMI). The composite index, which measures both services and manufacturing, fell from 52.4 in June to 47.7 – an 87-month low. Anything below 50 signals a contraction in activity.

The services index dropped from 52.3 in June to 47.4, an 88-month low, while manufacturing fell from 52.1 in June to 49.1. Chris Williamson, the chief economist at Markit, said: “July saw a dramatic deterioration in the economy, with business activity slumping at the fastest rate since the height of the global financial crisis in early 2009.

Private investment in fixed assets has collapsed. From 20% to 2%. Imagine what the government must do to fill the gap.

• Chinese Companies are Turning Japanese (BBG)

Chinese companies are swimming in cheap cash. Problem is, they’re not spending it. A reluctance to invest is frustrating policy makers after they unleashed a wave of cheap credit in an effort to stoke growth. Rather than build new plants or hire additional staff, corporates are opting to park money at the bank – or send it overseas through buying foreign assets. Known as the so called “liquidity trap,” it’s a problem not unlike the experience in Japan where weak business confidence and a reluctance to invest is also holding back the economy. “Cash-rich Chinese companies are searching for offshore investment, just as the Japanese did in the late 1980s due partly to the strength of the yen in the aftermath of the ‘Plaza Accord’,” ANZ bank economists led by Raymond Yeung wrote in a note.

China’s two main money supply gauges continued to diverge in June. M1, which includes currency in circulation and bank deposits, surged 24.6 percent in June from a year earlier, the biggest increase in six years. The broader M2, which also includes savings deposits, increased 11.8 percent. That was flat from May and below the government’s 13 percent annual target. The divergence has raised eyebrows given the main driver behind M1 since mid-2015 has been a demand for deposits by corporates. While healthier balance sheets offer a buffer to debt-burdened companies, the bigger worry is that these companies are reluctant to spend on expanding new capacity.

In a note titled “The Caution of Chinese Corporations,” Thomas Gatley of consulting firm Gavekal Dragonomics highlighted that companies are raising new cash to either hoard it or make financial investments because they expect “a further slowdown in demand for their products, so there is little need to expand production capacity or other fixed assets.” Weak private investment data underscores the observation. Private investment slumped to 2.8 percent in the six months ended in June from a rate of more than 20 percent two years ago.

She handed $300 million in taxpayers’ funds to a buddy. That’s all. Slap that wrist!

• Lagarde Seen Likely to Avoid Jail Time, Keep IMF Job Amid Trial (BBG)

Christine Lagarde is likely to avoid jail time and keep her job as head of the IMF after she was ordered to stand trial in France on charges that carry a potential prison term. Lagarde, 60, on Friday lost a bid to challenge a December decision to be tried for alleged negligence during her time as French finance minister that paved the way for a massive government payout to tycoon Bernard Tapie. The specialized panel that will hear Lagarde’s case has previously found ministers guilty without having them actually serve time in prison. The panel’s record and Lagarde’s strong support from IMF member nations amid the long-running case mean there’s little chance that it will amount to more than a distraction from her role leading the world’s lender of last resort.

No date has been set yet for the trial, which is expected to last about a week. “I don’t think anybody really feels that this is a matter that undermines her effectiveness,” and if Lagarde received a suspended jail sentence, “she would just carry on,” said Edwin Truman, a former U.S. Treasury official who’s now a senior fellow at the Peterson Institute for International Economics in Washington. Lagarde is accused of failing to block an arbitration process in 2008 that brought to an end the longstanding dispute between former state-owned bank Credit Lyonnais and Tapie, a businessman and supporter of then-French President Nicolas Sarkozy. Tapie walked away with an initial award of about €285 million before it was cut to zero by an appeals court.

It’s simply the end of our economic system.

• The Great Period of Instability (G&M)

It was just before dawn on the morning of July 15, and I was trying to explain to my six-year-old daughter why – instead of a planned day at the park – I was suddenly heading to the airport to catch a flight to a city called Nice. “A bad man hurt a lot of people in France,” was the best explanation I could come up with. As I watched her turn the news over in her head, disappointment spreading on her face, I realized it was a sentence I’d uttered three times in 18 months. Barely 36 hours later, I called her from a sun-baked plaza in the historic old city of Nice. That day in the park would have to be postponed again. Some men with guns had tried to take over the government in Turkey. Instead of coming home, Daddy was flying somewhere else. More bad men, more people hurt.

After we hung up, I contemplated how little sense any of this must make to her. She’s not alone. All of us – including and especially the political and economic elites who have long stood atop this suddenly wobbly pyramid – have been left reeling by events. A “period of instability” is upon us, historian Margaret MacMillan told me this week, one that has parallels to the pre-war periods of the 20th century that she’s written acclaimed books about. Future historians are likely to judge today’s leaders on whether they seek to calm – or simply take advantage of – the choppy waters that we’re in. Rarely, it seems, has the world spun so rapidly, have events felt so out of control.

The headlines blur into one another, feeding the sense of a world in chaos. The war in Syria bleeds into the refugee crisis. The refugees’ march into Europe boosts politicians on the nationalist right. The truck attack in France is followed by the shooting of police in Louisiana. Then it’s a man with an axe on a train in Germany. On Friday, it was a shooting at a mall in Munich. “Brexit” in the United Kingdom is knocked from the top of the news by a putsch attempt in Turkey. They seem like disconnected events. But what links the British who voted to quit the EU with the Turks who gathered in a public square on Wednesday to cheer the imposition of a state of emergency is their anger at how the system has worked until now.

Brexit was won in the small cities and towns of England, places where globalization has meant de-industrialization, the closing of factories and the transfer of work to cheaper locales overseas. The phenomenon was exacerbated by an influx of job-seekers from Eastern Europe who made competition for remaining jobs even stiffer. Leave voters didn’t change their minds when the elites told them Brexit would batter housing prices, or the stock market. To many, the idea that the elites, people who owned property and shares, would take a turn suffering sounded just about right.

Wealth is debt.

• Inequality: The Nexus of Wealth and Debt (Coppola)

Debt. We love debt. Money is created by issuing debt. Our monetary system is debt-based. And because we measure economic growth in monetary terms, growth comes from debt. There is a direct relationship between rising debt, rising money supply and rising GDP. To reduce the burden of debt, and stop it building up again, would mean curing ourselves of our love of debt. And that has enormous social and political implications. It is by no means cost-free. Globally, debt has increased since the 2008 financial crisis. Much of this is in developing countries – in corporations and governments. China’s debt burden, both public and private, is already huge and still growing. Will its bubble burst? What would be the consequences? We don’t know.

But other developing countries also have large debt burdens, especially in corporations. The extent of developing-country debt, both government and corporate, is becoming a matter of considerable concern to economists and policymakers. In developed countries, household debt remains a huge problem. In some countries, households are still deleveraging, preferring to pay off debt rather than spend. This puts a dampener on economic growth. In other countries, households have repaired their balance sheets, but are now reluctant to borrow. Though the lack of lending is not entirely due to households: in some countries, lending standards are now so tight that many households and smaller businesses can’t borrow at all.

But there are some countries where households are borrowing wildly. In Sweden, debt secured on property is rising rapidly, fuelled by very low interest rates. Economic projections from the OBR forecast similar borrowing increases for UK households, though as yet there is little sign that UK households are willing or able to comply. But if they do not, the UK’s economic performance will disappoint. High and rising household debt backed by property creates financial instability. So does high and rising corporate and government debt, especially in foreign currencies. By encouraging borrowing against property and across borders, we may gain a little more economic growth – but at what price?

Increasing the global debt burden in pursuit of economic growth will inevitably lead to another financial crisis somewhere in the world. It is not sustainable. But despite the risk that rising debt poses, those who wield power in our current political and social systems have no real interest in reducing the global debt burden. This is because the other side of debt is wealth. And we love wealth.

I’m not a great fan of the ‘imminent collapse of the dollar’ meme. That will take a while longer.

• The Rise and Fall of the Petrodollar System (Grass)

The intricate relationship between energy markets and our global financial system, can be traced back to the emergence of the petrodollar system in the 1970s, which was mainly driven by the rise of the United States as an economic and political superpower. For almost twenty years, the U.S. was the world’s only exporter of petroleum. Its relative energy independence helped support its economy and its currency. Until around 1970, the U.S. enjoyed a positive trade balance. Oil expert and author of the book “The Trace of Oil”, Bertram Brökelmann, explains a dramatic change took place in the U.S. economy, as it experienced several transitions: First, it transitioned from being an oil exporter to an oil importer, then a goods importer and finally a money importer. This disastrous downward spiral began gradually, but it ultimately affected the global economy.

A petrodollar is defined as a US dollar that is received by an oil producing country in exchange for selling oil. As is shown in the chart below, the gap between US oil consumption and production began to expand in the late 1960s, making the U.S. dependent on oil imports. And while it led to the U.S. Dollar being established as the world’s premier reserve currency, it also contributed to the country’s increase in debt. The oil embargo of 1973-74 was a major hit that exposed the vulnerability of the U.S. economy. Nevertheless, under the banner of “national security” the future policy course was firmly set: in a 1973 National Security Council (NSC) paper, it was stated that “U.S. leverage in energy matters resulted from its economic and political influence with Saudi Arabia and Iran, the two leading oil exporters”.

From an upcoming book by Stockman.

• Trumped! A Nation On The Brink Of Ruin (David Stockman)

America’s faltering economy has been made in Washington DC, not at the illegal crossing routes on the Arizona border or the containership berths at Long Beach. For more than three decades the nation’s central banks have flooded the US and world economies with too much free money and Washington politicians have accommodated the beltway lobbyists and racketeers and the country’s huge entitlement constituencies with too much free boot. So the real disease is bad money and towering debts. The actual culprits are the Wall Street/Washington policy elites who have embraced statist solutions which aggrandize their own power and wealth.

That much, at least, Donald Trump has right. Throwing-out the careerists, pettifoggers, hypocrites, ideologues, racketeers, power-seekers and snobs who have brought about the current ruin is at least a start in the right direction. What made American great once upon a time, of course, was free markets, fiscal rectitude, sound money, constitutional liberty, non-intervention abroad, minimalist government at home and decentralized political rule. Whether Donald Trump gets that part of the equation remains to be seen.

Then again, the GOP establishment has failed, the Democrats are clueless and the mainstream media and punditry is overtly hostile. So if the ideals of world peace, capitalist prosperity and constitutional liberty are to survive at all, it’s up to the Donald. That might seem like cold comfort. But a nation that has been Trumped is a people coming back to life. Americans don’t want to take it anymore. They want their existing rulers to take a permanent hike. And that’s a start.

All entirely preventable. But that would require an actual cvilization.

• Nearly 3,000 Dead In Mediterranean Already This Year (R.)

Nearly 3,000 migrants and refugees have perished in the Mediterranean Sea already this year while almost 250,000 have reached Europe, the International Organization for Migration said on Friday. The estimated death toll could put 2016 on track to be the deadliest year of the migration crisis. Last year the same landmark was only reached in October, by which time nearly one million people had crossed into Europe. “This is the earliest that we have seen the 3,000 (deaths) mark, this occurred in September of 2014 and October of 2015,” IOM spokesman Joel Millman told a briefing. “So for this to be happening even before the end of July is quite alarming.”

Three out of four victims this year died while trying to reach Italy from North Africa, mostly Libya, a longer and more dangerous route. The others drowned between Turkey and Greece before that flow dried up with the March deal on migrants between Turkey and the European Union. Nearly 2,500 fatalities have occurred since late March, with about 20 migrants dying each day along the route from Libya to Italy, Millman said. Most are from West Africa and the Horn of Africa, although they may include people from Pakistan, Bangladesh and Morocco. “The (Libyan) coast guard has had some luck turning back voyages from Libya. We’ve heard in the last six weeks a number of cases where they have been able to turn boats back. “They (have also been) recovering bodies at an alarming rate,” Millman said.

Some 84,052 migrants and refugees have arrived in Italy so far this year, almost exactly the same number as in the same period a year before, he said. That indicated departures from Libya were at “maximum capacity” due to a limited number of boats deemed seaworthy. But there is “a very robust market of used fishing vessels and things coming from Tunisia and Egypt that are finding their way to brokers in Tripoli,” Millman said. “And you can actually go to shipyards where people are trying to repair boats as fast as they can to get more migrants on the sea.”

China, Oil and Markets: It’s All One Story

Jan 072016

January 7, 2016 Posted by Raúl Ilargi Meijer at 2:05 pm Finance Tagged with: central banks, China, cycle, Kondratieff, markets, Ponzi, virtual, wealth, yuan 5 Responses »

Berenice Abbott William Goldberg, 771 Broadway, Manhattan 1937

If there’s one thing to take away from this year’s developments in markets and economies so far, it’s that they are all linked, they’re all part of the same thing. If you can’t see that, you’re not going to understand what’s happening.

Looking at falling oil prices as a separate thread is not much use, and neither is doing the same with Chinese stocks, or the yuan, or the millions of Americans who are one paycheck away from poverty, for that matter. It’s all one story.

And the take-away from that, in turn, is that focusing too much on ‘narrow’ conditions in your particular part of the globe has only limited value. We’re very much all in this together. In the UK today, it matters very little what George Osborne says or does, or Mark Carney, because they don’t shape the future of the economy.

The same goes for all finance ministers and central bank governors across the planet, Yellen, Draghi, Koruda, the lot: the influence they exert on their own economies, which was always limited from the start, is running into the boundaries imposed by global developments.

Even if central bankers could ever have ‘lifted’ anything at all (a big question mark), their power to do so is rapidly diminishing. The constraints global developments place on their powers will now be exposed -even more. And of course they’ll try to deny and ignore that, as naked emperors are wont to do.

And with the exposure of the limits to their abilities to make markets and economies do what they want, come the limitations of the mainstream financial press to make their long-promoted recovery narratives appear valid. Before we know it, we might have functioning markets back.

Oil -both Brent and WTI- have breached the $32 handle, and are very openly flirting with the $20s. China’s stock market trading was halted for a second time this year, just 14 minutes after the opening. This came about after the PBoC announced another ‘official’ devaluation of the yuan by 0.5% (stealth devaluation has been a daily occurrence for a while).

$2.5 trillion was lost in global equities in three days this year even before the Thursday China trading stop and ongoing oil price decline. Must be easily over $3 trillion by now. And counting: European markets look awful, and so do futures.

For the first time in years, markets begin to seem to reflect actual economic activity. That is to say, industrial production, factory orders, exports, imports and services sectors are falling both in China and the US. Many of these have been falling for a prolonged period of time.

In fact, Reuters quotes a Sydney trader as saying: The Chinese economy actually contracted in December. Given what I’ve written in the past year and change about China, that can hardly be a surprise anymore.

What we are looking at is debt deflation, in which virtual ‘wealth’ is being wiped out at a fast pace, and it’s taken some real wealth with it for good measure. It’s not going to be one straight line down, for instance because there are a lot of parties out there who need to cover bets they carry from last year, but it’s getting very hard to see what can stop the plunge this time. Volatility will be a popular term again.

The Fed could lose its last remaining shred of credibility through QE4,5,6 and a 180º turn on the rate hike, but it would lose that last shred for sure. Draghi’s ECB could start buying ever more paper, but they would have a hard time finding sufficient amounts of anything to buy that’s worth anywhere near the written value.

The PBoC can’t really do QE after the $25 trillion post-2008 credit pump, and the yuan devaluation today achieved the opposite of what it was intended for. The BoJ is being severely hampered by the rising yen. We’ll see crazy stuff from the global Oracles, for sure, but in reality they never had anything but expensive band-aids to offer, and they have nothing better now.

Ultimately, if China is a Ponzi (and $25 trillion in credit spent on overcapacity strongly suggests so), then the entire world economy is one. I would very much argue so, and have for years. And we all know what inevitably happens with Ponzi’s.

Economists like to think in cycles, in which things will simply bounce back at some point, but a lot of this stuff will not come back, not for a very long time. I’ve said it before: Kondratieff is also a cycle.

We’re watching the initial stages (though a lot has already vanished behind all sorts of curtains) of a massive ‘wealth’ destruction, a very loud POOF!, ‘wealth’ which can so easily be destroyed because most of it was never real, just inflated soap. It’s time to move to cash if you haven’t already, and if you have enough, perhaps a bit of gold, silver or bitcoin, but do remember those are not risk-free.

It’s tempting to see this as a China problem, but first of all there is no China problem that will not of necessity also gravely affect the west , and second of all when you read, just to name an example, that America’s new jobs pay 23% less than the jobs they replaced, it’s just plain silly to believe that the economy is doing well, let alone recovering.

Which is why a majority of Americans are living paycheck to paycheck, and don’t have enough savings even for a $500 car repair bill. All Ponzi’s burst, they can’t be tapered, and this one we have now is going down in epic fashion because there are no major economies left that are not overburdened by debt.

It’s also tempting, certainly for economists, to see money that’s lost in one ‘investment’ to automatically shift to another, but that’s not what’s happening. Much of it simply evaporates. That’s why investment funds where already in a huge high-yield bind last year, and why you should really worry about your pension fund.

Do prepare for rising taxes and services cuts: governments suffer along with everyone, and because they’re slow and lagging, probably even more so. And governments think they deserve to have their hands in your pockets. Prepare for mass lay-offs too. The consumption model is being broken and dismantled as we speak.

CON21

Dec 122015

December 12, 2015 Posted by Raúl Ilargi Meijer at 4:23 pm Finance Tagged with: babies, bombs, climate change, COP21, pollution, profit, war, wealth 21 Responses »

Nickolay Lamm Jefferson Memorial under 25 feet of water

French Foreign Minister Laurent Fabius just announced, in Paris, a “legally binding agreement” that no-one has agreed the financing for. We can hear a couple thousand lawyers across the globe snicker. But it’s all the COP21 ‘oh-so-important’ climate conference managed to come up with. No surprises there. They couldn’t make the 2ºC former goal stick, so they go for 1.5ºC this time. All on red, double or nothing. Because who really cares among the leadership, just as long as the ‘targets’ are far enough away that they can’t be held accountable.

I’ve been writing the following through the past days, and wondering if I should post it, because I know so many readers of the Automatic Earth have so much emotion invested in these things, and they’re good and fine emotions. But some things must still be said regardless of consequences. Precisely because of that kind of reaction. No contract is legally binding if there’s no agreement on payment. Nobody has a legal claim on your home without it being specified that, if, when and how they’re going to pay for it.

I understand some people may get offended by some of the things I have to say about this – though not all for the same reasons either-, but please try and understand that and why the entire CON21 conference has offended me. After watching the horse and pony show just now, I thought I’d let ‘er rip:

I don’t know what makes me lose faith in mankind faster, the way we destroy our habitat through wanton random killing of everything alive, plants, animals and people, through pollution and climate change and blood-thirsty sheer stupidity, or if it is the way these things are being ‘protested’.

I’m certainly not a climate denier or anything like that, though I do think there are questions people gloss over very easily. And one of those questions has to be that of priorities. Is there anyone who has thought over whether the COP21 stage in Paris is the right one to target in protest, whatever shape it takes? Is there anyone who doesn’t think the ‘leaders’ are laughing out loud in -plush, fine wine and gourmet filled- private about the protests?

Protesters and other well-intended folk, from what I can see, are falling into the trap set for them: they are the frame to the picture in a political photo-op. They allow the ‘leaders’ to emanate the image that yes, there are protests and disagreements as everyone would expect, but that’s just a sign that people’s interests are properly presented, so all’s well.

COP21 is not a major event, that’s only what politicians and media make of it. In reality, it’s a mere showcase in which the protesters have been co-opted. They’re not in the director’s chair, they’re not even actors, they’re just extras.

I fully agree, and more than fully sympathize, with the notion of saving this planet before it’s too late. But I wouldn’t want to rely on a bunch of sociopaths to make it happen. There are children drowning every single day in the sea between Turkey and Greece, and the very same world leaders who are gathered in Paris are letting that happen. They have for a long time, without lifting a finger. And they’ve done worse -if that is possible-.

The only thing standing between the refugees and even greater and more lethal carnage are a wide, even confusingly so, array of volunteers, and the people of the Greek coastguard, who by now must be so traumatized from picking up little wide-eyed lifeless bodies from the water and the beaches, they’ll live the rest of their lives through sleepless nightmares.

Neither Obama nor Merkel nor Hollande will have those same nightmares. And let’s be honest, will you? You weren’t even there. And still, you guys are targeting a conference in Paris on climate change that features the exact same leaders that let babies drown with impunity. Drowned babies, climate change and warfare, these things all come from the same source. And you’re appealing to that very same source to stop climate change.

What on earth makes you think the leaders you appeal to would care about the climate when they can’t be bothered for a minute with people, and the conditions they live in, if they’re lucky enough to live at all? Why are you not instead protesting the preventable drownings of innocent children? Or is it that you think the climate is more important than human life? That perhaps one is a bigger issue than the other?

Moreover, the very same leaders that you for some reason expect to save the planet -which they won’t- don’t just let babies drown, they also, in the lands the refugees are fleeing, kill children and their parents on a daily basis with bombs and drones. Dozens, hundreds, if not thousands, every single day. That’s how much they care for a ‘healthy’ planet (how about we discuss what that actually is?).

And in the hallways of the CON21 conference they’ve been actively discussing plans to do more of the same, more killing, more war. Save the world, bombs away! That’s their view of the planet. And they’re supposed to save ‘the climate’?

There are a number of reasons why the CON21 conference will not move us one inch towards saving this planet. One of the biggest is outlined in just a few quoted words from a senior member of India’s delegation -nothing new, but a useful reminder.

India Opposes Deal To Phase Out Fossil Fuels By 2100

India would reject a deal to combat climate change that includes a pledge for the world to wean itself off fossil fuels this century, a senior official said, underlying the difficulties countries face in agreeing how to slow global warming.

India, the world’s third largest carbon emitter, is dependent on coal for most of its energy needs, and despite a pledge to expand solar and wind power has said its economy is too small and its people too poor to end use of the fossil fuel anytime soon. “It’s problematic for us to make that commitment at this point in time. It’s certainly a stumbling block (to a deal),” Ajay Mathur, a senior member of India’s negotiating team for Paris, told Reuters in an interview this week.

“The entire prosperity of the world has been built on cheap energy. And suddenly we are being forced into higher cost energy. That’s grossly unfair,” he said.

This means the ‘poorer’ countries, -by no means just India; China has 155 more coal plants in the pipeline despite their pollution levels moving ‘beyond index’-, the poorer counties won’t volunteer to lower their emissions unless richer nations lower theirs even a lot more. US per capita emissions are over 10 times higher than India’s, those of the EU six times. Ergo: Step 1: lower US emissions by 90%. It also means that richer nations won’t do this, because it would kill their economies.

Which, in case you haven’t noticed, are already doing very poorly, much worse than the media -let alone politicians- will tell you. In fact, the chances that the richer countries will ‘recover’ from the effects of their debt binge are about on par with those of renewable energy sources becoming cheaper than fossil fuels -barring subsidies. If only because producing them depends entirely on those same fossil fuels. All the rest of what you hear is just con.

The people of India obviously know it, and you might as well. It’s going to cost many trillions of dollars to replace even a halfway substantial part of our fossil energy use with renewables, and we already don’t have that kind of money today. We will have much less tomorrow.

Besides, despite all the talk of Big Oil turning into Big Energy, Shell et al are not energy companies, they’re oil -and gas- companies, and they’ll defend their (near) monopolies tooth and claw. Especially now that their market caps are sinking like so many stones. They have no money left to invest in anything, let alone an industry that’s not theirs. They lost some $250 billion in ‘value’ this week alone. They’re getting killed.

In the same vein, China can’t close more than a token few of its most polluting plants. China’s getting killed economically. And for all nations and corporations there’s one principle that trumps all: competitive advantage. If going ‘green’ means losing that, or even some of it, forget it. We won’t volunteer to go green if it makes us less rich.

And who do you think represents big oil -and the bankers that finance them- more than anyone else? Right, your same leaders again, who make you pay for the by now very extensive and expensive security details that keep them from having to face you. Just like they’re planning to make you pay dearly for the illusion of a world running on renewables.

Because that’s where the profit is: in the illusion.

Whatever makes most money is what will drive people’s, corporations’, and nations’ actions going forward. Saving energy and/or substituting energy sources is not what makes most money, and it will therefore not happen. Not on any meaningful scale, that is.

There will be attempts to force people to pay through the nose to soothe their consciences -which will be very profitable for those on the receiving end-, but people’s ability to pay for this is shrinking fast, so that won’t go anywhere.

The only thing that could help save this planet is for all westerners to reduce their energy use by 90%+, but, though it is theoretically and technically feasible, it won’t happen because the majority of us won’t give up even a part of our wealth, and the powers that be in today’s economies refuse to see their profits (re: power) and those of their backers go up in -ever hotter- air.

The current economic model depends on our profligate use of energy. A new economic model, then, you say? Good luck with that. The current one has left all political power with those who profit most from it. And besides, that’s a whole other problem, and a whole other issue to protest.

If you’re serious about wanting to save the planet, and I have no doubt you are, then I think you need to refocus. COP21 is not your thing, it’s not your stage. It’s your leaders’ stage, and your leaders are not your friends. They don’t even represent you either. The decisions that you want made will not be made there.

There will be lofty declarations loaded with targets for 2030, 2050 and 2100, and none of it will have any real value. Because none of the ‘leaders’ will be around to be held accountable when any of those dates will come to pass.

An imploding global economy may be your best shot at lowering emissions. But then again, it will lead to people burning anything they can get their hands on just to keep warm. Not a pretty prospect either. To be successful, we would need to abandon our current political and economic organizational structures, national governments and ‘up’, which select for the sociopaths that gather behind their heavy security details to decide on your future while gloating with glee in their power positions.

Better still, we should make it impossible for any single one of them to ever be elected to any important position ever again. For now, though, our political systems don’t select for those who care most for the world, or its children. We select for those who promise us the most wealth. And we’re willing to turn a blind eye to very many things to acquire that wealth and hold on to it.

The entire conference is just an exercise in “feel good”, on all sides. Is there anyone out there who really thinks the likes of Bill Gates and Richard Branson will do anything at all to stop this world from burning to the ground? You have any idea what their ecological footprints are?

Sometimes I think it’s the very ignorance of the protesting side that dooms this planet. There’s a huge profit-seeking sociopathic part of the equation, which has caused the problems in the first place, and there’s no serious counterweight in sight.

Having these oversized walking talking ego’s sign petitions and declarations they know they will never have to live up to is completely useless. Branson will still fly his planes, Gates will keep running his ultra-cooled server parks, and Obama and Merkel will make sure their economies churn out growth ahead of anything else. Every single country still demands growth. Whatever gains you make in terms of lower emissions will be nullified by that growth.

And in the hallways, ‘smart’ entrepreneurs stand ready to pocket a ‘smart’ profit from the alleged switch to clean energy. At the cost of you, the taxpayer. And you believe them, because you want to, and because it makes you feel good. And you don’t have the knowledge available to dispute their claims (hint: try thermodynamics).

You’re seeking the cooperation of people who let babies drown and who incessantly bomb the countries these babies and their families were seeking to escape.

I’m sorry, I know a lot of you have a lot of emotion invested in this, and it’s a good emotion, and you’re thinking this conference is really important and all, and our ‘last chance’ to save the planet. But you’ve been had, it’s as simple as that. And co-opted. And conned.

And it’s not the first time, either. All these conferences go the same way. To halt the demise of the planet, you can’t rely on the same people who cause it. Never works.

Europe Will Never Be The Same. Neither Will The World.

Nov 022015

November 2, 2015 Posted by Raúl Ilargi Meijer at 10:08 am Finance Tagged with: babies, change, drowning, EU, Europe, Evros, fear, human rights, humanity, Merkel, refugees, wealth 13 Responses »

RLOppenheimer New flag for EU 2015

To reiterate: People are genetically biased against change, because change means potential danger. People are also genetically biased against acknowledging this bias, because they wish to see themselves as being able to cope with both change and danger. Put together, this means that when changes come, people are largely unprepared or underprepared.

Take this beyond the bias of the individual, and apply it to that of the group (s)he belongs to, the vantage point of a society, and you find the bias multiplies and becomes self-confirming. That is, the members of the group reinforce each other’s bias. When change comes in small and gradual steps, as it mostly does, this can be said to work relatively well. When it comes in large and sudden steps, trouble ensues.

This little bit of psychology 101 may seem redundant, but it is indispensable if we wish it to recognize the implications of Europe -and the entire world with it, in its slipstream- having already entered a period of change so profound it is impossible to predict what the impact will be. We can do a lot better at this than we do today, where so far the drivers of change, and indeed the changes themselves, are ignored and/or denied.

This ignorance and denial threatens to lead to a needless increase in nationalism, fascism, violence, misery, death and warfare. If we were to acknowledge that the change is inevitable, and prepare ourselves accordingly, much of this could be avoided.

There are two main engines of change that have started to transform the Europe we think we know. First, a mass migration spearheaded by the flight of refugees from regions in the world which Europeans have actively helped descend into lethal chaos. Second, an economic downturn the likes of which hasn’t been seen in 80 years or so (think Kondratieff cycle).

Negative ideas about refugees are already shaping everyday opinion and politics in many places, and this will be greatly exacerbated by the enormous economic depression that for now remains largely hidden behind desperate sleight-of-hands enacted by central bankers, politicians and media.

People, first in Europe, then globally, will need to learn to share what they have, and do with much less. This is not optional. The refugees won’t stop coming, and neither will the depression. It would be much better if people were prepared for this by those same central bankers, politicians and media, but the opposite is happening.

It’s not only individual people who are biased against change, societies are too, and that means so are those who ‘lead’ these societies. They are all motivated, consciously or not, to resist change, because their positions and their powers depend on things remaining -largely- the same.

‘Leaders’ in Brussels and various European capitals still operate on the assumption that the refugee stream is a fleeting phenomenon they can and must stop. In a sort of positive feedback loop with their populations, this idea is continuously reinforced.

This leads to today’s reality in which at least one baby drowns every single day (and more in the past few days) off the shores of Greece, on Europe’s borders, and easily ten times as many members of their families. Moreover, the count is accelerating fast. Weather forecasts for the coming week call for Beaufort 7 winds.

There’s no society, no civilization that allows such atrocities to happen, and is not subsequently down for the count, and bound to dissolve, crumble and disappear. Societies all need common values, based on minimum levels of humanity and compassion, just to survive. And they need a whole lot more if they wish to flourish. No such values, as we see on a daily basis, exist in Europe today.

And that means it has no future – at least not in its present EU structure. It doesn’t get simpler than that. Denied and ignored as the simple fact may have been from the start, it was always clear that the European Union, if it failed to solidly unify the continent, risked becoming a force for division. And it looks as if the first real crisis the union faces will be enough to generate that division. There’s no union in sight other than in name.

Scores of people still hail Angela Merkel for her role in the refugee crisis, but they should think again. Merkel demanded the protagonist role for herself and Germany in setting if not dictating the conditions in the Greek debt negotiations over the first half of 2015, but she’s nowhere to be seen in a leading role now.

Merkel, true, has opened German doors to refugees, but she has utterly failed in expanding any such policy to the EU as a whole. And since she’s the only recognized leader in the entire union, leaving people like Hollande and Juncker far behind, she must acknowledge responsibility if things go wrong. Being a leader doesn’t mean you get to cherry-pick your challenges, it’s a package deal. Merkel cannot today act as German leader only.

But as fast increasing numbers of refugees and their children are drowning in the Aegean, in an act of supreme cynicism Merkel last week went to China to sell Volkswagens and weapons, as well to talk about… human rights. That is to say, the human rights of Chinese people. Not those of the refugees making their way to Europe, who apparently don’t even have the right to safe passage.

It’s that safe passage that must be Europe’s first and main concern right now, not how to stop people from coming. There are many voices clamoring for the ‘Evros fence’, built by Greece three years ago on a stretch of land on its border with Turkey, to be opened, so the drownings stop.

This would seem to be a good first step to halt would should by now be labeled a refugee disaster, rather than crisis. But it’s a step that could have been taken months ago, and the fact that it hasn’t even after Merkel visited Turkey recently, doesn’t bode well. Tsipras is set to visit Turkey this week in the wake of Erdogan’s election victory yesterday, but Tsipras may not get the green light from Berlin to tear down the fence.

The best thing would perhaps be for ordinary people to organize themselves into a large group, 10,000+, travel to Evros, and tear down the fence themselves, rather than wait for politicians to do it. Perhaps the time to rely on others, politicians or otherwise, to do things, has passed.

The world has seen mass migrations before, numerous times, and Europe sure has had its share. The manner is which these migrations take place typically depends to a large extent on people’s human values and their willingness to share their wealth. What’s happening with Syrian refugees today bears some eery resemblances to the boats carrying Jewish refugees prior to WWII that were refused in many ports. Let’s not go there again.

Refugees almost always make a positive contribution to the country they resettle in, both economically and in other ways. We know that, just like we know many other things. But that doesn’t lead our reactions, fear does. And the more wealth people have, the more they seem to fear losing it.

I’ve quoted before how the German federal police warned Merkel at least 8 months ago that a million refugees would be at the country’s doorstep. And that nothing was done with this knowledge for about half a year, leaving Germany woefully unprepared when the warning turned out to be correct.

UN Geneva Director General Michael Moller puts the warning even further into the past; he says EU leaders were told about it at least two years ago.

Refugee Crisis Was Not Unexpected, Top UN Official Says

Director-General of the United Nations office in Geneva, Denmark’s Michael Moller, expresses optimism that the agency’s sustainable development goals (SDGs) will help toward ending extreme poverty but he has no illusions about the refugee crisis[..]

“The crisis we have today, we knew it was going to happen. The leaders of Europe were told it was going to happen at least two years ago. So a little prevention and a little preparation in terms of the narrative to their voters would have gone a long way.”

“This very negative, xenophobic and frankly racist narrative that we’re seeing in many countries, including my own country – I don’t recognize my own country – is unacceptable [..] one of the things that I find very puzzling is that there’s some sort of global amnesia going on. In the early 80s we had pretty much the same problem in Southeast Asia, with much bigger numbers of boat people.

It took a while and then someone decided we must deal with it in a more rational way and they came up with a plan of action which was the product of an international conference where international solidarity kicked in in a much broader way than now. Then we put in place a whole series of measures in a way that minimized the pain and over seven years we resettled 2.5 million people. I don’t see why we can’t take a page or two or three out of that book. To me what’s happening isn’t a European problem, it’s an international problem.

[Washington] are evolving as well. First of all, the number [of refugees the US would accept] was 10,000 but now they’ve upped it to 100,000. I’ve talked to some of the politicians.

[..] looking at this crisis as an isolated incident doesn’t make any sense whatsoever. We are going to have more of these things and a lot worse. The moment climate refugee problems kick in we are going to be in real trouble, unless we sit down globally and figure out structures and ways to deal with this in the future. Not to reinvent the wheel every damn time that happens, but to rethink completely the humanitarian system, because I guarantee you that it will happen again.

The refugee disaster is only the first step in a long and multi-pronged process of profound change in the lives of all citizens of -formerly- rich countries. And if we collectively screw up step 1 as badly as we have and still do, what’s going to happen when our economies fall to pieces? When our alleged ‘financial security’ crumbles, our pensions, our benefits?

Are we going to blame it all on the refugees, and vote in right wing simpletons? Too many of us undoubtedly will. Whether there’s enough decency to counter that is a toss-up. What is not is that the numbers of refugees will keep rising at the same time that our economies keep sinking.

It’s up to us, wherever we live in the world, to find the best way to deal with it. We have a choice in how we react to these developments, not in whether they happen or not.

Debt Rattle March 27 2015

Mar 272015

March 27, 2015 Posted by Raúl Ilargi Meijer at 8:09 am Finance Tagged with: arctic, asylum, China, deposits, drought, Greece, Putin, rate hike, wealth, Yemen 4 Responses »

Wyland Stanley Transparent Car, General Motors exhibit, San Francisco 1940

• For Most American Families, Wealth Has Vanished (Yahoo!)

• Fed Officials Say Rate Hike Plan Intact Despite Weak US Data (Reuters)

• China Stocks May Be In Serious Bubble (MarketWatch)

• You’re Playing Liar’s Poker at the Wall Street Casino (Paul B. Farrell)

• European Central Bank QE Is Masking Eurozone Struggles (MM)

• No, Greece Is NOT The Most Unhelpful Country Ever, IMF Says (MarketWatch)

• Greek Bank Deposits Plunge to 10-Year Low (Bloomberg)

• Charting Greece’s Draining Coffers (Bloomberg)

• Bank of Japan Under Pressure As Inflation Stalls (CNBC)

• Saudi Battle For Yemen Exposes Fragility Of Global Oil Supply (AEP)

• Putin Plays Wildcard as Ukraine Bond Restructuring Talks Begin (Bloomberg)

• Spain Urges EU to Remove Barriers to Banking Takeovers (Bloomberg)

• Deutsche Bank Wins German Backing to Be More Like Goldman (Bloomberg)

• Asylum Claims Up 45%, ‘Highest Level For 22 Years’ (BBC)

• California’s Epic Drought: One Year of Water Left (Ellen Brown)

• It’s The End Of March And 99.85% Of California Is Abnormally Dry Already (ZH)

• What Is Dark Matter Made Of? Galaxy Cluster Collisions Offer Clues (CSM)

• Antarctic Ice Shelf Thinning Speeds Up (BBC)

And nothing else matters one bit.

• For Most American Families, Wealth Has Vanished (Yahoo!)

If you re a typical family, you re considerably poorer than you used to be. No wonder the recovery feels like a recession. A new study published by the Russell Sage foundation helps explain why many families feel like they re falling behind: They actually are. The study, which measures the average wealth of U.S. households by income level, reveals a startling decline in wealth nationwide. The median household in 2013 had a net worth of just $56,335 – 43% lower than the median wealth level right before the recession began in 2007, and 36% lower than a decade ago. There are very few signs of significant recovery from the losses in wealth suffered by American families during the Great Recession, the study concludes.

Not surprisingly, lower-income households have lost a larger portion of their wealth than those with higher incomes. Wealth generally comes from two types of assets: financial holdings and real estate. Financial assets have more than recovered ground lost during the recession, thanks largely to a stock-market rally now in its sixth year. The S&P 500 index, for instance, has hit several new record highs this year and is up more than 25% from the peak it reached in 2007. Home values, however, are still about 18% below the peak reached in 2006, according to the S&P/Case-Shiller index. Since wealthier households tend to hold more financial assets, they ve benefited the most form the stock-market recovery, which itself has been assisted by the Federal Reserve s super-easy monetary policy.

Fed policy has been intended to help typical homeowners and buyers too, by pushing long-term interest rates unusually low and, in theory, goosing demand for housing. But a housing recovery is taking much longer to play out than the reflation of financial assets. That’s part of the reason the top 10% of households have held onto more of their wealth than the other 90% during the past 10 years.

Wall Street insists.

• Fed Officials Say Rate Hike Plan Intact Despite Weak US Data (Reuters)

The Federal Reserve should remain on track to raise interest rates later this year despite the U.S. economy’s weak start to the year and a stock market sell-off this week, two Fed officials said on Thursday. In separate events in Frankfurt and Detroit, St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart said U.S. monetary policy might need to be adjusted in light of the economy’s steady improvement since the 2007-2009 financial crisis. “Now may be a good time to begin normalizing U.S. monetary policy so that it is set appropriately for an improving economy over the next two years,” Bullard said at a conference in the German financial hub.

The comments came amid a spate of weak U.S. economic data that prompted major analyst firms to scale down their growth this week. Fed policymakers also lowered their growth forecasts at last week’s policy-setting meeting. Investors have followed suit, sending shares on Wall Street down for four consecutive trading sessions. The challenge now, Lockhart said, is to sort out whether recent weakness in exports, manufacturing and capital investment indicate the start of an economic slowdown or other temporary factors such as the soaring value of the U.S. dollar. Lockhart said he is confident for now that the weakness is “transitory,” and still regards it as highly likely that the Fed will raise rates at either its June, July or September meetings.

“We’re still on a solid track … The economy is throwing off some mixed signals at the moment and I think that is going to be passing or transitory,” Lockhart said in an interview with CNBC from a Detroit investment conference. The conflicting signals are partly familiar – seasonal softness that often accompanies severe winter weather – and partly uncharted. The Fed, for example, now finds itself moving in a divergent direction from other major global central banks, planning a rate hike at a time when Europe and Japan are still flooding markets with liquidity, and other central banks are cutting rates. That has driven the value of the dollar steadily higher, and Lockhart said he, for one, was caught off guard by how much that currency move has apparently impacted U.S. exports and manufacturing..

You think?

• China Stocks May Be In Serious Bubble (MarketWatch)

Some say that when the average “mom-and-pop” retail investors get back into the stock market, it could be time to get out. But what about when even teenagers start buying? China has entered a new stock frenzy, like something out of America in the Roaring 20s or the dottiest days of the dot-com bubble, with trading volumes continuing to push to new record highs. On Wednesday, combined trading on the Shanghai and Shenzhen markets hit 1.24 trillion yuan ($198 billion), the seventh straight session in which turnover surpassed the 1 trillion yuan mark. By comparison, the New York Stock Exchange typically saw $40 billion-$50 billion a day in trading during the first two months of this year.

The Shanghai Composite Index is hovering near its seven-year closing high of 3,691, hit on Tuesday when the index completed a 10-session winning streak. For the year so far, the benchmark is up 13.8%, making it the best-performing major East Asian stock index of 2015 to date, though it still has a way to go to match 2014’s 53% surge. The lure of flush times on the Shanghai market is sweeping in unlikely investors by the hundreds of thousands. This week, both the China Securities Daily and the Beijing Morning Post had dueling reports about recent college graduates and, yes, teenagers buying shares.

Typically these young investors speculate with money given to them by their parents, according to a Great Wall Securities broker quoted in the Beijing Morning Post story. Yet another report, this time by the Beijing News newspaper, relates that at the Beijing trading halls of China Securities Co., “even the cleaning lady” has opened an account to play the market. The data appear to agree with the anecdotes: Within the last week alone, 1.14 million stock account were opened in China, the biggest such surge since June 2007, according to China Securities Depository & Clearing Corp.

“..17 of the absolutely “stupidest statements” made by Wall Street’s best and brightest..

• You’re Playing Liar’s Poker at the Wall Street Casino (Paul B. Farrell)

Yes, you are playing liar’s poker at the Wall Street casino. So how do know Wall Street’s lying? You need this foolproof test. My friends from the anonymous programs use this test all the time. And it really works: “How can you tell when alcoholics and addicts are lying? Their lips are moving!” Same test fits Wall Street, they’re lying when their lips are moving. We have four years of proof and 17 examples. Why’s this test important? The SEC chairwoman recently announced plans to “implement a uniform fiduciary duty for broker-dealers and investment advisers where the standard is to act in the best interest of the investors.” Something Jack Bogle, Vanguard’s founder, has been unable to get government to pass for over 50 years: a fiduciary rule to put the investor ahead of Wall Street insiders. Maybe now he’ll get his wish!

So if you remember nothing else today, here’s your big takeaway: Never trust Wall Street bulls, they’re lying to you over 93% of the time. Behavioral-science research tells us bankers, traders and other market insiders are misleading us, manipulating us the vast majority of the time in their securities reports, PR, ads, speeches, sales material, in their predictions on television, cable shows and when quoted in newspapers and magazines. “Read Bull! 144 Stupid Statements from the Market’s Fallen Prophets,” hit America’s book stores near the end of a 30-month recession a decade ago, after the market wiped out over $8 trillion of the retirement money for 95 million Main Street Americans. The Dow peaked at 11,722 in January 2000, didn’t bottom for 32 months, in October 2002 at 7,286, over 40% down.

We picked 17 of the absolutely “stupidest statements” made by Wall Street’s best and brightest to illustrate their tendency to lie, manipulate, mislead and steal from investors by hook or by crook, using hype, happy talk and all kinds of BS. And it’s guaranteed to happen again in 2015-2016, igniting another market and economic collapse like 2008, which is why the new SEC fiduciary rule would save billions for Main Street in the next round of liar’s poker. Remember, this time is never different, the names change but the BS stays the same, repeating before’ and after every market cycle, never stops, wiping out trillions of our money.

They’re faking it. Everybody is.

• European Central Bank QE Is Masking Eurozone Struggles (MM)

The ECB QE (quantitative easing) regime is officially in full swing. ECB data released last Friday indicated as much. The sovereign bond-buying program began March 9. And in less than two weeks, Eurozone central banks had already purchased €26.3 billion worth of these bonds. At the same time, economic indicators seem to point toward a recovery. Markit’s Purchasing Managers’ Index data released yesterday (Tuesday) revealed Eurozone businesses are at their most optimistic in four years. The EURO STOXX 50 Index – the leading blue-chip index for the Eurozone – is up 21% in 2015. And what’s more, it’s at nearly seven-year highs.

Even the beleaguered euro has stepped off a bit from the precipice of euro-dollar parity . This morning, it was trading at $1.0967. This is after falling to $1.0484 on March 15. This positivity in Eurozone markets all seems unwarranted. The Greek debt crisis , perhaps the biggest problem facing the Eurozone right now, doesn’t have a solution. And Eurozone QE was never built to address it. Eurozone QE is a “confidence trick,” Financial Times columnist Wolfgang Münchau wrote on Sunday. Positive economic data came as a result of falling oil prices , which provided a windfall to the Eurozone, the world’s largest net importer of oil and gas. And those benefits are easily wiped away by any surge in oil prices.

It’s hard to actually be bullish on the Eurozone even with economic data providing a thin veneer of Eurozone confidence. The situation in Greece is worse and more contentious than it has ever been. And QE, a policy aimed at bringing on a recovery, is hardly what it’s cracked up to be. The benefits of Eurozone QE are illusory. This surge in Eurozone optimism is built on a false premise that a largely impotent policy will be the saving grace for a struggling Eurozone. But a closer look at how Eurozone QE works should shatter all those illusions…

Bloomberg made that one up.

• No, Greece Is NOT The Most Unhelpful Country Ever, IMF Says (MarketWatch)

The IMF on Thursday denied a report that officials view Greece as the most unhelpful country the organization had ever dealt with in its 70-year history. “There is no basis in fact for that contention. No such remark was made,” said IMF spokesman William Murray at a news conference. Bloomberg had reported on March 18 that IMF officials had told their euro-area colleagues that Greece stands out as its worst client ever. “I wish they had checked with us before that story was published,” Murray said. IMF managing director Christine Lagarde had a “constructive” conversation Wednesday with Greece’s prime minister Alexis Tsipras, Murray said.

“They had a constructive conversation that focused on next steps in taking forward the policy discussions related to the IMF’s continued support of Greece’s reform program,” Murray said. Greece is locked in talks with the IMF and European creditors on a deal on economic reforms that would unlock €7.2 billion in aid. Greece needs the funding as it faces several major debt repayments in early April. On Wednesday, Greece’s central bank Governor Yannis Stournaras said in London that further debt relief was needed to boost economic growth. Stournaras said exiting the single currency union wasn’t an option for the Hellenic Republic.

“..give Greece a bit of leeway to announce its reform proposals, give it some easy wins that it can implement in the next week or two.”

• Greek Bank Deposits Plunge to 10-Year Low (Bloomberg)

Greek bank deposits plunged to their lowest level in 10 years in February as a political standoff between the government in Athens and the country’s creditors raised the prospect of a possible euro exit. The deposits of households and businesses fell 5% in February to €140.5 billion, their lowest level since March 2005, according to Bank of Greece data released on Thursday. Greeks have pulled about €23.8 billion from banking system in the past three months, 15% of the total deposit base. Greek lenders are depending on Emergency Liquidity Assistance controlled by the European Central Bank to stay afloat as depositors flee.

The country’s creditors have given Prime Minister Alexis Tsipras, elected in January on a platform to end austerity, a Monday deadline to present enough details of a new economic plan to convince them to release more bailout funds. “What we’re likely to see is over the course of the next few weeks is still the drip-feed of liquidity,” said Janet Henry, chief European economist at HSBC Holdings Plc in London, in a Bloomberg TV interview. “We could get more of the ELA, that’s essential to keep the banking system afloat; they could give Greece a bit of leeway to announce its reform proposals, give it some easy wins that it can implement in the next week or two.”

The ECB Governing Council on Wednesday made more than €1 billions of ELA available to Greek lenders, its latest move to defer a financial meltdown. That raised the limit to just over €71 billion. Bank of Greece governor Yannis Stournaras, who is also an ECB Governing Council member, acknowledged at a speech in London on Wednesday that the crisis has unsettled the banking system, saying that there has been “some outflow of deposits due to uncertainty.” While officials including Stournaras and Finance Minister Yanis Varoufakis said bank system deposits stabilized after a Feb. 20 agreement that extended the country’s loan accord to the end of June, outflows picked up again last week, when about 1.5 billion euros left the system.

Getting serious.

• Charting Greece’s Draining Coffers (Bloomberg)

When Dutch Finance Minister Jeroen Dijsselbloem raised the possibility that Greece might need to impose capital controls in a radio interview last week, it seemed like a crazy indiscretion. Why would a senior member of the euro establishment effectively tell people “Hey, we’re considering locking your money inside the country, so you might want to get your euros out while you still can,” and risk accelerating outflows from the country’s already enfeebled banking system? And when the European Central bank decided yesterday to grant more than €1 billion of extra funds to Greece’s banks, it was hard to divine the motivation for the altruism. Was it a carrot to incentivize the government to get serious about meeting the demands of its creditors? Or was it an emergency infusion, acknowledging that Greece is fast running out of money as well as time? The following chart, based on data just released by the Bank of Greece, hints strongly at the latter explanation:

So the Greek banking system had just a bit more than 140 billion euros at the end of February. That’s down almost 15% since the end of November, suggesting bags of capital are fleeing the country as fast as their little legs can carry them. And while extrapolation is an imperfect science, taking the trend from November and running it to the end of this month suggests there could be as little as €133 billion left at the current pace of withdrawals, which would be the lowest in more than a decade. So the reason Dijsselbloem is talking about capital controls may be because the authorities are mulling last-resort, worst-case scenarios as the banking system bleeds out. And the reason the ECB has suddenly become more accommodative might not be a gesture of friendship to Greek Finance Minister Yanis Varoufakis; it might be because its lender-of-last-resort duties are compelling it to act. Today’s figures, though, suggest Greek depositors are voting with their bank balances on the increasing risk of Grexit.

Inevitable when you don’t understand what inflation is.

• Bank of Japan Under Pressure As Inflation Stalls (CNBC)

Japan’s consumer inflation eased in February for a seventh straight month increasing expectations that the Bank of Japan (BOJ) will have to undertake further stimulus measures to achieve its price target. The consumer price index (CPI) rose 2.0% in February from the year-ago period, government data showed on Friday, compared with Reuters’ forecast for a rise of 2.1% and down from a 2.2% rise in January. Excluding the effects of the consumption sales tax hike in April, the nationwide consumer price index was flat in February after increasing 0.2% in January. That marks the first time since May 2013 that it stopped rising. “I think this will keep the pressure on the Bank of Japan to keep their foot on the accelerator,” Joe Zidle, portfolio strategist at Richard Bernstein Advisors, told CNBC.

“You’ve had this split between the BOJ and the government over quantitative and qualitative easing and I think this is going to force the to keep the spigots open.” “This is an economy thats showing data point after data point that its too weak to stand on its own,” he added. Many analysts believe the trend will continue. “The Tokyo CPI result suggests that the nationwide core CPI will probably remain flat yoy in March. However, electricity and gas charges are expected to start declining from April onwards, putting larger downward pressures on the core CPI inflation rate going forward,” it said in a note.

“..Yemen is very difficult terrain, as the British learned in the Aden crisis..”

• Saudi Battle For Yemen Exposes Fragility Of Global Oil Supply (AEP)

The long-simmering struggle between Saudi Arabia and Iran for Mid-East supremacy has escalated to a dangerous new level as the two sides fight for control of Yemen, reminding markets that the epicentre of global oil supply remains a powder keg. Brent oil prices spiked 6pc to $58 a barrel after a Saudi-led coalition of ten Sunni Muslim states mobilized 150,000 troops and launched air strikes against the Iranian-backed Houthi militias in Yemen, prompting a furious riposte from Tehran. Analysts expect crude prices to command a new “geo-political premium” as it becomes clear that Saudi Arabia has lost control over the Yemen peninsular and faces a failed state on its 1,800 km southern border, where Al Qaeda can operate with near impunity.

Over 3.8m barrels a day (b/d) pass through the 18-mile Bab el-Mandeb Strait off Yemen, one of the world’s key choke points for crude oil supply. While there is little likelihood of disruption to tanker traffic, Saudi Arabia is increasingly threatened by Shiite or Jihadi enemies of different kinds. Shiite Houthi rebels have already seized Yemen’s capital, Sanaa, and pose a potential contagion risk for aggrieved Shia minorities across the Saudi border in the kingdom’s Southwest pocket, never an area friendly to the ruling Wahhabi dynasty in Riyadh. The Houthis are well-armed with rocket-propelled grenades and surface-to-air missiles that were either caputured or came from Iran. They have been trained by the Lebanese Hezbollah. “I don’t think air strikes are going to do the job, and it is not clear whether Saudi Arabia is really willing to put boots on the ground,” said Alastair Newton, head of political risk at Nomura and a former intelligence planner for the first Gulf War.

“Nor do I have much confidence in the ability of the Saudis to wage a successful campaign against the Houthis, despite their massive superiority on paper. Yemen is very difficult terrain, as the British learned in the Aden crisis,” he said. The Saudis face an impossible dilemma. The harder they hit the Houthis, the greater the danger of a power vacuum that can only benefit Al Qaeda and Islamic State groupings that already control central Yemen. They are among the most lethal of the various Al Qaeda franchises. A cell from that area was responsible for the Charlie Hebdo attack in Paris. The last 120-strong contingent of US military advisers has been evacuated from the country, while Yemen’s own security apparatus is disintegrating. It is now much harder for the US to coordinate drone strikes or harass Al Qaeda strongholds.

Nothing wild about it.

• Putin Plays Wildcard as Ukraine Bond Restructuring Talks Begin (Bloomberg)

As Ukraine begins bond-restructuring talks, it finds itself face-to-face with a familiar foe: Russia. President Vladimir Putin, who the U.S. and its allies accuse of sending troops and weapons into Ukraine to back a separatist uprising, bought $3 billion of Ukrainian bonds in late 2013. The cash was meant to support an ally, then-President Yanukovych. While his government fell just two months later, Russia was left with the securities. Now, those holdings take on an added importance as Putin’s stance on the debt talks could affect the terms that all other bondholders get in the restructuring. Russia, which is Ukraine’s second-biggest bondholder, has maintained that it won’t take part in any restructuring deal. Here are the three most likely tacks – as seen by money managers and analysts – that Putin’s government could pursue.

Ukraine, after gaining a lifeline from the IMF, included Russia’s bond among the 29 securities and enterprise loans it seeks to renegotiate with creditors before June. Finance Minister Natalie Jaresko has promised not to give any creditor special treatment. The revamp will include a reduction in the coupon, an extension in maturities as well as a cut in the face value, she said. Russian Deputy Finance Minister Sergey Storchak said March 17 that the nation isn’t taking part in the debt negotiations because it’s an “official” creditor, not a private bondholder. If the Kremlin maintains this view, it would be “negative” for private bondholders as “other investors will be more tempted to hold out as well,” according to Marco Ruijer at ING. He predicts a 45% chance of a hold out, while Michael Ganske at Rogge in London says it’s 70%.

There is little precedence of sovereigns and private bondholders taking part in the same talks, given that a nation’s debt considerations include a “foreign-policy dimension,” according to Matthias Goldmann at the Max Planck Institute in Heidelberg, Germany. Ukraine and Russia may need to find an “appropriate forum,” such as the Paris Club, for separate negotiations, he said. Holding out can lead to two outcomes: Russia gets paid back in full after the notes mature in December, or Ukraine defaults. The former option is politically unacceptable in Kiev, according to Tim Ash, chief emerging-market economist at Standard Bank, while the latter would likely start litigation and delay the borrower’s return to foreign capital markets, which Jaresko expects in 2017. “Russia will be holdouts, to try and force a messy restructuring,” Ash said by e-mail on March 19.

Worst idea ever: make Spain’s biggest bank grow bigger. Who’s going to bail them out?

• Spain Urges EU to Remove Barriers to Banking Takeovers (Bloomberg)

Spain, home of the euro area’s largest bank, is pushing the EUto remove obstacles to cross-border mergers of retail lenders. The European Commission should stop national regulators using discretionary powers to hamper tie-ups that strengthen the financial links between euro member states, Alvaro Nadal, chief economic adviser to Prime Minister Mariano Rajoy, said in an interview this week. “One of the problems with monetary union is the lack of risk sharing across the system,” Nadal said. “Imagine if half of Spanish mortgages had been provided by German banks, the crisis would have been very different.” Europe’s retail banking industry should follow the path of the telecommunications industry which has seen a wave of consolidation since EU action facilitated deals, Nadal said.

That would make the currency bloc’s financial system more resilient to shocks like the real-estate collapse that forced Spain to seek a banking-system bailout in 2012. Nadal said he wants to see measures to promote cross-border bank mergers included in the plans to strengthen the euro financial system being drawn up by the so-called four presidents – the heads of the EU, the commission, the ECB and the finance ministers’ group. Spain still has to sell its majority stake in Bankia, a lender with more than €230 billion of assets, which was bailed out with European funds in 2012. Bankia has cleaned up its books selling non-performing real estate assets to Spain’s bad bank and received more than €22 billion of state aid.

While European banking rules are already harmonized in general terms, national regulators still have discretion in how they apply those rules, said Ricardo Wehrhahn, a Madrid-based managing partner at Intral Strategy Execution, a banking and business consultant.
“Within the margins of the law a regulator can make your life harder,” said Wehrhahn, who has analyzed possible targets in Spain for German lenders. “The French, German and Italian banking markets are particularly difficult to penetrate.” Banco Santander, the euro region’s largest bank by market value, has submitted one of seven non-binding offers for Portugal’s state-owned Novo Banco.

What a great plan! Why didn’t I think of that? The more squids the merrier.

• Deutsche Bank Wins German Backing to Be More Like Goldman (Bloomberg)

Deutsche Bank is winning support from German politicians for a plan to transform the country’s biggest bank into a company more like Goldman Sachs. That would be the result of an option the firm is weighing as it seeks to bolster capital levels and profitability, according to a person with knowledge of the matter, who asked to remain anonymous because the talks are confidential. Exiting retail banking to focus on global fund management and investment banking would cut fewer jobs and deliver the quickest boost to returns among three scenarios under review, said the person. Deutsche Bank co-Chief Executive Officers Anshu Jain and Juergen Fitschen are revamping their strategy after the stock fell 24% last year, the most among the top investment banks.

At stake for Germany, the world’s third-biggest exporter, is maintaining a competitive advantage by having a domestic corporate and investment bank with global reach that can offer local companies access to capital markets. “Deutsche Bank is Germany’s only global player in banking,” Michael Fuchs, the deputy parliamentary leader of Chancellor Angela Merkel’s Christian Democratic Union said by phone from Berlin. “If they decide to restructure their business, we should support them.” The lender would still shrink its investment bank, which is Europe’s largest, in all three scenarios it is considering, according to one of the people. The bank may pare its interest-rate trading business and the prime finance activities that cater to hedge funds, the person said.

The company said on Friday that it would present the results of its strategy review in the second quarter. Politicians might have an interest in Deutsche Bank’s plan because Germany is its single biggest market, making up 34% of the bank’s 31.9 billion euros ($35.1 billion) of revenue last year and accounting for 46% of its 98,138 staff at the end of December, company filings show. If Deutsche Bank has concluded that it’s “economically” better to sell its consumer unit, “we have to accept this,” said Ingrid Arndt-Brauer, chairwoman of the parliamentary finance committee and a member of Merkel’s Social Democratic Party coalition partners.

So what are we going to do?

• Asylum Claims Up 45%, ‘Highest Level For 22 Years’ (BBC)

The number of refugees seeking asylum in developed countries rose by almost half last year to the highest level for 22 years, a UN report says. The UN refugee agency said an estimated 866,000 asylum seekers lodged claims in 2014, a 45% rise on the year before and the highest figure since the start of the war in Bosnia. It said the increase had been driven by the conflicts in Syria and Iraq. Germany received the most applications at 173,000 – 30% of claims in the EU. It was followed by the US, Turkey, Sweden and Italy as the countries with the most claims. Between them, the top five receiving countries accounted for 60% of all new asylum bids among the 44 included in the report. The surge is linked to the spiralling conflicts in Syria and Iraq, which have created “the worst humanitarian crisis of our era,” UNHCR spokeswoman Melissa Fleming said.

She urged European countries to open their doors, and respond as generously to the current situation as they did during the Balkan wars in the 1990s. “We need countries to step up to the plate,” AFP news agency quoted her as saying. The UNHCR figures do not include the millions of Syrians who have been taken in by countries such as Lebanon and Jordan. Syrians accounted for the most applications for asylum in 2014 – at nearly 150,000 – more than double the 2013 figure of 56,300. More than 215,000 people are estimated to have been killed since the conflict in Syria started in 2011. Iraqis came in second with 68,700 asylum requests, up from 37,300 the year before. Afghans formed the third largest group, followed by citizens of Serbia and Kosovo, and Eritreans, the UNHCR said.

Tom Joad just turned around in his car..

• California’s Epic Drought: One Year of Water Left (Ellen Brown)

Wars over California’s limited water supply have been going on for at least a century. Water wars have been the subject of some vintage movies, including the 1958 hit The Big Country starring Gregory Peck, Clint Eastwood’s 1985 Pale Rider, 1995’s Waterworld with Kevin Costner, and the 2005 film Batman Begins. Most acclaimed was the 1975 Academy Award winner Chinatown with Jack Nicholson and Faye Dunaway, involving a plot between a corrupt Los Angeles politician and land speculators to fabricate the 1937 drought in order to force farmers to sell their land at low prices. The plot was rooted in historical fact, reflecting battles between Owens Valley farmers and Los Angeles urbanites over water rights.

Today the water wars continue, on a larger scale with new players. It’s no longer just the farmers against the ranchers or the urbanites. It’s the people against the new “water barons” – Goldman Sachs, JPMorgan Chase, Monsanto, the Bush family, and their ilk – who are buying up water all over the world at an unprecedented pace. At a news conference on March 19, 2015, California Senate President Pro Tem Kevin de Leon warned, “There is no greater crisis facing our state today than our lack of water.” Jay Famiglietti, a scientist with NASA’s Jet Propulsion Laboratory in La Cañada Flintridge, California, wrote in the Los Angeles Times on March 12th:

Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain.

Maps indicate that the areas of California hardest hit by the mega-drought are those that grow a large%age of America’s food. California supplies 50% of the nation’s food and more organic food than any other state. Western Growers estimates that last year 500,000 acres of farmland were left unplanted, an amount that could increase by 40% this year. The trade group pegs farm job losses at 17,000 last year and more in 2015. Farmers with contracts from the Central Valley Project, a large federal irrigation system, will receive no water for the second consecutive year, according to preliminary forecasts. Cities and industries will get 25% of their full contract allocation, to ensure sufficient water for human health and safety. Besides shortages, there is the problem of toxic waste dumped into water supplies by oil company fracking. Economists estimate the cost of the drought in 2014 at $2.2 billion.

And his grave…

• It’s The End Of March And 99.85% Of California Is Abnormally Dry Already (ZH)

With NASA scientists warning about California only having one year of water left, it appears The Kardashians and March Madness continue to distract Americans from the ugly looming reality of water shortages. With summer around the corner, the US Drought Minitoring service reports today that a stunning 99.85% of California is “abnormally dry,” and 98.11% of the state is in drought conditions leaving over 37 million people in harm’s way. As we concluded previously: Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain. In short, we have no paddle to navigate this crisis. Several steps need be taken right now.

First, immediate mandatory water rationing should be authorized across all of the state’s water sectors, from domestic and municipal through agricultural and industrial. The Metropolitan Water District of Southern California is already considering water rationing by the summer unless conditions improve. There is no need for the rest of the state to hesitate. The public is ready. A recent Field Poll showed that 94% of Californians surveyed believe that the drought is serious, and that one-third support mandatory rationing.

Second, the implementation of the Sustainable Groundwater Management Act of 2014 should be accelerated. The law requires the formation of numerous, regional groundwater sustainability agencies by 2017. Then each agency must adopt a plan by 2022 and “achieve sustainability” 20 years after that. At that pace, it will be nearly 30 years before we even know what is working. By then, there may be no groundwater left to sustain.

Third, the state needs a task force of thought leaders that starts, right now, brainstorming to lay the groundwork for long-term water management strategies. Although several state task forces have been formed in response to the drought, none is focused on solving the long-term needs of a drought-prone, perennially water-stressed California.

NOT a mirror version of the visible universe.

• What Is Dark Matter Made Of? Galaxy Cluster Collisions Offer Clues (CSM)

Dark matter may not be part of a “dark sector” of particles that mirrors regular matter, as some theories suggest, say scientists studying collisions of galaxy clusters. When clusters of galaxies collide, the hot gas that fills the space between the stars in those galaxies also collides and splatters in all directions with a motion akin to splashes of water. Dark matter makes up about 90% of the matter in galaxy clusters: Does it splatter like water as well? New research suggests that no, dark matter does not splatter when clusters of galaxies collide, and this finding limits the kinds of particles that can make up dark matter. Specifically, the authors of the new research say it is unlikely that dark matter is part of an entire “dark sector” — a mirror version of the visible universe.

Our galaxy contains hundreds of billions of stars, and there are hundreds of billions of galaxies in the observable universe. There’s also a lot of gas and dust between the stars and the galaxies. But all of those stars, galaxies, gas and dust make up only about 10 to 15% of the matter in the universe. The other 85 to 90% is dark matter. Scientists don’t know what dark matter is made of or where it comes from, only that it doesn’t appear to reflect or radiate light. It does, however, exert a gravitational pull on the regular matter around it. David Harvey, a postdoctoral researcher at the Swiss Federal Institute of Technology Lausanne, is one of many scientists currently trying to figure out what dark matter is made of.

There are lots of ways to go about this, and Harvey decided to see what happens when dark matter collides with itself. To do this, Harvey and his colleagues at the University of Edinburgh, where Harvey did his PhD work, looked at collisions among entire clusters of galaxies, where as much as 90% of the mass involved in the collision is dark matter, according to a statement from the Swiss Federal Institute of Technology Lausanne. “[Galaxy cluster mergers] are incredibly messy,” Harvey said. “You’ve got [the stars], the highest densities of dark matter and hot gas all swirling together.”

“Many of Antarctica’s ice shelves are huge. The one protruding into the Ross Sea is the size of France.” “A number of these ice shelves are holding back 1m to 3m of sea level rise..”

• Antarctic Ice Shelf Thinning Speeds Up (BBC)

Scientists have their best view yet of the status of Antarctica’s floating ice shelves and they find them to be thinning at an accelerating rate. Fernando Paolo and colleagues used 18 years of data from European radar satellites to compile their assessment. In the first half of that period, the total losses from these tongues of ice that jut out from the continent amounted to 25 cubic km per year. But by the second half, this had jumped to 310 cubic km per annum. “For the decade before 2003, ice-shelf volume for all Antarctica did not change much,” said Mr Paolo from the Scripps Institution of Oceanography in San Diego, US. “Since then, volume loss has been significant. The western ice shelves have been persistently thinning for two decades, and earlier gains in the eastern ice shelves ceased in the most recent decade,” he told BBC News.

The satellite research is published in Science Magazine. It is a step up from previous studies, which provided only short snapshots of behaviour. Here, the team has combined the data from three successive orbiting altimeter missions operated by the European Space Agency (Esa). The findings demonstrate the value of continuous, long-term, cross-calibrated time series of information. Many of Antarctica’s ice shelves are huge. The one protruding into the Ross Sea is the size of France. They form where glacier ice running off the continent protrudes across water. At a certain point, the ice lifts off the seabed and floats. Eventually, as these shelves continue to push outwards, their fronts will calve, forming icebergs.

If the losses to the ocean balance the gains on land though precipitation of snows, this entirely natural process contributes nothing to sea level rise. But if thinning weakens the shelves so that land ice can flow faster towards the sea, this will kick the system out of kilter. Repeat observations now show this to be the case across much of West Antarctica. “If this thinning continues at the rates we report, some of the ice shelves in West Antarctica that we’ve observed will disappear by the end of this century,” said Scripps co-author Helen Amanda Fricker. “A number of these ice shelves are holding back 1m to 3m of sea level rise in the grounded ice. And that means that ultimately this ice will be delivered into the oceans and we will see global sea-level rise on that order.”

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