Wikileaks Archives - Page 6 of 6 - The Automatic Earth

Japan shows the exact same trend as China, huge drops in exports AND imports: world trade is collapsing. Still, Reuters’ comment today: “exports fall less than expected, offer some hope of recovery”

• Japan’s Exports Decline for 9th Straight Month, Imports Plunge 18.8% (BBG)

Japan’s exports dropped again in June, with shipments down for a ninth consecutive month, underscoring the continuing challenge of reviving the nation’s economy. Overseas shipments declined 7.4% in June from a year earlier, the Ministry of Finance said on Monday. Imports slid 18.8%, leaving a trade surplus of 692.8 billion yen ($6.5 billion). Japan had a trade surplus of 1.81 trillion yen in the January-June period, the first surplus since the second half-year of 2010.

The weak exports data show that the nation’s economic recovery remains tepid and come before the Bank of Japan meets later this week to consider whether to further expand monetary stimulus. Japan’s growth is at risk as a slowdown in overseas demand and the yen’s surge this year make the nation’s products less attractive overseas and hurt the earnings of exporters. [..] Exports to the U.S. fell 6.5% in June from a year earlier, while shipments to the EU declined 0.4% and sales to China, Japan’s largest trading partner, dropped 10%.

And this is mostly just the US.

• Beware, Oil Bulls: Demand Is About To Fall Off A Cliff (BBG)

Beware, oil bulls: Just as U.S. oil production sinks low enough to drain supplies, demand is about to fall off a cliff. American gasoline consumption typically ebbs in August and September as vacationers return home, and refiners use that dip to shut for seasonal maintenance. Over the past five years, refiners’ thirst for oil has dropped an average of 1.2 million barrels a day from July to October. “People are looking ahead to the fall and are worried,” said Michael Lynch, president of Strategic Energy & Economic Research. “There’s more and more talk of prices going south of $40 and as a result people are going short.” Money managers added the most bets in a year on falling WTI crude prices during the week ended July 19, according to Commodity Futures Trading Commission data.

That pulled their net-long position to the lowest since March. WTI dropped 4.6% to $44.65 a barrel in the report week and traded at $44.14 at 11:53 a.m. Singapore time on Monday. With weekly Energy Information Administration data showing U.S. gasoline stockpiles at the highest seasonal level since at least 1990, refiners may shut sooner and for longer ahead of the Labor Day holiday in early September, the end of the driving season. “With gasoline supplies the highest since April, refiners may pull some projects forward,” said Tim Evans at Citi Futures Perspective. “This will take more support away the market and add to the broader problem of excess supply.”

“..oil bulls counting on further declines are fighting history..”

• Peak Oil ‘Demand’ & The Duelling Narratives Of Energy Inventories (ZH)

Crude oil inventories in the U.S. have fallen 23.9 million barrels since the end of April, but, as Bloomberg notes, oil bulls counting on further declines are fighting history. Over the past five years refiners’ crude demand has fallen an average of 1.2 million barrels a day from the peak in July to the low in October. “The rough part will be once refineries start going into maintenance,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management. “We aren’t drawing down inventories very fast and the pressure on prices will increase.”

But, as Alhambra Investment Partner’s jeffrey Snider notes, the significance of crude and gasoline inventory (and price) changes is the difference in narratives and what is supporting them. While there is a direct relationship between the steepness of contango in the oil futures curve and the amount of crude siphoned from the market to storage, it is not an immediate one. When crude prices originally collapsed starting in late 2014, twisting the WTI curve from backwardation to so far permanent contango (of varying degrees), it wasn’t until January 2015 that domestic inventories began their surge. And while oil prices rose through spring, flattening out again the futures curve and drastically reducing that contango, the spike in oil stocks didn’t actually end until almost the end of last April.

Given the “dollar’s” explicit seasonality, combined with the usual intra-year swings of crude itself, it isn’t surprising to find the process repeated almost exactly a year later. This time it happened in two separate events, the latter of which was a near replica of the start to 2015. The futures curve was pressed into deep contango after October 2015, and sure enough oil inventories spiked again in early January 2016. And like last year, though the futures curve would begin to flatten out again starting February 12, oil storage levels continued to build until the end of April.

“Most investors today have no idea what is happening in the bond market and have exposed themselves to incredible amounts of risk.”

• What Happens When The Bond Bubble Finally Pops (IceCap)

The 2008-09 crisis was caused by the private sector. Regardless of the reason or the assigned blame, far too many people and companies borrowed way too much money and when the bubble eventually popped (they always do), millions of people and companies lost an awful lot of money. The one important thing to know from those dark days is that governments were told (by the banks) that in order to save the world they had to save the banks. But what few people realise is that when they saved the banks, two things happened:

1. Tax payers and the most conservative investors from all over the world saved the banks – in other words, many who didn’t take the risk had to bailout those who took excessive risks. 2. The bailout and stimulus programs simply shifted the enormous debt crisis away from the private sector and straight onto the laps of the public sector. In other words, the bubble has shifted away from the PRIVATE sector to the GOVERNMENT sector. And when the government sector has a crisis, it is reflected in the GOVERNMENT BOND MARKET. To put this government bond market crisis into perspective, we offer our Chart 4 which shows a relative comparison to recent crises from the private sector.

To really understand how serious of a problem this is, just know that a mere 1% rise in long-term interest rates, will create losses of approximately $2 Trillion for bond investors. The fun really starts when long-term yields increase by 3%, and then 6% and then 10%. This is the point when certain government bonds simply stop trading altogether, and losses pile up at 50%-75%. When long-term rates decline, it is usually in a gradual trending manner – such as what we are experiencing today. For those of you shaking your heads in disagreement, we kindly suggest you research your history of long-term interest rates.

However, when long-term rates go higher – it is an explosive move. Long-term rates ratchet up VERY quickly making the sudden loss instant, while exponentially increasing the funding cost of the borrower. Most investors today have no idea what is happening in the bond market today and have exposed themselves to incredible amounts of risk. And more importantly, because a global crisis in the government bond market has never occurred in our lifetime – advisors, financial planners and big banks continue the tradition of telling their clients that bonds are safer than stocks. As a result, the most conservative investors in the word remain heavily invested in the bond market and are therefore smack dab in the middle of the riskiest investment they’ll ever see. Chaotic indeed.

“Not unlike the Fed, it is clear that the BOJ is trapped in its own end game.”

• With Kuroda Under Pressure To Increase Stimulus Again, Dissenters Appear (ZH)

With what little credibility it still has, the Bank of Japan is set to meet this week and likely agree on the size of yet another stimulus package for the economy. Prime Minister Abe’s main economic advisor Etsuro Honda recently detailed in an interview that the BOJ should increase its Qualitative and Quantitative Monetary Easing (QQE) program from ¥80 trillion to ¥90 trillion. In addition, there has been growing speculation regarding coordinated fiscal and monetary stimulus. The fiscal stimulus efforts are not expected to be unveiled until August, according to the WSJ. Expectations point to a “multiyear program valued at ¥20 trillion ($188 billion), including direct spending, government loans and public-private financing.”

Perhaps more interesting, this time, Kuroda may have a difficult time convincing the 8 remaining members of the monetary board. As the Journal notes, “other BOJ officials are signaling a reluctance to act, underscoring questions about whether the central bank has reached the limits of its powers to revive Japan’s economy. They note that monetary policy is already extremely accommodative, with bond yields and interest rates at or near record lows, and express doubts that additional easing would make fiscal stimulus much more effective, according to people familiar with the central bank’s thinking.” As core metrics and corporate expectations of inflation plummet, Kuroda’s promise to do “whatever it takes” to reach 2% inflation seems to be under significant threat.

Doing nothing now would “amount to an admission that the BOJ’s monetary policy has reached its limits—it wants to move, but it can’t,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance. Not unlike the Fed, it is clear that the BOJ is trapped in its own end game. As Kyle Bass recently told CNBC, “The textbooks aren’t working for the academics … I fear they’re going to have to go into some sort of jubilee where the central bank just forgives the debt that they own…I don’t know what happens to the yield curve then. The unconventional policies aren’t working, so they’re going to have to go to unconventional, unconventional policies next. I don’t know where that takes them.”

“There is no banking problem in Italy..” There’s only €360 billion in bad loans…

• Italy Insists There’s ‘No Banking Problem’ As Stress Tests Loom Large (CNBC)

Top finance officials in Italy have moved to play down the issues the country’s banking industry is facing, just days ahead of crucial stress tests by the ECB. Speaking on the outskirts of a G20 finance leaders meeting in Chengdu, China, Italy’s Finance Minister, Pier Carlo Padoan, told CNBC that the Italian banks “do not need [a] rescue.” “There is no banking problem in Italy, it’s one particular case which is being dealt with … I’m confident this will be successful,” he said Sunday, highlighting issues at Monte dei Paschi (BMPS). That institution is thought to be the weakest link among lenders in the euro zone’s third-largest economy. Italian policymakers and EU officials have been trying to deal with its fragile banking system, bogged down by non-performing loans (NPLs) estimated to total €360 billion.

Reports had suggested that Matteo Renzi, the Italian prime minister, is hoping to bailout the banking sector, which would contravene EU rules. Such a solution would stand in contrast to a bondholder “bail-in,” as Italian households are heavily exposure to the asset class. These reports have since been denied. These problems in Italy have roiled stock markets in the past few weeks, alongside the uncertainty following the British vote to leave the European Union. Shares of BMPS have been particularly volatile. However, Padoan told CNBC that this particular bank had put in place a “very effective restructuring plan” and said there had been a widespread misunderstanding of the whole industry. “(Italian banks are) not more vulnerable than they used to be. They have been strengthening over time due to reforms that have been introduced by the government,” he added.

It will cost the global economy $1.6 trillion if companies don’t go deeper into debt to buy each other… Completely empty rhetoric.

• Brexit Will Cost UK Up To $340 Billion In Lost M&A: Study (CNBC)

The Brexit vote will cost the U.K. up to $338 billion in lost merger-and-acquisition (M&A) activity by 2020 and the global economy up to $1.6 trillion, law firm Baker & McKenzie said on Monday. “An active M&A market is all about confidence and credibility,” Michael DeFranco, global chair of M&A at Baker & McKenzie, said in a report. “To restore that confidence the U.K. government will need to get to grips with the enormous challenge of negotiating a new trading relationship with the EU as quickly as practically possible. Otherwise we move into more dangerous territory,” he added. The forecasts above are based on an adverse scenario where Brexit incites growing populism in mainland Europe and undermines EU support among remaining members.

In Baker & McKenzie’s central forecast, Brexit still knocks $239 billion off U.K. M&A activity by 2020 and $409 billion off global volumes. In 2017 alone, U.K. M&A transactions are seen falling by 33%. “In the last few days we have seen evidence that the M&A market in the U.K. won’t come to a crashing halt even if it won’t be at its previous pace,” Tim Gee, London M&A partner at Baker & McKenzie, said. “There are still plenty of buyers and sellers for the right deal at the right price. There are already some clear upsides — global organizations looking to acquire U.K. companies will find that a weaker pound makes U.K. valuations more attractive, although the uncertainty surrounding trade negotiations could deter the more risk averse,” he added.

Hilarious.

• “Putin’s Useful Idiot”: Anyone Who Disagrees With The Establishment (ZH)

This weekend we once again got confirmation that any time the generic narrative spectacularly falls apart, and the “establishment” is caught with its pants down (or, in the case of the DNC, engaging in borderline election fraud leading to what the FT just described as “Democrats in turmoil“) what does it do? Why blame Putin of course, and more specifically his “useful idiots”, and hope the whole thing blows over quickly.

Not convinced? Here is the proof.

And of course:

So sad it’s funny. Hubris rules.

• Leaked DNC Emails Reveal Inner Workings Of Party’s Finance Operation (WaPo)

In the rush for big donations to pay for this week’s Democratic convention, a party staffer reached out to Tennessee donor Roy Cockrum in May with a special offer: the chance to attend a roundtable discussion with President Obama. Cockrum, already a major Democratic contributor, was in. He gave an additional $33,400. And eight days later, he was assigned a place across the table from Obama at the Jefferson Hotel in downtown Washington, according to a seating chart sent to the White House. The 28-person gathering drew rave reviews from the wealthy party financiers who attended. “Wonderful event yesterday,” New York lawyer Robert Pietrzak wrote to his Democratic National Committee contact. “A lot of foreign policy, starting with my question on China. The President was in great form.”

The details of the high-dollar event were captured in the trove of internal DNC emails released last week by the site WikiLeaks that has riled the party as delegates gather in Philadelphia to nominate Hillary Clinton. Internal discussions of the May 18 event with Obama and other aggressive efforts to woo major donors reveal how the drive for big money consumes the political parties as they scramble to keep up in the age of super PACs. The DNC emails show how the party has tried to leverage its greatest weapon — the president — as it entices wealthy backers to bankroll the convention and other needs. At times, DNC staffers used language in their pitches to donors that went beyond what lawyers said was permissible under a White House policy designed to prevent any perception that special interests have access to the president.

Facebook plays multiple questionable roles these days. This is an ugly one.

• Facebook Admits To Blocking Wikileaks Links In DNC Email Hack (NYP)

Facebook admitted Sunday that it had blocked links to the Wikileaks trove of emails hacked from the Democratic National Committee. In a Twitter post late Saturday, WikiLeaks accused the social media giant of “censorship” and gave its followers an online workaround, saying “try using https://archive.is.” The WikiLeaks allegation followed a firestorm of controversy that erupted earlier this year when former Facebook workers admitted routinely suppressing conservative news. In response to the WikiLeaks charge, another Twitter user, @SwiftOnSecurity, chimed in that “Facebook has an automated system for detecting spam/malicious links, that sometimes have false positives,” which prompted a response from the company’s chief security officer. “It’s been fixed,” Facebook CSO Alex Stamos tweeted.

“..retribution for monetary donations to Sanders’ campaign..” That would be some $220 million?!

• How Can You Join the DNC Class Action Lawsuit? (Heavy)

With news about the WikiLeaks dump showing the Democratic National Committee working to push Hillary Clinton’s nomination rather than remaining neutral, there may be more evidence than ever for a class action lawsuit that has been filed against the Democratic National Committee. But how can you join the fraud lawsuit? There’s still time and we have all the details below. Here’s what you need to know. So far, thousands of Bernie Sanders supporters and other voters have requested to join DNC class action lawsuit, which is being led by Beck & Lee Trial Lawyers, a civil litigation firm based in Miami. The lawsuit is based on DNC internal emails hacked by Guccifer 2.0 which show the DNC was working behind the scenes to boost Clinton.

These emails show that work starting as early as May 2015, a month after Sanders had entered the race. Jared Beck told US Uncut that Article 5 Section 4 of the Democratic Party charter and bylaws requires the chair of the DNC to stay neutral during the primaries: “In the conduct and management of the affairs and procedures of the Democratic National Committee, particularly as they apply to the preparation and conduct of the Presidential nomination process, the Chairperson shall exercise impartiality and evenhandedness as between the Presidential candidates and campaigns. The Chairperson shall be responsible for ensuring that the national officers and staff of the Democratic National Committee maintain impartiality and evenhandedness during the Democratic Party Presidential nominating process.”

[..] Beck said there were six claims to the case. The first is fraud against the DNC and Wasserman Schultz, stating that they broke legally binding agreements by strategizing for Clinton. The second is negligent misrepresentation. The third is deceptive conduct by claiming they were remaining neutral when they were not. The fourth is retribution for monetary donations to Sanders’ campaign. The fifth is that the DNC broke its fiduciary duties during the primaries by not holding a fair process. And the sixth is for negligence, claiming that the DNC did not protect donor information from hackers.

“..can only carry reports provided by government-controlled print or online media..”

• China Slaps Ban on Internet News Reporting as Crackdown Tightens (BBG)

China’s top internet regulator ordered major online companies including Sina and Tencent to stop original news reporting, the latest effort by the government to tighten its grip over the country’s web and information industries. The Cyberspace Administration of China imposed the ban on several major news portals, including Sohu.com and NetEase, Chinese media reported in identically worded articles citing an unidentified official from the agency’s Beijing office. The companies have “seriously violated” internet regulations by carrying plenty of news content obtained through original reporting, causing “huge negative effects,” according to a report that appeared in The Paper on Sunday.

The agency instructed the operators of mobile and online news services to dismantle “current-affairs news” operations on Friday, after earlier calling a halt to such activity at Tencent, according to people familiar with the situation. Like its peers, Asia’s largest internet company had developed a news operation and grown its team. Henceforth, they and other services can only carry reports provided by government-controlled print or online media, the people said, asking not to be identified because the issue is politically sensitive.
The sweeping ban gives authorities near-absolute control over online news and political discourse, in keeping with a broader crackdown on information increasingly distributed over the web and mobile devices. President Xi Jinping has stressed that Chinese media must serve the interests of the ruling Communist Party.

China, Turkey, good thing there’s the internet.

• Turkey Issues Arrest Warrants For 42 Journalists After Coup (AFP)

Turkish authorities have issued arrest warrants for 42 journalists as part of the investigation into the failed coup aimed at toppling President Recep Tayyip Erdogan, television news channels said Monday. Among those targeted by the warrants were prominent journalist Nazli Ilicak who was fired from the pro-government Sabah daily in 2013 for criticising ministers caught up in a corruption scandal, NTV and CNN-Turk said. There was no indication any of the journalists had been detained so far. The government blamed the 2013 corruption scandal on the US-based cleric Fethullah Gulen who it also accuses of being behind the coup.

The Hurriyet daily said that the warrants – the first to target several members of the press in the crackdown over the failed July 15 coup bid – were issued by the office of Istanbul anti-terror prosecutor Irfan Fidan. The prosecutor said an operation was already in progress to detain the journalists but Ilicak was not found at home in Istanbul and could be holidaying on the Aegean. Provincial police there have been alerted, it said. Erdogan’s government had been under fire even before the coup for restricting press freedoms in Turkey, accusations the authorities strongly deny.

It’s the government, parliament, all the individuals that make up these institutions, that should be held accountable.

• Refugee Camp Company In Australia ‘Liable For Crimes Against Humanity’ (G.)

The company that has taken over the management of Australia’s offshore immigration detention regime has been warned by international law experts that its employees could be liable for crimes against humanity. Spanish infrastructure corporation Ferrovial, which is owned by one of the world’s richest families and the major stakeholder in Heathrow airport, has been warned by professors at Stanford Law School that its directors and employees risk prosecution under international law for supplying services to Australia’s camps on Nauru and Manus Island in Papua New Guinea.

“Based on our examination of the facts, it is possible that individual officers at Ferrovial might be exposed to criminal liability for crimes against humanity under the Rome Statute,” said Diala Shamas, a clinical supervising attorney at the International Human Rights and Conflict Resolution Clinic at Stanford Law School. “We have raised our concerns with Ferrovial in a private communication to their officers and directors detailing our findings. We have yet to hear back.” Shamas said her colleagues’ findings should be a warning to any company or country seeking to replicate Australia’s refugee policies elsewhere. “One of the things that we and our partners are concerned about is the timing of all of this,” said Shamas, who also worked in conjunction with the Global Legal Action Network.

[..] The NBIA executive director, Shen Narayanasamy, told the Guardian that Ferrovial’s complicity in the abuses on Nauru and Manus was “incredibly cut-and-dried under international law”. “There is no shadow of a doubt that gross human rights violations are occurring, no shadow of a doubt that Ferrovial is complicit,” she said. “The risk to Ferrovial is essentially the annihilation of its reputation. As a company that relies upon contracting with governments for service provision, they put at risk all of their contracts, and all of the future contracts they hope to win. They put at risk all of their ratings, all of their client relationships – people will assess that they are too controversial, too unethical to have a relationship with, and they could see large institutional investors divesting.”

NBIA links the Pacific Ocean camps to the 22 mainly European banks that fund Ferrovial’s activities, and six European and American investment funds that own shares in the company. Twenty-two mainly European banks – many of them household names – have jointly provided Ferrovial with a €1.25bn (£1bn) loan for general corporate purposes. The banks include Barclays, RBS, Santander, HSBC, Goldman Sachs, BNP Paribas, Citigroup, JP Morgan Chase – as well as Instituto de Crédito Oficial, a bank owned by the Spanish state. The other banks are Banca IMI (Intesa Sanpaolo), Banco Sabadell, Banco Popular Español, Bank of America, Bankinter, BBVA, Crédit Agricole, Deutsche, Mediobanca, Mizuho, Morgan Stanley, Société Générale, and the Royal Bank of Canada.

Debt Rattle July 24 2016

Jul 242016

July 24, 2016 Posted by Raúl Ilargi Meijer at 9:25 am Finance Tagged with: Brexit, debt, DNC, EU, G20, Greece, Growth, Hillary, migration, neocon, Trump, Wikileaks 3 Responses »

Milton Greene “Actress Marilyn Monroe in bed” 1955

• China’s Growth Sucks In More Debt Bucks For Less Bang (R.)

• G20 Will Use ‘All Policy Tools’ To Protect Growth As Brexit Looms (R.)

• OECD’s Gurria Says No Other EU Country Will Consider Exit After Brexit (CNBC)

• EU Considers Migration ‘Emergency Brake’ For UK For Up To 7 Years (O.)

• Mortgages Issued By Greek Banks Declined 99% In Past Decade (Kath.)

• 5 Reasons Why Trump Will Win (Michael Moore)

• Trump Policy Will Unravel Traditional Neocons – Michael Hudson (RNN)

• WikiLeaks Trove Plunges Democrats Into Crisis On Eve Of Convention (SMH)

• DNC Chair Won’t Speak At Dem Convention Following WikiLeaks Fallout (CNN)

• Imagine How The Land Feels (G.)

Reuters says: “..this year it has taken six yuan for every yuan of growth,[..] twice even the level in the United States during the debt-fueled housing bubble..”

That’s questionable. ZH in 2013: “..over the past five years in the developed world, it took $18 dollars of debt (of which 28% was provided by central banks) to generate $1 of growth..”

• China’s Growth Sucks In More Debt Bucks For Less Bang (R.)

As China’s economy notches up another quarter of steady growth, the pace of credit creation grows ever more frantic for every extra unit of production, as inefficient state firms swallow an increasing share of lending. The world’s second-largest economy grew 6.7% in the first half of the year, unchanged from the first quarter, testament to policymakers’ determination to regulate the pace of slowdown after 25 years of breakneck expansion. Analysts say that determination has come at the cost of a damngerous rise in debt, which is six times less effective at generating growth than a few years ago. “The amount of debt that China has taken in the last 5-7 years is unprecedented,” said Morgan Stanley’s head of emerging markets, Ruchir Sharma, at a book launch in Singapore.

“No developing country in history has taken on as much debt as China has taken on on a marginal basis.” While Beijing can take comfort that loose money and more deficit spending are averting a more painful slowdown, the rapidly diminishing returns from such stimulus policies, coupled with rising defaults and non-performing loans, are creating what Sharma calls “fertile (ground) for some accident to happen”. From 2003 to 2008, when annual growth averaged more than 11%, it took just one yuan of extra credit to generate one yuan of GDP growth, according to Morgan Stanley calculations. It took two for one from 2009-2010, when Beijing embarked on a massive stimulus program to ward off the effects of the global financial crisis.

The ratio had doubled again to four for one in 2015, and this year it has taken six yuan for every yuan of growth, Morgan Stanley said, twice even the level in the United States during the debt-fueled housing bubble that triggered the global crisis. Total bond debt in China is up over 50% in the past 18 months to 57 trillion yuan ($8.5 trillion), equal to around 80% of GDP, and new total social financing, the widest measure of credit provided by China’s central bank, rose 10.9% in the first half of 2016 to 9.75 trillion yuan. China’s money supply has increased in tandem with new lending, and at 149 trillion yuan is now 73% higher than in the US, an economy about 60% larger. “China is the largest money printer in the world – they have been for some time. The balance is really extreme,” says Kevin Smith, CEO of U.S.-based Crescat Capital.

Ionesco and Samuel Beckett were ahead of their time, but we’re catching up with them. Words lose ever more meaning. Example are this article, but also this WSJ headline: “Hillary Clinton Introduces Tim Kaine as ‘a Progressive Who Likes to Get Things Done'”. That may have sounded lofty even just 20 years ago, but today it’s just meaningless, if not outright repulsive.

• G20 Will Use ‘All Policy Tools’ To Protect Growth As Brexit Looms (R.)

Leaders from the world’s biggest economies are poised on Sunday to renew their commitments to support global growth and better coordinate actions in the face of uncertainty over Britain’s decision to leave the EU and growing protectionism. The meeting of finance ministers and central bankers from the Group of 20 major economies in China’s southwestern city of Chengdu is the first of its kind since last month’s Brexit vote and a debut for Britain’s new finance minister. Philip Hammond faced questions about how quickly the UK planned to move ahead with formal negotiations to leave the EU. “We are taking actions to foster confidence and support growth,” a draft statement by the policymakers seen by Reuters said.

“In light of recent developments, we reiterate our determination to use all policy tools – monetary, fiscal and structural – individually and collectively to achieve our goal of strong, sustainable and balanced growth,” it said. The IMF this week cut its global growth forecasts because of the Brexit vote. Data on Friday seemed to bear out fears, with a British business activity index posting its biggest drop in its 20-year history. The draft communique, expected to be issued at the end of the meeting on Sunday afternoon, said Brexit added to uncertainty in the global economy but G20 members were “well positioned to proactively address the potential economic and financial consequences”.

U.S. Treasury Secretary Jack Lew said on Saturday it was important for G20 countries to boost shared growth using all policy tools, including monetary and fiscal policies as well as structural reforms, to boost efficiency. “This is a time when it is important for all of us to redouble our efforts to use all of the policy tools that we have to boost shared growth,” Lew told reporters.

He’ll find out yet.

• OECD’s Gurria Says No Other EU Country Will Consider Exit After Brexit (CNBC)

Countries in the European Union are unlikely to consider an exit from the bloc once they realize how complicated, costly and disruptive the process will be for the United Kingdom, the secretary general of the Organization for Economic Cooperation and Development (OECD) told CNBC on Saturday. “Nobody in their right mind will even attempt or even think of leaving the European Union because they will understand that it is not in their best interest,” Angel Gurria told CNBC before the start of the G-20 finance ministers and central bank governors meeting in Chengdu, China.

Gurria had recommended against the Brexit vote, but says the next step should be helping the U.K. and its partners through the proceedings in the least costly and least disruptive way. On the Italian banking crisis and whether the EU should rescue the country’s third largest bank, Monte dei Paschi di Siena, Gurria said that “national, regional and EU intervention is necessary”. However, the challenge is to define who is going to be doing what, he added. Rome is bracing for the results of critical bank stress tests that are due on July 29 and is hoping to find a solution for the battered bank ahead of that.

Mere days after everyone said there could be no pre-Brexit discussions with the UK, of course there’s things like this anyway.

• EU Considers Migration ‘Emergency Brake’ For UK For Up To 7 Years (O.)

Plans to allow the United Kingdom an exemption from EU rules on freedom of movement for up to seven years while retaining access to the single market are being considered in European capitals as part of a potential deal on Brexit. Senior British and EU sources have confirmed that despite strong initial resistance from French president François Hollande in talks with prime minister Theresa May last week, the idea of an emergency brake on the free movement of people that would go far further than the one David Cameron negotiated before the Brexit referendum is being examined.

If such an agreement were struck, and a strict time limit imposed, diplomats believe it could go a long way towards addressing concerns of the British people over immigration from EU states, while allowing the UK full trade access to the European market. While the plan will prove highly controversial in many member states, including France, Poland and other central and eastern European nations, the attraction is that it would limit the economic shock to the EU economy from Brexit by keeping the UK in the single market, and lessen the political damage to the European project that would result from complete divorce.

Sales only to those with deep pockets. The rest of the world buys up Greece.

• Mortgages Issued By Greek Banks Declined 99% In Past Decade (Kath.)

Cash was the preferred from of payment for the few people who decided to purchase real estate in the first half of the year in Greece, bank officials have suggested. Converging estimates by bank officials contacted by Kathimerini show that eight out of 10 property buyers opted for the transfer of cash between deposit accounts instead of a loan, a trend that started with the imposition of capital controls by the government just over a year ago and continues to date. The same trend is also dominant in consumer credit.

According to data compiled by Kathimerini, the new loans issued in H1 came to €75 million in mortgage credit across the banking system and to €150 million in consumer credit. This sum constitutes a historic low for the last few decades at least. Comparisons with a decade ago are staggering: The number of mortgages issued in January-June 2016 – also affected by the lawyers’ strike – came to just 800, against about 80,000 in the same period in 2006. A Bank of Greece analysis recently said that the course of loans to households is mainly determined by demand, and in the last couple of years the drop in house prices has played a decisive role in the reduction of loan issues.

Well argued. But as Moore himself also argues, that’s a problem, not a winner.

• 5 Reasons Why Trump Will Win (Michael Moore)

Friends: I am sorry to be the bearer of bad news, but I gave it to you straight last summer when I told you that Donald Trump would be the Republican nominee for president. And now I have even more awful, depressing news for you: Donald J. Trump is going to win in November. This wretched, ignorant, dangerous part-time clown and full time sociopath is going to be our next president. President Trump. Go ahead and say the words, ‘cause you’ll be saying them for the next four years: “PRESIDENT TRUMP.” Never in my life have I wanted to be proven wrong more than I do right now. I can see what you’re doing right now. You’re shaking your head wildly – “No, Mike, this won’t happen!”

Unfortunately, you are living in a bubble that comes with an adjoining echo chamber where you and your friends are convinced the American people are not going to elect an idiot for president. You alternate between being appalled at him and laughing at him because of his latest crazy comment or his embarrassingly narcissistic stance on everything because everything is about him. And then you listen to Hillary and you behold our very first female president, someone the world respects, someone who is whip-smart and cares about kids, who will continue the Obama legacy because that is what the American people clearly want! Yes! Four more years of this! You need to exit that bubble right now. You need to stop living in denial and face the truth which you know deep down is very, very real.

Trying to soothe yourself with the facts – “77% of the electorate are women, people of color, young adults under 35 and Trump cant win a majority of any of them!” – or logic – “people aren’t going to vote for a buffoon or against their own best interests!” – is your brain’s way of trying to protect you from trauma. Like when you hear a loud noise on the street and you think, “oh, a tire just blew out,” or, “wow, who’s playing with firecrackers?” because you don’t want to think you just heard someone being shot with a gun. It’s the same reason why all the initial news and eyewitness reports on 9/11 said “a small plane accidentally flew into the World Trade Center.” We want to – we need to – hope for the best because, frankly, life is already a shit show and it’s hard enough struggling to get by from paycheck to paycheck. We can’t handle much more bad news. So our mental state goes to default when something scary is actually, truly happening.

The attempts to link Trump to Russia have become a sort of hilarious boomerang.

• Trump Policy Will Unravel Traditional Neocons – Michael Hudson (RNN)

On Friday, just after the RNC wrapped up with its presidential candidate, Donald Trump, Paul Krugman of the New York Times penned an article titled “Donald Trump: The Siberian Candidate.” He said in it, if elected, would Donald Trump be Vladimir Putin’s man in the White House? Krugman himself is worried as ludicrous and outrageous as the question sounds, the Trump campaign’s recent behavior has quite a few foreign policy experts wondering, he says, just what kind of hold Mr. Putin has over the Republican nominee, and whether that influence will continue if he wins. Well, let’s unravel that statement with Michael Hudson. [..] So let’s take a look at this article by Paul Krugman. Where is he going with this analysis about the Siberian candidate?

HUDSON: Well, Krugman has joined the ranks of the neocons, as well as the neoliberals, and they’re terrified that they’re losing control of the Republican Party. For the last half-century the Republican Party has been pro-Cold War, corporatist. And Trump has actually, is reversing that. Reversing the whole traditional platform. And that really worries the neocons. Until his speech, the whole Republican Convention, every speaker had avoided dealing with economic policy issues. No one referred to the party platform, which isn’t very good. And it was mostly an attack on Hillary. Chants of “lock her up.” And Trump children, aimed to try to humanize him and make him look like a loving man.

But finally came Trump’s speech, and this was for the first time, policy was there. And he’s making a left run around Hillary. He appealed twice to Bernie Sanders supporters, and the two major policies that he outlined in the speech broke radically from the Republican traditional right-wing stance. And that is called destroying the party by the right wing, and Trump said he’s not destroying the party, he’s building it up and appealing to labor, and appealing to the rational interest that otherwise had been backing Bernie Sanders.

So in terms of national security, he wanted to roll back NATO spending. And he made it clear, roll back military spending. We can spend it on infrastructure, we can spend it on employing American labor. And in the speech, he said, look, we don’t need foreign military bases and foreign spending to defend our allies. We can defend them from the United States, because in today’s world, the only kind of war we’re going to have is atomic war. Nobody’s going to invade another country. We’re not going to send American troops to invade Russia, if it were to attack. So nobody’s even talking about that. So let’s be realistic.

Well, I said a long time ago that Clinton would not be electable. There’ll be much more of this released while the convention takes place.

• WikiLeaks Trove Plunges Democrats Into Crisis On Eve Of Convention (SMH)

On the eve of the convention at which Hillary Clinton is to be confirmed as presidential candidate, the Democratic Party has been plunged into crisis – the US media is brimful of ugly and embarrassing stories from within the party’s head office, all based on 20,000 emails dropped on Friday evening by the anti-secrecy group WikiLeaks. The correspondence seems to confirm allegations by the campaign of defeated Senator Bernie Sanders that the Democratic National Committee was actively rooting for Mrs Clinton to win, a revelation that will most likely serve as a wedge between the two camps and make it even more difficult for her to persuade Sanders voters to support her.

The emails also reveal plotting within the DNC to embarrass Republican candidate Donald Trump, including drafting a fake ad to recruit “hot women” to work for him. Bad as this trove of emails is, it could presage something much worse. A brief introduction to the emails, that were released on Twitter with a link to a webpage, described them as “part one of our new Hillary Leaks series”. Naming key DNC officials, the introduction says how many of the emails came from each, including communications director Luis Miranda (10,770 emails), national finance director Jordon Kaplan (3797 emails), and finance chief of staff Scott Comer. The emails are dated through the five months to May 25, 2016.

Several of the emails address efforts to embarrass or to wrong-foot the Sanders campaign, which began almost as a non-event but surged with young voter support in particular to become a serious and determined challenger to Mrs Clinton. One email suggests that Senator Sanders be questioned on his faith, in the hope of revealing him as an atheist. It reads: “Does he believe in a God. He had skated on saying he has a Jewish heritage. I think I read he is an atheist. This could make several points difference with my peeps. My Southern Baptist peeps would draw a big difference between a Jew and an atheist.”

“She’s been quarantined..” She should be under investigation.

• DNC Chair Won’t Speak At Dem Convention Following WikiLeaks Fallout (CNN)

The head of the Democratic National Committee will not speak at the party’s convention next week, a decision reached by party officials Saturday after emails surfaced that raised questions about the committee’s impartiality during the Democratic primary. Debbie Wasserman Schultz, whose stewardship of the DNC has been under fire through most of the presidential primary process, will not have a major speaking role in an effort “to keep the peace” in the party, a Democrat familiar with the decision said. The revelation comes following the release of nearly 20,000 emails.

One email appears to show DNC staffers asking how they can reference Bernie Sanders’ faith to weaken him in the eyes of Southern voters. Another seems to depict an attorney advising the committee on how to defend Hillary Clinton against an accusation by the Sanders campaign of not living up to a joint fundraising agreement. Wasserman Schultz is expected to gavel the convention in and out, but not speak in the wake of the controversy surrounding the leaked emails, a top Democrat said. “She’s been quarantined,” another top Democrat said, following a meeting Saturday night.

Love it. Not so much the part of how to get nature into a novel, but the idea itself. The world is alive. These fierce looking hunters singing to the land, the forest. And the land singing back:

“The place itself, in which their people had lived for millennia, was not an inanimate “environment”, a mere backdrop for human activity. It was part of that activity. It was a great being, and to live as part of it was to be in a constant exchange with it. And so they sang to it; sometimes, it sang back.”

• Imagine How The Land Feels (G.)

We had climbed, slowly, to a high mountain ridge. We were two young Englishmen who were not supposed to be here – journalism was forbidden – and four local guides, members of the Lani tribe. Our guides were moving us around the highlands of West Papua, taking us to meet people who could tell us about their suffering at the hands of the occupying Indonesian army. The mountain ridge was covered in deep, old rainforest, as was the rest of the area we had walked through. This forest, to the Lani, was home. In the forest they hunted, gathered food, built their homes, lived. It was not a recreation or a resource: there was nothing romantic about it, nothing to debate. It was just life.

Now, as we reached the top of the ridge, a break in the trees opened up and we saw miles of unbroken green mountains rolling away before us to the horizon. It was a breathtaking sight. As I watched, our four guides lined up along the ridge and, facing the mountains, they sang. They sang a song to the forest whose words I didn’t understand, but whose meaning was clear enough. It was a song of thanks; of belonging. To the Lani, I learned later, the forest lived. This was no metaphor. The place itself, in which their people had lived for millennia, was not an inanimate “environment”, a mere backdrop for human activity. It was part of that activity. It was a great being, and to live as part of it was to be in a constant exchange with it. And so they sang to it; sometimes, it sang back.

When European minds experience this kind of thing, they are never quite sure what to do with it. It’s been so long since we had a sense that we dwelled in a living landscape that we don’t have the words to frame what we see. Too often, we go in one of two directions, either sentimentalising the experience or dismissing it as superstition. To us, the wild places around us (if there are any left) are “resources” to be utilised. We argue constantly about how best to use them – should we log this forest, or turn it into a national park? – but only the bravest or the most foolish would suggest that this might not be our decision to make.

To modern people, the world we walk through is not an animal, a being, a living presence; it is a machine, and our task is to learn how it works, the better to use it for our own ends. The notion that the non-human world is largely inanimate is often represented as scientific or rational, but it is really more like a modern superstition. “It is just like Man’s vanity and impertinence,” wrote Mark Twain, “to call an animal dumb because it is dumb to his dull perceptions.” We might say the same about a forest; and science, interestingly, might turn out to be on our side.

Debt Rattle July 21 2016

Jul 212016

July 21, 2016 Posted by Raúl Ilargi Meijer at 9:03 am Finance Tagged with: 1MDB, Aegean, Antarctic, Brexit, bubble, credit, Crexit, emergency, New Zealand, oil, Turkey, Wikileaks 12 Responses »

DPC City Hall and Market Street and west from 11th, Philadelphia 1912

• S&P Issues ‘Crexit’ Warning as Corporate Debt to Swell to $75 Trillion (CNBC)

• The Entire Market is Driven by a “Once in History” Bubble About to Burst (P.)

• Bank Of England Report Finds Economy Has Not Slowed Since Brexit Vote (G.)

• US Links Malaysia PM, Wolf of Wall Street to Millions Stolen From 1MBD (WSJ)

• Singapore Finds UBS, DBS, StanChart ‘Failings’ in 1MDB Probe (BBG)

• Erdogan Declares State Of Emergency, Warns S&P ‘Don’t Mess With Turkey’ (ZH)

• Wikileaks, About To Expose Turkish ‘Coup’, Under ‘Sustained Attack’ (TAM)

• Reports Of Turkish Commandos In Greek Aegean Put Athens On Alert (Kath.)

• A Turkey of a Coup (Dmitry Orlov)

• More Pain Seen For US Crude As Product Glut Adds To Gloom (R.)

• New Zealand House Bubble Warning Will ‘Shake Government’ (NZH)

• Greek Brain Drain Amounted To 223,000 People In 2008-2013 (Kath.)

• Warmer Water, Not Air, Drives Antarctic Peninsula Glacier Melt (CB)

Too late to take away the punch bowl. It’s set to end up on the floor in a thousand pieces when someone knocks it over.

• S&P Issues ‘Crexit’ Warning as Corporate Debt to Swell to $75 Trillion (CNBC)

Corporate debt is projected to swell over the next several years, thanks to cheap money from global central banks, according to a report Wednesday that warns of a potential crisis from all that new, borrowed cash floating around. By 2020, business debt likely will climb to $75 trillion from its current $51 trillion level, according to S&P Global Ratings. Under normal conditions, that wouldn’t be a major problem so long as credit quality stays high, interest rates and inflation remain low, and there are economic growth persists. However, the alternative is less pleasant should those conditions not persist. Should interest rates rise and economic conditions worsen, corporate America could be facing a major problem as it seeks to manage that debt.

Rolling over bonds would become more difficult should inflation gain and rates raise, while a slowing economy would worsen business conditions and make paying off the debt more difficult. In that case, a “Crexit,” or withdrawal by lenders from the credit markets, could occur and lead to a sudden tightening of conditions that could trigger another financial scare. “A worst-case scenario would be a series of major negative surprises sparking a crisis of confidence around the globe,” S&P said in the report. “These unforeseen events could quickly destabilize the market, pushing investors and lenders to exit riskier positions (‘Crexit’ scenario). If mishandled, this could result in credit growth collapsing as it did during the global financial crisis.” In fact, S&P considers a correction in the credit markets to be “inevitable.” The only question is degree.

[..] “Central banks remain in thrall to the idea that credit-fueled growth is healthy for the global economy,” S&P said. “In fact, our research highlights that monetary policy easing has thus far contributed to increased financial risk, with the growth of corporate borrowing far outpacing that of the global economy.” Between now and 2020, debt “flow” is expected to grow by $62 trillion – $38 trillion in refinancing and $24 trillion in new debt, including bonds, loans and other forms. That projection is up from the $57 trillion in new flow S&P had expected for the same period a year ago. [..] China is expected to account for the bulk of the credit flow growth, with the nation projected to add $28 trillion or 45% of the $62 trillion expected global demand increase. The U.S. is estimated to add $14 trillion or 22%, with Europe adding $9 trillion, or 15%.

“Buying stocks for their yield because bonds are at their lowest yields in 5000 years is like switching to cigarettes from crack for health purposes.”

• The Entire Market is Driven by a “Once in History” Bubble About to Burst (P.)

Since QE 3 ended in October 2014, stocks have traded in a large range between roughly 2,130 and 1800 on the S&P 500.

During this time, whenever stocks began to breakdown in a serious way, a clear intervention was staged in which someone manipulated the markets higher. Regardless of whether you are a bull or a bear, none of those rallies felt normal or sane in any way. No one panic buys every single day at the exact same time for days on end. Which brings us to today. Stocks have broken out of the trading range to the upside hitting new all-time highs.

They are doing this despite the US entering a recession, China continuing to devalue the Yuan, Italy facing a banking crisis, etc. The explanation the bulls are giving for the breakout is that stocks supposedly hitting all time highs because with $13 trillion in bonds posting negative yields, stocks’ 2.4% or so in dividends are extremely attractive from a yield perspective. Yes, we’ve reached the point at which investors are buying stocks for yield and bonds for capital gains. This is extremely problematic in that it implies that all equity purchases are being driven by a “once in history” bond bubble.• German bond yields are negative out to nearly 10 years. • Japanese bond yields are negative out to 10 years. • Swiss bond yields are negative out to 50 years.

These are completely unsustainable developments. Buying stocks for their yield because bonds are at their lowest yields in 5000 years is like switching to cigarettes from crack for health purposes. At some point something will break in the bond markets. Central Banks are attempting to corner the asset class that is the benchmark for the risk-free rate globally. Put another way, investors are willing to PAY for the right to lend to these Governments for up to and even over a decade. At some point something is going to break here. When it does, stocks will implode below the 2008 lows. It’s only a matter of time.

It’s not fair! They promised us the sky would fall…

• Bank Of England Report Finds Economy Has Not Slowed Since Brexit Vote (G.)

Theresa May’s new administration has received a significant boost from a Bank of England report showing that the economy has been resilient in the first few weeks since the Brexit vote and displays no general signs of slowing down. The monthly survey by the Bank’s regional agents – considered to be the “eyes and ears” of policymakers in Threadneedle Street – found that a majority of firms questioned were not planning to mothball investment or change hiring plans. Even so, City analysts said the Bank was still likely to announce fresh stimulus measures for the economy next month in anticipation that the better-than-expected economic news since the referendum would not last.

Howard Archer, chief UK economist at IHS Global Insight, said: “While there may be some relief that the economy may have dodged an immediate sharp slowdown from the Brexit vote, the danger is still very much there given the major uncertainty that is apparent – and there seems a compelling case for the Bank of England to deliver a substantial package of measures at its August meeting to try and bolster business and consumer confidence” The agents’ report was released at the same time as the Office for National Statistics reported that the labour market remained solid in the period from March to May, the first three months of the referendum campaign, with the jobless rate falling to its lowest level in more than a decade.

Question: why did this talke so long?

• US Links Malaysia PM, Wolf of Wall Street to Millions Stolen From 1MBD (WSJ)

U.S. prosecutors have linked the prime minister of Malaysia, a key American ally in Asia, to hundreds of millions of dollars allegedly siphoned from one of the country’s economic development funds, according to a civil lawsuit seeking the seizure of more than $1 billion of assets from other people connected to him. The Justice Department filed lawsuits Wednesday to seize assets that it said were the result of $3.5 billion that was misappropriated from 1Malaysia Development Bhd., or 1MDB, a fund set up by Prime Minister Najib Razak in 2009 to boost the Malaysian economy. The move sets up a rare confrontation between U.S. prosecutors and an important partner in the fight against terrorism.

The moderate Muslim nation is also a counterpoint to China’s rising ambitions in Asia. Among the Justice Department’s assertions: That some $1 billion originating with 1MDB was plowed into hotels; luxury real estate in Manhattan, Beverly Hills and London; fine art; a private jet and the 2013 film “The Wolf of Wall Street.” Among those behind the spending, the lawsuit alleges, was Riza Aziz, stepson of Mr. Najib. No criminal charges were filed. The Malaysian people were defrauded on an enormous scale, said Deputy FBI Director Andrew McCabe at a news conference announcing the complaints. The asset seizure would be the largest ever by the Justice Department’s anticorruption unit.

Excuse me, but how did Goldman Sachs end up not being mentioned?

• Singapore Finds UBS, DBS, StanChart ‘Failings’ in 1MDB Probe (BBG)

Singapore vowed to take action against four banks for failures in anti-money laundering controls and said it seized S$240 million ($177 million) in assets linked to alleged fraud at the Malaysian state investment company known as 1MDB. Preliminary findings uncovered “instances of control failings” in UBS’s Singapore branch, Standard Chartered’s local unit and DBS, as well as “substantial breaches” of anti-money laundering regulations at Falcon Private Bank in the city-state, the Monetary Authority of Singapore said in a statement Thursday. The regulator’s probe, which started in March 2015, is part of global investigations into 1Malaysia Development Bhd. that stretch across Abu Dhabi, Switzerland, the Caribbean, Hong Kong and the U.S.

More than $3.5 billion was misappropriated from the Malaysian firm, and about $1 billion laundered through the U.S. banking system, the U.S. Justice Department said Wednesday as it launched what could potentially be its biggest ever seizure for such ill-gotten gains. “Supervisory examinations of financial institutions with 1MDB-related fund flows have revealed a complex international web of transactions involving multiple entities and individuals operating in several jurisdictions,” the Singapore central bank said. “Certain financial institutions in Singapore were among those used as conduits for these transactions” and MAS will be taking actions against them, it said.

It’s really years too late to blame ratings agencies for one’s troubles.

• Erdogan Declares State Of Emergency, Warns S&P ‘Don’t Mess With Turkey’ (ZH)

Having warned earlier of the possibility, Turkish President Tayyip Erdogan on Wednesday announced a three-month state of emergency, saying this would enable the authorities to take swift and effective action against those responsible for last weekend’s failed military coup. He explicitly focused on the effort across his nation to “effectively tackle the Gulen movement,” as Erdogan stated that there might be more plans to continue coup attempts. The state of emergency, which comes into force after it is published in Turkey’s official gazette, will allow the president and cabinet to bypass parliament in passing new laws and to limit or suspend rights and freedoms as they deem necessary. The decision has immediately raised fears of more arbitrary arrests, killings and disappearances.

“The aim of the declaration of the state of emergency is to be able to take fast and effective steps against this threat against democracy, the rule of law and rights and freedoms of our citizens,” the president said. Erdogan, who has launched mass purges of state institutions since the July 15 coup attempt by a faction within the military, said the move was in line with Turkey’s constitution and did not violate the rule of law or basic freedoms of Turkish citizens. The president added that “citizens should have no concerns for democracy,” and warned ratings egency S&P “not to mess with Turkey” and comforted his citizens that a “state of emergency does not mean military rule” and that the decision was not against the constitution.

Erdogan said regional governors would receive increased powers under the state of emergency, adding that the armed forces would work in line with government orders. But most amusingly, Erdogan promptly warned S&P, which earlier today downgraded Turkey to BB, “not to mess with Turkey” and that the decision to downgrade the country was political. Finally, he lashed out at Europe, “which he said does not have the right to criticize this decision,” anticipating expressions of “concern” from the European Union, which has become increasingly critical of Turkey’s rights record and has urged restraint as Ankara purges its state institutions since the abortive coup.

Ther are people who think they can shut down WikiLeaks? What do they think the US has been trying to do for years?

• Wikileaks, About To Expose Turkish ‘Coup’, Under ‘Sustained Attack’ (TAM)

Wikileaks claimed Monday it was under attack after it announced it would release hundreds of thousands of documents related to Turkey and the failed military coup attempted Friday, CNET reported. The organization, which has released information on everything from war crimes to Hillary Clinton’s email scandal, announced Sunday it would be releasing 100,000 documents related to Turkey’s “political power structure,” some of which detail the “leadup” to the coup.

ANNOUNCE: Get ready for a fight as we release 100k+ docs on #Turkey’s political power structure. #TurkeyCoup #Soon
— WikiLeaks (@wikileaks) July 18, 2016

Wikileaks anticipated the release would be censored in Turkey, cautioning in a three-part tweet posted Monday: “Turks will likely be censored to prevent them reading our pending release of 100k+ docs on politics leading up to the coup. We ask that Turks are ready with censorship bypassing systems such as TorBrowser and uTorrent and that everyone else is ready to help them bypass censorship and push our links through the censorship to come.” The Turkish government, headed by President Recep Tayyip Erdogan, has increasingly ramped up censorship efforts against journalists, lending credibility to Wikileaks suspicions their release may not fully reach Turkish citizens—especially considering the latest leak concerns his ruling party, AKP.

As CNET noted: “Facebook, Twitter and YouTube were reportedly blocked in Turkey during the attempted coup Friday, but many residents appear to have gotten around the blocks, posting messages and videos, likely using VPNs or other anonymizing services.”
Throughout Monday, Wikileaks continued to promote the release. (“Turks ask whether WikiLeaks is pro or anti-AKP. Neither. Our only position is that truth is the way forward. 100k+ docs serves all sides. – WikiLeaks (@wikileaks) July 18, 2016”). They then tweeted that instead of 100,000 documents, they would actually be releasing far more. “Our pending release of 100k docs on Turkish political power? Just kidding. The first batch is 300k emails, 500k docs,” they announced.

But just hours later, they alerted followers their website was being attacked. “Our infrastructure is under sustained attack,” they tweeted, alongside the hashtag, #TurkeyPurge. “We are unsure of the true origin of the attack. The timing suggests a Turkish state power faction or its allies. We will prevail & publish,” Wikileaks tweeted shortly after.

Greece will be nervous.

• Reports Of Turkish Commandos In Greek Aegean Put Athens On Alert (Kath.)

Reports that a group of Turkish military commandos tried to cross from Turkey to the island of Symi, in the southeastern Aegean, put the Greek armed forces on alert on Wednesday amid fears that ties between Greece and Turkey could be tested in the wake of a failed coup in the neighboring country. The Greek Coast Guard was on alert from around 11 a.m. when a group of inflatable dinghies and other vessels were seen departing from Datca, on the Turkish coast, in the direction of Symi. Confused intelligence referred to the presence of around 20 Turkish commandos on those vessels. Athens had been anticipating a possible attempt by participants in the failed coup to come to Greece and so took the reports seriously.

Later in the day, citing Turkish military officials, Reuters reported that Turkish F-16 fighter jets were scrambled to check reports that missing Turkish coast guard vessels had appeared in Greek waters in the Aegean. Some Turkish military hardware was stolen and used in the failed coup but Turkish government officials have insisted that no military equipment remains unaccounted for. Later on Wednesday, the Turkish interior ministry denied claims that rebel soldiers might have “hijacked” a vessel to flee to Greece, Reuters reported. Sources of the Hellenic Air Force confirmed that two Turkish F-16s had conducted patrols but they said they remained in Turkish air space. The Greek Coast Guard monitored the movements of the Turkish vessels, which remained in Turkish waters. Also, a contingent of the Greek Police was dispatched to Symi to conduct checks there.

The developments came after a statement by Foreign Minister Nikos Kotzias on the anniversary of the Turkish occupation of Cyprus prompted a terse reaction by Ankara. “Greece does not and will never accept the consequences of the Turkish invasion,” Kotzias said. “It has made it clear to all sides that the elimination of the anachronistic system of guarantees and the withdrawal of all Turkish occupation forces – which, as the recent events in Turkey confirmed, undermine rather than ensure constitutional order and democratic normalcy – are an integral part of the solution of the Cyprus problem.” The Turkish Foreign Ministry responded that linking the Cyprus situation to recent events in Turkey was “ill-intentioned” and “unfortunate,” and called on Athens to avoid trying to benefit from the events and to display good neighborly behavior.

Orlov contends that Erdogan is simply not that smart.

• A Turkey of a Coup (Dmitry Orlov)

A lot of words have already been said in the past few days about the Turkish coup that couldn’t fly, but strangely enough some rather obvious things went unmentioned, so I’ll try to fill in a few gaps. Specifically, a lot of the things that have been said range from feeble-minded to utterly preposterous. If this is propaganda, then it sounds like very bad, weak propaganda. Still, there is no shortage of people endlessly repeating these talking points, whether because they get paid to or because they don’t know better. They are the ones I want to address.

Idiotic Theory #1: Erdogan staged his own coup in order to consolidate his power. Prior to the putsch, Erdogan went on vacation, which is traditionally the best time to overthrow a leader. For example, Gorbachev’s tenure as “president” of USSR was ended by a putsch in August 1991 while he was on vacation. People who are busy staging a putsch to consolidate their power don’t go on vacations; they are too busy plotting and orchestrating. Erdogan attempted to fly back to Turkey, only to find that he couldn t land at Istanbul Ataturk, then found himself chased by hostile F-16s. He then flew toward Europe and requested political asylum in Germany, which was refused (bye-bye, Germany!). At some point it dawned on him that most of the army and virtually all of the people in Turkey were on his side, and so he called upon them to take to the streets in defense of the legitimate government.

He did this using an improvised public communications technique that was almost a mockery of itself: his face on a cell phone held in front of a television camera. What followed wasn’t some peaceful, timid demonstration in support of the status quo but gonzo political action, complete with civilians laying down in front of tanks and getting crushed, followed by other civilians jumping on top of tanks and slitting the drivers’ throats. The putsch crumbled. The optics of all of this are hard to misread. He went on vacation; he tried to flee; he begged his people for help over a cell phone. He ended up looking like a very weak and confused leader in a region where leaders either look strong or they don’t stay leaders for long. Do you still think that he planned all this? I don’t.

Demand.

• More Pain Seen For US Crude As Product Glut Adds To Gloom (R.)

A glut of refined products has worsened the already-grim outlook for U.S. crude oil for the rest of the year and the first half of 2017, traders warned this week, as the spread between near-term and future delivery prices reached its widest in five months. A stubborn, massive supply overhang punished crude over the winter as U.S. oil futures hit 12-year lows in February. As supply outages and production cuts increased, crude rallied and spreads tightened significantly in May. But the unusually large amount of gasoline and oil in storage, combined with expectations of a ramp-up in crude production, has made traders more bearish on the price outlook for late 2016 and early 2017.

West Texas Intermediate (WTI) futures for delivery in September traded at a discount of as much as $2.23 to those for delivery in December on Wednesday, the biggest this year. Turnover in that spread soared, touching a record high of more than 19,000 contracts, or about 19 million barrels of oil. December spreads, which are the most actively traded, have also blown out in the past month. The discount of the WTI December 2016 contract to December 2017 widened to $4.11 last week. On Wednesday it traded as wide as $3.92 with over 15,000 lots traded. In May that spread had narrowed to just 50 cents, the tightest since November 2014.

The craziest thing of all is foreign buyers often get credit from foreign banks, so New Zealand can only do so much; other than ban foreign buyers outright.

• New Zealand House Bubble Warning Will ‘Shake Government’ (NZH)

A top banker’s dire warning about New Zealand’s overheated house prices shows the market is in crisis and an immigration rethink is needed, Labour says. In a strongly worded opinion piece, ANZ chief executive David Hisco has warned Auckland property prices are over-cooked and the end would likely be messy. He has joined several leading establishment figures in calling for stronger action on housing, and warns yesterday’s Reserve Bank lending restrictions did not go far enough. Hisco’s comments come after Finance Minister Bill English and Housing Minister Nick Smith signalled they expected property values to slow or drop.

Both told first home buyers to ride the bubble out before buying. Labour finance spokesman Grant Robertson said Hisco’s message reflected the fact the housing market was in crisis. “This is the kind of warning from inside the system that should, if nothing else, shake the Government.” Labour policy is to ban foreign buyers, extend the “bright line” test to five years so investment properties on-sold within five years have to pay a tax on the capital gains achieved, fast-track the building of affordable homes and begin consultation on ending negative gearing.

[..] NZ First leader Winston Peters said Hisco’s warning of a “messy end” was totally predictable and avoidable but had been ignored by the Government and others for too long. “There will be a correction. It is going to be enormously painful for hundreds of thousands of New Zealanders and that’s the sad part about it. Many people will lose their equity. But any conception such a build up in the house price bubble could go on shows what enormous denial the political system is in.” Peters said English and Smith were trying to stave off the inevitable. He did not believe the Reserve Banks’ moves this week to increase loan to value radios for investors from 30 to 40 per cent deposits would have much impact. “It’s crude, it’s blunt and not helpful.”

Note: this is well before the ‘Greece crisis’, and well before Syriza was elected.

• Greek Brain Drain Amounted To 223,000 People In 2008-2013 (Kath.)

A special study by the Bank of Greece on Wednesday showed that 223,000 young people left the country from 2008 to 2013 in search of a better future abroad, constituting the so-called “brain drain.” The results of recent research point to the vast majority of people aged between 25 and 39 years who left the country in the first five years of the Greek recession being single and with a university degree. The young Greeks left not only due to unemployment and adverse economic conditions but also because of state’s failure to provide and generate opportunities for professional evolution.

The Bank of Greece study revealed that the momentum and magnitude of the phenomenon makes it essential to record its characteristics and to investigate the factors that are in play before analyzing the negative consequences for the local economy. The main characteristic identified is that it mainly concerns the section of the workforce that is healthy, educated and specialized, and has high mobility and employability rate. The central bank also attributed the growth of the brain drain to the failure of the local education system to produce high-quality human capital and to the inability of the domestic economy to hold on to and attract talented workers.

It’s not the air.

• Warmer Water, Not Air, Drives Antarctic Peninsula Glacier Melt (CB)

The Antarctic Peninsula is a long, relatively narrow limb extending 800 miles out from West Antarctica, and is home to hundreds of glaciers. These rivers of ice ooze their way down through the Peninsula’s rocky mountain range and into the ocean, powered by gravity and their own weight. But of the 674 glaciers on the Peninsula’s western side, almost 90% are retreating. This happens when their ice melts faster than new snowfall can replenish it. The prevailing theory has been that warming air are melting the glaciers. But a new study, just published in Science, finds that the main cause is actually rising ocean temperatures. As the Peninsula’s glaciers are among the main contributors to sea level rise, knowing how and why they’re changing will help make predictions more accurate, the lead author tells Carbon Brief.

The Antarctic Peninsula is one of the fastest warming regions on Earth. Temperatures have risen by more than 3C over the past 50 years. The warming atmosphere has caused some remarkable changes to the eastern side of the Peninsula. The Larsen ice shelf, a floating sheet of ice formed from glaciers spilling out onto the cold ocean, has lost two of its four sections in recent decades. Larsen-A collapsed in 1995, followed by its neighbour, Larsen-B, in 2002. Rising air temperatures are also contributing to the thinning of Larsen-C, which is now at risk of collapse. Over on the western side of the Peninsula, around 600 small glaciers of various shapes and sizes have also been melting.

Scientists had thought that warming air temperatures were the likely cause of these retreating glaciers, says lead author Dr Alison Cook, a research fellow at the Durham University. She explains to Carbon Brief: “Few of these glaciers had been studied in detail and it was thought that their retreat was in response to the atmospheric warming, which has been the predominant driver on the eastern side.” However, recent research suggests the glaciers are retreating even more quickly than can be explained by just the warming atmosphere. Cook’s study finds that the main cause of glacier melt actually lies deep in the ocean – several hundred metres beneath the surface.

Average ocean temperatures (at a depth of 150m) and change in glacier size (in % per year) for 1945-2009 on the Antarctic Peninsula. The size and colour of the dots indicates glacier change – the larger, red dots showing the largest decrease, and the blue dots show stable glaciers that aren’t retreating. Ocean circulation and types of water mass are labelled as follows: Circumpolar Deep Water (CDW), Shelf Water (SW), Bransfield Strait Water (BSW), and Antarctic Circumpolar Current (ACC). Source: Cook et al. (2016)

Debt Rattle April 2 2016

Apr 022016

April 2, 2016 Posted by Raúl Ilargi Meijer at 9:56 am Finance Tagged with: Aramco, China, debt, Greece, IMF, refugees, steel, tariffs, trade war, Wikileaks 2 Responses »

Gottscho-Schleisner Fishing boat at Fulton Market Pier, NY 1933

• 2016: The End Of The Global Debt Super Cycle (PR)

• Saudi Arabia Plans $2 Trillion Megafund for Post-Oil Era (BBG)

• Defiant China Slaps Steel Tariffs On Britain, EU As Trade War Looms (AEP)

• Tata’s Pain Intensifies As China Imposes Hefty Tariffs On Hi-Tech Steel (Tel.)

• Anbang’s Starwood Retreat Is Setback For China’s M&A Campaign (Reuters)

• How People In China Afford Their Outrageously Expensive Homes (Forbes)

• Even Bankrupt US Shale Drillers Keep Pumping Oil (Reuters)

• Native American Tribes Mobilize Against Proposed North Dakota Oil Pipeline (G.)

• Solar-Energy Company SunEdison Preparing to File for Bankruptcy (WSJ)

• Greece Reacts To Wikileaks Claims About IMF Conversation On Bailout (Kath.)

• EU-Turkey Refugee Deal: Staff Shortages, Rights Concerns Pose Twin Threat (G.)

• Afghan Refugee Shot Dead Trying To Enter Bulgaria (AJ)

• Turkey Is No ‘Safe Haven’ For Refugees – It Shoots Them At The Border (G.)

Deflation. “Deflation destroys financial asset values like stocks and corporate bonds and hard assets like real estate. It also lowers incomes while making debt more expensive to service as debt to income ratios rise.”

• 2016: The End Of The Global Debt Super Cycle (PR)

[..] The credit markets are signaling that the debt fueled expansion that began in 2010 is turning to bust. This is the most precarious moment in financial market history because as the world slides into recession global central banks have no ability to soften the oncoming recession with debt creation. Globally interest rates are close to zero and even negative in Europe and Japan. Long term government bond yields are also extremely low. This is sending a very clear and ominous signal that the world cannot service more debt and in fact needs to deleverage and get on more solid financial footing. The last time the world deleveraged was during The Great Depression. The defining quality of The Great Depression was the destructive deflation that gripped the economy.

Deflation destroys financial asset values like stocks and corporate bonds and hard assets like real estate. It also lowers incomes while making debt more expensive to service as debt to income ratios rise. The world economy is on the precipice of another Great Depression. This state of affairs demands a dramatic repositioning of investment portfolios. Investors who choose to remain passive but want to preserve their wealth need to liquidate their investments in stocks and corporate bonds and hold cash only. Investors who are more opportunistic can hold a combination of cash and U.S. government bonds. U.S. government bonds have already begun to rally so buying at current levels is not quite as attractive as it was a month ago but we expect negative interest rates to eventually visit America so there is still considerable upside.

The more aggressive investor can find opportunities to earn high returns employing strategies that will benefit from a financial collapse and a severe, deflationary recession. These strategies include shorting stock index futures, getting long VIX futures, etfs, and options, getting long stock index option volatility via index etfs, and on a limited basis shorting individual company stocks whose business plans will be acutely affected by economic developments. We would not simply be short financial assets every day because we recognize that the markets will initially be quite volatile which means sharp bear market rallies in between dramatic declines in financial assets. We would initially be positioned to benefit from this two-way volatility and as the declines become more severe and investors begin to throw in the towel the fund will be more short oriented.

Selling off Aramco.

• Saudi Arabia Plans $2 Trillion Megafund for Post-Oil Era (BBG)

Saudi Arabia is getting ready for the twilight of the oil age by creating the world’s largest sovereign wealth fund for the kingdom’s most prized assets. Over a five-hour conversation, Deputy Crown Prince Mohammed bin Salman laid out his vision for the Public Investment Fund, which will eventually control more than $2 trillion and help wean the kingdom off oil. As part of that strategy, the prince said Saudi will sell shares in Aramco’s parent company and transform the oil giant into an industrial conglomerate. The initial public offering could happen as soon as next year, with the country currently planning to sell less than 5%. “IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil,” the prince said in an interview. “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”

Almost eight decades since the first Saudi oil was discovered, King Salman’s 30-year-old son is aiming to transform the world’s biggest crude exporter into an economy fit for the next era. As his strategy takes shape, the speed of change may shock a conservative society accustomed to decades of government handouts. The sale of Aramco is planned for 2018 or even a year earlier, according to the prince. The fund will then play a major role in the economy, investing at home and abroad. It would be big enough to buy Apple, Google parent Alphabet, Microsoft and Berkshire Hathaway – the world’s four largest publicly traded companies. PIF ultimately plans to increase the proportion of foreign investments to 50% of the fund by 2020 from 5% now, said Yasir Alrumayyan, secretary-general of the fund’s board.

The trade war is much further advanced than ‘looming’.

• Defiant China Slaps Steel Tariffs On Britain, EU As Trade War Looms (AEP)

China has thrown down the gauntlet in an escalating trade war over the global steel glut, imposing punitive tariffs of 46pc on hi-tech steel produced in Britain and the rest of the EU. The astonishing move came as the Prime Minister, David Cameron, confronted the Chinese leader Xi Jinping at a meeting in Washington, pleading for action to slow the flood of Chinese steel exports reaching Europe. The imminent demise of the Port Talbot steelworks and Tata’s wider steel operations in Britain has mushroomed within days into a full-blown national drama, calling into question the Government’s whole approach to China. The Chinese ministry of commerce said in a terse statement that it was slapping anti-dumping tariffs of 14.4pc to 46.3pc on companies from the EU, South Korea, and Japan, claiming that China had suffered “substantial damage” from trade abuses.

In a macabre twist, the measures target the Tata plant in Port Talbot, which produces the specialist flat-rolled electrical steel used in transformers. A tiny amount is exported to China. “If this is not a trade war, I don’t know what is,” said Gareth Stace, director of UK Steel. “We’re literally drowning in a flood of Chinese imports globally. We’re certainly not seeing a flood of European steel into China.” China’s share of global steel output has risen from 10pc to 50pc over the last twelve years, with the single province of Hebei now producing twenty times as much as Britain. China’s excess capacity 400m tonnes, double the size of the entire EU steel industry. The country can no longer absorb its own supply as the construction boom fades and the catch-up phase of breakneck industrial growth hits the limit.

A record 112m tonnes was exported last year but Chinese producers are also suffering huge losses. Anshan Iron and Steel announced today that it had lost $7bn over the last year and warned that the steel industry faces an “Ice Age that will force a brutal consolidation”. The US Trade Representative accused China of systematic trade abuse and illicit subsidies for its steel industry in a blistering report released today. “China’s trade policies and practices in several specific areas cause particular concern for the United States. Chinese government actions and financial support in manufacturing industries like steel and aluminium have contributed to massive excess capacity in China,” it said.

The US trade report said China’s steel capacity has continued to grow “exponentially” to 1.4bn tonnes – even higher than previously feared – despite weakening global demand. This now dwarfs the rest of the world’s combined output and is profoundly distorting the global steel market. It said China has no natural advantages in raw materials or energy costs to justify this, and claimed that it is the result of export subsidies, cheap credit, and an opaque regime of state support. “These practices have caused tremendous disruption, uncertainty, and unfairness in the global markets. To date, however, China has not made any movement toward the adoption of international best practices,” it said. It cited a long list of alleged violations, especially in “strategic emerging industries”, technology, intellectual property, and services, accusing Beijing of obstructing access its own markets.

Maybe China will buy Tata? There are no other buyers.

• Tata’s Pain Intensifies As China Imposes Hefty Tariffs On Hi-Tech Steel (Tel.)

China has levied huge new tarrifs on a type of steel produced by Britain despite David Cameron personally challenging the country’s president to help save UK steelmakers, it emerged yesterday. The Prime Minister used a dinner at the White House to confront President Xi Jinping over the possible extinction of the UK steel industry due to Chinese dumping. However it later emerged that China will levy a 46% duty on a type of high tech steel made by just 16 producers worldwide including Tata Steel’s Cogent subsidiary in Newport. China’s decision comes after the European Union imposed tariffs of up to 13% on steel from the country used to reinforce concrete earlier this year.

The development raised the pressure on Britain to better protect the country’s steel manufacturing amid fears 40,000 jobs could be lost as Tata Steel looks to sell off its UK business. It came amid reports Tata is pulling out of Britain in order to smooth a merger with German engineering conglomerate Thyssenkrupp. Credit Suisse analysts said Tata’s planned exit from the UK was a prerequisite to any potential deal with Thyssenkrupp. Sajid Javid, the Business Secretary, yesterday travelled to Port Talbot in South Wales to meet managers and face the anger of hundreds of workers over the government’s handling of the crisis. He appeared to indicate a deal is possible by saying there were “viable buyers” to take over Tata’s operations but said he could not go into details for commercial reasons. Mr Javid said steel remains “absolutely vital” to the British economy and addressed fears work could dry up within days by indicating he had secured more time for negotiations.

Credibility shot.

• Anbang’s Starwood Retreat Is Setback For China’s M&A Campaign (Reuters)

Anbang Insurance’s unexpected withdrawal this week of its $14 billion offer to acquire Starwood Hotels & Resorts Worldwide is a wider blow to the unprecedented drive by Chinese companies to acquire North American and European assets. From semiconductors and industrial equipment, to financial services and real estate, China’s insatiable appetite for Western companies has pushed the country’s outbound cross-border M&A to $101.1 billion year-to-date, nearly surpassing the full-year record of $109.5 billion set last year. Yet Anbang’s abrupt move, which came after Starwood said on Monday that the Chinese insurer’s latest offer was “reasonably likely” to be superior to a cash-and-stock deal with Marriott International, added fuel to concerns that many Chinese companies may not be able to deliver on their acquisition expectations.

“To succeed in the U.S., Chinese companies will have to adapt to American styles of governance and transparency. It will be difficult to close mega deals without a more open style, so we may see more modest deals until China changes,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. To be sure, the largest M&A deal of this year thus far globally is by a Chinese company: China National Chemical’s agreement to acquire Swiss seeds and pesticides group Syngenta for $43 billion. Several Chinese companies, however, are having trouble convincing Western peers that they are a credible M&A counterparty. Earlier this week, for example, U.S. gene-sequencing products maker Affymetrix rejected an offer by some of its former executives that was financed by a Chinese investment firm, even though they offered more money than an existing deal with Thermo Fisher Scientific, on the basis of financing and regulatory risks.

[..] Anbang said on Thursday that it withdrew its offer due to “market considerations”, without elaborating. One of Anbang’s private equity partners, Primavera Capital Ltd chairman Fred Hu, said Anbang walked away to avoid a protracted bidding war, even though Marriott had not disclosed a higher offer. “We have little independent insight into what happened, but based on what Starwood has told us, Anbang did not deliver the same kinds of undertakings or arrangements that would have allowed the Starwood board to conclude that they were credible at $82.75,” Marriott Chief Executive Arne Sorenson told investors and analysts on a conference call. Anbang became concerned that Starwood had no intention of declaring its latest offer superior and was stalling for time for Marriott to come in with a new offer, according a source close to Anbang’s consortium.

Sources close to Starwood, however, said Anbang did not deliver the assurances on financing its latest offer it had said it would on Monday, and had since had no communication with Starwood until its withdrawal on Thursday. Chinese financial magazine Caixin reported last month that China’s insurance regulator would likely reject a bid by Anbang to buy Starwood, since it would put the insurer’s offshore assets above a 15% threshold for overseas investments. “(Anbang) told us what they told the market, (that their withdrawal was due to) the market considerations,” Starwood Chief Executive Thomas Mangas told the same conference call.

Debt by another name.

• How People In China Afford Their Outrageously Expensive Homes (Forbes)

Before we can understand how people in China can afford to frolic in their country’s over-inflated housing market, we must look at where this market came from. Hardly 20 years ago China’s real estate market didn’t exist. It wasn’t until the mid-90s that a series of reforms allowed urban residents to own and sell real estate. People were then given the option to purchase their previously government-owned homes at extremely favorable rates, and most of them made the transition to being property owners. Now with a population provisioned with houses that they could sell at their discretion and the ability to buy homes of their choice, China’s real estate market was set to boom. By 2010, a little over a decade later, it would be the largest such market in the world.

When we talk about how people afford houses in China today, more often than not we’re not talking about individuals going out and buying property on their own — as is the general modus operandi in the West. No, we’re talking about entire familial and friend networks who financially assist each other in the pursuit of housing. At the inner-circle of this social network is often the home buyer’s parents. When a young individual strikes out on their own, lands a decent job, and begins looking to pursue marriage, getting a house is often an essential part of the conversation. Owning a home is virtually a social necessity for an adult in China, and is often a major part of the criteria for evaluating a potential spouse. As parents tend to move into their children’s homes in old age, this truly is a multi-generational affair.

So parents will often fork over a large portion of their savings to provision their children with an adequate house – oftentimes buying it years in advance. If parents are not financially able to buy their kids a house outright, they will generally help with the down payment, or at the very least provide access to their social network to borrow the required funds. Take for example the case of Ye Qiuqin, a resident of Ordos Kangbashi who owns two houses across the country in Guangdong province, where she is originally from. Together with her fiancé, she makes roughly US$3,200 per month from running a cram school. For her first home she made a down payment of roughly US$20,000; of which $3,300 came from her parents, $10,000 came in the form of loans from her sister and friends, and the rest came from her savings.

To decrease the amount of volatility in China’s often hot property market, there are very strict rules as to how much money people can borrow from the bank for purchasing real estate. Although this slightly varies by city and wavers in response to current economic conditions, for their first home a buyer must lay down a 30% down payment, for the second it’s 60%, and for any property beyond this financing isn’t available. So for people to buy homes in this country they need to step up to the table with a large amount of cash in hand. Why there is so much liquid cash available for these relatively large down payments is straight forward: the Chinese are some of the best savers in the world. In fact, with a savings rate that equates to 50% of its GDP, China has the third highest such rate in the world. As almost a cultural mandate, the Chinese stash away roughly 30% of their income, which is often called into use for such things as making a down payment on a home — which is the most important financial transaction that many Chinese will ever make.

Drilling zombies.

• Even Bankrupt US Shale Drillers Keep Pumping Oil (Reuters)

As oil prices nosedived by two-thirds since 2014, a belief took hold in global energy markets that for prices to recover, many U.S. shale producers would first have to falter to allow markets to rebalance. With U.S. oil prices now trading below $40 a barrel, the corporate casualties are already mounting. More than 50 North American oil and gas producers have entered bankruptcy since early 2015, according to a Reuters review of regulatory filings and other data. While those firms account for only about 1% of U.S. output, based on the analysis, that count is expected to rise. Consultant Deloitte says a third of shale producers face bankruptcy risks this year.

But a Reuters analysis has found that bankruptcies are so far having little effect on U.S. oil production, and a tendency among distressed drillers to keep their oil wells gushing belies the notion that deepening financial distress will prompt a sudden output decline or oil price rebound. Texas-based Magnum Hunter Resources, the second-largest producer among publicly-traded companies that have filed for bankruptcy, is a case in point. It filed for creditor protection last December, but even as the debt-laden driller scrambled to avoid that outcome, its oil and gas production rose by nearly a third between mid-2014 and late 2015, filings show.

Once in Chapter 11, its CEO Gary Evans said the bankruptcy, which injected new funds to ensure it would stay operational, could help to “position Magnum Hunter as a market leader.” The company did not respond to a request for comment for this story. However, John Castellano, a restructuring specialist at Alix Partners, said that all of the nearly 3,000 wells in which Magnum Hunter owns stakes have continued operations during its bankruptcy. Production figures can be hard to track post-bankruptcy, but restructuring specialists say that many bankrupt drillers keep pumping oil at full tilt. Their creditors see that as the best way to recover some of what they are owed. And as many bankrupt firms seek to sell assets, operating wells are valued more than idled ones.

“Oil companies in bankruptcy do not seem to automatically curtail production,” said restructuring expert Jason Cohen at the Bracewell firm in Houston. “Lenders are willing to let them continue to produce as long as economically viable.” For most companies in bankruptcy or considering it, maximizing near-term production does make economic sense. Day-to-day well operating costs in most U.S. shale fields remain well below $40 a barrel. Bankrupt firms are also eligible for new financing that can allow them to keep pumping for some time.

What need is there for a pipeline at this point int ime?

• Native American Tribes Mobilize Against Proposed North Dakota Oil Pipeline (G.)

Dozens of tribal members from several Native American nations took to horseback on Friday to protest the proposed construction of an oil pipeline which would cross the Missouri river just yards from tribal lands in North Dakota. The group of tribal members, which numbered around 200, according to a tribal spokesman, said they were worried that the Dakota Access Pipeline, proposed by a subsidiary of Energy Transfer Partners, would lead to contamination of the river. The proposed route also passes through lands of historical significance to the Standing Rock Lakota Sioux Nation, including burial grounds.“They’re going under the river 500 yards from my son’s grave, my father’s grave, my aunt who I buried last week,” said Ladonna Allard, a member of the Standing Rock nation and the closest landowner to the proposed pipeline.

“I really love my land, and if that pipeline breaks everything is gone.” “We must fight every inch of our lives to protect the water,” Allard said. A “spiritual camp” will be set up starting Saturday at the point where the proposed pipeline would cross the river, and the tribal members plan to stay and protest indefinitely. The group is composed of members of the Standing Rock nation as well as others from North and South Dakota nations, including the Cheyenne River Lakota and the Rosebud Sioux. They joined together to ride, run and walk from the Tribal Administration Building north to Cannonball, North Dakota, on the reservation’s northern edge.

The Missouri river is the primary source of drinking water for the tribal reservation, according to Doug Crow Ghost, a spokesperson for the Standing Rock Sioux and the director of the tribe’s water office, who joined the protest on Friday. Tribal members also fish in the river, he said. “Because we are going to be fighting this giant, all the rest of the nations came on horseback to say ‘we support you’,” said Allard. “That is why this horse ride is so important to us. Because we’re not alone in this fight. All of our nations are coming to stand with us, and all our allies and partners. This pipeline is illegal.”

Renewable bubble?!

• Solar-Energy Company SunEdison Preparing to File for Bankruptcy (WSJ)

Solar-energy company SunEdison plans to file for bankruptcy protection in coming weeks, a dramatic about-face for a company whose market value stood at nearly $10 billion in July. The company is preparing a chapter 11 filing and is in talks with two creditor groups to obtain a loan to fund its operations during the process, according to people familiar with the matter. Creditors are likely to take control of the company and its portfolio of power projects, the people said. SunEdison, whose stock has plunged in recent months, would rank among the largest financial collapses in recent years. The company, based about 20 miles outside St. Louis, used a combination of financial engineering and cheap debt to grow to be one of the country’s biggest developers of renewable-power plants.

But a proposed $1.9 billion takeover of residential-rooftop installer Vivint Solar, which was terminated last month, was unpopular with investors. Meanwhile, falling oil prices caused a broad selloff for energy stocks, and capital-market turbulence stoked concerns about SunEdison’s ability to continue financing acquisitions. SunEdison’s stock fell to fresh lows this past week on bankruptcy fears and news that the company is facing Securities and Exchange Commission and Justice Department investigations. Its market capitalization is now about $150 million, and it had long-term debt of about $7.9 billion as of Sept. 30, according to a regulatory filing.

Where Wikileaks meets the real world. Gov’t spokeswoman: “Greece demands to know whether the creation of bankruptcy conditions in Greece is official position of the IMF”

• Greece Reacts To Wikileaks Claims About IMF Conversation On Bailout (Kath.)

Prime Minister Alexis Tsipras was reportedly to chair an emergency meeting with key ministers on Saturday after the publication of a leaked transcript of a conversation that is alleged to have taken place between Poul Thomsen, the head of the IMF’s European department, and Delia Velculescu, the IMF mission chief for Greece. WikiLeaks, which made the revelation, said it obtained the details of the conversation, which took place last month, and in which the two leading IMF officials apparently discuss putting pressure on Germany over the eurozone’s position regarding Greece’s bailout review by threatening that the IMF will leave the program.

According to the WikiLeaks transcript, the two IMF officials discuss an “event” that would force the Europeans to accept the IMF’s position so the bailout review can be concluded. “What is going to bring it all to a decision point? In the past there has been only one time when the decision has been made and then that was when they were about to run out of money seriously and to default. Right?” Thomsen is claimed to have told Velculescu. “I agree that we need an event, but I don’t know what that will be,” Velculescu allegedly added a little later in the conversation. The transcript quotes Velculescu as saying: “What is interesting though is that [Greece] did give in … they did give a little bit on both the income tax reform and on the … both on the tax credit and the supplementary pensions”.

Thomsen’s view was that the Greeks “are not even getting close [to coming] around to accept our views”. Velculescu argued that “if [the Greek government] get pressured enough, they would … But they don’t have any incentive and they know that the commission is willing to compromise, so that is the problem.” A Greek official told the ANA-MPA news agency that the government “is not willing to allow games to be played to the detriment of the country.”

A tragedy in the making.

• EU-Turkey Refugee Deal: Staff Shortages, Rights Concerns Pose Twin Threat (G.)

Serious concerns have been raised about the viability and legality of the EU-Turkey refugee deal just three days before its implementation, after rights campaigners alleged that Ankara had been deporting hundreds of refugees back to Syria on a daily basis in recent weeks, and the Greek asylum service said it needed more staff to make the deal work. In a double blow to the deal, the most senior Greek asylum official, Maria Stavropoulou, called for a 20-fold increase in personnel – while Amnesty International alleged that unaccompanied children were among scores of Syrians illegally expelled from Turkey since January. Hours later, the UN refugee agency again called for a halt to the deal unless Turkey could guarantee refugees’ basic rights.

The news came as hundreds of people detained on a Greek island fled their camp en masse, and other refugees began to sail from mainland Greece to Italy for the first time since eastern European governments began to block their onward route through the Balkans last month. Seeking to block off a migration route that brought more than 800,000 refugees to Greece from Turkey last year, European and Turkish leaders are set to implement a deal on Monday that will see almost all asylum seekers deported back to Turkey. The success of the deal rests on both Greece’s ability to process thousands of people in a short space of time, and Turkey’s ability to prove itself a safe country for refugees.

Both factors were called into question on Friday, as the Greek parliament voted to begin deportations on Monday. Stavropoulou said her department did not have enough people to process the claims of the many people who, prior to the deal, would simply have passed through Greece on their way to Germany and other wealthier European countries. “I’m worried about very many things, but the main worry now is about having the capacity to process all these claims,” she said in an interview with the Guardian. “We have about 300 staff,” she said. “My estimate is that if we are asked to handle anything like half the flow of last year, then we need to have 20 times more capacity.”

First refugee shot dead in Europe?!

• Afghan Refugee Shot Dead Trying To Enter Bulgaria (AJ)

Bulgarian border guards have shot dead an Afghan asylum seeker after he crossed into the country from Turkey. The man was killed near the border with Turkey after police fired and struck him with a warning shot that ricocheted, Bulgarian authorities said on Friday. Interior Ministry chief of staff Georgi Kostov said: “A group of 54 people aged between 20 and 30, all from Afghanistan, were intercepted by border guards and a police officer after crossing into Bulgarian territory. “One of my colleagues used his personal weapon and fired.” The man was injured and died from his wounds en route to hospital.

The targeted group of refugees were seen by a patrol near the southeastern Bulgarian town of Sredets. The UNHCR said it was the first time an asylum seeker had been shot dead while trying to cross into Europe. “We, at UNHCR, are deeply shocked by this incident,” said Boris Cheshirkov, a spokesman for the UN refugee agency. “We deplore the death of an Afghan asylum seeker, trying to reach safety across the border. We call on the Bulgarian authorities to conduct an immediate, transparent and independent investigation. Seeking asylum is an universal human right and not a crime.” The other refugees were detained while an investigation was launched. The men carried no identification documents.

“.. recent deal that sees the world’s richest continent (population 500 million) corral a single Middle Eastern country (population 80 million) into caring for more Syrian refugees than the rest of the world combined.”

• Turkey Is No ‘Safe Haven’ For Refugees – It Shoots Them At The Border (G.)

It was beyond sad to read in the Times this week that Turkish border guards have allegedly shot dead Syrians trying to reach safety in Turkey. Sixteen refugees, including three children, have been killed trying to escape the battlegrounds of northern Syria in the past four months, according to the Syrian Observatory for Human Rights, a frequently cited watchdog. It is shocking to think of people fleeing the combined atrocities of Islamic State and Bashar al-Assad being gunned down just as they make their bid for safety. But what is perhaps most shocking of all is that we observers are still shocked by this. The shooting of Syrians on the border is not a new phenomenon. Refugees and rights groups have reported shootings of migrants on the Turkish-Syrian border since at least 2013.

These abuses are well-documented, and the reports widely circulated. So why, in the months following a shady European deal that forces Turkey to shoulder the biggest burden of the refugee crisis, are we still so appalled when Turkey continues to use deadly violence to stop that burden getting any bigger? A surge in border abuses is the logical result of a recent deal that sees the world’s richest continent (population 500 million) corral a single Middle Eastern country (population 80 million) into caring for more Syrian refugees than the rest of the world combined. We shouldn’t have expected any other outcome. But sadly, some did. And Europe’s leaders – including David Cameron – apparently still do. Turkey is in the process of being designated by the EU as a “safe third country” for refugees – a sobriquet that gives Greece the right to send back almost all of those who land on its shores from Turkey.

Leaders, including Cameron, have justified this with the claim that refugees are safe from mortal danger in Turkey. Border shootings show this is not always strictly true, as do well-substantiated allegations that Turkey has illegally returned some Syrians and Afghans to the danger of their home countries, even after they had safely settled on Turkish soil. An alarming new report by Amnesty International, released today, alleges that in recent weeks large groups of Syrians have been deported back to Syria from southern Turkey, as officials there attempt to reduce their refugee burden.

In Cameron’s favour, most refugees in Turkey are not at risk of death on a battlefield. But this is not what refugee advocates mean when they say that Turkey is an unsuitable place for refugees. Refugee rights extend far beyond the simple right to life: they include the right to education, to healthcare and to work. The point of giving people refugee status is to guarantee them all the opportunities that are extended to natural-born citizens of the country in which they now live.

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