May 182018
 
 May 18, 2018  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , , ,  


Daniel Garber Lambertville holiday 1941

 

Almost Half Of US Families Can’t Afford Basics Like Rent And Food (CNN)
A Liquidity Crisis of Biblical Proportions Is Upon Us (Mauldin)
Fake News No Problem: Internet Totally Dominates Advertising in the US (WS)
Blundering Into Recession (Rickards)
Peso Crisis Highlights Fragility Of Argentina’s Economy (AFP)
China Offers Trump $200 Billion Package To Slash US Trade Deficit (R.)
Ecuador Orders Withdrawal Of Extra Assange Security From London Embassy (R.)
How Public Ownership Was Raised From The Grave (NS)
EU Dashes Membership Hopes Of Balkan States (G.)
US House Committee Approves Provision To Freeze Arms Sales To Turkey (K.)
Alabama Congressman Blames Sea Level Rise On Rocks Falling Into The Ocean (Al)
Climate Change On Track To Cause Major Insect Wipeout (G.)
EU Court Upholds Curbs On Bee-Killing Pesticides (AFP)

 

 

“California, New Mexico and Hawaii have the largest share of struggling families, at 49% each. North Dakota has the lowest at 32%.”

Almost Half of US Families Can’t Afford Basics Like Rent And Food (CNN)

Nearly 51 million households don’t earn enough to afford a monthly budget that includes housing, food, child care, health care, transportation and a cell phone, according to a study released Thursday by the United Way ALICE Project. That’s 43% of households in the United States. The figure includes the 16.1 million households living in poverty, as well as the 34.7 million families that the United Way has dubbed ALICE — Asset Limited, Income Constrained, Employed. This group makes less than what’s needed “to survive in the modern economy.” “Despite seemingly positive economic signs, the ALICE data shows that financial hardship is still a pervasive problem,” said Stephanie Hoopes, the project’s director.

California, New Mexico and Hawaii have the largest share of struggling families, at 49% each. North Dakota has the lowest at 32%. Many of these folks are the nation’s child care workers, home health aides, office assistants and store clerks, who work low-paying jobs and have little savings, the study noted. Some 66% of jobs in the US pay less than $20 an hour. [..] in Seattle’s King County, the annual household survival budget for a family of four (including one infant and one preschooler) in 2016 was nearly $85,000. This would require an hourly wage of $42.46. But in Washington State, only 14% of jobs pay more than $40 an hour.

Read more …

“For now, bond market liquidity is fine because hedge funds and other non-bank lenders have filled the gap. The problem is they are not true market makers. Nothing requires them to hold inventory or buy when you want to sell.”

A Liquidity Crisis of Biblical Proportions Is Upon Us (Mauldin)

In an old-style economic cycle, recessions triggered bear markets. Economic contraction slowed consumer spending, corporate earnings fell, and stock prices dropped. That’s not how it works when the credit cycle is in control. Lower asset prices aren’t the result of a recession. They cause the recession. That’s because access to credit drives consumer spending and business investment. Take it away and they decline. Recession follows. Corporate debt is now at a level that has not ended well in past cycles. Here’s a chart from Dave Rosenberg:

The Debt/GDP ratio could go higher still, but I think not much more. Whenever it falls, lenders (including bond fund and ETF investors) will want to sell. Then comes the hard part: to whom? You see, it’s not just borrowers who’ve become accustomed to easy credit. Many lenders assume they can exit at a moment’s notice. One reason for the Great Recession was so many borrowers had sold short-term commercial paper to buy long-term assets. Things got worse when they couldn’t roll over the debt and some are now doing exactly the same thing again, except in much riskier high-yield debt. We have two related problems here. • Corporate debt and especially high-yield debt issuance has exploded since 2009. • Tighter regulations discouraged banks from making markets in corporate and HY debt.

Both are problems but the second is worse. Experts tell me that Dodd-Frank requirements have reduced major bank market-making abilities by around 90%. For now, bond market liquidity is fine because hedge funds and other non-bank lenders have filled the gap. The problem is they are not true market makers. Nothing requires them to hold inventory or buy when you want to sell. That means all the bids can “magically” disappear just when you need them most. These “shadow banks” are not in the business of protecting your assets. They are worried about their own profits and those of their clients.

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“Internet advertising revenues in the US soared 21.4% in 2017 from a year earlier to a record of $88 billion..”

Fake News No Problem: Internet Totally Dominates Advertising in the US (WS)

You might think you never look at these ads or click on them, and you might think they’re the biggest waste of money there ever was, but reality is that internet advertising revenues in the US are surging, and are blowing all other media categories out of the water. But only two companies divvy up among themselves nearly 60% of the spoils. Internet advertising revenues in the US soared 21.4% in 2017 from a year earlier to a record of $88 billion, thus handily demolishing TV ad revenues, which declined 2.6% to $70.1 billion, according to annual ad revenue report by the Interactive Advertising Bureau (IAB). It was the second year in a row that internet ad revenues beat TV. In 2016, internet ad revenues (or “ad spend”) had surpassed TV ad revenues for the first time in US history.

And 2017 was the first year in the data series going back to 2010 that TV advertising actually declined. That formerly unstoppable growth industry is now a declining industry. [..] Social Media sizzles, fake news no problem. Advertising spend on social media surged 36% from the prior year to $22.2 billion, now accounting for a quarter of all internet advertising, up from just an 8% share in 2012. But who’s getting all this internet ad manna? The report is presented at an “anonymized aggregate level,” and no company names are given. But it’s not hard to figure out. The top ten companies got 74% of the share in Q4 2017, according to the report.

For further detail, we mosey over to eMarketer, which estimates that in 2017, Google captured 38.6% of the total internet ad spend in the US and Facebook captured 19.9% in the US, for a combined total of 58.5% of total internet ad spend. Just by these two companies! For perspective, Google’s parent Alphabet reported global revenues of $111 billion in 2017, and Facebook $40 billion. Practically all of it was generated by internet advertising.

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Well, you can’t do QE forever.

Blundering Into Recession (Rickards)

Contradictions coming from the Fed’s happy talk wants us to believe that QT is not a contractionary policy, but it is. They’ve spent eight years saying that quantitative easing was stimulative. Now they want the public to believe that a change to quantitative tightening is not going to slow the economy. They continue to push that conditions are sustainable when printing money, but when they make money disappear, it will not have any impact. This approach falls down on its face — and it will have a major impact. My estimate is that every $500 billion of quantitative tightening could be equivalent to one .25 basis point rate hike. Some estimates are even higher, as much 2.0% per year. That’s not “background” noise. It’s rock music blaring in your ears.

For an economy addicted to cheap money, this is like going cold turkey. The decision by the Fed to not purchase new bonds will therefore be just as detrimental to the growth of the economy as raising interest rates. Meanwhile, retail sales, real incomes, auto sales and even labor force participation are all declining or showing weakness. Every important economic indicator shows that the U.S. economy can’t generate the growth the Fed would like. When you add in QT, we may very well be in a recession very soon. Then the Fed will have to cut rates yet again. Then it’s back to QE. You could call that QE4 or QE1 part 2. Regardless, years of massive intervention has essentially trapped the Fed in a state of perpetual manipulation. More will follow.

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You can’t resolve a crisis with 40% interest rates. That spells panic.

Peso Crisis Highlights Fragility Of Argentina’s Economy (AFP)

Argentina appears to have resolved, at least in the short term, the crisis over the peso and its depreciation by taking drastic action — but analysts warn the policy is untenable over time. To sustain the Argentinian peso, the Central Bank raised its benchmark interest rate up to 40% and injected more than $10 billion into the economy. A crisis of confidence in the peso saw it plunge nearly 20% over six weeks as investors concerned by Argentina’s high inflation yielded to the lure of a strong dollar. On Monday, the unit dipped to a historic low of 25.51 against the dollar, as talks continued with the International Monetary Fund for a stabilizing loan. Argentina’s center-right president, Mauricio Macri, has sought to be reassuring, saying Thursday that “we consider the turbulence overcome.”

But he pointed the finger at an endemic problem: the budget deficit of Latin America’s third largest economy – even though it has dropped from six to four% of gross domestic product since he took power in late 2015. “It’s a real structural problem, well identified for a long time by the IMF, difficult to resolve politically,” said Stephane Straub, an economist at the Toulouse School of Economics. “If rates remain at this level, it will pose problems in the medium-to-long term. But confidence must return in order to reduce the rates. That’s where the intervention of the IMF can be useful, to bring back confidence and halt the flight of capital and the pressure on the currency.” Annual inflation at more than 20% and a balance of trade deficit still stifle economic reform efforts in an economy whose annual growth was 2.8% in 2017.

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But how?

China Offers Trump $200 Billion Package To Slash US Trade Deficit (R.)

China is offering U.S. President Donald Trump a package of trade concessions and increased purchases of American goods aimed at cutting the U.S. trade deficit with China by up to $200 billion a year, U.S. officials familiar with the proposal said. News of the offer came during the first of two days of U.S.-China trade talks in Washington focused on resolving tariff threats between the world’s two largest economies. But it was not immediately clear how the total value was determined. One of the sources said U.S. aircraft maker Boeing would be a major beneficiary of the Chinese offer if Trump were to accept it. Boeing is the largest U.S. exporter and already sells about a quarter of its commercial aircraft to Chinese customers.

Another person familiar with the talks said the package may include some elimination of Chinese tariffs already in place on about $4 billion worth of U.S. farm products including fruit, nuts, pork, wine and sorghum. [..]The top-line number in the Chinese offer would largely match a request presented to Chinese officials two weeks ago by Trump administration officials in Beijing. But getting to a $200 billion reduction of the U.S. China trade deficit on a sustainable basis would require a massive change in the composition of trade between the two countries, as the U.S. goods deficit was $375 billion last year. The United States’ two biggest exports to China were aircraft at $16 billion last year, and soybeans, at $12 billion.

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An invitation to London and Washington?!

Ecuador Orders Withdrawal Of Extra Assange Security From London Embassy (R.)

The president of Ecuador, Lenin Moreno, ordered the withdrawal on Thursday of additional security assigned to the Ecuadorian embassy in London, where WikiLeaks founder Julian Assange has remained for almost six years. The Australian took refuge in the small diplomatic headquarters in 2012 to avoid sexual abuse charges in Sweden. He rejects the charges and prosecutors have abandoned their investigation. However, British authorities are still seeking his arrest.

“The President of the Republic, Lenin Moreno, has ordered that any additional security at the Ecuadorian embassy in London be withdrawn immediately,” the government said in a statement. “ From now on, it will maintain normal security similar to that of other Ecuadorian embassies,” the statement said. Ecuador suspended Assange’s communication systems in March after his pointed political comments on Twitter. Moreno has described Assange’s situation as “a stone in his shoe.”

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Own your own basics.

How Public Ownership Was Raised From The Grave (NS)

For decades, nationalisation was a taboo subject in British politics. New Labour accepted all of Margaret Thatcher’s privatisations and even extended the market into new realms (such as air traffic control and Royal Mail). Few expected public ownership to return in any significant capacity. But the state has since risen from its slumber. Chris Grayling, the Transport Secretary, yesterday announced that the East Coast Mainline rail franchise would be renationalised (for the third time in 12 years) after its private operators defaulted on payments. Labour, which has called for the whole network to be restored to public ownership, can boast of changing policy from opposition. Further franchises, rail experts say (Northern Rail, South Western, Transpennine Express and Greater Anglia), may also be renationalised out of necessity.

Grayling emphasised that the East Coast move was a “temporary” and purely pragmatic one; the Conservatives usually deride nationalisation as retrogressive, redolent of the grim 1970s. But the voters back Labour’s interventionism. A poll published last year by the Legatum Institute and Populus found that they favour public ownership of the UK’s water (83%), electricity (77%), gas (77%) and railway (76%). Voters are weary of the substandard service and excessive prices that characterise many private companies. (And saw the commanding heights of the British banking system renationalised following the financial crisis.) .

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People are tired of more EU.

EU Dashes Membership Hopes Of Balkan States (G.)

Keep waiting in line, but don’t expect the door to open any time soon. That was the message delivered on Thursday to six Balkan states hoping to join the EU. The six had been invited to the EU heads of state summit in Sofia, Bulgaria, as a gesture to reaffirm their path towards EU membership. Instead, the summit was notable for divisions on whether or not the bloc could cope with further enlargement in the foreseeable future. The EU is keen to offer enticements to the six states, given worries about potential instability and the growing role of Russia in the region. Johannes Hahn, the commissioner for enlargement, has said on a number of occasions that the EU should “export stability” to the region to avoid “importing instability”.

But many member states are uneasy about giving concrete commitments. Emmanuel Macron has emerged as the leading opponent of further EU expansion. “I think we need to look at any new enlargement with a lot of prudence and rigour,” the French president told journalists in Sofia. “The last 15 years have shown a path that has weakened Europe by thinking all the time that it should be enlarged.” A declaration was adopted at the summit that offered support for the “European perspective” of the six Balkan countries but was noticeably lacking words about “accession” or “enlargement”.

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“The draft was approved with votes 60-1..”

US House Committee Approves Provision To Freeze Arms Sales To Turkey (K.)

The United States House Committee on Armed Services of the US Congress approved in principle on Thursday a draft bill on the US budget for 2019 national defense which includes a provision that would halt any sale of military equipment to Turkey until the Secretary of Defense submits a report on the US-Turkish relationship to the congressional defense committees. The draft was approved with votes 60-1 and will be followed by a debate on various amendments, while a similar procedure will take place in the Senate.

If this provision comes into force after the end of the debate, the restrictions imposed on Turkey’s military supplies will be wide-ranging, including, but not limited to, the sales of F-35 Lightning II JSF and F-16 Fighting Falcon, CH- 47 Chinook helicopters, H-60 Blackhawk, and Patriot missiles. The effort to freeze the delivery of the F-35 fighter aircraft to Ankara has formed part of an important campaign conducted by the Hellenic American Leadership Council (HALC) in Washington. As explained by HALC’s executive director, Endy Zemenides, the fact that this provision was included in the draft law is another important step towards fulfilling the goal of the HALC campaign.

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No comment.

Alabama Congressman Blames Sea Level Rise On Rocks Falling Into The Ocean (Al)

North Alabama Congressman Mo Brooks is making headlines again for blaming sea level rise on rocks falling into the ocean and silt washing from major rivers. Brooks was one of several Republican lawmakers sparring with a climate scientist at a Wednesday hearing of the House Science, Space, and Technology Committee. Included in the arguing were Republicans Lamar Smith of Texas, the committee’s chairman, and California’s Dana Rohrabacher, but the websites for Science and Esquire used Brooks’ picture to illustrate their coverage. “Republican lawmaker: Rocks tumbling into ocean causing sea level rise,” read the Science site’s headline.

“Is the Human Race Too Dumb to Survive on This Planet?” asked Esquire also featuring Brooks. “Here’s how big a rock you’d have to drop into the ocean to see the rise in sea level happening now,” chimed in the Washington Post. Brooks was quoted saying, “Every time you have that soil or rock or whatever it is that is deposited into the seas, that forces the sea levels to rise, because now you have less space in those oceans, because the bottom is moving up.” He referred to erosion on the California coastline and England’s White Cliffs of Dover and silt from the Mississippi and Nile rivers.

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I think chemicals are a much bigger issue.

Climate Change On Track To Cause Major Insect Wipeout (G.)

Global warming is on track to cause a major wipeout of insects, compounding already severe losses, according to a new analysis. Insects are vital to most ecosystems and a widespread collapse would cause extremely far-reaching disruption to life on Earth, the scientists warn. Their research shows that, even with all the carbon cuts already pledged by nations so far, climate change would make almost half of insect habitat unsuitable by the end of the century, with pollinators like bees particularly affected. However, if climate change could be limited to a temperature rise of 1.5C – the very ambitious goal included in the global Paris agreement – the losses of insects are far lower.

The new research is the most comprehensive to date, analysing the impact of different levels of climate change on the ranges of 115,000 species. It found plants are also heavily affected but that mammals and birds, which can more easily migrate as climate changes, suffered less. “We showed insects are the most sensitive group,” said Prof Rachel Warren, at the University of East Anglia, who led the new work. “They are important because ecosystems cannot function without insects. They play an absolutely critical role in the food chain.” “The disruption to our ecosystems if we were to lose that high proportion of our insects would be extremely far-reaching and widespread,” she said. “People should be concerned – humans depend on ecosystems functioning.” Pollination, fertile soils, clean water and more all depend on healthy ecosystems, Warren said.

In October, scientists warned of “ecological Armageddon” after discovering that the number of flying insects had plunged by three-quarters in the past 25 years in Germany and very likely elsewhere. “We know that many insects are in rapid decline due to factors such as habitat loss and intensive farming methods,” said Prof Dave Goulson, at the University of Sussex, UK, and not part of the new analysis. “This new study shows that, in the future, these declines would be hugely accelerated by the impacts of climate change, under realistic climate projections. When we add in all the other adverse factors affecting wildlife, all likely to increase as the human population grows, the future for biodiversity on planet Earth looks bleak.”

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It’s a start. But why the focus still only on bees?

EU Court Upholds Curbs On Bee-Killing Pesticides (AFP)

A top European Union court on Thursday upheld the ban on three insecticides blamed for killing off bee populations, dismissing cases brought by chemicals giants Bayer and Syngenta. The decision involves a partial ban by the European Union from 2013, but the bloc has since taken more drastic action after a major report by European food safety agency targeted the chemicals. “The General Court confirms the validity of the restrictions introduced at EU level in 2013 against the insecticides clothianidin, thiamethoxam and imidacloprid because of the risks those substances pose to bees,” a statement said.

“Given the existence of new studies … the Commission was fully entitled to find that it was appropriate to review the approval of the substances in question,” it said. Bees help pollinate 90% of the world’s major crops, but in recent years have been dying off from “colony collapse disorder,” a mysterious scourge blamed partly on pesticides. The pesticides – clothianidin, imidacloprid and thiamethoxam – are based on the chemical structure of nicotine and attack the nervous systems of insect pests. Past studies have found neonicotinoids can cause bees to become disorientated such that they cannot find their way back to the hive, and lower their resistance to disease.

Read more …

Sep 202017
 
 September 20, 2017  Posted by at 8:26 am Finance Tagged with: , , , , , , , , , ,  


Edward Hopper Automat 1927

 

Australia: A Delusional, Stuffed, Basket Case, Bubble, Third World Economy (MB)
With QT On The Way, This Market ‘Is Headed For A Brick Wall’ (Boockvar)
Where Deutsche Bank Thinks The Next Financial Crises Could Happen (CNBC)
Just 4% Own Over 95% Of Bitcoin (HowMuch)
MPs Want Public Inquiry Into UK’s £200 Billion Household Debt Crisis (G.)
Millennials Spend Three Times More Of Income On Housing Than Grandparents (G.)
New Zealand Jet Fuel ‘Debacle’ Disrupts Flights, Exports (G.)
Bain, KKR, Vornado Suffer Wipeout in Toys ‘R’ Us Bankruptcy (BBG)
Manafort Calls On DOJ To Release His Intercepted Phone Calls (ZH)
Trump Warned Saudis Off Military Move on Qatar (BBG)
Putin Orders To End Trade In US Dollars At Russian Seaports (RT)
Eurozone ‘Bouncing Back’? Tell That To The People Of Spain And Greece (DiEM25)
Greece’s Bailout Review Is Leaving Markets Jittery (BBG)
EU’s Dombrovskis: Greek Government Chose To Increase Taxes (K.)
Lesvos Mayor Issues Warning On Refugee Numbers (K.)

 

 

Now there’s a headline.

Australia: A Delusional, Stuffed, Basket Case, Bubble, Third World Economy (MB)

Australia is doomed to become a third-world country unless its government starts “something like the Apollo program” to inspire its citizens into becoming a technology economy, Freelancer.com chief executive Matt Barrie told the AFR Innovation Summit 2017. “Australia is basically a property bubble floating inside a mining bubble inside a commodities bubble inside a China bubble, and that lucky free ride is about to go pop,” he said. The government was focused on “new ways to tax things” in reaction to its looming revenue problem, while neglecting education with proposed cuts to university funding of $1.2 billion, the biggest in 20 years. “Why not try and grow the biggest line of tax, income tax, by encouraging people to study in the right areas like science and engineering, instead of making these cuts which will push the cost of an electrical engineering degree at UNSW above $34,000, while slashing the HECS repayment threshold at the same time,” Mr Barrie said.

…Where is the growth come from? Mr Barrie asks. Governments have achieved growth from a property bubble “like no other”, says Mr Barrie. To paint this picture he says there are cranes in Sydney right now than in most American states combined and that being in postcodes with restricted lending. He is trawling fast through a broad range of figures that highlight Australia’s “basket case” economy including figures around low wage growth, unaffordable housing, manufacturing losses. Mr Barrie [says] we are “delusional” after 26 years of growth based on bubbles: mining, commodities and now property. Mr Barrie is slamming the economy’s structure (it’s hard to keep up, he’s moving fast). “Our economy is completely stuffed. We can’t rely on property to make us…we need serious structural change.”

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It’s not rocket science.

With QT On The Way, This Market ‘Is Headed For A Brick Wall’ (Boockvar)

We’re finally here. About nine years after quantitative easing (QE) began, quantitative tightening (QT) is about to start. On Wednesday, after the Federal Open Market Committee releases its statement, Janet Yellen will follow with a press conference that she will do her best to make as boring as possible. Every Fed member I suppose is praying for boring because of the epic bubbles that QE and seven years of zero interest rate policy (ZIRP) has created in just about everything. They want this to unfold as orderly and as quietly as possible. Wishful thinking I believe. I also expect the FOMC to lay the groundwork for a December rate hike with the market currently 50/50 on that. If one believes that the stock market still is a discounting mechanism, then there’s nothing to fear with QT and maybe it will actually be like “watching paint dry” as Fed members so desperately want it to be. After all, the S&P 500 is at an all time high.

If you think, like me, that the stock market is not the same discounting tool as it once was because of the major distortion and manipulation of markets via central market involvement and the dominance of machines that are reactive instead of proactive in response to news, then we must review the previous experiences when major Fed changes took place. After all, they were all well telegraphed as this week’s likely news has been. I expect no different an outcome this time and I believe the market – with the S&P at an all-time high – is headed for a brick wall the deeper QT gets. Before I get to that, let me remind everyone that the third mandate of QE was higher stock prices. Ben Bernanke in rationalizing the initiation of QE2 in a Washington Post editorial back in November 2010 said in regards to QE1 and the verbal preparation for QE2, “this approach eased financial conditions in the past and, so far, looks to be effective again.

Stock prices rose and long term interest rates fell when investors began to anticipate the most recent action.” He then went on to say “higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.” Well, the belief in the wealth effect hasn’t worked in this expansion. Hence, the record high in stocks last week and the 2.9% year over year rise in core August retail sales, both below the 5 year average and well less than the average seen in the prior two expansions.

After QE1 ended when we knew exactly the full size and expiration date (March 31st, 2010), the market topped out three weeks after and then fell 17%. After QE2 ended when we also knew the exact amount and deadline (June 30th, 2011), the market peaked one week later and then fell about 20%. Around the time QE3 ended with the lead up being a very methodical process of tapering, stocks had a hissy fit of about 10% only saved by James Bullard who hinted that maybe they won’t end QE.

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And there’s more. Isn’t it great to have all these options?!

Where Deutsche Bank Thinks The Next Financial Crises Could Happen (CNBC)

The Great Central Bank Unwind Central banks including the Federal Reserve, European Central Bank and Bank of England are embarking on what has been called the “Great Unwind” – the winding-down of quantitative easing programs which included trillions of dollars’ worth of asset purchases and record low interest rates that have bolstered economies, financial markets and banking systems. Calling the “Great Unwind” a “journey into the unknown,” the strategists warned that “history would suggest there will be substantial consequences of the move especially given the elevated level of many global asset prices” adding that “even if the unwind stalls as either central banks get cold feet or if the economy unexpectedly weakens, we will still be left with an unprecedented global situation and one which makes finance inherently unstable.”

Out of ammunition? The strategists said there was a danger that central banks and governments could find themselves without ammunition to tackle a recession should one occur, given their already near zero interest rates, creaking balance sheets, and a backdrop of high levels of government debt. “Could the next recession be the one where policy makers are the most impotent they’ve been for 45 years or will they simply go for even more extreme tactics and resort to full on monetization to pay for a fiscal splurge? It does feel that we’re at a crossroads and the next downturn could be marked by extreme events given the policy cul-de-sac we seem to be nearing the end of,” Reid et al warned.

More QE if inflation disappoints? Since the financial crisis of ten years ago, persistently low inflation has been a constant headache for central banks, the Deutsche Bank strategists noted, a situation they found “fairly incredible” given the phenomenal level of central bank and government stimulus. “Although not our base case, given the recent inflation and Trump’s fiscal challenges, it’s not infeasible that markets could be blindsided by a return to more QE rather than less…If central banks do end up conducting increased QE again, the risk is we again go back to negative rates and worries about the banking system and the plumbing of the financial system.”

Italy – Crisis ‘waiting to happen?’ Turning to the euro zone’s third largest economy, Deutsche Bank’s strategists warned of more political and economic uncertainty from Italy. “A country nearing an election and with high populist party support, with a generationally underperforming economy, a comparatively huge debt burden, and a fragile banking system which continues to have to deal with legacy toxic debt holdings ticks a number of boxes to us for the ingredients of a potential next financial crisis.”

A China crisis?Conceding that China’s economy had so far avoided a hard landing predicted by many economists, Deutsche Bank warned that China still needed to transition its economy “from manufacturing to services and investment to consumption,” a process with Deutsche Bank said “needs to take place in the context of also containing the rapid growth of credit in our view.” “Rapid credit expansion due to an insatiable demand for debt fuelled growth, compounded by a hugely active shadow banking system, as well as an ever expanding property bubble fuelled fears for economists that China could inevitably make a hard landing and send shockwaves through the world’s financial markets. However, the economy has seemingly defied the odds.” “However, future growth cannot forever rely on debt and investment alone…The warning signs are there and the fundamental vulnerabilities remain. The greater issue might be ‘when’ rather than ‘if’ the credit bubble pops.”

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That is scary.

Just 4% Own Over 95% Of Bitcoin (HowMuch)

Bitcoin has been making a lot of news lately. The cryptocurrency shot up in value by over 200% in 2017, making many people fear that the market is in a bubble. Last week, China decided to close its bitcoin exchanges, which caused investors around the world to panic about the currency’s long-term viability. But HowMuch.net asks, how many people own bitcoin, and how is the currency distributed around the world? Check out our new visualization. Our graph represents the entire bitcoin market, which has a value of around $60 billion. For comparison, that’s bigger than several well-known companies, like Fed-Ex and General Motors. We then divided the value of the bitcoin market by address. As you can see, over 95% of all bitcoins in circulation are owned by about 4% of the market. In fact, 1% of the addresses control half the entire market.

There are a couple limitations in our data. Most importantly, each address can represent more than one individual person. An obvious example would be a bitcoin exchange or wallet, which hold the currency for a lot of different people. Another limitation has to do with anonymity. If you want to remain completely anonymous, you can use something called CoinJoin, a process that allows users to group similar transactions together. This makes it seem like two people are using the same address, when in reality they are not. So it’s a complex situation. but let’s try to break bitcoin down as simple as possible. Bitcoin is just a type of money, like dollars and euros. The main difference is that there isn’t a sovereign government backing the currency, and it instead lives online. This is possible thanks to something called the blockchain.

Banks and companies must keep detailed records of where they send money, marking it possible to detect fraud and criminal activity. The blockchain works differently because it breaks each transaction into tiny components, routes the pieces through a computer network, and directs them to a recipient who can then re-assemble the code together. If you don’t have the right key, you can’t own a bitcoin. And if you aren’t at the right digital address (think your home network’s IP address), then you can’t receive bitcoin. The technology is hard to understand, and it presents challenges for companies and people who want to use it. That’s why folks typically turn to a vendor like Coinbase to handle their transactions. You know how you carry physical money in your personal wallet? Think of Coinbase as a digital wallet.

You use it to buy stuff and pay for services. But be careful—people can steal your digital wallet, and the thieves can be untraceable. And that’s the issue. There’s only a very limited number of bitcoin wallet providers out there. It’s not like you can just go to your local bank and buy some bitcoin. The big takeaway from all this is that if you are considering purchasing some bitcoin, you have very limited options. There are only a few key players in the game where you can park your investment. And if you do make that purchase, understand that it is highly speculative and unregulated, so prepare for a bumpy ride.

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And then what? Jubilee?

MPs Want Public Inquiry Into UK’s £200 Billion Household Debt Crisis (G.)

The chairs of two powerful parliamentary committees have urged the government to set up an independent public inquiry into the £200bn of debt amassed by households. The call by Rachel Reeves, the Labour chair of the business select committee, and Frank Field, the Labour head of the work and pensions select committee, comes as the Conservative-led Treasury select committee plans to hold meetings around the country to examine the impact of debt on individuals and households. “Debt is a huge emotional burden for people,” said Nicky Morgan, the Conservative MP who chairs the Treasury select committee. She added that “unstable personal finances” often emerged as problems raised by her constituents in Loughborough.

The £200bn of debt amassed on credit cards, personal loans and car deals is now at the same level it reached before the 2008 financial crisis and there are fears that rises in interest rates could put more households under pressure. Mark Carney, the governor of the Bank of England, warned on Monday that interest rates were likely to rise in response to rising inflation and skills shortages brought on by Brexit that will increase pressure on wages. Field said people in his Birkenhead constituency on the Wirral were being pushed into destitution by the actions of loan sharks and finance companies that heaped extra pain on low income households with sky-high interest charges. He said: “We need a commission to assess the current situation. There are so many moving parts that a proper investigation goes beyond the remit of any single committee.”

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Probably true in many countries.

Millennials Spend Three Times More Of Income On Housing Than Grandparents (G.)

Millennials are spending three times more of their income on housing than their grandparents yet are often living in worse accommodation, says a study launched by former Conservative minister David Willetts that warns of a “housing catastrophe”. The generation currently aged 18-36 are typically spending over a third of their post-tax income on rent or about 12% on mortgages, compared with 5%-10% of income spent by their grandparents in the 1960s and 1970s. Despite spending more, young people today are more likely to live in overcrowded and smaller spaces, and face longer journeys to work – commuting for the equivalent of three days a year more than their parents. The research by Willetts’ intergenerational commission at the Resolution Foundation thinktank also reveals that today’s 30-year-olds are only half as likely to own their own home as their baby boomer parents.

They are four times as likely to rent privately than two generations ago, a sector which has the worst record for housing quality, the report claims. The report’s authors argue that the housing crisis is a huge part of public anxiety about the country’s direction, a factor in the result of the EU referendum last year and in the general election in June. A young family today has to save for 19 years on average to afford a typical deposit compared with three years for the previous generation, the report states. “This is the biggest problem facing the younger generation,” said Willetts. “It depresses their living standards and quality of life. It is very important for the Tory party to open up the route to home ownership again. A lot of twentysomethings also have horror stories of bad landlords and we need to help them as well.”

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There’s a lesson about redundancy somewhere in here.

New Zealand Jet Fuel ‘Debacle’ Disrupts Flights, Cars, Exports (G.)

New Zealand’s jet fuel crisis is worsening by the day with airlines restricting ticket sales, politicians limiting travel to essential flights only on some routes in the final days of the election campaign and all but the most critical exports halted. Rationing is set to continue for another week after a digger on Thursday struck the sole jet fuel, diesel and petrol supply pipe to Auckland, the country’s biggest city and major transport hub for international visitors. Three thousand people a day are being affected by cancelled domestic and international flights. Another 6,000 people will be impacted by delays or disruptions to normal service, Air New Zealand said, and it had taken the “unusual” step of restricting ticket sales to all but essential or compassionate travel to try and manage the shortage.

As a result of the tightening fuel shortage, all airlines stopping in Auckland are only able to upload 30% of their normal capacity of jet fuel and the government has instructed its employees to cancel all non-essential travel. Export goods are being off-loaded from domestic and international flights unless they are at risk of rotting to lighten the load. Some international routes have been cancelled altogether or diverted to Australia and Fiji until the crisis is resolved.

Although the jet fuel supply pipe is privately owned and operated, opposition Labour leader Jacinda Ardern has criticized the government’s lack of investment in vital infrastructure in Auckland, as the ruling National party instructed its staffers and candidates around the country to restrict campaigning in the final days of the general election to save on jet fuel. “One pipeline and one digger and New Zealand grinds to a halt,” said Ardern on Tuesday. [..] Petrol and diesel supplies have also been affected by the damaged pipe, with both fuels being driven overland to Auckland from other supply points in the North Island, and the defence force called in to assist with transportation and logistics, including the naval tanker HMNZS Endeavour.

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Wait. They had written their investments down to zero, so how can they suffer a wipeout? is it possible they dumped a whole lot of losses into the black hole?

Bain, KKR, Vornado Suffer Wipeout in Toys ‘R’ Us Bankruptcy (BBG)

Bain Capital, KKR and Vornado Realty Trust stand to have their Toys “R” Us Inc. investment erased as the retailer they bought in 2005 for $7.5 billion seeks bankruptcy protection. The three firms and their co-investors sank $1.3 billion of equity into the takeover of the Wayne, New Jersey-based toy company, financing the rest with debt, according to company filings. The debt included senior loans in which they held a stake. Partly offsetting the loss is more than $470 million in fees and interest payments that Toys “R” Us awarded the firms over time. Toys “R” Us, which has 1,600 stores in 38 countries, filed for bankruptcy late Monday. The filing in Richmond, Virginia, estimated that the company has more than $5 billion in debt, which costs about $400 million a year to service.

The buyout was part of a vast wave of debt-enabled takeovers by private equity firms from 2005 to 2007 that saw deal prices soar to tens of billions of dollars. The wave crashed at the onset of the financial crisis in 2009. The biggest of that era’s private equity deals was the $48 billion buyout of Texas utility TXU, now called Energy Future Holdings Corp. The company went belly-up in 2014, obliterating $8.3 billion of equity put in by KKR, TPG Capital, Goldman Sachs and co-investors.

Toys “R” Us appeared stable out of the gate. The $7.5 billion price worked out to about 7.5 times earnings before interest, taxes, depreciation and amortization – not outlandish by today’s standards. With about $1 billion a year in Ebitda, the company was able to cover the interest on its $5.5 billion of debt and fund store improvements with more than $200 million to spare. But the ravages of the financial crisis, competition from online rivals and price wars blew up that safety cushion. KKR and Vornado, which are publicly traded, had previously written their investments in the company down to zero. As a result, the bankruptcy won’t affect their earnings going forward.

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“..it is a felony to reveal the existence of a FISA warrant, regardless of the fact that no charges ever emerged..”

Manafort Calls On DOJ To Release His Intercepted Phone Calls (ZH)

Less than 24 hours after CNN triggered the latest outbreak of ‘Trump Derangement Syndrome’ by relaying information from anonymous sources that Trump’s former campaign manager Paul Manfort has been under surveillance by the FBI since 2014, Manafort has fired back by calling on the Department of Justice to release all transcripts of his tapped phone calls so that the American public “can come to the same conclusion as the DOJ — there is nothing there.” Per the Daily Caller: “Former Trump campaign manager Paul Manafort is calling on the Justice Department to release transcripts of any intercepted communications he may have had with foreigners. Manafort, a longtime Republican political consultant, also called on the Justice Department’s inspector general to investigate the leak of details of secret surveillance warrants obtained by U.S. investigators.

“Mr. Manafort requests that the Department of Justice release any intercepts involving him and any non-Americans so interested parties can come to the same conclusion as the DOJ — there is nothing there,” Manafort spokesman Jason Maloni said in a statement. Manafort’s spokesman goes on to demand that the DOJ launch an immediate investigation into who continues to commit federal felonies with reckless abandon by leaking details of confidential FISA warrants to the media. Whether or not Manafort committed a crime — and he has not been charged with anything — the leak of information about FISA warrants is a federal crime, Maloni noted in his statement.

“If true, it is a felony to reveal the existence of a FISA warrant, regardless of the fact that no charges ever emerged,” Maloni said. Information about FISA warrants is classified and tightly held by government officials and the federal judges that approve them. Unauthorized disclosures of FISA information is also a felony. At a House Intelligence Committee hearing in March, then-FBI Director James Comey testified that the leak of FISA information is punishable by up to 10 years in prison. In his statement, Maloni called on the Justice Department’s watchdog to “immediately” open an investigation into the leak and to “examine the motivations behind the previous Administration’s effort to surveil a political opponent.”

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No, I’m not going to talk about his UN speech yesterday. That’s all just confirmation bias.

Everyone involved denies any of this ever actually happened.

Trump Warned Saudis Off Military Move on Qatar (BBG)

Saudi Arabia and the United Arab Emirates considered military action in the early stages of their ongoing dispute with Qatar before Donald Trump called leaders of both countries and warned them to back off, according to two people familiar with the U.S. president’s discussions. The Saudis and Emiratis were looking at ways to remove the Qatari regime, which they accused of sponsoring terrorism and cozying up to Iran, according to the people, who asked not to be identified because the discussions were confidential. Trump told Saudi and U.A.E. leaders that any military action would trigger a crisis across the Middle East that would only benefit Iran, one of the people said. More recently, the Trump administration has quietly sent high-level messages to Saudi Arabia and the U.A.E. to try to defuse the quarrel.

Trump, who initially sided with the Saudi-led bloc, had a change of heart because of evidence that a prolonged dispute with Qatar will serve as an advantage to Iran, according to a U.S. official familiar with his thinking. Trump met with Qatar’s emir, Sheikh Tamim bin Hamad Al Thani, at the United Nations General Assembly in New York on Tuesday. Asked by a reporter if he had warned Saudi Arabia and the U.A.E. against military action in the country, Trump responded, “No.” At the same meeting, Trump confronted the Qatari leader with what one U.S. official said is evidence that Qatar is still engaged in terrorism-related activity and told him it has to stop.

[..] Trump said on Tuesday that the U.S. is pushing for an end to the Gulf dispute. “We are right now in a situation where we’re trying to solve a problem in the Middle East,” he said. “I have a very strong feeling that it will be solved, and pretty quickly.” Those comments reflected how Trump has changed his thinking on the Qatar dispute in the past 10 days or so, becoming more sympathetic with the Qataris after previously backing the Saudi-led bloc and saying his priority is to clamp down on terror financing, according to the U.S. official familiar with his thinking.

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There’s no reason for it to happen in other currencies.

Putin Orders To End Trade In US Dollars At Russian Seaports (RT)

Russian President Vladimir Putin has instructed the government to approve legislation making the ruble the main currency of exchange at all Russian seaports by next year, according to the Kremlin website. To protect the interests of stevedoring companies with foreign currency obligations, the government was instructed to set a transition period before switching to ruble settlements. According to the head of Russian antitrust watchdog FAS Igor Artemyev, many services in Russian seaports are still priced in US dollars, even though such ports are state-owned. The proposal to switch port tariffs to rubles was first proposed by the president a year and a half ago.

The idea was not embraced by large transport companies, which would like to keep revenues in dollars and other foreign currencies because of fluctuations in the ruble. Artemyev said the decision will force foreigners to buy Russian currency, which is good for the ruble. In 2016, his agency filed several lawsuits against the largest Russian port group NMTP. According to FAS, the group of companies set tariffs for transshipment in dollars and raised tariffs from January 2015 “without objective grounds.” The watchdog ruled that NMTP abused its dominant position in the market and imposed a 9.74 billion rubles fine, or about $165 million at the current exchange rate. The decision was overturned by a court in Moscow in July this year.

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Everyone thinks corporate tax cuts are the solution?!

Eurozone ‘Bouncing Back’? Tell That To The People Of Spain And Greece (DiEM25)

EU citizens living under squeezed financial circumstances could be forgiven for wondering whether European Commission President Juncker was having a joke at their expense when he spoke recently about how Europe’s economy is finally bouncing back. After a tumultuous decade triggered by the global financial crisis in 2007, the Eurozone’s growth figures are being compared favourably to America’s, with production up 3.2% against last year. However, evidence points to a wide chasm between people’s lived experiences and Juncker’s message of triumph. It is doubtful that the citizens of Spain and Greece, for example, would agree with his assessment. According to the Commission, 30% of Spaniards are at risk of social exclusion due to poverty and income inequality.

The proportion of children in Spain living below the poverty line increased by 9% between 2008 and 2014, to 30.5%, and Spain is in 7th place on the OECD list of countries where inequality has risen the most since 2010. Greece, meanwhile, is at top of this ranking. Now, ‘growth’ may be used to express the success of a country’s economic performance. But how impressive is it really, when the Troika’s austerity-driven politics is causing so much human suffering in countries like Greece and Spain? According to the OECD, countries have continued the trend towards implementing tax policy reforms to boost growth. French President Macron is proposing to cut corporation tax from 33.3% to 25% by 2022. Yet the use of tax levers, primarily cuts to corporation tax, as a means to draw inward investment has been disputed by top economists.

“The way you get a productive economy is changing the fundamentals, says John Van Reenen of the LSE. “You get your people to be more skilled, or you have your infrastructure working efficiently. You’re never really going to get there just by reducing corporate tax.” So what’s the alternative? It is possible to pursue a successful strategy without crucifying ordinary people in the process, and Portugal is leading the way. The country adopted left wing alternatives to austerity policies in 2015 and is now reporting an impressive recovery. It is a model from which governments can learn.

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That’s the intention.

Greece’s Bailout Review Is Leaving Markets Jittery (BBG)

Greece faces two possible outcomes. Officials from both the government and creditors say the aim is to finish the third bailout review by the end of the year, giving the country time to raise more funds in the market and paving the way for its successful program exit. Concluding the review by the end of the year, or even in the early months of next year, would help Greece gain much-needed investor confidence. Prolonged negotiations, on the other hand, could weigh on investor sentiment and hamper the country’s effort to exit its bailout next summer and finance itself. “Investments are at a very low level and, as a result, Greece is growing much slower than it should and, in fact, slower than many of its eurozone partners,” Vettas said.

Greek investment was stagnant in 2016 and fell during the first two quarters of this year. If Greece’s bailout runs out before the country completes all the reforms it has agreed to, it could put at risk any plans for debt relief from the euro area, something the government has sought for years. Greece’s partners agreed to ease the country’s debt at the end of its bailout, provided agreed reforms are successfully concluded. Key sticking points in the review include Greece’s budget for 2018, and whether the country is taking sufficient measures to hit bailout-prescribed targets. Greece is expected to have a primary surplus, which excludes interest payments, of 3.5% of GDP next year, a target that seems more difficult as tax receipts have failed to yield expected revenue, Greek and EU officials say.

Meanwhile, politically contentious issues such as privatizations, the reform of public administration as well as an overhaul of the labor market may be raised in the upcoming talks. Greek banks’ handling of nonperforming loans is also expected to come under fire as is a restructuring of social benefits. Tsipras’s administration has yet to find resources in the budget to avoid cutting some popular benefits. The IMF’s demand for a new asset-quality review for Greek banks may be another bone of contention, this time between the Fund and the ECB. The Greek government and Frankfurt say that such a review will harm the nation’s lenders because they need to focus on addressing the NPL issue. A solution, they say, may be to wait for the results of the banks’ regular stress tests, which are expected before the end of the bailout program, without a new asset-quality review.

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Being blamed for being strangled.

EU’s Dombrovskis: Greek Government Chose To Increase Taxes (K.)

European Commission Vice President Valdis Dombrovskis has told Kathimerini in an exclusive interview that a successful conclusion to the third review of Greece’s third international bailout by the end of the year would send money markets a convincing message that the program is on track and close to its end – although it’s still rather early to discuss a so-called “clean exit,” he said. The Latvian politician also explained it was the government’s decision to raise taxes instead of cutting public spending, and income tax has now failed to meet revenue expectations.

Regarding talk about a “clean exit” from Greece’s third bailout at the end of next summer, Dombrovskis indicated that such a discussion was “premature” and that the priority now is to focus on completing the third bailout review by the end of the year. He said 95 prior actions, some of which have been legislated, must still be implemented. The EU official underlined the importance of Greece meeting a primary surplus target of 3.5% next year and creating a more beneficial environment for potential investors as part of efforts to boost much-needed growth.

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And on and on.

Lesvos Mayor Issues Warning On Refugee Numbers (K.)

Lesvos Mayor Spyros Galinos has written to the government and the European Commission asking that immediate action be taken to reduce the number of refugees on the island. In the letter sent to European Commissioner for Migration Dimitris Avramopoulos and Greek Migration Policy Minister Yiannis Mouzalas, Galinos says there are now more than 6,000 refugees and migrants on the island, which is far more than existing facilities can cope with. The Lesvos mayor attributed this to a steady rise in arrivals and insufficient efforts to reduce the numbers at hotspots. Galinos claimed the island is being “held hostage” and called for immediate action by authorities. He ruled out the possibility of more temporary facilities being built on the island. “Lesvos’s ability to offer hospitality is limited to its current infrastructure,” the mayor wrote.

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